Balaji Srinivasan on Bitcoin, The Great Awokening, Reputational Civil War, and Much More | Transcription
Transcription for the video titled "Balaji Srinivasan on Bitcoin, The Great Awokening, Reputational Civil War, and Much More".
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We have an important preface, an important caveat, an important disclaimer before we get started, and here it is provided from my lovely lawyers. Here we go. I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or in Bitcoin or in cryptocurrencies or in anything. None of the information presented today or really anytime since you might be listening to this anytime is intended to form the basis for any offer or recommendation or have any regard to the investment objectives, financial situation, or needs of any specific person that includes you my dear listener. So everything you're going to hear is for informational entertainment purposes only. And with that said, please enjoy. Hello, boys and girls. Ladies and gentlemen, this is Tim Ferriss. Welcome to another episode of The Tim Ferriss Show. My guest today is a repeat guest. His first episode on the podcast roughly a year ago was one of the most popular of the last year. His name is Bologie S. Srinivasan. Who is Bologie? Well, on Twitter, you can find him @BologieS. That's B-A-L-A-G-I-S. He is an angel investor and entrepreneur formerly the CTO of Coinbase and general partner at Andreessen Horowitz. He was also the co-founder of urn.com, which was acquired by Coinbase Council, which was acquired by Maried Teleport, which was acquired by Topia and Coin Center. He has been named to the MIT Technology Reviews Innovators Under 35. He's won a Wall Street Journal Innovation Award and holds a B-S, M-S, PhD in Electrical Engineering and an M-S in Chemical Engineering, all from Stanford University. Bologie also teaches the occasional class at Stanford, including an online MOOC in 2013, which reached a mere 250,000 plus students worldwide. The mirror is a joke, obviously. That is a large number. To learn more about Bologie's most recent project, sign up at 1729.com. That's 1729.com, a newsletter that pays you. They're giving out $1,000 in Bitcoin, BTC, each day for completing tasks and tutorials. Subscribers also receive chapters from Bologie's free book, The Network State. And I highly encourage you to check out tim.blog/b2, the letter B and two for show notes and timestamps for this episode. Feel free to jump around. It is an extensive and wide-ranging and long episode. In the very beginning, we dig into Afghanistan and its importance. That lasts for the first, I would say, five to six minutes. And feel free also, if you want to listen A to Z, to just listen, listen, listen. If a subject is not of interest to you, chances are within a few minutes, we move on to a new topic and we cover a lot of ground. To hear our first conversation, you can check out tim.blog/bologie, but without further ado, please enjoy this very, very wide-ranging conversation with Bologie S. Srinivasan. Bologie, welcome back, sir. It was good to see you. Last we spoke, it was Q1 2021. It is now Q4 2021 late October. And I would like to ask you, where should we begin?
Discussions On Current Worldview And Cryptocurrency
The biggest lead in human history (03:31)
Well, I thought we might begin with some premises, some of which were sort of predictions in the last pod. One in particular was, I think I had mentioned that COVID-19, I thought of it as a military defeat for the US. And the reason I thought of it as such is because literally billions of dollars had been allocated for biodefense over span of about 20 years since the anthrax episode in 2001 and during SARS and Ebola, all of these sort of scares happened. And so in the US in 2018, it announced they had a national biodefense policy that was supposed to combat man-made and national threats. And so there's an expectation that of the WMDs, nuclear, biological, and chemical, that the US military would have some trick up its sleeve just like out of the movies where, you know, hard men would come in and America's time of need and step in with some, you know, magic thing. And that totally didn't happen. And when that didn't happen, that's why I said, you know, COVID-19 was a military defeat, even if it wasn't being presented that way to the American public, a big piece of the military industrial complex or the military, whatever you want to call it, was like cardboard. It was like a Potemkin village just kind of fell over with a push. And people kind of argued with me about this and they said, no, no, no, you know, because it was right on the border of what you think of as military or not, right? Since most of the folks who had been talked about publicly were the CDC and the FDA and the civilian agencies, but certainly billions had been allocated for biodefense. And when it was borderline, you could argue it wasn't military, you could argue I was off base there that the military was actually highly competent. But then one thing that happened, you know, six months, each later after our podcast was the whole Afghanistan thing. And so now you had something where, you know, the US military had 20 years and two trillion dollars and total air superiority and total surveillance and the local government that they had set up and a military that they had trained, local military that they had trained and handpicked and equipped. And even even a timeline that they had negotiated with the Taliban, which had for the most part of the year or two in terms of its terms, it hadn't like fired on American troops during during that process. I think it had a dear to its side of it. And those are advantages that you normally don't get in a military conflict. You know, folks with that level of events, it's like it's like a huge handicap in golf, right? And you know, as it's saying, right with military things, amateurs talk tactics, professionals talk logistics. And the withdrawal showed these military is no longer really that amazing at logistics. Also, you know, the president and the secretary of state, you know, Blinken said something like, the collapse won't happen from a Friday to a Monday. And it basically did. It was like, it was like a like a Monday to a Wednesday or something like that. I forget the exact days, but it happened just over a few days. And you know, Biden says there's not going to be a scene that's like the helicopter evacuation in Vietnam. And there was. And the thing is, there's no way that I'm not by the way saying, you know, it's not a political comment, really, it's basically about the decline of state capacity over the last 20 or 30 years. In many ways, in 1991, the US was the hyper power after the collapse of the Soviet Union. It was a hyper powers, a French put it that could win everywhere without fighting. And in many ways, the combination of administrations over the last 30 years have blown maybe the biggest lead in human history. Now it, you know, rather than winning everywhere without fighting, it fights everywhere without winning. So the Afghanistan thing, I think was sort of, I hate to call it a vindication because it's a very unfortunate thing, especially for the the Afghans, you know, like who are now subject to this medieval regime. But but I think that that is something which also has important ripple effects kind of flips over a card. And you kind of think there's something that's 70% probably and then it goes to 100% probably anything about what the, you know, consequences of that are. So that's like one, I think, quote, prediction or something that came true or piece of a world model that was that was vindicated. Let me pause our gate with us. I have no thoughts to share. Please continue. Okay. So I will, I will just kind of download content and then pause. And then you, you know, jump in. Okay. And you will be met mostly with silence or I'm not familiar. If my, if my last performance is any indication, but I appreciate the pauses. Yes. I will, I can also, since we're on video, I can raise my hand like a student and then request pause. But yes, please proceed. Okay, great. So, so, you know, one, one thing that as a meta kind of comment that I want to do is sort of A invite pauses certainly B enumerate my premises and sort of open source my thinking so that people can understand where I'm coming from. And if I open source my premises and my logic comes from those premises and you can at least isolate, if you think I'm off base, I mean, the wrong of the premises or the logic, but at least we started to decouple the two, right? So how do I build my, my worldview? How do I build my model?
Balaji’s current worldview (08:41)
Well, what's, what's rising? What's up? Technology, which is drones and biomedicine and robotics and AI and so on. And particularly cryptocurrency, which is kind of, you know, the new back end of all of software as we'll come to. So technology, cryptocurrency, China and India, basically, you know, tech in Asia are up and to the right on many different kinds of graphs. Those are, those are words, but that captures the phenomenon of literally billions of people every day moving up into the right, you know, whether it's global trade or its number of, you know, smartphones or it is the number of people doing cryptocurrencies or the progress of AI, all that is up into the right. And then what is falling is the West as a percent of GDP. Like if you make a graph of the US and the EU's percent of global GDP, that's been dropping basically for the last 40 years, whereas India and China's share in particular has been rising. You know, actually, as of 2019, you know, McKinsey had a report on this, but Asia was more than 50% of GDP, I believe by 2019 on certainly PPP terms. And I think it's going to pass or has already passed soon. So Asia is not really the, the present. PPP is what pricing power parity was that's the? Yeah, yeah, yeah. Purchase power parity. It's basically like purchase power parity. Yeah, that's what I believe it is. It's sort of like what can the dollar buy there? What can your renmin be buy there in terms of number of big max, right? They have an adjustment for that because, you know, some of the production costs are less. You $10,000 goes a long way in some of these countries. So Asia isn't really, you know, the future, it's a present. So what's falling? A, the West is a percent of GDP. There's a graph by visual capitalists, the US share of the world economy that shows it in sort of absolute terms. And then you can kind of calculate the zero to 100% terms, right? So West is a percent of GDP, the US military strength, as we just discussed, and that's a kind of a very important topic to discuss further. Internal US cohesion and also just the European percentage of the world. It was, you know, much higher at in the early 1900s. And now it's like on the order of 10% and so just the percentage of the world. And so if the West is declining a percent of GDP in terms of its relative military strength, in terms of its internal cohesion, and in terms of just raw percentage of the world, yet all of these institutions that were set up years ago kind of assume Western predominance, for example, like the United Nations is the US, the UK, France, Russia, and China. And that's like, you know, I know it's only four out of five, so it's a small count, but that's like 80% Western or at least European, if you think of Russia as a European country, you can argue that. Whereas, you know, there's no India, there's no Brazil, there's no Japan, and you can argue whether that actually reflects the world as it is. Certainly, you know, probably India should be there rather than France, right? You might might say India should be there rather than the UK, and you should be there rather than France or something like that, right? Go ahead. All right, I raised my hand for those who can't see me.
China’s challenges to cryptocurrency (11:56)
I like this approach. This is a good approach. Professor Bologie, I have a question, sir. Please. That is related to the up and to the right with respect to technology, and let's just take China as an example. But we can grab both China and India, because we discussed India last time as a dark horse of sorts. Yes. And a lot has happened with respect to cryptocurrency in China since we last recorded it also. And I'm wondering how that factors in, in your mind, to the up and to the right with respect to technology, and Bitcoin or cryptocurrency or blockchain more broadly speaking, within China and say, India, does it mean that the best entrepreneurs or many of the best entrepreneurs simply get scattered to the wind to places like Singapore and elsewhere from China? What are the implications and what are your thoughts overall? So a lot has happened this year in Chinese American and Indian crypto, right? So just to discuss that, when we were talking a Chinese interference with the Bitcoin network was something that was like TBD, right? It hadn't actually happened yet. With Chinese crypto, what we discussed was that they might pursue the state, Chinese state might, for example, block at the firewall level, but allow might continue, which would mean sort of a peekaboo problem where the Chinese chain gets extended, but so is the rest of the world and so on. And that would be bad. But what I also said was, that's like in some ways the worst case scenario, it's actually better and perhaps more probable that they would just ban mining entirely or go after that. And they're the one state in the world that is ruthless enough and has a low enough disregard for civil liberties and contract law and all of that type of stuff for them to just be able to do that. And that is what they did, meaning they just went after, they just said, get out of China. And so if you go to blockchain.com from /charts/hashrate and go to the all-time chart and look at kind of the period from May to July issue of 2021, you'll see it drop from about 180 terahashes per second to about 80 to 90 terahashes per second. And what is a terahash that's 10 to the 12 hashes per second, meaning 10 to 12 attempts to solve the inequality that allows you to mine a new block of Bitcoin. So it's kind of a measure of the computational speed of the Bitcoin network and the higher that is, the more secure the network because the harder it is to falsify history. Quick interjection. Why did China do this? And there may be a headline press release equivalent and then there may be some degree of speculation or informed opinion. I would just like to know kind of both. So I think the fundamental thing is, and we can drill into this, China is the exception to the sovereign individual thesis. India, by the way, might be the partial exception, but China is the exception to the sovereign individual thesis where they want root over everything. If it's not made in China, they look at it with suspicion, and it's funny, you know, made in China, it's sort of a play on words, right? If it's not, they look at it with suspicion and that's why actually they were very early on things like the Great Firewall or social media bans. Many years before politicians were getting deplatform from Twitter, Xi Jinping denied Facebook's attempt to come into China, right? And instead, basically, they set up parallel social networks that could operate within China, but which the Chinese state had root access to. And so fundamentally, their premise, you know, they've articulated this actually explicitly. It's an interesting concept, and I think it's at least they've got some philosophical basis for it, which is the doctrine of internet sovereignty. That's to say, if a nation state is allowed to interdite the physical packets crossing its border, then it should be able to interdite any internet packets crossing its border, and they're doing like customs for that. That's how they justify the Great Firewall. By the way, there's actually there's an article that's sort of making the rounds that, you know, folks who are listening to this probably should read on Wang Hooning. Did you see this article? I did not. How do you spell that name? Yeah, so it's W-A-N-G-H-U-N-I-N-G. So the Triumph and Tariff Wang Hooning at PalladiumMag.com. And you know, this whole site is actually really good, but what's great about this article is, first of all, reading this, you're like, okay, the depth of this is just much more, like the IQ level is frankly much higher than what you're accustomed to seeing in mainstream media because it kind of, it just doesn't come from the same set of trite premises and, you know, rehash things that we usually see. So I think it's informative, and the whole site is actually really good. But basically what this article is about is a guy Wang Hooning has been there over three Chinese administrations, you know, I think Jiang's Whose and Xi's, which is unusual. It's sort of like being, I don't know, he's working in the government. In the government, in the senior, most senior levels, you know, the seven men standing committee, right? And at least what the article says is, you know, he is trying to top ideological theorist. And to be consistent across those three administrations, it's sort of like being, you know, rough analogy would be like Robert Gates, who was sect def under, I believe both, was he under both Bush and Obama? I think so. Yes, he was appointed under both Bush and about, which is unusual, right? Usually political appointees get fired by the new regime. Yeah, exactly. And vice versa, right? This is sort of like that. And he's been there for a while. The reason I just bring this article up is you can sort of get a sense of how much they have been conscious about the need for state control, because they saw the fall of the USSR, they saw the US move in after that. They saw that Russia actually didn't do that. Well, they saw the loss of control. So you've always been about control, right? And what's interesting is there's been a tension between total state control and of course, capitalism, which is decentralization of control, right? One thing that is true that I think is a constant across these, you know, sort of three eras of China. So the Mao era was revolutionary communism. Then Deng, Jiang, and Hu was internationalist capitalism. And now I think it's fair to say under Xi Jinping, it's now pretty clear that it's sort of a nationalist socialism, a militarism. And economics is no longer first. It is there, but they're reasserting kind of root control, but from sort of the nationalist right rather than the communist left in some ways. And so the reason I think that's important is it's a genuine change. And the same way that you can argue the US had a genuine change in culture over the last seven or eight years, call it like the great awakening, which is what Matt Iglesias article at Vox kind of dubbed the whole thing. And you can sort of see this religious fervor taking over the country, all these graphs up from the right of various words in kind of the same way China for a long time had this keep your head down, you know, sort of policy where they didn't like a lot of the things the West was telling them, but they sort of gritted their teeth and they manned the factories and they tolerated the humiliation of having like, you know, their embassy at Belgrade, like blown up by a stray bomb and just being like, oh, our bad. You know, that type of stuff, they didn't have the power to protest on a world stage. They're just like, you know what, just suck it up and we'll just continue trading for a while. But with with Xi, that is no longer the case. They are, you know, have you heard this term wolf warrior diplomacy?
The Great Awokening + Wolf Warrior diplomacy (20:24)
Wolf warrior diplomacy? I have not. If I'm hearing that correctly. Yeah, wolf warrior, right? I like the sound of it, but maybe I shouldn't wait until you define it for me. Well, I mean, look, it's it's not like, you know, this is not deep China analysis or anything like that. And I basically consider myself, I think, reasonably informed in China, but certainly there's folks who speak flu in Chinese. It's like a it's like a logger mixed scale, you know, there's folks who know 10x 100x as much as I know in China. So the wolf warrior diplomacy would refer to is there's a movie called Wolf Warrior Two, which was China's number one movie, I think in 2017. It's worth watching. And the reason it's worth watching is it sort of surreal. It is American filmmaking techniques of the Rambo Rocky, you know, a variety of the mid 80s, applied to a masculine Chinese speaking hero where the Chinese are basically cast on the role of the USA and the USA is cast on the role of the USSR. Okay. Yeah. So it is kind of like a like a rotation where you realize what aspects of filmmaking are constant and what are highly variable. This is also, Joe, the number one movie in the world is right now is of our time speaking. I do not. I learned I learned so much when we have our conversations. Yeah, so it's frozen frozen five. No, no, it's a well, it's so so bad thing. It's a it's a battle of Lake Changjin, right? Chinese language movie. Here's the thing. It tells you your fifth things first is China's in person movie market is massive and it is able to do to do number one in the world. And I think it just costs like a billion dollars in box office, right? Number two, but the movie depicts is basically the defeat of the US military in the Korean War by the Chinese military. Okay. So that's where their head is at. They are making massive blockbuster epics with all the, you know, Hollywood techniques about the Chinese military winning and the Americans losing. And moreover, what you can get canceled for in China is insufficient nationalism. As somebody once said, you know, in like the West today, you know, for an ambitious young person, they would, they would articulate a desire to quote, change the world. But in China, it is, it is like served the motherland. Yeah, it's different. Is there a may I interject for a second? Of course, of course. I just want to say that less listeners get too judgmental about what they're hearing. The US has done what we're describing, or I should say US entertainment certainly has done what we're describing for a very, very long time. So this isn't unique to China. It just, I think, indicates it's what is to come, right? It's a harbinger. And it's also a gauge of public sentiment. And well, that so is so is a sense of meaning Chinese sentiment on a certain level. Yes. And I find that deeply interesting. Also, what I find interesting from a entertainment media perspective is, as an example, I just went to see the new bond. It was my first time in a real movie theater seeing a film since COVID. And there were many different trailers. Most of the movies had at least one Chinese lead actor or actress. And that is very deliberate because they need Chinese eyes. They need that. And so that's another kind of chess piece on the table. It's more like backgammon than chess, probably because it's not a game of complete information, but you get the idea. So I just wanted to just note that because I do think these are trends that are going to become more intensified over time. That's right. And you know, look, this is a startup analogy, but Microsoft made, I believe, a $150 million investment in Facebook in 2007 as part of a way to kind of keep it from Google. And they did so the super high valuation, basically playing Game of Thrones when Facebook was a still startup, right? That was actually maybe bombers best decision in some ways. But what that did was that thing grew and grew and grew until Facebook is now, it's not like extremely hostile to Microsoft, but it is certainly appeared at Microsoft. It is up there, right? It is grown into a redwood tree of its own. It is also like a roughly a trillion dollar company. It's the youngest of the big five, you know, Google Apple, Amazon, Microsoft, Facebook. And in sort of the same way what the US did was it made a startup investment in China when Nixon went to China because USSR was the number one rival at that time. And they've just executed like phenomenally well over the last 35, you know, 40 years. And now they have the market size, the internal market size to be the number one movie market in the world. And they dictate terms now. So winners write history, winners film history. And they are writing a history where they're the winners and they're the good guys. And the thing is the airbrushing is super obvious when it's somebody else's propaganda, for example, in this movie, which is worth watching, by the way, it's hard to kind of see you have to get like a streamer out of China or something like that. And by the way, Wolf Warrior or the other? Well, Wolf Warrior, I think you can just download an iTunes, but the Battle of Lake Chang Jin is not that easy to see right now. And one of the things about it is this itself is a change where China used to be super freewheeling on IP. The new Xi Jinping regime is not freewheeling on IP. It's hard to get that this. I mean, it's like, it's basically almost as hard as it is to get like an American movie on the internet. You have to kind of like actually try. It's not just like widely accessible, you know, DVD on the street kind of thing. And you know, some people think this is similar to the whole Changang school. Are you familiar with that? Like, legalism? No. Well, there's various. So, again, I'm not like a student of Chinese philosophy. And so on, I just I know some. But basically, there's a there's a philosopher named Chang Yang who is well known for as an exponent of legalism. And legalism, we would call it like a super harsh, you know, like one of his sayings, if I roughly paraphrase if I'm getting this right is if there are harsh punishments, there will be no punishments. Right? Meaning if you articulate what the law is and you ruthlessly enforce it, then people won't actually go near the border and so on. And there's like another thing, which, you know, if I let me see if I can get the quote right after one year, people would not pick up items left lying in the street, nor would they take anything that was not their property. The army had grown strong and the feudal lords lived in fear. Okay. And the thing about that is what is what is the source? What are you reading? Oh, that's like from Chang Yang's biography. So the point being is like, Xi Jinping used working and all this stuff since the beginning, but the tipping point only came near the end of his first term. So like how the great awakening was also happening in the US and just kind of went exponential in 2020 and 2021. China has changed. It is now a different thing than what you and I grew up with, which was the internationalist capitalism of the Deng Cheng and Huera, you know, like hide your strength and buy your time, I think was like the official philosophy and make plastic stuff for the West, have them call us uncreative, have them depict us as emasculated on TV, just assemble iPhones, grid our teeth, tolerate the pollution, breathe the bad air, blah, blah, blah, and then work our way up. That's kind of the mentality. And now they're standing up, right? Yeah, may I just add one thing to that, which is when I was in Beijing, I lived in Beijing in 1996, I went to two universities there and the most popular book at the time, and this is very understandable for a lot of reasons. So this is not to fault anyone, but the most popular book at the time, which was stacked, it was widely counterfeited, but also bought legitimately, stacked everywhere. You could see it in the streets in front of stores. It was called China Can Say No. I think it was and it was like China Can Say No. And there is this deep sense of, I think warranted deep sense of being disrespected on a lot of levels from a geopolitical perspective. And that is not new, right? That is not new. And it's just taken a while for them to play the game so well that they're now in a position to execute extremely well on multiple fronts. That's right. Now, the thing is interesting is, if I recall, that was modeled on the Japan That Can Say No, right? But there is a difference. And some people will basically say, oh, people talked about the rise of Japan in the 1980s and why won't the rise of China turn out the same way. There's a huge difference, by the way, between China and Japan, which is that Japan is literally occupied by the US military. Yeah. Huge difference. Huge difference. The US basically wrote Japan's operating system and constitution after World War II, and they have literally a military base there. And I think in a real sense, they are a independently operated US subsidiary. Okay. You know, like, you're saying about like the purpose of NATO was keep the Americans in the Germans down and the Russians out. I haven't, but I can imagine. May I also just pull us back to an initial query for those people who are wondering what the some of the punchlines are. So with respect, and then we can come back to all of this. So just bookmark for a sec. Of course. When we look at the Chinese government's decisions with respect to Bitcoin mining and perhaps cryptocurrency more broadly speaking, what are the sort of first order, second order, third order effects of that? Some of which may have already been seen, but what has happened and what do you expect will happen as a result of that? And we could look at what that means within China and outside of China or however you want to approach it. Yeah. So I think what they've done is setting up the decade and maybe the century. I don't think people realize how important some of this stuff is. But think about, you know, for example, their social media ban. How important is that today versus how important was it seen to be at the time? Yeah, huge. Huge, right? That was a branch in history. So basically, China wants to maintain root. And because they want to maintain root, I think they're going to have significant short and perhaps even medium term advantages. But in the very long run, like 20, 30, 40 years, I think the century lines up as centralized China versus a decentralized world, right? Or a centralized China versus a decentralized West. And I actually think India may be actually a big component of that. And that's where I think things land up by like 2040ish or so. But it's really hard to say because time compresses in the internet era, right? Just to kind of drill into that, right? Like, let me give sort of a sci-fi scenario here.
Will the US lose?” (32:05)
This is a sci-fi scenario, all right? You know, like, when you do a simulation and it's like, okay, all the molecules kind of move in this path, okay? They can move in other paths, okay? So I don't like assign super high probability to this. But let's call it a scenario, right? I don't assign zero probability to it. So Chinese control American anarchy, indeed intermediate, okay? So coming back to the thing that we kicked it off with, which is the US military basically just got defeated by COVID and in Afghanistan. So obviously, the immediate question is, will they lose versus China? And in particular, will they lose versus, you know, what will happen with Taiwan? Now, there's sort of the first order response, which is, oh, Taiwan and Afghanistan are totally different. You know, Taiwan is obviously a first world country and it's an independent nation and it has its own judiciary and military and a long history of operating independently in civil society and blah, blah, blah. Whereas Afghanistan, obviously was, you know, that was a fixer upper at best when it has a long history of civil war and was very difficult. So of course, they're totally, totally different, right? But they're not because there's certain things that are the same. And one of the things that is very much shared between the two things is America's willingness to fight because the withdrawal from Afghanistan was based on a reluctance to pursue quote unquote forever wars, right? And a thing where the American consensus on the right is isolationist like, why are we helping these folks out by fighting their wars for them? And on the left is also isolationist, which is why are we harming these folks by bombing them? We should pull back. And while the stance is perhaps different, and I actually, I can see reasonable things on both though without litigating the percentage on each, the some forces withdrawal, right? And so it is from Taiwan's view questionable as to whether the US would fight. And here's the problem, wars get fought when things are questionable. See, when things are, you know, if the Shanghai said is, if the punishments are certain, there will be no punishments, right? Wars happen when there's a miscalculation, right? Like, for example, I think, I believe Saddam Hussein invaded Kuwait in 1991 because he thought he had gotten the go ahead from April glass be at that time, who was the US ambassador. And he basically is like, you know, 1991, the Soviet Union was falling and so on, new world order. Let me settle scores, right? And I think that basically the there's a transcript that there's different transcripts. One of them was like, we have no opinion on your Arab Arab conflicts, it should dispute with Kuwait. You know, the Kuwait issue is not a sister in America, Secretary of Director Baker has directed me to emphasize this, right? But the thing about this is that, you know, glass be like, I'm not a scholar of this particular issue. And she may have gotten a bum wrap on this or would have you, right? But people thought that that she'd given unclear instructions to Saddam. Now, first of all, it's interesting is like the US with basic green light and invasion is interesting in its own, right? Like that it could happen versus not. But that's what being Leviathan means. Like, if you're the guarantor of order, you know, the Soviets allowed the North Koreans to go and invade the South. Okay, the North Koreans were looking for the the nod to go ahead from their patron to be able to do that, right? And similarly, you know, the US had actually been working with Iraq during the Iraq-Iran war because they were against Iran. And they thought Iraq, you know, was a good way to put a thumb in the eye of the Iranians who had done the hostage crisis. And so that was, you've seen the whole video with some shaking hands with Rumsfeld, right? You know, from from many years ago, right? So how does this tie into China? Yeah, yeah. So the thing is that that kind of uncertainty is what causes wars or provides fertile ground for wars, depending on how it's planned, right? Yeah, because it's not like invincible US military solid commitment to Taiwan. All right, we're not going to start a fight. It is will they want they? You're now decision-treating it out. It is uncertain for everybody involved. It's uncertain for Taiwan. It's uncertain for China. You have many scenarios. One scenario, which I think is underestimated is that China, I mean, China speaks a language. They have lots of people across border. They have total focus on this. So you should pick one. So one possibility is they try to force a gun to the head referendum, where they try to get KMT, the Pan-Blue Party to just vote for reunification with China. And that's something where they'd be an obvious gun to the head, but it'd be like a peaceful onschluss, like, you know, Germany and Austria, right? Like they vote for it. Another possibility, of course, is like an actual military conflict where maybe the US just doesn't even intervene. Maybe it does. And then there's like a shooting war. And we don't know what happens after that. But I think it's quite likely that the US loses. Now, why do I think it's likely the US loses? A couple of books I'll recommend, there's The Kill Chain by Christian Bros, who was formerly very senior on the Senate Armed Services Committee, saw the entire $700 billion defense budget, including the classified parts. And he has a quote in there, which is, let me see if I get this right. So the quote is, "Over the past decade in US war games against China, the United States has a nearly perfect record. We have lost almost every single time." And he says, you know, this is well-known in the Department of Defense, but the American public doesn't know this, and Congress doesn't know this. And he actually goes on in the first chapter to outline a scenario where China basically pursues an asymmetric strategy against the US uses area denial weapons, kind of forced the US Navy to be way offshore while it's invading Taiwan. And it can't get the reinforcements over there, over this huge ocean. They're all blown up and or forced back. And basically thinks China would win. So that's a non-fiction book. There's also another book that came out this year called 2034. The Kill Chain I think came out last year. 2034, which is co-authored by a former US Marine who's on the ground, this guy, Elliot Ackerman. And the other guy, James Stavritus, who I believe was the former NATO commander, that also essentially talks about a serious Chinese effort on or conflict with China, rather, in the South China Sea, where the US does not definitively win. In fact, they almost portrayed the US as this old battleship that's getting its butt kicked by the Chinese, and it goes to nuclear very quickly. Okay, that's in their scenario. And like, you know, I don't want to spoil it, but India intervenes at the end to kind of play mediator in a sense. If I may, yeah, yeah, just just coming back. So if we have hypothetically centralized China, decentralized world, and India is some type of intermediary, yeah, or very large and compelling nation state at the very least, let's just were on parity with the China discussion on some level.
