203. The Immaculate Conception: Bitcoin vs Fiat Standard | Dr. Saifedean Ammous

[0] Welcome to the JBP podcast, Season 4, Episode 58.

[1] This episode was recorded on September 8th, 2021.

[2] Safedine Amos is a leading researcher, communicator, and educator in the field of Bitcoin.

[3] He has successfully advised many corporations and private investors.

[4] He earned his PhD from Columbia University and has since delved into energy, environmental, and political economics.

[5] His research has also explored concepts like spontaneous or emergent order, and the limitations of centralized planning.

[6] Dr. Amos is the author of The Bitcoin Standard, published in 21 languages with thousands of Amazon reviews.

[7] It's widely considered the most important book for understanding the economics of Bitcoin.

[8] We hope you enjoy this episode.

[9] This episode is sponsored by Green Chef, the number one meal kit for eating well.

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[23] Hello everyone.

[24] I'm pleased today to have with me, Dr. Savadine Amos.

[25] He's an independent economist as well as a leading researcher, communicator, and educator in the field of Bitcoin.

[26] his PhD at Columbia University.

[27] Dr. Safedine is the author of the Bitcoin Standard, which was published in 2018 and the newly released Fiat Standard.

[28] He has advised corporations on Bitcoin strategy, helping many investors perform their due diligence on Bitcoin.

[29] Dr. Amos teaches courses on the economics of Bitcoin and economics in the Austrian school tradition in his online learning platform, safedine .com.

[30] and also hosts the Bitcoin Standard podcast.

[31] Thanks very much for agreeing to talk to me today, and I'm looking forward to learning a lot about things I know very little about today.

[32] So tell us maybe to begin with about your books.

[33] Let's start with the Bitcoin Standard and then move to the Fiat Standard.

[34] So the Bitcoin Standard?

[35] Yeah, well, first of all, thank you very much for having me on.

[36] It's a true pleasure to be talking to you.

[37] I published the Bitcoin Standard in 2018, and it was a book that tried to explain the economics of Bitcoin, why Bitcoin functions, why it functions the way it does, and what are the implications that you would expect from the continued growth of Bitcoin in the future?

[38] And so I analyzed it from the perspective of the Austrian school, relying on the work of economists like Karl Menger and Ludwig Bonn Mises and Murray Rothbard and Joe Salerno and Friedrich Kayak.

[39] and I think the key insights that I well there are several key insights but one of the most important ones in the book is that Bitcoin is the hardest money that has ever been invented because we've essentially thrown away the algorithm for making Bitcoin work has been set at producing a certain number of Bitcoin over time that's going to end at 21 million and there's no way of making more Bitcoins and I think after 12 years of Bitcoin operating, we can pretty confidently say there's not going to be more than 21 million Bitcoin.

[40] So that makes Bitcoin truly unique as a monetary asset because it is the hardest monetary asset that we've ever found.

[41] There's no possibility.

[42] Let me ask you a question about that.

[43] So why is it important that that limit exists?

[44] And what do you mean by hardest currency compared to other currencies?

[45] Yeah.

[46] So the hardness here refers to the difficulty of making more more currency units to add onto the existing supply.

[47] And I think this is a big deal.

[48] And essentially the first four chapters of my book focus on explaining why this is such a big deal.

[49] Because if you look historically at money, you find that money has been a contest of survival of the hardest.

[50] People are always looking for the hardest money available.

[51] And the ones who manage to find the hardest money manage to store their wealth in it successfully, whereas the ones who use an easy money will witness their wealth dissipate.

[52] So people will learn, but even if they don't learn, you know, the market will brutally teach them the lesson by discounting and reducing the wealth of the people who put into easy money.

[53] So the end result is that more and more wealth will be concentrated in the harder money.

[54] And that's why historically when societies that had harder money came into contact with societies that had easier money, the ones with the hard money were able to essentially buy up a lot of the resources of the, easy money societies because they could continue to make more of their money and therefore devalue the money and increase the supply of it.

[55] And there are many examples in my book about this.

[56] Seychelles and glass beads and limestones all were used as money when industry made them scarce in certain times and places.

[57] But then when modern technology came and allowed for an increase in their supply, their value was declining.

[58] And then in the 19th century, we see this happen between gold and silver too.

[59] the price of gold and silver I used to oscillate around 15 ounces of silver per one ounce of gold and in 150 years it's now or somewhere around 100 it's gotten to around 120 recently so the price of silver has been declining next to gold and I think that can be explained by the fact that gold is harder the supply of silver is being increased at a faster rate and there was utility in the use of silver when money was physical but then with the creation of essentially financial instruments that were backed by gold, you could use silver, you could use gold payments for small amounts of payments as well as large amounts of payments.

[60] So that kind of obsoleted the role of silver.

[61] And so everybody went with the harder money and then the harder money appreciated and the easier money continued to lose its monetary status.

[62] Okay.

[63] So let me see if I've got this straight.

[64] So money is an abstract store of value.

[65] And you always wanted to represent value as such.

[66] So something like the exchange of labor or the exchange of efficiency, something like that, and you can correct me if I'm wrong there, you have to use something to represent that abstraction.

[67] And the problem with that is that there will be people who have control over the representation rather than contributing to the value.

[68] And those could be politicians who could print money or they could be people who find silver or who find gold or who mine it.

[69] and so forth.

[70] So anything that can be produced that's a representation is subject to devaluation if the production becomes more efficient.

[71] And anything that's producible like a paper money can be toyed with by those who have control over its distribution.

[72] And so your argument essentially, and the Bitcoin argument in general is, well, here's something that we will never get more of no matter what we do.

[73] So I'd like to know why I should believe that.

[74] The next thing I'd like to know about that maybe is, well, why Bitcoin and not 200 alternative cryptocurrencies?

[75] So Bitcoin can't be produced, but cryptocurrencies can be.

[76] And so why isn't that an indication of the softness of cryptocurrency, Bitcoin included?

[77] Yeah.

[78] Well, these are great questions.

[79] So I think initially, yeah, you're absolutely spot on.

[80] It's exactly that, that whatever gets chosen is money, it holds value because it has value on the market.

[81] But as soon as it starts getting chosen as money, it gets into what I call the easy money trap, which is the people who can make more of it will try and make more of it.

[82] People will find the way and they will make more of it.

[83] And so the things that have ended up being used as money were always the thing that resisted that the most, things that are the hardest.

[84] And so gold did an excellent job with that because gold's chemistry naturally gives it that property because gold is indestructible.

[85] So because we've been accumulating gold production over thousands of years, No matter how much gold we produce this year, it's still going to be a tiny fraction of all of the stuff that we've accumulated over the last 5 ,000 years.

[86] And so every year, the gold supply increases by around 1 .5%.

[87] And that's why it beat everything out.

[88] So the hardest thing ends up winning, you know, whether people consciously realize that that is the case, or just because of the realities of supply and demand.

[89] Every year, we're making 5 % or 20 % or 30 % more silver and maybe 100 % more copper and larger quantities of all other commodities.

[90] on the market, but we're only making one and a half or two percent gold.

[91] So over time, gold holds on to its value, and over time, that ends up being the best store of value.

[92] So gold resisted that, and then gold failed for issues we could talk about when we talk about the Fiat standard.

[93] But then Bitcoin offers us this possibility again, which is that nobody can break this algorithm.

[94] And I must say, this is really the reasonable skepticism about Bitcoin is that, yeah, well, you You know, it's just a line of code, and then anybody can change it.

[95] It's a line of code.

[96] You know, we can change lines of code all the time.

[97] Somebody can get under the hood and change the code.

[98] And it takes a lot of time to be able to understand why this is not exactly the case.

[99] And I try and make that case in my book extensively in the latter chapters of the book.

[100] But if I were to summarize it, I would say this.

[101] With Bitcoin, what we had was that the person who created the code, he put it out there.

[102] He was anonymous.

[103] He worked on it for about a year or two.

[104] And then he disappeared.

[105] And that was it.

[106] There was nobody in charge since then.

[107] It's now been more than 10 years that he's been disappeared.

[108] And there has not been anybody in charge of the project.

[109] And what we've only had are users.

[110] So Bitcoin only has users.

[111] It doesn't have any admins.

[112] There's nobody with a master key.

[113] And we've, you know, this is kind of the simple way of thinking about it, which is 10 years of this thing operating without anybody being in charge, and with everybody who tried to change the consensus parameters, the most important parameters of the network, everybody who tried to change these ended up basically failing, and Bitcoin has maintained its consensus parameters to the point where you could run it according to the same code that was available in 2009, and you could still make it interoperable with the current chain.

[114] And that's something that is unique about Bitcoin, which is that it is the coin that, you know, I like to call it the immaculate conception.

[115] Somebody made these coins.

[116] Anybody could have mined the coins from the first day.

[117] You know, they announced the currency and they said, I'm going to start running it on this day.

[118] And anybody could have joined.

[119] And since then, everybody who got Bitcoin got Bitcoin at the market price or because they mined it and expended resources, which roughly cost them close to what the market price was.

[120] So there are no insiders in Bitcoin.

[121] And Bitcoin has operated this way for 12 years now.

[122] And this is kind of the sociological explanations for it.

[123] Now, to get more technical in terms of the explanations, basically Bitcoin is a distributed network.

[124] And so anybody can run the code on their own computer and the network functions according to the consensus parameters that everybody agrees upon.

[125] Okay, so I don't know what those are, the consensus parameters.

[126] Can you tell me what those are?

[127] What does that mean?

[128] basically the main and most important rules according to which the network runs from the beginning and one of them perhaps the most important one yes it's like the constitution and perhaps the most important one is the number of coins that are generated so we have a very strict and clear schedule of how many coins are going to be produced every day essentially in perpetuity and if you abide by these consensus rules then your computer can be in sync with the rest of the network and you're in consensus with the network and you can buy and sell coins and you can transact coins on the network.

[129] But if you try and break those consensus parameters, you leave the coin.

[130] So the miracle of Bitcoin in a sense is that it has managed to maintain these important consensus parameters for 12 years now and it continues to get increasingly more ossified every day.

[131] Bitcoin is the most conservative thing in human history, probably.

[132] There's not going to be, it just continues to get harder and harder to change the constitution of Bitcoin and nobody's been able to do it in 12 years.

[133] So that's kind of the superficial or broad picture explanation of those things.

[134] But you could also get into the software itself.

[135] You know, it's a distributed network.

[136] So everybody needs to be in consensus with the network.

[137] And then if you end up breaking the rules, if you end up trying to change the rules, which a lot of people have tried, to do, all that you will do is that you will end up with another Bitcoin that is out there competing on the market with the original Bitcoin, but you've got a lot less liquidity and you've got a lot less ability to compete.

[138] And we've seen many people try and do that.

[139] And all that has happened is that their coins have, you know, continued to change their consensus parameters because once you break the, you know, once you break your duck once, then it just becomes much easier to do it.

[140] And they devolved into civil strife between participants.

[141] on the network, and of course they lost economic value, and the value of the network is essentially dissipated close to zero.

[142] So Bitcoin continues to get stronger because it continues to demonstrate that it can do those few very simple technological tasks, and it can do them reliably, and it can do them according to the same rules that it has been doing them for 12 years.

[143] That's kind of the value proposition.

[144] It's immutable, it's decentralized, and the money supply is fixed.

[145] So that's kind of a big deal, if you put all of these.

[146] altogether.

[147] Right.

[148] And so it's hard for anyone to make a Bitcoin substitute that can catch up to it because it's established a kind of primacy given its track history of reliability and its widespread distribution.

[149] That's part of the argument for its primacy.

[150] Yes, but I think it's more than that.

[151] It's not just, you know, Coca -Cola and Pepsi catching up to one another or McDonald's and Burger King.

[152] There is a fundamental issue here, which is that what you would want the most in this kind of digital currency because after all, this is all numbers and ones and zeros, and programmers can change it.

