Michael Saylor: Bitcoin, Inflation, and the Future of Money

00:00:00.000 | Remember George Washington, you know how he died?

00:00:02.240 | Well-meaning physicians bled him to death.

00:00:04.720 | And this was the most important patient in the country,

00:00:08.380 | maybe in the history of the country.

00:00:10.520 | And we bled him to death trying to help him.

00:00:13.700 | So when you're actually inflating the money supply at 7%,

00:00:18.480 | but you're calling it 2% because you wanna help the economy,

00:00:22.880 | you're literally bleeding the free market to death.

00:00:27.880 | But the sad fact is George Washington went along with it

00:00:31.400 | 'cause he thought that they were gonna do him good.

00:00:33.920 | And the majority of the society, most companies,

00:00:38.920 | most conventional thinkers, the working class,

00:00:44.440 | they go along with this because they think

00:00:47.120 | that someone has their best interest at mind.

00:00:49.820 | And the people that are bleeding them to death

00:00:52.180 | believe that prescription because their mental models

00:00:56.880 | are just so defective.

00:00:58.220 | - The following is a conversation with Michael Saylor,

00:01:03.000 | one of the most prominent and brilliant

00:01:05.000 | Bitcoin proponents in the world.

00:01:06.880 | He is the CEO of MicroStrategy,

00:01:09.760 | founder of Saylor Academy, graduate of MIT.

00:01:13.880 | And Michael is one of the most fascinating

00:01:16.440 | and rigorous thinkers I've ever gotten a chance

00:01:18.640 | to explore ideas with.

00:01:20.220 | He can effortlessly zoom out to the big perspectives

00:01:23.240 | of human civilization and human history

00:01:25.480 | and zoom back in to the technical details

00:01:28.880 | of blockchains, markets, governments,

00:01:31.040 | and financial systems.

00:01:33.080 | This is the Lex Friedman Podcast.

00:01:35.080 | To support it, please check out our sponsors

00:01:37.280 | in the description.

00:01:38.440 | And now, dear friends, here's Michael Saylor.

00:01:42.420 | Let's start with a big question of truth and wisdom.

00:01:48.160 | When advanced humans or aliens or AI systems,

00:01:50.680 | let's say five to 10 centuries from now,

00:01:53.240 | look back at Earth on this early 21st century,

00:01:58.200 | how much do you think they would say we understood

00:02:01.080 | about money and economics or even about engineering,

00:02:04.920 | science, life, death, meaning, intelligence,

00:02:07.240 | consciousness, all the big interesting questions?

00:02:09.880 | - I think they would probably give us a B minus

00:02:16.640 | on engineering, on all the engineering things,

00:02:21.560 | the hard sciences.

00:02:23.080 | - A passing grade.

00:02:24.760 | - Like we're doing okay.

00:02:26.240 | We're working our way through rockets and jets

00:02:28.660 | and electric cars and electricity transport systems

00:02:32.880 | and nuclear power and space flight and the like.

00:02:37.240 | And if you look at the walls that grace the great court

00:02:42.240 | at MIT, it's full of all the great thinkers

00:02:47.160 | and they're all pretty admirable.

00:02:49.960 | If you could be with Newton or Gauss or Madame Curie

00:02:54.280 | or Einstein, you would respect them.

00:02:59.280 | I would say they'd give us a D minus on economics,

00:03:04.100 | like an F plus or a D minus.

00:03:08.000 | - You say they have an optimistic vision.

00:03:09.720 | First of all, optimistic vision of engineering

00:03:12.120 | because everybody you've listed, not everybody,

00:03:15.320 | most people you've listed is just over the past

00:03:17.840 | couple of centuries and maybe stretches a little

00:03:20.520 | farther back, but mostly all the cool stuff

00:03:23.360 | we've done in engineering is the past couple of centuries.

00:03:26.400 | - I mean, Archimedes had his virtues.

00:03:30.100 | You know, I studied the history of science at MIT

00:03:33.680 | and I also studied aerospace engineering.

00:03:35.920 | And so I clearly have a bias in favor of science.

00:03:39.800 | And if I look at the past 10,000 years and I consider

00:03:43.680 | all of the philosophy and the politics

00:03:47.100 | and their impact on the human condition,

00:03:49.840 | I think it's a wash for every politician that came up

00:03:52.280 | with a good idea, another politician came up with a bad idea.

00:03:55.920 | And it's not clear to me that most of the political

00:04:00.560 | and philosophical contributions to the human race

00:04:05.560 | and the human conditions have advanced so much.

00:04:08.360 | I mean, we're still taking guidance and admiring Aristotle

00:04:13.440 | and Plato and Seneca and the like.

00:04:17.260 | And on the other hand, you know, if you think about

00:04:21.260 | what has made the human condition better,

00:04:23.780 | fire, water, harnessing of wind energy,

00:04:30.380 | try to row across an ocean, right?

00:04:33.620 | Not easy.

00:04:34.780 | - And for people who are just listening or watching,

00:04:37.580 | there's a beautiful, sexy ship from 16th, 17th century.

00:04:42.180 | - This is a 19th century handmade model

00:04:44.360 | of a 17th century sailing ship,

00:04:47.520 | which is of the type that the Dutch East India's Company

00:04:51.120 | used to sail the world and trade.

00:04:54.100 | So that was made, you know, the original was made

00:04:57.480 | sometime in the 1600s.

00:04:59.520 | And then this model is made in the 19th century

00:05:03.440 | by individuals.

00:05:04.560 | - Both the model and the ship itself

00:05:06.260 | is engineering at its best.

00:05:07.640 | And just imagine, just like rockets flying out to space,

00:05:10.140 | how much hope this filled people with.

00:05:12.100 | Exploring the unknown, going into the mystery.

00:05:15.180 | Both the entrepreneurs and the business people

00:05:19.680 | and the engineers and just humans.

00:05:22.060 | What's out there?

00:05:23.080 | What's out there to be discovered?

00:05:24.480 | - Yeah, the metaphor of human beings leaving shore,

00:05:27.720 | sailing across the horizon, risking their lives

00:05:30.640 | in pursuit of a better life is an incredibly powerful one.

00:05:33.800 | In 1900, I suppose the average life expectancy is 50.

00:05:41.800 | During the Revolutionary War, you know,

00:05:44.060 | while our founding fathers were fighting to establish,

00:05:47.260 | you know, life, liberty, pursuit of happiness,

00:05:49.860 | the constitution, average life expectancy of,

00:05:52.900 | it's like 32, somewhere between 32 and 36.

00:05:56.880 | So all the sound and the fury doesn't make you live past 32,

00:06:01.260 | but what does, right?

00:06:02.460 | Antibiotics, conquest of infectious diseases.

00:06:06.580 | If we understand the science of infectious disease,

00:06:10.460 | you know, sterilizing a knife and harnessing antibiotics

00:06:15.460 | gets you from 50 to 70, and that happened fast, right?

00:06:18.860 | That happens from 1900 to 1950 or something like that.

00:06:23.860 | And I think if you look at the human condition,

00:06:28.100 | you ever get on one of those rowing machines

00:06:31.580 | where they actually keep track of your watts output

00:06:34.140 | when you're on that?

00:06:34.980 | - Yeah.

00:06:35.820 | - Yeah, it's like 200 is a lot.

00:06:38.620 | - Okay, 200 is a lot.

00:06:41.060 | So a kilowatt hour is like all the energy

00:06:44.780 | that a human, a trained athlete can deliver in a day.

00:06:49.780 | And probably not 1% of the people in the world

00:06:53.900 | could deliver a kilowatt hour in a day.

00:06:56.180 | And the commercial value of a kilowatt hour,

00:06:59.020 | the retail value is 11 cents today.

00:07:01.980 | And the wholesale value is 2 cents.

00:07:05.540 | And so you have to look at the contribution

00:07:10.140 | of politicians and philosophers and economists

00:07:13.540 | to the human condition.

00:07:15.260 | And it's like at best a wash one way or the other.

00:07:19.020 | And then if you look at the contribution

00:07:20.620 | of John D. Rockefeller,

00:07:22.880 | when he delivered you a barrel of oil,

00:07:25.380 | yeah, and the energy in oil, liquid energy,

00:07:29.380 | or the contribution of Tesla, you know,

00:07:32.980 | as we deliver electricity,

00:07:35.260 | and what's the impact on the human condition

00:07:38.380 | if I have electric power, if I have chemical power,

00:07:43.380 | if I have wind energy,

00:07:45.300 | if I can actually set up a reservoir,

00:07:47.900 | create a dam, spin a turbine,

00:07:51.220 | and generate energy from a hydraulic source,

00:07:55.060 | that's extraordinary, right?

00:07:58.020 | And so our ability to cross the ocean,

00:08:02.340 | our ability to grow food, our ability to live,

00:08:05.940 | it's technology that gets the human race

00:08:09.000 | from a brutal life where life expectancy is 30

00:08:14.000 | to a world where life expectancy is 80.

00:08:18.300 | - You gave a D minus to the economists.

00:08:21.820 | So are they too like the politicians,

00:08:23.660 | a wash in terms of there's good ideas and bad ideas,

00:08:27.020 | and that tiny delta between good and bad

00:08:31.620 | is how you squeak past the F plus

00:08:34.020 | onto the D minus territory?

00:08:36.220 | - I think most economic ideas are bad ideas.

00:08:39.580 | - Most?

00:08:40.780 | - You know, like, take us back to MIT,

00:08:44.180 | and you wanna solve a fluid dynamics problem,

00:08:47.380 | like design the shape of the hull of that ship,

00:08:51.060 | or you wanna design an airfoil, a wing,

00:08:54.100 | or if you wanna design an engine,

00:08:57.220 | or a nozzle in a rocket ship,

00:09:01.500 | you wouldn't do it with simple arithmetic.

00:09:04.360 | You wouldn't do it with a scalar.

00:09:05.680 | There's not a single number, right?

00:09:07.060 | It's vector math, you know,

00:09:09.260 | computational fluid dynamics is N-dimensional,

00:09:12.720 | higher level math, you know, complicated stuff.

00:09:17.320 | So when an economist says the inflation rate is 2%,

00:09:21.160 | that's a scalar.

00:09:22.460 | And when an economist says,

00:09:24.980 | it's not a problem to print more money

00:09:27.340 | because the velocity of the money is very low,

00:09:30.420 | monetary velocity is low, that's another scalar.

00:09:34.140 | Okay, so the truth of the matter is,

00:09:37.280 | inflation is not a scalar,

00:09:40.000 | inflation is an N-dimensional vector.

00:09:43.060 | Money velocity is not a scalar.

00:09:45.380 | Saying what's the velocity of money,

00:09:50.320 | oh, it's slow or it's fast,

00:09:52.740 | it ignores the question of

00:09:55.340 | what medium is the money moving through?

00:09:58.140 | And the same way that, you know,

00:10:00.460 | what's the speed of sound?

00:10:02.820 | Okay, well, what is sound, right?

00:10:05.140 | Sound, you know, sound is a compression wave,

00:10:09.260 | it's energy moving through a medium,

00:10:12.540 | but the speed is different.

00:10:14.120 | So for example, the speed of sound through air

00:10:16.500 | is different than the speed of sound through water.

00:10:19.100 | And sound moves faster through water.

00:10:21.460 | It moves faster through a solid,

00:10:22.820 | and it moves faster through a stiffer solid.

00:10:25.400 | So there isn't one.

00:10:27.260 | - What is the fundamental problem

00:10:28.740 | with the way economists reduce the world down to a model?

00:10:32.220 | Is it too simple?

00:10:33.860 | Or is it just even the first principles

00:10:35.940 | of constructing the model is wrong?

00:10:37.900 | - I think that the fundamental problem is,

00:10:41.920 | if you see the world as a scalar,

00:10:43.860 | you simply pick the one number

00:10:47.060 | which supports whatever you wanna do,

00:10:50.620 | and you ignore the universe of other consequences

00:10:55.620 | from your behavior.

00:10:57.220 | - In general, I don't know if you've heard of,

00:10:59.580 | like Eric Weinstein has been talking about this

00:11:02.380 | with gauge theory.

00:11:03.220 | So different kinds of approaches from the physics world,

00:11:06.660 | from the mathematical world

00:11:07.980 | to extend past this scalar view of economics.

00:11:12.980 | So gauge theory is one way that comes from physics.

00:11:16.100 | Do you find that way of exploring economics interesting?

00:11:20.820 | So outside of cryptocurrency,

00:11:22.700 | outside of the actual technologies and so on,

00:11:24.380 | just analysis of how economics works,

00:11:27.420 | do you find that interesting?

00:11:28.920 | - Yeah, I think that if we're gonna wanna

00:11:33.260 | really make any scientific progress in economics,

00:11:36.020 | we'll have to apply much more computationally intensive

00:11:40.740 | and richer forms of mathematics.

00:11:43.220 | - So simulation perhaps, or?

00:11:45.340 | - Yeah, you know, when I was at MIT,

00:11:47.140 | I studied system dynamics.

00:11:49.580 | You know, they taught it at the Sloan School.

00:11:51.180 | It was developed by Jay Forrester,

00:11:53.700 | who was an extraordinary computer scientist.

00:11:58.700 | And when we've created models of economic behavior,

00:12:04.340 | they were all multidimensional non-linear models.

00:12:08.520 | So if you wanna describe how anything works

00:12:12.100 | in the real world,

00:12:13.140 | you have to start with the concept of feedback.

00:12:15.660 | If I double the price of something, demand will fall

00:12:19.780 | and attempts to create supply will increase.

00:12:23.420 | And there will be a delay before the capacity increases.

00:12:28.140 | There'll be an instant demand change,

00:12:30.480 | and there'll be rippling effects

00:12:32.220 | throughout every other segment of the economy,

00:12:34.420 | downstream and upstream of such thing.

00:12:37.320 | So it's kind of common sense,

00:12:39.500 | but most economics, most classical economics,

00:12:41.940 | it's always taught with linear models,

00:12:45.740 | fairly simplistic linear models.

00:12:48.740 | And oftentimes even, I'm really shocked today

00:12:52.740 | that the entire mainstream dialogue of economics

00:12:56.860 | has been captured by scalar arithmetic.

00:13:00.760 | For example, if you read, you know,

00:13:04.460 | read any article in New York Times

00:13:06.300 | or the Wall Street Journal, right?

00:13:07.640 | They just refer to it.

00:13:08.540 | There's an inflation number or the CPI

00:13:11.420 | or the inflation rate is X.

00:13:14.340 | And if you look at all the historic studies

00:13:17.300 | of the impact of inflation,

00:13:19.540 | generally they're all based upon the idea

00:13:23.900 | that inflation equals CPI.

00:13:26.220 | And then they try to extrapolate from that

00:13:28.380 | and you just get nowhere with it.

00:13:31.280 | - So at the very least,

00:13:34.020 | we should be considering inflation

00:13:35.860 | and other economics concept

00:13:38.020 | as a nonlinear dynamical system.

00:13:39.780 | So non-linearity and also just embracing the full complexity

00:13:44.020 | of just how the variables interact,

00:13:45.580 | maybe through simulation,

00:13:47.140 | maybe some have some interesting models around that.

00:13:50.180 | - Wouldn't it be refreshing if somebody for once

00:13:52.460 | published a table of the change in price of every product,

00:13:56.260 | every service and every asset in every place over time?

00:14:01.260 | - You said table.

00:14:02.300 | Some of that also is the task of visualization,

00:14:05.060 | how to extract from this complex set of numbers,

00:14:08.720 | patterns that somehow indicate something fundamental

00:14:13.720 | about what's happening.

00:14:15.220 | So summarization of data is still important,

00:14:18.820 | perhaps summarization not down to a single scale of value,

00:14:22.220 | but looking at that whole sea of numbers,

00:14:25.420 | you have to find patterns.

00:14:30.020 | Like what is inflation in a particular sector?

00:14:32.380 | What is maybe a change over time,

00:14:34.940 | maybe different geographical regions,

00:14:37.260 | things of that nature.

00:14:39.180 | I think that's kind of,

00:14:40.580 | I don't know even what that task is.

00:14:42.420 | You could look at machine learning,

00:14:44.940 | you can look at AI with that perspective,

00:14:47.260 | which is like how do you represent

00:14:50.060 | what's happening efficiently,

00:14:52.460 | as efficiently as possible.

00:14:54.060 | That's never going to be a single number,

00:14:55.700 | but it might be a compressed model

00:14:57.220 | that captures something beautiful,

00:14:59.580 | something fundamental about what's happening.

00:15:02.060 | - It's an opportunity for sure.

00:15:04.660 | If we take, for example, during the pandemic,

00:15:13.980 | the response of the political apparatus

00:15:16.700 | was to lower interest rates to zero

00:15:20.140 | and to start buying assets, in essence, printing money.

00:15:24.660 | And the defense was there's no inflation.

00:15:27.120 | But of course you had one part of the economy

00:15:31.940 | where it was locked down,

00:15:33.460 | so it was illegal to buy anything.

00:15:36.620 | But you couldn't, it was either illegal

00:15:39.180 | or it was impractical.

00:15:41.360 | So it would be impossible for demand to manifest.

00:15:44.220 | So of course there is no inflation.

00:15:46.100 | On the other hand,

00:15:47.820 | there was instantaneous immediate inflation

00:15:51.540 | in another part of the economy.

00:15:53.540 | For example, you lower the interest rates to zero.

00:15:58.180 | At one point we saw the swap rate on a 30 year note

00:16:01.440 | go to 72 basis points.

00:16:03.420 | Okay, that means that the value of a long dated bond

00:16:08.140 | immediately inflates.

00:16:09.500 | So the bond market had hyperinflation within minutes

00:16:14.100 | of these financial decisions.

00:16:17.620 | The asset market had hyperinflation.

00:16:20.400 | We had what you call a K-shape recovery,

00:16:23.300 | what we affectionately call a K-shape recovery.

00:16:26.100 | Main street shut down,

00:16:27.640 | Wall Street recovered all within six weeks.

00:16:30.940 | The inflation was in the assets,

00:16:33.300 | like in the stocks, in the bonds.

00:16:37.460 | If you look today, you see that a typical house,

00:16:41.380 | according to the Case-Shiller Index today

00:16:43.120 | is up 19.2% year over year.

00:16:46.720 | So if you're a first time home buyer,

00:16:50.400 | the inflation rate is 19%.

00:16:53.740 | The formal CPI announced a 7.9%.

00:16:58.740 | You can pretty much create any inflation rate you want

00:17:03.420 | by constructing a market basket,

00:17:05.980 | a weighted basket of products or services

00:17:08.820 | or assets that yield you the answer.

00:17:11.840 | I think that the fundamental failing of economists

00:17:15.740 | is first of all,

00:17:17.480 | they don't really have a term for asset inflation.

00:17:22.680 | Right?

00:17:24.700 | What's an asset?

00:17:25.700 | What's asset hyperinflation?

00:17:27.340 | You mentioned bond market swap rate

00:17:29.760 | and asset is where the majority

00:17:32.300 | of the hyperinflation happen.

00:17:33.780 | What's inflation?

00:17:35.780 | What's hyperinflation?

00:17:36.820 | What's an asset?

00:17:38.020 | What's an asset market?

00:17:39.340 | I'm gonna ask so many dumb questions.

00:17:40.860 | In the conventional economic world,

00:17:43.500 | you would treat inflation as the rate of increase in price

00:17:48.500 | of a market basket of consumer products

00:17:51.380 | defined by a government agency.

00:17:54.360 | So they have like traditional things

00:17:58.460 | that a regular consumer would be buying.

00:18:01.180 | The government selects like a toilet paper, food,

00:18:05.740 | toaster, refrigerator, electronics, all that kind of stuff.

00:18:09.940 | And it's like a representative basket of goods

00:18:14.580 | that lead to a content existence on this earth

00:18:18.240 | for a regular consumer.

00:18:19.820 | - They define a synthetic metric, right?

00:18:22.740 | I mean, I'm gonna say you should have

00:18:24.360 | a thousand square foot apartment

00:18:26.780 | and you should have a used car

00:18:29.820 | and you should eat three hamburgers a week.

00:18:33.180 | Now, 10 years go by and the apartment costs more.

00:18:37.460 | I could adjust the market basket by,

00:18:40.740 | they call them hedonic adjustments.

00:18:42.220 | I could decide that it used to be in 1970,

00:18:45.100 | you needed a thousand square feet,

00:18:46.480 | but in the year 2020, you only need 700 square feet

00:18:50.480 | because we've miniaturized televisions

00:18:53.720 | and we've got more efficient electric appliances

00:18:56.780 | because things have collapsed under the iPhone.

00:18:58.620 | You just don't need as much space.

00:19:00.300 | So now, it may be that the apartment costs 50% more,

00:19:04.780 | but after the hedonic adjustment, there is no inflation

00:19:07.460 | because I just downgraded the expectation

00:19:10.260 | of what a normal person should have.

00:19:11.820 | - So the synthetic nature of the metric

00:19:13.460 | allows for manipulation by people in power.

00:19:17.520 | - Pretty much.

00:19:18.360 | I guess my criticism of economists

00:19:21.880 | is rather than embracing inflation

00:19:25.940 | based upon its fundamental idea,

00:19:28.260 | which is the rate at which the price of things go up,

00:19:31.540 | right, they've been captured

00:19:35.420 | by mainstream conventional thinking

00:19:39.240 | to immediately equate inflation to the government issued CPI

00:19:44.240 | or government issued PCE or government issued PPI measure,

00:19:48.300 | which was never the rate at which things go up.

00:19:51.460 | It's simply the rate at which a synthetic basket

00:19:55.020 | of products and services the government wishes to track

00:19:59.100 | go up.

00:20:00.220 | Now, the problem with that is two big things.

00:20:04.460 | One thing is the government gets to create

00:20:07.340 | the market basket and so they keep changing

00:20:09.920 | what's in the basket over time.

00:20:13.360 | So, I mean, if I said three years ago,

00:20:16.860 | you should go see 10 concerts a year

00:20:18.700 | and the concert tickets now cost $200 each,

00:20:21.620 | now it's $2,000 a year to go see concerts.

00:20:24.680 | Now I'm in charge of calculating inflation.

00:20:27.060 | So I redefine your entertainment quota for the year

00:20:30.860 | to be eight Netflix streaming concerts

00:20:33.540 | and now they don't cost $2,000, they cost nothing

00:20:36.660 | and there is no inflation,

00:20:37.780 | but you don't get your concerts, right?

00:20:39.600 | So the problem starts with continually changing

00:20:44.340 | the definition of the market basket.

00:20:47.460 | But in my opinion, that's not the biggest problem.

00:20:52.180 | The more egregious problem is the fundamental idea

00:20:57.180 | that assets aren't products or services.

00:21:00.360 | Assets can't be inflated.

00:21:02.600 | What's an asset?

00:21:03.800 | A house, a share of Apple stock, a bond,

00:21:08.800 | a Bitcoin is an asset, or a Picasso painting.

00:21:15.520 | Not a consumable good.

00:21:19.600 | - Not an Apple that you can eat.

00:21:23.180 | - Right, if I throw away an asset,

00:21:25.420 | then I'm not on the hook to track the inflation rate for it.

00:21:30.240 | So what happens if I change the policy such that,

00:21:34.380 | let's take the classic example,

00:21:35.700 | a million dollar bond at a 5% interest rate

00:21:38.260 | gives you $50,000 a year in risk-free income.

00:21:41.880 | You might retire on $50,000 a year

00:21:44.260 | in a low cost jurisdiction.

00:21:46.840 | So the cost of social security or early retirement

00:21:49.840 | is $1 million when the interest rate is 5%.

00:21:54.000 | During the crisis of March of 2020,

00:21:56.740 | the interest rate on a 10-year bond went to 50 basis points.

00:21:59.920 | So now the cost of that bond is $10 million.

00:22:04.000 | The cost of social security went from $1 million

00:22:08.320 | to $10 million.

00:22:09.720 | So if you wanted to work your entire life,

00:22:12.440 | save money and then retire risk-free

00:22:15.020 | and live happily ever after on a $50,000 salary,

00:22:18.160 | live in on a beach in Mexico, wherever you want it to go,

00:22:22.000 | you had hyperinflation.

00:22:23.360 | The cost of your aspiration increased by a factor of 10

00:22:28.240 | over the course of some amount of time.

00:22:30.660 | In fact, in that case,

00:22:32.400 | that was like over the course of about 12 years, right?

00:22:35.380 | As the inflation rate ground down, the asset traded up,

00:22:39.520 | but the conventional view is,

00:22:43.200 | oh, that's not a problem because it's good that assets,

00:22:46.820 | it's good that the bond is highly priced

00:22:49.180 | because we own the bond.

00:22:51.080 | Or what's the problem with the inflation rate

00:22:54.500 | in housing being 19%?

00:22:56.860 | It's an awful problem for a 22-year-old

00:22:59.860 | that's starting their first job,

00:23:01.460 | that's saving money to buy a house,

00:23:03.620 | but it would be characterized as a benefit to society

00:23:07.660 | by a conventional economist who would say,

00:23:09.660 | well, housing asset values are higher

00:23:12.900 | because of interest rate fluctuation,

00:23:14.820 | and now the economy's got more wealth.

00:23:17.220 | And so that's viewed as a benefit.

00:23:20.940 | - So what's being missed here,

00:23:24.140 | like the suffering of the average person

00:23:27.260 | or the struggle, the suffering,

00:23:31.220 | the pain of the average person,

00:23:33.360 | like metrics that captured that within the economic system.

00:23:36.800 | Is that, when you talk about-

00:23:38.020 | - One way to say it is a conventional view of inflation

00:23:42.480 | as CPI understates the human misery

00:23:46.140 | that's inflicted upon the working class

00:23:49.580 | and on mainstream companies by the political class.

00:23:54.580 | And so it's a massive shift of wealth

00:24:00.260 | from the working class to the property class.

00:24:03.100 | It's a massive shift of power from the free market

00:24:07.140 | to the centrally governed or the controlled market.

00:24:11.280 | It's a massive shift of power

00:24:12.900 | from the people to the government.

00:24:14.900 | And maybe one more illustrative point here, Alexis,

00:24:19.900 | is what do you think the inflation rate's been

00:24:23.500 | for the past 100 years?

00:24:24.700 | - Oh, are we talking about the scalar again?

00:24:27.740 | - If you took a survey of everybody on the street

00:24:30.660 | and you asked them, what do they think inflation was?

00:24:33.300 | What is it?

00:24:34.540 | You remember when Jerome Powell said,

00:24:36.660 | our target's 2%, but we're not there.

00:24:40.420 | If you go around the corner,

00:24:42.440 | I have posted the deed to this house sold in 1930.

00:24:46.820 | Okay, and the number on that deed is $100,000, 1930.

00:24:53.420 | And if you go on Zillow and you get the Z estimate-

00:24:58.780 | - Is it higher than that?

00:25:00.260 | - $30,500,000.

00:25:02.780 | So that's 92 years, 1930 or 2022.

00:25:09.440 | And in 92 years, we've had 305X increase

00:25:14.440 | in price of the house.