Crypto in India (38:40)
What has happened in India since we last spoke with respect to crypto? And where do you think it's going? The good news is, and I may have actually influenced this on the margins, India had been floating, or there's folks in India rather, who had been floating like a crypto ban, you know, in January thereabouts. I wrote three articles on this, and the Indian crypto community, the web three community really got out there. And now, Nirmala Sitharaman, who is the finance minister of India, like the equivalent of like the treasury secretary, is actually quite smart and has made good comments on this in public. And moreover, with the deliberation, she said this is not going to be a ban, right? It's going to be regulation of some kind. And over the last nine months, Indian crypto has just absolutely exploded. There's coin switch slash Cooper, and there's a bunch of these exchanges. I won't remember all of them. They've all just gone vertical with the rise of cryptocurrency this year. And there's multiple India crypto unicorns and Indians are a huge part of the global crypto community. And in the meantime, China has basically forced mining outside and is basically done with their new bill. It's almost like pushing a guy until he's just like almost off the cliff. Okay, they essentially have, you know, in 2017, they pushed pretty hard to stop much retail trading activity happening within China, right? And so hence, like, Binance kind of left the country and whoa, B and OK, coin, restore force overseas. But OTC was sort of allowed or kind of winked at. Now they're kind of going after OTC. They're going after mining. What does OTC mean in this context over the counter? But what does that mean in this context? Good question. So one version of trading cryptocurrency is you go to a website, you click a button, you buy cryptocurrency, there's a user interface and so on. And OTC trade is like a big block trade where you call somebody on the phone, you're like, I want to buy a million dollars of Bitcoin. And the thing is them as a seller and you as a buyer actually have an incentive. See, if they try and sell a million bucks of Bitcoin, they might move the price. You try to buy a million bucks of Bitcoin, you might move the price up. And so you both sort of settle on a mid-market price and you do the trade real quick because you don't know if it'll go up or down. So that was kind of like allowed, but they're cracking down on that too. Now what they haven't done and you can read this bill, it's actually posted on their website, it's a long thing. That bill is like an announcement rather. What they haven't done is they haven't criminalized holding. They have that in English? Yeah, it is in Chinese. Chinese is a little rusty. No, I heard you say something in Chinese just now. So I thought it's like, you use some Google Translate possibly to translate the page. Yeah, that's what I did. Basically, the People's Bank of China statement on cryptocurrencies, it's posted on their website. Okay, this is super long URL. We could put it in the show notes. Yeah, it's like, notice on further preventing and disposing of the risk of hype and virtual currency trading. That's the English translation via Google Translate. And I have a tweet on this. But basically, they've kind of done everything up to criminalizing holding. Okay, so they haven't criminalized holding. You can still hold. But I have a feeling that if in a way, it's a dumb question, where do you purchase your holdings or is it just pre-existing holders of crypto who are now a legacy didn't somehow? Yeah, it's kind of like that. It's unclear. The thing is that one of the things about China as a friend of mine over there said is in the US, there is like, there's like a rule of law, where you have written laws and that's supposed to constrain the state. And you can kind of operate with those. Whereas there, it's often more like guidelines and a negotiation, which is actually more like interacting with the regulatory state in the US, where it's like a moving boundary. And they will basically do what they want. And it's not something where the laws are meant to be binding on the government in the same way. So we don't know exactly how it's going to be enforced, but it definitely signals a step up. And the way you can see that is action speak louder than words and that drop in the hash rate is actually a remarkable drop. Now, importantly, by the way, it came all the way, I shouldn't say all the way back up, but it came back up to like 150 terror hashes. So even the Chinese government going after Bitcoin mining, it slowed down transactions a little bit for a few weeks, but not really all of it. However, you attribute that, how much of that do you attribute to new mining operations elsewhere, places where you can get cheap energy, where they would expect friendlier regulation or lack of regulation versus just the vertical climb of popularity in the rest of world Bitcoin and cryptocurrency. That's right. Yeah, we attribute that that that regaining of hash rate. So I don't know the exact breakdown. One could say, there's folks who are looking at this every day, which I haven't been doing for a while, but Bitcoin mining is now actually understood to be something which is a component of the energy grid, because in a sense, just like when you say a document, it's both a paper document and it's a digital thing, right? Like we use the term interchangeably now. So in a sense, Bitcoin mining is now like a money battery, because on the power grid, you can't store power that easily. You have to sort of instantaneously generate it as being consumed. And every flick of a light switch and so on, a serving this model of this Gaussian where you don't all these small events, you can't predict whether you're going to flick the light switch on or not, but you can have sort of demand prediction. And it kind of goes up and down, you generate the power in proportion to that. The problem is that if you've got source of power that are themselves variable, like renewables, for example, is the sun shining or not, is it wind blowing or not, right? Now you've got volatility on both sides and it's hard to match that up. And Bitcoin mining actually comes in there because it's a load that you can put basically in any location and dial it all the way up. And rather than trying to store that energy in a battery, okay, you quote, store it as money by mining Bitcoin. And depending on the economics, it may be better to do that. And then with that BTC by energy later, then to actually store it in a conventional battery. Okay, that's super that's super interesting, super interesting. So this is an important thing that is happening now actually, the Ted Cruz of all people actually gave a talk on this. So it's starting to filter out into politicians. Wait, Ted Cruz gave a talk on this subject? Yes, just a few weeks ago. Wow, that's that's unexpected. All right. Yeah, well, so that's the thing is this is becoming a big thing within natural gas and so on, because the flaring problem of having this, you know, it looks like this dystopian blast of flame into the air when you have a like stranded gas that gets addressed with this. So was he speaking with within the confines of the state of Texas or was it more broadly applied? It's much more broadly applied. This is something which is, you know, I'm not an expert in this area, okay, but Google like Bitcoin mining oil and gas and you will be able to read about this, right? But it's also something it's not just oil and gas, it's also renewables. Essentially, your renewable energy source Bitcoin mining increases the profitability of it, because there is always demand for the renewable energy you're generating. Say that one more time, please. It may be more precise. So your renewable energy source, like especially if it's volatile, like solar power or wind wind. Now there's always a way to make money from it, even if there isn't demand on the grid, because it's volatile. For example, the sun may be shining, but nobody's turning on their appliances or the wind may be blowing and nobody's actually consuming the power, but you can use that to mine Bitcoin. Yeah, that's very interesting. And power is like instantaneous energy is over time, but go ahead. So I'm just going to, this is going to be a very stochastic conversation by design, by the nature of it, I think. Let me just come back. We may return to this subject, but come back to India for a moment. What would be your predictions, maybe too strong a word, but what are some plausible things you see happening or developing in India over the next three to five years with respect to cryptocurrency or web three blockchain all the above? Well, so what's interesting is that now that China's sort of taken itself out of crypto, it has kind of left the door open for others. The US certainly has a big crypto sector. There's a huge fight within the US on crypto regulation and web three and whatnot. And we'll see where that pans out. And we'll also see where it pans out in India. It might be better, it might be worse. We will see. But basically, it is, I'm cautiously bullish in both the US and India on cryptocurrency. And I'm cautiously optimistic that both India and China will maintain some degree of stability. And so in this, I'm not saying it's a five year thing, but like a 15 year-ish kind of thing, 10, 15, 20 years, India could be an intermediate between kind of a coming American anarchy and total Chinese control. And let me explain what I mean by this just to go back to that scenario we were talking about. And again, sci-fi scenario, I'm not saying I put a lot of weight on this, but I think it's possible. So let's say, I had this one liner, which is the US government has sort of lost root control over the system, the future of hard power is CCP and the future of hard money is BTC. This is related to that like, NYTCB BTC triangle that we talked about last time, right? Which is World Capital, Communist Capital, Crypto Capital. And just to recap that, Communist Capital says, you must submit. That's a Communist Party. They're strong, you're weak, they have power, you don't go out of the government. It's very straightforward, just down the middle, like a full back. Okay. World Capital says, you must sympathize. And that's different. That says it is because you are powerful, because you're white or male or straight or cis, you have, or you're rich or something, you have power. And therefore, you must sympathize, you must apologize, and you must like, you know, bend your eyes down, your eyes are downcast, your head is bent. But it ends in the same position of submission as Communist Capital with a bent head and, you know, a dispirited stance. So it's also an ideology of control. It's just a little more subtle, rather than saying they are powerful, they say you are powerful. And the trick of it is with the algebra of intersectionality, everybody's in a presser on some axis. So everybody's either white or male or straight or cis or wealthy, like Dave Chappelle is no longer, he's in a presser on some axis, you know, for example, right? So anybody can be turned into an oppressor in this way. And so everybody kind of lives under threat of having their card yanked and instantly turned into an oppressor, because they're in a presser on some axis. So that's how woke capital works. It's more subtle, slightly more subtle. And then crypto capital BTC is the third point on the triangle. And rather than saying you must submit like Communist Capital or you must sympathize like what capital it says, you must be sovereign. You must hold your head up high, okay, like, you know, jaw out, okay. And you must not just hold your own private keys. Ideally, you're living off grid with a solar panel and you're growing your own food. And you're in a like a Bitcoin Citadel where you're kind of waiting out the Mad Max and so on, right? And so all of those are actually like extremely points. You know, you must submit, you must sympathize, you must be sovereign. And the thing is that while each of them is actually bad, if you if you just go totally to that point, but they're also bad if you have the total absence. So for example, obviously, you don't want to just completely bow your head to this totalitarian state, you know, you must submit. But the opposite of that, where nobody submits is San Francisco, where you can walk in and it's they've legalized crime, like anything under 950 or something, you can shoplift from Walgreens, you go in, help yourself, walk out, repeat it. And that's why like 22 Walgreens are closing in San Francisco. Did you hear about that? I did not, but it doesn't surprise me. Yeah, so so they basically have legalized crime. And then, you know, the city government is denying that this is a real thing. They're like, oh, Walgreens published in their SEC filing three years ago that they might shut down some stores. Therefore, they're just doing this to make more profit, you know, blah, blah, right? And it's like, you can you can and they're like, the rate of crime reported crime has dropped in San Francisco. And this is basically like quoting statistics from the Soviet Union at this point. Yeah, nothing to see here. Move along, folks. Yeah, the crime rate in SF is so high, like, you know, anybody who's there has seen like multiple crimes happening as you walk down the street. There's like open air drug deals. There's like public defecation. There's people who, you know, walk into a store and shoplift something like you can just you can just record, probably put a camera up there. You'll see a bunch of crimes. The reporting doesn't happen because the prosecution doesn't have the police system. So okay, point is, if you if you do not submit, you get San Francisco. Then, okay, if everything is, is quote, sympathizing, everybody's competing to be a victim all the time. And that's kind of, you know, where we are in many ways in American society. But the total opposite of that is also bad because the total denial that any victims exist is the denial of charity and many of our good impulses. And that leads you to a society that's sort of like Russia in the 90s, where for 70 years, all compassion and charity and like goodwill had been sort of milked out of them because, you know, communism had said share at gunpoint, right? Yeah. And so all of that had been linked out. It's all sympathy was kind of leached out. And that's kind of what you get there in the total opposite of that. And then sovereignty, I mean, of course, I'm sympathetic to this, but total sovereignty is actually the opposite of, for example, division of labor, which is also like capitalist virtue. You're trying to do everything yourself. And total sovereignty is also a position of total distrust of everybody else in society. And taken to its limit. And unfortunately, the thing about the internet is people do take everything to their limit, take to its limit. It's like, you know, one person can do everything by themselves, but humans are not just individual animals, they're also social animals. Now, of course, the total opposite of sovereignty is also bad. That's actually the, you know, woke capital and communist capital model where they can deplatform you via the corporation or the state at any time, since your speech, etc. Right. So this triangle model is kind of useful because each extreme point on the triangle is bad, but so is the sort of opposite point. And so that's why I think we want to do is carve out a decentralized center that's in the that has a healthy optimum between these with a recognition that different people will trace out different optima. For example, the the Netherlands is a functional society, but so is Singapore and so is Dubai in its own way and so on. And these have different trade offs of submission, sympathy and sovereignty. Okay. So with that kind of as like a like political philosophy-ish kind of thing for the for the modern era, basically, I think one new piece of information for me or last seven, eight months is that the the woke capital corner of the triangle, the NYT corner, the reason I say NYT CCP BTC is in many ways what while CCP is in control of China, you know, it is a state control press. It is something where nobody in the press is going to go investigate like ZZP. In America, there's it saying, you know, if China's got a state control press, America is a press control state. And what we've seen that is a corporate journalist can get a politician fired, but not really vice versa. Yeah. So the org chart is the other way, you know, like who can get who fired, who's who's superior. Now, the thing is immediate rebuttal is, well, what do you mean? I can write an article and they may not necessarily get fired. And I would agree, it's like a stochastic org chart. And that's what sort of hides the lines of reporting. But if the, you know, let's take, I don't know, the department, the interior, if the if the guy from the W.J. and the guy from the Washington Post, the guy from the N.Y.T., who all have the beat that includes the department of interior, just started writing negative article after article on the person in that position, they'd eventually get capped, almost like a board meeting where it's like a three to zero vote. And, you know, they get fired. I just want to sort of share something that came to mind, which has been on my mind for a while.
The woke-capital–communist-capital–crypto-capital triangle (56:29)
And that is that the U.S., the trends in the U.S. I suppose is somewhat obvious or very different from the trends collectively in China in one very important respect, many respects, but one really jumps out. And that is, nationalism is unifying on a lot of levels. But what we're seeing in the U.S. with, as you put it, the great awakening, and this is not to point fingers at any one side necessarily, but much like the nature of warfare is going to change is changing over time. And it's going to involve more and more cyber attacks, non-physical attacks, although there will be physical components. I would argue just by watching an audience of say 10 to 20 million people per month over the last several years, that we are in the midst of the beginning of a reputational civil war, where the weapons are provided by companies that produce tools for social media and so on. And the attacks may not be those that we would see among different ethnic groups, in a case of, say, ethnic cleansing, but nonetheless, the damage is seen reputationally, right? And that it's not just the New York Times and a politician. It is like neighbor against neighbor. And I find that absolutely terrifying. But I do think we're in the middle of that. I mean, when I look at it, the scale and the intensity, it is absolutely a reputational civil war. And the weapons are technological. Absolutely. You can argue that the corporate takeover of the U.S. actually happened in the 1970s, when three privately held newspaper corporations, the Washington Post were sown by the Grahams, the New York Times owned by the Oxellsberger family and the Wall Street Journal, which is owned by the bankroves at the time before they're sailed to Murdoch. They all went after Nixon with the post, certainly leading the way. And essentially, they got quote, "The most powerful man in the world fired." Now, of course, you can argue, and I think it's fair to say that Nixon was a crook. He actually did do those things. He hasn't denied doing Watergate or the Berkeley or anything like that. I'm not litigating that part. What I will say is that at the time, what he thought was, and was certainly talked about, was that JFK had done it as well and his race against Nixon in 1960s, so he just had to do it. And actually, there's a book by Seymour Hirsch, who is a legendary investigative reporter, exposed to My Lie Massacre, won the National Book Critics Award. And so he has a book called The Dark Side of Camelot and claims, for example, that Kennedy stole the 1960 election with the help of the mafia and that all the sort of stuff. Some of the stuff has filtered out into the public that Kennedy had lots of affairs and all this type of stuff. But the election part is, I think, the material thing, where Nixon thought that Kennedy had gotten away with it and quote, "stole it fair and square," and Nixon decided not to contest it for the good of the country. And then Nixon kind of did it himself, and then he got tagged for it when it wasn't, no scrutiny was applied to Kennedy. So, point being, though, that this concept of quote, "journalist holding politicians accountable" means that the US is a press-controlled state. It also means, by the way, how is that accountability doing? If journalists are holding politicians accountable, and over the last 30 years, the US government has done very poorly, who's holding accountable to people who are holding the government accountable? If they are actually the most senior management, like the Board of Directors vote, who comes in an emergency to remove the CEO, namely the president, you know, via an impeachment, or investigation, or something, well, ultimately the Board of Directors is responsible. So, the thing is, though, that the whole thing is set up to exercise power without responsibility, because it's a stochastic org chart. No one reporter thinks of themselves as being, like, in control of somebody, because it's like throwing a stone at somebody who's being stoned, right? No one stone necessarily kills them, but the fuselage, the hail storm, does, right? And, of course, if you're at the Times or the Journal or the Washington Post, you know, back before social media, you had pretty big stones that you were tossing, you know? And what's interesting is, there is, just to be on this topic for a second, there's a whole field called, you know, we're going to field it. There's a concept called impact journalism, where the whole point is to make an impact, like that stone hitting somebody, like the impact of a government truncheon hitting your head, where the idea is that, you know, people will brag this article led to a government investigation, this article led to so-and-so reforms. And what those reforms mean is that the state made something that was previously discretionary, now mandatory or forbidden. Then say, a law was passed. Freedom was constrained. In the most trivial sense, it's like, you know, a 40 mile per hour and 55 mile per hour speed limit puts you in a box on the v-axis of velocity. You can't go below that or can't go above that. Like, freedom was constrained. You were previously discretionary. Now you're in a box. You may argue that box is good or bad, but as every law is passed, you're in a box on more and more and more and more parameters, right? You cannot be below this amount, you cannot be above this amount. So it's literally like an ideological box, like a constraint, right? And so the thing is that when you are able to, quote, cause impact in this way, you are powerful, but because it's stochastic and it's not like you order it and it happens with 100% probability, you can deny that that power exists. Okay, so the whole system is sort of evolved for the deniable exercise of power. In many ways, the org chart is actually even embedded in the language. Do you know the concept of like Russell conjugation is? Eric Weinstein is big on this. I do not know Russell conjugation. Yeah, so Russell conjugation, at first it just seems like a funny curiosity. It's by Bertrand Russell, the concept, also known as like emotive conjugation. So it's like I sweat, you perspire, but she glows. Okay. So he doxes, she leaks, but the New York Times investigates. I got you, right? And so the thing is, that's a great example, actually. That's a really good example. It's a very important example. Very important example. Yeah, here's why is when it comes to like, what journalism is, like what is real journals? Anybody can go and set up a blog to go and review movies, right? Or restaurants, well, pre-COVID, probably easier, but you know, review books or whatever, all that stuff, you know, huge portions of a modern newspaper, you can just kind of go and do and set up and do yourself. What is the one thing that you can't do on your own? I can think of a lot of things I can't do on my own, but continue. I would argue it is the investigative journals in part because you can't just go to somebody and like start digging through their garbage, interrogating their friends, acting as essentially a for-profit, you know, intelligence agency, because basically what they will do is they will put somebody under surveillance. Okay, that's literally what being a quote investigative journalist is. You're putting somebody under surveillance, essentially wiretapping them, eavesdropping on them and so on. And it's actually, it's an extremely hostile thing because, you know, the goal often is to try to get that person fired, to cause harm to them, cause harm to their company, and to essentially write up a prosecution and put that in the paper. And that's why they say the court of public opinion. It's basically like an indictment, you know, in fact, we sometimes use the same word, like a biting indictment appear in the paper, but it's stochastic, right? It's out there and it's deniable as to what happens. You know, hey, I just put it out there, you know, the old Arthur Sellsburg used to say, our job is to tell the public that the cat is jumping through the window, the public will take care of the cat. So it's like a disassembled bomb strategy where you give them all the parts and you emotively conjugate, you rustle conjugate the whole article, such that, you know, the reader who's unaware of this is led to a conclusion, but you kind of have no fingerprints on it because you just did it with language. Okay. Well, it's like, yeah, it's semantic, like word laundering. Yeah, it's semantic. That's exactly, it's power laundering. Yeah. Okay. And I'll give you some concrete examples of this. Like, here's a really good one. Okay. So there's article in 2012, you know, how punch protected the times, you know, you can just Google that and it talks about how dual class stock was like the, the, the savior of the times and, you know, it was, it was something that was really good because they could, they could think about the long term. Then a few years later in, I think 2019, you can't fire Mark Zuckerberg's kids, kids. Okay. And this is a denunciation of the same thing. Oh, we are creating a class of royalty that controls our national dialogue without basically just emotively conjugates its other way, right? So dual class is good when the cells burger do it and it's bad when Zuckerberg does it. So I would love to, if it's okay with you, I'd love to shift gears just a little bit, but it's going to be, it'll be tangential.
Chinese control/American anarchy scenario (01:06:22)
Yeah. Still related. So we were, we, we chatted very briefly about, I think a pretty justifiable stance that we are already in the midst, not in the middle, but in the beginning of what we might call widespread reputational civil war in the US, which is just going to intensify. And it's going to get a lot worse once we have AI driving additional misinformation and so on. It's going to be, it's going to be a hell of a thing, which is not that far off, I don't think, but where do you see the US going in the next, say, three to five years? If we can constrain a little bit, because I know it may be easier to go to say 15 directionally, but if you had to make some educated guesses or wild ass speculations just based on your reading of the kind of gestalt next three to five years, what do you think plausibly happens in the US? Okay. So let me give a scenario and I'm certainly not saying this is desirable. I think this is possible. The scenario is Chinese control American anarchy. So basically a Chinese victory of some kind in the South China Sea over Taiwan, where there's a referendum or military victory or something like that, especially if the US prints money only to lose, okay, because you print a lot of money in a war, you know, foreign military defeat of that kind would show that the US is no longer a hyper power. And with that would potentially result in, you know, saying fiat currency is backed by men with guns. Yes. Yeah. Finally, saying I recognize. Yes. All right. Yeah. So that's actually Krugman himself said that in an interview to Joe Weisenthall several years ago, fiat money is backed by men with guns. So what happens when those men with guns lose and not in a sort of deniable way to COVID or Afghanistan, like we didn't really try or it was a military thing, but to appear competitor? Well, there's potentially an economic markdown that happens. I mean, Russia's outcome in World War I, Sean Mcknegan has a book that argues that the Russian Revolution, it's called like a New History of the Russian Revolution, argues that very good book that Russia's most important thing was it was at war during 1917. And that's what allowed Lenin and others to take power that it was a war 10 thing. It wasn't just some random proletarian revolution is the chaos of war that led to that. And so foreign military defeat or even foreign conflict is the kind of thing where it turns things molten, things that were bubbling, now things can flow and move around. And here's a bad scenario. The bad scenario is an attempt to repeat executive order 6102, like the gold seizure. Okay. Do you know what that is? Well, I can kind of read between the lines, but why don't you tell me what it is? During the rise of the centralized government of the US and I'll come back to this, the concept of peak centralization, or ping me on it. Basically, one of the things that FDR did was executive order 6102, which seized all the gold in the US. And it basically forced it to be kind of exchanged in at a certain price and whatnot. Now, right now, we're seeing like insane levels of money printing. And it is certainly possible that at some point in the future, they try something like an executive order 6102. And in fact, there's this guy on Twitter who has moderate following, basically is starting to advocate for this type of thing, okay, because he had been predicting Bitcoin was going to go to zero. It's like Facebook is a fad. It's a bubble. Oh, no, it's terribly powerful. It must be stopped. It's a flip from this thing is nothing. It's going to go to zero to we must drive it to zero, right? Or we must seize it. So if they try something like that, and the reason that might be possible is you print a lot of money to finance this war, and now you've got an executive order 6102 like thing and attempted Bitcoin seizure, that is the type of thing that could kick off serious civil unrest. It's possible. The reason is, if you're trying to seize BTC in a time of rampant inflation, that is no longer something that can be portrayed as like being for the good of the population, because inflation touches, I mean, inflation is already pretty high, but it touches everybody touches white people, black people, Latino people, Asian people, it is economics. It's very hard to portray it as some grand historical conflict or something like that. It really is the state versus the people, and it's not like the people were printing dollars or managing the economy. That was supposed to be the Fed and the Treasury and whatnot. So if inflation is rampant, any try to seize a BTC, that I think could be like the match for the next wave of conflict. Just a quick logistics question. Is additional instruments and abstractions or created ETFs, futures, etc?
Risk of BTC on exchanges and DeFi interest rates (01:11:17)
In a seizure scenario, would that be limited to a certain form of BTC or would it apply across all of these different instruments? I don't know, but I think that basically there's a huge difference between gold and ETF. Yeah, exactly. That's right. And custodial Bitcoin, which is like, let's put it as user custodial Bitcoin versus holding coins on an exchange. If you have your coins on your laptop or your device, you're saying not your keys, not your coins. That is something where there will have to be a serious legal process or even a SWAT team to try to get them from you. Whereas if they're on an exchange or but I advise complying with the law at all times, blah, blah, blah. But this would be something where it would be easier to enforce that law on a giant exchange that has all their coins there. Yeah, sure. You just log in and you get a notification. Yeah, that's right. Okay. So there's a graph that I posted in November 17, 18, 2020. Bitcoin is moving off exchanges, prices are moving up, ecosystem is building out, having this constraint supply the all time high, maybe just the beginning, which are not to be true. That was almost exactly a year ago. And there's a graph from Glass Node, Bitcoin, colon, balance on exchanges, all exchanges, which seems to show that coins have been moving off exchanges. And there's another graph from Valamoo, THAL, AMU, underscore, also showing that BTC held on spot, exchanges may be falling. Now I haven't dug into this. So you need a pro subscription to Glass Node and so on and so forth. But that's an important metric to monitor because coins on exchanges are easier to seize than coins off exchanges. Is that because do you think the main driver there is because people can stake their coins or stake their, I suppose, coins and get a higher return on decentralized platforms? Is that why you think they're coming off? I mean, so interest is a massively scalable application, right? Just park your money and get money back. And DeFi offers insane interest. And how people don't know, so DeFi decentralized finance. Decentralized finance offers an absolutely insane level of interest. I wouldn't even quote the numbers because any number I quote, you can find a higher one if you can take on more risk, basically. And what does that risk mean? It means like possibly loss of principal, like the smart contract could be hacked, possibly other kinds of things. But you can put in a million bucks and get like $100,000 a year or more in interest. Now the thing is that you could also try and put a million bucks and try to make $10 million because some of these coins will 10x. So it is absolutely like the upside of crypto. By contrast in banks, they're at like zero interest rates or like nothing. So just to play the other side of the, just to play the other side.