[153] And so if your programmers can change the consensus parameters of the network, which basically all the other digital currencies can do at will, you know, the other digital currencies, they have these hard forks, which change the consensus parameters quite frequently, and particularly the successful ones, because the way that, you know, they managed to get successful was essentially through active management.

[154] And so they're more like companies rather than private protocols.

[155] And the key thing is, as you said, there is a first mover advantage, but there's also the problem of the immaculate conception.

[156] You know, if you make a new Bitcoin that's going to start from scratch, you break consensus parameters or you start by imposing new consensus parameters.

[157] You're already, you know, not starting with that immaculate conception.

[158] You're already starting with the idea that there's somebody in charge.

[159] And so there's now, it's not 200 coins.

[160] there's about 10 ,000 coins.

[161] And if you've heard about any of them, other than Bitcoin, it's because there's a small group of people that have been behind them.

[162] And so that, as far as I'm concerned, makes it highly unlikely that they would have a monetary role.

[163] Because at the end of the day, you know, what you appreciate about Bitcoin, what makes me pay attention to Bitcoin is that it is neutral money that nobody can control.

[164] So you can see two banks in two different countries use Bitcoin because that means they don't need to resort to their own legal system and their own central banks and their own regulators in order to carry out this transaction because Bitcoin is just neutral.

[165] They know, you know, it's like the N engine.

[166] You know, you click the right buttons and then the right smoke comes out and it does the right transaction that you want.

[167] Okay.

[168] So I'm going to recapitulate that for a moment.

[169] So because there's something in there too that's quite difficult to grasp, quite difficult to believe apart from the fact that the technical aspects are rather impenetrable for an outsider.

[170] The way Bitcoin came about, it seems like a story that's virtually impossible to believe.

[171] You can't, you can't, you couldn't make it up, right?

[172] So this unknown engineer, Satoshi, Anonymous, created this, came up with this idea that no one else had ever had, implemented it online, anonymized it, and then vanished essentially without a trace.

[173] I mean, how much do people know about him?

[174] Are we sure he's who invented it?

[175] And what the hell was he up to?

[176] And why did this happen?

[177] And why should an outsider believe any of this?

[178] Because it does seem like the plot of a bad science fiction novel.

[179] I will have confessed that I did use to think about this in similar terms.

[180] But I'll say this, you know, you use the wheel.

[181] every day, but you don't know who invented the wheel.

[182] And we use a lot of things every day that you don't use them because you trust the guy who made them.

[183] You use them because they have a proven track record.

[184] You know, you've spent your life seeing wheels working.

[185] And so you're willing to trust a wheel next time you get into a car.

[186] So I think, you know, that's ultimately what, in a sense, it's kind of bad press for Bitcoin.

[187] But like a lot of things about Bitcoin, it actually ends up being illustrating its strength.

[188] Yes, this thing has a story that, you know, a PR person would tell you, just don't bother.

[189] You know, start doing something else with your life rather than try and sell this thing.

[190] And it doesn't need anybody to sell it.

[191] That's kind of the point.

[192] It doesn't have a story.

[193] It doesn't have a PR person.

[194] And the fact that it has this kind of ugly story where this person just came in and then disappeared.

[195] And who knows what happened?

[196] Nobody really knows.

[197] You know, maybe he died.

[198] Maybe he has other things to keep him busy.

[199] maybe he's incapacitated in some way but ultimately it doesn't matter because even if he were to come back today he has no ability to control the network any more than you and I can control it he can control the code that he runs on his computer but at this point the project has worked 10 years without him so there's no reason why anybody in Bitcoin is going to defer to his judgment if he were to come back but besides this you know I think the key point is that it works regardless of whether this person is part of it or not.

[200] Okay, so fair enough.

[201] I understand that.

[202] So advantages of Bitcoin, you contrast it.

[203] Oh, yeah, a couple of questions.

[204] Advantages of Bitcoin over fiat currency, and that needs to be defined fiat currency.

[205] And then I'm also curious, as an outsider, you're an advocate, I suppose, of the Austrian School of Economics.

[206] And there are a variety of economic schools.

[207] And maybe you could briefly, for everyone who's listening, outline the competing schools and what the different propositions are and why there are competing schools and why you chose the Austrian school.

[208] Okay.

[209] I'll say this.

[210] I think the main split is between the Austrians and everybody else, as far as I'm concerned.

[211] When it comes to the main most important questions, because the Austrians come at the question from a different starting point, which is that value is subjective.

[212] Economic value is subjective.

[213] And that then leads to a whole different intellectual path with different methodologies and different conclusions from what you get from essentially everybody within the mainstream.

[214] And when I say the mainstream, you know, that includes neoclassical economists, Chicago school economists to some extent.

[215] Keynesian economists and all other different flavors and even Marxist economists.

[216] Because on the main and big questions, I think the Austrians stand on a completely different ground, which is value is subjective, so therefore economic calculation is something that is done at an individual level, and it is something that cannot be done objectively by a centralized authority, which is the kind of physics envy that has plagued mainstream economics, throughout the 20th century.

[217] So this leads to a difference in methodology, leads to a difference in conclusions, which is once you understand that value is subjective, you realize the best person who's able to achieve the important values that matter to them is the person themselves.

[218] And so you are more likely to be sympathetic to ideas that give individuals more autonomy over their own life in economic terms.

[219] Whereas from the other schools, it's a question of what is the optimum policy and what kind of policy should government, be using so you know the entire the questioning of the entire premise of the need for economic policy and for the need of economic management by the government is one important difference so if you're working within the parameters of the austrian economic school does that tilt you so that tilts you more towards appreciation of non -centurally controlled distributed networks and and and the emphasis on the individual actor that's that's yes and to the mainstream economists this is you know, irredeemably ideological and unscientific.

[220] But, you know, to the Austrians.

[221] What's the rationale for that, though?

[222] Because it seems precisely the opposite.

[223] I mean, if you're, if the, because it seems to me that that's more grounded in a kind of humility.

[224] There's no way of determining once and for all what the best thing is for the most people.

[225] So what we should try to do is establish institutions that distribute decision making in as, in an uncontrolled manner as possible, I suppose.

[226] So that's like a rat, in some sense, is that a radically free market approach that is applied to all sorts of institutions?

[227] And the fundamental issue there is the decentralization of decision -making power.

[228] Absolutely.

[229] And this is what, you know, from the mainstream perspective, appears to be ridiculous.

[230] Because in their mind, you know, the job of the economists is to figure out how the government can fix the economy, you know, get rid of unemployment.

[231] and eliminate wage disparities and get rid of inequality and all these other buzzwords that appear to be profound economic scientific thinking when really is just politics masquerading as science.

[232] So how would a mainstream economist react to that kind of statement if you were playing devil's advocate to help me understand how they would criticize what they'd say is I think what they'd say is the Austrian school made important contributions up until the First World War to marginal analysis.

[233] But then the field advanced mathematically, with the improvement in mathematical techniques that happened around the world, and with the advancement of computers, there became so much more room for the application of mathematical and quantitative methods into economics.

[234] And the Austrian school failed to keep up with that.

[235] And so they're still stuck in the past writing essays, shouting at the clouds, not making much sense, Whereas, you know, the mainstream has moved on to this scientific management, which is, you know, once you scratch under the surface, you realize there's very few differences between modern macroeconomists, scientific management and erstwhile socialist economists and Soviet economists and their conception of central planning.

[236] It's, in fact, you know, one interesting anecdote, Paul Samuelson literally wrote the textbook on economics in post -World War II, America and the world.

[237] and his principles of economics textbook, which first came out in the 40s or 50s, I don't remember when it was the first edition, and it continued to come out until his death about 10, 15 years ago.

[238] Up until the 1989 edition, the book had continuously, when discussing the Soviet economy, the book had continuously said the Soviet economy will likely outperform the U .S. economy, and it will overtake the U .S. economy within the next two years.

[239] And there's a paper that's done that goes through all of these different editions.

[240] And as Samuelson continues to move the goalposts, you know, they were supposed to overtake the U .S. in 68.

[241] But then by the 65 edition, they're supposed to take the U .S. in 75 now, and then new edition comes along.

[242] And I don't remember the exact dates.

[243] But, you know, they kept on kicking the can downward down the road while continuously, you know, not challenging the essential idea, which is that central planning of the economy works.

[244] and the Soviet Union is going to do a better job than the U .S., but their defense against central planning of the economy is that it flies in the face of democratic control of society and we wouldn't want to infringe on people's freedom.

[245] So for mainstream economists, the problem with Soviet economic planning was that it necessitated, you know, breaking a few eggs and putting a few million people in gulags.

[246] And that's why we don't want it, but it would work and it would give us more GDP.

[247] And so this continued to be published in Paul Samuelson's textbooks up until 1989, or 1990 or something like that.

[248] You know, students were studying this in class as the Soviet Union was collapsing.

[249] And of course, you know, this is Fiat academia, Fiat world.

[250] The next year they just take that section out and they continue to print the textbooks that continue to teach kids in universities around the world today that, you know, this is how economics works.

[251] And economics is about central planning.

[252] Were you trained at Columbia as a classical economist?

[253] Yeah, I took the foundational course for economics in Colombia, yeah.

[254] My PhD was a sustainable development.

[255] It wasn't entirely economics, but we took the foundational courses of economics, basically.

[256] So why did you become a deviant from that, let's say?

[257] What was your intellectual journey?

[258] And I'm very curious about that.

[259] Well, so my undergraduate background was a mechanical engine.

[260] of all things.

[261] And in my PhD, it was in sustainable development and we were supposed to study issues of, you know, energy and society and economics and approach it from multidisciplinary perspective.

[262] So my engineering background and then my new knowledge in economics gave me that kind of what Kayak calls the fatal conceit of, I'm just going to pick a topic in energy economics, in energy and engineering economics.

[263] And, you know, study.

[264] it with the big brains of a Columbia PhD and then figure out what needs to be done, basically.

[265] And then, you know, you can maintain these illusions until you actually start digging into the spreadsheets.

[266] And then you start trying to actually mathematically model the complex world outside and put it on a spreadsheet on your computer.

[267] And then you start realizing just how absurd these things are, you know, the...

[268] Yeah, well, you'd think if you could do that, then you could put the stock market on a spreadsheet and run your economic wizardry and gather all the money in the world with your capability to model the economic system and predict.

[269] And yet no one can do that.

[270] So, mm -hmm.

[271] So, and I let me let me what one more comment about that.

[272] I mean, I see that danger of that fatal conceit lurking underneath all the discussions of climate change.

[273] Does that seem like a reasonable proposition to you?

[274] Because it's a justification.

[275] for central planning, masquerading as a masquerading as, well, we have to save the planet, we know what's wrong with it, and we know how to fix it, and our solutions are going to work, and they're not going to produce unintended consequences, and it's so dire that you need to leave us alone while we do this, and we know better than you do.

[276] Exactly, and that's exactly how I essentially went off the reservation, because, you know, the topic of the course, the topic of the PhD and the topic of the program was about how you can I use this kind of scientific management to solve these big problems like climate change.

[277] And as I was studying, in particular, my PhD was on the topic of biofuels.

[278] So, you know, ethanol and biodiesel, which they make from plants, which is just an absolutely insane abomination of humanity.

[279] It's insane that people do this.

[280] You know, you grow crops, you use up land for a year to grow crops and then to process them and then to turn them into fuel when you can just get fuel straight out of the earth and much cheaper, much more and much more.

[281] and much better quality that doesn't degrade the car and it doesn't destroy the other soil.

[282] And as I was studying that, on the one hand, I was struck by the impossible complexity of the question.

[283] And then on the other hand, I was noticing the inescapable conclusion that everything that they're trying to do here is just making things worse.

[284] In fact, you know, the idea was that we're going to save the earth from climate change by replacing fossil fuels with ethanol and biodiesel.

[285] But the reality was that you were chopping down the Amazon and Indonesian palm forests and to turn them into sterile farming land.

[286] The Midwest and the Mississippi Valley over the U .S. was essentially degraded from all of its soil.