00:25:17.160 | Now, if you actually back calculate,

00:25:19.760 | you come to a conclusion that the inflation rate

00:25:22.420 | was approximately 6.5% a year, every year for 92 years.

00:25:27.420 | Okay, and there's nobody, nobody in government,

00:25:33.360 | no conventional economists that would ever admit

00:25:36.040 | to an inflation rate of 7% a year

00:25:38.600 | in the US dollar over the last century.

00:25:41.560 | Now, if you dig deeper, I mean,

00:25:45.360 | one guy that's done a great job working on this

00:25:48.880 | is Saifuddin Amos, who wrote the book, "The Bitcoin Standard."

00:25:52.440 | And he notes that on average,

00:25:54.440 | it looks like the inflation rate and the money supply

00:25:57.800 | is about 7% a year, all the way up to the year 2020.

00:26:03.120 | If you look at the S&P index,

00:26:04.900 | which is a market basket of scarce desirable stocks,

00:26:08.180 | it returned about 10%.

00:26:12.160 | If you talk to 10% a year for a hundred years,

00:26:14.520 | the money supply is expanding at 7% a hundred years.

00:26:19.320 | If you actually talk to economists

00:26:21.520 | or you look at the economy and you ask the question,

00:26:24.480 | how fast does the economy grow

00:26:27.280 | in its entirety year over year?

00:26:29.920 | Generally about two to 3%.

00:26:31.640 | Like the sum total impact of all this technology

00:26:34.800 | and human ingenuity might get you a 2.5, 3% improvement

00:26:39.160 | a year.

00:26:39.980 | - As measured by GDP.

00:26:41.240 | Is that, are you okay with that?

00:26:43.800 | - I'm not sure I'd go that far yet,

00:26:45.760 | but I would just say that if you had the human race

00:26:49.760 | doing stuff, and if you ask the question,

00:26:53.560 | how much more efficiently will we do the stuff next year

00:26:56.880 | than this year, or what's the value of all of our

00:27:00.480 | innovations and inventions and investments

00:27:03.320 | in the past 12 months?

00:27:05.120 | You'd be hard pressed to say we get 2% better.

00:27:08.080 | Typical investor thinks they're 10% better every year.

00:27:13.600 | So if you look at what's going on,

00:27:16.160 | really when you're holding a million dollars of stocks

00:27:19.240 | and you're getting a 10% gain a year,

00:27:21.200 | you're really got a 7% expansion of the money supply.

00:27:25.440 | You're getting a two or 3% gain under best circumstances.

00:27:30.040 | And another way to say that is,

00:27:33.280 | if the money supply stopped expanding at 7% a year,

00:27:36.220 | the S&P yield might be 3% and not 10%.

00:27:39.560 | It probably should be.

00:27:40.880 | Now that gets you to start to ask a bunch of other

00:27:46.080 | fundamental questions.

00:27:47.160 | Like if I borrow a billion dollars and pay 3% interest

00:27:51.400 | and the money supply expands at 7 to 10% a year,

00:27:54.960 | and I ended up making a 10% return on a billion dollars

00:28:00.440 | investment paying 3% interest, is that fair?

00:28:03.920 | And who suffered so that I could do that?

00:28:07.360 | Because in an environment where you're just inflating

00:28:11.400 | the money supply and you're holding the assets constant,

00:28:15.240 | it stands to reason that the price of all the assets

00:28:18.520 | is going to appreciate somewhat proportional

00:28:21.620 | to the money supply.

00:28:23.400 | And the difference in asset appreciations

00:28:25.720 | is gonna be a function of the scarce desirable quality

00:28:28.720 | of the assets and to what extent can I make more of them

00:28:32.400 | and to what extent are they truly limited in supply?

00:28:37.400 | - Yeah, so we'll get to a lot of the words you said there.

00:28:41.560 | The scarcity and so connected to how limited they are

00:28:46.560 | and the value of those assets.

00:28:49.700 | But you also said, so the expansion of the money supply,

00:28:52.920 | which is put another way is printing money.

00:28:56.800 | And so is that always bad,

00:28:58.680 | the expansion of the money supply?

00:29:00.600 | Is this, just to put some terms on the table

00:29:03.360 | so we understand them.

00:29:04.520 | You nonchalantly say it's always on average

00:29:09.760 | expanding every year, the money supply's expanding

00:29:12.080 | every year by 7%.

00:29:13.800 | That's a bad thing?

00:29:14.760 | That's universally a bad thing?

00:29:17.240 | - It's awful.

00:29:18.080 | I guess to be precise, it's the currency.

00:29:25.840 | I would say money is monetary energy or economic energy.

00:29:30.360 | And the economic energy has to find its way into a medium.

00:29:34.120 | So if you wanna move it rapidly as a medium of exchange,

00:29:37.320 | has to find its way into currency.

00:29:39.420 | But the money can also flow into property,

00:29:41.960 | like a house or gold.

00:29:44.320 | If the money flows into property,

00:29:46.880 | it'll probably hold its value much better.

00:29:50.040 | If the money flows into currency,

00:29:52.300 | if you had put $100,000 in this house,

00:29:56.120 | you would have 305X return over 92 years.

00:29:59.760 | But if you had put the money,

00:30:00.980 | $100,000 in a safe deposit box and buried it in the basement,

00:30:05.260 | you would have lost 99.7% of your wealth

00:30:09.760 | over the same time period.

00:30:11.960 | So the expansion of the currency

00:30:16.000 | creates a massive inefficiency in the society,

00:30:20.140 | what I'll call an adiabatic lapse.

00:30:22.420 | What we're doing is we're bleeding

00:30:25.620 | the civilization to death.

00:30:28.720 | - What's the adiabatic, what's that word?

00:30:31.180 | - Adiabatic lapse.

00:30:33.180 | - Adiabatic.

00:30:34.240 | - Right, in aerospace engineering,

00:30:36.260 | you wanna solve any problem, they start with the phrase,

00:30:39.580 | assume an adiabatic system.

00:30:41.720 | And what that means is a closed system.

00:30:44.620 | So I've got a container, and in that container,

00:30:48.220 | no air leaves and no air enters,

00:30:50.460 | no energy exits or enters, so it's a closed system.

00:30:54.540 | - So you got the closed system lapse.

00:30:57.100 | - Okay, what's a closed, okay, I'm gonna use a--

00:31:00.660 | - There's a leak in the ship.

00:31:02.020 | - I'm gonna use a physical metaphor for you,

00:31:04.540 | 'cause you're a jujitsu, right?

00:31:06.020 | Like you got 10 pints of blood in your body,

00:31:09.280 | and so before your next workout,

00:31:12.120 | I'm gonna take one pint from you.

00:31:14.020 | Now you're gonna go exercise, but you're one pint,

00:31:17.260 | you've lost 10% of your blood, okay?

00:31:21.420 | You're not gonna perform as well,

00:31:22.860 | it takes about one month for your body

00:31:25.380 | to replace the red blood platelets.

00:31:27.700 | So what if I tell you every month you gotta show up

00:31:29.980 | and I'm gonna bleed you?

00:31:31.340 | - Yeah.

00:31:32.180 | - Okay, so if I'm draining the energy,

00:31:35.660 | I'm draining the blood from your body, you can't perform.

00:31:39.420 | If you, adiabatic lapse is when you go up in altitude,

00:31:42.740 | every thousand feet, you lose three degrees.

00:31:45.780 | You go 50,000 feet, you're 150 degrees colder than sea level,

00:31:50.180 | that's why you look at your instruments

00:31:53.540 | and instead of 80 degrees, you're minus 70 degrees.

00:31:56.740 | Why is the temperature falling?

00:31:58.860 | Temperature's falling because it's not a closed system,

00:32:01.780 | it's an open system.

00:32:02.980 | As the air expands, the density falls, right?

00:32:06.860 | The energy per cubic whatever, you know, falls,

00:32:14.900 | and therefore the temperature falls, right?

00:32:16.860 | The heat's falling out of the solution.

00:32:18.940 | So when you're inflating, let's say you're inflating

00:32:22.860 | the currency supply by 6%, you're sucking 6% of the energy

00:32:27.860 | out of the fluid that the economy is using to function.

00:32:34.620 | - So the currency, this kind of ocean of currency,

00:32:37.540 | that's a nice way for the economy to function.

00:32:39.900 | It's the most kind of, it's being inefficient

00:32:42.540 | when you expand the money supply,

00:32:44.500 | but it's the liquid, I'm trying to find the right

00:32:49.340 | kind of adjective here.

00:32:50.820 | It's how you do transactions at a scale of billions.

00:32:54.980 | - Currency is the asset we use to move monetary energy

00:32:59.380 | around and you could use the dollar

00:33:01.020 | or you could use the peso or you could use the Bolivar.

00:33:04.580 | - Selling houses and buying houses is much more inefficient.

00:33:08.100 | Or like you can't transact between billions of people

00:33:13.540 | with houses.

00:33:14.700 | - Yeah, properties don't make such good mediums of exchange.

00:33:18.740 | They make better stores of value

00:33:20.820 | and they have utility value if it's a ship or a house

00:33:25.100 | or a plane or a bushel of corn, right?

00:33:29.460 | - Can I zoom out just for, can we zoom out?

00:33:31.580 | Keep zooming out until we reach the origin

00:33:33.900 | of human civilization, but on the way,

00:33:36.260 | ask, you gave economists a D minus.

00:33:39.820 | I'm not even gonna ask you what you give to governments.

00:33:43.620 | Do you think their failure, economists and government failure

00:33:48.620 | is malevolence or incompetence?

00:33:51.900 | - I think policy makers are well-intentioned,

00:33:56.340 | but generally all government policy is inflationary

00:34:00.580 | and all government, it's inflammatory and inflationary.

00:34:03.660 | So what I mean by that is, you know,

00:34:06.100 | when you have a policy pursuing supply chain independence

00:34:11.100 | if you have an energy policy, if you have a labor policy,

00:34:15.780 | if you have a trade policy, if you have a, you know,

00:34:19.140 | any kind of foreign policy, a domestic policy,

00:34:22.900 | a manufacturing policy, every one of these,

00:34:25.940 | a medical policy, every one of these policies

00:34:29.860 | interferes with the free market

00:34:32.180 | and generally prevents some rational actor

00:34:36.860 | from doing it in a cheaper, more efficient way.

00:34:40.100 | So when you layer them on top of each other,

00:34:43.100 | they all have to be paid for.

00:34:44.900 | If you wanna shut down the entire economy for a year,

00:34:47.820 | you have to pay for it, right?

00:34:49.260 | If you wanna fight a war, you have to pay for it, right?

00:34:52.940 | If you don't wanna use oil or natural gas,

00:34:55.540 | you have to pay for it.

00:34:57.020 | If you don't wanna manufacture semiconductors in China

00:35:00.660 | and you wanna manufacture them in the US,

00:35:02.500 | you gotta pay for it.

00:35:03.540 | If I rebuild the entire supply chain in Pennsylvania

00:35:06.860 | and I hire a bunch of employees

00:35:08.820 | and then I unionize the employees,

00:35:11.460 | then not only am I, I idle the factory in the Far East,

00:35:16.460 | it goes to 50% capacity.

00:35:18.500 | So whatever it sells, it has to raise the price on.

00:35:22.300 | And then I drive up the cost of labor

00:35:24.500 | for every other manufacturer in the US

00:35:26.700 | because I'm competing against them, right?

00:35:29.980 | I'm changing their conditions.

00:35:31.220 | So everything gets less efficient,

00:35:33.580 | everything gets more expensive.

00:35:35.540 | And of course the government couldn't really pay

00:35:37.580 | for its policies and its wars with taxes.

00:35:42.540 | We didn't pay for World War I with tax,

00:35:44.380 | we didn't pay for World War II with tax,

00:35:46.140 | we didn't pay for Vietnam with tax.

00:35:47.940 | In fact, when you trace this,

00:35:50.060 | what you realize is the government never pays

00:35:52.740 | for all of its policies with tax.

00:35:54.220 | - 'Cause it's too painful to ask,

00:35:56.420 | to raise the taxes to truly transparently pay

00:35:59.980 | for the things you're doing with taxes,

00:36:02.660 | with taxpayer money 'cause they feel the pain.

00:36:05.180 | - That's one interpretation

00:36:06.660 | or it's just too transparent.

00:36:08.100 | If people understood the true cost--

00:36:12.580 | - Of war, they wouldn't wanna go to war.

00:36:15.220 | - If you were told that you would lose 95% of your assets

00:36:20.220 | and 90% of everything you will be ever

00:36:23.940 | will be taken from you,

00:36:25.780 | you might reprioritize your thought about a given policy

00:36:30.180 | and you might not vote for that politician.

00:36:32.020 | - But you're still saying incompetence, not malevolence.

00:36:35.700 | So fundamentally, government creates a bureaucracy

00:36:38.820 | of incompetence is kind of how you look at it.

00:36:42.100 | - I think a lack of humility,

00:36:44.180 | right, like if people had more humility

00:36:49.180 | than they would realize--

00:36:51.820 | - Humility about how little they know,

00:36:53.860 | how little they understand

00:36:55.380 | about the function of complex systems.

00:36:56.940 | - There's a phrase from Quinney's "Towards Movie"

00:36:58.660 | on "Forgiven" where he says,

00:36:59.860 | "A man's gotta know his limitations."

00:37:01.900 | (laughing)

00:37:04.060 | I think that a lot of people overestimate

00:37:06.860 | what they can accomplish and experience,

00:37:12.060 | experience in life causes you to re-evaluate that.

00:37:17.060 | So I mean, I've done a lot of things in my life

00:37:20.060 | and generally my mistakes were always my good ideas

00:37:25.060 | that I enthusiastically pursued.

00:37:27.020 | To the detriment of my great ideas

00:37:31.140 | that required 150% of my attention to prosper.

00:37:36.140 | So I think people pursue too many good ideas.

00:37:39.540 | You know, they all sound good,

00:37:41.700 | but there's just a limit to what you can accomplish.

00:37:45.620 | And everybody underestimates the challenges

00:37:49.660 | of implementing an idea, right?

00:37:53.460 | And they always overestimate the benefits

00:37:57.540 | of the pursuit of that.

00:37:58.500 | And so I think it's an overconfidence

00:38:01.100 | that causes an overexuberance in pursuit of policies.

00:38:05.180 | And as the ambition of the government expands,

00:38:09.100 | so must the currency supply.

00:38:11.900 | You know, I could say the money supply,

00:38:14.300 | but let's say the currency supply.

00:38:16.020 | You can triple the number of pesos in the economy,

00:38:21.340 | but it doesn't triple the amount of manufacturing capacity

00:38:25.060 | in the said economy.

00:38:27.020 | And it doesn't triple the amount of assets in the economy,

00:38:29.820 | it just triples the pesos.

00:38:31.140 | So as you increase the currency supply,

00:38:35.620 | then the price of all those scarce desirable things

00:38:39.540 | will tend to go up rapidly.

00:38:42.460 | And the confidence of all of the institutions,

00:38:47.180 | the corporations and the individual actors

00:38:50.220 | and trading partners will collapse.

00:38:53.500 | If we take a tangent on a tangent

00:38:55.300 | and we will return soon

00:38:57.420 | to the big human civilization question.

00:39:00.540 | So if government naturally wants to buy stuff

00:39:07.700 | it can't afford, what's the best form of government?

00:39:12.620 | Anarchism, libertarianism.

00:39:17.140 | So not even, there's not even armies,

00:39:20.100 | there's no borders, that's anarchism.

00:39:22.660 | - Not least.

00:39:23.980 | - The smallest possible.

00:39:25.700 | The smallest possible.

00:39:27.580 | - The best government would be the least

00:39:29.380 | and the debate will be over that.

00:39:32.100 | - When you think about this stuff,

00:39:33.740 | do you think about, okay, government is the way it is,

00:39:36.140 | I as a person that can generate great ideas,

00:39:39.700 | how do I operate in this world?

00:39:41.420 | Or do you also think about the big picture?

00:39:43.340 | If we start a new civilization somewhere on Mars,

00:39:47.460 | do you think about what's the ultimate form of government?

00:39:50.980 | What's at least a promising thing to try?

00:39:54.420 | (Lex sighs)

00:39:56.740 | - You know, I have laser eyes on my profile on Twitter, Lex.

00:40:04.140 | - What does that mean?

00:40:07.660 | - And the significance of laser eyes is to focus

00:40:11.620 | on the thing that can make a difference.

00:40:14.300 | And if I look at the civilization,

00:40:19.220 | I would say half the problems in the civilization

00:40:24.220 | are due to the fact that our understanding of economics

00:40:28.660 | and money is defective, half, 50%.

00:40:32.260 | I don't know, it's worth $500 trillion worth of problems.

00:40:35.460 | Like money represents all the economic energy

00:40:40.460 | in the civilization and it kind of equates

00:40:44.060 | to all the products, all the services

00:40:46.380 | and all the assets that we have and we're ever gonna have.

00:40:49.580 | So that's half.

00:40:50.860 | The other half of the problems in the civilization

00:40:54.180 | are medical and military and political

00:40:59.180 | and philosophical and natural.

00:41:04.820 | And I think that there are a lot of different solutions

00:41:09.740 | to all those problems.

00:41:11.060 | And they are all honorable professions

00:41:16.060 | and they all merit a lifetime of consideration

00:41:19.860 | for the specialist in all those areas.

00:41:22.200 | I think that what I could offer it's constructive is

00:41:27.780 | inflation is completely misunderstood.

00:41:32.940 | It's a much bigger problem than we understand it to be.

00:41:37.060 | We need to introduce engineering and science techniques

00:41:40.060 | into economics if we wanna further the human condition.

00:41:44.540 | All government policy is inflationary.

00:41:47.240 | And another pernicious myth is inflation is always

00:41:53.260 | and everywhere a monetary phenomena.

00:41:55.860 | A famous quote by Milton Friedman, I believe,

00:41:58.420 | it's like, "It's a monetary phenomena,

00:42:00.460 | "that is inflation comes from expanding the currency supply."

00:42:03.940 | It's a nice phrase and it's oftentimes quoted

00:42:06.860 | by people that are anti-inflation.

00:42:09.160 | But again, it just signifies a lack of appreciation

00:42:13.220 | of what the issue is.

00:42:14.900 | Inflation is, if I had a currency

00:42:18.260 | which was completely non-inflationary,

00:42:21.140 | if I never printed another dollar,

00:42:23.900 | and if I eliminated fractional reserve banking

00:42:26.340 | from the face of the earth, we'd still have inflation.

00:42:29.980 | And we'd have inflation as long as we have government

00:42:33.660 | that is capable of pursuing any kind of policies

00:42:38.660 | that are in themselves inflationary

00:42:41.820 | and generally they all are.

00:42:43.380 | - So in general, inflationary is the big characteristic

00:42:48.380 | of human nature that governments,

00:42:50.940 | collection of groups that have power over others

00:42:53.300 | and allocate other people's resources,

00:42:55.440 | will try to intentionally or not hide the costs

00:43:00.860 | of those allocations, like in some tricky ways,

00:43:04.940 | whatever the options that are available.

00:43:08.220 | - Hiding the cost is like the tertiary thing.

00:43:12.340 | The primary goal is the government will attempt to do good.

00:43:16.600 | Right?

00:43:18.540 | - That's the primary problem?

00:43:21.420 | - They will attempt to do good

00:43:22.660 | and they will do good imperfectly

00:43:26.000 | and they will create oftentimes as much damage,

00:43:31.000 | more damage than the good they do.

00:43:32.740 | Most government policy will be iatrogenic.

00:43:35.420 | It will create more harm than good in the pursuit of it.

00:43:37.940 | But it is what it is.

00:43:39.980 | The secondary issue is they will unintentionally pay for it

00:43:44.980 | by expanding the currency supply without realizing

00:43:51.020 | that they're actually paying for it in a suboptimal fashion.

00:43:56.020 | They'll collapse their own currencies

00:44:01.000 | while they attempt to do good.

00:44:02.720 | The tertiary issue is they will mismeasure

00:44:06.800 | how badly they're collapsing the currency.

00:44:09.740 | So for example, if you go to the Bureau of Labor Statistics

00:44:13.780 | and look at the numbers printed by the Fed,

00:44:16.040 | they'll say, "Oh, it looks like the dollar has lost 95%

00:44:19.220 | "of its purchasing power over a hundred years."

00:44:21.580 | Okay, they sort of fess up that there's a problem

00:44:24.900 | but they make it 95% loss over a hundred years.

00:44:27.940 | What they don't do is realize it's a 99.7% loss

00:44:32.660 | over 80 years.

00:44:34.100 | So they will mismeasure just the horrific extent

00:44:38.480 | of the monetary policy in pursuit of the foreign policy

00:44:43.480 | and the domestic policy, which they overestimate

00:44:49.240 | their budget and their means to accomplish their ends.

00:44:53.940 | And they underestimate the cost.

00:44:57.420 | And they're oblivious to the horrific damage

00:45:02.120 | that they do to the civilization

00:45:03.920 | because the mental models that they use

00:45:07.040 | that are conventionally taught are wrong, right?

00:45:10.680 | The mental model that like,

00:45:12.920 | "It's okay, we can print all this money

00:45:14.580 | "because the velocity of the money is low, right?

00:45:18.820 | "Because money velocity is a scalar

00:45:21.440 | "and inflation is a scalar

00:45:23.120 | "and we don't see 2% inflation yet

00:45:25.280 | "and the money velocity is low.

00:45:26.520 | "And so it's okay if we print trillions of dollars."

00:45:29.920 | Well, the money velocity was immediate, right?

00:45:34.480 | The velocity of money through the crypto economy

00:45:37.280 | is 10,000 times faster than the velocity of money

00:45:42.520 | through the consumer economy, right?

00:45:45.640 | It's like, I think Nick pointed out when you spoke to him,

00:45:48.160 | he said, "It takes two months

00:45:49.640 | "for a credit card transaction to settle, right?

00:45:52.600 | "So you wanna spend a million dollars

00:45:54.400 | "in the consumer economy,

00:45:56.100 | "you can move it six times a year.

00:45:59.080 | "You put a million dollars into gold,

00:46:01.400 | "gold will sit in a vault for a decade, okay?

00:46:04.060 | "So the velocity of money through gold is 0.1.

00:46:07.200 | "You put the money in the stock market

00:46:09.800 | "and you can trade it once a week,

00:46:11.340 | "the settlement is T plus two,

00:46:12.920 | "maybe you get to two to one leverage.

00:46:15.000 | "You might get to a money velocity of 100 a year

00:46:18.440 | "in the stock market.

00:46:20.180 | "You put your money into the crypto economy

00:46:22.520 | "and these people are settling every four hours.

00:46:25.660 | "And if you're offshore,

00:46:27.920 | "they're trading with 20X leverage.

00:46:30.240 | "So if you settle every day

00:46:32.720 | "and you trade the 20X leverage,

00:46:34.540 | "you just went to 7,000."

00:46:36.320 | Yeah.

00:46:38.240 | So the velocity of the money varies.

00:46:42.660 | I think the politicians,

00:46:44.300 | they don't really understand inflation

00:46:46.340 | and they don't understand economics,

00:46:48.280 | but you can't blame them

00:46:50.360 | because the economists don't understand economics.

00:46:52.840 | Because if they did,

00:46:55.440 | they would be creating multivariate computer simulations

00:47:00.160 | where they actually put in the price

00:47:03.440 | of every piece of housing in every city in the world,

00:47:06.500 | the full array of foods and the full array of products

00:47:09.740 | and the full array of assets.

00:47:12.220 | And then on a monthly basis,

00:47:14.840 | they would publish all those results.

00:47:17.440 | And that's a high bandwidth requirement.

00:47:21.940 | And I think that people don't really wanna embrace it.

00:47:25.180 | And also there's the most pernicious thing,

00:47:28.040 | like there's that phrase,

00:47:30.280 | you can't tell people what to think,

00:47:33.420 | but you can tell them what to think about.

00:47:35.160 | The most pernicious thing is,

00:47:38.400 | I get you to misunderstand the phenomena

00:47:42.760 | so that even when it's happening to you,

00:47:46.680 | you don't appreciate that it's a bad thing

00:47:48.920 | and you think it's a good thing.

00:47:50.520 | So if housing prices are going up 20% year over year,

00:47:53.840 | and I say this is great for the American public

00:47:56.060 | 'cause most of them are homeowners,

00:47:58.580 | then I have misrepresented a phenomena.

00:48:02.020 | Inflation is 20%, not 7%.

00:48:05.820 | And then I have misrepresented it

00:48:08.100 | as being a positive rather than a negative.

00:48:11.360 | And people will stare at it

00:48:13.340 | and you could even show them their house on fire

00:48:17.580 | and they would perceive it as being great

00:48:19.500 | because it's warming them up

00:48:21.020 | and they're gonna save on their heat cost.

00:48:23.020 | - It does seem that the cruder the model,

00:48:25.760 | whether it's economics, whether it's psychology,

00:48:28.220 | the easier it is to weave

00:48:31.160 | whatever the heck narrative you want,

00:48:33.540 | and not in a malicious way,

00:48:36.180 | but just like it's some kind of emergent phenomena,

00:48:41.180 | this narrative thing that we tell ourselves.

00:48:43.820 | So you can tell any kind of story about inflation.

00:48:46.360 | Inflation is good, inflation is bad.

00:48:47.920 | Like the cruder the model,

00:48:49.500 | the easier it is to tell a narrative about it.

00:48:51.820 | And that's what the,

00:48:52.900 | so like if you take an engineering approach,

00:48:55.280 | I feel like it becomes more and more difficult

00:48:59.660 | to run away from sort of a true deep understanding

00:49:03.620 | of the dynamics of the system.

00:49:05.320 | - I mean, honestly, if you went to 100 people on the street

00:49:09.460 | and you asked them to define inflation,

00:49:11.500 | how many would say it's a vector tracking

00:49:15.540 | the change in price of every product,

00:49:18.780 | service, asset in the world over time?

00:49:22.160 | - No. - Not many.

00:49:23.240 | - Not many.

00:49:24.200 | - If you went to them and you said,

00:49:26.700 | do you think 2% inflation a year is good or bad?

00:49:31.840 | The majority would probably say, well, here it's good.

00:49:34.600 | The majority of economists would say,

00:49:36.840 | 2% inflation a year is good.

00:49:39.040 | And of course, there's, look at the ship next to us.

00:49:43.280 | What if I told you that the ship leaked 2%, right,

00:49:49.800 | of its volume every something, right?

00:49:52.360 | The ship is rotting 2% a year.

00:49:54.440 | That means the useful life of the ship is 50 years.

00:49:57.120 | Now, ironically, that's true.

00:49:58.600 | Like a wooden ship had a 50 year to 100 year life,

00:50:02.520 | 100 would be long, 50 years, not unlikely.

00:50:05.120 | So when we built ships out of wood,

00:50:07.400 | they had a useful life of about 50 years

00:50:10.740 | and then they sunk, they rotted.

00:50:13.320 | There's nothing good about it, right?

00:50:15.120 | You build a ship out of steel, you know,

00:50:17.840 | and it's zero as opposed to 2% degradation.