Cryptocurrency and the principal-agent problem (01:14:47)
Yeah. Where can you make more money and also lose more money if you make more decisions? Exactly. Crypto. It's like, you know, it's like the Unix of money. You can room dash RF your entire fortune or move millions of the future. Do you know room dash RF is? I don't, but I love that. I almost want you not to explain it because like five people in my audience will find that amazing and the rest won't get it. But I mean, I can sort of intuit what that means, but why don't you spell it out for me? Room dash RF is, it's like a Unix man, which means remove everything dash recursive dash force. So you do it at the top of your directory hierarchy dash R means descend into everything dash force means don't ask me any questions. And you know, people are used to doing this when they want to just nuke a directory. But if you do it in the wrong spot, you're like, oh my god, I deleted my entire files or whatever. Oops. Yeah. Now, now, modern systems will kind of detect what nodes you're in and, you know, may not actually allow you to do that. Right. But that's what being a quote power user means a computer will do what you tell it to do, not necessarily what you actually wanted it to do. That's what a bug is. You've instructed the computer to do something goes an error in your logic. You didn't think through a scenario, didn't think through an input. And it does what you told to do, but not what you wanted to do. By the way, this is like a super important thing in terms of cryptocurrency, because it solves the principal Asian problem and replaces it with your ability to debug. Do you know what I mean by that? Should I talk about that? You said the principal Asian principal agent. I'm kidding. Sure. I wanted to know who this principal Asian is. Yes. Principal Asian problem. No, I don't know what that means. Please continue. Okay. So, so this was like back in 2013 when I understood the full scope of this. I was like, holy cow. And the reason is whenever you have a principal and an agent, for example, you have a venture capitalist as a principal and they fund a CEO who's their agent or you are the principal and you hire a plumber who is your agent to fix something, right? Or you hire a banker to go and sell something for you. The problem is that in the two by two matrix of you win, you lose, they win, they lose. All four outcomes are possible. In particular, it is possible for you to lose and them to win. For example, they take commission without delivering you returns on your portfolio. Okay. And in fact, you know, the principal agent problem is a fundamental thing of every single relationship on an org chart. Manager, engineer, right? CEO, manager, VCCO. Every single edge there has a two by two matrix of who can win and who can lose. Okay. Now, the key is to try to diagonalize this as much as possible such that the win, win and lose, lose are, you know, like you both win the most together and you both lose the most together. So, there isn't any temptation for one party to defect off diagonal and win at the other guy's expense. Yeah. Yeah. Read your terms and conditions carefully. That's right. And the thing is that this becomes more complicated when you have just two people, it's a two by two. When you have three people, it's a two by two by two because there's eight outcomes. Win, lose times win, lose times win, lose. It's a Cartesian product. Okay. When you have n people, it's two by two to the nth power. It's like this hypercube. Okay. Yep. As it gets very complicated. So, it starts to happen in large organizations is that some subset of people picks the strategy where they win and everybody else loses. They, you know, for example, 51% can vote themselves the money of the other 49%. That's a straight win, lose, zero, some kind of dynamic. Okay. Now, the way that startups avoid this is with equity. If you've heard the term like aligning incentives, it actually comes from like math where it's like a diagonal alignment pointing through this hypercube of incentives. Okay. Where the key thing to do is especially to start up, you know, 51% could vote themselves the other 49% money in theory if everybody, you know, as a shareholder vote, everybody is equal. But there isn't any money to distribute. All the money comes in the exit. Yep. So, internal politics are limited because internal resources are limited in a small company. And so, what you do there is rather than encourage people to compute every possible strategy in this giant, you know, two by two by two by two hypercube, instead you say the win, win, win, win, win, win, win, quadrant, we're all N of us win together in an exit, you know, an acquisition or an IPO. Well, you don't have to do out the math. That pays off the most. And every other off-diagonal thing where some coalition wins while the other group loses is suboptimal. Okay. Now, here's the thing. The principal agent problem comes from the fact that when you've got two human beings, their interests never fully coincide.
Automation and eliminating human error (01:19:47)
There's a situation where one can die, another can live or vice versa, you know, trolley problem type things, you know, push hard enough. And there's often a divergence in incentives, right? Not so for robots. Not so for programs, not so for intelligent agents. And you're going to tie this into crypto or blockchain? Yes. Yes. Because with cryptocurrency, a program can now trade on your behalf. You can, rather than hiring a banker to go and trade for you, you can write a program that will trade for you while you sleep on cryptocurrency exchanges and especially decentralized exchanges worldwide. So that program that you write to trade, especially the reason I say decentralized exchanges worldwide is that is truly just packet to packet. That's full internet. They may not even be a sign up process. Okay. That is fully on chain. And so that is something where, see, just like you go from a telephone number to an IP address, you know, telephone number is a human associated thing, but an IP address is a machine associated thing. Any machine can call any other machine via an IP address. That's what an IP address really is, right? You go from a human bank account to a cryptocurrency address and you remove the human association. And now a program can hold money, make money, lose money, fully autonomously. And so now, rather than hiring the banker, you write the program, there's no more principal agent problem because the program has no mind of its own. It's only the mind that you give it. Okay. Now, this is super important because as trust in society decreases, it is harder and harder to maintain like a scaled organization of human beings because there's more and more divergence. It's an individual era. Everybody is going in this direction. Why are you the boss? I should be the boss. You know, like, in fact, both equality and freedom, while in some ways they're often made and and and typical to each other where, you know, they're actually also similar in another respect, which is, if we are all equal, totally equal, if you ain't the boss of me, you know, I have total freedom, then there's zero hierarchy. Right. It's all flattened out. Right. It is basically an arctic. Right. And in that situation, everybody feels that everybody's interested in diverge. So I'm, you know, every man for themselves. Okay. Now, in that situation, it's hard to maintain a civilized society. So I think that the answer is going to be robotics, cryptocurrency. How do those things relate? Well, when you give a robot instructions to go and unpack a box, it just does it. There is no divergence between the capitalist and the worker. The capitalist is the worker because the cap like management becomes automation. There's a great book, Factory Physics, you heard of this book? I have not. Like, it's way harder to build an assembly line than to work on an assembly line. Okay. Factory Physics, a good book. Also, Eliyahu Goldratt's book, The Goal is quite good. He kind of managed to wrap a like, it's kind of funny. It's like, it's almost like a fictional story around operations research type stuff. And, you know, it's executed better than it sounds. Okay. It's like, who move my cheese? Operations research finance. That's right. That's right. So both of these are good books. Factory Physics is like, it's like a textbook that takes a very quantitative approach to cycle times and other parameters within a factory sector. But the main thing that you take away from that is, and so I designed a robotic genome sequencing assembly line like 10 years ago as part of my first company. And this is something where you realize, whoa, it's actually way harder to build an assembly line than to run it. It's like the difference between writing a program and running a program because every box there, it's actually very similar to architecting like a data analysis pipeline, which more of your viewers will have done. Because, you know, something has to flow out from this and into something else and ask me the right format. And it has to process only this many units at a given time. You need to use buffers and cues to get rid of it and so on. And in many ways, by the way, that data analysis pipeline thing now integrates with the offline physical stuff where you'll do some physical processing to wait for computation online. And then the physical process kicks off, right? So 10 years ago, I was kind of merging robotics and AI and cues and all this type of stuff. You know what? And this made me like, tech people, you'll mess around with a palm pilot years before people are using an iPhone, right? Or you will be in World of Warcraft before people are doing VR or everybody's on Twitter before the people are on Twitter, right? So I kind of saw this firsthand. And one of the biggest things was what you want to do from any process like that is eliminate as much human error as possible. And eliminating as much human error as possible means as limiting has been humans from the process as possible. It's an error to have humans if you want to eliminate human error. Okay. And if you can reduce it to just bugs in your code, that's way better because you can see that on screen. It's super consistent, at least. The error is made in the same way every time. Just to give you an example, if if somebody rotates a so-called 96 well plate, okay, an 8 by 12 plate, if they just rotate it wrong, if they're cranking through high volume and there's rotated wrong, which is easy to do. I mean, they've got kind of markers on it, but you know, people or people can screw up. There's 96 samples that are off, 96 patients get the wrong report. Wait, 96 patients of what type? Sorry, I lost the connection. What does the plate have to do with patients? So visualize like a like a plastic tray with indentations in it to contain liquid. Okay. And so those indentations are like really small, like basically eyedropper scale indentations. If you Google like 96 well plate, you'll see, you know, and go to Google Images, you'll see like a visual of this, right? Okay. Got it. Each cell there is often like a patient sample. Okay. So you might have 96 samples from 96 different patients in this plate. And then you're, you know, putting various reagents in there and putting it through this process. And if you rotate it wrong, you know, everybody gets the wrong result, like 23. Oh, I see what you're saying. Right. I understand what you're saying. They are matched incorrectly. Is that what you mean? Yeah, yeah, exactly. Right. So they had like a sample swap error back in 2010, where like a bunch of people got like, you know, the wrong ancestry results, they were, oh, you know, they thought they were this ancestry. They were another ancestry. They thought, Oh my God, am I in the legitimate child or something like that? Right. So, so the downstream consequences of this like very human error are, are something that the error was to include a human. And so, you know, what's, what is going to happen is cryptocurrency means that you don't have to hire a banker. You can write an intelligent agent to trade for you. Robotics means you don't have to hire a worker. You can hire, you can program a robot. Management literally becomes automation. So rather than writing out instructions and setting up the assembly line and positioning workers there and calculating cycle times and so on and so forth, you as the manager, like for many people, by the way, management is, it's not tangible. And that's why they devalue it. The way the labor theory of values is talked about the Marxist theory of value, it starts with a visual of the factory floor. You have these workers who are working and it's like, oh, we owe, we owe. And you have this evil fat cat boss with a cigar who's got his feet up on the desk and is just like basically cracking the whip on these poor workers. And of course, you know, it seems like this did exist in late 1800s America. And you know, I'm not arguing that like unethical bosses didn't exist. But the fundamental premise of this is, oh, the workers are doing all the work and this fat cat is just sitting there and contributing nothing and so on and so forth. And part of that is because capital and management are kind of intangible and it's often denied they create any value. Okay. But now what is actually possible is a totally different model where it doesn't start at the factory floor. But instead you start, let's say, in an academic lecture hall. And now you say, okay, let's say it's physics, right? What percentage of people are able to comprehend the material and what percentage of people could write the textbook and then what percentage of people could rewrite the textbook? And it is on that small minority of people that we depend for refrigeration and flight and fiber optics and so on. Like it's it's opposite rather than like this small set of fat cats who exploits this giant pyramid, you know, with all these workers at the bottom, it's like an inverse pyramid theory where the vast, vast majority of people depend upon this small, small group of technologists to create all the stuff that they don't understand how to operate that maintains modern civilization. The funny thing is that your engineering grad student often has both of these mental models in their head at the same time. And it just depends on whether they're thinking of themselves as a poor exploited worker or a like, you know, sophisticated, like engineering kind of character, right? And what I'd argue is that in the 20th century, the reason that the labor theory value perponderated is that there was leverage to large groups of workers. They could do a strike because of mass production, you needed workers to operate a factory. So there was leverage there. And, you know, of course, what happened was they in the Soviet Union, they pushed everybody into a lose-lose scenario where yeah, there was a strike, but it wasn't a win-lose scenario where the workers win and the bosses lose. It was a lose-lose scenario where after enough strikes, you got communism where nobody could strike. You know, you had the white sea labor canal, you had the gulag, you had basically, you know, communism as this giant slave labor country, this prison state where you couldn't escape. They would shoot you if you tried to get over the Berlin Wall, for example, right? So actually, the leverage existed between workers and capitalists in a certain way. Now it's a different kind of thing. Now with the dock worker shortages, with the truck, you know, truck driver shortages, there's a huge incentive for automation and for robotics. And people are just doing, if you've heard this thing, the great resignation, it's happening across many different social classes. With labor shortages of a different kind, okay, it's on a strike, it's a resignation, okay, well, I can't get somebody at this price fine. Let me figure how to automate this with robots. And now, and here's a critical thing, it is not intangible anymore. Management is not intangible. It's not just instructions that the, you know, the boss is giving to the workers and he puts his feet up on a desk. It is literally code in GitHub. It is lines of code that say, move this arm here, position it here, calculate the degrees of freedom here. It is math, it is computer science. It is now tangible because it is code. And now you're not giving instructions to a worker, you're giving instructions to a robot, a computer, an agent. All right. So this is, this is actually a perfect segue to what I was going to lead into.
Potholes on the road to utopia (01:31:05)
And I'm just going to talk for a little bit to set the stage since, so beginning, probably just before our last conversation in Q1 of this year, and certainly with increasing depth over the last six months, I've been spending a lot of my time in what we might consider Web3, more immersed in blockchain and cryptocurrencies and FTUs, etc. So many of the things that I had read about have become less theoretical for me. And there are, there are things that I've been able to explore and thankfully not experience in some of the negative cases that have led me to all sorts of realizations. So for instance, one is, if you just read crypto Twitter, at least some of the people on crypto Twitter, which I would suggest no one do if that is your sole source of information. But some interesting discussions nonetheless, there are some sort of techno idealists or techno optimists who sort of paint this decentralized future that is just utopian in almost every respect. But there are risks in bad code, smart contract risk, and there are insurance companies, Nexus Mutual and many others of different types that try to provide ways for people to protect themselves against the downside of certain types of smart contract risk. We talked about the pseudonymous economy last time, whereby people would use alter egos of different types that didn't change constantly, but rather accrued some type of reputational value. This is another thing that I've seen most acutely for myself within DeFi and NFTs specifically within NFTs, people who are collecting a high value or what are currently high value JPEGs in essence, but pieces of artwork that are non-fungible. People now have hundreds of millions of dollars worth of these pieces of artwork in some instances, and very few people, if anyone knows their real names. I've had this experience for the first time where I've even met some of these people in person and tried to make small talk. We chatted about this before we started recording and I'm like, "Hey, where are you flying in from?" And they're like, "Yeah, I'm not going to answer that." And I was like, "Oh, wow. Okay. This is the different conversation that I'm accustomed to." But there's also some degree of counterparty risk when you're dealing with pseudonymous identities, let's just say, where you don't yet have established some reliability score outside of a verified account and check mark on Twitter, which can also be faked. I mean, that can also be hacked in some respects. So here's my sort of overarching question and I'm going to lead into it. So I'm sure you've heard this line, trusted third parties are security holes, right? So on paper, I'm like, "That makes sense." But when you start to really wade into, say, NFTs, this is an example, and people say, "You need to be your own bank." There's a lot of responsibility and logistics that goes into being your own bank. In the same way that if you, for instance, want to or imagine living in this kind of utopian decentralized world where there's a degree, I'm not saying this is you, but a degree of anarchy. And we saw this during riots in the last year or two in places like Portland, in many cities around the world, you quickly end up in a state that is not unlike what we saw during Hurricane Katrina, where these atrocities being committed left and right because there's no law enforcement. So then that leads to questions of, "Do you want to be your own law enforcement?" And I've seen how much fraud there is, just say, and sophisticated social engineering goes into some shadowy corners of the world of NFTs, say, with people posing as customer support and discords, and then taking snapshots of people's QR codes and so on. I mean, there's a level of sophistication that I hadn't personally been exposed to because I'm shielded by my... Now, you can sure pick this apart, but I'm shielded on some level from certain trusted third parties, right? I do not have the obligation to act as my own bouncer and security guard and banker. So I'm wondering if you'd like to kind of comment on any of this because I have realized that for me personally, being Jason Bourne in my physical and digital life on every level is a scale and scope of responsibility that I don't really want. Even though I have some... I have firearms training, I have some technical ability, I have an incredibly good network. I could actually organize my life around some of those pillars of self-sufficiency, but I'm not convinced I totally want to. And I'll tie this in also. You were talking about Singapore before we started recording, and you said it's for centralized, it delivers. So I'm just wondering, for muggles, who might be listening, and I would include myself in that group, where we're like, you know what? I'm not ready to be the lone ranger on the frontier of complete decentralization for all of the perceived risks that at least I see once you start to wade into it. Where's the Goldilocks point? And how do you decide that for yourself? Excellent, excellent question. I thought about this a lot from many different angles, and let me at least give you my thinking on it, and shoot at it or agree as you want. So this kind of relates to the thing I was talking about earlier with communist capital, woke capital, crypto capital, submission, sympathy, you must submit. You must sympathize. You must be sovereign. And that last point of the triangle, you must be sovereign, as you are discovering, is actually not, that's why I said it's an extremely point. It is too hard for pretty much anybody to not just hold their own currency, but grow their own food, and get their own water, and so on and so forth. Humans are individuals, but they're also social animals, and you make some compromises. Now, the stuff I had just discussed on robotics actually reduces the necessary scale of societies. In theory, you could have, and this is where I think we end up in 2050 or 2040, maybe even sooner, you could go back to the future now of robotic farms, robotic autarkic farms, where if you're looking at the automation of agriculture, it's getting there. It's really improving dramatically. AI for picking things and so on, and you kind of give your instructions to your robotic field hands, and you might actually, because then you go truly full stack, you're quote off the grid, but you have maybe a modern life. Now, of course, you need enough land, you're still going to have trade, you're not going to be able to grow every crop there, but you might be able to do okay. So I do think that there's an eventual thing, I don't know what the minimum scale society is, but I think it's smaller than 300 million, might be smaller than a million, might be even a few thousand people who could operate something decent. But there's actually, to put it, to make that more explicit, there's a, you know, the project open source ecology. I don't, I recognize the words, I can imagine, but why don't you describe it? Yes, it's a little different than what people think when they hear the word ecology. It's basically a kit of like 30 open source machines that if you build them from scratch, you could rebuild civilization, the global village construction set, okay, open source blue. So it's like, how do I get running water, and how do I get this? It's all the things that civilization depends on, and, but it's machines that you can build yourself. And there's also, you know, a couple other books like this, there's a book called The Knowledge by, I think, Louis Dartnell, which thing's really good. And, you know, how to build, rebuild our world from scratch, okay, like kind of the post apocalyptic thing. That's what the knowledge is about? Yeah, the knowledge colon, how to rebuild our word for world from scratch. And then there's another book, which is, how to invent everything a survival guide from the stranded time traveler, okay. And, you know, those books, I think, are quite good, okay, those two, as well as like open source ecology, because it addresses some of what you're talking about, which is how would somebody start from scratch and do this? We don't know how to do it, right? And in some ways, what's happening is there's a cycle of centralization, decentralization that just happens. For example, in China, it's like there's the boring states period, and then the whole thing is unified. And then it breaks up again and it's unified, right? And we see this in the computer industry in a totally different context, which is you have mainframes, then you have personal computers. Oh, and then you have cloud, and then you have, you know, cryptocurrency and smartphones, right? And like, it kind of goes back and forth like this. And the thing about this is when, you know, system is centralized, people chief at the control, and they want, you know, sovereignty, they want power, they push on it, then they manage to break it up, and then it's all decentralized and it's chaos. And now what is scarce is leadership. They're like, oh, let's put it back together and so on. And seen from one vantage point, this just looks like, you know, like a cycle, you just keep coming back where you came from, right? You know, you go from anarchy back to tyranny to anarchy to terror, right? But seen from another standpoint, it's like a, it's like a helix. It's a cycle in the XY plane, but we are making progress in sort of this, you know, ascending kind of cycle over many generations, right? Now I'll put an asterisk on that too, which is, I don't believe that progress is necessarily guaranteed. In fact, there's a couple of good podcasts or shows like the fall of civilizations podcast or, you know, Samo Berja actually has some good stuff on this, where he talks about Gobeckli Tepe, which is like the oldest human civilization. It appears looking at some of the civilizational records that humans may have like gotten pretty advanced and then just kind of totally collapsed. And we've done that a few times in human history. So you're saying you believe in Atlantis? Well, not at all. I'm getting, I'm getting, so like, like Gobeckli Tepe, for example, it like it's this site that's kind of like Stonehenge, except way older than Stonehenge, found in what is today modern Turkey that pushed way back our dates of when, you know, civilization started. Okay. So it might be like, you know, playing a video game where you get to level 15 and then you die, get to level 27 and then you die. And this just might be the most advanced human civilization we've built to date. But it could just collapse and we might come back. I mean, it happened to the dinosaurs, they got hit by a meteor, right? Yeah, well, it's happened to, I mean, there's some pretty bizarre archaeological records and really interesting carbon dating done in South America also that would point to advanced civilizational collapse of different types. That's right. And so the thing is that when you say progress is possible, but it's not guaranteed. I mean, you know, for example, think about Christianity and the Roman Empire, like Christianity in some sense was, you know, right? No offense to your listeners. I have nothing against it. But it was like the original communism at the time of the Roman Empire. It tore down the Roman Empire. It said that slaves, you know, are good and sooner or rich men go through the I of Needle and get to heaven. And basically it de-legitimated the Roman Empire. And eventually, you know, it fell at least the Western Roman Empire. And that was something you got the Dark Ages for a while until the sort of fusion emerged on the other side. You know, you had the Germanization of Christianity, you know, had, for example, why do you have St. Nicholas and Santa Claus and Snow next to a scene of Bethlehem and the manger in the desert? Those are two totally different cultures, thousands of miles apart. But what's happened is it's like copy-pasting one story next to another, like horizontal gene transfer in organisms, like the meme replicates even if the substance is changed quite a bit, right? And so what happened was eventually after the Dark Ages, you got like this, you know, a thing that was a contradiction in terms or oxymoron before, the Christian king, not the Roman Empire, the Holy Roman Empire. Of course, it wasn't continuous with the thing, but conceptually. And you kind of had that raprochemon. But there was a Dark Ages, like a collapse of civilization in between. And so bad ideas or let's call it, let's call it certain ideas can collapse civilization. That has happened. Okay. And yeah, we've recovered, but it's not necessarily a guarantee if we've collapsed, is a guarantee that we'll cover. The dinosaurs didn't, of course, of course. Well, some ideas are even generated or myths to collapse civilizations. Yeah. So, right. So this gets to something which I think of as a very important part of the future political axis, which is, you know, you can say it is like Democrat Republican, you can say it's centralization, decentralization. But I think an even more important axis in the medium to long term is going to be transhumanism versus an archa-primitivism. And we kind of talked about some of this before, I think. Do we? Let's reiterate it. And then I just want to make sure I bookmark that I want to come back to how do you find this sweet spot on the spectrum? Because one concern I have is that the decentralized tools, given the literacy required and the precautionary measures and tech savvy required, will forever remain or for a long time, maybe not forever, but for a long time remain the tools of half a percent of a population, or maybe a few percent of a given population. Yeah. So the answer is, unless there are kind of UIs slapped on top, which will ostensibly just create, again, trusted third parties.
Society'S Reconfigurations And The Role Of Crypto
The unbundling and rebundling of society (01:45:40)
So it seems sort of antithetical. But I don't want you to lose your train of thought, but I want to make sure that we come back to that. Okay. So let me quickly do an archa-primitivism transhumanism. Then we come back to your point. Okay. So the quick thing on that is an archa-primitivism says, we're not living in nature. We're far away from it. We're having all these plastics. We're having all of this pollution. That's why maybe there's a right-of-center version of that, which is like our testosterone count is down. But it is actually, that's not like a conspiracy theory. It's actually like a scientific fact. It's way lower than it used to be for adult men. All that is down. And so there's some aspect where this is now neutral. We're diabetic. We're eating all these grains. It's all bad. Instead, we need to kind of reject modern civilization in part or full, like the unibomber thesis and just go back to the land. And of course, the problem with this is, I think that's a romanticized version of what going back to the land is. I don't care if some people want to go and do an Amish thing and live on their own or snapshot some point in time. They want to tear down industrial civilization. Conversely, the transhumanist thing is the opposite, which says what makes us human is technology. You know, Richard Rangam's book, How Cooking Made Us Human? You're heard of that. I have, yeah. Okay. Finally, one book I've heard of. So Rangam's book is interesting. I've also read Horton Hears-a-Hoo, just to establish my level of reading. Your Chinese is way better than mine. And we have a non-overl... I should say, non-overlover, I learned from tools of times is amazing. Thank you. But Cooking Made Us Human essentially says that technology is actually part of humanity in the sense that we sort of outsource our metabolism to cooking and therefore could evolve in a different way. Right? 100% agree. That's probably also true for clothes and other things. You know, there's this book like The Naked Ape, which is kind of also about that. And the idea is that we are a technological species. Technology is not some anti-human thing. It is humanity. It is a difference between us versus animals. And so our destiny is to get to the stars. Let's do this. Right? Let's become transcendent beings like one with the machine, you know, brain machine interface. Like this vessel is just what we are today. But our ancestors, ancestors, if we really want to make our ancestors proud, they were like single-seller organisms or like non-human creatures. So whatever is in front will be to us as we are to them. Right? And so that's like the transunism thing. And what's funny is both of these in their extreme form are like off-putting to some people. Right? They're like, "Why can't we just stick where we are?" But the nature of things is that those people who have ideological zeal will start pulling the train in one direction versus another. It's very hard to kind of keep something just like stable in one state, you know? You have to end technology and communications, right? Okay. So now coming back to your point, basically, what do you do when all of these institutions collapse? Let me, I'll slightly rephrase it. What do you do when all these institutions collapse? Because most people cannot be that sovereign. Because it's like an overnight plunge into refounding everything. Okay? It is not simply be your own bank. It's maybe be your own food supply. And there's certain things that are sitting on your desk that cost you 10 bucks. But you would never be able to build them or it's very, very expensive to build them from scratch. Like a, I don't know, like a USB cable. Okay. Well, how am I going to build this? I'm holding up a ballpoint pen. Yeah, of course that's the famous thing. You know, like no one can build a pencil, right? Like the first unit rolling off the assembly line is wildly expensive. Okay. Then the one millionth or billionth unit is super cheap. But getting to that point of technology from just a a grass field and sand is super hard, right? Yeah, it's gonna be hard to do from your intentional community in the jungles of Costa Rica. That's right. But all the supply chain stuff is going to start forcing a greater degree of autarky. If we're lucky, it is just a gradual ramping up. If unlucky, it is too fast and you don't have time to adapt. It's like the difference in like working out gradually versus like go put up 300 and you know, break your elbow or whatever, right? The point is what I think happens is unbundling and rebundling. Okay. So one of Mark Anderson's collaborators a long time ago had this throw-off line, which I, which I love because it's so funny, but it's also true is, you know, the only ways to make business, money in business are bundling and unbundling. Okay. And this gets back to the spiral thing I was talking about. For example, you take the songs off of a CD and you unbundled them in 10P3s, and you rebundled them into Spotify playlists. Yeah. Or you take the articles out of a newspaper and you put them into individual URLs and then you rebundled them into Twitter feeds. Okay. Yeah, or a subscription, right? Or a subscription. That's right. And you take the countries that we have today, okay, that are, you know, the people no longer feel a loyalty to. You're unbundling them into the coming American anarchy. And then you're going to rebundle them on the other side into groups that do have something in common. And that will be probably a really messy global process when this Pax Americana falls. And one analogy is, you know, the 30 years war, right? Like in some ways, by the way, that's actually quite analogous to what we're going through. Do you know about what happened then? I do not. I would love to know. Tell me. Okay. Sure. So the printing press, I have this tweet actually on this. Printing press plus Martin Luther led to the Reformation led to the counter-reformation, led to the religious wars, you know, the 30 years war led to eventually the peace of Westphalia and the nation state. And the internet plus Satoshi Nakamoto led to the decentralization by analogy to the Reformation led to the counter decentralization led to potentially the coin wars, the American anarchy, and then question mark, question mark, and then network states. So let me explain what that means. So basically, you know, by the time of, you know, Martin Luther, the Catholic Church had become this ossified centralized power and had, for example, this thing called indulgences where you could go and sin and you could just go and pay some money and be like, yeah, to church to be like, no biggie. Okay, you have, you know, yeah, it's a whole pass exactly, right? You can argue it's similar and you know, I know this is a little bit of a poke, but like a carbon credit. Yep. Go and sin with carbon and then buy a credit, right? You might argue that's a good thing or a bad thing, but it's analogous, right? Gotta make, gotta make those fuckers more expensive. Gotta make them work anyway. And even better example is like, like TSA pre, okay, where like everybody's a center, everybody's a potential terrorist, but pay this money, you could be in an express lane, you know, like, huh, it doesn't strike anybody as right, you know, it's like this weird thing where if you shoot with safety, why can you pay for it, right? Or at least let's call it arousal question marks, right? And so, so two things. Now, I was just gonna bring us back to your tweet. The other thing I'll say for folks is if you want to learn a bit more about Martin Luther and many of the things that followed, there's an incredible podcast episode. Takes a little while to get warmed up called Profits of Doom, which is on hardcore history by Dan Carlin. It was the first episode I ever listened to of his which got me hooked, but fascinating listen. So I recommend that to folks. And back to our regularly scheduled apology, sir, please continue. Great. Also, you know, there's a good thing on this called the Bitcoin Reformation with Tour Demestre T-U-U-R-D-E-M-E-S-T-E-R that kind of goes through some, you know, similar ideas, basically like analogizing Bitcoin to to Martin Luther. So maybe look at both of those together and then you know the historical version and some of the parallels. But briefly, basically, Martin Luther, you know, because it's the time of the printing press, he didn't just nail his 95 DCs to Wittingen in I think 15, 17. Basically, you know, people were able to copy, you know, his arguments. And you know, for the first time people had heard these sort of deconstructing arguments, you know, that said the Catholic Church is a scam, you should have a personal relationship with God. It doesn't matter what the church says, you know, etc, etc. And so, yeah, that was a religious argument, but it was also an argument over power and who should hold power. And you know, for a long time, when I was a kid, I didn't understand why are people arguing about, you know, the body of Christ like a wafer? It seemed like the weirdest kind of thing to argue about and fight and kill about. I just didn't understand this. Now I understand that a lot of those things were sort of proxies for who has power. Does the church have power or did these new guys have power? And so what happened was the Reformation was like this thing of basically of decentralization and power away from the church. And the counter Reformation took a little while to get underway. But this was the Catholic Church saying not so fast, right? And basically fought. There are some reforms. There's also some combat. And these were the wars of religion. You know, do you go with the like the centralized church or the decentralized, you know, Protestant movement, you know, Protestant versus Catholic? And eventually after 30 years of war, very bloody war, people were like, okay, you know, we're going to come up with essentially a live and let live philosophy, you know, the piece of Westphalia where we're within nation states and you have the monopoly of violence within that and a transnational religion doesn't have influence within this geography. Okay. So that's to say the Catholic Church doesn't have influence here. And it was like, you know, okay, we're both like pretty bloody, let's settle this, you know, okay. And the thing is, that's way out of living memory. Okay, that is many generations go. But you know, sometimes people seem to need, you know, one thing that's funny is a lot of things kind of you can argue they happen on like 70, 80 year cycles, because like things drop out of living memory and then certain aspects repeat, right? So things people have sort of forgotten how bad war is in some ways. So you know, that they're kind of larping it, right? And maybe they'll make it into a real thing. This is actually Fukuyama mentioned this, his end of history thing actually had a pressure in common that people on some level are wired to struggle. And if they don't have struggle, they will re-event struggle that will struggle against order and prosperity to kind of make it hard. Yeah, manufacturer struggle. Yeah, exactly. That's right. And that's Francis, Francis Fukuyama. Yeah, let me actually find the exact quote on a second. And while you're looking for that, then I want to come back to the Bitcoin or cryptocurrency comparison.