[287] And then the fertilizer that is just running off from the Mississippi is causing all.

[288] these enormous damage to the Gulf of Mexico, it's insane how much damage is being done from this attempt to sort of centrally plan things from above.

[289] And Hayek has a saying where he says, you know, we used to suffer from problems.

[290] We now suffer from solutions.

[291] And this...

[292] So let me ask you about that.

[293] Like, look, I've been struck by exactly this problem, right?

[294] This is the problem of unintended consequences and the irreducible complexity of things.

[295] So, like, we can talk about climate change, the problem of climate change.

[296] But there isn't, those words are unbelievably deceiving.

[297] Because there isn't a problem of climate change.

[298] There's 150 ,000 problems of climate change.

[299] And every single one of those is an unbelievably difficult problem.

[300] And the solutions to those problems could well exist in terrible contradiction to one another.

[301] And so, but you get deluded.

[302] You think, well, climate change, well, I can understand that.

[303] The climate.

[304] climate.

[305] That's easy to say.

[306] I must be able to conceptualize that.

[307] Of course, you can't.

[308] And then it hides the fact that it hides this understructure of complexity.

[309] Now, you got a glimpse of that and that instilled in you this resistance to this fatal conceit.

[310] It instilled in you some humility.

[311] Why doesn't that happen to other people?

[312] And why did it happen to you?

[313] That's a good question.

[314] I don't know.

[315] I think I don't know, different people, they react in different ways.

[316] I just, I have an insatiable curiosity to continue to try and understand this question, whereas what I needed to do was to just sit down and run a bunch of equations on a spreadsheet and say that this is the model.

[317] And, you know, as long as the thing was internally consistent, then it gets the pass and then you get the degree.

[318] Maybe it was your training as an engineer.

[319] Yes, I think actually that is a very good point.

[320] Yeah, because engineers really like, yeah, engineers really like to build things that work.

[321] Exactly.

[322] And you can't hide the fact, you know, like you have to trace the whole thing and how it works.

[323] And you try and put, you have to conceptualize it in your brain.

[324] It has to make sense.

[325] You know, think of the Rube Goldberg machine, whatever it is.

[326] You have to follow it through and then you need to figure out where it breaks.

[327] And so thinking of trying to approach, you know, something as complex as the global.

[328] energy market.

[329] As an engineer approaches something like an engine, you know, a single engine, that's the fatal conceit.

[330] Because the engine is a product of human design.

[331] It's a product of human constructive design.

[332] Somebody sat there with a pen and paper or computer program and designed this engine and then they iterated on it.

[333] But things that are societal institutions are the products of human action and not human design.

[334] You know, we don't, nobody sat down and design the global energy market.

[335] Everybody out there is helping shape the global energy market every day with their consumption decisions and with their production decisions.

[336] And everybody's kind of reacting to everybody else's actions in this kind of global dance that we all do together that ends up rewarding the better ideas and punishing the worst ideas.

[337] And nobody knows how it's going to evolve.

[338] That's ultimately, you know, Mises's critique of socialism is primarily about property rights.

[339] It's the issue of calculation without property rights.

[340] It's impossible for people who don't own resources and who don't have an opportunity cost to the use of resources to accurately and rationally estimate what is the best use of those resources.

[341] It has to be real.

[342] Mises has a beautiful quote.

[343] He says, you know, capital is not play pretend or something along those lines.

[344] It's not a game where you can just, let's pretend that this is my capital I'm going to allocate it.

[345] No. It has to be worth what it actually is worth to you individually so that the decision has the weight.

[346] Yes, the full weight of the reward and the full cost.

[347] You have to feel it in order to be able to understand the decision.

[348] If you don't own it, then you don't understand the cost and you don't understand and you can't make that decision.

[349] So that's one hand, it's the property rights and calculation critique.

[350] And then on the other hand, there's the entrepreneurship critique, which is even if we manage to, let's say, take over a capitalist functioning society.

[351] and turn it into socialist society today, it has no possibility for accommodating change.

[352] It has no possibility for making change happen because it has no mechanism for consumers to impose their preferences for quality and quantity of goods that they want on the producers.

[353] Right.

[354] So there's no way of gathering information about the state of the market.

[355] Absolutely, yeah.

[356] And about the future.

[357] And this is the crucial role of the entrepreneur because the entrepreneurs plays a central role in Austrian economics, but not in mainstream economics.

[358] Because in Austrian economics, the entrepreneur is the one who foresees possibilities, and most entrepreneurs are likely wrong, perhaps maybe most or maybe close to most.

[359] They're wrong about what they foresee in the world, but some of them are the ones who build the turmoil.

[360] Right.

[361] Well, and there's a Darwinian issue there, too, because, look, part of the rationale for evolution for the, what would you say, for understanding why the idea of evolution is necessarily true in some sense is exactly the problem of the complexity of the future.

[362] It's unpredictable in principle.

[363] You're not going to get smart enough to predict it.

[364] That's never going to happen.

[365] Maybe that would partly be because if you built a machine that was smart enough to predict that the existence of a machine, that smart would change the way that the future would manifest itself in a way that that machine couldn't predict.

[366] And so the way evolution solves that problem is that it produces, it's like there's a million, one mosquito gives rise to a million mosquitoes, but every mosquito doesn't produce a successful million offspring.

[367] We'd be like knee -deep in mosquitoes in no time.

[368] Hardly any of those mosquitoes live.

[369] And the ones that live vary a little bit from their parents in some unforeseen direction.

[370] And if you get enough of that production of unforeseen variance, then some of those unforeseen variants can match the unforeseeable future.

[371] And that's exactly how entrepreneurs work, is most entrepreneurs fail.

[372] And then when you look at successful entrepreneurs, you see that most of their ideas failed.

[373] And so what you do is overproduce and cull.

[374] And that's not the same as logical prediction.

[375] Now, there is some role that intelligence plays, right?

[376] Because by all things considered, you'd hope that more intelligent entrepreneurs you would predict that more intelligent entrepreneurs have a higher probability of success than less intelligent entrepreneurs, but it isn't necessarily because they're better able to foresee the future.

[377] You know, it might be that they're making better rational decisions of the sort of rational decision that intelligence can make.

[378] But so it's very interesting to me that you say that the, so the entrepreneurs in some sense, their function is to keep the system modifying itself, to keep up with the transforming present that we call the future.

[379] That's the role of the entrepreneur.

[380] And even psychologically, that's the case.

[381] They're high in openness and open people psychologically overproduce ideas.

[382] They're fascinated by ideas.

[383] And they tend to be, they have high verbal fluency.

[384] They have high fluency in the ability to generate images.

[385] So, for example, someone who's creative, if you say to someone creative, write down as many words as, you can that begin with the letter S in three minutes.

[386] The creative people will on average outperform the uncreative people.

[387] And that's a consequence of trade openness.

[388] And that's a consequence in part of its association with high levels of G, fluid intelligence.

[389] So it's just speed in some sense.

[390] And there's also very, the other thing that the creative people do is they'll produce more divergent answers.

[391] How many different uses can you think of for a brick?

[392] You score that by number of uses generated, but then also by the rarity of the use that's specified.

[393] Extra points, so to speak, are given for that.

[394] So the way that nature solves the problem of the unpredictability of the future, even within human psychological functioning, is by overproduction and culling, not by rational prediction.

[395] Yes.

[396] And, you know, one saying, I think it's Popper who said this, but it may be a proactively attributed to him, but it is to predict the wheel is to invent the wheel.

[397] That's, I think, the issue of prediction.

[398] To predict the future is to basically try and predict what the future of knowledge is.

[399] And we're at the limit of our knowledge right now.

[400] So, you know, the invention of the wheel was a new thing.

[401] You had to actually invent it in order to be able to predict it because you didn't even know that it was possible before you, before it was invented.

[402] And this is ultimately where it's something new is by definition.

[403] outside of your domain of knowledge.

[404] It might even be outside the axiomatic structure of your domain of knowledge if it's new enough.

[405] And so it's unpredictable by definition, or it wouldn't be new.

[406] And it doesn't matter.

[407] You know, creativity is not, you know, it's not like you can pick the 100 most creative people in the country and then put them in a room and tell them come up with all the creative things.

[408] The whole point is that it's a living ecosystem in which the creativity is what makes the new ideas and these ideas are tested in the real world.

[409] You know, they either sink or swim in the real world of the market.

[410] And it's specifically their, you know, sinking or swimming is what determines their success because that's all that matters.

[411] So you need those people to be out there in every field of life in order to be able to innovate in those fields.

[412] You can't just isolate it.

[413] And so a system that is built on central planning, and this is one of the critiques that Meez has leveled at socialism exactly a century.

[414] ago.

[415] In 1922, he wrote his book, Socialism.

[416] And until today, I don't think there has been a single socialist that has actually illustrated their ability to comprehend this point and still disagree with it.

[417] Like, they all just completely ignore it.

[418] It's not something that anybody, they grapple with his ideas on property rights, and they made some attempts to refute him and failed, in my opinion.

[419] But on the entrepreneurship point, there's almost complete silence because there's no way that you can square the idea of letting every workshop worker have the opportunity to create and innovate something new and try it out because they have their own money and then they start their own shop.

[420] There's no way that you can square that with having a committee that decides all of these workshops that are doing this in this line of business, all of their capital, all of their work, all of their structure, everything that they do has to be decided.

[421] by central authority.

[422] Those two things are fundamentally incompatible.

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[457] So we're still walking through the bitcoin standard, at least in some sense.

[458] Shall we talk more about the fiat standard, the book that you've just released?

[459] And so let's first of all tell everybody what constitutes a fiat currency and contrast that with Bitcoin and have Adder.

[460] All right.

[461] So let me just conclude with one more thing about Bitcoin standard and the Austrian school because I think it's a good recap of everything we've discussed so far, which is that, you know, practically speaking, where the rubber hits the road in terms of the difference between the Austrians and everybody else is in the free market conception of money.

[462] versus the state's conception of money.

[463] This is where, you know, the two world views are the most divergent, because from the mainstream perspective, everybody in the mainstream, you know, the money is the creation of the state, and the only question is what is the state's role in the management of money.

[464] But from the Austrian perspective, money is a product of the market, and the state's not the money is not the invention of the state, and the state's meddling in money is actually not just, not just, you know, irrational in the sense of it can't succeed for all the reasons that socialist central planning cannot succeed.

[465] It's also at the root of the cause, it's also the root cause of the majority of economic problems that all economists are concerned with.

[466] So once you, and I heard your discussion with Robert Murphy, who did a great job explaining the business cycle, it's the corruption of money that ultimately leads to the business cycle.

[467] And up until Bitcoin came about, this was an interesting philosophical discussion and academic discussion.

[468] But there were very few Austrian economists and the majority of everybody just went along with what the mainstream thought.

[469] But the absolutely fascinating thing about Bitcoin, one of the many fascinating things about Bitcoin is that it is a live experiment in this question.

[470] Here we go.

[471] We have a form of money that is not produced by the state, not regulated by the state, not controlled by the state.

[472] and it's functioning as a form of money.

[473] And it tests, you know, its continued survival refutes the state theory of money and perhaps even more deliciously.

[474] It refutes the inflationist theories of money, which all of these other schools are inflationists.

[475] You know, they all argue about how much the money supply should increase and how should the money supply increase and who should be in charge of the money supply increase.

[476] But none of them has ever questioned the fundamental proposition, which is the money supply should not increase.

[477] does not have to increase.

[478] So why do they presume that it should increase?

[479] I mean, intellectually, the whole field is shaped from the perspective of how should the government manage the money successfully.

[480] And so there's no way that you, as somebody who's getting paid from the increase of the supply, there's no, you know, the overturn window of acceptable answers for you through self -censorship more than or intellectual capture is, you know, how do we increase the money supply?

[481] But, you know, if there's no money supply increase, you most likely don't get a salary because your job is linked to that printer.

[482] And essentially, I think, you know, a less charitable interpretation by an Austrian economist of a mainstream economist is that they're essentially court jesters for the inflationary central banks.