00:50:21.800 | And how much better is 0% versus 2%?

00:50:25.480 | Well, 2% means you have a useful life of, you know,

00:50:30.320 | it's half life at 35 years.

00:50:32.760 | 2% is a half life of 35 years.

00:50:35.120 | That's basically the half life of money and gold.

00:50:37.760 | If I store your life force in gold,

00:50:40.420 | under perfect circumstances,

00:50:42.240 | you have a useful life of 35 years.

00:50:44.960 | 0% is a useful life of forever.

00:50:48.200 | So 0% is immortal.

00:50:51.000 | 2% is 35 years average life expectancy.

00:50:55.880 | So the idea that you would think the life expectancy

00:50:59.320 | of the currency and the civilization

00:51:01.480 | should be 35 years instead of forever

00:51:03.600 | is kind of a silly notion.

00:51:05.660 | But the tragic notion is it was, you know,

00:51:09.640 | seven into 70 or 10 years.

00:51:12.920 | The money has had a half life of 10 years,

00:51:15.000 | except for the fact that in weak societies

00:51:18.360 | in Argentina or the like,

00:51:21.160 | the half life of the money is three to four years,

00:51:24.640 | in Venezuela, one year.

00:51:26.680 | So the United States dollar

00:51:30.480 | and the United States economic system

00:51:32.520 | was the most successful economic system

00:51:35.040 | in the last hundred years in the world.

00:51:37.160 | We won every war.

00:51:38.640 | We were the world's superpower.

00:51:40.480 | Our currency lost 99.7% of its value.

00:51:43.840 | And that means horrifically,

00:51:46.160 | every other currency lost everything, right?

00:51:49.880 | In essence, the other ones were 99.9,

00:51:53.120 | except for most that were 100%

00:51:55.560 | because they all completely failed.

00:51:58.080 | And, you know, you've got a mainstream economic community,

00:52:03.080 | you know, that thinks that inflation is a number

00:52:07.420 | and 2% is desirable.

00:52:10.660 | It's kind of like, you know,

00:52:14.420 | remember George Washington, you know how he died?

00:52:16.860 | - No.

00:52:17.680 | - Well-meaning physicians bled him to death.

00:52:21.300 | Okay, the last thing in the world you would wanna do

00:52:26.220 | to a sick person is bleed them, right?

00:52:29.820 | In the modern world.

00:52:30.680 | I think we understand that oxygen

00:52:33.380 | is carried by the blood cells.

00:52:37.820 | And if, you know, there's that phrase, right?

00:52:42.820 | A triage phrase, what's the first thing you do in an injury?

00:52:47.020 | Stop the bleeding.

00:52:48.540 | Single first thing, right?

00:52:49.920 | You show up after any action, I look at you,

00:52:52.420 | stop the bleeding because you're gonna be dead

00:52:55.020 | in a matter of minutes if you bleed out.

00:52:57.860 | So it strikes me as being ironic

00:53:01.080 | that orthodox conventional wisdom

00:53:03.380 | was bleed the patient to death.

00:53:05.340 | And this was the most important patient

00:53:07.740 | in the country, maybe in the history of the country.

00:53:11.180 | And we bled him to death trying to help him.

00:53:14.380 | So when you're actually inflating the money supply at 7%,

00:53:19.140 | but you're calling it 2% because you wanna help the economy,

00:53:23.540 | you're literally bleeding the free market to death.

00:53:28.540 | But the sad fact is George Washington went along with it

00:53:32.060 | 'cause he thought that they were gonna do him good.

00:53:34.600 | And the majority of the society, most companies,

00:53:39.600 | most conventional thinkers, you know, the working class,

00:53:45.120 | they go along with this because they think

00:53:47.780 | that someone has their best interest at mind.

00:53:50.480 | And the people that are bleeding them to death

00:53:52.840 | believe that prescription because their mental models

00:53:57.520 | are just so defective.

00:53:58.680 | And their understanding of energy and engineering

00:54:03.800 | and the economics that are at play

00:54:07.960 | is crippled by these mental models.

00:54:11.560 | - But that's both the bug and the feature

00:54:13.400 | of human civilization, that ideas take hold,

00:54:16.320 | they unite us, we believe in them.

00:54:18.820 | And we make a lot of cool stuff happen

00:54:23.720 | by, as an average sort of, just the fact of the matter,

00:54:28.720 | a lot of people believe the same thing,

00:54:31.720 | they get together and they get some shit done

00:54:34.400 | because they believe that thing.

00:54:36.080 | And then some ideas can be really bad

00:54:38.720 | and really destructive, but on average,

00:54:40.920 | the ideas seem to be progressing in a direction of good.

00:54:45.160 | Let me just step back.

00:54:47.200 | What the hell are we doing here, us humans, on this earth?

00:54:51.480 | How do you think of humans?

00:54:52.840 | How special are humans?

00:54:54.640 | How did human civilization originate on this earth?

00:54:59.240 | And what is this human project that we're all taking on?

00:55:02.140 | You mentioned fire and water,

00:55:05.720 | and apparently bleeding you to death is not a good idea.

00:55:08.600 | I always thought you can get the demons out in that way,

00:55:11.280 | but that was a recent invention.

00:55:14.880 | So what's this thing we're doing here?

00:55:16.980 | - I think what distinguishes human beings

00:55:22.880 | from all the other creatures on the earth

00:55:26.600 | is our ability to engineer.

00:55:30.040 | We're engineers, right?

00:55:31.880 | - To solve problems or just build incredible cool things?

00:55:36.880 | - Engineering, harnessing energy and technique

00:55:42.200 | to make the world a better place than you found it.

00:55:44.760 | From the point that we actually started to play with fire,

00:55:51.520 | that was a big leap forward.

00:55:54.640 | Harnessing the power of kinetic energy and missiles,

00:55:58.360 | another step forward.

00:56:00.560 | Every city built on water.

00:56:04.160 | Why water?

00:56:05.440 | Well, water's bringing energy, right?

00:56:08.360 | If you actually put a turbine on a river

00:56:13.360 | or you capture a change in elevation of water,

00:56:16.920 | you've literally harnessed gravitational energy.

00:56:19.720 | But water's also bringing you food.

00:56:21.880 | It's also giving you a cheap form

00:56:25.960 | of getting rid of your waste.

00:56:27.880 | It's also giving you free transportation.

00:56:30.400 | You wanna move one ton blocks around.

00:56:32.840 | You wanna move them in water.

00:56:34.680 | So I think, I mean, the human story

00:56:38.220 | is really the story of engineering a better world.

00:56:41.640 | And the rise in the human condition

00:56:47.120 | is determined by those groups of people,

00:56:50.520 | those civilizations that were best at harnessing energy.

00:56:54.160 | If you look, the Greek civilization,

00:56:58.360 | they built it around ports and seaports and water

00:57:02.800 | and created a trading network.

00:57:04.680 | The Romans were really good at harnessing

00:57:07.160 | all sorts of engineering.

00:57:09.660 | I mean, the aqueducts are a great example.

00:57:12.060 | If you go to any big city,

00:57:14.940 | you travel through cities in the Med,

00:57:16.440 | you find that the carrying capacity of the city

00:57:19.640 | or the island is 5,000 people without running water.

00:57:22.720 | And then if you can find a way to bring water to it,

00:57:25.320 | increases by a factor of 10.

00:57:27.560 | And so human flourishing is really only possible

00:57:31.480 | through that channeling of energy, right?

00:57:35.240 | That eventually takes the form of air power, right?

00:57:40.240 | I mean, that ship, I mean,

00:57:44.280 | look at the intricacy of those sails.

00:57:46.680 | I mean, it's just the model is intricate.

00:57:49.320 | Now think about all of the experimentation

00:57:51.840 | that took place to figure out how many sails

00:57:53.600 | to put on that ship and how to rig them

00:57:55.640 | and how to repair them and how to operate them.

00:57:59.000 | - It's thousands of lives spent thinking

00:58:03.820 | through all the tiny little details,

00:58:06.760 | all to increase the efficiency of this,

00:58:10.040 | the effectiveness, the efficiency of this ship

00:58:12.760 | as it sails through water.

00:58:14.600 | And we should also note there's a bunch of cannons

00:58:16.560 | on the side, so obviously.

00:58:18.400 | - Another form of engineering, right?

00:58:20.840 | Energy harnessing with explosives.

00:58:23.640 | - To achieve what end?

00:58:24.800 | That's another discussion, exactly.

00:58:26.640 | - Suppose we're trying to get off the planet, right?

00:58:30.320 | - Well, there's a selection mechanism going on,

00:58:32.260 | so natural selection.

00:58:33.800 | However evolution works,

00:58:36.160 | it seems that one of the interesting inventions on Earth

00:58:39.420 | was the predator-prey dynamic,

00:58:42.200 | that you wanna be the bigger fish.

00:58:45.280 | That violence seems to serve a useful purpose

00:58:48.520 | if you look at Earth as a whole.

00:58:50.520 | We as humans now like to think of violence

00:58:54.120 | as really a bad thing.

00:58:56.000 | It seems to be one of the amazing things about humans

00:58:58.880 | is we're ultimately tend towards cooperation.

00:59:02.600 | We like peace.

00:59:03.780 | If you just look at history,

00:59:06.980 | we want things to be nice and calm.

00:59:08.880 | But just wars break out every once in a while

00:59:14.920 | and lead to immense suffering and destruction and so on.

00:59:18.000 | And they have a kinda,

00:59:19.440 | like resetting the palette effect.

00:59:26.000 | It's one that's full of just

00:59:27.880 | immeasurable human suffering,

00:59:31.220 | but it's like a way to start over.

00:59:33.200 | - We're called the apex predator on the planet.

00:59:37.600 | And I Googled something the other day,

00:59:40.500 | what's the most common form of mammal life on Earth?

00:59:45.500 | - By number of organisms?

00:59:48.740 | - Count. - By count.

00:59:49.980 | - And the answer that came back was human beings.

00:59:52.700 | I was shocked, I couldn't believe it.

00:59:54.460 | It says, apparently, if we're just looking at mammals,

00:59:57.540 | the answer was human beings are the most common,

00:59:59.460 | which was very interesting to me.

01:00:01.100 | I almost didn't believe it,

01:00:03.500 | but I was trying to, you know,

01:00:04.860 | eight billion or so human beings.

01:00:07.340 | There's no other mammal that's got more than eight billion.

01:00:10.300 | If you walk through downtown Edinburgh and Scotland

01:00:13.020 | and you look up on this hill and this castle up on the hill,

01:00:16.900 | you know, and you talk to people and the story is,

01:00:20.780 | oh yeah, well, that was a British castle

01:00:23.700 | before it was a Scottish castle,

01:00:25.260 | before it was a Pict castle,

01:00:26.660 | before it was a Roman castle,

01:00:28.380 | before it was, you know, some other Celtic castle,

01:00:31.960 | before it was, you know,

01:00:32.900 | then they found 13 prehistoric castles

01:00:35.700 | buried one under the other under the other.

01:00:38.380 | And you get to conclusion that 100,000 years ago,

01:00:42.500 | somebody showed up and grabbed the high point,

01:00:45.060 | the apex of the city,

01:00:48.140 | and they built a stronghold there and they flourished

01:00:51.500 | and their family flourished and their tribe flourished

01:00:53.580 | until someone came along and knocked them off the hill.

01:00:56.580 | And it's been a nonstop, never ending fight

01:01:00.180 | by the aggressive, most powerful entity,

01:01:04.580 | family, organization, municipality, tribe, whatever.

01:01:08.700 | - All for the hill.

01:01:09.860 | - For that one hill, going back since time immemorial.

01:01:14.860 | And you know, you scratch your head

01:01:18.340 | and you think it seems like it's like

01:01:21.940 | just this never ending wheel.

01:01:24.340 | - But doesn't that lead, if you just,

01:01:26.620 | all kinds of metrics that seems to improve

01:01:29.780 | the quality of our cannons and ships as a result.

01:01:33.180 | Like it seems that war, just like your laser eyes,

01:01:36.900 | focuses the mind on the engineering tasks.

01:01:39.580 | - It is that.

01:01:40.420 | And it does remind you that the winner

01:01:45.220 | is always the most powerful.

01:01:47.980 | And we throw that phrase out,

01:01:51.100 | but no one thinks about what that phrase means.

01:01:53.220 | Like who's the most powerful or the, you know,

01:01:56.820 | or the most powerful side one,

01:01:58.420 | but they don't think about it.

01:01:59.580 | They think about power, energy delivered

01:02:04.020 | in a period of time.

01:02:05.180 | And then you think a guy with a spear is more powerful

01:02:09.460 | than someone with their fist.

01:02:10.900 | And someone with a bow and arrow is more powerful

01:02:13.100 | than the person with the spear.

01:02:14.540 | And then you realize that somebody with bronze

01:02:17.540 | is more powerful than without,

01:02:19.180 | and steel is more powerful than bronze.

01:02:21.700 | And if you look at the Romans, you know,

01:02:24.020 | they persevered, you know, with artillery

01:02:26.380 | and they could stand off from 800 meters

01:02:28.900 | and blast you to smithereens, right?

01:02:31.460 | You know, you study the history of the Balearic slingers,

01:02:35.300 | right?

01:02:36.140 | And, you know, you think we invented bullets,

01:02:37.780 | but they invented bullets to put in slings

01:02:41.060 | thousands of years ago.

01:02:43.020 | They could have stood off 500 meters

01:02:45.040 | and put a hole in your head, right?

01:02:47.240 | And so there was never a time when humanity wasn't vying

01:02:55.900 | to come up with an asymmetric form of projecting

01:02:59.780 | their own power via technology.

01:03:02.620 | - And absolute power is when a leader is able

01:03:05.500 | to control a large amount of humans

01:03:10.340 | that are facing the same direction,

01:03:13.300 | working in the same direction to leverage energy.

01:03:17.380 | - The most organized society wins.

01:03:20.220 | - Yeah.

01:03:21.060 | - When the Romans were dominating everybody,

01:03:24.220 | they were the most organized civilization in Europe.

01:03:27.500 | And as long as they stayed organized, they dominated.

01:03:31.640 | And at some point they over expanded

01:03:33.820 | and got disorganized and they collapsed.

01:03:36.480 | And I guess you could say that, you know,

01:03:39.740 | the struggle of the human condition,

01:03:41.920 | it catalyzes the development of new technologies

01:03:45.300 | one after the other.

01:03:46.180 | It penalizes anybody that rejects ocean power, right?

01:03:52.140 | It gets penalized, you reject artillery, you get penalized,

01:03:55.100 | you reject atomic power, you get penalized.

01:03:58.140 | If you reject digital power, cyber power, you get penalized.

01:04:02.440 | And the underlying control of the property

01:04:07.380 | keeps shifting hands from, you know, one institution

01:04:12.140 | or one government to another based upon how rationally

01:04:15.460 | they're able to channel that energy

01:04:17.760 | and how well organized or coordinated they are.

01:04:20.660 | - Well, that's a really interesting thing,

01:04:21.740 | about both the human mind and governments,

01:04:25.020 | that they, once they get a few good, and companies,

01:04:27.820 | once they get a few good ideas, they seem to stick with them.

01:04:31.260 | They reject new ideas.

01:04:33.300 | It's almost, whether that's emergent

01:04:35.540 | or however that evolved,

01:04:37.700 | it seems to have a really interesting effect.

01:04:41.180 | 'Cause when you're young, you fight for the new ideas.

01:04:45.340 | You push them through, then a few of us humans

01:04:49.460 | find success, then we get complacent,

01:04:52.900 | we take over the world using that new idea,

01:04:55.820 | and then the new young person with the better new idea

01:05:00.620 | challenges you, and you, as opposed to pivoting,

01:05:05.020 | you stick with the old and lose because of it.

01:05:07.900 | And that's how empires collapse.

01:05:09.620 | And it's just both at the individual level that happens,

01:05:12.460 | when two academics fighting about ideas

01:05:14.460 | or something like that, and at the human civilization level,

01:05:18.940 | governments, they hold on to the ideas of old.

01:05:22.900 | It's fascinating.

01:05:24.460 | - Yeah, an ever persistent theme in the history of science

01:05:27.980 | is the paradigm shift.

01:05:29.300 | And the paradigms shift when the old guard dies

01:05:33.460 | and a new generation arrives.

01:05:35.580 | Or the paradigm shifts when there's a war,

01:05:38.460 | and everyone that disagrees with the idea of aviation

01:05:43.340 | finds bombs dropping on their head.

01:05:45.540 | Or everyone that disagrees with whatever your technology is

01:05:48.500 | has a rude awakening, and if they totally disagree,

01:05:51.780 | their society collapses and they're replaced

01:05:54.220 | by that new thing.

01:05:57.300 | - A lot of the engineering you talked about

01:05:59.500 | had to do with ships and cannons and leveraging water.

01:06:04.060 | What about this whole digital thing that's happening,

01:06:07.420 | been happening over the past century?

01:06:10.940 | Is that still engineering in your mind?

01:06:14.460 | You're starting to operate in these bits of information.

01:06:18.180 | - I think there's two big ideas.

01:06:21.620 | The first wave of ideas were digital information,

01:06:25.580 | and that was the internet wave been running

01:06:27.260 | since 1990 or so, for 30 years.

01:06:31.100 | And the second wave is digital energy.

01:06:33.580 | So if I look at digital information,

01:06:36.660 | this idea that we wanna digitally transform a book,

01:06:42.980 | I'm gonna dematerialize every book in this room into bits,

01:06:47.660 | and then I'm going to deliver a copy of the entire library

01:06:51.740 | to a billion people, and I'm gonna do it

01:06:54.540 | for pretty much de minimis electricity.

01:06:58.080 | If I can dematerialize music, books, education,

01:07:03.900 | entertainment, maps, right?

01:07:07.500 | That is an incredibly exothermic,

01:07:13.140 | transaction, it's a crystallization

01:07:16.300 | when we collapse into a lower energy state

01:07:18.340 | as a civilization and we give off massive amounts of energy.

01:07:22.620 | Like if you look at what Carnegie did,

01:07:24.260 | the richest man in the world created libraries everywhere

01:07:27.220 | at the time, and he gave away his entire fortune.

01:07:29.740 | And now we can give a better library

01:07:32.060 | to every six-year-old for nothing.

01:07:34.620 | And so what's the value of giving a million books

01:07:37.900 | to eight billion people, right?

01:07:41.420 | That's the explosion in prosperity

01:07:44.180 | that comes from digital transformation.

01:07:46.480 | And when we do it with maps, I transform the map,

01:07:51.340 | I put it into a car, you get in the car

01:07:53.380 | and the car drives you where you wanna go with the map,

01:07:56.660 | right, and how much better is that

01:07:58.660 | than a Rand McNally Atlas right here?

01:08:01.180 | It's like a million times better.

01:08:03.780 | So the first wave of digital transformation

01:08:08.420 | was the dematerialization of all of these

01:08:12.020 | informational things which are non-conservative.

01:08:14.980 | That is, I could take Beethoven's Fifth Symphony

01:08:17.980 | played for by the best orchestra in Germany,

01:08:21.100 | and I could give it to a billion people

01:08:22.940 | and they could play it a thousand times each

01:08:26.680 | at less than the cost of the one performance, right?

01:08:29.300 | So I deliver culture and education and erudition

01:08:33.180 | and intelligence and insight to the entire civilization

01:08:37.660 | over digital rails.

01:08:39.620 | And the consequences of the human race

01:08:41.260 | are first order, generally good, right?

01:08:44.740 | The world is a better place, it drives growth.

01:08:47.260 | And you create these trillion dollar entities

01:08:49.740 | like Apple and Amazon and Facebook

01:08:51.900 | and Google and Microsoft, right?

01:08:54.980 | That is the first wave.

01:08:57.020 | The second wave--

01:08:58.180 | - Do you mind, I'm sorry to interrupt,

01:08:59.900 | but that first wave,

01:09:03.320 | it feels like the impact that's positive,

01:09:07.920 | you said the first order impact is generally positive.

01:09:10.640 | It feels like it's positive in a way

01:09:12.360 | that nothing else in history has been positive.

01:09:15.280 | And then we may not actually truly be able

01:09:20.280 | to understand the orders of magnitude

01:09:23.960 | of increase in productivity in just progress

01:09:28.600 | of human civilization

01:09:30.440 | until we look back centuries from now.

01:09:32.860 | It just feels, or maybe,

01:09:34.600 | like just looking at the impact of Wikipedia.

01:09:37.920 | - Right.

01:09:38.760 | - Giving access to basic wisdom or basic knowledge

01:09:44.440 | and then perhaps wisdom to billions of people.

01:09:48.140 | If you can just linger on that for a second,

01:09:50.700 | what's your sense of the impact of that?

01:09:53.140 | - You know, I would say if you're a technologist,

01:10:00.260 | philosopher, the impact of a technology

01:10:05.260 | is so much greater on the civilization

01:10:08.620 | and the human condition than a non-technology

01:10:12.080 | that it's almost not worth your trouble to bother

01:10:14.660 | trying to fix things a conventional way.

01:10:17.340 | So let's take example.

01:10:18.840 | I have a foundation, the Sailor Academy,

01:10:23.220 | and the Sailor Academy gives away free education,

01:10:27.220 | free college education to anybody on earth

01:10:29.780 | that wants it.

01:10:31.060 | And we've had more than a million students.

01:10:33.460 | And if you go and you take the physics class,

01:10:36.840 | the lectures were by the same physics lecturer

01:10:39.060 | that taught me physics at MIT.

01:10:41.140 | Except when I was at MIT,

01:10:43.780 | the cost of the first four weeks of MIT

01:10:46.980 | would have drained my family's life,

01:10:49.380 | collective life savings for the first last 100 years.

01:10:52.220 | - Yeah. (laughs)

01:10:53.060 | - Like 100 years worth of my father, my grandfather,

01:10:56.180 | my great-grandfather,

01:10:57.100 | they saved every penny they had after 100 years,

01:10:59.420 | they could have paid for one week or two weeks of MIT.

01:11:02.780 | That's how fiendishly expensive and inefficient it was.

01:11:05.780 | So I went on scholarship.

01:11:08.120 | I was lucky to have a scholarship.

01:11:10.540 | But on the other hand,

01:11:12.580 | I sat in the back of the 801 lecture hall

01:11:16.980 | and I was like right up in the rafters.

01:11:19.180 | It's an awful experience

01:11:20.860 | on these like uncomfortable wooden benches

01:11:23.260 | and you can barely see the blackboard

01:11:25.500 | and you got to be there synchronously.

01:11:28.340 | And the stuff we upload,

01:11:30.220 | you can start it and stop it and watch it on your iPad

01:11:33.100 | or watch it on your computer and rewind it multiple times

01:11:36.380 | and sit in a comfortable chair

01:11:37.880 | and you can do it from anywhere on earth

01:11:39.800 | and it's absolutely free.

01:11:42.020 | So I think about this and I think,

01:11:44.460 | you want to improve the human condition.

01:11:47.260 | You need people with postgraduate level education.

01:11:51.780 | You need PhDs.

01:11:53.100 | And I know this sounds kind of elitist

01:11:54.500 | but you want to cure cancer

01:11:56.360 | and you want to go to the stars, fusion drive.

01:12:00.980 | We need new propulsion, right?

01:12:02.780 | We need extraordinary breakthroughs

01:12:06.880 | in every area of basic science,

01:12:10.500 | be it biology or propulsion or material science

01:12:14.580 | or computer science.

01:12:16.260 | You're not doing that with an undergraduate degree.

01:12:18.440 | You're certainly not doing it with a high school education.

01:12:22.180 | But the cost of a PhD is like a million bucks.

01:12:25.580 | There's like 10 million PhDs in the world.

01:12:27.880 | If you go do the, if you check it out,

01:12:29.740 | there's 8 billion people in the world.

01:12:31.420 | How many people could get a PhD or would want to?

01:12:34.940 | Maybe not 8 billion, but a billion, 500 million.

01:12:38.520 | Let's just say 500 million to a billion.

01:12:41.220 | How do you go from 10 million to a billion

01:12:44.400 | highly educated people, all of them specializing in,

01:12:49.400 | and I don't have to tell you how many different fields

01:12:52.180 | of human endeavor there are.

01:12:53.620 | I mean, your life is interviewing these experts

01:12:56.300 | and there's so many, right?

01:12:59.880 | You know, it's amazing.

01:13:02.140 | So how do I give a multimillion dollar education

01:13:06.260 | to a billion people?

01:13:07.860 | And there's two choices.

01:13:09.880 | You can either endow a scholarship,

01:13:12.180 | in which case you pay $75,000 a year.

01:13:15.460 | Okay, 75,000, let's pay a million dollars

01:13:18.940 | and a million dollars a person.

01:13:20.780 | I can do it that way.

01:13:22.600 | And you're never, even if you had a trillion dollars,

01:13:27.380 | if you had $10 trillion to throw at the problem,

01:13:30.260 | and we've just thrown $10 trillion at certain problems,

01:13:34.340 | you don't solve the problem, right?

01:13:36.780 | If I put $10 trillion on the table and I said,

01:13:39.380 | "Educate everybody, give them all a PhD,"

01:13:41.060 | you still wouldn't solve the problem.

01:13:42.300 | Harvard University can't educate 18,000 people

01:13:47.300 | simultaneously or 87,000 or 800,000 or 8 million.

01:13:51.820 | So you have to dematerialize the professor

01:13:54.200 | and dematerialize the experience.

01:13:56.120 | So you put it all as streaming on-demand,

01:13:58.960 | computer-generated education,

01:14:02.160 | and you create simulations

01:14:03.960 | where you need to create simulations and you upload it.

01:14:06.940 | It's like the human condition is being held back

01:14:11.360 | by 500,000 well-meaning average algebra teachers.

01:14:16.360 | (Luke laughs)

01:14:20.880 | I love them.

01:14:21.720 | I mean, please don't take offense

01:14:22.840 | if you're an algebra teacher,

01:14:23.900 | but instead of 500,000 algebra teachers

01:14:27.360 | going through the same motion over and over again,

01:14:31.140 | what you need is like one or five or 10

01:14:35.080 | really good algebra teachers,

01:14:36.840 | and they need to do it a billion times a day

01:14:39.760 | or a billion times a year for free.

01:14:42.360 | And if we do that,

01:14:44.700 | there's no reason why you can't give infinite education,

01:14:49.920 | certainly in science, technology, engineering, and math,

01:14:54.640 | infinite education to everybody with no constraint.

01:14:59.640 | And I think the same is true

01:15:01.720 | with just about every other thing.

01:15:03.200 | If you wanna bring joy to the world, you need digital music.

01:15:08.200 | If you wanna bring enlightenment to the world,

01:15:11.680 | you need digital education.

01:15:13.540 | If you wanna bring anything of consequence in the world,

01:15:18.640 | you gotta digitally transform it,

01:15:20.320 | and then you gotta manufacture it something like

01:15:23.000 | 100 times more efficiently as a start,

01:15:26.840 | but a million times more efficiently is probably optimal.

01:15:31.840 | That's hopeful.