Counter-decentralization prediction (01:57:21)
And the part that I stumbled over when you were reading the tweet initially was the, I want to say the great re-centralization or something like that. And I just wasn't sure what that was. Okay, yes. So centralization, decentralization, re-centralization is like entity, unbundling, rebundling. You know, it's like CDs, individual mp3s, playlists, it is newspapers, individual articles, Twitter feeds. It is countries, anarchy, new countries, new cities. What is that in cryptocurrency, the re-centralization? For example, in exchange, so it's happening on many different scales. But one of them is store your money in a bank, okay, pull it all out and you've got Bitcoin on your computer, store your money in exchange, okay, pull that out and then put it on a DEX partially. And each step here actually gives you greater control. DEX, decentralized exchange. Decentralized exchange. And there's ways of kind of doing this where you have less risk than on a centralized exchange. For example, it's only like it's an atomic trade, it's on the DEX like a flash loan and then you're getting it back in the next transaction. There's various ways of doing this where a centralized exchange improves your control over a bank and a decentralized exchange improves your control over a centralized exchange. Even if there's parts of it that seem like you're reinventing the wheel, the wheel was reinvented. In fact, there's this great graphic that shows like an original stone wheel and then like a chariot wheel, then like a modern Michelin tire. We do need to reinvent the wheel. Okay, and we have reinvented the wheel. We just need to be conscious when we're doing it. So the way I kind of think about this, I'll just finish that Reformation analogy by the way. So just like there was the Catholic Church and then there's the Reformation, which is a decentralizing event, and then there's this huge fight with the counter-reformation and then eventually a truce where Protestant basically won relative to the previous Arabic Catholicism to not die out. It's still a big thing. Similarly, I think you can think of the era we're in as the decentralization and now the counter-decentralization. So just like the printing press in Martin Luther kicked off the Reformation, the internet and cryptocurrency have kicked off the decentralization. And what does a counter-decentralization look like? It looks like de-platforming from social media platforms. It looks like unbanking. It looks like the Chinese surveillance state. It looks like basically exercising root control over this, it's basically root versus routers. So do you have root over this computer system and you're exercising root control? Or do you have this decentralized set of routers that are just routing packets back and forth? And the counter-decentralization, I believe, is going to succeed in China and fail in the US. And what I mean by that is, I think China, because they have very ruthlessly competent managers, there's actually a good video by Eric Exley from 2013, which it doesn't hold up in every respect today because there's certain claims he makes that, for example, that Xi Jinping will step down and it's like a multi... that they've figured out political succession because Xi Jinping repealed that or whatever. Those are things where he says that the Mao era is continuous with the Deng era when really Deng was really a coup against Mao's successor. It was a total shift in direction, so that would not end up intended. So those two parts, maybe he just has to say that for domestic consumption or what have you. So you have to take it with a grain of salt, but the rest of it is actually very interesting where at least it gives a 2013 Chinese vantage point on their system. Why China? Why do they actually have these ruthlessly competent managers? Because the way that the CCP works is, yes, there isn't voting. If people want to exercise political power, they join the party. Similar to how in the US, yes, you can vote. If you really want to be politically powerful, you want to run for mayor or something like that, that means joining a party. Sort of like that, of course, not the same, but roughly analogous, those people who are politically ambitious join the Communist Party and they might start as running some small, really tiny town of 100 people. Then they level up and they go to something of 10,000 or 100,000 people or a million and then eventually 10 million. Each level becomes more and more competitive and they have surveys they do of the populace and they do like 360 reviews where they're looking at your peers who are running other cities and they're looking at your superior supports. It's like promotion in a corporation. And so, of course, there's patronage and there's connections and so on that go into it, but it's like a giant corporation where they're looking very much at metrics and did you build this many toilets? Did you hit your numbers from above? Did you manage the populations discontent? Is this region? Does it have higher dissatisfaction than other parts of China and so on and so forth? So, it's like, a corporation is not a democracy, but it is responsive to its customers in a certain way. And the Chinese government was always kind of conscious of losing the mandate of heaven and having too much dissatisfaction. So did all these polls and so on, try to keep ahead of public sentiments, all these kinds of problems and so on. Again, I'm not saying they're good. I'm saying that this is how they selected for competent leadership. That's why they have a lot of engineers in their ranks and that's why they built a great firewall and other things because they have guys who are basically selected as capital allocators as managers. So because of that, because they set the great firewall, because they ban social media, because they've done other things, I think China is going to win the counter decentralization where people thought that their bans on the internet and their controls on the internet wouldn't work. They kind of did. They basically just had their wall garden where they have root access and this Asian paying can basically push a button and anybody can be disappeared. There's like super famous actresses that just got disappeared. Now, that's, as I said, ruthlessly common because that's kind of a scary thing to be under. You don't really, you don't have any recourse. There's no civil liberties. There's no human rights. And yeah, it's true that they, over the last 40 years, they've delivered a lot of benefits to their population. There's this huge group that's been pulled out of poverty, but that level of absolute power can also go south. And so, but the point is that I think they will succeed, they have succeeded, arguably, in the counter decentralization. By contrast in the US, the US establishment is by turns apathetic. It's either apathy or panic. For example, on COVID, oh, it's not a big deal. Oh, for example, these text journalists wrote this article, no handshakes, please, trying to make fun of anybody for taking precautions, trying to shame taking precautions. Folks wrote about, oh, these bubble boys are so concerned about this, making fun of this early on in COVID. And then they switched completely to panic later, and never acknowledged that they had all this false reporting, misleading reporting. They accused people of being racist for saying, hey, maybe we shouldn't have the Chinatown parade after with the Wuhan coronavirus on the loose, after Wuhan itself had canceled its own parades. This is like January of February 2020. So what happened was they were at first apathetic, oh, this is not going to be a big deal, nobody should do anything. And then they're panicking, oh my God, and so that kind of mode is very common. The US establishment is not selected for folks who look ahead, it's selected for actors, propagandists. It's not selected for capital allocators. Just a couple examples, like there's Lorena Gonzalez, this legislator in California, thought that a relatively junior guy at Founders Fund was a billionaire, or Brian Williams, and a member of the New York Times editorial board thought that if you divide a Bloomberg's fortune by 300 million Americans, all of them would get a ton of money, and obviously they wouldn't. So you actually select for folks who are verbally good, but enumerate, and that's very different from where the Chinese system selects for, and that results in folks who are not like VCs or technologists who are not calculating ahead or doing contingency planning, we're saying, neither apathy nor panic, we can have a technical plan to potentially succeed if we do X, Y, and Z. So what that results in is the US establishment that's always behind the eight ball. Lehman is a surprise, Bearer is a surprise, COVID is a surprise, Trump is a surprise, Afghanistan is a surprise, everything is a surprise, and then they react in this very reactive way. Facebook is a surprise, and why is it a surprise? Because Facebook's a fad, Facebook's a bubble, these text journalists, for example, in 2013 even, there's this article, why Facebook will never make a significant profit, or famous article Amazon.bomb, or another NYT classic, Google's toughest searches for a business model. And it's something where this goes back so far in some ways. Basically, these guys are, they're so used to inheriting something that they could never have built, they sit upon this US establishment that they don't understand what it is to build something, and they don't think anybody can build something. And so for their dismissive of the stuff, until it gets so big that it can't be denied, and then they react in this super panicked way. Okay, so let's extend that to current and near term crypto. And you could take that in any direction you want, it could be BTC, Ether otherwise in the US, is there going to be a rash regulatory whiplash, because we've already seen cease and desist letters and so on, to DeFi companies, and there's a lot of scrutiny, right, over lending products. Where do you foresee that going? Yeah, so by the way, I will say one thing, which is, once you do get in the mode of trying to react to this stuff that's all at 0.001% traction, you're thinking like an angel investor, because it's like when you start looking at that dashboard, and you no longer sit your filter at something that's at 50% of the population traction, or even 10%, when you go to 0.01%, and a tiny percentage of population is using it, the number of things you're looking at explodes, and you need to have a really good detector for what will be important, but won't be, and it's going to be erroneous at times, and it needs to be quantitative, because you put in 50K into this and 50M into this.
The regulatory state vs. crypto (02:06:43)
And so it's hard, but that's actually what capital allocation involves, especially in the modern era, is figuring out what's going to get big and getting ahead of it. So to your question, what is going to happen with sort of the regulatory state's collision with crypto? There's various scenarios, but I think on balance, they're going to lose. And let me explain what I mean by that. They meaning the US government? The federal government is going to lose. Federal government. Okay. And why do I say that? Well, so the macro, the short version is the US government is losing control over both domestic and international affairs. And so states and cities within the US will take positions at variance with the feds, because cryptocurrencies are coming so valuable to them that they'll have the equivalent of sanctuary states and sanctuary cities for crypto. Crypto entrepreneurs will write model legislation that will be adopted by places like Texas and Wyoming and Colorado and Florida and other kinds of things that, for example, prevent Bitcoin seizures in law before the thing happens. This is already there, by the way, in some ways that Wyoming's Dow law is quite advanced, right? Miami has accepted some city coins. And Texas is big in Bitcoin mining. This is already happening, but the next level of that is doing the same thing that they're already doing versus the feds, which is basically openly defined them and saying, actually, we're doing state nullification. And just to give you some recent examples of this, the federal government is losing control of events. I just made a little list of this the other day, but both domestic and international affairs, inflation, Afghanistan, China on Taiwan, France on the August thing, El Salvador in Bitcoin, 17 states, by the way, opposed this idea that the FBI should be sent to school board meetings, the 17 states sort of letter on education. Texas has taken a different policy on vaccine mandates and abortion. Germany went its own way on Nord Stream to Florida is pushing back on this financial surveillance thing saying that they are not going to abide by the government's, the federal government's edict on this. So you're seeing significant energy at the state level within Empire and then also outside from places like El Salvador or Switzerland that are just taking policies that are at variance with what the US government's position is. Now, this is quite different from 10 or 15 or 20 years ago when under Obama, for example, there was a lot of kicking indoors in Europe, like going after Swiss bank accounts or sanctioning everybody on the planet or invading everybody for democracy, like under Bush. So abroad, there are a lot of muscles being thrown on and then domestically, like, basically the feds would step in and force states to do something. Over the last few decades, what we've seen are sanctuary cities for immigration. We've seen states have different gun laws. We've seen states have different marijuana laws. We're seeing a larger and larger divergence. States, for example, had different gay marriage laws than the feds for a long time. We're seeing a larger and larger divergence. States are becoming genuinely differentiated from each other and from the federal government. And that's happening within. And then countries abroad are also taking a different route. So France, for example, now they're going hard on nuclear, which is definitely not a priority of, to my knowledge, at least the current admin. They're doing things. Germany is trading with Russia. That's not something the US government wants them to do. India is trading with Russia on some missile stuff. That's, again, something the US government threatens sanctions on. So countries are doing things that the US government doesn't want them to do and states within the US are doing things, the federal government doesn't want them to do. So because they're losing control over world events, see, the whole Pax Americana is based on basically the repeal of the 10th Amendment at home and regulatory harmonization abroad. So FDR effectively repealed the 10th Amendment where everything that wasn't officially the federal government was left to the states, but a very broad interpretation of the Interstate Commerce Clause said that everything is interstate commerce. So the states actually don't have any rights. We're going to reinterpret it as a federal government having power of everything. And therefore you get these alphabet super agencies, FDA and SEC and all these things kind of rose out of the FDR era. And then abroad, go ahead. You left? No, I was, I was just like the alphabet soup mentioned. It shows you my level of, of, of humor sophistication. But if I could interject for one second, if you had to live in the United States, where would you live and why?
Which US states are “freer” than others? (02:12:04)
Texas or Florida? Okay. Why? Probably Florida. Why? Because those are becoming like freedom states. I think Wyoming is also good. I think Colorado under Jared police is really good. You're basically seeing the pro freedom, you know, Jared police, the Democrat, by the way, he's a, but he's a tech founder. He understands what like wealth creation is and so on. Didn't you have Blue Mountain, the gift card company way back in the early days? I could have sworn. Yeah. Yeah. That's right. So yeah, he was, he was a few years ahead of me at Princeton and did very well. Super smart guy. I think he actually was like involved with tech stars and so on. So, you know, it's something where the, in some of the sort of the center and south of the country are going to diverge from the West Coast and the Northeast, I think, you know, roughly speaking. But, but that's not straight Democrat Republican. That is more decentralization versus centralization. And so I think that those, those states, and you can, it's literally like a search engine, right? I think, you know, one thing I've wanted for a long time, actually, I've wrote about this like eight, nine years ago, but I think that the next political model is what I call a crowd choice, where you have a search engine where the rows are jurisdictions and the columns are policies, sort of like nomadlist.com, but it's basically a bunch of attributes. And then you just put in your preference and you sort and filter. But then the next step is to group with a bunch of your friends and have you all put in your preference vector and then it finds a jurisdiction that is closest to your collective preferences. Let me ask you just before we, I want to not lose that. But with Florida and Texas, when we're talking about freedom, what types of freedom, what does your hierarchy of freedoms look like? Because there, there are also a lot of people listening just to ask, to act as a proxy for the listener would say, well, you may have greater, say, financial freedom because a state might act like a crypto safe haven of some type, but there may be sacrifices that you make and sort of tacitly endorse. Yeah, for example, reproductive freedom. Exactly. So how do you, how do you think about the, how to stack rank? Yeah, so the first thing I would say is, as a pragmatist, like being in the US and the USs and means your sort of de facto funding, like all the wars the US wages around the world and so on. So people are implicitly already making moral trade-offs of some kind, right? They might, you know, when you point that out, that sometimes takes the heat down because then, because a new thing is different from the thing that's already baked, the moral compromise they've already made implicitly, right? You know, you buy stuff and you don't know where that supply chain comes from. Maybe there's something that you would disagree with ethically, right? So people make these compromises all the time. And fundamentally, I think it is, it's a vector, right? Policy is not a scalar. It's a vector. It's a, it's a set of decisions, you know, a tax rate of X and a zero one as to whether drones are legal and this is your reproductive freedom slash abortion policy and this is your this policy. And there's, there's an aspect of de Gospis non-disputendum. Before you ask, I don't know what that means. It sounds like some Latin though, if I'm not. Yeah, so, so I, you know, I probably mispronounced it, but de Gospis non-disputendum is there's, in matters of taste, there can be no disputes, right? So like, there's aspects of this that are preferences rather than absolutes. I might say d'Auschalt not kill, but I can't say d'Auschalt like the color green. That's a preference, right? So some of these things, and crucially, by the way, I think there are multiple optimize. Okay, this, by the way, you know, I was coming up with sort of a name for how I think about like, you know, my philosophy or something. And could you define the optima, please? Sure. Imagine looking down at a bit of hilly terrain. Okay. And an optima, a local optima is the peak of one of those hills and a global optima is the highest peak of the highest hill. Right. I got it. So if your goal was to ascend to the highest height, you might ascend to the top of one of the hills. But really, what you want is the global optimum in this case, which is the top of the highest hill, right? However, it could be the case that you could have multiple hills all in the same region that are basically of the same height. Got it. Okay. Okay. And if, for example, you thought of your kind of latitude and launch to there as, I don't know, let's say your percent of time spent remote and your, I don't know, your equity compensation versus cash percentage, right? In a company culture, these are like sliders that you could set to like zero and a hundred, both of them. And if you replace that hill analogy with latitude and longitude with, you know, these two zero and a hundred sliders, you could imagine different kinds of companies that had different combinations that are both equally successful in market cap on the Z axis, but that had different policy combinations. Okay. How does that apply to states? Similarly, how would you do that? Very similarly. That's right. Because I think, you know, right now, we sort of think of companies, currencies, cities, countries, communities as being different things, but they're all going to become the same thing, essentially the projection of a social network. Or rather, like companies and become like apps effectively on the, this will sound like tech babble, okay? But, you know, a blockchain is property rights, identity, historical records, marriage and birth certificates, all the type of stuff a society can run a ton of stuff that currently does at City Hall on a blockchain. It's property rights. It is who has admission to what building, who owns what property, what sale occurred at what time, who paid, who dispute resolution. A lot of that stuff goes on chain. And then a lot of companies kind of are but off from that and use that as an application point. So all of these things basically set around, you know, companies, currency, cities, countries, communities, all settle around chains, right? That is like the software stack for running a community. And, you know, an analogy to this is before the internet, books and movies and music and songs, telephone calls, those are all different. And then after the internet, they got turned into packets and all kind of mixed together. So the normal thing that a macroeconomist will say is he'll say something like, governments aren't households.
Governments as subscription or inflation models (02:18:51)
Okay. Have you heard that before? Nope, I have not. It was a quote actually. I think it was Tyler Cowen quoted it. I think it's John Lancaster in the something review of books. Gosh, hold on, let me find it. Yeah, here we are. So January 2013, Richard Feynman was once asked what he would pass on if the whole edifice of modern scientific knowledge would be lost and all he could give to posterity was a single sentence. What axiom would convey the maximum amount of scientific information the fewest possible words, his candidate was all things are made of atoms. In a similar spirit, if the whole ramshackle structure of contemporary macroeconomics vanished into thin air, and the field had to reconstruct from scratch, the sentence which packs as much of the discipline into the fewest possible words might be quote, governments are not households. Now, the reason this is really important is this is why people will argue that, you know, what I'm talking about for companies doesn't apply to cities or to countries because they're fundamentally different governments around households. And, you know, there's a whole discipline of macro that is arisen around this. However, I argue that actually in many ways, American and Western macroeconomics is in its own way as pseudoscientific as Soviet economics was. You know, there's a whole discipline by the way of Soviet economics, Marx economics that had all these equations and so on. And there's some aspects of it that are still useful like Cantor's work on, I mean, it was Ketera Kintorovich on linear programming and optimal allocation. And, you know, so some of it is okay, but a lot of it was basically essentially just a recapitulation of Marxist premises, right? And when they say governments are not households and they say that recapitually is the whole field, what they really mean is that the government has guns and households do not, and therefore the government can seize money and coerce people to do things and households do not cannot do this. So everything which assumes some ability to redistribution, some ability to print, some ability to do this, that is a hidden assumption. The bullet point at the end of QED is a bullet. Okay. And it is basically the assumption is of course a force as opposed to physics where it's like the analogy gives us to physics and atoms, the human element isn't there. Okay. So once you say governments are not households and you think of it from a different angle of governments have guns, yes, it is true they are different. But I do think that in the medium term future, because of exit, because of global mobility, I mean, we have this tension now, you know, I talked about exit a lot even before the coronavirus as the most important right, but post-corona, post-lockdown, people prize it way more. When it's taken away, you prize it more. Okay. You prize free migration, you prize ability to leave. And you know, we're seeing a great migration in the US. So the great resignation, the great migration, remote work, all this and lockdown, all this stuff has made people both more aware of how important the policy is of the state that they're in and we're able to move. And you know, by the way, everybody doesn't have to move. You know, only a small percentage of the world moved to the US and look at what a big deal that was, right? On the margins, some degree of mobility can cause massive change. This is also why everybody doesn't necessarily need to hold their coins. The fact that some people can is enormous leverage on the system. It's just like, you know, Steve Bomber back when this is a powerful story, but when an executive left from Microsoft to Google is supposedly like through a chair or shoved a chair or something like that, everybody didn't need to leave Google enough. People need to leave that he's like, okay, this is real. Okay. Google is a real competitor. And eventually that led to him stepping down and set the taking over. So the thing is that the great resignation, the great migration, remote, lockdown, all of these things mean much more exit. When there's much more exit, when you can hold your coins on your person, when you're renting rather than buying, when you're basically running light and your stuff is in NFTs rather than real estate. And you know, when all of the stuff, when your books are in Kindle, when your mail is in Gmail, all of that type of stuff, right? Or ideally, you know, in some kind of decentralizing versus centralized service, when when you don't have obligate ties to the land, then the state has less leverage. And so because of that, over time, it moves, for example, to like a subscription model. And because the cost of-- And you say it, you mean residency in a given place? Yeah, like Swiss Cantons have something like this, where you pay X dollars per year, and that satisfies your obligation to them to live there. Okay. And so I think the future business model of governments is a subscription and B inflation. So what that means is there's a SaaS type service that you subscribe to, and that gives you access to all this government stuff. Like a V zero of that is like SingPass in Singapore, for example, right? It's only something called X-Road. And the thing about this is it actually isn't just a revenue model for them. It's also actually a crime and punishment model, where right now we think of digital deplatforming as completely lawless and policing as forceful and inhumane. But it may turn out that in the future, if your punishment is being deplatform for something, but it's written in law beforehand. It's not some arbitrary thing that's being made up. It's like a seven-day suspension in order for doing this. And it's-- That's like having your driver's license revoked for infractions. Yeah, exactly. And so the thing about this is that I'm not saying that's good, necessarily, but it is more humane than jailing somebody, arguably, right? And again, I'm not also saying I'm not so unrealistic as to think that physical punishment is never necessary or anything like that, not at all. But I do think that having levels of steps are valuable, where you don't have to escalate it all the way, that you can have a deterrent, which is a slap, like a digital slap or digital suspension versus all the way to the gun. The gun is a really serious thing. Basically, when you have these subscription states, you pay and you have effectively access to this service and doors open and literally physically open, like the key unlocks it, you have-- It's basically digital border control in the sense of, you know, why do you have access to the state? Because you've paid in. You have a subscription, you have an identity, unifies, passport, driver's license, all of this stuff, right? Now, immediately people say, "Oh my God, that gives the root operator of the state enormous control." And it does, so that's why you have to preserve the right to exit. You have to preserve Bitcoin, you have to preserve cryptocurrency. And then there's boundary cases where, like, if you went and killed somebody, which you then have the right to exit right after that, probably not. And so there's some social smart contract that you sign upon physically entering or virtually entering this jurisdiction, just like terms of service on a website, but it's more serious. And you might require a cryptocurrency deposit, for example, rather than just a click through of, "I have read this." And so it's almost like posting bail or posting a bond to enter the jurisdiction and if you-- Or posting a deposit with rent, right? And if you exit without doing it, then that is forfeit. And that is significant enough, for example, to deter petty crimes and whatnot. So that's like the subscription aspect. And the inflation aspect is, I think, as I said, unbundling and bundling, Bitcoin is necessary as a corrective to 20th century fiat. But there's an other way of thinking about fiat, which was actually a useful thing for me to conceptualize. You know, Chesterton's fence, you know, that concept? Like-- I do not. So there's a fence sitting out there and someone says, "I don't know this fence is here, I'm going to tear it down." He's like, "Well, if you know why that fence is there, then maybe I'll let you tear it down because it might be there for a good reason." Okay? And there's a second version of this, which says, often there's a structure that exists and the reasons that people give for its existence are not the actual reasons. For example, religious taboos on, like, preparing milk and meat a certain way, like, tray for haram. You know, the theory is that that was related to, like, in a desert environment, food with spoil, and these taboos would roughly keep people safe. Even if they were kind of religious as opposed to scientific, they sort of help people stay away from impure food. And so people thought that you were struck down by God if you violated them, but it's really a bacteria or something you had, right? So the practice kept you safe, you know? Okay. So even if the active ingredient wasn't well understood. So one thing about fiat currency that I observed the other day is... But hold on a second, pause there. So you said they believe something, or they believe the justification for something. I think you've... But there's sort of an inaccurate assessment of the history of something. So that is true. You take that to be true or untrue, what you just said about the religious food taboos. Okay, got it. It's sometimes true. In that particular... Like I haven't run the study myself to see if these written religious practices actually ended up in food purification. There's certainly things where there's tribes that have had potion preparation processes that include a genuine active ingredient that pharmaceutical companies have then extracted and put into a pill, right? Yeah. So basically there's often an active ingredient in some folk practice that we don't yet know how it works. For example, one thing that's sort of interesting is acupuncture and bioelectricity. Like bioelectricity is actually like a real thing and it's not really talked about, but evidently has implications for wound healing and so on and maybe acupuncture is tapping into that, right? This guy... He's got a great TikTok. What is this guy's name? Are you on TikTok? No, but educational TikTok. What's his name? Nasjack. Okay. NASJAQ has a great video on bioelectricity and like limb regeneration with citations and visuals and so on. So sometimes there's stuff and it works and we don't know why it works and in fact maybe our reasoning for why it works is wrong. Like people actually still disagree in some ways on how like lift works for an airplane. And of course with physics there's things like this. So the two business models of states in the future will be, I think rather than course it will be subscription and inflation. Subscription we just described. Inflation, the idea is this. Bitcoin is short-term volatile but shows immense long-term appreciation. The US dollar is actually the opposite. It is short-term relatively stable. You know, forget about inflation for now. I'll come back to that. It is short-term relatively stable but over the long-term you can see it has had a huge drop in purchasing power. Now right now this is talked about in a moral way and I understand why because essentially the quote fiat engineers don't really acknowledge this as a trade-off or even recognizes it such it gets back to this thing of like the religious taboo. But if you think about it from an engineering mindset most people hold a portfolio. They don't hold 100% BTC and 100 or 100% well some people hold 100% USD. But you don't usually hold 100% BTC. You hold some BTC and some USD. Why? Because some of this is like stable on a daily basis and rest is appreciating over time. Right? Okay. Now here's the concept. What if those are just opposite engineering trade-offs that say the long-term depreciation of fiat provides effectively the funds to stabilize it in the short term? Okay. And just to think about that from an equation standpoint if you were to do it like an order book is? Probably not what I have in my imagination. So why don't you tell me? Okay. So this was something actually which I didn't know before I got into cryptocurrency. And I think I mean the number of people who know what this is is probably increased by 100 or 1000 X over the last 10 years. And it's very important because it describes what like how supply and demand and prices really interact. Prices don't come from storks. They come from this. And where does it come from? Okay. So let me explain. Then I'll come all the way back up. So you go to the store and you buy like I don't know a gallon of milk. All right. That's going to cost you I don't know how much it is today. Let's say it's five bucks. Okay. Maybe 10 bucks with all the inflation but all right. Five bucks. So fine. You're a price taker. Okay. If instead you go to the store and you say I want all your milk. I want 200 individual one gallon bottles. I'll pay five bucks per. You can do that. But now if you want yet more milk you need to go to the next store and they're selling they have an inventory of 30 gallon bottles but it's 550. Okay. And as you start buying out inventory here where it gets around and people start hiking the price because they know you're going to walk in and clear them out of all of this liquidity of milk. Okay. And that is a difference between having like a small enough demand that you don't really affect the price and having a large enough demand that you actually move the market. And one way of thinking about it is these are like bids that are placed on either side. Okay. One store has placed a sell order of 200 gallons of milk at five bucks. And the next store has placed a sell order of 30 gallons of milk at 550. Okay. And all of these add up to be all of what is for sale and you know there might be like a ton there might be thousands of gallons if somebody really wants to pay like 20 bucks a gallon there's like thousands of gallons that become profitable to produce at that level, right? At that price. Okay. And then conversely demand is sort of lowest at five dollars but there'd be a ton of demand there might be lots of people who would buy a gallon of milk for a dollar. Okay. So you can visualize this sort of V-shaped thing where the current market clearing price is five bucks but if a lot of people suddenly buy and clear out the supply then the next available unit might be at like eight bucks or ten bucks and conversely if there's a huge amount of supply and there isn't demand the market clearing price drops from like five dollars like four or three dollars. Okay. With me so far? I am. So that is called an order book and that is actually how prices are born. Prices literally come from the interaction of supply and demand. So all kinds of people are being trained as true capitalists because they're actually seeing the root acts of the system how prices are set between supply and demand are now like computable, visible, tangible. This has huge implications for lots of things because those order books are going to come to everything. As we cryptify the whole world it's not just BTC USD that has an order book where you're buying units of BTC for blocks of USD or vice versa. It's not just like either USD it's not just every coin versus every coin it's every asset versus every asset. Okay. This is what I call the DeFi matrix. Essentially every financial interaction that we think of so a digital wallet doesn't just hold Bitcoin it can eventually hold everything. It can hold fiat currencies, Ethereum tokens, NFTs, whatever and so it's got billions of rows but doesn't just hold everything. Everything trades against everything. Just to interject for a second I mean a very concrete I feel like NFTs and expensive or non-expensive JBags are sort of the will be an on-ramp.