[483] The central banks need an intellectual apparatus that gets on TV and says, you know, order to prevent unemployment from happening and to prevent bad things from happening.

[484] But really, I think, you know, the bigger story here is the money printing, of course, is highly lucrative for governments.

[485] And so, of course, governments are highly favorable of people who want that.

[486] So Bitcoin is powerful in this regard because, A, you know, economically it's succeeding and intellectually it's succeeding as well.

[487] I think it's a massive challenge to the mainstream economics establishment.

[488] Their complete inability to explain it or to try and present a coherent explanation for why it behaves the way it does or why it grows is absolutely astonishing.

[489] You know, it's been there for 12 years.

[490] It's worth a trillion dollars right now.

[491] And the vast majority of university professors will tell you, oh, it's just a tulip.

[492] Somehow they're convinced that the fact that, you know, agricultural product prices went up for a few months in Amsterdam in the 17th century, somehow invalidated.

[493] the fact that we have a form of money that travels internationally and is hard and is completely outside the state the control of the state it's it's argument by soundbite almost they haven't even given it much thought because there's not much to say it's argument by dismissive analogy yes which is very common also in the climate change discussion as you always notice yeah you see I mean it's not that I I I speak a lot of time looking at the climate change literature and considering solutions for various reasons.

[494] And I can never stop being more afraid of the solutions than the problem.

[495] And it's not like I'm not afraid of the problem.

[496] It's conceivable that human activity is producing global climate change.

[497] And I think the evidence for that seems to be relatively robust, although the economic, how economically consequential that will be is subject to tremendous debate because it's prediction out 100 years or 50 years and like good luck with that boys and girls but the solutions terrify me so and in fact i discussed this in the fiat standard okay i use this as an as an as an example of how fiat corrupts the planet basically so um in the bitcoin standard a lot of bitcoin standard was about government money but uh you could always say more because it's just been so enormously important over the last hundred years.

[498] So in the Fiat standard, I take the same kind of analytical lens that I used in the Bitcoin standard to look at Bitcoin, which was, you know, when I started writing that book, it was this obscure thing that only a bunch of weirdos on the internet had heard about.

[499] And I tried to kind of come at the same, with the same kind of lens at the Fiat system and trying to ignore all the hoopla of a century of propaganda and academic work.

[500] Yeah, well, you know, sir, your discussion already has made me aware of all sorts of axioms of my thought that I didn't know I had.

[501] So, for example, I basically just accepted, in some sense, on faith, the idea that money is the governments fundamentally, the money.

[502] I know we all have our money and we own it, but it's a state construct.

[503] That's why each country has its own currency.

[504] And so one of the functions of the government is to deal with money.

[505] And the idea that you could abstract that away from the government, any government, any conceivable government, conceivably forever, or at least forever as far as we're concerned, it's hard to wrap my head around how radical an idea that is.

[506] I don't know what that would mean if it was actually true.

[507] And so, and I, the idea that, I mean, the arguments that you've presented that suggests that the notion that government control of, that the government has valid control over money, and maybe that that should be subject in some sense to the democratic process rather than the market process, you know, it's going to take me a long time to think that through because that really is a radical it's unbelievably radical proposition yes that's kind of why the austrians are kind of ostracized and considered outside the pale on this issue but think about it you know no government declared gold as money gold emerged as money all over the world independently because of its because of its properties and then governments had to use gold in their own currencies in order to give their currencies value you know if you wanted your picture of on a coin and you wanted that coin to circulate and for people to hold it and appreciate it, you had to make that coin out of gold.

[508] You couldn't just make coins out of anything and give it to people.

[509] And when people tried to do that, hilarity and calamity ensued in every case.

[510] You know, we have a long history of what happens when governments debase currency.

[511] And, you know, it always happens in the same way.

[512] They begin by making sound money.

[513] they specify the weight and they make it uniform but then they almost always I think every example in history has ended up with them basically succumbing to the temptation to increase the supply if it was paper money backed by gold or to what they used to do previously which is mix in base metals so wasn't it the case that the ridges on these edges of coins were there because the coins were shaved by slightly, and was that a government?

[514] Was that a state functioner?

[515] Were people doing that to coins?

[516] I'm sorry.

[517] This is just an example of how that solid, uncorruptible currency can be, you know, if you get a gold coin, you can scrape some of the gold off.

[518] And if you have enough gold coins, you can make a nice pile of gold dust, and the gold coins still work, but you have the gold.

[519] And so there's various ways of doing that.

[520] And I read that the ridges on the outside of coins why do they have them they do you know is that the case or am i just chasing something that's not the case at all do you i think i've heard stories like that yeah there's so many stories historically of governments finding creative ways of debasing their currencies you know the most common one is oh no some people are making fake currency so give us all of your currency so we can mint it again into a new form so that we can make sure that it's right and then you get your currency back and then it has 5 % less gold than it used to have.

[521] That was kind of the quantitative easing that they did before and that they take some of their gold for themselves.

[522] So that is always, that temptation has always been there.

[523] And Bitcoin is essentially the most powerful defensive technology against that.

[524] It's, it's an enormous quantum leap forward in the technology of money as protection of value against predation and against inflation because you know you don't have to worry about whether the coin has base metal inside it you can verify everything with bitcoin and it's it's it's fully auditable everybody can see every single transaction and everybody can verify the rules of the network so it's the most powerful technology that we have for money and I think it's it's a natural fit to anybody who's productive and wants to save their value into the future and it's not just a fit for them.

[525] I think the beautiful thing about it is that it is a great reward for them.

[526] It's a great reward for those people to go and, you know, save into the future.

[527] And this is why I think Bitcoin is so transformative to the individual because it gives you a better way of saving for the future.

[528] And I think this is something I discuss extensively in the Bitcoin standard.

[529] I think that's highly related to the time preference of individuals, which is an enormously important topic.

[530] historically, all throughout human history, you know, we're always moving to a harder money because we're looking for a better form of money.

[531] And that culminated by the end of the 19th century with everybody in the world being on the classical gold standard.

[532] Basically, the entire planet was on the same currency.

[533] One money, chosen on the market, very hard to produce, holding onto its value, offering anybody in the world the ability to save for the future, essentially for free.

[534] You know, you get paid in the coin, you keep the coin safe, And then 20 years later, that coin is not only held on to its value, it's likely appreciated more.

[535] Because in those 20 years, we've made more cars, more houses, more apples, more oranges, more everything.

[536] But we haven't made a lot more gold.

[537] So the gold coins remains valuable.

[538] And so historically, you see this has coincided with a decline in interest rates, which from the Austrian perspective is a measure of time preference.

[539] Time preference is what the term is interest rate.

[540] And time preference is the degree of discounting for the future.

[541] So effectively, as long as we're using harder and harder money, we're being able to provide for the future better.

[542] And that's reducing our uncertainty of the future.

[543] You know, now you can be fairly confident that the money that you worked for today, that you can save it and it'll be there for you in five years time.

[544] Well, you start thinking more about yourself in five years' time.

[545] And as our technology for money has improved and as our ability to save has improved, our time horizon has expanded.

[546] Our time preferences dropped.

[547] We start thinking more and more about the future.

[548] That encourages us to save more, to invest more.

[549] And then that leads to capital accumulation, which leads to the increase in productivity.

[550] And I think the whole world was basically lowering its time preference until the early 20th century.

[551] And then in the early 20th century, this is kind of the central argument of the Fiat standard, by switching to an easy money, where now, you know, in the 20th century we moved to government money, which has been increasing, on average, I calculate at something like roughly 14 % a year globally.

[552] So you move from a money supply that's being inflated at 1 or 2 % as the average human being in the world.

[553] You have that same gold coin.

[554] Now you're stuck with your government's local script that is inflating at, on average, 14%.

[555] Some people have witnessed 200 % inflated.

[556] So that on average, so you said worldwide, if you just took Western democracies into account, say, relatively, stable societies with relatively admirable forms of government.

[557] What sort of inflation rate are you looking at?

[558] Do you know that?

[559] Yeah, yeah, I've done the numbers in the Fiat standard.

[560] The lowest averages you'll see are in the U .S., Switzerland, Denmark, and Sweden, and they're about 6 to 7 % per year over the last 50, 60 years.

[561] So that's really as good as it gets for Fiat as a kind of average.

[562] So you're constantly...

[563] So you need a return of...

[564] six percent or seven percent just to keep up basically yeah and you know seven percent is is is not nothing seven percent means you basically lose half the value stored in 10 years and that's seven percent that's in the good cases there are countries that have had an average of 200 percent because you know they had years in which the money supply went up tenfold within one year and that that has happened so you think about the examples of people living in hyperinflationary societies and I used to live in Lebanon until recently, and you see that when the currency collapses, you know, think about the stories about Weimar, Germany, or about any Latin American country or Lebanon or Zimbabwe, when you hear about their inflation, you know, the stories are of people that have been reduced to very, very, very short -term thinking.

[565] Your money, you get paid on the beginning of the month, your money is going to be worth half of its price by the end of the month.

[566] So you get paid and you run straight to the supermarket.

[567] I remember I was a kid growing up in Brazil and I remember that, you know, in the first day of the month, the supermarkets would be overrun and there would be people fighting and things would be crazy because everybody trying to get things now before everybody else gets their paycheck and buys everything and then bids up the price.

[568] So your time horizon is shortened when your money is losing its value.

[569] Okay, so let me ask, okay, let me ask you a question about that then too.

[570] So one of the problems that the people who are concerned about the environment and about global warming are trying to solve is they're trying to increase our sense of caring for, let's call it the planet, the environment, right?

[571] Global concern.

[572] Think globally, act locally.

[573] You're supposed to be taking all these other things into account and not consuming like a madman and despoiling the planet.

[574] But implicit in your argument, as far as I can tell, is that if you stabilize the currency so it can't be inflated and you make people's time horizon much longer, that they're going to be concerned about a far greater variety of things that are distal from them, like the environment, because they can.

[575] They're now able to do that instead of having to fight for short -term emergency survival continually.

[576] Exactly, exactly.

[577] Exactly.

[578] That's it.

[579] So the more capital you accumulate, the more you can provide for the future, the more you can secure the present and start thinking about the future.

[580] And more you care about the future then in some sense or can care about it.

[581] And you know, you think about it like the fishermen who's able to move toward building a fishing boat and a fishing rod, you know, they're able to now rest assured that any day they just need a small amount of time to go out and catch the fish.

[582] It's not like the days when they had nothing and they had to try and catch them with their hands every day.

[583] And so some days you might not be able to even catch anything.

[584] So now your survival is more secure and so you start thinking more about the future.

[585] And money is an incredible technology for that, for lowering our time preference.

[586] That's kind of one of my central arguments in the Fiat standard that money is the best mechanism we have for moving value to the future because, you know, you can save a fishing boat and you can save something else, but you don't know what's going to happen in the future and you don't know if you want to move away from where you are.

[587] Money itself is enormously important because it's very useful.

[588] You save some money and then it doesn't matter what happens in your town.

[589] You take the money and you can go away.

[590] So it protects you against the uncertainty of the future.

[591] And when that money is compromised, your ability to think of the future is massively compromised as well.

[592] And I think, you know, the hyperinflationary examples are an extreme example of that.

[593] But I think the 20th century itself was one global slow train wreck of watching.

[594] humanity's time preference rise as, you know, generation after generation of people all over the world witnessed their currency devalued.

[595] Everybody saw it.

[596] There isn't a single people in the world that has escaped this.

[597] It doesn't matter if you live in Western Europe or Africa or Latin America.

[598] Everybody has been screwed by inflation in the 20th century.

[599] And everybody has a story in their family about somebody who saved up and worked hard and diligently.

[600] And then one day they woke up and all their money was gone and all the wealth that they worked for was gone.

[601] has gone through this.

[602] And it leaves a mark.

[603] It tells you, you know, don't be the sucker who saves for tomorrow because, you know, you missed out one.