01:15:34.720 | Maybe you have a chance.

01:15:36.680 | If you look at all of these space endeavors

01:15:39.520 | and everything we're thinking about,

01:15:40.600 | getting to Mars, getting off the planet,

01:15:42.480 | getting to other worlds,

01:15:44.260 | number one thing you gotta do

01:15:45.640 | is you gotta make a fundamental breakthrough

01:15:47.960 | in an engine.

01:15:49.680 | People dreamed about flying for thousands of years,

01:15:52.320 | but until the internal combustion engine,

01:15:56.080 | you didn't have enough energy,

01:15:59.360 | enough power in a light enough package

01:16:03.320 | in order to solve the problem.

01:16:05.480 | And the human race has all sorts of those

01:16:08.760 | fundamental engines and materials and techniques

01:16:13.760 | that we need to master.

01:16:16.920 | And each one of them is a lifetime of experimentation

01:16:20.880 | of someone capable of making a seminal contribution

01:16:25.640 | to the body of human knowledge.

01:16:27.920 | - There's certain problems like education

01:16:29.320 | that could be solved through this process

01:16:31.400 | of dematerialization.

01:16:32.800 | And by the way, to give props to the 500K algebra teachers,

01:16:37.800 | when I look at YouTube, for example,

01:16:41.320 | one possible approach is each one of those 500,000 teachers

01:16:45.000 | probably had days and moments of brilliance.

01:16:47.960 | And if they had ability to contribute

01:16:49.680 | to the natural selection process,

01:16:52.240 | like the market of education,

01:16:55.000 | where the best ones rise up,

01:16:57.120 | that's a really interesting way,

01:16:59.020 | which is like the best day of your life,

01:17:03.320 | the best lesson you've ever taught

01:17:05.960 | could be found and sort of broadcast to billions of people.

01:17:14.640 | So all of those kinds of ideas

01:17:17.120 | can be made real in the digital world.

01:17:19.200 | Now, traveling across planets,

01:17:21.640 | you still can't solve that problem with dematerialization.

01:17:26.640 | What you could solve potentially

01:17:28.320 | is dematerializing the human brain

01:17:31.200 | where you can transfer, like you don't need

01:17:34.520 | to have astronauts on the ship.

01:17:36.720 | You can have a floppy disk carrying a human brain.

01:17:41.120 | - Touching on those points,

01:17:42.720 | you'd love for the 500,000 algebra teachers

01:17:45.400 | to become 500,000 math specialists,

01:17:48.440 | and maybe they clump into 50,000 specialties as teams,

01:17:52.200 | and they all pursue 50,000 new problems,

01:17:54.840 | and they put their algebra teaching on autopilot.

01:17:57.520 | That's the same as when I give you

01:17:59.920 | 11 cents worth of electricity,

01:18:02.240 | and you don't have to row a boat eight hours a day

01:18:07.240 | before you can eat, right?

01:18:10.320 | It would be a lot better

01:18:11.920 | that you would pay for your food

01:18:13.760 | in the first eight seconds of your day,

01:18:15.960 | and then you could start thinking about other things, right?

01:18:18.860 | With regard to technology,

01:18:23.760 | one thing that I learned studying technology

01:18:26.520 | when you look at S-curves is until you start the S-curve,

01:18:31.520 | you don't know whether you're 100 years from viability,

01:18:36.880 | 1,000 years from viability, or a few months from viability.

01:18:41.680 | So--

01:18:43.000 | - Isn't that fun?

01:18:44.080 | That's so fun.

01:18:45.440 | The early part of the S-curve is so fun,

01:18:48.000 | 'cause you don't know.

01:18:49.880 | - In 1900, you could've got any number of learned academics

01:18:54.840 | to give you 10,000 reasons why humans will never fly, right?

01:18:59.040 | And in 1903, the Wright brothers flew,

01:19:01.360 | and by 1969, we're walking on the moon.

01:19:03.960 | So the advance that we made in that field was extraordinary,

01:19:09.720 | but for the 100 years and 200 years before,

01:19:12.520 | they were just back and forth and nobody was close.

01:19:15.560 | And that's the happy part.

01:19:19.080 | The happy part is we went from flying 20 miles an hour

01:19:22.960 | or whatever to flying 25,000 miles an hour in 66 years.

01:19:27.960 | The unhappy part is I studied aeronautical engineering

01:19:33.840 | at MIT in the '80s,

01:19:35.840 | and in the '80s, we had Gulfstream aircraft,

01:19:39.320 | we had Boeing 737s, we had the space shuttle.

01:19:43.200 | And you fast forward 40 years,

01:19:46.000 | and we pretty much had the same exact aircraft.

01:19:49.120 | The efficiency of the engines was 20, 30% more, right?

01:19:55.400 | We slammed into a brick wall around '69 to '75.

01:20:01.480 | Like in fact, the Global Express, the Gulfstream,

01:20:07.200 | these were all engineered in the '70s, some in the '60s.

01:20:12.000 | The actual, the fuselage silhouette of a Gulfstream,

01:20:16.880 | of a G5 was the same shape as a G4,

01:20:19.360 | is the same shape as a G3, is the same shape as a G2.

01:20:22.720 | And that's because they were afraid to change the shape

01:20:25.160 | for 40 years because they worked it out in a wind tunnel,

01:20:27.880 | they knew it worked.

01:20:29.320 | And when they finally decided to change the shape,

01:20:32.400 | it was like a $10 billion exercise

01:20:35.400 | with modern supercomputers and computational fluid dynamics.

01:20:40.400 | - Why was it so hard?

01:20:41.840 | What is that wall made of that you slammed into?

01:20:46.440 | - The right question is, so why does a guy

01:20:48.160 | that went to MIT that got an aeronautical engineering degree

01:20:50.720 | spend his career in software?

01:20:52.680 | Like why is it that I never a day in my life,

01:20:56.080 | with the exception of some Air Force Reserve work,

01:20:59.240 | I never got paid to be an aeronautical engineer

01:21:01.240 | and I worked in software engineering my entire career.

01:21:03.720 | - Maybe software engineering is the new aeronautical

01:21:06.080 | engineering in some way.

01:21:07.400 | Maybe you hit fundamental walls in certain,

01:21:12.280 | until you have to return to it centuries later.

01:21:14.640 | Or no.

01:21:17.200 | - The National Gallery of Art was endowed

01:21:19.880 | by a very rich man, Andrew Mellon,

01:21:23.400 | and you know how he made his money?

01:21:25.880 | Aluminum.

01:21:26.720 | Okay?

01:21:28.640 | And so, and you know what kind of airplanes

01:21:32.520 | you can create without aluminum?

01:21:34.280 | Nothing.

01:21:36.480 | Nothing, right?

01:21:37.680 | - So it's a materialist problem.

01:21:39.600 | - Okay, so 1900, we made massive advances in metallurgy,

01:21:44.600 | right, I mean that was US steel,

01:21:47.160 | that was iron to steel, aluminum,

01:21:50.280 | massive fortunes were created because this was

01:21:52.520 | a massive technical advance, and then we also had

01:21:55.640 | the internal combustion engine and you know,

01:21:57.920 | the story of Ford and General Motors and Daimler,

01:22:01.040 | Chrysler and the like is informed by that.

01:22:04.480 | So you have no jet engines, no rocket motors,

01:22:07.400 | no internal combustion engines, you have no aviation,

01:22:10.600 | but even if you had those engines,

01:22:12.480 | if you were trying to build those things with steel,

01:22:15.280 | no chance, you had to have aluminum.

01:22:17.640 | So there's like two pretty basic technologies

01:22:22.640 | and once you have those two technologies,

01:22:25.560 | stuff happens very fast.

01:22:27.620 | So tell me the last big advance in like jet engines,

01:22:32.620 | there hasn't been one, like the last big advance

01:22:38.380 | in rocket engines, how's it been one?

01:22:40.300 | The big advances in spaceship design from what I can see

01:22:43.940 | are in the control systems, the gyros and the ability

01:22:47.220 | to land, right, in a stable fashion,

01:22:50.900 | that's pretty amazing, landing a rocket.

01:22:53.620 | - Also in the, at least according to Elon and so on,

01:22:58.620 | the manufacture of more efficient

01:23:03.300 | and less expensive manufacture of rockets.

01:23:06.700 | So like it's a production, whatever you call that discipline

01:23:09.300 | of at scale manufacture, at scale production,

01:23:12.380 | so factory work, but it's not 10X.

01:23:15.340 | I mean, maybe it's 10X over a period of a few decades.

01:23:18.660 | - When we figure out how to operate a spaceship,

01:23:23.660 | on the water in your water bottle for a year, right?

01:23:27.580 | Now, then you've got a breakthrough.

01:23:29.380 | So the bottom line is propulsion technology,

01:23:34.380 | propellants and the materials technology,

01:23:37.780 | they were critical to getting on that aviation S curve

01:23:40.900 | and then we slammed into a wall in the 70s

01:23:44.740 | and the Boeing 747, the Global Express, the Gulf Stream,

01:23:49.740 | these things were, the space shuttle,

01:23:52.580 | they were all pretty much reflective of that

01:23:54.620 | and then we kind of, then we stopped

01:23:56.620 | and at that point you have to switch to a new S curve.

01:23:59.140 | So the next equivalent to the internal combustion engine

01:24:03.780 | was the CPU and the next aluminum equivalent was silicon.

01:24:07.900 | So when we actually started developing CPUs,

01:24:11.420 | the transistor gave way to CPUs

01:24:13.420 | and if you look at the power, right?

01:24:17.260 | The bandwidth that we had on computers and Moore's law,

01:24:20.300 | right, what if the efficiency of jet engines

01:24:24.140 | had doubled every three years, right?

01:24:28.620 | In the last 40 years, where we'd be right now, right?

01:24:31.220 | So I think that if you're a business person,

01:24:35.980 | if you're looking for commercially viable application

01:24:40.420 | of your mind, then you have to find that S curve

01:24:44.540 | and ideally, you have to find it

01:24:47.780 | in the first five, six, 10 years

01:24:50.860 | but people always miss this.

01:24:52.780 | Let's take Google Glass, right?

01:24:55.660 | Google Glass was an idea 2013, the year is 2022

01:25:00.660 | and people were quite sure this was gonna be a big thing.

01:25:03.740 | - And it could have been at the beginning of the S curve.

01:25:07.140 | - But fundamentally, we didn't really have

01:25:10.500 | an effective mechanism.

01:25:11.980 | I mean, people getting vertigo and they're--

01:25:14.140 | - But you didn't know that at the beginning of the S curve.

01:25:17.140 | Right, I mean, maybe some people had a deep intuition

01:25:19.980 | about the fundamentals of augmented reality

01:25:23.020 | but you don't know that.

01:25:24.220 | You don't have those, you're looking through the fog.

01:25:27.740 | You don't know.

01:25:28.580 | - So the point is, we're year zero in 2013

01:25:32.140 | and we're still year zero in 2022

01:25:34.820 | on that augmented reality

01:25:37.100 | and when somebody puts out a set of glasses

01:25:40.500 | that you can wear comfortably without getting vertigo,

01:25:44.820 | right, without any disorientation

01:25:48.060 | that managed to have the stability

01:25:49.900 | and the bandwidth necessary to sync with the real world,

01:25:53.660 | you'll be in year one and from that point,

01:25:57.020 | you'll have a 70 year or some interesting future

01:26:01.020 | until you slam into a limit to growth

01:26:04.500 | and then it'll slow down

01:26:06.420 | and this is the story of a lot of things, right?

01:26:10.540 | I mean, John D. Rockefeller got in the oil business

01:26:13.260 | in the 1860s and the oil business as we understood it,

01:26:18.260 | you know, became fairly mature, you know,

01:26:22.260 | by the 1920s, the '30s

01:26:25.300 | and then it actually stayed that way

01:26:26.980 | until we got to fracking

01:26:28.340 | and which was like 70 years later

01:26:30.540 | and then it burst forward.

01:26:32.620 | So--

01:26:33.460 | - The interesting story about Moore's law though

01:26:35.100 | is that you get this like constant burst of S curves

01:26:39.780 | on top of S curves on top of S curve.

01:26:41.700 | It's like the moment you start slowing down

01:26:44.820 | or almost ahead of you slowing down,

01:26:47.300 | you come up with another innovation, another innovation.

01:26:50.220 | So Moore's law doesn't seem to happen

01:26:52.100 | in every technological advancement.

01:26:55.780 | It seems like you only get a couple of S curves

01:26:58.740 | and then you're done for a bit.

01:27:01.020 | So I wonder what the pressures there are

01:27:02.620 | that resulted in such success over several decades

01:27:06.140 | and still going.

01:27:07.420 | - Humility dictates that nobody knows

01:27:10.500 | when the S curve kicks off

01:27:13.260 | and you could be 20 years early or a hundred years early.

01:27:17.820 | Leonardo da Vinci, you know, Michelangelo,

01:27:22.140 | they were designing flying machines

01:27:24.900 | hundreds and hundreds of years ago.

01:27:26.340 | So humility says you're not quite sure

01:27:28.460 | when you really hit that commercial viability

01:27:31.500 | and it also dictates you don't know when it ends.

01:27:34.740 | Like when will the party stop?

01:27:37.180 | When will Moore's law stop?

01:27:39.020 | And we'll get to the point

01:27:39.900 | where they're exponentially diminishing returns

01:27:42.100 | on silicon performance.

01:27:45.580 | And just like we got exponentially diminishing returns

01:27:48.900 | on jet engines, you know,

01:27:51.900 | and it just takes an exponential increase

01:27:54.820 | in effort to make it 10% better.

01:27:57.300 | But while you're in the middle of it,

01:27:59.460 | then you know you can do things.

01:28:01.020 | So the reason that the digital revolution is so important

01:28:05.180 | is because the underlying platforms,

01:28:08.340 | the bandwidth of, and the performance of the components,

01:28:12.260 | and I say the components are the radio protocols,

01:28:17.260 | mobile protocols, the batteries,

01:28:21.100 | the CPUs and the displays, right?

01:28:26.020 | Those four components are pretty critical.

01:28:28.380 | They're all critical in the creation of an iPhone.

01:28:31.380 | I wrote about it in the book, "The Mobile Wave,"

01:28:33.940 | and they catalyze this entire mobile revolution.

01:28:38.140 | Because they have advanced and continue to advance,

01:28:41.900 | they created the very fertile environment

01:28:45.340 | for all these digital transformations.

01:28:48.860 | And the digital transformations themselves, right,

01:28:53.860 | they call for creativity in their own, right?

01:28:58.260 | Like, I think the interesting thing about,

01:29:01.740 | let's take digital maps, right?

01:29:03.860 | When you conceptualize something

01:29:05.620 | as a dematerialized map, right,

01:29:08.620 | it becomes a map because I can put it on a display,

01:29:13.180 | like an iPad, or I can put it in a car, like a Tesla.

01:29:17.300 | But if you really want to figure it out,

01:29:20.140 | you can't think like an engineer.

01:29:21.420 | You need to think like a fantasy writer.

01:29:24.300 | Like, this is where it's useful if you studied,

01:29:27.060 | if you played "Dungeons and Dragons"

01:29:28.900 | and you read "Lord of the Rings"

01:29:30.500 | and you studied all the fantasy literature.

01:29:33.100 | Because when I dematerialize the map,

01:29:38.100 | first I put 10 million pages of satellite imagery

01:29:41.580 | into the map, right?

01:29:43.540 | That's a simple physical transform.

01:29:46.020 | But then I start to put telemetry into the map

01:29:50.940 | and I keep track of the traffic rates on the roads.

01:29:53.780 | And I tell you whether you'll be in a traffic jam

01:29:55.620 | if you drive that way.

01:29:56.500 | And I tell you which way to drive.

01:29:58.220 | And then I start to get feedback on where you're going.

01:30:00.660 | And I tell you the restaurant's closed

01:30:02.100 | and people don't like it anyway.

01:30:03.980 | And then I put an AI on top of it

01:30:06.820 | and I have it drive your car for you.

01:30:09.300 | And eventually, the implication

01:30:12.780 | of digital transformation of maps is,

01:30:14.780 | I get in a self-driving car and I say,

01:30:16.860 | take me someplace cool where I can eat.

01:30:18.860 | Yeah.

01:30:21.420 | And how did you get to that last step, right?

01:30:23.940 | It wasn't simple engineering.

01:30:27.500 | There's a bit of fantasy in there, a bit of magic.

01:30:30.540 | - Design, art, whatever the heck you call it.

01:30:33.380 | It's whatever, yeah.

01:30:34.460 | Fantasy injects magic into the engineering process.

01:30:38.340 | Like imagination, like precedes

01:30:43.340 | great revolutions in engineering.

01:30:46.260 | It's like imagining a world,

01:30:48.020 | like of what you can do with the display.

01:30:51.180 | How will the interaction be?

01:30:52.460 | That's where Google Glass actually came in,

01:30:54.020 | augmented reality, virtual reality.

01:30:55.860 | People were playing in the space of sci-fi imagination.

01:31:00.260 | - They called a moonshot.

01:31:01.260 | They tried, it didn't work.

01:31:02.500 | But to their credit, they stopped trying, right?

01:31:05.020 | - And then there's new people.

01:31:06.020 | They keep dreaming.

01:31:06.860 | There's dreamers all around us.

01:31:09.580 | I love those dreamers.

01:31:10.500 | And most of them fail and suffer because of it.

01:31:13.340 | But some of them will win Nobel prizes

01:31:16.540 | or become billionaires.

01:31:18.620 | But what I would say is,

01:31:20.260 | if half the civilization dropped

01:31:23.820 | what they were doing tomorrow

01:31:25.820 | and eagerly started working

01:31:29.180 | on launching a rocket to Alpha Centauri,

01:31:32.580 | it might not be the best use of our resources

01:31:37.700 | because it's kind of like if half of Athens

01:31:41.500 | in the year 500 BC eagerly started working

01:31:44.380 | on flying machines.

01:31:46.020 | If you went back and you said,

01:31:47.300 | what advice would you give them?

01:31:49.100 | - Don't.

01:31:49.940 | - You would say, you know,

01:31:50.940 | it's not gonna work till you get to aluminum

01:31:52.780 | and you're not gonna get to aluminum

01:31:53.980 | till you work out the steel and certain other things.

01:31:57.380 | And you're not gonna get to that

01:31:58.340 | until you work out the calculus of variations

01:32:00.780 | and some metallurgy.

01:32:02.060 | And there's a dude, Newton,

01:32:03.340 | that won't come along for quite a while.

01:32:05.620 | And he's gonna give you the calculus to do it.

01:32:07.500 | And until then it's hopeless.

01:32:08.980 | So you might be better off to work on the aqueduct

01:32:12.940 | or to focus upon sales or something.

01:32:16.180 | So if I look at this today, I say,

01:32:19.080 | there's massive profound civilization advances

01:32:25.060 | to be made through digital transformation of information.

01:32:27.780 | And you can see them out there.

01:32:29.340 | This is the story of today.

01:32:31.780 | This is not the story of today, right?

01:32:33.340 | It's 10 years old, what we've been seeing.

01:32:36.020 | - We're living through different manifestations

01:32:38.100 | of that story today too, though.

01:32:39.940 | Like social media, the effects of that is very interesting

01:32:44.620 | because ideas spread even,

01:32:46.620 | you talk about velocity of money,

01:32:48.300 | the velocity of ideas keeps increasing.

01:32:52.060 | So like Wikipedia is a passive store.

01:32:55.220 | It's a store of knowledge.

01:32:57.220 | Twitter is like a water hose or something.

01:33:02.220 | It's like spraying you with knowledge

01:33:04.500 | whether you want it or not.

01:33:05.880 | It's like social media is just like this explosion of ideas.

01:33:10.420 | And then we pick them up

01:33:11.780 | and then we try to understand ourselves

01:33:14.180 | because the drama of it also plays with our human psyche.

01:33:17.660 | So sometimes there's more ability for misinformation,

01:33:21.940 | for propaganda to take hold.

01:33:23.300 | So we get to learn about ourselves.

01:33:25.300 | We get to learn about the technology

01:33:26.820 | that can decelerate the propaganda, for example,

01:33:29.620 | all that kind of stuff.

01:33:30.640 | But like the reality is we're living,

01:33:32.460 | I feel like we're living through a singularity

01:33:34.700 | in the digital information space.

01:33:37.640 | And we don't have a great understanding

01:33:41.340 | of exactly how it's transforming our lives.

01:33:43.900 | - And this is where money is useful

01:33:45.860 | as a metaphor for significance

01:33:48.540 | because if money is the economic energy of the civilization,

01:33:53.540 | then something that's extraordinarily lucrative

01:33:59.340 | that's gonna generate a monetary or a wealth increase

01:34:02.500 | is a way to increase the net energy in the civilization.

01:34:05.620 | And ultimately, if we had 10 times as much of everything,

01:34:09.300 | we'd have a lot more free resources

01:34:12.820 | to pursue all of our advanced scientific

01:34:15.260 | and mathematical and theoretical endeavors.

01:34:17.460 | So let's take Twitter.

01:34:19.360 | Twitter is something that could be 10 times

01:34:20.800 | more valuable than it is.

01:34:22.040 | Twitter could be made 10 times better.

01:34:26.420 | - Oh, by the way, I should say that people

01:34:28.620 | should follow you on Twitter.

01:34:29.460 | Your Twitter account is awesome.

01:34:30.780 | - Thank you.

01:34:31.620 | (laughing)

01:34:32.460 | - It could be made 10 times better, yeah.

01:34:34.100 | - Yeah, Twitter can be made 10 times better.

01:34:36.380 | If we take YouTube or take education,

01:34:42.380 | we could generate a billion PhDs.

01:34:45.140 | And the question is, do you need any profound breakthrough

01:34:49.900 | in materials or technology to do that?

01:34:52.180 | And the answer is not really.

01:34:53.860 | Right, so if you wanna, you could make Apple,

01:34:57.460 | Amazon, Facebook, Google, Twitter, all these things better.

01:35:00.840 | The United States government, if they took 1%

01:35:06.580 | of the money they spend on the Department of Education

01:35:09.580 | and they simply poured it into digital education

01:35:13.060 | and they gave degrees to people

01:35:16.500 | that actually met those requirements,

01:35:19.380 | they could provide 100x as much education

01:35:22.040 | for 1/100th of the cost,

01:35:24.700 | and they could do it with no new technology.

01:35:26.660 | That's a marketing and political challenge.

01:35:30.900 | So I don't think every objective is equally practical.

01:35:35.900 | And I think the benefit of being an engineer

01:35:39.300 | or thinking about practical achievements

01:35:44.020 | is when the government pursues an impractical objective

01:35:49.020 | or when anybody, an entrepreneur,

01:35:53.260 | not so bad with an entrepreneur

01:35:54.420 | 'cause they don't have that much money to waste.

01:35:56.020 | When a government pursues an impractical objective,

01:35:58.840 | they squander trillions and trillions of dollars

01:36:01.460 | and achieve nothing.

01:36:02.860 | Whereas if they pursue a practical objective

01:36:06.300 | or if they simply get out of the way and do nothing

01:36:11.140 | and they allow the free market

01:36:12.980 | to pursue the practical objectives,

01:36:15.180 | then I think you can have profound impact

01:36:17.980 | on the human civilization.

01:36:20.260 | And if I look at the world we're in today,

01:36:25.260 | I think that there are multi-trillion,

01:36:30.500 | 10, 20, $50 trillion worth of opportunities

01:36:35.860 | in the digital information realm yet to be obtained.

01:36:40.000 | But there's hundreds of trillions of dollars

01:36:45.300 | of opportunities in the digital energy realm

01:36:49.100 | that not only are they not obtained,

01:36:52.460 | the majority of people don't even know

01:36:54.740 | what digital energy is.

01:36:56.320 | Most of them would reject the concept.

01:36:58.540 | They're not looking for it.

01:37:00.820 | They're not expecting to find it.

01:37:02.660 | It's inconceivable because it is a paradigm shift.

01:37:05.900 | But in fact, it's completely practical,

01:37:08.820 | right under our nose.

01:37:10.740 | It's staring at us and it could make

01:37:13.000 | the entire civilization work dramatically better

01:37:16.860 | in every respect.

01:37:18.900 | - So you mentioned in the digital world,

01:37:22.260 | digital information is one, digital energy is two,

01:37:27.100 | and the possible impact on the world

01:37:30.900 | and the set of opportunities available

01:37:33.300 | in the digital energy space is much greater.

01:37:36.260 | So how do you think about digital energy?

01:37:39.340 | What is it?

01:37:40.160 | - So I'll start with Tesla.

01:37:44.140 | He had a very famous quote.

01:37:45.360 | He said, "If you want to understand the universe,

01:37:47.220 | "think in terms of energy, vibration, and frequency."

01:37:50.820 | And it gets you thinking about what is the universe.

01:37:55.780 | And of course, the universe is just all energy.

01:37:58.860 | And then what is matter?

01:38:00.580 | Matter is low frequency energy.

01:38:03.780 | And what are we?

01:38:05.740 | We're vibrating from ashes to ashes, dust to dust.

01:38:10.180 | I can turn a tree into light.

01:38:13.100 | I can turn light back into a tree.

01:38:16.340 | If I consider the entire universe,

01:38:19.220 | and it's very important because we don't really

01:38:21.460 | think this way, let's take the New York disco model.

01:38:25.640 | If I walk into a nightclub and there's loud music blaring

01:38:30.460 | in New York City, what's really going on there?

01:38:34.540 | If you blast out 14 billion years ago,

01:38:39.140 | the universe is formed.

01:38:40.860 | Okay, that's a low frequency thing, the universe.

01:38:43.860 | Four and a half billion years ago,

01:38:45.360 | the sun, maybe the earth are formed.

01:38:47.660 | The continents are 400 million years old.

01:38:51.140 | The schist that New York City is on

01:38:53.500 | is some hundreds of millions of years.

01:38:55.940 | But the Hudson River is only 20,000 years.

01:38:58.940 | There's a building that's probably 50 years old.

01:39:02.540 | There's a company operating that disco or that club,

01:39:06.100 | which is five to 10 years old.

01:39:08.760 | There's a person, a customer walking in there

01:39:11.180 | for an experience for a few hours.

01:39:13.900 | There's music that's oscillating at some kilohertz

01:39:18.900 | and then there's light.

01:39:20.860 | And you have all forms of energy, all frequencies,

01:39:25.900 | right, all layered, all moving through different medium.

01:39:29.620 | And how you perceive the world is a question of

01:39:33.060 | at what frequency do you wanna perceive the world?

01:39:36.980 | And I think that once you start to think that way,

01:39:41.980 | you're catalyzed to think about

01:39:46.260 | what would digital energy look like

01:39:48.140 | and why would I want it?

01:39:51.460 | And what is it?

01:39:54.140 | So why don't we just start right there.

01:39:57.100 | What is it?

01:39:58.620 | The most famous manifestation of digital energy is Bitcoin.

01:40:02.780 | Bitcoin's a crypto asset.

01:40:05.040 | It's a crypto asset that has monetary value.

01:40:08.220 | - Can we just linger on that?