What is the DeFi Matrix? (02:34:23)
It's like a gateway drug for a lot of people into crypto and web3 and so on and you can see just for people who want to look for articles on this and certainly you can see it yourself but if you compare traditional art to say OpenSea and collectibles or NFT artwork on OpenSea price discovery and the sort of transparency of order book that you're talking about is right there and then there analytics being built on top of these marketplaces. I wanted to give one example of what's already happening for folks. Exactly right so essentially order books mean price discovery. All kinds of things suddenly become liquid and priceable. Things we could never price before like a minute of your time as a JPEG like a make a bite on your hard drive. All the types of stuff becomes priceable and just to relate it I'm going to talk about the D5 Matrix come back up to the order book, come back up to Smart Fiat, then back up to subscription inflation, then back up to the rebundling after the American anarchy. What is the D5 Matrix? Digital wallets mean you can hold every asset in your computer not just Bitcoin, not just Ethereum but fiat currencies like CBDCs when central bank digital currencies come out. Every stock, every bond, every NFT, every video game potion, you have a billion items in your digital wallet. Those billion items you just hold them you trade them against the billion items. You have this gigantic table and every existing exchange today, a crypto exchange, a stock exchange, a foreign exchange, foreign currency exchange, all of them can be considered sub-matrices of these like a crypto exchanges, fiat currencies and cryptocurrencies versus each other. A stock exchange of stocks and fiat currencies, a foreign exchange as currencies versus currencies, all those are just sub-matrices of this massive D5 Matrix and some of them are actually exchanges and some of them are so-called automated market makers where like you've got some rare piece of art and you've got a, you know, or rather like some infrequently traded token and you've got another infrequently traded token, this will give you some conversion between them at some price. It might be a high price being good directly between them. Okay. The D5 Matrix means everything is just getting repriced all the time. Every asset competes against every other asset. People don't understand how big a deal this is. It's kind of like- It's a huge deal. Huge, huge deal. Yeah, even for a lot I like me, it's a fucking huge deal. Once you really start to look at it, it's huge, enormous. It is the internet of wealth, the internet of money and it's going to be similar. It's like every newspaper went online and then Google News came online and indexed them and suddenly every newspaper is competing against every other newspaper. And so what that meant was that now all the ones that were just reprinting AP stories were no longer competitive. And so lots of weak newspapers that weren't adding that much value died. Right. And so in the same way, when every asset is competing against every other asset, that is like extreme capitalism. Okay. There's no geographical advantage anymore. And it's a lot- Not just competing, but also you can sort of cross collateralize and do all sorts of wacky, not wacky, but new things that are going to upend a lot of our current thinking around how capital flows. That's right. And one of the big ones is it's actually a second attack on fiat currency. The first attack is that Bitcoin appreciates and Bitcoin can't be seized and so on. Like all the stuff we've known over the last 10 years. The second attack, what do they call it when you sell a company or you go IPO? They call it a liquidity event. Right. Because cash is universal barter and you can exchange it for other things, whereas you can exchange stock directly. The DeFi matrix changes that. Everything is always liquid all the time. So at some price, you can get a quote for something so long as it's not like banned by the state. Right. And if you can get a quote for something, do you need to actually convert it into cash? You can just do it instantaneously. You can liquidate as necessary. And in fact, you want to hold minimum necessary cash and have everything else as cash doesn't appreciate. In fact, cash depreciates. Okay. And so now liquidity is itself a second whole access where it reduces the amount of wealth held in fiat currencies. The DeFi matrix is this very, very big thing. It will be to this decade what the social graph was the previous one. And you might say, "Why don't countries just ban it?" Well, the thing is that coercion only works within your borders. And large countries can try it. But small countries like Switzerland or Singapore or Dubai or Sonya will see an opportunity here to level up their fiat currencies, recognizing that they no longer have a geographical advantage, just like local newspapers no longer have a geographical advantage. They were just put into this global competition, recognizing no longer a geographical advantage. They might add privacy features. Okay. They might add transparent management of reserves. They might add Bitcoin backing. Suddenly, currencies are competing with each other in a way they never have before on features and not simply like monetary policy and so on. Like central bankers become like Vitalik and Zuko, like the smart ones, at least to the ones who don't just like the newspaper guys that don't, you know, NGMI. You've heard that one? Yes, I do know NGM. I'm not going to make it. Exactly. Not going to make it. That's right. And so this is probably nothing. Yeah, probably nothing exactly. Right. So this is the same thing that the remote economy is done is it has put Miami in direct competition with San Francisco and poorly managed cities, right?
Regulations, Coin Systems, And Lessons From Pandemic
What is NIMBY-YIMBY? (02:40:00)
And like this was recently reported, I don't know how true it is, but the mayor of SF told the mayor, you know, Miami, hey, stop taking my people. He's like, I love you, but no, right? And that is awesome. And the reason that is awesome is removing from the tired two party system to the wired in city system, right? From two parties to 20 or 30 or 50 or 100 cities competing for you means that internal disputes are less and intercity competition is more, which is healthier, right? Arguably, you can say that gets bad when it goes to interstate violence, right? But it is good when it is economic competition because that is, you know, there's Marquis of Queensborough rules and make your city better and make it greener and make it cleaner and make it healthier and have a better life for people and you'll attract good residents, right? So, all right, coming back up. So the DeFi matrix was every asset against every other asset, all assets trade against all other assets in the DeFi economy, just like all cities trade against all other cities in the remote economy. By the way, those are related because municipal bonds and municipal equity, like city coins are like municipal equity, you know, the equivalent of municipal bonds in a sense, or like the next version. All of those will also trade and so you'll have the price of a city, okay? Every ideology, everything will have a price which roughly reflects, you know, people's measure of belief in it. Are there more buy orders? Are people long on the city? Do they think it's going to improve in 10 years? Is it the next Shanghai or is it the next Detroit? Sell, sell, sell, sell, right? Right. That's reflected in real estate values currently today, but it's kind of opaque. That all becomes REITs that are on chain. And so the price of a city goes up and down. And in fact, that is actually probably going to be the determinant of your re-election. Did you boost the rate of the city or not? That's actually quantitative and numerical and empirical. It cuts through the BS, you know? Did you deliver shared prosperity for your residents or not? You know, basically did more people want to buy into the city, buy a subscription, buy a piece of the digital REIT versus not. And by the way, let me just talk about the REIT for a second. You know, a real estate investment trust, okay? One thing I've thought a lot about is there's an interesting way to sort of cut the Gordian knot of Nimby Yimby. And when each... What the hell is Nimby Yimby? I was like, "I got Gordian knot, but what is the hell is Nimby Yimby?" So, Nimby Yimby, this is a big... I'm a little surprised you haven't heard of this one because this is a big thing in cities, probably in Austin. But Nimby is not in my backyard. You can't build in my backyard. And then Yimby is a more recent movement that's like, "Yes, in my backyard, we need to build housing. You know, housing scarcity is bad." And essentially, this is like this interest city kind of thing, right? Now, what leads to this dispute is that the Nimby's have their own houses and their property values go up if they can constrain supply while demand remains constant. Now, a lot of the stuff they did in San Francisco restricting housing construction because of shadows and so on. I think he's short-sighted because by driving away demand, it's like it's something where the long term, it's detroitifying the city. You know, tech is leaving. Not even that long term. It's happening now. Especially with such a limited inventory. I mean, especially for a city of that size, right? Yeah. And you know, the rebuttal to this is, "Oh, that place sucks. It's too crowded and the food sucks." Right? That seems like a contradiction. I'm butchering that. You know, the proverb, right? Nobody wants to go there. It's too crowded. Okay. But there's a truth to that, which is, you know, why did friends do not make it? It couldn't handle the traffic so people went elsewhere. Okay. Nobody goes there anymore. It was too crowded, meaning it fell over. It couldn't handle a load. It couldn't scale and therefore, it lost. So yeah, the demand goes up and then it crashes down to nothing. So nobody goes there anymore. It's too crowded. It is not always a fallacy. It's sometimes a real thing. It means that thing couldn't scale. Okay. So the point is that with Nimby, Nimby, and hear me out because I'm going to say something that will sound totally shocking or whatever. Okay. Maybe. Thank God. The whole conversation was just so timid. Please continue. So maybe the problem is actually that direct ownership of non-fungible property leads people to only have an interest in their local house, but not a shared interest in the city or community or town as a whole. Okay. And if you can separate out the utility of living in the house from the value proposition of like selling the house and actually, as you should ping of all people, it was like, how is this should be for living in non-speculation? Okay. The more that people move into the digital realm, the more they start thinking about things in terms of investments and so on, just like you can split out, for example, a corporate stock, you can split out the voting shares versus the economics. Right. And you can like sell the vote independently in some context. Can we split out the utility from the appreciation? And one model is you buy like a big plot of land, like a burning man-style thing in the middle of nowhere. Okay. And you set up a REIT on it. And basically every square, you know, I don't know, maybe every square meter or something like that is like a share in the REIT because it's all equal at the beginning. Right. Now, you might say the city century is somewhat more valuable than the outside. But when somebody goes and lives there, they do not own their home. Instead, they own shares in the REIT. And so as the city expands, if they're asked to literally like demolish their home and like move to maybe a bigger home, but something differently, they have an interest in the city as a whole. They have an economic interest in the city's whole, not just their individual home. Do you see what I'm saying? I do. And I was thinking, you know, in addition to the REIT, I can't remember the terminology used, but like the municipal bonds, the city tokens, I'm not sure the proper phrasing. But if your taxes or your SASS fee that you paid to a given city or state went into a city or state based token in sufficient quantity, and you'd have to figure out what the sufficient quantity is to properly incentivize someone who's resourced at X level or Y level or Z level, that would also align interest. So it's interesting. You could kind of go back to like, you know, have you heard of Georgeism? I haven't. It sounds like it has something to do with George, though. Yes. Well, yes. So Henry George, this was this concept, which is it is obscure. This one is a pretty obscure, I guess, but it's things might come back to the future. So Georgeism is the idea that like the one thing that governments really do own is land. That's the arbitrary thing. And that all revenue should come from that. And you know, it's interesting because it's kind of outside of left and right. And basically the premise is everything else is value added by humans, but land is the thing that was arbitrarily sort of stolen or controlled or whatever by a government. And so land is the ledger that states have access to, right? And more generally land plus natural resource rights. Okay. And the thing about this is you can imagine, you know, people talk about like goldback currency, you can imagine land-backed city coins. Okay, where you, the city is reorganizing as a REIT, okay, or this might have to be done from scratch, by the way, because legacy cities might not be able to do this reform. Okay. It's basically like land reform under communism, you know, in a sense, collectivization, except it's capitalization. Okay. Ideally you would be opt in where you do it. Sounds tricky. City. That's right. That's right. So like doing with a legacy city, I don't have a good answer for it. Okay. But let's say you go and buy land in the middle of nowhere. And there's a ton of middle of nowhere, by the way, America is still a big country, Russia's big, you know, Canada's big. Like there's actually lots of like wide open piece of land. And what you do is because it's the internet, you do a drone over flight of it, you recruit people to crowdfund this territory, and they have to buy in and hold the city coin to hold that that's like the right to build on this number of shares, you know, like square meters or whatever the territory. Okay. And they have to commit to some holding period. They can't just like, you know, buy and then leave and speculate. So there's, there's a commitment to actually build into it. And then you have something where at the beginning, that's another thing, just a quick side note, that's another thing I learned about since kind of wading into the waters of web three is wash trading and all that kind of. Yeah. Anyway, we don't have to go down that rabbit hole, but yes. So to prevent people from flipping, there's a holding period. Yeah, it's essentially somewhere where it's again, unbundling and rebundling where in a sense markets say, hey, screw loyalty, it's an economic transaction. And you sort of like rediscover loyalty or patriotism or loyalty cards or frequent flyer miles or, you know, like holding periods, whatever you want to call it, loyalty is valuable, right? Because loyalty produces collective goods that an individual can't necessarily have on their own. Like other people's loyalty to something is valuable to you because you know, it'll be stable and be there when you come back. We should take a second just for people. So holding, total HODL, I've read a number of different explanations for this one is hold on for dear life. Another one is hold, but it was a typo. And therefore, yeah, that's what it was. Basically, it was a typo. There's a guy who's drunk and he posted, I'm not smart enough to do the trades. I'm just holding and off it went. Have you heard the term backronym? I have not heard the term backronym. A backronym is a reverse engineered acronym. So hold on for dear life is like a reverse engineered acronym. You know, I like that. I like that. That's clever. Yeah, they often just for like bills coming out of DC, like the Patriot Act or something, it's something like abbreviation or whatever. Yeah, yeah. Or the CARES Act. And by the on the topic of like loyalty and so on, this is actually a deep point because my friend and you know, somebody who I agree with on some things, just going to things. No, Smith had this tweet about how when the police were basically quasi abolished in San Francisco, you have organized crime looting these stores. And actually, the working class employees at these stores are being victimized by essentially a mafia criminal class because the police have left. It's not like some, you know, Jean Valle Jean going and stealing a loaf of bread. It's a guy who's just like methodically loading stuff into the car and then going and fencing it on Amazon or eBay, very different kind of thing, right? Yeah, totally different. And people can look back at the Loma Prieta, Loma Prieta earthquake and what happened during that period of time in San Francisco, same story. I just heard after the Loma Prieta earthquake that happened? Well, after the Loma Prieta earthquake, I think people overestimate the amount of infrastructure, mobile infrastructure that is available in a given city, right? So in San Francisco, I did disaster response training with the, it's called Nurt, Nurt, Northern California emergency response team training with the fire department. And I believe the police department was also involved. And they just kind of specked out how long you could expect to go without services if certain capacities went down, like water or electric. And during Loma Prieta, which is also called, I believe the World Series earthquake because it was caught on camera during the World Series. People were, well, I shouldn't say people, criminals were greasing the hills at Dolores Park and just carjacking car after car after car after car, which is sort of like just a reminder of some of the possible harsh realities that await you if you have no available law enforcement or infrastructure. Yes. So let's get to decentralized defense in a bit after the American anarchy. But basically, we and we still don't know how inflation fits into all of this. Yeah. Okay. Okay. So, so the thing about this is like, abolish the police, abolish the economy, or at least the physical economy. Okay. And the reason is in the digital world and everything that you can map digital, you can protect it with the cryptography, but the physical world still requires physical balance. It may eventually move to robots, you know, like, like drone enforcement of law or something like that. That would actually mean laws, like code really is law, but at least for a while, it is going to be like physical police and so on. And the thing about that, but we're starting to see robocops, like robodogs and stuff walking around the cops and so on, like in like the V one of this era, V 0.1, but abolish the police, abolish the economy means if you don't have police, then people are just going to steal. If they're just going to steal, there's no property rights and there's no stores and all the wall greens leave and whatnot. But it's actually also deeper than that, which is, you know, unless there's some prestige or praise, because, you know, the police, the military do risk their lives for relatively low pay. Actually, I mean, I know policemen are sometimes well paid nowadays, but in general, and you can argue this point, of course, you know, there's lots of people who will, you know, get mad about this, but in general, like, you know, at least for service, the risk of death is actually non-trivial, and so the price often can offset that, but what does is the patriotism and the feeling of serving your country and serving your collective and whatnot. When that loyalty and patriotism is no longer there, when that center doesn't hold, when people don't believe in it, it's not like the economics can just continue, or at least they can't continue very easily, because the guys who will step up to essentially collectively defend property and going back to the earlier thing, you know, it's when there's uncertainty that war happens. It's when there's uncertainty that crime happens, right? If there are, you know, strong punishments, there will be no punishments, right? The Xiang Yang concept. It is the end, it's like the variable reward, the variable punishment, that kind of like, you know, should I make a break for it, should I go for it? If it's certain, then people typically won't do it. It's like a very swift and certain deterrent. If it's worth the risk, it might be worth the risk. What you don't want is you're able to start calculating whether that kind of crime pays, right? Once they start calculating it, then it's bad, and you get a destabilization because more people do it, and that overwhelms even more limited resources, and you start moving to a new equilibrium of a mafia state, which is like, you know, Russia in the 90s, okay? Which unfortunately I think is similar to what the coming American anarchy might be. And so just talking about this coming back, so the DFI matrix is all versus all, all assets versus all. The order book tells you how prices are determined. And, you know, when I mentioned that future states will have subscription versus inflation, all currencies are going to compete against all other assets. And cities will also be able to issue their currencies alongside states. Okay, so issuing a currency will become a new business model. It already has been. And the currencies of companies and cities and countries and communities will trade alongside digital currencies in one gigantic thing. Okay, in this environment, you are doing a currency is become, sorry, do currencies almost like tokens become, and yeah, we have to be careful here with, yeah, I mean, who knows how it'll get resolved, but sort of unregulated securities, but you're there, they're sort of interchangeable in this hypothetical example, right? Yeah, so on that topic, by the way, I do not believe tokens are securities any more than I believe like YouTube is television.
Warnings about overregulation (02:55:39)
And the thing is, YouTube was not regulated like television. You don't need a TV license. You don't need a broadcast license. Like Skype, you know, or telephony, you know, to go and place a WhatsApp call, that's not regulated like AT&T. Email is not regulated like the post office, because we didn't take these super old things and apply them to the internet. And the same way going insideing 100 year old statutes, you know, from like, or stuff from like the 1930s in the 2020s or 2030s is simply in a deposit. Like, you know, Larry Page had this saying, you know, any law that's more than 50 years old just has to be reexamined probably can't be right. I mean, it's before the internet, right? This paraphrase Larry Page. So I think these laws will get reexamined. I think the, what the Soviets called the correlation of forces is against them. But so far as they're in effect or being interpreted that way, of course, be compliant, etc, etc. With that said, not every country is America. And in fact, actually, you know, I are teed something the other day where it's actually more and more common now for crypto projects to ban Americans from buying into them. You may have seen some of these things, right? They literally IP and Americans, right? And the thing is, like a lot of Swiss banks. Yeah, they're just ID banning instead of IP banning, you know, that's right. This you should expect more and more of where the US throwing its weight around with sanctions and threats and so on is suddenly starting to realize that, okay, it's backlashing on them, okay? Because the expectation is, oh, so you want the American market? Well, you need to comply with us. And now entrepreneurs realize, I don't need the US market to win. So no, thank you very much. I'm just going to block Americans. Yeah. Okay. This already happened in New York with the Bit license where it basically meant that any crypto innovation, it was, I mean, in a sense, it was good because it just ensured that we move the future of finance out of Wall Street. Right. Now, could you describe what Bit license was and then what happened? Yeah. It was a set of onerous regulations on cryptocurrency companies where, you know, it was just basically passed so that somebody could have a career achievement. And it was something where you just had to fill out enormous amounts of paperwork and it was uncertain, the timeline and the cost. I mean, your company, right? You can't, Jardub can't wait years for a possible license before it operates. So what happened was New York overestimated their leverage and they're like, we're New York, what are you going to do? We're the center of the world. You can make it here. You can make it anywhere. Actually, no, I can make it elsewhere and New York is last on the list. And so rather than putting them at the front, it was too onerous. It was too high a form to fill out, too high a price imposed for that first customer. Because that's what regulation is, right? It's a price of your first customer. Yeah. Okay. Like your first, or another way of putting it, your first customer is the state that grants you the license to operate and have access to their market. Now, as the relative share of that market declines, as the rest of the world becomes bigger, as the percent of GDP that New York controls or financial GDP, whatever you want to call it, finance market, that New York controls drops. Suddenly, it's leverage drops off a cliff, but it's regulators haven't caught up and they still think that they have that leverage when you just IP ban all New York people and just have them last. And maybe you do that feature three years in. So insurance in New York is at the back of the line for innovation. That is now happening to America. So startups just move. Startups just move, but they also IP ban. And so this is a new thing because the US is supposed to be at the front of things and whatnot. So that's happening in Asia Pacific, right? And in the sense that entrepreneurs are sort of leaving the gravitational pull of China to have their physical base elsewhere. Yes, absolutely. So both China and the US are driving away their best. Actually, all three corners of that triangle, NYT, CCP and BTC, their fundamental weaknesses are, they're driving away some of the best. NYT, for example, is piling up the midwits, but it's losing Mark Anderson and Glenn Greenwald. CCP has certainly got a bunch of nationalist like zombies. Some of them are actually pretty smart, but they're losing the next Jack Ma and Maytuan CEO and ByteDance CEO and so on. They've decapitated all of their major tech companies. And they don't make the pretenses about it. When NYT did that to Uber, there's this whole, because it's decentralized, because it's stochastic, because the press can't just fire somebody, like Xi Jinping can just basically order and fire somebody. It had to be like a thousand articles in this whole process to decapitate them and replace Travis with a guy who I like, but who's formerly on the NYT editorial board who was acceptable to NYT. So the journals effectively went and decapitated a tech company. They're trying to do that to Facebook now, but because there's still some pretense of rule of law and some pretense of due process and free speech, it can't just be like they do in China where they just chop and gone. But it certainly is doing something where it's alienating many of the best from the NYT corner, just as CCP is alienating many of the best from the CCP corner of the triangle. And actually even the BTC corner of the triangle maximalism, which is like the extreme version, is alienating people like Vitalik or Zuko or the Solana founders or anybody who wants to innovate on so-called L1, they're kind of being pushed away from that corner. So those three corners are kind of pushing what I think of as the decentralized center. It is the folks who no longer believe in NYT, the folks who are leaving CCP are the folks who want to do L1 innovation besides BTC. They may be BTC and, but they may respect BTC and use it and hold it, but they're not mono-numists. That is to say, they're like, there's mono-theism. Monotheism is only one God. There's also mono-theism, only one government. The government can do everything. There's this ad from 10 years ago. Government is the thing we all belong to, where people replace GOD with GOV as like the strong man up there is like, rather than the guy with the beard, it becomes like the US carbon, the US military. It's really strong and it's benevolent. It can kill your enemies and it can redistribute the money and take care of the poor. And then the third version of that is mono-numism, which is not replacing GOD with GOV with BTC, where it's like, just like the certain people who believe the government can do anything, it's sort of a joke. Bitcoin fixes this. And I do believe, by the way, that Bitcoin fixes a lot of things, but it doesn't fix everything. And when you project so much onto it, it actually becomes unrealistic. And again, to be clear, relative to most people, I'm probably down near that corner, but it's like a log scale. Yeah, totally. There's people who are 10x or 100x, right? So now coming back up. What are we missing for the matrix? Because I definitely want to ask you some additional questions. Okay, so I'll just kind of come back up those six points, right? So DeFi matrix, all versus all, all currencies trade against all other currencies.