[604] You see, like in Weimar, Germany, you think about the people who are punished by that hyperinflation.

[605] Those were people who were productive and who had foresight because they put away something for the future.

[606] The ants were published, punished, not the grasshoppers.

[607] You know, exactly.

[608] And that's a terrible thing to to a society to take the most creative people who also have the ability to delay gratification and then to just cut them off at the knees for daring to do both of those things.

[609] You couldn't do a worse thing to a society in some sense than that, to punish people for creativity, productivity, and the capacity to save instead of the pursuit of impulsive pleasure.

[610] So it is really a catastrophe.

[611] It absolutely is.

[612] And maybe that's not much improved when it's a slow train wreck rather than a quick one.

[613] I mean, who knows, right?

[614] So all right.

[615] Yeah, I mean, the speed has varied.

[616] But I think this has been the story of the 20th century.

[617] And on the flip side of it, which is kind of the two sides of the story that I tell in the Fiat standard, on the one hand, you know, you had individual productive people and businesses having their wealth robbed from them continuously throughout the 20th century because it's constantly devaluing.

[618] And on the other hand, you had government bureaucracies being given essentially unlimited financing to do whatever they want because they were connected to the printing press.

[619] And all that you needed was to just have the right story in the ear of the right person to get the printing press to run for you.

[620] And so, you know, not only are you punishing the most productive people in society and the people that are the best at saving for the future and thinking of the future, you're also essentially rewarding heavily people who are.

[621] are good at playing politics and people who can, you know, get into government and people who can use government power because you are giving those people unlimited power.

[622] So naturally you're going to...

[623] Our prime minister, our prime minister managed to get a billion dollars into the hands of one of the charities he's associated with.

[624] Yes, I've heard of that.

[625] Your prime minister has been an excellent lesson in what happens when seemingly idealist people with beautiful sounding cliches get into power and then have that power foisted upon them and then they see a great opportunity to capitalize on that to their own benefit and to their own aggrandizement and all the while justifying it by reference to their moral standards they hold that exceed those of everyone else absolutely absolutely and then you know you think about it so there's the aspect of the corruption or the fact that you know, playing politics pays.

[626] But then there's the other aspect, which to go back to the energy discussion and the food discussion, which I discussed in the Fiat standard, these markets then become heavily regulated and influenced by a government that has an infinite printing press to the point where they've been made almost dysfunctional at this point.

[627] So if you think in terms of energy, we've had, and in both energy and food, you know, the The current hysteria that you hear around, oh, no, we're going to boil the oceans because we're driving cars or, you know, we're going to boil the ocean because we're eating cows and cows are farting and, you know, four and a half billion years of Earth was doing fine until the cows started to fart and now the whole earth is going to hell.

[628] Both of these hysterias, incidentally, have their roots in the inflation of the 1970s.

[629] It was when the prices of food and energy rose in the 1970s that all these hysteriaes, that all these cranky, cookie ideas about, you know, earth punishing us and there's not enough resources for us to be able to live and we need to limit the global population and we're destroying the earth.

[630] All that stuff started to come about in the 1970s and it was highly politically conducive at that point.

[631] It was likely to be popular because it was providing a very a useful alibi to the government when it comes to inflation.

[632] You know, the reason we are witnessing massive increases in the price of oil and food has nothing to do with the fact that your currency is being printed and debased.

[633] It's because we've reached the natural carrying limits of the Earth, and we're going to boil the oceans, and we're going to destroy the planet.

[634] And so, you know, you need to repent by moving away from consuming hydrocarbon energy, you know, oil and gas and coal and all of those things that made our modern world, And the things that are, the reason that we have are modern world and modern technology, we can't live without them.

[635] They're 80 % of energy consumption around the globe, and that's not declining in any meaningful sense anytime soon, unless we want to go back to pre -industrial societies.

[636] And so, you know, by Fiat, we've tried to, we fought these energy sources for 50 years and subsidized these feel -good, essentially pre -industrial, unworkable technologies which rely on biomass.

[637] So biofuels, that's an example.

[638] You know, you're burning plants like your ancestors 500 years ago had to do in order to survive.

[639] Or wind, which again, you know, your ancestors could use occasionally, but it didn't build them, it didn't build them Apple computers and it didn't build the internet.

[640] And solar energy, which you know also we've always used, but again, it won't build you a car.

[641] In order to have all these modern conveniences that we have.

[642] We need those energies.

[643] And people in the Fiat world are completely dissociated from this reality.

[644] They almost want to overrule thermodynamics by Fiat.

[645] We want to have the same cars, better cars, but we don't want them to run on fuels.

[646] We want them to run on wind and solar and all that.

[647] And the result of that, I think, you know, when I was doing my PhD, I saw this for the grift that it was, and I was not interested in it intellectually because, you know, who cares?

[648] a bunch of people like Al Gore are going to become billionaires from this, but a lot of hucksters get rich a lot of ways, no reason to get worked up.

[649] But now I think I'm beginning to realize this is actually a serious, serious threat to industrialization and civilization itself.

[650] I mean, our planet will witness massive catastrophes and calamities if reduction, if we have a serious reduction in the consumption of these energy sources, which plants are being commissioned all over the world based on the idea that we're going to be replacing it with wind and solar and the result is energy prices are rising massively and you know energy is becoming less and less reliable and you're witnessing more and more grid failures yeah all right so on to the Fiat standard yes so in the Fiat standard looking at the way that the Fiat money works as you know from first principles trying to understand how it works I think that the fundamental idea is that in the fiat system the way that you mine a new currency into existence is through lending you when you when your bank makes a new loan they don't take somebody else's money and give it to you they make new money essentially out of thin air and they hand it to you and they put it in your back account so this i think is a very key insight so in bitcoin we have walk through that walk through that so everyone understands exactly what the banks are doing because that is not something that people know or understand.

[651] Yeah, so it's not like there's a fixed sum of money that the bank has to deal with, where they need to get depositors money and then they need to lend it out to borrowers.

[652] If you have a lending license, if you're a bank, you're licensed by your local central bank, the mere fact that you have that lending license means that you can issue loans and essentially create new money and add new money to the money supply and put it in your clients as a bank account.

[653] so now obviously they can't just do this limitlessly there are regulations and rules by the central bank that determine how much lending is done and so what are the rules approximately well the rules is you know the person who borrows has to have good credit history and good credit standing and good reason for why they want to borrow it but obviously these things are getting less and less strict over time as monetary expansion picks up and political pressure for more and more monetary and increases.

[654] You saw that with the housing crash.

[655] Yeah, housing is one example, but I think perhaps the even bigger example is the financial industry, which is constantly receiving enormous amounts of new credit from the central bank directly in the form of quantitative easing.

[656] That's a huge one.

[657] So, you know, in Bitcoin, we have Bitcoin mining, which is an extremely sophisticated industry.

[658] In order to produce new bitcoins, You know, we have about six and a quarter Bitcoin's produced every 10 minutes.

[659] And in order to produce these, people expend a lot of resources in order to be able to make them.

[660] Roughly, the cost of making a Bitcoin fluctuates around the market price of Bitcoin.

[661] But both vary, but it's roughly around it.

[662] With gold, the same is true as well.

[663] You know, it's costly and expensive to find new gold.

[664] You have to dig it and you have to process it.

[665] And it's very...

[666] So why bother mining it?

[667] And why not just cap Bitcoin wearing it?

[668] is now.

[669] Why bother producing more?

[670] Why is that built into the system?

[671] Why 21 million and not just where we are now?

[672] Well, 21 million is as good as any number.

[673] It could have been 500 trillion.

[674] It could have been five.

[675] It could have been anything.

[676] Any number is good enough as long as it's divisible.

[677] And that's kind of the key insight from the Austrians that made me specifically very interested in Bitcoin.

[678] The Austrians were the only one who said, yeah, the quantity of money doesn't matter.

[679] You could run any economy on any size of the money.

[680] And then as the economy grows, the value of the money increases and that's a great thing that's that's the golden period that's the golden age of the west so it's sort of an it's sort of an illusion in some sense the cap because well there's 21 million bitcoin let's say but they could be worth anywhere from like two dollars to a million dollars each and because it's it's fractionable right so so there is no in that sense there's no limit to how much money there is even though there is a limit to how many tokens there are Exactly.

[681] There's no limit to the value that the network can carry, but there's a limit to the tokens that represent that value.

[682] So you don't corrupt the tokens of the system in order to make more tokens in order to enrich the insiders.

[683] You just keep packing more value into it.

[684] Into the tokens.

[685] Okay.

[686] So why are they, why was it allowed to be mined at all then?

[687] So that the distribution of the coins would be a fair distribution so that anybody could enter into the network and secure coins.

[688] because that, you know, if you just made the first 21 million, you know, who owns them in the first day?

[689] Who's going to be owning the 21 million?

[690] How are you going to distribute them?

[691] This is not an easy question.

[692] And I think, you know, most people wouldn't have thought something like Bitcoin to be possible had it not because of this issue.

[693] You know, how are you going to start off an upstart currency and give everybody in the world a new balance?

[694] So it was to get it going.

[695] Exactly.

[696] So, you know, it's kind of like just for the first.

[697] hundred and thirty years of bitcoin's history we're going to need to have mining but then bitcoin operates without any more mining right so you have some you need some gold for gold to work and so you need to have a mechanism for mining the gold and so this is some mechanism for producing bitcoin so that there are some bitcoins so it can work and they're distributed across the people who have done the mining and so you already have a bit of an economy there because all those people are vested in it and it's completely open and perfectly competitive Anybody in the world can mine, anybody can bring their computer onto the network and mine and, you know, benefit from the mining.

[698] And it rewards only the most successful miners.

[699] It rewards only the most economic miners because it has this thing called the difficulty adjustment, which is my favorite part of Bitcoin.

[700] It's really the magic glue that holds Bitcoin together and I discuss it in the Bitcoin standard and in the Fiat standard.

[701] What happens is that, you know, if more miners try and mine copper or gold or silver, you end up with a lot more copper or gold or silver.

[702] But with Bitcoin, the more miners that get into the network, you still get the same number of Bitcoin as was predetermined earlier.

[703] But the difference is that you don't get, but it just gets harder for the individual miners to get into the network.

[704] So it's more like a sports competition wherein there's one trophy.

[705] And then the more competitors get in, the trophy just gets harder to win.

[706] It doesn't get, you don't get more trophies handed out.

[707] So how in the world did Satoshi figure this out?

[708] How did he, I don't understand how he could conceptualize this.

[709] It just doesn't make sense to me. It's an incredible work of genius.

[710] When you think about just the amount of expertise that he had to have in different fields of knowledge to bring this monster together is absolutely astounding.

[711] Yeah, well, just the conceptualization to begin with, let alone the implementation, the engineering implementation.

[712] To be fair, I mean, it wasn't like he invented this problem.

[713] It's a problem that had been around for many decades.

[714] People have been trying to build a digital form of money for decades, you know, since the 1970s and 80s and 90s.

[715] There have been attempts to do something like this.

[716] And the different attempts to produce something like this always came up against a technical problem called the Byzantine general's problem.

[717] And then Satoshi figured out a solution to it through the proof of work system, which is absolutely astounding.

[718] So tell me about that.

[719] If we can do that without deviating too much.

[720] So what is that problem and how did he solve it?

[721] Well, the problem is essentially about how to get all the different nodes on the network to agree on the same version of what's going to happen together.

[722] How do they all agree without having a central command?

[723] manned authority.

[724] That's really the issue.

[725] And why was that the Byzantine general's problem?

[726] You know, ashamed to say it, but I'm not very much up on my history.

[727] I'm not sure where the history of the term comes from.

[728] Okay, okay.

[729] Well, I won't torture you with that then.

[730] But he solved the problem of consensus verification without a central authority.

[731] Exactly.

[732] And the way to do it was to have this expensive ritual called proof of work being performed before any of the members of the network proposes a block of transactions to be added onto the record of transactions.