01:40:09.820 | Bitcoin is a,

01:40:12.940 | so it's a digital asset that has monetary value.

01:40:17.680 | What is a digital asset?

01:40:20.380 | What is monetary?

01:40:21.260 | Why use those terms versus the words of money and currency?

01:40:26.260 | Is there something interesting in that disambiguation

01:40:29.020 | of different terms?

01:40:30.580 | - I'd call it a crypto asset network.

01:40:33.440 | The goal is to create a billion dollar block

01:40:38.220 | of pure energy in cyberspace.

01:40:41.420 | One that I could then move with no friction

01:40:46.900 | at the speed of light, right?

01:40:49.320 | It's the equivalent to putting a million pounds in orbit.

01:40:54.260 | How do I actually launch something into orbit, right?

01:40:59.260 | How do I launch something into cyberspace

01:41:01.940 | such that it moves friction-free?

01:41:03.860 | And the solution is a decentralized

01:41:08.540 | proof of work network, right?

01:41:10.060 | Satoshi's solution was,

01:41:12.340 | I'm going to establish a protocol

01:41:14.720 | running on a distributed set of computers

01:41:17.440 | that will maintain a constant supply

01:41:19.940 | of never more than 21 million Bitcoin

01:41:22.740 | sub-dividable by a hundred million Satoshi's each,

01:41:26.860 | transferable via transferring private keys.

01:41:31.340 | Now, the innovation is

01:41:34.940 | to create that in a

01:41:39.220 | ethical, durable fashion, right?

01:41:45.300 | The ethical innovation is,

01:41:47.080 | I want it to be property and not a security.

01:41:50.120 | A bushel of corn, an acre of land,

01:41:53.500 | a stack of lumber and a bar of gold

01:41:57.000 | and a Bitcoin are all property.

01:41:59.480 | And that means they're all commonly occurring elements

01:42:03.000 | in the world.

01:42:03.880 | You could call them commodities,

01:42:05.320 | but commodity is a little bit misleading.

01:42:07.400 | And I'll tell you why in a second,

01:42:09.000 | but they're all distinguished by the fact

01:42:10.720 | that no one entity or person or government controls them.

01:42:15.720 | If you have a barrel of oil and you're in Ukraine

01:42:19.500 | versus Russia versus Saudi Arabia versus the US,

01:42:23.600 | you have a barrel of oil, right?

01:42:27.520 | And it doesn't matter what the premier in Japan

01:42:31.300 | or the mayor of Miami beach thinks about your barrel.

01:42:35.400 | They cannot wave their hand

01:42:37.620 | and make it not a barrel of oil or a cord of wood, right?

01:42:42.620 | And so property is just a naturally occurring element

01:42:46.640 | in the universe, right?

01:42:49.160 | - Why use the word ethical?

01:42:50.760 | And sorry to, I may interrupt occasionally.

01:42:53.760 | Why ethical assigned to property?

01:42:56.920 | - Because if it's a security,

01:43:00.720 | a security would be an example of a share of a stock

01:43:04.500 | or a crypto token controlled by a small team.

01:43:07.660 | And in the event that something is a security

01:43:12.160 | because some small group or some identifiable group

01:43:17.160 | can control its nature, character, supply,

01:43:20.520 | then it really only becomes ethical to promote it

01:43:26.080 | or sell it pursuant to fair disclosures.

01:43:31.280 | So I'll give you maybe practical example.

01:43:34.740 | I'm the mayor of Chicago.

01:43:36.940 | I give a speech.

01:43:38.540 | My speech, I say, I think everybody in Chicago

01:43:40.460 | should own their own farm and have chicken,

01:43:43.860 | a chicken in the backyard and their own horse

01:43:46.860 | and an automobile.

01:43:48.020 | That's ethical.

01:43:50.440 | I give the same speech and I say,

01:43:52.780 | I think everybody in Chicago should buy Twitter stock,

01:43:56.060 | sell their house or sell their cash and buy Twitter stock.

01:44:01.260 | Well, is that ethical?

01:44:03.580 | Not really.

01:44:04.900 | At that point, you've entered into a conflict of interest

01:44:07.440 | because what you're doing is you're promoting an asset

01:44:11.940 | which is substantially controlled

01:44:13.820 | by a small group of people, the board of directors

01:44:16.560 | or the CEO of the company.

01:44:18.840 | So how would you feel if the president of the United States

01:44:22.060 | said, I really think Americans should all buy Apple stock?

01:44:26.600 | Especially if you worked at Google,

01:44:29.820 | but you worked anywhere, you'd be like,

01:44:31.200 | why isn't he saying buy mine?

01:44:32.760 | A security is a proprietary asset in some way, shape or form

01:44:38.780 | and the whole nature of securities law,

01:44:43.500 | it starts from this ancient idea,

01:44:46.900 | thou shalt not lie, cheat or steal.

01:44:48.860 | So if I'm going to sell you securities

01:44:55.300 | or I'm gonna promote securities as a public figure

01:44:58.260 | or as an influencer or anybody else,

01:45:01.560 | if I create my own yo-yo coin or Mikey coin

01:45:06.280 | and then there's a million of them

01:45:08.860 | and I tell you that I think that it's a really good thing

01:45:11.820 | and Mikey coin will go up forever,

01:45:13.780 | everybody buys Mikey coin and then I give 10 million to you

01:45:18.700 | and don't tell the public, I've cheated them.

01:45:22.200 | Maybe if I have Mikey coin

01:45:24.680 | and I think there's only 2 million Mikey coin

01:45:27.160 | and I swear to you, there's only 2 million

01:45:29.700 | and then I get married and I have three kids

01:45:31.700 | and my third kid is in the hospital

01:45:34.100 | and my kid's gonna die and I have this ethical reason

01:45:37.420 | to print 500,000 more Mikey coin

01:45:39.620 | or else people are gonna die

01:45:40.900 | and everybody tells me it's fine.

01:45:42.540 | I've still abused the investor, right?

01:45:46.940 | It's a ethical challenge.

01:45:50.260 | If you look at ethics laws everywhere in the world,

01:45:57.140 | they all boil down to having a clause

01:45:59.420 | which says that if you're a public figure,

01:46:01.100 | you can't endorse any security,

01:46:04.560 | you can't endorse something that would cause you

01:46:06.520 | to have a conflict of interest.

01:46:08.340 | So if you're a mayor, a governor, a country,

01:46:11.340 | a public figure, an influencer,

01:46:13.780 | and you want to promote or promulgate or support something

01:46:17.920 | using any public influence or funds

01:46:21.460 | or resources you may have, it needs to be property,

01:46:25.180 | it can't be security.

01:46:27.380 | So it goes beyond that, right?

01:46:29.780 | I mean, like what the Chinese want to support

01:46:32.680 | an American company, right?

01:46:34.700 | As soon as you look at what's in the best interest

01:46:37.440 | of the human race, the civilization,

01:46:41.140 | you realize that if you want an ethical path forward,

01:46:45.860 | it needs to be based on common property, which is fair.

01:46:50.860 | And the way you get to a common property

01:46:54.180 | is through an open permissionless protocol.

01:46:57.780 | If it's not open, right?

01:46:59.180 | If it's proprietary and I know what the code says

01:47:01.700 | and you don't know what the code says,

01:47:03.480 | that makes it a security.

01:47:05.340 | If it's permissioned, if you're not allowed on my network

01:47:10.340 | or if you can be censored or booted off my network,

01:47:16.260 | that also makes it a security.

01:47:18.000 | So when I talk about property,

01:47:23.740 | I mean, the challenge here is how do I create something

01:47:27.140 | that's equivalent to a barrel of oil in cyberspace?

01:47:32.140 | And that means it has to be a non-sovereign bearer

01:47:36.500 | instrument, open permissionless, not censorable, right?

01:47:41.060 | If I could do that, then I could deliver you

01:47:47.100 | 10,000 dematerialized barrels of oil

01:47:50.660 | and you would take settlement of them

01:47:53.820 | and you would know that you have possession

01:47:56.620 | of that property, irregardless of the opinion

01:48:00.020 | of any politician or any company

01:48:02.420 | or anybody else in the world.

01:48:04.420 | That's a really critical characteristic.

01:48:08.780 | And it actually is, it's probably one of the fundamental

01:48:13.420 | things that makes Bitcoin special.

01:48:15.780 | Bitcoin isn't just a crypto asset network.

01:48:18.020 | It's easy to create a crypto asset network.

01:48:20.220 | It's very hard to create an ethical crypto asset network

01:48:25.220 | because you have to create one without any government

01:48:30.780 | or corporation or investor exercising

01:48:35.500 | in due influence to make it successful.

01:48:37.620 | - So open, permissionless, non-censorable.

01:48:42.580 | So basically no way for you without explicitly saying so

01:48:48.580 | outsourcing control to somebody else.

01:48:50.540 | So it's a kind of, you have full control.

01:48:54.980 | Even with a barrel of oil, what's the difference

01:48:58.220 | in between a barrel of oil and a Bitcoin to you?

01:49:01.820 | Because you kind of mentioned that both are property.

01:49:07.140 | You mentioned Russia and China and so on.

01:49:10.860 | Is it the ability of the government to confiscate?

01:49:13.820 | In the end, governments can probably confiscate

01:49:16.340 | no matter what the asset is,

01:49:17.700 | but you want to lessen the effort involved.

01:49:21.500 | - A barrel of oil is a bucket of physical property,

01:49:24.140 | liquid property, and a Bitcoin is a digital property.

01:49:27.860 | - But it's easier to confiscate a barrel of oil.

01:49:32.420 | - It's easier to confiscate things in the real world

01:49:35.260 | than things in cyberspace, much easier.

01:49:38.740 | - So that's not universally true.

01:49:40.220 | Some things in the digital space are actually easier

01:49:43.140 | to confiscate because just the nature of how things move

01:49:48.140 | easily with information, right?

01:49:50.140 | - So I think in the Bitcoin world, what we would say

01:49:52.580 | is that Bitcoin is the most difficult property

01:49:57.500 | that the human race possesses

01:49:59.300 | or has yet invented to confiscate.

01:50:02.420 | And that's by virtue of the fact that you could take

01:50:04.700 | possession of it via your private keys.

01:50:06.700 | So if you got your 12 seed phrases in your head,

01:50:10.900 | then that will be the highest form of property right

01:50:13.740 | because I literally have to crack your head open

01:50:16.580 | and read your mind to take it.

01:50:19.100 | It doesn't mean I couldn't extract it from you

01:50:21.580 | under duress, but it means that it's harder

01:50:25.300 | than every other thing you might own.

01:50:26.900 | If you, in fact, it's exponentially harder.

01:50:29.740 | If you consider every other thing you might own,

01:50:32.540 | a car, a house, a share of stock, gold, diamonds,

01:50:37.580 | property rights, intellectual property rights,

01:50:40.380 | movie rights, music rights, anything imaginable,

01:50:43.740 | they would all be easier by orders

01:50:45.700 | and orders of magnitude to seize.

01:50:48.140 | So digital property and the form of a set of private keys

01:50:53.140 | is by far the apex property of the human race.

01:50:58.140 | In terms of ethics, I wanna make one more point.

01:50:59.900 | It's like, I might say to you, Lex,

01:51:02.500 | I think Bitcoin is the best, most secure,

01:51:05.460 | most durable crypto asset network in the world

01:51:08.100 | is gonna go up forever

01:51:09.300 | and there's nothing better in the world.

01:51:11.340 | I might be right, I might be wrong,

01:51:14.060 | but the point is because it's property,

01:51:18.460 | it's ethical for me to say that.

01:51:21.260 | If I were to turn around and say, you know, Lex,

01:51:23.740 | I think the same about micro strategy stock, MSTR.

01:51:27.540 | That's a security, okay?

01:51:29.940 | If I'm wrong about that, I have civil liability

01:51:33.380 | or other liability because I could go

01:51:37.500 | to a board meeting tomorrow and I could actually propose

01:51:40.260 | we issue a million more shares of micro strategy stock.

01:51:43.700 | Whereas the thing that makes Bitcoin ethical for me

01:51:48.180 | to even promote is the knowledge that I can't change it.

01:51:51.740 | If I knew that I could make it 42 million

01:51:55.860 | instead of 21 million and I had the button back here,

01:51:59.820 | right, then I have a different degree

01:52:03.580 | of ethical responsibility.

01:52:05.500 | Now, I could tell you your life will be better

01:52:07.540 | if you buy Bitcoin and it might not.

01:52:09.260 | You might go buy Bitcoin, you might lose the keys

01:52:11.580 | and be bankrupt and your life ends

01:52:13.340 | and your life is not better

01:52:14.540 | because you bought Bitcoin, right?

01:52:16.620 | But it wouldn't be my ethical liability any more

01:52:20.820 | than if I were to say, Lex, I think you ought to get a farm.

01:52:24.740 | I think you should be a farmer.

01:52:26.940 | I think a chicken in every pot,

01:52:28.980 | you should get a horse.

01:52:30.580 | I think you'd be better.

01:52:31.500 | I mean, these are all, they're all opinions expressed

01:52:36.380 | about property, which may or may not be right

01:52:39.420 | that you may or may not agree with.

01:52:41.980 | But in a legal sense, if we read the law,

01:52:46.060 | if we understand securities law,

01:52:48.300 | and I would say, you know, most people

01:52:49.740 | in the crypto industry, you know,

01:52:52.100 | they didn't take companies public.

01:52:54.300 | And so they're not really focused on the securities law.

01:52:56.580 | They don't even know the securities law.

01:52:58.940 | If you focus on the securities law,

01:53:00.700 | that would say you just can't legally sell this stuff

01:53:04.740 | to the general public or promote it

01:53:07.060 | without a full set of continuing disclosures

01:53:10.860 | signed off on by a regulator.

01:53:13.780 | So there's a fairly bright line there

01:53:17.460 | with regard to securities.

01:53:19.420 | But when you get to the secondary issue,

01:53:23.100 | it's how do you actually build a world

01:53:27.420 | based on digital property if public figures

01:53:31.500 | can't embrace it or endorse it?

01:53:36.500 | You see, so you're not gonna build a better world

01:53:39.140 | based upon Twitter stock, if that's your idea of property,

01:53:43.980 | because Twitter stock is a security

01:53:46.780 | and Twitter stock is never going to be

01:53:48.820 | a non-sovereign bearer instrument in Russia, right?

01:53:52.180 | Or in China, right?

01:53:53.660 | It's not even legal in China, right?

01:53:55.100 | It's not a global permissionless open thing.

01:53:58.420 | It will never be trusted by the rest of the world.

01:54:01.140 | And legally it's impractical, but would you really wanna

01:54:05.620 | put $100 trillion worth of economic value on Twitter stock

01:54:08.980 | if there's a board of directors and a CEO

01:54:10.860 | that could just get up and take half of it tomorrow?

01:54:13.340 | The answer is no.

01:54:14.340 | So if you wanna build a better world

01:54:18.980 | based on digital energy,

01:54:21.060 | you need to start with constructing a digital property.

01:54:25.060 | And I'm using property here in the--

01:54:28.300 | Open, permissionless--

01:54:29.900 | In the legal sense. Okay.

01:54:31.760 | But I would also go to the next step and say,

01:54:35.220 | property is low frequency money.

01:54:39.220 | So if I give you a million dollars

01:54:42.380 | and you wanna hold it for a decade,

01:54:46.380 | you might go buy a house with it, right?

01:54:49.180 | And the house is low frequency money.

01:54:51.700 | You converted the million dollars of economic energy

01:54:55.940 | into a structure called a house.

01:54:58.200 | Maybe after a decade, you might convert it back into energy.

01:55:01.700 | You might sell the house for currency

01:55:04.820 | and it'll be worth more or less

01:55:06.740 | depending upon the monetary climate.

01:55:08.380 | The frequency means what here?

01:55:10.940 | How quickly it changes state?

01:55:13.940 | How quickly does something vibrate?

01:55:17.180 | So if I transfer $10 from me to you for a drink

01:55:22.180 | and then you turn around and you buy another, right?

01:55:26.720 | We're vibrating on a frequency of every few hours, right?

01:55:30.260 | The energy is changing hands.

01:55:32.200 | But it's not likely that you sell

01:55:33.860 | and buy houses every few hours, right?

01:55:36.980 | The frequency of a transaction in real estate

01:55:41.120 | is every 10 years, every five years.

01:55:43.280 | It's a much lower frequency transaction.

01:55:46.180 | And so when you think about what's going on here,

01:55:51.180 | you have extremely low frequency things

01:55:56.620 | which we'll call property.

01:55:58.480 | Then you have mid frequency things.

01:56:01.760 | I'm gonna call them money or currency.

01:56:04.660 | And then you have high frequency and that's energy.

01:56:09.240 | And that's why I use the illustration of,

01:56:11.140 | you got the building, you got the light

01:56:13.620 | and you got the sound

01:56:14.860 | and they're all just energy moving at different frequencies.

01:56:19.620 | Now, Bitcoin is magical and it is truly the innovation.

01:56:24.620 | It's like a singularity because it represents

01:56:29.600 | the first time in the history of the human race

01:56:32.400 | that we managed to create a digital property

01:56:36.540 | properly understood.

01:56:38.340 | It's easy to create something digital, right?

01:56:42.820 | Every coupon and every scan on Fortnite and Roblox

01:56:46.700 | and Apple TV credits and all these things,

01:56:49.900 | they're all digital something, but they're securities, right?

01:56:53.420 | Shares of stock are securities.

01:56:55.340 | Whenever anybody transfers,

01:56:57.420 | when you transfer money on PayPal or Apple Pay,

01:56:59.860 | you're transferring an essence, a security or an IOU.

01:57:04.440 | And so transferring a bearer instrument

01:57:07.740 | with final settlement in the internet domain

01:57:11.820 | or in cyberspace, that's a critical thing.

01:57:16.020 | And anybody in the crypto world can do that.

01:57:19.740 | All the cryptos can do that.

01:57:21.360 | But what they can't do,

01:57:22.740 | what 99% of them fail to do is be property.

01:57:26.620 | They're securities, right?

01:57:27.900 | Well, there's a line there I'd like to explore further.

01:57:30.540 | For example, what about when you,

01:57:34.440 | like Coinbase or something like that,

01:57:36.820 | when there's an exchange that you buy Bitcoin is in,

01:57:41.660 | you start to move away from this kind of,

01:57:45.120 | some of the aspects that you said makes up a property,

01:57:50.120 | which is this non-censorable

01:57:55.740 | and permissionless and open.

01:57:58.500 | So in order to achieve the convenience,

01:58:01.600 | the effectiveness of the transfer of energy,

01:58:05.860 | you have to leverage some of these places

01:58:10.240 | that remove the aspects of property.

01:58:12.520 | So maybe you can comment on that.

01:58:14.540 | - Let me give you a good model for that.

01:58:17.060 | If you think about the layer one of Bitcoin,

01:58:20.320 | the layer one is the property settlement layer.

01:58:24.060 | And we're gonna do 350,000 transactions or less a day,

01:58:27.980 | 100 million transactions a year

01:58:29.740 | is the bandwidth on the layer one.

01:58:31.920 | And it would be an ideal layer one

01:58:34.900 | to move a billion dollars from point A to point B

01:58:37.840 | with the massive security.

01:58:40.560 | The role of the layer one is two things.

01:58:44.160 | One thing is I wanna move a large sum of money

01:58:47.800 | through space with security.

01:58:50.720 | I can move any amount of Bitcoin in a matter of minutes

01:58:55.720 | for dollars on layer one.

01:58:59.260 | The second important feature of the layer one

01:59:03.100 | is I need the money to last forever, right?

01:59:06.360 | I need the money indestructible, immortal.

01:59:08.680 | So the bigger trick is not to move a billion dollars

01:59:12.680 | from here to Tokyo.

01:59:13.740 | The big trick is to move a billion dollars

01:59:15.760 | from here to the year 2140.

01:59:17.980 | And that's what we wanna solve with layer one.

01:59:24.000 | And the best real metaphor in New York City

01:59:26.700 | would be the granite or the schist.

01:59:29.200 | What you want is a city block of bedrock.

01:59:33.040 | And how long has it been there?

01:59:34.480 | Like millions of years it's been there.

01:59:37.340 | And how fast do you want it to move?

01:59:39.380 | You don't.

01:59:40.520 | In fact, the single thing that's most important

01:59:43.080 | is that it not deflect.

01:59:45.240 | If it deflects a foot in a hundred years, it's too much.

01:59:49.280 | If it deflects an inch in a hundred years,

01:59:51.360 | you might not want that.

01:59:53.040 | So the layer one of Bitcoin is a foundation

01:59:55.920 | upon which you put weight.

01:59:57.440 | How much weight can you put on it?

01:59:59.400 | You put a trillion, 10 trillion, 100 trillion, a quadrillion.

02:00:04.240 | How much weights on the bedrock in Manhattan?

02:00:07.940 | Think about a hundred story buildings.

02:00:10.380 | So the real key there is the foundational asset

02:00:15.260 | needs to be there at all.

02:00:16.680 | So the fact that you can create a hundred trillion dollar

02:00:20.720 | layer one that would stand for a hundred years,

02:00:23.380 | that is the revolutionary breakthrough first time.

02:00:27.460 | And the fact that it's ethical.

02:00:29.540 | It's ethical and it's common property,

02:00:32.060 | global permissionless.

02:00:33.740 | Extremely unlikely that would happen.

02:00:36.320 | People tried 50 times before and they all failed.

02:00:39.200 | They tried 15,000 times after,

02:00:41.800 | and they've all generally failed.

02:00:44.240 | 98% have failed and a couple have been less successful.

02:00:48.600 | But for the most part, that's an extraordinary thing.

02:00:53.600 | Just really quickly pause just to define some terms.

02:00:57.000 | If people don't know, layer one that Michael's referring to

02:01:01.880 | is in general what people know of

02:01:05.820 | as the Bitcoin technology originally defined,

02:01:09.720 | which is the blockchain.

02:01:11.600 | There's a consensus mechanism of proof of work,

02:01:14.360 | a low number of transactions,

02:01:16.140 | but you can move a very large amount of money.

02:01:21.140 | The reason he's using the term layer one

02:01:24.280 | is now that there's a lot of ideas of layer two technologies

02:01:27.440 | that built on top of this bedrock

02:01:29.800 | that allow you to move a much larger number of transactions.

02:01:33.580 | So sort of higher frequency,

02:01:39.240 | I don't know what terminology you want to use,

02:01:41.100 | but basically be able to use now

02:01:43.340 | something that is based on Bitcoin to then buy stuff,

02:01:48.000 | be a consumer, to transfer money, to use it as currency.

02:01:51.420 | Just to define some terms.

02:01:54.800 | - Yeah.

02:01:56.600 | So the layer one is the foundation

02:02:00.040 | for the entire cyber economy.

02:02:02.720 | And we don't want it to move fast.

02:02:06.760 | What we want is immortality,

02:02:10.560 | immortal, incorruptible, indestructible, right?

02:02:15.800 | That's what you want, integrity from the layer one.

02:02:18.880 | Now there's layer two and layer three,

02:02:21.000 | and layer two I would define as an open, permissionless,

02:02:25.040 | non-custodial protocol that uses

02:02:30.000 | the underlying layer one token as its gas fee.

02:02:34.360 | - So what's custodial mean

02:02:35.920 | and how does the different markets,

02:02:38.600 | like is lightning network?

02:02:40.240 | - So lightning network would be an example

02:02:42.040 | of a layer two, non-custodial.

02:02:44.640 | So the lightning network will sit on top of layer one.

02:02:49.560 | It'll sit on top of Bitcoin.

02:02:51.560 | And it solves the, what you want to do

02:02:53.880 | is solve the problem of, it's well and fine.

02:02:57.000 | I don't want to move a billion dollars every day.

02:02:59.360 | What I want to move is $5 a billion times a day.

02:03:04.360 | So if I want to move $5 a billion times a day,

02:03:08.200 | I don't really need to put the entire trillion dollars

02:03:12.320 | of assets at risk every time I move $5.

02:03:16.080 | All I really need to do is put $100,000 in a channel

02:03:20.240 | or a million dollars in a channel.

02:03:22.240 | And then I do 10 million transactions

02:03:24.320 | where I have a million dollars at risk.

02:03:27.000 | And of course it's kind of simple.

02:03:28.680 | If I lower my security requirement by a factor of a million,

02:03:36.060 | I can probably move the stuff a million times faster.

02:03:39.440 | And that's how lightning works.

02:03:41.440 | It's non-custodial because there's no corporation

02:03:45.960 | or custodian or counterparty you're trusting.

02:03:50.100 | Right?

02:03:50.940 | There's the risk of moving through the channel,

02:03:53.380 | but lightning is an example of how I go

02:03:57.700 | from 350,000 transactions a day

02:04:00.540 | to 350 million transactions a day.

02:04:03.300 | So on that layer too, you could move the Bitcoin

02:04:06.060 | in seconds for fractions of pennies.

02:04:08.640 | Now that's not the end all be all

02:04:11.140 | because the truth is there are a lot of open protocols.

02:04:14.700 | Lightning probably won't be the only one.

02:04:16.860 | You know, there's a open market competition

02:04:18.980 | of other permissionless open source protocols

02:04:21.980 | to do this work.

02:04:23.700 | And in theory, any other crypto network

02:04:28.700 | that was deemed to be property, deemed to be non-security,

02:04:33.780 | you could also think of as potentially

02:04:36.180 | a layer two to Bitcoin.

02:04:38.100 | Right?

02:04:38.940 | There's a debate about are there any and what are they?

02:04:40.980 | And we can leave that for a later time.

02:04:43.420 | - But why do you think of them as layer two

02:04:46.620 | as opposed to contending for layer one?

02:04:49.520 | - Yeah, actually, if they're using their own token,

02:04:53.540 | then they are layer one.

02:04:54.940 | If you create an open protocol that uses the Bitcoin token

02:04:58.380 | as the fee, then it becomes a layer two.

02:05:02.420 | - Okay.

02:05:03.260 | - Right?

02:05:04.080 | Bitcoin itself, right, incentivizes its own transactions

02:05:07.500 | with its own token and that's what makes it layer one.

02:05:10.560 | - Okay, what's layer three then?

02:05:13.920 | - Layer three is a custodial layer.

02:05:16.380 | So if you wanna move Bitcoin in milliseconds for free,

02:05:20.500 | you move it through Binance or Coinbase or Cash App.

02:05:26.220 | So this is a very straightforward thing.

02:05:27.860 | I mean, it seems pretty obvious when you think about it

02:05:30.500 | that there are gonna be hundreds of thousands

02:05:32.700 | of layer threes.

02:05:34.520 | There may be dozens of layer twos.

02:05:36.860 | There might, I mean, lightning is A1,

02:05:38.700 | but it's not the only one.

02:05:39.980 | Anybody can invent something, right?

02:05:42.740 | And we can have this debate about custodial, non-custodial.

02:05:47.740 | - Don't you think there's a monopolization possibilities

02:05:55.100 | at layer three?