How a flat coin would work (03:02:56)
The order book is each sell in the DeFi matrix, how that price is determined, how does it relate to the concept of the future business models of governments? So subscription and inflation. Basically, you pay for the subscription to have like this effectively digital passport, wallet, driver's license, currency of the city, login, property rights, marriage certificate, birth certificate, all that stuff. The inflation comes from the smart version of Fiat, says, "Hey, Bitcoin is volatile today, but appreciating over time. Fiat is flat today, but depreciating over time." And the reason is, that the reason it's flat today is we're sort of seizing some of the money a little bit to maintain its price stability against a bunch of goods. And this is where all the pieces look together. So essentially, if you were to design not a fiat currency, but what I call a fiat coin, but a flat coin, where it's not the dollar or the renminbi, it is a new digital asset whose property is that unlike the inflating dollar, it is flat against the number of chairs or bottles of milk or things like that. A flat coin would try to be as flat as possible in a time of money driven inflation. In order for that to work, you need some reserve of that flat coin, and you need to you have, let's say there's 10 goods that you're monitoring, the price of flat coin versus chairs, the price versus milk, the price versus tomatoes, whatever. Those are 10 order books with buy and sell demand like we talked about. In order to maintain it to be flat, you need to keep the price within that V, just like not moving too much. And that means some amount of money so you can place buy and sell orders to stabilize it when other people are selling and buying. Now, that will deplete that amount of money over time. And where do you replenish it from? Let me ask a dumb question. When you say so, you can place buy and sell orders to maintain the flatness of the flat coin. Who is you in this case? Is it just code? Yeah, or it's basically the manager of that flat coin. It is like the city or the government or the entity. I see yours. Right? Basically, it's a new central banker. Right, exactly. It's like the central bank. Yeah, it's like, you know, Greenspan and Wisconsin is like the plunge protection team. And the thing about it, and this is crucial, you might say, well, wait, didn't we just invent the new boss, see him as the old boss, so how come you saying central bankers? Well, that's why, like I mentioned, the helix, like the spiral, unbundling and rebundling. You, you know, just like you go from CDs to MP3s to playlists. Here you go from unconstrained fiat, where you have no alternatives. And it is just being printed and seizing everybody's money silently to Bitcoin, which checks that. And now to a checked fiat, where if they print too much or inflate too much, and they're doing too much more than is necessary to achieve short-term monetary stability, you exit to BTC. In the same way that with a company, if it issues too many shares and dilutes everybody down, you're like, no, thank you very much. And you look great to cash. Right. So Bitcoin then, and it makes this for a bit like Bitcoin at 100 billion valuation market cap, Bitcoin at 100 billion is an industry. Bitcoin at a trillion is a government, Bitcoin at 10 trillion or maybe 100 trillion somewhere in that range is a world government, just not the one that anybody imagined.
Bitcoin: better than gold? (03:06:11)
Essentially, you know, there's this vision of a world government that was like this sort of communist socialist world government thing that everybody would be a brotherhood of man, you know, and there's sort of the libertarian thing of F that, you know, F the UN, like we want to do so. And then Bitcoin is actually like a libertarian-ish world government, which constrains every state in the sense that they can't spend more than they have because their users will go to the DFI matrix and cash out the currency for BTC. Right. Which is like BTC is like the zero, zero of the DFI matrix. Most people don't think about this, but gold is, you know, when people thought, okay, Bitcoin would achieve convergence with gold. It has done that by the way. It's around a trillion. It's like same order of magnitude as gold and it goes like two and Bitcoin is like one or two. I think it's one at the time of this. Here, let me check that actually. Okay. So because like 1.2 trill, and I think gold last had looked was like two trill. So the same order of magnitude Bitcoin is now hit gold. But here's the thing. Gold today is a shadow of what gold was. Gold was the thing that kings wanted, that it was a thing that constrained all states. It had its flaws because Spain could mine gold out of the new world and basically caused this huge inflation shock of gold coming back. So it wasn't like a constant in the same way. Like Bitcoin is digital gold. If the world economy is re-centered around it, that's not a trillion dollar thing. That's like a hundred trillion dollar thing. That's like the thing that everybody cares about. It's a very, very different matter. So that is how basically future governments are subscription and inflation, which is roughly similar to a SaaS company's SaaS subscription and its equity. Yep. That makes sense. So inflation and subscription, those are the new business models of governments, right? Subscription and inflation. They're non-coresive because it's not profitable to be coercive. Setting SWAT teams around costs money. So instead, what you want to do is have somebody hit a key and enter your society. Enforcing compliance is costly. Now, again, drones and so on may change this. That is actually, I think, a trend for 2040, late 2030s. I say drones, I don't just mean aerial drones. Autonomous robotics of all kinds, walking robots, driving robots, all that stuff. As we mentioned earlier, that solves the principalation problem. You don't need to have people fold into you. The robot will do exactly what you say. So an individual can exert much more control if they've got a robot fleet. But coming back up, this is how I see us sort of rebundling eventually after the coming American anarchy.
American anarchy, tensegrity, and San Francisco’s decline (03:08:56)
And why do I say American anarchy? If you recall, we talked about the decentralization and the counter decentralization. And why I thought the counter decentralization would succeed in China because they have highly competent management, they're ruthlessly competent, but they're selected for capital allocators, people who can get ahead of the curve, engineers, folks who basically set up the Great Firewall and block social media before anybody in the West realized how significant that stuff was going to be. They had seen the Arab Spring in China saying knew what it could be, but they acted early. Now, today, what you have is the same writers who celebrated free speech at that time are now you turning on it and basically arguing only media corporations should be considered true. And they're trying to jam the jack in the box, but it's already kind of sprung out because they're very rearward looking. So in the West, I think the counter decentralization will fail because these guys are rearward looking, because it got too big, because also they're not selected for engineering competence, how many people in Congress can even name what a firewall is, how many of them could define what a private key is. They're selected for being lawyers and actually also actors. And why do I say actors? This is actually a bigger thing that I realized. Hollywood explains more of America than I'd realized. Essentially, everybody who's an influencer is like a celebrity, and politicians are reading lines given to them. And when there's less and less and less connection with the real world, when it's more and more just rhetoric to win elections and celebrity influencing online, they basically become like actors reading scripts, and there's no follow through, there's no follow up. Of course, this trend has been going on for a while. You know, obviously Reagan was an actor and there'd been famous actors on the base of name recognition. But now just the concept of acting, Bruno McCaise has also written about this, how current admin is kind of like a, and it has been for a while, Trump as well. It's not a partisan thing. It's like a hologram. It's like an order that people are going through the motions and acting, but something very different is bubbling elsewhere. It's like CCP and BTC and these things that are not part of the movie. So the thing is that with San Francisco in 2019, I actually had this post that I think holds up fairly well. And, you know, I said this is like about six months, seven months right before the COVID-19. And I said, San Francisco has, this is like June 19, 2019. San Francisco has 30,000 car breakens a year. The streets are filthy in a health hazard. It's extraordinarily expensive. Yet feces and prices, feces and prices rise in tandem. This is a bubble which will burst when the right alternative finally appears, just like taxi medallions. And I said San Francisco can be compared to a terrible product with great legacy distribution. Users hate it and want to leave, just like they want to leave Oracle or something like that. But network effects keep people in for a while at least as extractive rents continue to soar. When the true alternative finally arrives, exit will be rapid. Right. And, you know, what was interesting is Paul Graham actually disagreed with this. What was that published? That was June 18, 2019. Good timing. Good timing, right? So I was like, you know, this feels like a rubber band tension, which is getting too strong. And what was funny, by the way, was Paul Graham's response, which I actually think also held up well, which I only actually saw much later. Paul said, in response, this seems unlikely historically has been common for hubs of certain industries to draw people despite high costs and low quality of life. When they decline, it's always due to some external force, e.g. the whole country does not simply an alternative appearing. And there's a guy who replied to both of these that looks like both tweets held up from October 2021. Right? It's pretty good. Isn't that good? That is good. And so essentially, you know, there's a recent post that I actually like a lot. Have you heard of the concept of tensegrity? I have actually. That's a nice boost to my confidence. Yes. I had not heard of it until recently. I'm familiar with tensegrity within the context of Buckminster Fuller and different design principles. Yeah. And so this is something where I had probably seen it, but I was not actually aware of the word, you know, until like, like, a few days ago. And tensegrity is, I think, an excellent visual metaphor. See, I thought of things, a lot of things implicitly in terms of that, in terms of like rubber band tensions and like force diagrams. And like, there's a rubber band tension and SF between how horrible the city was, which was pushing people out, you know, like feces and prices rising in tandem, just being attacked on the street in the super expensive city and like, you know, no public transport. And it's like unsafe for women and crime, all this stuff, right? Yet on the other hand, you had all these tech jobs and all this stuff, keeping people and the valuations of these companies kept going up. So the money was available to like compensate for the stuff, Uber this here and, you know, expensive apartment or whatever. So there's this like this crazy thing happening where like money is being pumped in from the cloud and just like incinerated by the city and, you know, it's $12 billion a year on this stuff. I think it's 13.7. Now it's like the probably the worst managed like for you can't even call it a first world city really anymore. That doesn't even apply. It's a it's a descending world city. Did I tell you about that? I don't use the term developed world and developing world anymore. It's just all ascending world and declining world. And that's a declining world city. That makes sense to me. Let me say one thing just real quick on 10 segredy. So it's a it's a combination of tension and integrity. Here's the definition, the characteristic property of a stable three dimensional structure consisting of members under tension that are contiguous and members under compression that are not. So you can find this on Wikipedia. There are also a somatic or physiological examples of this, at least certainly some people would posit that fascia and some of the internal structures of the body. But one could make an argument would also fall under the under this principle or definition of 10 segredy. Yes. And there's this good post, you know, there's a blogger I hadn't heard before, but it's a penelysis P and a l y s s dot sub sack.com, front slash P from such Y dash words dash starts. So a 10 segredy model of international relations, right? And I thought this is really well done because it was kind of a like this is kind of how I modeled things in my head. It was great to see a visual metaphor for it and relate to stuff I already know, like forced diagrams and stuff where in this in this post, you know, you can see, for example, like the UK and Germany, you know, they they both align because they have democratic ideals and they have auto and meat trade and they're part of the NATO alliance. But what pushes them apart? Well, language and they have differing regulations, right? So there's both pull and push, right? And the thing is this that whenever you have that like rubber band tension, but 10 segredy is a better model because it's not just like one force at a time, it's many different forces. Whenever like this thing can kind of withstand some push and pull and whatnot. But if something just goes really strong or really weak, suddenly the whole structure goes kachunk, right? Because there's things that are connecting to other things. And so what happened with San Francisco was I could tell that these forces were like just in like extreme tension, but I felt that, you know, that it would collapse. I didn't realize that it was going to be COVID, of course, you know, six months before COVID, but I did know that it wasn't going to persist. And just what happened was these forces were there and then one of them just suddenly went to zero because everybody went remote since you didn't have to be in the city at all. And all and all the culture changed at once. It was a crowd exit. It was a collective exit. A cultural convention changed, which said, if you're serious, you're not in person. Because before, if you're serious about a deal, you were in person. But now if you're serious about your health, you were not in person. And so now there's an excuse in a sense, not just an excuse, but you can turn down every plane flight. You can turn down every in person conference. They must offer a remote option. It's actually really important now. And so the thing is that that's why COVID-19 is a permanent shock. Whenever you take a bunch of people who are at the zero point on an axis, and then you spread them out where like some of them were 100% remote, even in the removal of that force like post vaccination, it doesn't all come back. It's like a hysteresis. Yeah, no, absolutely. Yeah, there's a lot of durability. And we could just look at examples of how many zoom invites I get, even though we could just do telephone and walk around. Even though people are now re-engaging with one another. And also there's something to be said for the proof of concept that we witnessed for mobility and relocations during COVID.
Lesson from COVID: WFH (03:17:45)
So people prove to themselves, and their peer groups prove to them that it was possible to not just trial other locations while working, but insist on being relocated or else you are going to take a different job. And those kind of macro trends feed on each other. And Austin is a great example, right? It's like, when you have zero friends in Austin, moving to Austin is a harder decision than if you have five, and once you have 50 friends in Austin, it becomes quite easy. And I think we see that along a number of different directions. That's right. And now the new thing is those 50 friends can all move together. Yeah. So I wrote an article at 179.com/maimie, which actually cites articles from I think from 2013 that I think predict this in some detail. Like I gave this talk Silicon Valley's Ultimate Exit, and I followed an essay called "Softors Reorganizing the World" that talk about how software is enabling these mass migrations. And that's fundamentally the resolution to our current disaligned world. I mean, the thing is that what you really want is not a 51% democracy, you want 100% democracy. That is, you don't want a situation where it's the absolute minimum necessary consent, where it's a fosbury flop like we talked about before. You're just barely clearing the bar, and you have 51% of people vote, and 49% of people are unhappy. Those 49% will comply in the most grudging way possible, and your majority is very contingent and could drop with one bad headline or event. What happens is low levels of consent, the 51% may feel like they want to impose their will on the 49% via coercion, and that's actually bad because it's easy to coerce when it's like 0.01% of the society, when it's like some random murderer, you're going to get 99.99% of society agreeing that coercive force is legitimate against them. When it's 51 versus 49%, not only is coercion much, much harder to do by orders of magnitude, because the ratio of 99.99 to 0.01 is much greater than the ratio of 51 to 49. Not only is coercion much, much, much harder, it is also not obvious that it's going to be something that'll even maintain your majority, because even the application of coercion reduces your majority. Instead, what you want is to resolve this route. You're not going to resolve that by just voting more. It's going to be resolved by some combination of either coercion or migration. When I say why coercion, well, one side coerces the other into just completely agreeing with them. They basically win a civil war. That's what happened with the Russian Reds versus the Russian whites after the Russian Civil War. But in the US, in the Cold Civil War, there was an article on this in 2018 that actually was RTed by both Jack Dorsey and Evan Williams. And it was like, "Here, hold on, I'm going to see if I can get the exact." There's an article from early 2018, so almost four years ago now, the great lesson of California and America's new civil war, why there's no bipartisan way forward at this juncture in our history, one side must win. The people writing this, Roy Tuxera is a co-author, the emerging Democrat majority. And essentially, they say, remember the great lesson of California, the Harbinger America's political future, and realized today such bipartisan cooperation simply can't get done.
Centralization Vs. Decentralization And Potential Seccession
The new conditions for victory (03:21:25)
And essentially, what they're basically saying is California is a one-party Democrat state, and that's what you want for the country. So then the natural continue more progressive to more moderate solutions and got worked out within the context of the only remaining functioning party. And so essentially, they're just saying like, just win. Okay. And now, of course, it is a question mark as to whether you actually quote "want democracy" if you want your party to win every single election. If you don't even want the other party to exist and consider them illegitimate, then that's actually not really in a democracy anymore, right? Because, you know, or if it is, it is something that's actually more similar. If it's a one-party rule, it's similar to a Communist Party, where it's just a smoke-filled room, where the primary is not really the general election, general election is just a formality, and the primary is the real election. So you could argue it's still a democracy if the primary is an open primary. But the thing about this is this kind of relates to, now, you know, Evan, Jack, basically RT this, then like, indoor superstitious said interesting take, but it definitely got a fair amount of attention. And this is what I mean about one path forward when you have massive disagreement like that is just one party just courses the other, okay? And course includes a lot of stuff. It could mean physical force, but it can also mean what we've seen, which is de-platforming, un-banking, etc. In fact, one way of thinking about this sort of cold civil war is, you know, with 1861 to 1865, you know, if you look at the map prior to 1861, the blue and the gray were geographically separated, and of course they were ideologically separated, but the victory condition was obvious, like, you know, the north invades the south's territory, okay? Like ideological and geographical victory coincide. But today, if you look at a map of the US, blue and red are like, you know, they're the county level. They're all mixed between themselves. And so there's nothing to like invade. There's nothing in physical space that you can, like, invade. They're all mixed, right? But there's an article from 2017 that gives a visual, so from CGR.org. It's a title is study, Breitbart led, right-wing ecosystem, altered, broader media agenda, okay? But the main thing about this is the graphs that are mid-screen on this, okay? So, you know, I have no opinion on the article itself, but the graphs that are in the middle show that, here, I just paste in the link for you so you can see them, okay? The graphs in the middle show that even if the blue and the red are on top of each other in physical space, they are completely disjoint in digital space. Yeah, that's interesting. So that is where the war is being waged. And here's the thing, if victory in the physical realm is invading somebody's territory, victory in the digital realm is invading their mind. Victory here looks like blue blotting out red or red blotting out blue. And now we can actually look back on the last several years with a completely new lens, which is not the marketplace of ideas, but the battlefield of ideas. And now we understand de-platforming, un-banking, canceling, et cetera, not as disputes within a free society, but as digital warfare. We're trying to take out their tanks, their battleships, et cetera, their big guns on the other side by having them wink out of the digital space so they can't recruit more soldiers, energize them, et cetera. Now, this is a war that is fought with words and with keystrokes and with economics.
Centralization versus decentralization (03:25:09)
It's not guns and shells, though it did bleed over to the real world during the riots and the capital and so on. So it's like the physicality of this is secondary, but it's not nonexistent. So this, I think, is actually not the coming conflict though. This conflict is Democrat Republican. I think the coming conflict rotates it by x degrees or in a different plane. The coming conflict is going to be centralization versus decentralization, where it's going to be basically like fiat versus Bitcoin. I think that's quite likely to come. And so a lot of people switch sides. There's going to be people who are like, let's say, super patriot Republicans who will side with the government, my country right or wrong, like the guys who were in the Russian military who stayed in the Soviet military. It doesn't matter. And then there's folks who will switch to the or take the decentral aside. And that's like actually many of the tech CEOs, like Jack Dorsey is a Bitcoin Maximalist, right? Zuck is now doing Ethereum with Facebook and so on. Many of those are going to go on the crypto side, right? Though I think Bitcoin itself will be like the main flash point of the conflict. Then crypto is sort of Bitcoin is different from crypto because Maximalists want it to be different. Like that is to say, whether you think of them, it's kind of like, is Taiwan part of China or is it its own country, right? If you're the Chinese government, Taiwan is part of China. And if not, it's its own country. Now in reverse, if you're a maximalist, Bitcoin is its own thing and all crypto is just scams, etc, etc. Whereas if you are in crypto or in web three, actually Bitcoin is great, but it does one thing, which is digital gold, and then we need that. We also need private cash and we need programmable currency and need some more contracts. We know this stuff, right? Now, for what it's worth, like I had this, you know, a couple of tweets on this, but basically Satoshi wasn't a troll. He didn't start fights on the internet. He spoke to Zuko, who was the founder of Zcash. He endorsed idea of name coin. In general, I think he was about as attitudinally different from some of his self-siled disciples as the mythical Jesus was from the Spanish inquisitors, right? So I definitely wouldn't call myself a maximalist. However, and moreover, I would also say, if you look at Satoshi's writings, like, you know, how Fannie, you're heard of how Fannie? I have heard that name, but I can't place it. Is the first named person to engage with Bitcoin, the first person to engage with Bitcoin publicly, other than Satoshi, like replied on the original email, some people think he was Satoshi, and used his name to boost it. Certainly, he fits, but he passed away from a general disease. However, he froze his body, so maybe we can revive him at some point. But here's the thing. How Fannie and Satoshi had a discussion, and Fannie said, Satoshi, are you endorsing the idea that additional blockchains would each create their own flavor of coins, which are traded with bitcoins on exchanges? And so she said, right, domain objects, parentheses, domain coins, question mark, could represent the right to own a domain for a year. So Satoshi Nakamoto did entertain the concept of issuing other digital currencies, okay, domain coins. Okay, the reason is, like, I might seem like totally obvious to you or me, but whereas I or you, you know, might think of Satoshi as like a newton, and the Bitcoin white pair is like, Principia Mathematica, like a feed of science or a feed of engineering. There's other, a lot of maximalists think of it more as like a religious text. And to be fair, you can argue it's got aspects of it because it's not simply an engineering innovation. It has implications for how one lives and that basically debt is bad and inflation is bad and equity is good and capitalism is good. There's a lot of principles that are bound up in it. Freedom, you know, sudanimity, lots of different principles, the network society, all those things are bound up in it. Even the Genesis block has this concept of, you know, the bank bailouts being bad. And so it does have something which is more than just F equals ma. And so I understand where that comes from. And basically in many ways, I think this will be seen as something like the Bible or the Quran or the communist manifesto or the American declaration. We're still close to this event, but the Bitcoin white pair, the invention of Bitcoin is going to be something that, you know, just like there's Sunnis and Shiites, Protestants and, you know, Catholics, there's all these different schools of thought. And there's maximalists and there's ethereum people and there's, you know, like CBDCs are this weird kind of thing, like the counter reformation, you know, Catholicism adopted some aspects of what Protestant was criticizing them for. CBDCs are the state, the central state adopting some aspects of digital currency criticism. All of these things come out of this, but okay, how did I get on this topic? Hold on. May I interrupt? Oh, okay. Okay. Here's what it is. 60 seconds. I'm going to give you a 60 seconds. Here's what I was saying. I was saying that the past iteration of this Cold Civil War was Democrat Republican. Think of that as like World War I. Now there's like a rotation of it, which is like World War II. And that may not be the best analogy because there's most of the same groups who fought the same time. We might come up with a better one, which is like, you know, I don't know, World War I and the Cold War or World War II and the Cold War where the US and the US are on the same side then on different sides. But the point is that the last one is Democrat Republican. The next one is Decentralist versus Decentralist and Bitcoin maximalists on one side and like woke capital on the other. And then there's folks who are in the middle and like crypto is sort of in the middle. Web three is in the middle, but I think it's more on the Decentralist side. And then you'll have folks who are like, I don't know, Republican types who are also more in the middle, but they're going to be more on like the state side, right? Yeah. So that's I think what the coming axis is, which is a rotation of the current axis. And that leads to I think significant civil conflict because they're kind of irreconcilable. But I do think the Decentralist version will win. But now let me give the mic to you and I'll come back and explain why. Okay. All right. We may end up hitting pause on that and coming back to it in another conversation. I want to say a few things that I'm going to segue to some rapid fire questions. We'll see how successful I am. But the couple of things I'll say, number one is that for people who are interested in how humans make meaning and create myth, spread myth, you could substitute ideology for myth that makes you sound smarter. That's fine. I would suggest they read or reread Dune. So I'm rereading Dune. I've read it before by Frank Herbert. And it is incredibly sophisticated and nuanced as an adult as an adult. Oh, absolutely. As basically me more fair. And the use of kind of the use of not just myth, but the human proclivity, almost necessity for myth, whether that myth is something called my country or whether it is a religious doctrine. And this we can get into separately. We talked about it a bit in the first episode. But I would suggest people reread Dune, which I'm doing right now because I'm about to see the movie. And I want to make sure my memory is fresh. But the whole idea of the lineage of the Benet Gesserit is really worth looking at very, very, very closely. Also really talks about, in a sense, decentralized gorilla warfare on multiple fronts. It's a fucking fantastic book. So everybody should read that. And Bitatrivia, because I imagine a lot of people listening will be, if not crypto native, crypto curious, the he so the word the word and the name Nakamoto is in Japanese, Japanese is a lot better than my Mandarin, but is center origin is would be one way to translate that Nakamoto. And the character for Nakamoto is the same character different reading as the Jung of Jungkuo of China, middle kingdom. Although I think the better way to translate that is center kingdom. And I just want to drop a little bit of trivia for any language nerds out there. But Nakamoto is a really it's a great last name for Satoshi Nakamoto. All right, my questions. First one, very important. Have you always said RT instead of retweeted? I guess I don't know. I mean, I think I might use him interchangeably. Is this like an accent thing? No, no, no, just I just like it. I've never heard that verbally before. So I like that. All right, so you said I'm not a Bitcoin maximalist, but I want to ask you a question. I'll preface it with saying people listening, this is not investment advice. Information will purpose only. It's a way for me to to better understand and share your thinking, biology. If you were starting from scratch, had no holdings in crypto, but could only bet in one place.
BTC or ETH? (03:34:30)
BTC versus ETH versus other. You only get to pick one, which would you choose and why? BTC. BTC, why? And the reason is everything else is a technology company, whereas Bitcoin has become almost like a like an element, like gold. That's to say, the fact that Bitcoin not only is the first, but it has the disappeared founder. It has because it has a disappeared founder, it fits a certain kind of mentality where because there's no leader, you don't feel like you're submitting to somebody. You don't feel like you're submitting to somebody by buying gold. Okay, Satoshi is who you make them out to be. The disappeared found. I mean, one thing, like, this is not how I think about money typically, but if you look on any dollar bill, there's weird incantations. There's like a pyramid with like eyes on it and so on. Most forms of bills, they have like the most famous people in the country on them. The branding exercise is actually pretty important on this stuff, right? And the thing is that you can separate out the economic, the ideological and the technological, right? As I said, it's a log scale. Most people would consider me like from the outside, very similar to Bitcoin Maximus, but you know, I'll give you two thoughts on that. So first is on the economics, yes, if I can only buy one thing, just buy Bitcoin because nothing competes with it. It is possible, by the way, now to be clear, do I think it's a hundred percent chance of success? No, I think it's possible that there is some remaining security issue associated with the code. But what's interesting is, Square is now doing some with decentralizing mining and the fact that mining has been driven out of China is actually good because I don't think any other state has the state capacity to do what China did in the ruthlessness. So it's unlikely that there's going to be a technical attack on Bitcoin. The only thing that's going to happen going forward is potentially a regulatory or software attack. But outside of that, it's communities so strong that can probably repair on that. Regulatory attacks are also less likely to kill it because the US is losing control over the world. If Germany defies on Nord Stream 2, and if sanctions don't affect Germany anymore, it doesn't affect India, if El Salvador can go Bitcoin, some states will have Bitcoin be legal as well as within the US. So the federal government doesn't have the veto. So finally, really the technical attack. Is there some possibility of some zero day that can inflate a lot of coins and be hard to patch? That's possible. It is still something where there's one client that is very popular, one Bitcoin client. It's not a multi-client thing. So that's the main weakness right now. Is it possible there's some supply chain attack where some libraries included and it hasn't been audited sufficiently? Yes. Also quantum cryptography, that's kind of an unknown, but is it possible that say quantum decryption becomes something that is out there before quantum encryption, that quantum decryption is highly centralized and some governments can do it or some centralized actor can do it, but quantum encryption is not something everybody has access to. Those are all possibilities, but the risk factor is relatively low. So that's on the economics. On the ideological, the way I think about it is I actually, if you go item by item, probably I agree with Maximus of many things. I understand where they're coming from. Exit the Fed, check. Stop the bailouts, check. Return to sound money, check. Build a volunteer society, check. And the welfare warfare state, check. Bitcoin is a global reserve currency, check. Bitcoin is an apocal technological breakthrough, check. But Bitcoin is the only digital asset ever and everything else is evil. That's where they lose me. And that's X. And that's why I buy Bitcoin and sell maximumism is the economic slash ideological thing because I'm not a monotheist. I'm like, you might say, from my cultural background or something like that, India is polytheistic, it's plastic, it's pluralist. I believe in the value of immutability, but I also believe in the value of programmability. And I think it's good that those are two separate things. It's highly immutable, like Bitcoin or gold. It's not going to be highly mutable and programmable. Those are two valuable things, but they're two almost necessarily separate things. And so the thing about it is that's on the ideology. Again, though, the reason I think Maximus are going to have amazing traction or huge traction over the coming years, I think Bitcoin Maximus in a sense, the most important political movement in the world that people don't understand about today. Because essentially, their argument is, it's all a scam.