[733] So Bitcoin is, you know, it's a record of transactions that exist over tens of thousands of computers.

[734] And the issue is how do you make sure that people don't put in fake transactions in this record?

[735] Well, the way he did it was that anybody anywhere in the world could come in and propose new transactions.

[736] But in order to have your transactions added, you must first solve this problem.

[737] this mathematical problem, the proof of work mathematical problem, and that's actually expensive to solve.

[738] It takes your computer running for many, many hours to be able to try and figure out the solution to those things and, you know, for it to get lucky once every 10 minutes.

[739] So you have to spend serious money in order to be able to commit, to make the claim of the new transactions.

[740] And so once, you know, it's like if you just allow everybody to present their record of transactions, then there's no mechanism of coordinating.

[741] between everybody, whose record do we pick from all those thousands of people.

[742] But if you put, currently, you know, the reward is about six, six and a half, seven Bitcoin, so that's about $350 ,000.

[743] The Bitcoin network is giving out $350 ,000 every 10 minutes.

[744] You can have them as long as you provide the proof of war solution, which roughly costs you around $350 ,000, more or less.

[745] So how do we make sure that we can all agree on this, all the members of the network?

[746] We don't evaluate any claim for the transactions.

[747] We only evaluate the claim that has done the work and that has spent the money.

[748] So why would someone make that claim then if it's so difficult?

[749] What's the advantage to that?

[750] You get $350 ,000.

[751] You get $7 ,000.

[752] And how is that related?

[753] That's the mining process.

[754] That's the mining process.

[755] That is the mining process.

[756] That is the mining.

[757] Okay, good.

[758] Exactly.

[759] Now I got it.

[760] That's the mining process.

[761] Exactly.

[762] So to mine new bitcoins, you have to mine new bitcoins, to solve that problem.

[763] So this is why it's portrayed as mining.

[764] It's like those computers are digging in the ground, trying to find the solution of the mathematical problem.

[765] It costs money to be able to arrive at that solution, on average, around $350 ,000 currently at current prices.

[766] So that's, in order to be able to make a claim to get that, your claim doesn't get looked at unless you've solved the problem.

[767] And it's very cheap for everybody on the network to see that you have the right solution to the problem.

[768] but it's very expensive to arrive at that solution.

[769] So the solution is like this very difficult key to find, but once you found it, it's trivial to verify that this is the right key because you just put it in the lock and it works.

[770] So it's instantaneous and very cheap for members of the network to figure out that this thing is correct.

[771] So you set up this massive hurdle, essentially.

[772] If anybody wants to come and get this reward, they first need to spend...

[773] Why wouldn't they just buy Bitcoin?

[774] It seems to be to be a lot simpler than mining it, then if it costs $350 ,000 to make $350 ,000, why bother with the mining?

[775] You know, you said it rewards more efficient people.

[776] Exactly.

[777] The short answer is if you have a way of securing electricity at less than $0 .5 per kilowatt hour, then you should get into a Bitcoin mining business, which is, you know, lower than most rates everywhere in the world.

[778] So if you have a source of energy that is isolated from the grid, or if you have a cheap way of securing energy, then Bitcoin is a great.

[779] mining Bitcoin is great.

[780] But for the most...

[781] So does that mean that Bitcoin is a very good way of moving resources from places that can produce electricity very cheaply to other places where electricity is more expensive?

[782] Does that actually make the electricity, the cheap electricity?

[783] It makes the cheap electricity much more valuable.

[784] Absolutely.

[785] This is weird.

[786] That's a weird thing.

[787] It's very weird.

[788] I think it's going to have a very profound impact on the global energy market because for the first time in history, we have a way to sell energy that is location independent so a lot of places in the world have a lot of energy but it's very expensive to get that to the population center so the north of canada has a so you don't need wires exactly jesus that's weird that's a really strange thing yeah to get electricity from the north of ontario to toronto needs a lot of wires or you need to you know if it was gas you need to put it on tankers or on trains or in pipelines all of that stuff is pretty expensive but with bitcoin You just need an internet connection.

[789] You take the Bitcoin miners to where that energy is, and then you can monetize that energy and turn it into Bitcoin.

[790] It's magic.

[791] So what's the net effect of that on the price of electricity worldwide?

[792] Is that deflationary with regards to electricity cost?

[793] I think so.

[794] I think this is a point that I make in the Fiat standard, which is that, you know, we've had Fiat subsidize all these dysfunctional forms of energy over the last 50 years that have led to the grid becoming unreliable.

[795] And we have Bitcoin, like the vigilante savior that it is, coming in and providing a global subsidy for anybody who can make electricity at a cheap rate to monetize that.

[796] Well, not only at a global subsidy, but it's so interesting because not only you could go to where the energy is cheap with virtual certainty that you're going to make more and more money as the value of the Bitcoin increases by investing there.

[797] assuming you assume that the value of Bitcoin is going to continually increase, which is a logical presupposition if it's as stable as is claimed, and it's finite in the way that you're describing and increasingly widely accepted by vast numbers of people.

[798] So it's also an investment that's likely to increase in value over time rather than decrease.

[799] So it takes some of the uncertainty out of investing in cheap electricity, generating processes that are geographically isolated.

[800] I just can't believe that's true.

[801] It's amazing that I think I must be misunderstanding because it seems like you can move the value of the electricity magically without any of the problems of transportation.

[802] Yes, exactly.

[803] Wow, that's really something.

[804] And in terms of, you know, think about it in terms of independence, I think the implications are pretty good because if you have an energy source, it becomes far more sustainable to be able to exploit that energy source if you have a steady way of monetizing it.

[805] So I think it can help people get off the grid.

[806] It can help people become more independent.

[807] You have your own energy sources and you have your own monetary system that you use to trade with the rest of the world.

[808] You don't need much of the control of the grid on you, which is getting more and more suffocating every day.

[809] Yes, and as this idea that we're despoiling.

[810] the planet and our technical activities, our industrial activities, our high standard of living, all that's immoral because we're doing immeasurable long -term harm to this pristine biosphere.

[811] You can just feel the moral pressure growing there just intensely, intensely, intensely.

[812] Yeah, and I think it's completely ridiculous because, you know, every action has a cost.

[813] This is the thing about it you learn from economics.

[814] Everything has a cost.

[815] Everything has an opportunity cost.

[816] And people like to present this idea as if, you know, there's an evil concept.

[817] of oil producers that are out there forcing our governments to make our lives dependent on these oils.

[818] And what we need to do is to just have the political will to transition to these more advanced forms of energy that are going to save the planet.

[819] And it's just completely ridiculous.

[820] Well, people don't understand.

[821] People don't understand things as simple as the fact that there's a finite amount of solar energy that falls on a square yard of territory.

[822] At that basic level of physics, it's just, well, the sun is in an exhaustive.

[823] source of energy.

[824] It's like, well, that's true, but practically speaking, that's not exactly the issue.

[825] Exactly, because what you need is the power.

[826] What you want is to convert that high quantity of energy into high power, which is a lot of energy over a small, short period of time.

[827] And to do that, this is really understanding that what humans look for is not energy, because energy is everywhere.

[828] There's sun and there's wind and all of that stuff.

[829] But being able to channel that in order to use it in high power applications, that's what makes everything that we value possible.

[830] That's what makes surviving the winter a breeze for the vast majority of us.

[831] This is why we have our modern lives.

[832] This is why we have transportation is because we have high power.

[833] And the way that we've managed to secure high power, the way that we built our world is modern hydrocarbons.

[834] And so the thing that carbon, people who are afraid of carbon dioxide need to present is they need to make the case that, you know, stopping hydrocarbons is going to have such a noticeable effect on the climate that it outweighs the benefits of taking the money back to the 1500s?

[835] They're not going to do that because you look at how this works out is that we're trying to calculate the economic consequences of climate change and the economic consequences of our interventions over this has to do with the time preference over say 50 to 100 years, but the errors in your measurements and your predictions grow and grow as you move out decades into the future.

[836] It's that those justifications will never be forthcoming.

[837] They're technically impossible.

[838] And so it does go down to basic principles.

[839] It's like, do you believe this is a problem that can be solved by intelligent, well -meaning people who are doing central planning?

[840] And I've toyed with those ideas and worked on UN committees that are devoted to, what are the UN Millennium Goals.

[841] And I looked at how that central planning was done.

[842] And that's an interesting story in and of itself, because it isn't even cabals of experts.

[843] So this committee I was on was composed of, you know, ex -presidents and prime ministers and people like that from all over the world.

[844] And so you think, well, they have some political and economic expertise.

[845] They're putting together the new vision of the UN for the new millennium, let's say.

[846] But those aren't the people who are actually making the decisions because they're completely occupied.

[847] They already have lives that are absolutely full.

[848] So then the decision -making power falls down the bureaucracy until it lands on the shoulders of someone who has spare time for one reason or now.

[849] And they make the decisions in the name of that person.

[850] And then all those decisions are aggregated.

[851] And there isn't anybody who's in some sense taking central responsibility for that.

[852] So the document that I worked on to begin with looked like it was written by people who were stuck in the 1980s.

[853] It was all Cold War ideology, essentially, the Northern Hemisphere against the Southern Hemisphere.

[854] And so we just stripped all that out.

[855] We just took it out.

[856] And the reason we were able to get away with that was that we, rewrote it.

[857] And no one else wanted to re - rewrite our rewrite.

[858] And so it just stuck.

[859] And then there was these 200 millennial goals, essentially.

[860] And I looked at that and I thought, well, why those goals?

[861] And the answer was, well, there was constituencies of interest for each of those goals.

[862] And then I thought, well, we need to rank order these because there's no bloody way we're going to do all 200.

[863] And there was no rank ordering.

[864] And the reason for that was it would upset all the constituencies.

[865] And I thought, well, you get this weird aggregation of things we need to do.

[866] And then the impossibility of rancourting that means you don't have a priority.

[867] Like, what's the most important and how do you decide that?

[868] Well, that problem just wasn't addressed at all.

[869] And so this, well, it was an object lesson in how these sorts of things work.

[870] It was central planning, but it was so dysfunctional in some way.

[871] It's not like it's partly because, Because there wasn't anyone in the world who had enough intelligence, enough knowledge to make those sorts of decisions.

[872] No one.

[873] No one exists like that.

[874] So, well, so, well, I'm going to stop with that.

[875] Yeah, I think the ultimate issue, I think, in these things, I'd go back to Meese's point, which is that none of these people is making calculations with opportunity cost.

[876] That's the great thing about the fiat world is that everybody has essentially a fake fiat.

[877] job wherein they get paid regardless of actual results, you know, and the fiat world results are optional because your money doesn't come from the customer for many of those people.

[878] Their money comes from the money printer from up above.

[879] So it's not about how you serve the customer.

[880] It's about whether you do the things that the people providing the funding.

[881] Right.

[882] So it's dissociated.

[883] It's dissociated from the actual environment because the consumer is the actual environment.

[884] The consumer is an actual living being.

[885] And if you're serving the consumer, then you have nature there as your witness and your judge.

[886] And then there can be all sorts of intermediaries between that, which is what you're discussing.

[887] And then that moves the producer away from feedback from the consumer.

[888] And it corrupts the signal.

[889] It corrupts the information signal.

[890] Precisely.

[891] And that's kind of the other central point in the Fiat standard.

[892] So in the one hand, you're robbing people of the purchasing power.

[893] On the other hand, you're putting the decisions about people's lives in the hands of people who essentially face no opportunity cost and they have these jobs regardless of whether they perform them because they're linked to this magic printer that continues to finance them.

[894] So they don't lose their job and they always can continue to do whatever it is that they're doing and facing no accountability.

[895] And, you know, the impact across life, I think, is enormous.

[896] It leads to all kinds of central planning.

[897] And the fundamental problem with this, which you see in the climate change, debate and you see it in the coronavirus restrictions and response is that all of these people don't understand the concept of opportunity cost, you know, the Zoom warrior class, the people whose lives can be conducted from their internet connection, they're just completely blind to the idea that other people need to leave the house and eat.