02:05:56.600 | So, you know, coin, you mentioned Binance, Coinbase,

02:06:02.620 | what if they start to dominate

02:06:04.740 | and basically everybody's using them, practically speaking,

02:06:08.580 | and then it becomes too costly to memorize

02:06:11.980 | the private key in your brain?

02:06:15.220 | I mean, or like a cold storage of layer one technology.

02:06:19.620 | - The idealist fear the layer threes because they think,

02:06:23.380 | and especially they detest, they would detest a bit,

02:06:28.380 | there's almost like a layer four, by the way,

02:06:30.380 | if you want to.

02:06:31.220 | A layer four would be, I've got Bitcoin on an application,

02:06:34.980 | but I can't withdraw it.

02:06:37.740 | So I've got an application that's backed by Bitcoin,

02:06:40.580 | but the Bitcoin is sealed.

02:06:42.660 | It's a proprietary example.

02:06:44.340 | And I'll give you an example of that.

02:06:45.620 | That would be like a grayscale.

02:06:48.620 | If I own a share of GBTC, and so I own a security,

02:06:53.620 | actually, you know, you could own MSTR.

02:06:57.340 | If you own a security or you own a product

02:06:59.580 | that has Bitcoin embedded in it,

02:07:01.360 | you get the benefits of Bitcoin,

02:07:03.980 | but you don't have the ability to withdraw the asset.

02:07:07.580 | - So you get out of the security market at layer four?

02:07:10.740 | Am I understanding this correctly?

02:07:12.860 | - I don't know if I would say,

02:07:14.540 | not all securities are layer four,

02:07:17.420 | but anything that's a proprietary product

02:07:21.140 | based upon with Bitcoin embedded in it,

02:07:23.980 | where you can't withdraw the Bitcoin

02:07:26.580 | is another application of Bitcoin.

02:07:29.100 | So if you think about different ways you can use this,

02:07:33.660 | you can either stay completely on the layer one

02:07:36.340 | and use the base chain for your transactions,

02:07:39.300 | or you can limit yourself to layer one

02:07:42.020 | and layer two lightning.

02:07:43.820 | And the purist would say, we stay there,

02:07:46.020 | get your Bitcoin off the exchange.

02:07:48.580 | But you could also go to the layer three.

02:07:50.940 | When Cash App supported Bitcoin,

02:07:53.900 | they made it very easy to buy it.

02:07:55.540 | And then they gave you the ability to withdraw.

02:07:57.780 | When PayPal, or I think Robinhood let you buy it,

02:08:00.860 | they wouldn't let you withdraw it.

02:08:01.940 | And there was a big community uproar.

02:08:03.540 | And people want, they want these layer threes

02:08:07.060 | to make it possible to withdraw the Bitcoins.

02:08:09.300 | You can take it to your own private wallet

02:08:11.820 | and get it off the exchange.

02:08:14.220 | I think the answer to the question of,

02:08:15.940 | well, is corruption possible?

02:08:17.820 | Corruption is possible in all human institutions

02:08:22.620 | and all governments everywhere.

02:08:25.060 | The difference between digital property

02:08:27.260 | and physical property is when you own a building

02:08:30.180 | in Los Angeles and the city politics turn against you,

02:08:34.780 | you can't move the building.

02:08:36.940 | And when you own a share of a security,

02:08:40.740 | that's like a US traded security,

02:08:43.180 | and you wish to move to some other country,

02:08:46.580 | you can't take the security with you either.

02:08:50.660 | And when you own a bunch of gold

02:08:52.180 | and you try to get through the airport,

02:08:53.580 | they might not let you take it.

02:08:55.860 | So Bitcoin is advantageous versus all those

02:09:00.860 | because you actually do have the option

02:09:03.100 | to withdraw your asset from the exchange.

02:09:06.460 | And if you had Bitcoin with Fidelity

02:09:09.420 | and you had shares of stock with Fidelity,

02:09:11.820 | and if you had bonds and sovereign debt with Fidelity,

02:09:15.700 | and if you own some mutual funds

02:09:20.180 | and some other random limited partnerships with Fidelity,

02:09:23.500 | none of those things can be removed from the custodian,

02:09:26.180 | but the Bitcoin, you can take off the exchange,

02:09:30.060 | you can remove from the custodian.

02:09:31.820 | So-

02:09:32.660 | It's still possible though.

02:09:35.980 | There's a deterrent.

02:09:37.060 | There's a deterrent that's an anti-corrupting element.

02:09:40.300 | And the phrase is an armed society is a polite society.

02:09:43.800 | Right, because you have the optionality

02:09:47.620 | to withdraw all your assets from the crypto exchange,

02:09:52.100 | you can enforce fairness.

02:09:54.100 | And at the point where you disagree with their policies,

02:09:57.360 | you can within an hour,

02:09:59.100 | move your assets to another counterparty

02:10:01.740 | or take personal custody of those assets.

02:10:04.660 | And you don't have that option

02:10:06.660 | with most other forms of property.

02:10:08.460 | Maybe you don't have as much optionality

02:10:11.820 | with any other form of property on earth.

02:10:13.580 | And so what makes digital property distinct

02:10:17.480 | is the fact that it has the most optionality for custody.

02:10:22.300 | Now, coming back to this digital energy issue,

02:10:25.120 | the real key point is the energy moves in milliseconds

02:10:28.980 | for free on layer threes.

02:10:32.100 | It moves in seconds or less than seconds on layer twos.

02:10:35.600 | It moves in minutes on the layer one.

02:10:39.320 | And I don't think it makes any sense to even think about

02:10:43.600 | trying to solve all three problems on the layer one

02:10:46.720 | because it's impossible to achieve the security

02:10:49.640 | and the incorruptibility and immortality

02:10:53.000 | if you try to build that much speed

02:10:55.180 | and that functionality and performance.

02:10:57.340 | In fact, if you come back to the New York model,

02:11:01.460 | you really wanted a block of granite,

02:11:03.720 | a building and a company.

02:11:06.000 | That's what makes the economy, right?

02:11:08.600 | If I said to you, you're gonna build a building,

02:11:11.400 | but you can only have one company in it

02:11:13.000 | for the life of the building,

02:11:14.520 | it would be very fragile, like very brittle.

02:11:17.660 | What company a hundred years ago is still relevant today?

02:11:21.360 | You want all three layers

02:11:22.900 | because they all oscillate at different frequencies.

02:11:26.280 | And there's a tendency to think,

02:11:29.480 | well, it's gotta be this L1 or that L1, not really.

02:11:33.840 | And sometimes people think,

02:11:34.920 | well, I don't really want any L3.

02:11:38.480 | But companies, it's not an even or.

02:11:41.320 | Companies are better than crypto asset networks

02:11:45.560 | at certain things.

02:11:46.960 | If you want complexity, you wanna implement complexity

02:11:50.080 | or you wanna implement compliance or customer service,

02:11:55.080 | companies do these things well.

02:11:57.640 | We know you couldn't decentralize Apple or Netflix

02:12:04.120 | or even YouTube.

02:12:06.140 | The performance wouldn't be there

02:12:08.400 | and the subtlety wouldn't be there.

02:12:10.000 | And you can't really legally decentralize

02:12:14.080 | certain forms of banking and insurance

02:12:16.240 | because they will become illegal

02:12:18.080 | in the political jurisdiction they're in.

02:12:19.780 | So unless you're a crypto anarchist

02:12:22.340 | and you believe in no companies and no nation states,

02:12:25.860 | which is just not very practical, not anytime soon.

02:12:31.960 | Once you allow that nation states will continue

02:12:34.640 | and companies have a role,

02:12:36.880 | then the layered architecture follows

02:12:40.280 | and the free market determines who wins.

02:12:45.280 | For example, there are layer threes

02:12:48.360 | that let you acquire Bitcoin and withdraw Bitcoin.

02:12:52.600 | There are other applications that let you acquire

02:12:56.720 | but not withdraw it.

02:12:58.400 | And they don't get the same market share,

02:13:01.500 | but they might give you some other advantage.

02:13:04.400 | There are certain layer threes like Jack Dorsey's Cash App

02:13:08.680 | where they just incorporated Lightning,

02:13:11.280 | an implementation of it.

02:13:12.760 | So-

02:13:13.720 | - Into Cash App.

02:13:16.580 | - So that makes it advantageous

02:13:19.400 | versus an application that doesn't incorporate Lightning.

02:13:23.780 | If you think about the big picture,

02:13:27.400 | the big picture is 8 billion people with mobile phones

02:13:30.640 | served by a hundred million companies

02:13:33.120 | doing billions of transactions an hour.

02:13:37.000 | And the companies are settling with each other

02:13:42.000 | on the base layer in blocks of 80 million at a time.

02:13:46.440 | And then the companies are trading with the consumers,

02:13:50.440 | right?

02:13:51.440 | In proprietary layers, like layer three.

02:13:55.720 | And then on occasion,

02:13:58.020 | people are shuffling assets across custodians

02:14:01.040 | with Lightning layer two,

02:14:02.800 | because you don't wanna pay $5 to move $50.

02:14:05.720 | You wanna pay a 20th of a penny to move $50.

02:14:10.320 | And so all of these things create efficiency in the economy.

02:14:15.320 | And Lex, if you wanna consider how much efficiency,

02:14:19.340 | if you gave me a billion dollars in 20 years,

02:14:22.360 | I couldn't find a way to trade with another company

02:14:25.560 | or a counterparty in Nigeria.

02:14:27.360 | Like no amount of money.

02:14:31.600 | Give me $10 billion.

02:14:33.000 | I couldn't do it

02:14:34.200 | because you get shut down at the banking level.

02:14:38.240 | You can't link up a bank in Nigeria

02:14:40.560 | with the bank in the US.

02:14:42.480 | You get shut down at this credit card level

02:14:45.040 | because they don't have the credit card

02:14:46.560 | so they won't clear.

02:14:48.240 | You get shut down at the compliance FCPA level

02:14:53.240 | because you wouldn't be able to implement a system

02:14:58.240 | that interfaced with somebody else's system

02:15:01.080 | if it's not in the right political jurisdiction.

02:15:04.160 | On the other hand, three entrepreneurs in Nigeria

02:15:06.840 | on the weekend could create a website

02:15:09.480 | that would trade in this lightning economy

02:15:12.200 | using open protocols without asking anybody's permission.

02:15:16.400 | So you're talking about something

02:15:17.680 | that's like a million times cheaper,

02:15:20.240 | less friction and faster to do it

02:15:24.120 | if you wanna get money to move.

02:15:27.680 | What do you think that looks like

02:15:28.840 | so that now there's a war going on in Ukraine,

02:15:31.840 | there's other wars, Yemen, going on throughout the world

02:15:35.280 | in this most difficult of states

02:15:40.280 | the nation can be in, which is at war,

02:15:43.300 | civil war or war with other nations.

02:15:46.580 | What's the role of Bitcoin in this context?

02:15:50.600 | I mean, Bitcoin's a universal trust protocol, right?

02:15:55.160 | A universal energy protocol, if you will.

02:15:58.400 | English is one.

02:15:59.520 | What I see is a bunch of fragmentation of applications.

02:16:04.440 | For example, the Russian payment app

02:16:07.560 | is not gonna work in Ukraine.

02:16:09.420 | The Ukraine payment app is not gonna work in Russia.

02:16:12.000 | The US payment apps won't work either of those places

02:16:15.560 | as far as I know.

02:16:17.000 | So, and in Argentina, their payment app

02:16:21.040 | may not work in certain parts of Africa.

02:16:23.820 | So what you have is different local economies

02:16:28.820 | where people spin up their own applications

02:16:31.940 | compliant with their own local laws

02:16:35.100 | or in war zones, not compliant, but just spinning up.

02:16:40.100 | So how do you build something that's not compliant?

02:16:44.500 | What is the revolutionary act here

02:16:47.860 | when you don't agree with the government

02:16:50.580 | or you want to free yourself from the constraints?

02:16:52.700 | So here's the thing.

02:16:54.700 | When a nation is really at war,

02:16:56.720 | especially if it's an authoritarian regime,

02:17:01.460 | it's going to try to control the,

02:17:03.340 | like lock everything down, the spread of information.

02:17:06.380 | How do you break through that?

02:17:07.660 | Do you do the thing that you mentioned,

02:17:09.100 | which is you have to build another app, essentially,

02:17:11.900 | that allows you the flow of money

02:17:14.420 | outside the legal constraints

02:17:16.860 | placed on you by the government?

02:17:18.020 | So basically break the law.

02:17:21.980 | Is that possible?

02:17:22.820 | Metaphorically speaking,

02:17:23.640 | if you want to break out of the constraints of your culture,

02:17:25.820 | you learn to speak English.

02:17:27.900 | For example, it's not illegal to speak English,

02:17:29.980 | or even if it is, right?

02:17:31.540 | Doesn't matter, but English works everywhere in the world

02:17:35.100 | if you can speak it, and then you can tap into

02:17:38.020 | a global commerce and intelligence network.

02:17:41.780 | So Bitcoin is a language, so you learn to speak Bitcoin

02:17:45.340 | or you learn to speak Lightning,

02:17:47.180 | and then you tap into that network

02:17:49.500 | in whatever manner you can.

02:17:53.060 | - But the problem is it's still very difficult

02:17:54.660 | to move Bitcoin around in Russia and Ukraine now,

02:17:58.220 | during war, and there was a sense to me

02:18:01.740 | that the cryptocurrency in general could be the savior

02:18:06.300 | for helping people.

02:18:07.140 | There's millions of refugees that are moving all around.

02:18:10.860 | It's very difficult to move money around

02:18:15.860 | in that space to help people.

02:18:18.140 | - I think we're very early.

02:18:19.860 | Like, we're very embryonic here.

02:18:22.220 | If you look at the--

02:18:23.340 | - Who's we, sorry?

02:18:24.180 | Are we as a human civilization,

02:18:25.660 | or are we operating in the cryptocurrency space?

02:18:28.340 | - I think the entire crypto economy is very embryonic,

02:18:32.700 | and the human race's adoption of it is embryonic.

02:18:36.540 | We're like 1%, 2% down that adoption curve.

02:18:39.980 | If you take Lightning, for example,

02:18:43.380 | the first real commercial applications of Lightning

02:18:46.940 | are just in the last 12 months.

02:18:48.940 | So we're like year one.

02:18:50.460 | We might be approaching year two

02:18:52.780 | of commercial Lightning adoption.

02:18:54.380 | And if you look at Lightning adoption,

02:18:56.980 | Lightning's not built into Coinbase,

02:18:59.660 | it's not built into Binance, it's not built into FTX.

02:19:03.020 | Cash App just implemented the first implementation,

02:19:07.780 | but not all the features are built into it.

02:19:09.500 | There's a few dozen,

02:19:11.900 | a dozen Lightning wallets circulating out there.

02:19:15.220 | So I think that we're probably gonna be 36 months

02:19:19.100 | of software development,

02:19:22.060 | at the point that every Android phone and every iPhone

02:19:26.700 | has a Bitcoin wallet or a crypto wallet in it of sorts.

02:19:31.700 | That's a big deal.

02:19:34.340 | If Apple embraced Lightning, that's a big deal.

02:19:37.940 | - So the adoption is the thing,

02:19:40.020 | like in a war zone adoption,

02:19:44.140 | the people who struggle the most in war

02:19:46.820 | are people who weren't doing that great

02:19:49.580 | before the war started.

02:19:51.100 | They don't have the technological sophistication.

02:19:53.180 | The hackers and all those kinds of people will find a way.

02:19:56.300 | It's just regular people who are just struggling

02:19:59.500 | to make day by day living.

02:20:01.740 | And so if the adoption permeates the entire culture,

02:20:05.540 | then you can start to move money around

02:20:08.380 | in the digital space.

02:20:13.980 | If you can psychoanalyze Jack Dorsey for a second.

02:20:17.300 | So he's one of the early adopters,

02:20:18.860 | or he's one of the people pushing the early adoption,

02:20:21.420 | this layer three, so inside Cash App.

02:20:25.180 | What do you make of the man of this decision

02:20:29.380 | as a business owner, as somebody playing in this space?

02:20:32.980 | Why did he do it?

02:20:35.820 | And what does that mean for others at this scale

02:20:40.300 | that might be doing the same?

02:20:41.500 | So incorporating lightning networking,

02:20:43.380 | incorporating Bitcoin into their products.

02:20:46.380 | I think he's been pretty clear about this.

02:20:49.300 | He feels that Bitcoin is an instrument

02:20:51.060 | of economic empowerment for billions of people

02:20:53.980 | that are unbanked and have no property rights in the world.

02:20:58.980 | If you want to give an incorruptible bank

02:21:07.620 | to 8 billion people on the planet,

02:21:11.220 | that's the same as asking the question,

02:21:14.980 | how do you give a full education through PhD

02:21:19.780 | to 8 billion people on the planet?

02:21:22.540 | And the answer is a digital version

02:21:26.500 | of the 20th century thing running on a mobile phone.

02:21:29.460 | And Bitcoin is a bank in cyberspace,

02:21:32.460 | is run by incorruptible software,

02:21:34.140 | and it's for everybody on earth.

02:21:36.180 | - So I think when Jack looks at it,

02:21:37.540 | he's very sensitive to the plight of everybody in Africa.

02:21:40.380 | You look at Africans, right?

02:21:42.580 | Like you're gonna give them banks,

02:21:43.940 | you're not gonna put a bank branch on every corner.

02:21:45.780 | That's an obscene waste of energy.

02:21:47.940 | You're not gonna run copper wires across the continent.

02:21:50.500 | That's an obscene waste of energy.

02:21:52.420 | You're not gonna give them gold.

02:21:56.140 | So how are you going to provide people with a decent life?

02:22:02.780 | The metaphor I think is relevant here,

02:22:05.820 | the biological metaphor, Lex, is a type one diabetic.

02:22:09.300 | If you're a type one diabetic, you can't form fat.

02:22:12.900 | And if you can't form fat,

02:22:14.700 | then you can't store excess energy.

02:22:16.660 | So that means that, I mean,

02:22:19.220 | fat is the ultimate organic battery.

02:22:21.300 | And if you've got 30 pounds of it,

02:22:22.780 | you can go 60 days without eating.

02:22:24.980 | But if you can't generate insulin,

02:22:27.540 | you can't form fat cells.

02:22:29.260 | And if you can't form fat cells and store energy,

02:22:32.180 | then you can eat yourself to death.

02:22:34.300 | I mean, you will eat and you will die.

02:22:36.380 | You'll starve to death.

02:22:37.860 | So the lack of property rights

02:22:40.460 | is like being a type one diabetic.

02:22:43.340 | And so if you look at most people everywhere in the world,

02:22:46.900 | they don't have property rights,

02:22:50.820 | they don't have an effective bank,

02:22:52.460 | and their currency is broken.

02:22:54.860 | Like what are the two things that in theory

02:22:58.300 | would serve as the equivalent of an organic battery

02:23:03.660 | or an economic battery to civilization?

02:23:05.740 | It would be, I have a currency which holds its value

02:23:09.100 | and I can store it in a bank.

02:23:10.580 | So a risk-free currency derivative.

02:23:15.580 | I pay you your money, you take your life savings,

02:23:21.380 | you put it in the bank, you save up for your retirement,

02:23:24.020 | you'll have happily ever after.

02:23:25.300 | That's the American dream, right?

02:23:28.180 | That's the idyllic situation.

02:23:30.740 | The real situation is there are no banks,

02:23:33.860 | you can't get a bank account.

02:23:35.620 | So I give you your pay in currency

02:23:38.940 | and then I double the supply and I give it to my cousin

02:23:42.260 | or I give it to whatever cause I want

02:23:44.180 | or I use it to buy weapons.

02:23:45.620 | And then you find a loaf of bread cost triple next month

02:23:48.860 | is what it costs.

02:23:50.020 | And your life savings is worthless.

02:23:53.140 | And so in that environment,

02:23:55.300 | everybody's ripped back to Stone Age barter.

02:23:58.220 | And the problem with that even Stone Age barter

02:24:00.780 | is you're gonna carry your life savings on your back.

02:24:03.820 | And what happens when the guy with a machine gun

02:24:05.380 | points it at your head and just takes your life savings.

02:24:07.580 | So I think from Jack's point of view,

02:24:11.380 | he thinks that life is, this is maybe too strong,

02:24:15.340 | but these are my words, life is hopeless

02:24:17.620 | for a lot of people and Bitcoin is hope.

02:24:20.740 | Because it gives everyone an engineered,

02:24:25.980 | an engineered monetary asset that's a bearer instrument.

02:24:30.980 | And it gives them a bank on their mobile phone.

02:24:35.740 | And they don't have to trust their government

02:24:40.220 | or another counterparty with their life force.

02:24:45.220 | So there's a secondary thing I think he's interested in,

02:24:50.860 | which is the first thing is the human rights issue.

02:24:53.980 | And the second thing would be the friction

02:24:57.780 | to trade cross borders is so great.

02:25:02.300 | You know, you like AI, so I'll give you a beautiful notion.

02:25:10.180 | Maybe one day there'll be an artificially intelligent

02:25:14.180 | creature in cyberspace that is self-sufficient and rich.

02:25:18.940 | - Like that we would have sovereignty.

02:25:23.900 | - Can a robot own money or property?

02:25:28.900 | How about can a Tesla car?

02:25:30.580 | Can I actually put enough money in a car

02:25:33.580 | for it to drive itself and maintain itself forever?

02:25:36.300 | Or can I create an artificially intelligent creature

02:25:39.700 | in cyberspace that is endowed such that it would live

02:25:43.780 | a thousand years and continue to do its job, right?

02:25:48.020 | You know, we have a word for that in the real world

02:25:50.460 | it's institution, Harvard, Cambridge, Stanford, right?

02:25:54.180 | There are institutions with endowments

02:25:56.060 | that go on in perpetuity.

02:25:58.660 | But what if I wanted to perpetuate a software program?

02:26:03.660 | And with something like digital property

02:26:09.420 | with Bitcoin and lightning, you could do it.

02:26:12.460 | And on the other hand, with banks and credit cards,

02:26:19.740 | you couldn't, right?

02:26:22.140 | You couldn't ever.

02:26:23.220 | So you can create things that are beautiful and lasting.

02:26:28.100 | And what's the difference in speed?

02:26:31.540 | Well, so I can either trade with everybody in the world

02:26:36.540 | at the speed of light, friction-free in 24 hours,

02:26:40.820 | writing a Python script, or I can spend $100 billion

02:26:45.940 | to trade with a few million people in the world

02:26:49.220 | after it takes them six months of application.

02:26:53.040 | The impedance is like a 10 million to one difference, right?

02:26:58.040 | And the metaphors are literally like launching something

02:27:02.100 | in orbit versus almost orbit or vacuum sealing something.

02:27:07.100 | Does it last forever and does it orbit forever

02:27:10.420 | or does it go up and come down and burn up, right?

02:27:14.140 | And I think Jack is interested in, you know,

02:27:19.500 | putting freedom in orbit, right?

02:27:21.660 | Putting freedom.

02:27:23.500 | Putting freedom in orbit.

02:27:24.420 | And he said it many times.

02:27:25.940 | He said, "The internet needs a native currency."

02:27:29.420 | Yeah.

02:27:30.300 | Right?

02:27:31.140 | And no political construct or security

02:27:35.500 | can be a native currency.

02:27:37.360 | You need a property and you need a property

02:27:39.540 | that can be moved a million times a second.

02:27:42.100 | Can you oscillate it at 10 kilohertz or a hundred kilohertz?

02:27:46.940 | And the answer is only if it's a pure digital construct,

02:27:51.940 | permissionless and open.

02:27:55.060 | And so I think he's enthusiastic as the technologist

02:27:58.860 | and he's enthusiastic as the humanitarian.

02:28:01.580 | And what he's doing is support both those areas.

02:28:05.900 | He's supporting the Bitcoin and the Lightning protocol

02:28:08.380 | by building them into his products,

02:28:09.620 | but he's also building the applications,

02:28:12.900 | which you need at the cash app level

02:28:15.580 | in order to commercialize and deliver the functionality

02:28:19.340 | and the compliance necessary.

02:28:20.700 | And they're related.

02:28:22.760 | - And I should also say, he's just a fascinating person.

02:28:28.020 | For a random reason that I couldn't even explain,

02:28:31.940 | if I tried, I met him a few days ago

02:28:35.580 | and gave him a great big hug in the middle of nowhere.

02:28:38.420 | There was no explanation.

02:28:39.980 | He just appeared.

02:28:41.340 | That's a fascinating human.

02:28:42.720 | His relationship with art, with the world,

02:28:45.420 | with human suffering, with technology is fascinating.

02:28:48.840 | I don't know what his path looks like,

02:28:53.660 | but it's interesting that people like that exist.

02:28:56.100 | And in part, I'm saddened that he no longer

02:28:59.300 | is involved with Twitter directly as its CEO,

02:29:03.580 | because I was hoping something inside Twitter

02:29:06.020 | would also integrate some of these ideas

02:29:09.900 | of what you're calling digital energy

02:29:13.740 | to see how social networks,

02:29:15.420 | something I'm really interested in and passionate about,

02:29:17.820 | could be transformed.

02:29:19.460 | Let me ask you just for educational purposes,

02:29:21.940 | what's the, can you please explain to me

02:29:26.700 | what Web3 and the beef between Jack and Marc Andreessen is?

02:29:30.580 | Exactly.

02:29:31.500 | Did you see what happened?

02:29:33.140 | Sorry to have you analyze Twitter like it's Shakespeare,

02:29:36.400 | but can you please explain to me

02:29:38.900 | why there was any drama over this topic?

02:29:42.740 | First of all, Web3 is a term that's used to refer

02:29:47.740 | to the part of the economy that's token finance.

02:29:51.740 | So if I'm launching an application and my idea

02:29:54.860 | is to create a token along with the application

02:29:58.820 | and issue the token to the community

02:30:00.540 | so as to finance the application and build support for it,

02:30:04.140 | I think that that's the most common interpretation

02:30:09.540 | of Web3.

02:30:10.380 | There are other interpretations too.

02:30:12.380 | So I'm just gonna refer to that one.

02:30:14.420 | And I think the beef, in a nutshell,

02:30:17.180 | not articulated, but I'll articulate it,

02:30:19.180 | is whether or not you should focus all your energy

02:30:23.620 | creating applications on top of an ethical digital property

02:30:26.940 | like Bitcoin, or whether you should attempt

02:30:30.460 | to create a competitor to it,

02:30:33.500 | which generally would be deemed as a security

02:30:39.020 | by the Bitcoin community.

02:30:40.560 | So I'm gonna put on my Bitcoin hat here.

02:30:42.660 | Yeah.

02:30:43.480 | All the tokens that are,

02:30:44.860 | if it's driven by a venture capitalist,

02:30:46.820 | well, it's a security.

02:30:48.000 | If there's a CEO and a CTO, it's a security.

02:30:50.900 | All these projects, they're companies,

02:30:53.700 | foundations are companies.

02:30:55.700 | If you call them a project or a foundation,

02:30:58.180 | it doesn't make it not a security.

02:31:00.660 | They're all in essence collections of individuals

02:31:04.500 | that are issuing equity in the form of a token.