What is the Cantillon Effect? (03:38:57)
That is to say, the Fed is a scam, but actually all the printed money means many of the corporations are a scam. The censorship is a scam. Like lots of things that the state is saying are false. It's everybody who's rich. They're all cantilian errors because if you hear that term, the cantaloum effect, do you know what that is? I do not. The cantaloum effect is like, some people get the printed money first. So it's not uniform in terms of its application or society. There's some truth to that. That's bidding up assets. That is causing something where it's like dunking on Mars. Actually, I think Mars has lower gravity than the US. It's like space jam. Dunking on the moon, we could say. Yeah, dunking on the moon. That's right. Actually, Mars is 38% of the gravity there's. So yeah, dunking in a lower gravity environment, you might still need to be athletic, but less so. That's what it's like doing tech or VC in this highly inflationary environment, at least for now. It's possible that all gains are just wiped out because things go totally vertical. That's what happened in Weimar. Everybody thought they were, have you read When Money Dies? I have not. Okay, that's a good book that actually Joe Calangelo had a good clip from. I'll just kind of read that clip. This is by Adam Ferguson. He had a great quote. Currently reading When Money Dies, the history of hyperinflation in Weimar Jeremy. When the Wild Assessments I never knew was that early on people all thought they were getting rich. They were selling hard assets for what they thought were insanely high prices and marks. Essentially, because the printed money flowed to some first rather than others, there's this cantaloupe on effect. Here's some quotes. "My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me. It already amounts to millions. Speculation on the stock changes spread to all ranks of the population and shares rise like air balloons to limitless heights. The value of my industrial investments is rising to an extent which seems to be incomprehensible and all this makes me uneasy. Basically, this thing is something of course then the hyperinflation comes because everybody's rich. They all spend and all the prices suddenly rise because more money is chasing fewer goods. In the US, it's non-linear actually. One aspect of it that I hadn't fully understood is the printed money is in some ways contributing to the great resignation. For whatever reason you're having strikes, you're having people who are not working as truck drivers or working as dock workers anymore, maybe more power to them. They've gotten this printed money. What that does actually, it non-linearly depresses supply not just of labor but of goods because the ports aren't being unpacked. That's why the administration is talking about bringing the national guard to go and man the docks. That concept is it's not just more money chasing fewer goods or it's not more money chasing the same goods. It's more money chasing fewer goods, fewer supply of both goods and services, less labor and less stuff because people are not being paid to unload things or build things. I think there's a non-linear inflation effect that might be coming. Yeah. You can look at lumber and a number of other things that I think are byproduct of multiple factors. It's a byproduct of multiple factors. Lumber in particular, I think it went up and then it crashed. Overall, inflation is definitely here. It's now no longer being denied as some conspiracy theory. They're no longer seeing its transitory. They're admitting it's bad. I'm confused as to why it happened. Eventually, they're going to say it's good because it's wiping out all of the fortunes. It's like a jubilee. All your debts are gone. Why are you mad about it? And then they might move to seizures, unfortunately. I know I'm saying this in a chipper tone, but let me give some good aspect of this. One of my macro theses, as we've talked about before, is that peak centralization was 1950, one telephone company, AT&T, and two superpowers, the US and USSR, and three TV stations, ABC, CBS, and NBC. We're running history and reverse, at least in the West. I have this essay on this at satonya.substack.com. He gave this very flattering title to it, which I would not have chosen. But if you Google SOTONYE, Bollages, Srivastan, you'll see it. We'll put it in the show notes as well. Put it in the show notes, right? This goes into more detail, but basically, if you go backwards from 1950 to 1890, the Western Frontier closes. But you go forwards from 1950 to 1991, the Internet Frontier reopens, and you can actually map these things backwards in time, you get the Spanish flu forwards, you get COVID-19. Backwards, you get the Robert Barons, forwards the tech billionaires. Backwards, you get the private banking era, forwards, you get the crypto era. Backwards, you get the cross of gold speech by William Jennings Bryan. Today, forwards, you get digital gold. Backwards, you have right and left fighting in the streets, and today you have right and left fighting in the streets. Backwards, you get Weimar Germany. Today, we have Weimar America, where there's both the inflation and the cultural stuff that was very common. If you see Babylon, Berlin, there's a lot of similarities to modern America. There's this book called Vluptuous Panic that kind of documents what Weimar Germany was like, similar to America today, culturally as well. It's not just the when money dies, gives the economic aspect of Vluptuous Panic, where Babylon, Berlin will give the cultural aspects similar. You also have the conflict between the state and capitalism, where the centralized states, FDR was doing the brain trust, and he was packing the courts, National Industrial Recovery Act. He was doing the, what's my call it, the entire alphabet soup was set up at that time, and of course, the gold seizure. You also have something, if you go even further back on time, anti-bellum polarization. Now, the thing is, the attentive listener will say, well, while you just mix things from the 1920s with the 1800s and so on. I say yes, but that's because it's sort of like ABCD, but it's not exactly DCBA. It's not exactly happening in exactly the same reverse order. I think the common symptom is the centralized fist clenching in 1950 is now losing control. Similar events are recurring in a different order because centralized control is dropping off. For example, that centralized control allowed for public health and also censorship. That's why the Spanish flu, I'm not sure if it was solved, but you just didn't hear about it because censorship was actually effective. That was part of the arc up of the centralized state. Now, we have the arc down of the decentralized states. There's neither effective censorship nor effective public health. You have this total catastrophe, or at least perceived catastrophe, around COVID-19. The way I think about it is, it wasn't the Spanish flu. Fortunately, it wasn't 100 million dead, but it's going to be on the other 10 million dead, so it's pretty severe. We're lucky that it wasn't Spanish flu. It might, who knows, could mutate. The thing about this is, when you have this worldview, at least in the West, and I'll come back to China, a lot of these things are happening, but we're seeing the alternative outcome. For example, you're getting the cross-gold speech and he's like, we will not be tortured or veritable, it's impaled, crucified, I think, on a cross-gold. Now, we're getting digital gold. People want gold back. The populist movement is not against gold, it's for it. You're seeing a lot of these things happening in reverse, not the frontier closing, but the frontier opening. One of them that I think is pretty important is the stuff that FDR had the brain trust, the brains on his side. So, Executive Order 6102, the seizure, they were able to implement it. But I think if they try it this time, it's not going to work because history is running in reverse and the IQ is not part of the state. Can I interrupt? Yeah, of course. Maybe could we pause that and leave the audience wanting more on this particular thread and may ask a number of new questions?
Crypto-civilization not crypto-anarchy (03:46:45)
Sure, but let me say one last thing and then let's go to that. Okay. Now, I'm going to say something that sounds sci-fi. Basically, the modern U.S., the whole thing is that the entire mythology is beating the Nazis and beating the Confederates. So, beating the ethno-nationals abroad and the secessionists would have you at home. And what may happen over the next 10 to 15 years is the regime may lose to the ethno-national sub abroad, namely CCP, and they be lose to the maximalists at home and the sessions at home. And the breakup may happen. And the difference is, of course, that the Chinese communists are non-white and they're communists. They're not like white Nazis, so they're different ethno-nationalists. It's different enough. And the secessionists or whatever you want to call them this time are absolutely not forced slavery. They're for freedom. In fact, you could argue they're anti-slavery activists because they don't want to submit. But I think that it's quite possible that we see the reverse outcome of a lot of things. And then at that point, what we want to do is, if the CCP wins and if we have American anarchy, we need to figure out some way to rebuild civilization or guard civilization because in that world, the thing is anything good can massively overcorrect. You have to have some limiting principle because otherwise too much is not enough. This is why I would not call myself a maximalist. I call myself an optimalist. That is to say, I want to figure out what the optimum is across many variables and set an explicit objective function rather than simply maximize something where too much is never enough. Maximumism just leads, you can call it fundamentalism. It just leads to a certain variety there. And again, I'm not trying to beat anybody up on this. I'm just trying to say that, yeah, okay, retire the current system. It's on whatever you do or I do, it seems destined for that retirement. We have to think about what the next system looks like after that. How do we ensure that we don't have crypto anarchy but crypto civilization? Yes, I think that the Chinese are going to rise. But what does an unchecked China look like? The US unchecked after 1991 behaved quite badly in some ways, in all the invasions. The unchecked China might be quite mean. How do we defend civil liberties? How do we defend privacy? How do we defend civilization in this environment where we have sort of the reverse outcome? I know that's provocative. Call that a sci-fi scenario. All right. You're once again, outlasting me and the battery in my headset. And I know I can't change my audio source with the software you think. So I may lose audio altogether. So I want to ask a couple of remaining questions. And I'm going to I'm going to just throw a number of them out there at once, because I think this will make the most sense. And then you can pick and choose which you want to go after. So here are some of them. One is if you had to choose a big US based tech company to be bullish on, which would you choose and why? That's one. Another is if you are still angel investing, what are you looking at? What types of things or categories of things you're looking at and why? And then any predictions for the next 12 months, that's my list. Yes. So the one thing I want to say is before we get into that, just on the topic of secession for a second, just to make sure I clarify what my position is, I believe in volunteerism.
Secession in a less “United” States (03:50:17)
And so I think rather than fighting over land, I have zero interest in doing that personally. Instead, I think you should try to crowd fund territory in no man's land. So nobody else has a claim on it and you've got it fair and square, and it's in the middle of nowhere, like basically the equivalent of Burning Man, because fighting is stupid and there's plenty of territory out there. And I'd rather build it from scratch without a fight. Right. So I would not call myself a secessionist. I do think that if you look at some of the conversation around national divorce, that is happening on both sides. That is happening in NYMag, published something on this a few years ago, which is like American breakup, I think maybe it's time for America to split up. Sarah Silverman has talked about this and folks on the right have talked about so-called national divorce. So it's definitely in the air. And one last thing I'll say is that all of the stuff, like the language is super important because secession, of course, sounds bad, but independence sounds good. It gets back to that concept of Russell conjugation. The American Revolution was secession of the colonies from the British, but that was independence from the American perspective. So this also gets that earlier concept of our winners writing history. So the adjectives I chose were as neutral as possible. I want to be clear that I don't support any kind of physical conflict, peace-loving, and I'd want to basically buy territory outside of this. However, what I want, or what you want, there's some forces that might be greater than us. So in this sci-fi scenario, this is how I sort of see the Harry Selden-like psychohistory happening. Okay. So that's my kind of clarification accepted. Thank you. Right. And you know what psychohistory is? It's like the sort of prediction of the future, you know, and so on. There's a scenario analysis. Okay. So why is that scenario now? It's important. Well, I sent some probability to that scenario. There's also other possible scenarios. Another possible scenario is it's just a lot of disagreement and just a lot of migration and yelling online for many, many years. And then it's something like what happened with the Soviet Union, where it does break up, but it breaks up in almost, you know, basically peaceful/bloodless way, right? And that's like a good outcome. And I think that's likely, you know, like that might be the most likely. It's much better than civil conflict. And there's things like with interstate unions, for example, where maybe that's what happens. But we'll see, you know, obviously hope for the best plan for the worst. So now to your points on this actually relates to big tech coz and bullish and bearish and whatnot, right?
Tech And Security Perspectives On Cryptocurrencies
Bullish on big tech companies (03:53:01)
So the US big tech companies that are in the most bullish on, though I'm not, I don't think actually, I shouldn't say I don't, I don't know if I actually hold any shares in these companies. I might in some like entity of an entity. Okay, but it's certainly not to my knowledge, a large holding. I'm actually most bullish on Twitter slash square and Facebook. And the reason is Twitter slash square, the reason I put them is they're going to become probably merged into something like with squares, Bitcoin support, and the fact that Jack is CEO of both, of course, they're two separate entities, but he can figure it out and probably offer Bitcoin payments on Twitter for many things and basically build like a Bitcoin Ethereum into Twitter. What do I mean by that? Like a Bitcoin Ethereum meaning, it's like a lot of the functionality or copied functionality of Ethereum, like root stocks sort of, I think, clone the Ethereum EVM. So it might have a lot of the functionality of Ethereum or salon or some of these other chains, but that is sort of Bitcoin backed. And there's different ways of doing that. There could be basically essentially a centralized version that says like a minimal decentralized component, which is one way of doing it. And you just like load Bitcoin onto it and the rest of it is centralized. There's ways of doing zero knowledge. There's a number of different engineering trade-offs that could be made, but essentially, I think that's it. That's one direction, like Twitter slash square. And Facebook, because Zuck is also a founder and he's just like his, I do respect him. I really do. And the reason I do is the number of hits that he's taken over the years to start is like a 21 year old kid in his dorm to build what he's built. And from that to this three billion person network, I mean, a lesser founder would have backed down after the mistake on, what's it called, Libra. Okay. But Libra and then DM and now he's doing Novi, which actually I think is a much better chance of working because it's natively crypto. I mean, look, it's hard. It's easy to say. I did actually say this at the time that what they should have done to start with Bitcoin and Ethereum payments and WhatsApp and do remittance corridors rather than doing this. I think there might be some public record of it, but I definitely, definitely talked about it. Rather than doing like a new coin, start with the existing ones, build up experience on that rather than doing Libra. And that wasn't their first shot, but you know what? That looks like what they're doing now in Novi. And very, very few people would have had the conviction to persist with something in the face of that level of resistance. I'm talking congressional hearings. Most people would have quailed. Okay. Same with all the negative press. Same with, I mean, like, you know, the Oculus bet, that's two billion dollars for something where they had to go through multiple iterations to get the product to work. But now they're going to maybe rebrand the company around the metaverse or Instagram, you know, like, I made this comment, like basically, Instagram was not an easy call. This is somewhere it's being retrospectively litigated because it's worth a lot. But just to just to bullet point this, Instagram raised at 500 million valuation the day before Zuck offered a billion for the company. One billion was like 25% of their cash in handy about like four billion times. There's actually a lot of money. It was weeks before the Facebook IPO. The board wasn't consulted. They were just informed. And Instagram had no revenue. Okay. Yeah, that's not, that's not an easy call. That's not an easy call. That, you know, and in fact, John Stewart mocked it at the time. He's like a billion dollars for Instagram. The only thing that's worth that is something that instantly gets me a gram of cocaine, right?
Cryptography vs. journalism (03:56:25)
Like, everybody mocked it, made fun of it. They said, Oh, this is such a bubble purchase. They're so stupid. It endaged through the IPO potentially like, I mean, there were so many aspects to that, where that was a like highly, highly non consensus call that has now been turned into always an obvious buy, right? And the thing about this, the problem is that people who are wrong will not admit they are wrong. The only way to show that you were not like two X writer than somebody, but 10,000 X, writer than somebody else, is an investment where you're 10,000 X writer, 10,000 X more correct. Okay. And by the way, this is very common. Google's toughest searches for a business model or the internet is not going to be a thing. So many articles on the early internet were like this, or of course Bitcoin is going to zero, or COVID-19 is not going to be a thing. These journals are not off by like 50%. You can't just like read their article and like, think you're being sophisticated by discounting it. Their mental model, the world is often off by 10,000 or 100,000 X. Now in fairness, just to just to set a counterpoint, there are some journalists who are incredibly prescient. There are good and bad and ugly within the world of journalism, right? Just to be fair. Sure, sure. But many of them are becoming VCs and angel investors, or going to some stack. Yeah. Yeah. Yeah. A lot of them are defecting because the ecosystem is just full of vitriol. It's like everyone's pissing in the pool. So a lot of people are getting out of the pool. Yeah. Because the thing is, look, what I'm talking about is really I should preface it with the corporate journalists, the one who's employed by a legacy media corporation, right? And that legacy media corporation will, like the Salzburgers company, the New York Times will literally run billboards advertising itself as a truth. Fox will run billboards advertising itself as fair and balanced. The Washington Post will literally equate itself to democracy itself. Now, Facebook doesn't do that. No tech company has the balls to do that, say that you're equivalent to truth or fairness or democracy itself, right? But yet that's a for profit corporation that has the arrogance or the lack of self-awareness or something to come out and say, I determined what is true for the world. I am the paper of record, right? I am the first draft of history. Whoa, you know, like that, that is the monopoly of truth is upstream of the monopoly of violence. The monopoly of truth, you say that WMDs are in rock and then people go and invade. You say that somebody is guilty, you prosecute them in the court of public opinion and they get prosecuted. And so that's a super important power that some privately held media corporations shouldn't have. And so what's happening now, fortunately, is that power is being decentralized. First, in the most important way, which is on-chain truth, cryptographic truth, not argument from authority, but argument from cryptography, not NYT, but BTC. So that power is being taken away. And what's funny is, look, as you know, I'm not the kind of person who thinks white is an insult, but these folks are. And for some rich white nepotists like Salzberger to be determining what is true for the whole world is simply not applicable, one might even say it's quote, white privilege. And so instead, what we should have is something that is a global decentralized network where people of every group, including, of course, white Americans, can participate and determine what is true through a mathematical process that starts figuring out who has what Bitcoin and then it goes to who has what asset and then it goes to who made what assertion. And that's like the ledger of record concept that we talked about before. So there's a root and branch thing where corporate journalism has also lost that they don't understand it. Just like CCP is hard power and BTC is hard money, cryptography is hard truth. And corporate journalism has actually lost control over hard truth. Just give you one example of this from earlier this year. Vitalik Beteran made a large donation to India for COVID. And do you know how people knew that it was real? Look at the blockchain. They looked at the blockchain. That was ground truth. That's really important. Because what is the other thing that you tend to do nowadays? If something is real, let me see if it's on Twitter. Did that guy actually say that? And the thing is that's actually not perfect nowadays because Twitter deplatforms a lot of people. So their record is gone. Or last year, Twitter was hacked if you remember that in Bezos and other people were posting things. So while it's imperfect, in the not too distant future, there's things like D so, there's various kinds of decentralized social networks out there, capsule, all these things that are coming or out there. In the not too distant future, that back end is also on chain. So to show that somebody said something, you won't link to Twitter, you'll link to the crypto Twitter version, the on chain record that shows they posted this or said this. And because it's protected by proof of work or a similar consensus algorithm, you can compute how much money would be required to falsify that. How much computation, how much energy would have to go into falsify that. That is really interesting, right? Because you also have multiple confirmations. It's not just one source. The thing is, I don't care if somebody, if something has a thousand retweets, what I care about is if it has two or three independent confirmations from economically disaligned actors. This is the same as academia, by the way. Everybody's optimizing citations. What you actually want to optimize is independent replication. That's what true science is. It's not peer review. It is physical test. So anyway, this leads to kind of worldview stuff. What am I interested in? So the reason I was interested in, I said, Twitter, Square and Facebook is they're still founder led. Because they're founder led, they're getting into respectively Bitcoin and Web3. Whereas Google, for example, I respect Sundar. It's very hard to run an organization like the one that he does. But with the big exception of AI, we're under DeepMind. Thanks to DeepMind acquisition, Google really hasn't innovated that much. There were some promising things like tried to integrate robotics. That was taken down by scandal. But basically, conceptually, technologically, economically, it was sound to kind of put that all under one roof and actually advance the state of the art of robotics. They had Boston Damix. They acquired all these companies are going to knit them all together. Unfortunately, scandal took that down. They had all these messaging apps. Basically, there's kind of being a drift. They've kind of got too much money and they don't have enough focus or what have you. It's all the same big company stuff. That thing, remember I said before about how, if there's a lot of money within a company, people can do the off-diagonal, they can loot.
Block explorers: the stealth threat to search (04:02:44)
They form those coalitions. The win loss and loss win is supposed to everybody wins. That's definitely happening there. Just to show why I'm not bullish on them, it's 2021. They don't have. It's a core thing for search that they would have had seven years ago, if probably Larry Page was still in charge. Do not. What is that? Block explorers. Why don't they have blockchain.info and either scan? People don't get this, but block explorers are actually the stealth threat to search. That is to say, we're not used to thinking of them as a threat to search because financial data of the blockchain type being indexed on a website like blockchain.com or either scan, where you're looking through smart contracts and so on. That seems like categorically distinct from text and media information that's on the internet, that you go through web search. But guess what? The internet of money and the internet of information eventually merge together because with something like D so, what was called BitCloud but D so, if you go to their block explorer, you can see that every post and like and so on is on chain. That shows that actually, more than just financial data can be represented on chain, social data can as well. If social data can, pretty much everything else can because social networks include media and all this other type of stuff. It's all going to go on chain eventually. Some of the zero knowledge stuff, like what Starkware has done, is solving some of the scalability issues. It all goes on chain. That actually is a threat not just Google but also Facebook and Twitter because indexing the web is hard. Indexing a social media company's database is even harder because it's closed and corporate, but indexing a public blockchain is easier than both.
Blockchain security (04:04:24)
Just to give one example, with indexing the web, you have to go and have a crawler that has to guess when to re-crawl one of a million sites. When is it going to refresh? You don't know they're not going to ping you. Okay. So you have to guess and you have to spend spare, you have to do a whole fiscal model on this kind of thing. That's just like one piece of the whole web crawling problem. With a blockchain, it's the opposite. Every update is pushed to you. You just subscribe to it and just get a block pushed to you and then you re-enx it. So like enormous parts of like the entire infrastructure are solved by different abstractions that take millions of lines of code and like reduce it to nothing. And then the question is, can blockchains themselves scale? And why would people put everything on chain? Well, it's human saying in 1990 to say you're going to stream movies over the internet, right? Like that was crazy and people thought it would scale, but it did. And one of the other reasons, by the way, that we're going to get blockchains as a back-in for everything. Do you know who sucks at information security? For think of a lot of people, but what is your answer? Government IT developers. Do you know who's actually awesome at security? Tell me, biology. No, I'm okay, whatever. But like crypto developers. Yeah. So there's this website. Most people don't understand this, right? There's a website called rekt.news, all right? And it essentially documents every major hack in crypto. Yeah, it's like the company of crypto, right? Yeah, so millions of dollars get stolen. But here's the thing. That's why people like, what are you talking about crypto? It's secure. There's all these hacks. Here's the thing. We're churning out the equivalent of combat veterans. Okay. This is a live fire environment because see, the thing is in web two, your systems can get hacked without you knowing about them. Someone can just get onto your computer and they'll just hang out there, slurp up information, sit there. And the reason is, it's not a negotiable instrument. The data in your database, they don't know what the price is on the open market, right? They might want to sit there and slurp it more information. They might want to escalate their privileges and so on and so forth. If, however, there are cryptocurrency private keys in every directory, you've now given that attacker an incentive to just take the money right now because who knows, you might move it in 10 minutes, right? So that suddenly makes intrusions tangible. There's an inset. Now, you might still have a politically or ideologically motivated attacker, but once intrusions become tangible, okay, and you can see the damage that is done, you basically, it's like capture the flag on everything in security. One of the hardest things about computer security is it's like, oh, my data was hacked. All right, guess that happened again. There's this website called Have I Been Poned where you can type in your email address and find how many different hacks you were subject to? I'm just wondering who owns that site. Just enter your email address. It's a good guy. Troy, Troy, I forget his last name, but he's a good guy. He's like a security guy who's legit, right? But yeah, it's a good question, right? So, but have I been poned? Like the thing is companies now subscribe to Have I Been Poned to run their users' emails through to make sure that they're not reusing a password that was already hacked. Now, think about what's going on there. That's like a shared database between companies that they're using. So like your login to X site depends on your login to Y and Z in W site, right? That's kind of like, you know, the concept by this post, yes, you may need a blockchain on how blockchains are effectively a primitive for shared state between companies, where I can write to it and read from it in such a way that I can't interfere with your reads and writes. But the point is, that kind of gives a shadow of like what a shared login kind of system looks like. The point is this, the current hacks of crypto things obscure the fact that in web 2, you can set security to zero and just focus on utility because if you have utility of customers and if you don't have utility, you don't. But security is sort of orthogonal to that, at least at the beginning. In web 3, that's not the case. If you don't do an audit of your contract, if you don't think about formal verification, if you don't use a type safe language, if you don't really think through all of your error modes and like maybe use audit contracts and be extremely defensive in what you're doing, your contract gets hacked on the first day. So minimum necessary security is much higher. It is a requirement for making money. And they sweat it. People sweat it for real like they know that one compromise, you lose the money. And people do die in the digital realm. And best practices come about and new tooling is coming about. What do you mean by people die? You mean initiatives, projects, companies? Yes, exactly. In virtual war, in this virtual cyber war, companies do die. They're all fun, sick, they're dead. Reputation killed. So the thing about this is, when people look at ransomware and so on, ransomware is actually, so how that works, right? Like, basically there's a security hole, undetected security hole on something like an epic software. And then there's a thing that appears when it says, pay me some Bitcoin or pay me some Monero in order to unlock your computer. Okay. Now, do you know if, okay, this is not yet feasible, but it's going to happen. Do you know where that would be actually extremely hard to do, would be to run that ransomware on the Bitcoin or Ethereum blockchain itself. Yeah. Why? Because if they could have hacked it, they could have awarded themselves a billion dollars, they don't need somebody else to do it. So the thing is that blockchains will become by dent of their built in bug bounty, by dent of the fact that they're not just open source, but open state, the most secure back end platforms in the world.
Social engineering in the anarcho-tyrannical state (04:09:50)
Now, don't you think that's also going to be a Cambrian explosion of social engineering? I mean, I would imagine that all sorts of sort of Kevin Mitnick, the art deception type social engineering will explode to sort of not skirt, but on some level, circumvent very tight technological precautions, right? And we're seeing that in discord. Certainly, I mean, I have to imagine this is happening, although I haven't read any accounts, but one of the crazy things in the NFT world, is if someone gets hacked because they accidentally give someone a QR code or even God forbid their passphrase, they can see exactly where their stolen stuff is, right? They can look at an unidentified wallet holding their stuff and watch someone selling their stuff. You just can't do anything about it. It might not be plausible or sensible now, but at some point in the future, I could foresee there being greater value of some NFTs to the person who had them stolen than the person who did the stealing, in which case you would have sort of ransom-like circumstances. I don't know, but I would be... Every crime we can possibly think of will happen in that sense. Okay, it might already have. Like there's James in law, it has this GitHub of like, I think, Bitcoin physical attacks, so physical plus virtual, we combine social engineering. But I think in some ways, there's... Okay, there's good and bad. Okay? The bad is you get more... With the state receding, okay, with decentralization winning, the American anarchy that may follow. Remember the thing we're talking about with 10-segrity and the rubber band, right? So right now, we're in this weird phase of an Arco tyranny, where there's a crazy guy who is smashing windows or pooping on the street in San Francisco. That's the anarchy. But the tyranny is that the Uber driver who parks next to him gets a $200 ticket for being on the wrong side of the road. Okay? So the guy who smashes the window of the car, nothing happens to them. The poor working-class guy who parks inside a road gets like whatever $100 ticket, right? So it's a combination of anarchy and tyranny. That, I think, is... So the new information to me over the last eight or nine months is I think that the tyranny doesn't have enough state capacity to sustain for long. And that's different than the Soviet tyranny. That's different than the 20th century kind of top-down sort of states. What I've sort of realized is if in the 20th century, the big problem was tyranny because you had sort of left authoritarian and right authoritarian extremists. And what was precious was freedom and equality, where in the sense of being treated as an equal member of society rather than some equal protection under law, all that stuff. In this century, I think after that rubber band snap happens, which I think is going to happen, and the tyranny vanishes and we just have anarchy, what is scarce is not freedom, but leadership. That's saying a time of tyranny, what scares us freedom, and a time of anarchy, but scares us leadership. Okay. And so what happens, I think, is like Russian the 90s, there's this book, I think, like... May it posit something while you're looking for that. And that is, I would imagine human nature being human nature doesn't seem to have changed all that much over the last few millennia, that if we have say decentralized social networks, while it may be true that no central authority can deplatform you, you will have Lord of the Flies dynamics whereby someone accrues incredible reputation/power societal sway and can effectively force exile by just causing so much vitriol and acid to be thrown at any individual player. In the sense that I expect that we'll see deplatforming by other means than some central order, if that makes any sense.