[898] It's astonishing to watch it because in their mind, you know, you can call for something like let's lock everybody at home for, you know, a year and a half so that nobody gets sick.

[899] except for being locked from being locked at home yeah well of course if you don't think about you know if you don't think about the downsides of thing then it's a brilliant idea everything is great if you just ignore the downsides and that's essentially what governments can afford to do because they don't have the market's discipline to essentially correct them and that's that's what bitcoin brings you know well the discipline the discipline is exactly the lack of discipline is exactly So we could depersonalize this to some degree and think about it as a technical problem, right?

[900] Is that as you stack up intermediaries between the producer and the consumer, because the signal is degraded, the responses aren't going to be accurate reflections of what's necessary in the environment.

[901] And that's sort of ideologically agnostic.

[902] What you derive from that is you want to set up systems where those intermediaries don't exist because then the signal isn't corrupt and we can act properly in concert with the dictates of the genuine environment.

[903] Yes, exactly.

[904] In fact, I begin the second section of my Fiat standard books called Fiat Life.

[905] It begins with this idea that all living things face this natural order of the world in which they need to produce more than they consume in order to survive.

[906] There's just every cell, every animal, every plant needs to do this.

[907] They're constantly working.

[908] Or they die.

[909] Or they die, exactly.

[910] And the only exception to this is essentially the Fiat human, because they do.

[911] don't need to produce because they can just live off the money printing that comes from them from above.

[912] And so I think we've had an enormous section of the population that is not used to the concept of productive work.

[913] It's destroyed the concept of the moral imperative of work as service to others when you take away the fact that work is also the only way to eat.

[914] You know, when work becomes optional, it becomes much easier to, it becomes much easier to philosophize it away and philosophize duty and responsibility away.

[915] And that's, I think, what Fiat does.

[916] And you combine that with the fact that it raises time preference because it discourages provision for the future and it discourages people to think a lot of the future.

[917] And you can see that a lot of the problems, a lot of the pathologies of the 20th century, I think have their root in highly influential.

[918] a couple of objections to Bitcoin, let's say.

[919] It's not easily usable.

[920] I can't just go to the store and buy something with Bitcoin.

[921] It's not easy.

[922] And I don't see that improving very radically.

[923] Now, maybe it's a store of value and there will be systems built on top of it that make those sorts of transactions possible.

[924] But maybe you could address that.

[925] You just brushed over the issue of the multiplicity of cryptocurrencies, but you made a very telling statement there, which is you said all of them, people have tried to make Bitcoin variants and they all failed.

[926] All the other cryptocurrencies are more like companies.

[927] And so they have someone centrally involved.

[928] And so why are people like Elon Musk, for example, interested in coins like it's the Deutsche coin?

[929] Is that due only good every day?

[930] Coin, is that it?

[931] And it was sort of a parody coin to begin with as far as my limited understanding enables me to.

[932] So Bitcoin isn't that usable.

[933] That's a problem.

[934] Why shouldn't we just be skeptical of cryptocurrency as such, given the multiplicity of cryptocurrencies?

[935] So.

[936] Yeah.

[937] So in terms of the usability, I think the limit, the reason that you don't use Bitcoin currently to buy things from your shop is not the technological use issue.

[938] It's simply the liquidity issue.

[939] It's the fact that, for the vast majority of people right now well overall the money balances over the world Bitcoin constitutes somewhere in the range of 1 % of the world's money balances so the odds that you are going to be trading with somebody who has enough Bitcoin that they are willing to take the other end of the trade you know let's say you want to buy a sandwich and they're willing to lose some to accept some extra Bitcoin to add it onto their balance sheet is very low because most people have zero Bitcoin and most people haven't heard of Bitcoin.

[940] So it's still very early.

[941] So that problem is, in my mind, it's just an issue of liquidity.

[942] It's not an issue of interface or users.

[943] You know, you don't know how your refrigerator works, your car.

[944] A lot of machines, we have no idea how they work, but you know, you know how to operate them.

[945] And so Bitcoin is like that.

[946] And we saw in El Salvador, you know, now McDonald's and Starbucks are accepting Bitcoin.

[947] It's just, there is a very easy way to do it in in el salvador in el salvador yeah why why so it was announced as a national currency as a legal tender in salvador in fact you know we're recording just one day after that law went into effect so now el salvador has two official currencies the u .s dollar and bitcoin they used to run on and why did they do that um it's an interesting move from the president of el salvador i think yeah it's a radical move it's amazing i can't believe it yeah one one motivation is that a lot of El Salvadorians send remittances back to their country and there's a lot of money in that so they could save with it on Bitcoin.

[948] Right, so that's a place where Bitcoin could really get wide usages.

[949] It's a replacement for things like Western Union.

[950] That's a big deal given how much money passes from first world countries to third world countries.

[951] It's a huge issue.

[952] Yes.

[953] And I think, you know, still, over time, I still think, you know, it's going to be a while until the whole world can move on to a Bitcoin -based economy because it's just, you know, you don't, there's a hundred trillion dollars of money out there in the world.

[954] We're not going to, Bitcoin can't eat all of that in a weekend.

[955] No, but it's stunning that it's even one percent of that.

[956] I mean, that's unbelievable.

[957] That's a huge percentage of it.

[958] It's a huge percentage because, you know, the vast majority of that, the vast majority of currencies are under one percent.

[959] Bitcoin is bigger than the vast majority of currencies.

[960] There's only like maybe five or six currencies that are bigger than Bitcoin.

[961] point, the big ones, you know, and then all the other ones are just tiny little fractions next to it.

[962] So it's astonishing that we've gotten so far.

[963] But I think, you know, in terms of the interface issue, it's, let me just put it this way, all of the solutions that you currently use for paying with your fiat can be adapted for Bitcoin.

[964] You know, Visa could add, you know, Visa already provides the U .S. dollar and the Canadian dollar in the euro and 160 currencies from all over the world.

[965] They can add 161, and then you'll be able to pay with Bitcoin.

[966] Okay, so you should think that's a threshold issue.

[967] users, that'll just start to happen.

[968] The market will drive that.

[969] And we have the Bitcoin native solutions as well.

[970] Okay.

[971] Now, the issue of the other cryptocurrencies.

[972] The other cryptocurrencies, I think, in my mind, they are dilutive of each other, but they are not dilutive of Bitcoin, because Bitcoin continues to grow very rapidly.

[973] And I think, you know, the other cryptocurrencies, their value proposition rests on some kind of special feature that they provide.

[974] None of them is really trying to compete with Bitcoin on being this neutral money -neutral protocol.

[975] None of them can claim in any kind of serious sense to be doing that.

[976] Okay, so let me ask you about that.

[977] So does that mean that Bitcoin is addressing the issue of the store of value, the long -term permanent store of value decentralized in the most philosophically profound possible manner in some sense?

[978] these other cryptocurrencies, they have other features, but that's not the problem they're essentially trying to address.

[979] Yes.

[980] So they're in a different category.

[981] Yeah, all the currencies that try to market themselves as a competitor to Bitcoin in this field have sunk without a trace.

[982] And the ones that have stuck around have introduced a whole bunch of buzzwords about other things that they're supposed to be doing.

[983] Like what?

[984] Like what?

[985] What's being popular?

[986] So there's all kinds of things like, you know, smart contracts.

[987] and decentralized finance.

[988] Honestly, if you ask me, like none of that stuff has shown any sign of being anything more than a basically a pump and dump scheme wherein, you know, people come in and they buy the token.

[989] There's a story, like there's a story about how this thing is going to be used for, you know, there was talk about betting markets and smart contracts and real estate on the blockchain and now they're putting, pictures on the blockchain and they're selling art on the blockchain and all of these fads come and go but ultimately none of them needs its own monetary system in order for it to function and I think the accurate interpretation here is that these things are just monetary systems that have a side story that they're selling you about what their applications is but nobody's really buying them in order to buy these applications because they don't really perform anything that Bitcoin cannot do or that, you know, any kind of real world use case.

[990] It's just people are buying these currencies and they're speculating on the price.

[991] And the value of all of these currencies is going up because, you know, we're starting from a very small level.

[992] However, I think, you know, the distinction is that in the long run, these currencies need to continue to invent new stories and to continue to invent new narratives to continue to drive more attention to them.

[993] But whatever store you invent in your currency, you know, there will be other currencies that will come and invest in, you know, promoting this in a better way.

[994] So I think they are diluted for each other because whatever value proposition you have, you know, let's say our blockchain network does the best smart contracts.

[995] Well, what's stopping somebody else from copying that?

[996] There's nothing that you can't copy about it.

[997] They can just move the same thing and start another network that does it.

[998] Right, which is essentially the equivalent of printing money to the electronic.

[999] equivalent of printing money in that currency.

[1000] Exactly.

[1001] And so I think, you know, maybe this speculative game won't run long, but ultimately, altcoins are easy money, because they individually, you can increase their supply.

[1002] There's a group of people that can sit down and change the money supply for all of these coins.

[1003] And that's the case with, you know, the second biggest currency after Bitcoin.

[1004] They've changed their monetary policy six times maybe since creation.

[1005] And that's which platform?

[1006] Ethereum.

[1007] Ethereum.

[1008] Right, right.

[1009] And, yeah.

[1010] So they've changed the monetary supply.

[1011] So they could change it in any case.

[1012] And, you know, if anything tells us, there's always reasons why you want to print money.

[1013] So we'll come times in which you're going to need to print money and there will be pressure.

[1014] And they did go through a case where, you know, somebody hacked their, somebody hacked one of their contracts, took a lot of money out of it from the people that were pretty influential in it.

[1015] And they did roll it back.

[1016] They effectively essentially ran.

[1017] admin move where they froze everybody's account well not exactly throws but they reversed the transactions in order to secure their own they reset the day exactly so that's that's you know that's that's that's the best competitor when it comes to bitcoin so can really establish the scarcity so for me in the long run I would not recommend I don't feel comfortable recommending any of this of course you could make money in the short run there's a lot of fluctuation but in the long run you know these things continue to make more and the supply continues to increase and you need a base of people that continue to hold them for the long run in order for the value to stay in them.

[1018] And I don't see any compelling narrative for people to want to store serious value in these currencies in the long run.

[1019] And I don't see that they could trust it because of the fact that it can be increased.

[1020] And I think it individually can be increased.

[1021] But collectively, all of them, you know, you're constantly making new currencies that trading on this novelty.

[1022] So the market for novelty, you know, the demand for novelty, even if it's larger than the demand for the store of value of Bitcoin, is getting dissipated at the all of the extra inflation of all these novelty coins that are being added every year.

[1023] And, you know, I don't pay much attention to this world because in my mind, I've paid enough attention and seen the patterns, which is that it's, you know, these stories are generally there to sell the story of the currency.

[1024] that exists there.

[1025] But I think Bitcoin is really all you need.

[1026] Bitcoin is the one that I can trust will be there in 10 years, 15 and 20 and 15.

[1027] So let me ask you about one more thing.

[1028] I want you to talk about your online learning platform and why you built that, why you're doing that, what you think the implications are, what you offer people, what that means for the future of education, let's say, why you aren't in the traditional university system.

[1029] I know that's a lot, but I do really want to hear what you have to say about it.

[1030] I wasn't in the traditional university system, but the internet changes everything.

[1031] And toward the time when I started learning about Bitcoin, it really changed the way that I think about the world and gave me an understanding of the power of technology and the power of innovation and the power of the internet.

[1032] And I started realizing just the limitation of the physical university model, which is you're stuck in a small classroom with students.

[1033] Many of them are there just because they want the credentials, not for the actual learning.

[1034] And the economics of it are not very good because the students pay a lot of money and the professors don't get paid a lot of money.

[1035] And then a lot of money gets lost in the middle in the gigantic bureaucracy.

[1036] Which expands way faster than the faculty and continually undermines the power of the faculty with the faculty's own, what would you call?