02:31:08.420 | And if there's a pre-mine, an IPO, an ICO, a foundation,

02:31:13.420 | or any kind of protocol where there's a group of engineers

02:31:18.980 | that have influence over it,

02:31:25.480 | then to a securities lawyer, or to most Bitcoiners,

02:31:30.480 | and definitely to anybody that's steeped in securities law,

02:31:33.440 | you look at it and say, "Well, that passes the Howey test.

02:31:36.920 | It looks like a security.

02:31:39.640 | It should be sold to the public

02:31:41.220 | pursuant to disclosures and regulations."

02:31:45.900 | And you're just ducking the IPO process.

02:31:49.600 | And so now we get back to the ethical issue.

02:31:53.760 | Well, the ethical issue is,

02:31:56.940 | if you're trading it as a commodity

02:31:58.760 | and representing it as a commodity,

02:32:00.980 | while truthfully it's a security,

02:32:03.820 | then it's a violation of ethics rules,

02:32:05.620 | and it's probably illegal.

02:32:07.060 | - Well, you keep leaning on this.

02:32:08.720 | Let me push back on that part.

02:32:10.020 | Maybe you can educate me.

02:32:10.980 | But you keep leaning on this line of securities law

02:32:14.220 | as if it, with all due respect to lawyers,

02:32:18.720 | as if that line somehow defines what is and isn't ethical.

02:32:23.720 | I think there's a lot of correlation, as you've discussed.

02:32:27.460 | But I'd like to leave the line aside.

02:32:31.300 | If the law calls something a security,

02:32:33.660 | it doesn't mean, in my eyes, that it is unethical.

02:32:38.460 | I mean, there could be some technicalities,

02:32:40.460 | and lawyers and people play games

02:32:42.780 | with this kind of stuff all the time.

02:32:44.200 | But I take your bigger point that if there's a CEO,

02:32:47.420 | there's a project lead that's fundamentally,

02:32:49.620 | well, that to you is fundamentally different

02:32:51.860 | than the structure of Bitcoin.

02:32:54.620 | - It's not that creating securities is unethical.

02:32:57.380 | I created security.

02:32:58.280 | I took a company public, right?

02:33:01.000 | That's not the unethical part.

02:33:02.260 | It's completely ethical to create securities.

02:33:05.060 | Block is a security.

02:33:06.220 | All companies are securities.

02:33:08.220 | The unethical part is to represent it as property

02:33:10.980 | when it's a security, and to promote it or trade it as such.

02:33:15.980 | - This whole promotion, that's also a technical thing,

02:33:20.800 | 'cause you're, like, what counts and not as promotion

02:33:25.800 | is a legal thing, and you get in trouble

02:33:28.020 | for all these things.

02:33:28.840 | But that's the game that lawyers play.

02:33:31.820 | There's an ethical thing here, which is, like,

02:33:34.260 | what's right to promote and not?

02:33:36.120 | To me, propaganda is unethical,

02:33:40.460 | but it's usually not illegal.

02:33:42.800 | - If you roll the clock back 20 years, right?

02:33:48.460 | All the boiler room pump and dump schemes

02:33:50.580 | were all about someone pitching a penny stock,

02:33:53.300 | selling Swampland in Florida.

02:33:55.660 | And if you roll the clock back forward 20 years,

02:33:59.720 | and I create my own company,

02:34:01.860 | and I represent it as the same thing,

02:34:03.740 | and I don't make the disclosures, right?

02:34:06.220 | You're just one step removed from the boiler room scheme,

02:34:10.540 | and that's what's distasteful about it.

02:34:13.760 | There are ways to sell securities to the public,

02:34:15.940 | but there are expectations.

02:34:18.580 | Maybe we could forget about whether the security laws

02:34:22.620 | are ethical or not, right?

02:34:24.540 | We'll leave that alone.

02:34:25.860 | We'll just start with the biblical definition of ethics.

02:34:29.500 | - Yes. - Don't lie, cheat, or steal.

02:34:31.860 | So if I'm going to sell something to you,

02:34:34.460 | I need to fully disclose what I'm selling to you, right?

02:34:38.280 | And that's a matter of great debate right now.

02:34:43.280 | And so I think that that's part of the debate.

02:34:47.160 | But the other part of the debate is

02:34:48.900 | whether or not we need more than one token.

02:34:54.280 | Like, we need at least one, right?

02:34:58.660 | We need at least one digital property

02:35:01.580 | because zero means there is no digital economy.

02:35:06.180 | And by the way, the conventional view of maximalists

02:35:10.140 | is they think there's only one and everything else isn't.

02:35:13.080 | That's not the point I'm gonna make.

02:35:14.640 | I would say we know there is at least one digital property,

02:35:19.440 | and that is Bitcoin.

02:35:20.440 | If you can create a truly decentralized,

02:35:24.980 | non-custodial, you know, bearer instrument

02:35:29.980 | that is not under the control of any organization

02:35:34.640 | that is fairly distributed,

02:35:36.980 | then you might create another or multiple,

02:35:39.500 | and there may be others out there.

02:35:42.100 | But I think that the frustration of a lot of people

02:35:47.100 | in the Bitcoin community, and I share this with Jack,

02:35:51.480 | is we could create $100 trillion of value in the real world

02:35:56.080 | simply by building applications

02:35:57.840 | on top of Bitcoin as a foundation.

02:36:02.080 | And so continually trying to reinvent the wheel

02:36:05.800 | and create competitive things

02:36:10.800 | is a massive waste of time

02:36:14.560 | and it's diversion of human creativity.

02:36:19.240 | It's like, we have an ethical good thing,

02:36:23.000 | and now we're going to try to create a third or a fourth one.

02:36:28.000 | Why?

02:36:29.020 | - Well, let's talk about it.

02:36:29.860 | So first of all, I'm with you,

02:36:31.680 | but let me ask you this interesting question,

02:36:34.360 | because we talked about properties and securities.

02:36:37.020 | Let's talk about conflict of interest.

02:36:39.480 | So you said you could advertise public,

02:36:41.840 | you have a popular Twitter account.

02:36:44.280 | It's hilarious and insightful.

02:36:48.560 | You do promote Bitcoin in a sense.

02:36:52.320 | I don't know if you would say that,

02:36:54.040 | but do you think there's a conflict of interest

02:36:56.720 | in anyone who owns Bitcoin promoting Bitcoin?

02:36:59.880 | Is it the same as you promoting the farming?

02:37:03.760 | - I would say no, there's an interest.

02:37:07.200 | I think that you can promote a property or an idea

02:37:15.320 | to the extent that you don't control it.

02:37:18.920 | I think that the point at which you start to have

02:37:22.640 | a conflict of interest is when you're promoting

02:37:25.520 | a proprietary product or a proprietary security.

02:37:29.140 | A security in general is a proprietary asset.

02:37:32.120 | So for example, if you look at my Twitter,

02:37:35.000 | you will find that I make lots of statements about Bitcoin.

02:37:38.120 | You won't ever see me making a statement that say,

02:37:40.960 | micro strategy stock will go up forever.

02:37:43.560 | I'm not promoting a security MSTR

02:37:47.560 | because at the end of the day, MSTR is a security.

02:37:51.400 | It is proprietary.

02:37:52.440 | I have proprietary interest in it.

02:37:54.680 | I have a disproportionate amount of control

02:37:58.440 | and influence on the direction.

02:38:01.040 | - The control is the problem.

02:38:02.320 | The control is the problem

02:38:03.960 | because you have interest in both.

02:38:05.920 | You can vary, if Bitcoin is as successful

02:38:09.600 | as we're talking about,

02:38:11.280 | you are very possibly can become

02:38:13.720 | the richest human on earth,

02:38:16.080 | given how much you own in Bitcoin, right?

02:38:19.360 | The wealthiest, not the richest.

02:38:20.920 | I don't know what those words mean.

02:38:22.560 | - I would benefit economically.

02:38:24.920 | - You would benefit economically.

02:38:26.280 | - That's true.

02:38:27.120 | - So the reason that's not conflict of interest

02:38:30.240 | is because the word property,

02:38:34.440 | that Bitcoin is an idea and Bitcoin is open.

02:38:40.160 | I don't control it.

02:38:41.960 | In essence, the ethical line here is,

02:38:46.000 | could I print myself 10 million more Bitcoin or not?

02:38:49.520 | - Or can anyone, right?

02:38:52.560 | It's not just you, it's can anyone.

02:38:55.600 | Because can you promote somebody else's?

02:38:57.680 | Yes, I guess you can.

02:38:58.920 | Like, can you promote us, Apple?

02:39:02.880 | - It's like, you could have a Twitter account

02:39:06.160 | where you promote oil or you promote camping

02:39:10.600 | or you promote family values or promote a carnivore diet

02:39:15.040 | or promote the Iron Man, right?

02:39:17.720 | - You're not gonna get wealthier if you promote camping

02:39:21.600 | 'cause you can't own a stake in, I mean,

02:39:23.760 | you own a lot of Bitcoin, what is that?

02:39:27.960 | Don't you own the stake in the idea of Bitcoin?

02:39:32.640 | - I would grant you that.

02:39:34.800 | But the lack of control is the fundamental ethical line

02:39:39.320 | that you just, you don't have,

02:39:41.160 | all you are is you're a fan of the idea,

02:39:43.320 | you believe in the idea and the power of the idea.

02:39:45.820 | - Yeah, I think--

02:39:47.920 | - You can't take that idea away from others.

02:39:50.400 | - Let's come back to, let me give you

02:39:52.080 | some maybe easier examples.

02:39:54.160 | If you were the head of the Marine Corps, right?

02:39:58.000 | And someone came to you and said,

02:40:01.880 | "I created Marine Coin."

02:40:03.920 | And the twist on Marine Coin is,

02:40:07.600 | I want you to tell every Marine

02:40:09.200 | that they'll get an extra Marine Coin

02:40:11.040 | when they get their next stripe.

02:40:15.160 | And then I'm gonna give you,

02:40:16.880 | I'm gonna let you buy Marine Coin now

02:40:18.800 | and then after you buy Marine Coin,

02:40:20.280 | I want you to like promote it to them, right?

02:40:25.280 | At some point, if you start to have

02:40:29.200 | a disproportional influence on it

02:40:31.680 | or if you're in a conversation

02:40:33.080 | with people with disproportionate influence

02:40:34.760 | becomes conflict of interest

02:40:36.160 | and it would make you profoundly uncomfortable, I think.

02:40:39.800 | If the head of the Marine Corps started promoting

02:40:42.120 | anything that looked like a security.

02:40:45.120 | Now, if the head of the Marine Corps

02:40:46.960 | started promoting canoeing,

02:40:48.440 | you might think he's kind of wacky,

02:40:51.680 | like maybe, like that's kind of a waste of time

02:40:54.440 | and a distraction, so,

02:40:56.040 | but to the extent that canoeing is not a security,

02:41:01.640 | not a problem unless you, you know.

02:41:03.920 | Ultimately, the issue of decentralization

02:41:07.400 | is really a critical one. - So not having a head.

02:41:10.600 | So is it something, can Bitcoin be replicated?

02:41:15.600 | So all the things that you're saying

02:41:19.960 | that make it a property, can that be replicated?

02:41:22.320 | Have any other-- - I think it's possible

02:41:23.760 | to create other crypto properties.

02:41:26.520 | - Does the having a head like of a project

02:41:31.560 | a thing that limits its ability to be a property?

02:41:35.040 | If you try to replicate a project?

02:41:38.120 | Is that the fundamental flaw?

02:41:41.480 | - Look, I think the real fundamental issue

02:41:43.760 | is you just never want it to change.

02:41:45.800 | Like, if you really want something decentralized,

02:41:51.200 | you want a genetic template that substantially

02:41:55.520 | is not gonna change for a thousand years.

02:41:58.280 | So I think Satoshi said it at one point,

02:42:00.760 | he said the nature of the software is such

02:42:02.760 | that by version 0.1, its genetic code was set.

02:42:06.480 | If there was any development team

02:42:09.800 | that's continually changing it, you know,

02:42:12.080 | on a routine basis, it becomes harder and harder

02:42:16.280 | to maintain its decentralization

02:42:18.080 | because now there's the issue

02:42:20.200 | of who's influencing the changes.

02:42:23.840 | So what you really want is a very, very simple idea, right?

02:42:30.320 | The simplest idea, I'm just gonna keep track

02:42:32.440 | of who owns 21 million parts of energy.

02:42:36.200 | And when someone proposes big functional upgrades,

02:42:40.680 | you almost don't, you don't really want that development

02:42:43.200 | to go on the base layer.

02:42:44.320 | You want that development to go on the layer threes

02:42:46.720 | because now Cash App has a proprietary set of functionality

02:42:51.720 | and it's a security.

02:42:53.880 | And if you're gonna promote the use of this thing,

02:42:57.160 | you're not gonna promote the layer three security

02:43:02.160 | because that's an edge to a given entity

02:43:05.960 | and you're trusting the counterparty.

02:43:07.520 | You're gonna promote the layer one or most the layer two.

02:43:12.400 | - Okay, so one of the fascinating things about Bitcoin,

02:43:18.600 | and sorry to romanticize certain notions,

02:43:21.320 | but Satoshi Nakamoto, that the founder is anonymous.

02:43:25.680 | Maybe you can speak to whether that's useful,

02:43:29.720 | but also I just like the psychology of that,

02:43:32.080 | to imagine that there's a human being

02:43:33.760 | that was able to create something special and walk away.

02:43:37.120 | So first, are you Satoshi Nakamoto?

02:43:40.360 | - I'm certain I'm not.

02:43:41.440 | No, actually, I think the provenance is really important.

02:43:48.760 | And if I were to look at the highlighted points,

02:43:51.680 | I think having a founder that was anonymous

02:43:55.320 | or said anonymous is important.

02:43:57.000 | I think the founder disappearing is also important.

02:43:59.920 | I think that the fact that the Satoshi coins never moved

02:44:03.400 | is also important.

02:44:04.720 | I think the lack of an initial coin offering

02:44:08.880 | is also important.

02:44:10.120 | I think the lack of a corporate sponsor is important.

02:44:14.160 | I think the fact that it traded for 15 months

02:44:16.920 | with no commercial value was also important.

02:44:21.480 | You know, I think that the simplicity of the protocol

02:44:26.480 | is very important.

02:44:29.200 | I think that the outcome of the block size wars

02:44:31.960 | is very important.

02:44:33.440 | And all of those things add up to common property.

02:44:38.440 | They're all indicators of a digital property

02:44:43.440 | as opposed to security.

02:44:45.160 | If there was a Satoshi sitting around,

02:44:47.440 | sitting on top of $50 billion worth of Bitcoin,

02:44:52.240 | I don't think it would cripple Bitcoin as property,

02:44:57.240 | but I think it would undermine its digital property.

02:45:02.240 | And if I wanted to undermine a crypto asset network,

02:45:05.680 | I would do the opposite of all those things.

02:45:08.080 | I would launch one myself.

02:45:09.840 | I would sell 25% or 50% of the general public.

02:45:13.480 | I would keep some of the initial,

02:45:15.320 | I would pre-mine some stuff or early mine it,

02:45:18.360 | and I would keep an influence on it.

02:45:20.480 | Those are all the opposite of what you would do

02:45:24.680 | in order to create common property.

02:45:28.640 | And so I see the entire story as Satoshi giving a gift

02:45:33.080 | of digital property to the human race and disappearing.

02:45:38.080 | - Do you think it was one person?

02:45:40.200 | Do you have ideas of who it could be?

02:45:41.800 | - I don't care to speculate.

02:45:45.040 | (laughs)

02:45:45.880 | - But do you think it was one person?

02:45:48.080 | - I think it was one person.

02:45:49.880 | Maybe in conjunction with a bunch of others.

02:45:51.880 | I mean, it might've been a group of people

02:45:53.480 | that were working together,

02:45:54.520 | but certainly there's a Satoshi.

02:45:56.440 | - I mean, it's just so fascinating to me

02:45:58.240 | that one person could be so brave and thoughtful.

02:46:02.080 | Or do you think a lot of his accent,

02:46:03.440 | like the block size wars,

02:46:05.280 | the decision to make a block a certain size,

02:46:08.560 | all the things you mentioned led up to the characteristics

02:46:12.000 | that make Bitcoin property.

02:46:13.960 | Do you think that's an accident

02:46:17.040 | or it was deeply thought through?

02:46:19.360 | Like how does, this is almost like a history

02:46:21.000 | of science question.

02:46:21.840 | - People tried it for, they tried 40 of them, right?

02:46:24.400 | I mean, I think there's a history of attempting

02:46:26.960 | to create something like this

02:46:28.280 | and it was tried many, many times

02:46:29.840 | and they failed for different reasons.

02:46:32.340 | And I think that it's like Prometheus tried to start a fire

02:46:35.760 | 47 times and maybe the 48th time it sparked.

02:46:39.440 | And that's how I see this.

02:46:40.840 | This is the first one that sparked

02:46:42.640 | and it sets a roadmap for us.

02:46:46.920 | And I think if you're looking for any one word

02:46:50.760 | that characterize it's fair, right?

02:46:52.600 | The whole point of the network is it's a fair launch,

02:46:55.840 | a fair distribution.

02:46:58.320 | Like, yeah, I have Bitcoin, but I bought it.

02:47:02.560 | In fact, at this point we've paid $4 billion

02:47:08.360 | of you real cash to buy it.

02:47:11.040 | If I was sitting on the same position and I had it for free,

02:47:16.040 | then there's always this question of,

02:47:19.080 | did I, or I bought it for a nickel, a coin or a penny,

02:47:21.840 | a coin, the question is, was it fair?

02:47:24.040 | And that's a very hard question to answer, right?

02:47:27.800 | Did you acquire the Bitcoin that you own fairly?

02:47:32.240 | And if you roll the clock back,

02:47:34.600 | you could have bought it for a nickel or a dime,

02:47:37.160 | but that was when it was a million times

02:47:38.880 | more likely to fail, right?

02:47:41.280 | When the risk was greater, the cost was lower.

02:47:44.600 | And then over time, the risk became lower

02:47:47.880 | and the cost became greater.

02:47:50.320 | And the real critical thing was to allow the marketplace

02:47:54.760 | absent any powerful interested actor, right?

02:47:59.120 | It's almost like if Satoshi had held a million coins

02:48:01.560 | and then stayed engaged for 10 more years,

02:48:03.640 | tweaking things in the background,

02:48:06.040 | there'd still be that question.

02:48:07.880 | But what we've got is really a beautiful thing.

02:48:11.200 | We've got a chain reaction in cyberspace

02:48:15.200 | or an ideology spreading virally in the world

02:48:19.480 | that has seasoned in a fair ethical fashion.

02:48:25.600 | Sometimes it's a very violent, brutal fashion

02:48:29.480 | with all the volatility, right?

02:48:32.040 | And there's been a lot of sound and fury along the way.

02:48:36.180 | - How do you psychoanalyze, how do you deal

02:48:39.780 | from a financial, from a human perspective

02:48:42.060 | with the volatility?

02:48:43.420 | You mentioned you could have gotten it for a nickel

02:48:45.820 | and the risk was great.

02:48:47.440 | Where's the risk today?

02:48:48.820 | What's your sense?

02:48:50.220 | - You know, we're 13 years into this entire activity.

02:48:54.100 | I think the risk has never been lower.

02:48:56.260 | I, if you look at all the risks, right?

02:48:59.100 | The risks in the early years are,

02:49:02.940 | is the engineering protocol proper?

02:49:05.020 | Like one megabyte block size, 10 minute clock frequency,

02:49:10.020 | cryptography is, first, will it be hacked or will it crash?

02:49:15.780 | 730,000 blocks and it hasn't crashed.

02:49:19.100 | Will it be hacked?

02:49:19.940 | Hasn't been hacked, but you know, it's a Lindy thing, right?

02:49:22.360 | You wait 13 years to see if it'll be hacked.

02:49:24.840 | But on the other hand, with a billion dollars,

02:49:27.860 | it's not as interesting a target as it is with a hundred

02:49:30.340 | billion and when it gets to be worth a trillion,

02:49:33.620 | then it's a bigger target.

02:49:34.700 | So, the risk has been bleeding off over time

02:49:39.700 | as the network monetized.

02:49:43.380 | I think the second question is, will it be banned?

02:49:46.700 | You couldn't know.

02:49:47.540 | It literally could have been banned at any time,

02:49:49.660 | many times early on.

02:49:51.420 | In fact, in 2013, I tweeted on that subject.

02:49:53.660 | I thought it would be banned.

02:49:55.740 | I made a very infamous tweet.

02:49:57.420 | - Infamous tweet, yeah.

02:49:58.260 | - I thought it was gonna be banned.

02:50:00.220 | In 2014, the IRS designated it as property

02:50:04.420 | and gave it property tax treatment, okay?

02:50:06.460 | So, they could have given it a tax treatment

02:50:09.740 | where you had to pay tax on the unrealized capital gains

02:50:13.940 | every year and it probably would have crushed it to death.

02:50:17.340 | Right?

02:50:18.180 | You know, so it could have been in any number of places,

02:50:23.180 | banned by a government,

02:50:25.220 | but in fact it was legitimized as property.

02:50:28.460 | And then the question is, would it be hacked

02:50:30.100 | or would it be copied?

02:50:31.020 | Will it be something better than that?

02:50:32.260 | And it was copied 15,000 times.

02:50:34.780 | And you know the story of all those.

02:50:36.620 | And they either diverged to be something totally different

02:50:41.180 | and not comparable,

02:50:42.380 | or someone trying to copy a non-sovereign bearer instrument

02:50:46.980 | store of value found that their networks crashed

02:50:50.260 | to be 1% of what Bitcoin is.

02:50:52.020 | So, now we're sitting at a point

02:50:55.980 | where all those risks are out of the way.

02:50:59.180 | I would say that year one of institutional adoption

02:51:02.660 | is it started August, 2020.

02:51:05.860 | That's when MicroStrategy bought $250 million worth

02:51:08.860 | of Bitcoin and we put that on the wire.

02:51:11.140 | We were the first publicly traded company

02:51:12.980 | to actually buy Bitcoin.

02:51:15.780 | I don't think you could have found a $5 million purchase

02:51:17.940 | from a public company before we did that.

02:51:20.540 | So, that was kind of like a gun going off.

02:51:23.740 | And then in the next 12 months,

02:51:26.460 | Tesla bought Bitcoin, Square bought Bitcoin.

02:51:30.060 | And I'd say now we're in year two of institutional adoption.

02:51:33.580 | And there are about 24,

02:51:35.580 | should be 24 publicly traded Bitcoin miners

02:51:38.100 | by the end of this quarter.

02:51:39.860 | So, you're looking at 36 publicly traded companies

02:51:43.460 | and you've got 50,

02:51:46.460 | at least in the range of $50 billion on the balance,

02:51:51.580 | of Bitcoin on the balance sheet

02:51:52.980 | of publicly traded companies,

02:51:54.980 | and hundreds of billions of dollars of market cap

02:51:59.340 | of Bitcoin exposed companies.

02:52:01.620 | So, I would say the asset,

02:52:04.540 | decade one was entrepreneurial, experimental.

02:52:09.300 | Decade two is a rotation from entrepreneurs to institutions

02:52:15.260 | and it's becoming institutionalized.

02:52:16.980 | So, maybe decade one, you go from zero to a trillion

02:52:19.420 | and decade two, you go from one trillion to a hundred trillion.

02:52:22.740 | What about governments?

02:52:24.500 | Government adoption, institutional adoption.

02:52:27.300 | Is government's important in this?

02:52:29.300 | Maybe making it some governments incorporating it

02:52:32.980 | into as a currency, into their banks,

02:52:36.660 | all that kind of stuff.

02:52:38.060 | Is that important?

02:52:39.180 | And if it is, when will it happen?

02:52:42.860 | It's not essential for the success of the asset class,

02:52:45.900 | but I think it's inevitable in various degrees over time.

02:52:50.980 | But the most likely thing to happen next

02:52:53.700 | is large acquisitions by institutional investors

02:52:58.700 | of Bitcoin as a digital gold,

02:53:03.660 | where they're just swapping out gold for digital gold

02:53:06.980 | and thinking of it like that.

02:53:08.700 | And the government entities most likely to be involved with

02:53:11.220 | that would be sovereign wealth funds.

02:53:13.220 | If you look at all the sovereign wealth funds

02:53:14.940 | that are holding a big tech stock,

02:53:17.340 | equities, the Swiss, the Norwegians,

02:53:19.980 | the Middle Easterners, if you can hold big tech,

02:53:23.700 | then holding digital gold would be,

02:53:26.700 | not far removed from that.

02:53:29.180 | That's a non-controversial adoption.

02:53:32.720 | I think there are opportunities for governments

02:53:36.540 | that are much more profound, right?

02:53:39.300 | If a government started to adopt Bitcoin

02:53:43.620 | as a treasury reserve asset,

02:53:46.660 | that's much bigger than just an asset investment.

02:53:50.260 | That's 100X bigger.

02:53:51.700 | And you could imagine that's like a trillion dollar

02:53:56.660 | opportunity, like any government that wanted to adopt it

02:53:59.340 | as a treasury reserve asset

02:54:01.140 | would probably generate trillions of dollars,

02:54:03.980 | a trillion or more of value.

02:54:06.380 | And then the thing that people think about is,

02:54:09.860 | well, will oil ever be priced in Bitcoin

02:54:13.420 | or any other export commodity?

02:54:16.260 | I think there's like $1.8 trillion

02:54:18.420 | or more of export commodities in the world.

02:54:21.980 | And right now they're all priced in dollars.

02:54:23.940 | I think that this is a colorful thing,

02:54:26.020 | but it's not really that relevant.

02:54:28.060 | Like you could sell all that stuff in dollars.

02:54:31.020 | The relevant decision that any institution makes,

02:54:33.900 | whether they're a nonprofit, a university,

02:54:36.700 | a corporation, or a government,

02:54:38.660 | is what's your treasury reserve asset?

02:54:41.340 | And if your treasury reserve asset is the peso,

02:54:44.380 | and if the peso's losing 20% or 30% of its value a year,

02:54:49.380 | then your balance sheet is collapsing within five years.

02:54:55.460 | And if the treasury reserve asset is dollars

02:55:01.100 | and currency derivatives and US treasuries,

02:55:05.340 | then you're getting your seven,

02:55:07.780 | right now it's probably 15% or more monetary inflation.

02:55:13.180 | We're running double the historic average.

02:55:15.700 | You could argue triple,

02:55:16.660 | somewhere between double and triple,

02:55:17.940 | depending upon what your metric is.

02:55:21.460 | So, do I think it'll happen?

02:55:23.340 | I think that they're conservative,

02:55:24.780 | but they have to be shocked.

02:55:25.940 | And I think there is a shock.

02:55:27.500 | The late Russian sanctions are a big shock.

02:55:32.900 | When the West sees $300 billion worth of Russian gold

02:55:36.060 | and currency derivatives, I think,

02:55:38.060 | you got the famous quote by Putin,

02:55:41.820 | we have to rethink our treasury strategies.