Lawful evil China vs. chaotic evil United States (04:13:40)
Yes. So, well, I think what happens is you get re-centralization. So, yes, I do agree with that. Basically, for example, what's happened in the US is if China has centralized censorship by the state, in the US, because the First Amendment prevents that, you have decentralized censorship by corporations, where it's technically compatible with the First Amendment, but it's spiritually not compatible. And then the response set is the third order, which is decentralized censorship resistance. See, because the western form of censorship is this retrofit. It's not like the Chinese where they set out and they're like, we're going to take the hit, we're going to take the PR hit, the reputational hit, whatever, international hit, just going to censor. Because this was a retrofit on the system, it is retrofitting this tyranny on a top of a previously free system. When Twitter was the free speech ring and the free speech party and started out with that, it's a bad fit. And there's still enough people with living memory of what that freedom looked like. And it is now becoming apparent, which was not to me, I think, a year ago, that the state capacity for really exercising that in a coordinated way is not there. That's to say, if the Chinese state, do you know what, like, lawful evil versus chaotic evil are? From Dungeons and Dragons? From Dungeons and Dragons, yes. I do. You should probably describe what they mean, but yes. Yeah, so like, lawful evil is methodical, careful evil, right? And in some ways, I mean, like, I think it's a caricature to say this in some ways, but in some ways, the Chinese state, you can think of it as lawful evil. When they set out to censor you or like, every switch is flipped, every, you know, the guys all fan out, like Bitcoin mining band, boom, they actually just go and execute on it, like ruthlessly, like a corporation. The top guy gives the order and they all go into it. If you watch like the Chinese military parades, okay, under Xi Jinping, they don't even salute like the seven person CCP standing committee, more it's not a salute of an oligarchy. It's a salute of one guy. And that one guy gives an order, and all these guys go, like, they're a little like robotic like this. That's the whole point of the military parade, by the way, is to show that in peacetime, if they can do this in an wartime, they're just completely coordinated like, you know, ballet of violence, basically. That's a whole point of military parade. So they're like lawful evil, whereas the American state in many ways is chaotic evil. Oh, you know, Afghanistan, just like this total catastrophe. And we have stores being burned down and people storming the capital and states doing this and money being printed. And look, they're a butterfly, you know, I'm on Twitter yelling at this person. And there's no, there's no coordination of any kind, there's no strategy. Like this August thing is a great example. Okay, did you see, did you follow this at all? I did not. Okay, so by the way, as a side light, some people would be like, oh, tech bro, how come, you know, why are these crypto bros tech bros like, you know, getting into foreign policy or politics?
Broader Look At Tech In Politics And Investment
On “tech bros” in politics (04:17:29)
On the other hand, they'll also say, why don't these tech bros or crypto bros? Why don't they learn some history and humanities? Like, you know, these are mutually contradictory criticisms, of course, right? But my response to that is twofold. First is, as I mentioned before, just like after the 2008 crisis, it was obvious that the Federal Reserve, the bankers, didn't have it under control. In fact, like Bernanke in 2004, had given the speech at Jackson Hole, Wyoming, I believe on the great moderation on how like macroeconomic volatility had been solved and they had it all under control. And it was, you know, no big deal, like basically, meaning no more depressions, nothing, right? Of course, a few years later, financial crisis happened. So they obviously didn't know what they were doing, even if they had, you know, control the system, hence fintech, hence crypto because of that distrust. And now what we're seeing in 2021, if it wasn't apparent before, but it's really apparent now, is that the foreign policy establishment of the US, the national security, the military establishment didn't just blow COVID, they blew Afghanistan, despite like $2 trillion in 20 years, they basically blew the largest lead in human history, arguably over the last 30 years, like an empire, it's absolute zenith, is now sort of losing to the Taliban, right? And by the way, it's not even like Vietnam, you know, why the Vietnam defeat was actually more excusable because they had a superpower sponsor, right? The Soviets were on the other side, they, you know, the Chinese were on the other side, supplying arms, like those, those were serious states, who's backing the Taliban? China isn't putting in weapons, to my knowledge, Russia isn't, maybe Pakistan. So you lose, it's not like Vietnam, it's actually much worse than that as a defeat, right? So the point is just like the bankers, obviously didn't know what they were doing, so you know, time for other people to come in, new fresh blood, right? You know, if you take a look at, you know, my fellow tech bros in finance and VR, Palantir and Andrew, right? These teal and Palmer Lucky waltzden with no background and advanced the state of the art of, you know, the intelligence and military communities, right? And that kind of shows a shade, I think, of what is possible if we do decide to get involved in this, and obviously in cryptocurrency, you know, like guys like Vitalik, people who are running these coins are running economies. They are running monetary policies of large countries. It is, it is a step up from simply running a company, you're running a community, you have to think about things, you can't control people's actions, you can nudge maybe by pushing through an update, but even that update may be pushed back on. It is actually like the executive legislative and judiciary, you know, the president and the lawyer, lawyer congressman who edit text and then the judiciary that enforces it, that fallible and highly unreliable and irregular judiciary. Rather than that, you have the executive of the CEO or the founder, you have the legislative, which are the coders that propose the edits and changes, and you have the judiciary or the nodes that interpret the code, but do so in an extremely faithful way, right? So it's not like, in a sense, it's a violation of equal protection. Every time somebody with the same facts walks into a Wyoming court and gets different justice, for example, than a Milwaukee court or, you know, Minnesota court, whatever, right? Like every time that happens on something that's supposed to be uniform, the same input should give the same output, right? That's what rule of law should mean. And I'm not saying I'm not beating up, I'm just using Wyoming, Minnesota as an example. I'm not being up any particular state. I'm saying that the concept of a judge changing their decision making based on anything other than the raw inputs. Judicial discretion in many ways is actually often bad because you have things where people start going jurisdiction shopping, not because the law is different, which is fine, but because the judge likes this or likes that and has a certain attitude towards this, you know, it's like there's that apocryphal is really study where people get lighter sentences after the judges have eaten something, you know, and their blood sugar is up so they're like more merciful. That's bad and said you should have this alternative. So my point is though that founders are now getting into rule of law, currency, you know, like with Palantir and Andrew into military and foreign policy stuff. So that this preface is kind of why we're starting to think about all of this stuff. Okay. Another preface, I know a preface to preface. Well, actually, let me talk about France, August and then come back to that.
An AUKUS among us and geopolitical power shifts (04:21:55)
So with France, August, that is that is this like amazing thing that shows when we talk about like chaotic evil, they still know what they're doing. So here is kind of the sequence of events, basically, after the whole Afghanistan withdrawal thing where, you know, it was just so televised, everybody saw the images of this catastrophe and it wasn't just obviously people within the US who saw it, all American partners saw it and they're like, whoa, that military that we saw in Hollywood beating up aliens and so on is like unable to manage a withdrawal without any gunfire. No one was even shooting at them. Right. I mean, I do support, I think the withdrawal overall probably was a good idea or at least necessary. It's complicated. But the execution was catastrophic. That's kind of conventional wisdom. It is, however, the second order consequences I think are important. So one is that the admin wanted to, I believe, turn the page on this from a PR standpoint. And that's why this August announcement was teed up. And the thing about it is it's very unusual. You know, when is the last time you've seen the president and the prime minister of the UK and the prime minister of Australia in a simulcast? Can't remember. Can't remember, right? So intentionally, like, the thing is, it could have been something that was like signed to some deal of like a million things that happened in government that are not a prime time announcement. This was intentionally the goal was like, hey, turn the page. Yeah, I know you thought we screwed up in Afghanistan, but we're pivoting to Asia and we're totally serious about it. Ha ha, China. Right. And so the problem is, though, that it actually revealed a bunch of issues. First is the fact that is Australia, the UK and the US, well, there's something called the Five Eyes, and that is, you know, Australia, UK, US, New Zealand, Canada. So there's this Canadian newspaper that said, what is it, the Three Eyes now? Because why were the other two excluded? Well, New Zealand, because they don't have some nuclear, you know, they have something about nuclear subs can operate in their territory or their maritime region and Canada, because evidently there's such wimps militarily they don't have anything. But the thing about that is it showed to the external world something they'd never seen before, which is internal division among the Five Eyes. Okay. Number one. Similarly, the Quad, which was this much ballyhood thing of India, Japan, Australia, and the US, which actually did make some sense in the sense of India, Japan, are, I think, serious countries versus China. Like, if you wanted to make an alliance, that would make sense. They were, India and Japan were left out of this. And the UK, which is on the other side, the world was brought in. Now, who has more concern with China than India and Japan, which are real countries that border them, they're not going anywhere. The UK doesn't really have an empire anymore. It doesn't really have stuff in the Pacific. Hong Kong went away. Okay. So what the heck, right? And, you know, so, so it also, just like it showed the Five Eyes were really the Three Eyes that showed internal division in the Quad. Indian and Japan made like polite murmurings in public, but, you know, within India, within Japan, if you read the newspapers, they're like, WTF, right? And then France itself, because they had this sub deal with Australia that evidently, by all reports, wasn't going that great. It was taking a long time, etc. But Australia had like recommitted to their relationship. Now all the stuff is being aired in the public, because here's what happened. Like, France got annoyed and France isn't just France. France is basically like one half of the EU with Germany. And so they got the EU to denounce this, and they pulled their ambassadors. And part of it is that their pride was wounded, because they actually have islands in the Pacific. They have actually a significant, I think like, million plus population of actual French citizens in the Pacific near Australia, more than the UK does. So they actually had a reason they wanted, they still think of themselves because they're on the UN Security Council as like a great power, right? And now they were just sort of kind of lied to and backhanded. That's how they think about it, even if they were screwing up on the sub aspect. But the thing about it is they got really mad, pulled their ambassador, the EU, you know, and the US are now actually largely split on China, because they said France isn't just France, France is EU. And even if I think the EU is declining, and Britain will break off, has broken off from it, of course, but Scotland might break off from Britain and Catalonia and the vice-grad countries, they may all break off from the EU. Still, the EU is like, is like a thing, even if it's declining. And so the EU is now kind of split and they're like, you know what, US, why don't you go and do your thing on China and we'll do our own thing. So China, I'm going to post that actually something on this. And then what did Australia get? Australia got subs, but you know what the fine print is? Do you know what the first nuclear submarine that Australia builds is going to appear? Do you know what the date that they've got is? What is that? 20 years. So the thing is, this is not a serious thing. Okay, this is basically something, you know, because it reminds me of the San Francisco 300 million dollar bustling that took like almost two decades, right? Patrick Collison has a website called FAST. I'll give you the exact URL. It is patrickholson.com/fast. Okay. And he shows that like, stuff in the past was built way faster like, oh, he gave an example of a nuclear reactor. Yeah, exactly. The first nuclear submarine was built faster than like in like a few years. Okay, relative to this one, which is it'll take 20. So how's that possible? The first sub that was built 40 years ago is fashioned this one, or like the Empire's tapeling, we started and finished in 410 days. The Eiffel Tower is built in two years and two months. This type of stuff, right? And the thing about this is we know that it is physically possible to do that today because China does it like China built a hospital in 10 days during COVID. There's videos you can see of them building like a subway station in nine hours or a, you know, like a building in like 10 days. Then of course, what people say is, oh, and this is Coke, by the way, they'll be like, oh, that's all, you know, Chinese construction, it's socks. It's just going to fall down. It's plastic crap. We have like good stuff. And like, have you seen the Millennium Tower in SF? Have you seen the SF transit center in SF? Those are also cracking and going to fall over. Even NYT actually did a thing on how SF is an actually earthquake proofed and all the building codes don't mean anything. So unlike the US is getting like high quality structures for all of that money and time. And moreover, even if even if you granted and probably seen the photo of like a building in China, the filler, even if like some tiny, tiny percentage of the time, you have some structural issue. When you go from like many years to being able to build a hospital in 10 days or being able to build a subway station in nine hours, it's like 100 or 1000 X. Like the amount of money you save is so dramatic that you can slash rents and crucially also enable military victories. Because the military is about the physical world. And if China as a subroutine can contemplate building a hospital in 10 days, they can also contemplate building a blockade or a bridge or something else in the physical world. And if the US can only build a sub in 20 years, it's like a, it's like an older man whose, whose bones don't heal us fast anymore, who can't do the things that they used to do anymore. And yet still think of themselves. That's a dangerous part. If you're 80 and you think of yourself as 20, okay, young and hard is one thing, but going and trying to knock out 300 for reps, you might hurt yourself, right? Like, you know, if you're, if you're trying to bench bench that much after not doing something in a while, right? And you might never be able to get there again under as that, as that man, you might need like your son to be able to do it, right? Like that might be the last time you bench that amount of what you so it might need a new nation to be able to do these things, right? Like a, like a rebirth of some kind. So then going a little further with China, the August thing, that just made them mad. It didn't give any results. I mean, the US is acting, China is taking actions because I don't do you see this like recent hypersonic missile launch? I did actually see the news. I haven't read the coverage, but well, have no worries. The US government is on it. That was basically a fucking very much show of power. Response. And you can argue, why are we hearing about this stuff? You can argue, oh, the military industrial complex is leaking it to get more money for hypersonic weapons. Oh, the military industrial complex, you know, wants us to know, think we're losing to China. So therefore, we'll buy more weapons. That may be true, but it's actually also true that the US is weaker militarily than China in the South China Sea on the specific issue that China cares about, which is Taiwan. Like it may be possible for someone to have an interest in it, but it also being true. It was like, we welcome the competition. This is what we say. I'm like, you welcome the competition when it comes to, you don't welcome military competition, right? That is exactly the kind of competition you do not welcome, you know, you welcome economic competition. That might be fine. I mean, you don't really welcome that, but okay, you can tolerate it, right? The thing is that, you know, it's a generalization, but a lot of Chinese people have said Chinese culture generally trusts actions over words. And Western, political culture today at least is 100% verbal. It's just all signifying and hashtags and so on on Twitter and like almost zero offline accountability for actually doing anything. Tech culture, I would say, is something of a hybrid, at least, you know, the pre 2019 tech culture, you might call it crypto culture or web three culture now, where absolutely there's a story that you're telling in a slide deck, but the numbers really, really, really matter, especially once numbers exist. Once you're at Series A or Series B or beyond, another investment of money doesn't come that easily. It requires you to actually deliver results. It's not simply like an election, an investment is much more diligence on it, right? And so the thing is that what happened was this August thing made China mad without getting any results. Now, I saw this joke like hypersonic missiles, well, which is a separate thing, but, you know, the US government is on it. They've just banned gifted and talented education in New York. Take that China, right? Like, that's going to crank out tons of people who understand how to fly something past Mach 5 and know how to deal with like, ultra light materials like that. Look at that. What a chess move, right? And so, and by the way, it's not like the federal government doesn't care about education. They do. They're actually saying the FBI to stop people from protesting school boards, but not to stop them from like banning gifts and talents to that, right? So, and then of course, India was in Japan, where like, why aren't we part of this, this quad discussion? India also is kind of having it a little bit both ways where they're also part of something called the SEO. Do you want that? It's the Shanghai Cooperation Organization. It's sort of like the, it's like a, it's a little bit like a NATO-ish EU thing that most people in the West don't know about, but it's pretty important becoming more important. It's China, Russia, Iran just became a member, Kazakhstan, like the Central Asian countries, and actually, India and Pakistan were admitted at the same time, which made me kind of quizzical because, first, India being in anything with Pakistan other than like the UN is pretty unusual. And second, India and China being clear as unusual, but India seems to be taking a balancing role. It's almost the opposite of its Cold War role, where it was closer to the Soviet Union than it was to the US, but it wasn't in the Soviet camp. It wasn't like fielding troops with the Warsaw Pact. This time, it is closer to the US in the West than it is to China, but it's not going to be like the UK, which is like America's poodle, as people would say, you know, after the Tony Blair thing, right? Like, so it's going to actually take its own independent thing. So SEO people believe, maybe that's just a way for India to kind of like hedge a little bit, but being in both the quad and the SEO meeting is kind of, it's like, you know, you put both the nicks and the Lakers or whatever, right? Yeah. And then of course, Taiwan saw this and was like, oh boy, because China got more annoyed. So the point is, why do I go into this example in detail? This is just pure chaotic evil, right? Or at least just chaotic, you know, even if not evil. It's something that pissed off the French, pissed off the Chinese, showed that the three eyes and the quad were internally disaligned, pissed off the EU and split them versus China, basically did it all for a photo op after another military disaster and essentially achieved the exact opposite of what they even wanted to achieve, which is a pure optical thing. And it's not even there's no military gain whatsoever, right? And this is being done at the most senior levels. There was a choice to do this at the leadership of these three countries. Okay. Now, this is just one event, but as you can see, it had like ripple effects and so on, but it was like the anti alliance. It like broke apart alliances rather than putting them together. So because of this, this is that's like at the foreign level and domestic, you can give similar examples where, for example, like 17 states are now protesting this thing of, you know, sending the FBI to local school boards to be mad about protests, right? And, you know, so the rubber band snap that I think is going to happen is that that control of the US, the federal government over locals and internationals is just going to contract until only like those, you know, jurisdictions that elected the current president listen to the federal government and those that didn't just nullify everything and just take it to court and don't abide by it. And then the question is like, like, how does that actually play out? Is that purely legal? Is there like national guard stuff involved? Is there like, who's actually, if anybody is prepared to actually shoot somebody over this? And I don't know, it's hard to say, right? But I can see the conflict kind of brewing. So, all right. So that was law-fleable versus chaotic evil.
Angel investing in the twenty-first century (04:35:30)
Let me hop in. I don't know, but we're at five hours plus now. So I think I would like to bring this to a close, if I may, the, and we can, we can also continue offline on a lot of subjects. But I'll skip the angel investing or hypothetical angel investing unless there's a fast answer for it. But yeah, I'll give you, I'll give you my fast answer on it, right? So my fast answer is that I'm broadly interested in obviously crypto, obviously startup cities and network states, which I've talked about. But if I was going to cut into areas, I'd say crypto, info, bio, robo, Astro, and actually Politico. So crypto is obvious. Info, actually, I think that thanks to wokeness, basically, media corporations have abandoned many niches. Sports Illustrated is not sports Illustrated. Teen Vogue is not Teen Vogue. In fact, if you took these articles, they basically all sound like the same, I can't even type stuff, right? And so that's like, like, literally, if you just strip the branding and you just had an AI try to distinguish it, I'm not sure you could, because they're essentially all like on Twitter and they're all part of the same sort of conformist group. Now, though, with sub stack and with ghost and with decentralized media, like mirror, you know, I'm small investor mirror, basically, what you're seeing is independence have the means to go and effectively start their own media company. But they also have an incentive to give a different message than the mainstream. So you're seeing Matt Iglesias and Glenn Greenwald and Taibee and Barry Weiss and Jesse single. And so this huge IQ drain of some of the best writers from these old outlets, leaving them only with those who were incapable of writing originally enough to become founders. So it's not just like, you know, for example, in academia, several years ago, there was a new level above professor. And that was founder or investor because you can scrape for like a whatever $100,000 grant from some stupid bureaucratic committee or you can make a $100 million company, exit it, and then you're basically able to investigate whatever the heck you want for the rest of your life. You can build a lab out of spare parts. And you know, or you can, you know, build the future that you want, like, you know, Vijay Ponday, for example, left Stanford and, you know, was running the bio fund ever created him, you know, to a six and a half, and so the level above professor is founder, the level above journal corporate journal is now founder. And so info is very interesting because all these niches are going to be re colonized by independence that started from the beginning with a better brand because they've been abandoned, the sports illustrate, the team, Vogue, etc. So media, I'm actually much more interested in, and I think you can make a profit in it. Like the athletic, for example, shows you can, it's just that you can't see the same things everybody else. You need to have the people who are independently minded. That's like the new thesis, the new wrinkle. I also actually think that India could become a media superpower. And I know I say that and immediately people think, Oh, what do you mean, Bollywood? Bollywood's going to become really popular. I'm not so sure about it. Look, Bollywood is fine. But what I mean by that is a lot of animation is done in India. Like if you look at the end of tenant, like a lot of the visual effects were done there, a lot of the computer graphics, there's something called Sajja, South Asian Journal Association. Obviously there's Bollywood. So a lot of talent exists there. And the same way that China ascended the ladder for making plastic stuff and iPhones to doing first party stuff like drones with DJI or WeChat. I think India, we've China's tech and manufacturing superpower. I think India becomes a tech and media superpower and can potentially be like the bright sun to the West Black Mirror. Because you know, Western media is sort of declining in revenue with technology. That's why they have this Black Mirror attitude towards it. Oh, everything is so bad. Whereas India is ascending with technology, all this stuff has just gotten better over their lifespan. Smartphone is coincided with a huge improvement in living standards rather than a collapse in their old media model. And so India thing is very underrated in terms of where that replacement media is going to come from. All the folks I just mentioned, like single and Barry, I like all of them, but they're like defectors from the old. I think we're also going to get a lot of fresh blood from overseas and genuinely internationalized media because it shouldn't just be a bunch of randos in New York. It should be globally representative, right? And you know, people should be able to tell their own stories without being intermediated by some New York media corporation, right? So that's info. Then that's media, but it's also movies and other stuff. So I mentioned crypto, info, bio. So like, telemedicine is now legal in the US thanks to actually some of the things past during COVID, what I mean by legal is doctors can do telemedicine across state lines. That opens up the market in a big way. And it is possible now to use that to unlock medical tourism and start actually, you know, unlocking fee for service medicine, which is actually way better than insurance. Like in general, you only want insurance for catastrophic things. You don't want it for routine things. You don't pull out your car insurance to pay for gas or a floor mat. It's only for like emergency things and same with healthcare. You're basically going to lose money on everything other than emergency insurance. So it's telemedicine, it's medical tourism, but it's also quantified self. It's all the true transhumanism, which is brain machine interface and genetic engineering and all that stuff, right? And then with robo. So that's, I think that's also underestimated because being done on the industrial side of things, that's robotic agriculture, manufacturing, farming, retail, supply chain, all of the recent supply chain stress, I think is going to cause an acceleration of that. And it's also actually the way to erode China's manufacturing advantage. In the medium to long term, just like everybody has a smartphone, you have a bunch of robots that start making things for you. And I think one thing I linked was like $100 robot arms, you can start learning this at home and just learning how a six degree of freedom arm works and grasping and all this stuff, build your own robot overlord. Astro, I think that's actually funny, right? Astro, I think that's coming down way and cost, such a SpaceX, there's a whole industry that's building up there. And then Politico is kind of the startup cities and network states and the media and crypto stuff, but really what the next, what does the next post-war order look like? And I think it looks like national stacks and neutral protocols. So neutral protocols with the crypto stuff, but national stacks are not just an American internet, a Facebook and Twitter and Instagram and so on, not just a Chinese internet of WeChat and ByteDance, but a Indian internet and a Brazilian and a Russian and a Japanese. And there's pieces of this already, like Korea has neighbor and Russia has Yandex. But going further with that and having kind of equivalence, national equivalence, so that local leaders are going to basically demand this so they can't get deplatformed. And it might be that not just, some countries have the scale to do it themselves, like the US and China, probably India, others, or Russia, others might be in groups, like it might be a bunch of Spanish-speaking countries that do it together. But national stacks, I think, will be important. And in collaboration with neutral protocols, that's sort of like domestic travel versus foreign travel, domestic transaction and communication versus foreign. So the type of stuff I'm thinking about in terms of angel investments and the thing that's there that I could probably talk more about is the transhuman and stuff, but that's under bio. It's very important. That's reversing aging, that's bionics, that's brain machine interface, that's like limer generation and bio electricity. I think that is, if in the 2010s, what was underrated were crypto in China, I think in the 2020s, what's underrated are India and transhumanism, and it'll be more obvious by the end of the decade. But that's kind of like how I think about things. Offline, we can talk about some scientific studies that you may be interested in supporting. So we should talk about that. Last, we forget, 1729. Do you want to tell us what the latest and greatest is with respect to 1729?
The current state of 1729 (04:43:39)
Yes. So I've been kind of running it in like alpha-ish or last few months, not posting that much recently because I've been kind of working on some new stuff. But on November 1st, I'm going to be announcing a lecture series with weekly VR lectures and having them recorded. So if you can't attend. And the goal is to basically build a community and audience in VR and start putting out the polished versions of what I've been working on. And so just go to my Twitter and you'll see the announcements over there or subscribe at 7029.com. Perfect. Beautiful. And for those who don't know, just briefly, the origin story, 1729. Oh, sure. So it refers to the, it's sort of like the E=MC squared of India. Just like E=MC squared came from Einstein, like a genius Western physicist. 7029 comes from Ramanjan, who's a genius Indian mathematician. And what it represents is the first number that's the sum of two cubes in two different ways. It's one cube plus 12 cubed, and it's also nine cube plus 10 cubed. And it's famous because when Ramanjan was very ill on his deathbed, like a mathematician who was a friend was trying to cheer him up and he came by and he said, hey, this taxi that I came in on was a very boring license plate at 1729. And Ranjan said, oh, no, it's actually a very interesting number. It is the sum of two cubes in two different ways. And so it's something that everybody can understand, you know, cubes and sums are. But it also illustrates that Ramanjan was on a first name basis with every number. And it has a couple of other kind of things, which is it's both Indian and international and it's been a lot of time in India now, but it's also universal. So like Google was both an American company and a global company, right? And it is, it's also something that has a number theoretic kind of connotation because Ranjan studied prime numbers and number theory. And that underpins cryptography and crypto, which is also something I think about. So that's kind of a fun thing. It's a nice tie in. So 1729.com, people can check that out. They can follow you on Twitter at Bology S B as in boy is an alpha L is in lambda is an alpha G is enjoy eyes in India S is in Sam. See nailed it. I'm not sure there's all the the call signs. I should have said like bravo Fox trot or something. I usually just make it up as I go if I need to spell it out that type of way.
Parting thoughts (04:46:20)
Bology once again, I don't know how you sustain this level of output. It is remarkable. And I appreciate you taking so much time on the other side of the planet to have a very wide ranging conversation. So thank you very much. Is there anything else that you would like to add in brief or requests that you'd like to make in the audience anything at all before we close out this conversation? I think I think that was great. I think that I'd like to see you all in VR. So come by. That's right. That's right. One seven two nine dot com. Lots of exciting things ahead. Well, thank you, biology for everybody listening. We will have copious copious show notes that will need a small stadium of my own full of show notes experts to help assemble everything. But we will have list to all of the books and people and so on mentioned in this episode. You can find that at tim.blog/podcast and I'll probably create a short redirect. So you can just go to tim.blog/b2 B is in Bravo number two. And that stands for biology second episode, of course. So tim.blog/b2 will take you to all of the show notes. And until next time, thank you for tuning in. Be safe out there.