[1037] They're concentrating on the research and they're politically naive and they get their power gets inflated away to a tremendous degree every year.

[1038] I warned my colleagues about this sort of thing continually when I was a faculty member and they never paid attention.

[1039] I said, you're, you just have no idea what you're giving away.

[1040] And well, okay.

[1041] So, so, so, you know, I've had the same experience as you, I think.

[1042] I mean, I was, I've had a lot of health problems recently, but I was thinking about going back to the university.

[1043] I've resigned from the University of Toronto.

[1044] My, my original position, I'm a professor or emeritus now, but I thought, if I'm well enough to go back to the university and teach, I'm well enough to teach on the net.

[1045] If I teach on the net, I can talk to people like you every day.

[1046] I never have to teach the same course twice.

[1047] I can learn while I'm teaching.

[1048] And I can teach to like 500 ,000 to a million people continually.

[1049] So why in the world, with no administrative overhead whatsoever, direct to consumer, exactly so that was that was really it and for me I think the most frustrating part of academia is the peer -reviewed journal nonsense it's just an enormously frustrating ritual where you that's no no the grant the grant writing system is worse yeah well I'm in my defense I never went that far I could never get myself to well you know the typical the typical researcher in the United States in particular you get big grants in the U .S., but they're impossible to get, whereas in Canada, you get small grants.

[1050] And if you do a grant proposal properly, you probably get a grant small.

[1051] But in the States, the typical scientist spends 40 % of his or her time writing grant proposals.

[1052] And that is not what they're good at.

[1053] Like, that's not the same as being an entrepreneurial and researcher.

[1054] It isn't the same skill set at all.

[1055] Yeah, it's a, so it's a, and then you don't get the grants.

[1056] Yeah.

[1057] And in particular, teaching is massively, massively.

[1058] undervalued in the modern university.

[1059] You know, your university hires you mostly for how many publications you can get.

[1060] No, no, no, no. Now it hires you mostly for you, the quality of your diversity statement.

[1061] No, I'm not kidding.

[1062] I'm not kidding.

[1063] This is really happening in California.

[1064] Codino, but not also not research now.

[1065] It's literally the case that in the UC systems, the diversity statement, which is just something that crept in, say, five, six years ago, you have to provide a diversity statement along with research statement.

[1066] That has more weight with regards to the hiring procedure than the research history and teaching.

[1067] Well, it's like, who cares about the damn undergraduates, right?

[1068] Yeah.

[1069] Fiat education is another chapter in the Fiat standard where, you know, I take my experience from the university world where essentially, again, it's the same story.

[1070] The financing doesn't come from the customers for the students, whether it's at the university or school level, it comes from above.

[1071] And so the bureaucracy is optimized for sucking more money from above and it essentially uses the students as the props to do that.

[1072] In fact universities get a lot of money, a lot more money from governments directly or indirectly, you know, governments subsidize the loans for the students.

[1073] So even student money is effectively government money.

[1074] And so they're optimized and focusing on kissing the hand that feeds them.

[1075] And that's why the university is becoming so politicized.

[1076] It's also part of fiatism.

[1077] It's not the case when, it's not how universities functioned under the gold standard.

[1078] They were at far more integrity because the money had integrity.

[1079] And so the only way that you could get to your university to have money was, you know, to teach people useful things so that they would be happy.

[1080] And they would tell their friends to go to that university and they would donate money.

[1081] But this kind of cycle is breaking now.

[1082] That's why we see so many.

[1083] God, even the economist, even the economist miracle of miracles has published articles in the last month, pointing out that the politicization of the university campus, which is something that I've been observing for like 20 years and have been warning people about, is having these massive downstream consequences throughout society.

[1084] It's like, and that's definitely the case.

[1085] And so why is that politicization occurring?

[1086] Exactly.

[1087] And so for me, you know, it was, I was.

[1088] wanted to just, it was like, you know, Bitcoin like Uber.

[1089] It's a sidestep the entire monster and figure out what it is, what is the essence of what it is that I'm good at.

[1090] I like to teach.

[1091] I enjoy teaching.

[1092] So I'm going to build a website and I'm going to, you know, I, writing the Bitcoin standard was what allowed me the courage to take this move.

[1093] And I, I regret not doing it earlier.

[1094] But once I had a little bit of a global audience that I could follow, you know, It was, I could teach many more students that I could teach in a physical classroom.

[1095] We're much more interested.

[1096] And, you know, this is what I learned from Austrian economics.

[1097] You want to follow the place where you're able to create more value.

[1098] That's what you need to follow.

[1099] So people seem to like what I was doing online.

[1100] And so I thought I'm going to try and figure it out.

[1101] So how long has this been?

[1102] Yeah.

[1103] How long has it been in operation?

[1104] That's safeddeen .com.

[1105] Safenddeen .com.

[1106] Yes, two years now.

[1107] I've had it running for, actually, yeah, just turned two years.

[1108] a couple of weeks ago.

[1109] I didn't make a big deal.

[1110] Well, congratulations.

[1111] So tell me, tell me, like, what size audience are you serving?

[1112] How is it growing?

[1113] What have you learned?

[1114] How are you generating revenue?

[1115] The first couple of years I've focused on building rather than getting a bigger audience.

[1116] I've made it a little bit more.

[1117] It's mainly focused on, you know, my audience on Twitter.

[1118] They're the ones who sign up.

[1119] I haven't promoted it widely.

[1120] I haven't done any advertisement, I haven't raised funds.

[1121] I've been focused for the first couple of years on just learning how to do the courses online and to putting the courses online and focusing on the topic itself, you know, how to make an actual online course rather than marketing this and growing in and also writing my two books.

[1122] So it's like the platform for me to intellectually stimulate myself and discuss things with students as I write the book.

[1123] It was enormously valuable for me to writing the book.

[1124] And it's, you know, I remember in the university, the teaching process is something that gives you the ideas for writing.

[1125] And I wanted to make sure that I had that as I left the university.

[1126] I didn't want to just write.

[1127] I wanted to have seminars where I discuss things.

[1128] So I have two live seminars every week with members of Safeind Dean .com.

[1129] Twice a week, we get together and we discuss my books, my work, my courses, Bitcoin in general, Austrian economics and all kinds of other issues.

[1130] and so now it's being done on a smaller scale as I was focusing on the courses in the books.

[1131] The plan is starting next year I'm going to start hopefully expanding the operation as I have my books completed and my next two books.

[1132] I'm also writing an economics textbook as well.

[1133] So, you know, the next problem to solve for the decentralization of education, I've been thinking about this for a long time as it's possible to learn more and more online is, Accreditation is where all the value is, all of it.

[1134] And I've talked to many wise academics, like seriously wise academics, who know perfectly well that there's almost zero financial utility in the knowledge that universities are dispensing to students.

[1135] It's not zero, but it's low.

[1136] But there's tremendous residual value in the accreditation.

[1137] So the next big revolution is going to be the decentralization, hopefully, the decentralization.

[1138] of accreditation so that there's a way of providing verifiable accreditation.

[1139] So I've been thinking about that, to some degree, so you can imagine something like a set of exams where only 10 % of the people who take them pass, or maybe it's 20%, that's bronze, 10%, that's silver, 5%, that's gold.

[1140] You can retake the exams multiple times, but you keep it scarce.

[1141] and so the accreditation there's tremendous economic value in the decentralization of educational accreditation because the content is going to be provided by people like you perhaps by people like me that's going to just keep happening and that's going to find its own market so well so I don't know how that problem might be solved but yeah the way that I solved it in my first two years was that I just told people you know I'm going to only give knowledge I'm not going to do any Pest.

[1142] Right, right, right.

[1143] Yeah, and that's a reasonable approach too, you know, and it sort of relies on your trust in the students themselves in some sense, right?

[1144] You don't have to sit through this.

[1145] You're not going to get anything out of it except the knowledge.

[1146] That's a reasonable approach, and maybe it's the right one, it's just for those who wish to educate to do so and to let the chips fall where they're going to fall.

[1147] And also, I think, you know, there is, there are some downsides to testing that you have to kind of formulate the education in a way that is amenable for testing and that can corrupt the system.

[1148] Exactly.

[1149] It's like predicting the future, right?

[1150] It's the same problem.

[1151] It's like which part of the knowledge that you've learned is relevant.

[1152] And can we form?

[1153] And so there's the hypothesis that we can formalize that.

[1154] Now, you know, you might be able to do it in some ways because maybe you can test something like literacy, right?

[1155] Because that's a broad scale skill that's useful across multiple domains.

[1156] And so maybe there's a role there for testing to specify level of skill.

[1157] But it gets much more difficult in other areas.

[1158] So that's partly why the accreditation problem is a real tough one to solve, to do it properly.

[1159] I don't know.

[1160] I go back and forth on whether accreditation really is such a big deal or whether the whole issue of gravitation is going to be devalued over time because in a sense I can see how it was valuable in the pre -internet world where you know going to a university and spending four years taking courses with the experts on a topic next to a physical library that actually contained the books in the topic was basically the only way that you could establish confidence in the topic and getting a degree that you've ticked all of the boxes was very reliable signal that you did do that.

[1161] But now, you know, the knowledge is all out there.

[1162] And the people looking to hire you are becoming increasingly practical, increasingly specialized about what they're looking for.

[1163] It's not that big of a deal, whether you have a degree in all those fascinating topics that you learned about, you know, can you build a mousetrap that catches my mind?

[1164] Exactly.

[1165] Have you, so that might mean that the accreditation problem is actually downloaded to the people who consume the students, so to speak.

[1166] That's the people who are doing the hiring.

[1167] I mean, the hiring people have a tough job, and they were using accreditation as a shortcut to doing their job properly, relying on the institutional validity of the universities to select the proper students.

[1168] And universities were basically doing that on the basis of it, making it difficult to get into the universities, and by proxy selecting people at high levels of G, fluid intelligence.

[1169] So basically, yeah.

[1170] And it's becoming less and less valuable as a signal as knowledge becomes everywhere, becomes available everywhere.

[1171] You don't need to go to a physical library, and you don't need to be next to the professor.

[1172] You can download the lectures online, and you can discuss things with students online.

[1173] You can recreate the entire university experience online, basically.

[1174] Now, is it as fun as going on to a campus?

[1175] Well, no, but, You know, when you think about the difference in costs, you could learn an entire undergraduate degree for a couple hundred bucks online.

[1176] You know, think about all the extra money that you save and all the extra time that you save.

[1177] And I don't think about how much fun you could have with that.

[1178] That's when it becomes a fair comparison, I think.

[1179] Well, look, that was great.

[1180] I learned a tremendous amount.

[1181] You really made me think.

[1182] He cleared up a lot of the questions I had about cryptocurrency and about Bitcoin.

[1183] I understand how it functions better.

[1184] Some of it was absolutely fascinating.

[1185] Like that idea that you can monetize energy production in areas that wouldn't be able to ship the electricity to market, that's absolutely mind -boggling.

[1186] It'll take me like five years to think that through.

[1187] And it seems to completely contradict the idea that Bitcoin is a waste of the world's resources, right?

[1188] It's a complete opposite if this monetization idea is actually true.

[1189] So that's really, really, really interesting.

[1190] So yeah, that was great.

[1191] I'd like to talk to you again at some point.

[1192] So we'll see how people respond to this and what sort of questions they have and what sort of things they might like us to discuss.

[1193] But I really enjoyed the conversation.

[1194] So thanks a lot for all that.

[1195] And good luck with your book, your new book.

[1196] So that new book, so everyone remembers the two books are the Bitcoin standard and the Fiat standard.

[1197] and you're going to learn a lot by reading those books an awful lot.

[1198] I learned a lot about the Austrian School of Economics too and about its fundamental philosophical differences, and that was really useful to me as well.

[1199] So lots of pieces fell into place, the sign of a good conversation when that happens.

[1200] Thank you.

[1201] Thank you very much.

[1202] It was an absolute pleasure as well.

[1203] I enjoyed talking to you very much, and I hope we do it again.

[1204] Mm -hmm.