02:55:45.580 | And that pushes everybody toward a commodity strategy.

02:55:48.700 | What commodities do I want to hold?

02:55:50.780 | I think that's got a lot of people thinking.

02:55:53.220 | I think it's got the Chinese thinking.

02:55:55.020 | Everybody wants to be the reserve currency, right?

02:55:57.500 | So, if I buy $50 billion worth of dollars every year,

02:56:01.660 | then I buy 500 billion over a decade,

02:56:07.460 | and I probably pay $250 billion of inflation cost

02:56:12.460 | on the backs of my citizens in a decade.

02:56:18.660 | So-

02:56:20.020 | - So, inflation could be one of the sources of shock.

02:56:23.180 | And you wonder if there is a switch to Bitcoin,

02:56:27.260 | whether it will be a bang or a whimper,

02:56:29.780 | like what is the nature of the shock or the transition?

02:56:32.660 | - I think that the year 2022 is pretty catalytic

02:56:37.660 | for digital assets in general,

02:56:40.140 | and for Bitcoin in particular.

02:56:42.300 | The Canadian trucker crisis,

02:56:44.900 | I think educated hundreds of millions of people

02:56:47.260 | and made them start questioning their property rights

02:56:51.980 | and their banks.

02:56:53.300 | I think the Ukraine war was a second shock,

02:56:59.540 | but I think that the Russian sanctions was a third shock.

02:57:03.220 | - Yeah.

02:57:05.300 | - I think all three of them,

02:57:06.260 | and I think hyperinflation in the rest of the world

02:57:09.740 | is a fourth shock,

02:57:10.820 | and then persistent inflation in the US is a fifth shock.

02:57:13.880 | So, I think it's a perfect storm.

02:57:17.420 | And if you put all these events together,

02:57:20.740 | what do they signify?

02:57:21.620 | They signify the rational conclusion

02:57:24.220 | for any person thinking about this is,

02:57:27.540 | I'm not sure if I can trust my property.

02:57:31.660 | I don't know if I have property rights.

02:57:33.420 | I don't know if I can trust the bank.

02:57:35.620 | And if I'm politically at odds

02:57:38.060 | with the leader of my own country,

02:57:41.760 | I'm gonna lose my property.

02:57:43.220 | And if I'm politically at odds

02:57:45.380 | with the owner of another country,

02:57:47.800 | I'm still gonna lose my property.

02:57:49.600 | (laughs)

02:57:50.840 | And when push comes to shove,

02:57:53.060 | the banks will freeze my assets and seize them.

02:57:56.380 | And I think that that is playing out

02:58:00.060 | in front of everybody in the world,

02:58:02.160 | such that your logical response would be,

02:58:08.780 | I'm going to convert my weak currency to a strong currency.

02:58:14.960 | Like I'll convert my peso and lira to the dollar.

02:58:18.400 | I'm going to convert my weak property to strong property.

02:58:22.900 | I'm gonna sell my building downtown Moscow.

02:58:27.160 | And I'd rather own a building in New York City.

02:58:30.620 | I'd rather own in a powerful nation

02:58:33.780 | than be stuck with a building in Nigeria

02:58:37.160 | or a building in Argentina or whatever.

02:58:40.020 | So I'm gonna sell my weak properties

02:58:41.700 | to buy strong properties.

02:58:43.280 | I'm gonna convert my physical assets to digital assets.

02:58:47.100 | I'd rather own a digital building

02:58:48.820 | than own a physical building.

02:58:51.600 | Because if I had a billion dollar building in Moscow,

02:58:54.560 | who can I rent that to?

02:58:56.240 | But if I have a billion dollar digital building,

02:58:58.440 | I can rent it to anybody in any city in the world,

02:59:01.880 | anybody with money.

02:59:02.840 | And the maintenance cost is almost nothing.

02:59:06.340 | And I can hold it for a hundred years.

02:59:07.720 | Okay, so it's an indestructible building.

02:59:09.860 | And then finally, I wanna move from having my assets

02:59:14.280 | in a bank with a counterparty to self custody assets.

02:59:18.720 | And this is not just Ukraine,

02:59:21.800 | but this is like the story in Turkey, Lebanon, Syria,

02:59:25.080 | Afghanistan, Iraq, South America.

02:59:29.080 | You don't really wanna be sitting with $10 million

02:59:31.320 | in a bank in Istanbul.

02:59:33.960 | The bank's gonna freeze your money,

02:59:35.640 | convert it to lira, devalue the lira,

02:59:39.280 | and then feed it back to you over 17 years.

02:59:42.560 | - So self custody assets would be layer one, Bitcoin?

02:59:46.560 | - Self custody assets, it's like,

02:59:49.320 | if I got my own hardware wallet,

02:59:51.880 | and I've either got,

02:59:53.120 | your highest form of self custody would be Bitcoin

02:59:58.520 | on your own hardware wallet,

02:59:59.920 | or Bitcoin in your own self custody.

03:00:02.240 | And the other thing people think about is,

03:00:04.720 | how do I get crypto dollars, like Tether,

03:00:07.920 | like some stable coin?

03:00:10.260 | Like I'd rather, if you had a choice,

03:00:12.200 | would you rather have your money in a bank,

03:00:14.360 | in a war zone, in dollars,

03:00:16.120 | or have your money in a stable coin

03:00:19.120 | on your mobile phone in dollars?

03:00:22.220 | Right, I mean, you take the latter risk

03:00:25.480 | rather than the former risk.

03:00:26.800 | - In a war zone, definitely, yeah.

03:00:28.680 | - And you can see that happening.

03:00:30.040 | Like we've gone from 5 billion in stable coins

03:00:32.240 | to 200 billion in the last 24 months.

03:00:36.520 | So I do think there's massive demand for crypto dollars

03:00:41.520 | in the form of a US dollar asset,

03:00:44.240 | and everybody in the world would say, yeah, I want that.

03:00:49.240 | Well, unless you're just an extreme patriot,

03:00:52.840 | but most people in the world would say, I want that.

03:00:54.680 | And then a lesser group of people would say,

03:00:56.960 | I think I want to be able to carry my property

03:00:59.360 | in the palm of my hand, so I have self custody of it.

03:01:04.360 | - So the Bitcoin price has gone through quite a rollercoaster.

03:01:08.480 | What do you think is the high point it's gonna hit?

03:01:11.040 | - I think it'll go forever, right?

03:01:13.760 | I mean, I think the Bitcoin is going to climb

03:01:18.760 | in a serpentine fashion.

03:01:20.240 | It's going to advance and come back,

03:01:22.880 | and it's gonna keep climbing.

03:01:26.720 | I think that the volatility attracts all the capital

03:01:30.120 | into the marketplace, and so the volatility

03:01:33.480 | makes it the most interesting thing

03:01:35.160 | in the financial universe.

03:01:36.600 | It also generates massive yield

03:01:38.920 | and massive returns for traders,

03:01:42.200 | and that attracts capital.

03:01:44.000 | Like we're talking about the difference

03:01:45.360 | between 5% return and 500% return.

03:01:49.240 | So the fast money is attracted by the volatility.

03:01:54.160 | The volatility has been decreasing year by year by year.

03:01:58.600 | I think that it's stabilizing.

03:02:02.480 | I don't think we'll see as much volatility

03:02:04.200 | in the future as we have in the past.

03:02:06.800 | I think that if we look at Bitcoin and model it

03:02:11.320 | as digital gold, the market cap goes

03:02:15.880 | to between 10 and 20 trillion,

03:02:18.360 | but remember, gold is defective property.

03:02:23.160 | Gold is dead money.

03:02:24.880 | You have a billion dollars of gold

03:02:26.240 | that sits in a vault for a decade.

03:02:27.800 | It's very hard to mortgage the gold.

03:02:29.800 | It's also very hard to rent the gold.

03:02:32.040 | You can't loan the gold.

03:02:33.200 | No one's going to create a business with your gold.

03:02:36.560 | So gold, it doesn't generate much of a yield,

03:02:39.440 | so for that reason, most people wouldn't store

03:02:41.560 | a billion dollars for a decade in gold.

03:02:43.360 | They would buy a billion dollars

03:02:44.520 | of commercial real estate property,

03:02:47.360 | and the reason why is because I can rent it

03:02:49.960 | and generate a yield on it that's in excess

03:02:52.680 | of the maintenance cost.

03:02:54.000 | So if you consider digital property,

03:02:56.720 | that's 100 to $200 trillion addressable market.

03:03:01.720 | So I would think it goes from 10 trillion to 100 trillion

03:03:06.440 | as people start to think of it as digital property.

03:03:08.480 | - What does that mean in terms of price per coin?

03:03:11.920 | - At 500,000, right, that's a $10 trillion asset.

03:03:16.920 | At five million, that's $100 trillion asset.

03:03:21.040 | - So you think it crosses a million, it can go even higher?

03:03:24.440 | - Yeah, I think it keeps going up forever.

03:03:26.320 | I mean, there's no reason we're going to go

03:03:27.160 | to 10 million a coin, right?

03:03:29.040 | Because digital property isn't the highest form, right?

03:03:32.560 | Gold was that low-frequency money.

03:03:35.440 | Property is a mid-frequency money,

03:03:37.920 | but when I start to program it faster,

03:03:42.920 | it starts to look like digital energy,

03:03:46.160 | and then it doesn't just replace property,

03:03:50.640 | then you're starting to replace bonds.

03:03:53.800 | It's 100 trillion in bonds,

03:03:55.360 | there's 50 to 100 trillion in other currency derivatives.

03:04:00.040 | And these are all conventional use cases, right?

03:04:03.800 | I think that there's 350 trillion to $500 trillion

03:04:08.800 | worth of currency derivatives in the world.

03:04:14.120 | And when I say that, I mean things that are valued

03:04:17.760 | based upon fiat cash flows.

03:04:20.120 | Any commercial real estate, any bond, any sovereign debt,

03:04:23.640 | any currency itself, any derivatives to those things,

03:04:28.600 | they're all derivatives, and they're all defective,

03:04:32.560 | and they're all defective because of this persistent

03:04:35.040 | seven to 14% lapse, which we call inflation,

03:04:40.040 | or monetary expansion.

03:04:41.920 | Can we switch, so I'm just gonna talk about

03:04:44.280 | the energy side of it, like the innovative piece.

03:04:48.480 | Let's just start with this idea that I've got a hotel

03:04:52.280 | worth a billion dollars with a thousand rooms.

03:04:55.040 | When it becomes a dematerialized hotel--

03:04:58.160 | - I love that word so much, by the way,

03:04:59.800 | dematerialized hotel.

03:05:01.040 | - We're crossing the fountain below here.

03:05:02.480 | Imagine the fountain below is dematerialized.

03:05:05.400 | The problem with a physical hotel is I gotta hire

03:05:07.440 | real people moving subject to the speed of sound

03:05:10.680 | and physics laws and Newton's laws,

03:05:13.440 | and I can rent it to people in Miami Beach.

03:05:15.720 | But if it was a digital hotel, I could rent the room

03:05:19.640 | to people in Paris, London, and New York every night,

03:05:23.360 | and I can run it with robots, and as soon as I do that,

03:05:26.600 | I can rent it by the room hour,

03:05:28.520 | and I can rent it by the room minute.

03:05:30.400 | And so I start to chop my hotel up into 100,000 room hours

03:05:35.400 | that I sell to the highest bidder anywhere in the world,

03:05:41.000 | and you can see all of a sudden the yield,

03:05:44.160 | the rent and the income of the property

03:05:48.040 | is dramatically increased.

03:05:50.920 | I can also see the maintenance cost of the property falls.

03:05:54.800 | I get on Moore's Law, and I'm operating in cyberspace,

03:05:58.640 | so I got rid of Newton's laws.

03:06:00.520 | I got rid of all the friction and all those problems.

03:06:04.000 | I tapped into the benefits of cyberspace.

03:06:07.840 | I created a global property.

03:06:10.560 | I started monetizing at different frequencies,

03:06:14.040 | and of course, now I can mortgage it

03:06:15.920 | to anybody in the world, right?

03:06:18.440 | I mean, you're not gonna be able to get a mortgage

03:06:20.640 | on a Turkish building from someone in South Africa.

03:06:24.320 | You have to find someone that's local

03:06:26.360 | to the culture you're in.

03:06:29.400 | So when you start to move from analog property

03:06:33.320 | to digital property, it's not just a little bit better.

03:06:36.400 | It's a lot better.

03:06:37.840 | And what I just described, Lex, is like the DeFi vision,

03:06:42.160 | right, it's the beauty of DeFi, flash loans,

03:06:45.640 | money moving at high velocity.

03:06:48.720 | At some point, if the hotel is dematerialized,

03:06:55.380 | then what's the difference between renting a hotel room

03:06:59.060 | and loaning a block of stock, right?

03:07:02.280 | I'm just finding the highest, best use of the thing.

03:07:05.160 | - It feels like the magic really emerges, though,

03:07:07.880 | when you build a lot, a market of layer two

03:07:11.800 | and layer three technologies on top of that.

03:07:14.240 | It's like, maybe you can correct me if I'm wrong,

03:07:18.200 | but for all these hotels and all these kinds of ideas,

03:07:21.160 | it's always touching humans at some point.

03:07:24.840 | And the consumers or humans, business owners, and so on.

03:07:29.840 | So you have to create interface,

03:07:32.280 | you have to create services that make all of that

03:07:35.680 | super efficient, super fun to use, pleasant, effective,

03:07:39.640 | all those kinds of things.

03:07:41.000 | And so you have to build a whole economy on top of that.

03:07:43.440 | - Yeah, and I happen to think that won't be done

03:07:45.880 | by the crypto industry at all.

03:07:47.340 | I think that'll be done by centralized applications.

03:07:51.120 | I think it'll be the citadels of the world,

03:07:54.120 | the high speed traders of the world, the New Yorkers.

03:07:57.680 | I think it'll be Binance, FTX, and Coinbase

03:08:02.160 | as a layer three exchange that will give you the yield

03:08:06.240 | and will give you the loan and the best terms.

03:08:10.560 | Because ultimately you have to jump these compliance hoops.

03:08:13.600 | It comes, like BlockFi can give you yield,

03:08:17.240 | but they have to do it in a compliant way

03:08:19.580 | with the United States jurisdiction.

03:08:22.040 | So ultimately those applications to use

03:08:25.080 | that digital property and either generate a loan,

03:08:29.960 | give you a loan on it or give you yield on it

03:08:32.040 | are gonna come from companies.

03:08:33.880 | But the difference, the fundamental difference is

03:08:37.400 | it could be companies anywhere in the world.

03:08:41.320 | So if a company in Singapore comes up

03:08:44.420 | with a better offering, right,

03:08:47.520 | then the capital is gonna start to flow to Singapore.

03:08:50.160 | I can't send 10 city blocks of LA to Singapore

03:08:54.880 | to rent during a festival,

03:08:57.580 | but I can send 10 blocks of Bitcoin to Singapore.

03:09:01.800 | So you've got a truly global market that's functioning

03:09:05.200 | and this asset, and it's their second order asset.

03:09:08.440 | For example, maybe you're an American citizen

03:09:11.080 | and you own 10 Bitcoin and someone in Singapore

03:09:13.800 | will generate 27% yield in the Bitcoin,

03:09:16.500 | but legally you can't send the money to them

03:09:19.280 | or the Bitcoin to them.

03:09:20.680 | It doesn't matter because the fact that that exists

03:09:23.320 | means that someone in Hong Kong will borrow the 10 Bitcoin

03:09:27.680 | from somebody in New York,

03:09:29.380 | and then they will put on the trade in Singapore

03:09:32.560 | and that will create a demand for Bitcoin

03:09:34.800 | which will drive up the price of Bitcoin,

03:09:36.560 | which will result in an effective tax-free yield

03:09:40.280 | for the person in the US

03:09:41.760 | that's not even in the jurisdiction.

03:09:43.920 | So there's nothing that's going on in Singapore

03:09:46.760 | to drive up the price of your land in LA,

03:09:50.320 | but there is something going on everywhere in the world

03:09:53.520 | to drive up the price of property and cyberspace

03:09:56.580 | if there's only one digital Manhattan.

03:09:59.460 | And so there's a dynamic there

03:10:02.600 | which is profound because it's global.

03:10:04.780 | But now let's go to the next extreme.

03:10:07.520 | I'm still giving you a fairly conventional idea,

03:10:11.140 | which is let's just loan the money fast on a global network

03:10:15.600 | and let's just rent the hotel room fast in cyberspace.

03:10:19.600 | But let's move to maybe a more innovative idea.

03:10:24.560 | The first generation of internet

03:10:27.600 | brought a lot of productivity,

03:10:28.820 | but there's also just a lot of flaws in it.

03:10:32.060 | For example, Twitter is full of garbage.

03:10:34.720 | Instagram DMs are full of garbage.

03:10:37.240 | Your Twitter DMs are full of garbage.

03:10:39.680 | YouTube is full of scams.

03:10:42.000 | Every 15 minutes,

03:10:43.080 | there's a Michael Saylor Bitcoin giveaway

03:10:44.800 | spun up on YouTube.

03:10:46.760 | My Office 365 inbox is full of garbage,

03:10:50.800 | millions of spam messages.

03:10:52.720 | I'm running four different email filters.

03:10:55.900 | My company spends million dollars a year

03:10:58.760 | to fight denial of service attacks

03:11:00.440 | and all sorts of other security things.

03:11:03.200 | There are denial of service attacks everywhere

03:11:05.880 | against everybody in cyberspace all the time.

03:11:09.280 | It's extreme.

03:11:10.240 | And we're all beset with hostility, right?

03:11:12.560 | You've been a victim of it in Twitter.

03:11:14.720 | You go on Twitter and people post stuff

03:11:18.720 | they would never say to your face.

03:11:20.280 | And then if you look,

03:11:21.120 | you find out that the account was created like three days

03:11:24.080 | ago and it's not even a real person.

03:11:27.520 | So, we're beset with phishing attacks and scams

03:11:31.380 | and spam bots and garbage.

03:11:33.680 | And why?

03:11:35.360 | And the answer is because the first generation

03:11:37.400 | of internet was digital information and there's no energy.

03:11:40.900 | There's no conservation of energy in cyberspace.

03:11:44.440 | The thing that makes the universe work

03:11:46.720 | is conservation of energy.

03:11:48.640 | Like if I went to a hotel room,

03:11:52.640 | I'd have to post a credit card.

03:11:54.200 | And then if I smash the place up,

03:11:56.400 | there'd be economic consequences,

03:11:59.900 | maybe there'd be criminal consequences.

03:12:02.620 | There might be reputational consequences.

03:12:05.680 | You know, a lamp might fall on me.

03:12:07.800 | But in the worst case scenario,

03:12:08.880 | I can only smash up one hotel room.

03:12:10.840 | Now imagine I could actually write a Python script

03:12:15.000 | to send myself to every hotel room in the world

03:12:17.920 | every minute, not post a credit card

03:12:20.800 | and smash them all up anonymously.

03:12:23.880 | The thing that makes the universe work is friction,

03:12:28.840 | speed of sound, speed of light,

03:12:31.440 | and the fact that it's ultimately it's conservative.

03:12:35.360 | You're either energy or you're matter,

03:12:37.000 | but once you've used the energy, it's gone

03:12:39.520 | and you can't do infinite everything.

03:12:42.800 | That's missing in cyberspace right now.

03:12:45.760 | And if you look at all of the moral hazards

03:12:49.760 | and all of the product defects that we have

03:12:52.560 | in all of these products,

03:12:54.260 | most of them, 99% of them could be cured

03:12:58.960 | if we introduced conservation of energy into cyberspace.

03:13:05.040 | And that's what you can do with high-speed digital property,

03:13:08.920 | high-speed Bitcoin.

03:13:09.920 | And by high-speed, I mean, not 20 transactions a day.

03:13:13.440 | I mean, 20,000 transactions a day.

03:13:15.380 | So how do you do that?

03:13:18.680 | Well, I let everybody on Twitter post

03:13:23.680 | a thousand or 10,000 Satoshis via a lightning wallet,

03:13:27.520 | a lightning badge.

03:13:29.200 | Give me an orange check.

03:13:31.200 | If you put up 20 bucks once in your life,

03:13:34.260 | you could give 300 million people an orange check.

03:13:37.280 | Right now, you don't have a blue check, Lex.

03:13:41.840 | You're a famous person.

03:13:42.960 | I don't know why you don't have a blue check.

03:13:45.320 | Have you ever applied for a blue check?

03:13:47.040 | - No.

03:13:47.880 | - There are 360,000 people on Twitter with a blue check.

03:13:51.000 | There are 300 million people on Twitter.

03:13:54.440 | So the conventional way to verify accounts

03:13:58.440 | is elitist, archaic.

03:14:02.440 | - Yeah, how does it work?

03:14:03.520 | How do you get a blue check?

03:14:04.600 | I mean, what-- - You gotta apply

03:14:05.840 | and wait six months, and you have to post

03:14:08.960 | like three articles in the public mainstream media

03:14:12.640 | that illustrates you're a person of interest.

03:14:15.120 | - Interesting.

03:14:15.960 | - Generally, they would grant them

03:14:17.080 | to CEOs of public companies.

03:14:20.800 | The whole idea is to verify that you are--

03:14:24.400 | - Yeah, who you are.

03:14:25.240 | - Who you say you are.

03:14:26.080 | - Right.

03:14:26.900 | - But the question is, why isn't everybody verified?

03:14:28.600 | - Right.

03:14:29.440 | - And there's a couple of threads on that.

03:14:31.400 | One is some people don't wanna be doxed.

03:14:33.920 | They wanna be anonymous.

03:14:35.720 | But there are even anonymous people

03:14:38.080 | that should be verified.

03:14:39.800 | - Right.

03:14:40.760 | - Because otherwise, you're subjecting

03:14:44.200 | their entire following to phishing attacks

03:14:46.460 | and scams and hostility.

03:14:48.700 | But the other--

03:14:51.320 | - What's the orange verification?

03:14:52.680 | So this idea, can you actually elaborate

03:14:55.400 | a little bit more if you put up 20 bucks?

03:14:57.360 | - Yeah, I think everybody on Twitter

03:14:59.200 | ought to be able to get an orange check

03:15:00.720 | if they could come up with like $10.

03:15:02.760 | - And what is the power of that orange check?

03:15:05.760 | What does that verify exactly?

03:15:08.280 | - You basically post a security deposit

03:15:11.040 | for your safe passage through cyberspace.

03:15:13.880 | So the way it would work is,

03:15:15.720 | if you've got $10 once in your life,

03:15:19.120 | you can basically show that you're credit worthy.

03:15:22.320 | And that's your pledge to me

03:15:24.560 | that you're gonna act responsibly.

03:15:27.340 | So you put the 10 or the $20 into the lightning wallet,

03:15:31.240 | you get an orange check,

03:15:33.320 | then Twitter just gives you a setting

03:15:35.400 | where I can say, the only people that could DM me

03:15:37.440 | are orange checks, the only people

03:15:38.640 | that can post on my tweets are orange checks.

03:15:41.340 | So instead of locking out the public

03:15:43.200 | and just letting your followers comment,

03:15:46.480 | you lock out all the unverified.

03:15:49.520 | And that means people that don't wanna post

03:15:51.200 | $10 security deposit can't comment.

03:15:53.640 | Once you've done those two things,

03:15:57.040 | then you're in position to monetize malice,

03:16:01.400 | right, monetize motion or malice for that matter.

03:16:03.760 | But let's just say, for the sake of argument,

03:16:06.180 | you post something and 9,700 bots spin up,

03:16:11.180 | you know, and pitch their whatever scam.

03:16:14.400 | Right now you sit and you go,

03:16:17.060 | report, report, report, report, report, report.

03:16:20.380 | And if you spend an hour, you get through half of them,

03:16:23.440 | you waste an hour of your life,

03:16:25.520 | they just spin up another 97 kazillion

03:16:27.760 | because they've got a Python script spinning it up,

03:16:29.640 | so it's hopeless.

03:16:31.240 | But on the other hand, if you report them

03:16:33.560 | and they really are a bot, Twitter's got a method

03:16:36.920 | to actually delete the account,

03:16:39.520 | they know that they're bots.

03:16:41.260 | The problem is not, they don't know how to delete the account

03:16:43.520 | the problem is there are no consequences

03:16:45.240 | when they delete the account.

03:16:46.860 | So if there are consequences, Twitter could give,

03:16:50.800 | they could just seize the $10 or seize the $20

03:16:53.680 | 'cause it's a bot, it's a malicious criminal act

03:16:57.440 | or whatever, it's a violation of the platform rules.

03:17:00.440 | You end up seizing $10,000, give half the money

03:17:04.600 | to the reporter and half the money to the Twitter platform.

03:17:08.040 | - That's a really powerful idea, but that's tying it,

03:17:10.800 | that's adding friction akin to the kind of friction

03:17:14.200 | you have in the physical world.

03:17:16.360 | You're tying, you have consequences,

03:17:18.080 | you have real consequences.

03:17:19.360 | - It's putting conservation of energy.

03:17:21.480 | - Conservation of energy.

03:17:22.320 | - There's no friction, there's no nothing on this earth.

03:17:25.600 | I mean, you can't walk across the room without friction.

03:17:28.600 | Friction is not bad, unnecessary friction is bad.

03:17:34.680 | So in this particular case,

03:17:39.200 | you're introducing conservation of energy

03:17:42.200 | and in essence, you're introducing the concept

03:17:44.120 | of consequence or truth into cyberspace.

03:17:48.360 | And that means if you do wanna spend up 10 million

03:17:51.240 | fake less Freedmans, right?

03:17:55.400 | It's gonna cost you $100 million

03:17:57.480 | to spend up 10 million fake Lexus.

03:18:00.080 | - But the thing is you could do that with the dollar,

03:18:01.960 | but your case, you're saying that it's more tied

03:18:06.960 | to physical reality when you do that with Bitcoin.

03:18:10.320 | - Yeah, well, let's follow up on that idea a bit more.

03:18:13.720 | If you did do it with the dollar,

03:18:16.120 | then the question is how does six billion people

03:18:19.000 | deposit the dollars?

03:18:21.400 | Right, because what you're doing is,

03:18:23.520 | could you do it with a credit card?

03:18:25.480 | Like how do you send dollars?

03:18:28.200 | You have to dock yourself.

03:18:29.920 | It's not easy.

03:18:31.680 | So you're talking about inputting a credit card transaction,

03:18:35.280 | doxing yourself and now you've just eliminated

03:18:37.840 | the 2 billion people that don't have credit cards

03:18:40.080 | or don't have banks.

03:18:41.440 | You've also got a problem with everybody

03:18:42.880 | that wants to remain anonymous,

03:18:44.840 | but you've also got this other problem,

03:18:46.960 | which is credit cards are expensive transactions,

03:18:51.960 | low frequency, slow settlement.

03:18:55.720 | So do you really wanna pay 2.5% every time

03:18:59.720 | you actually show a $20 deposit?

03:19:02.440 | And maybe you could do a Kluge version of this

03:19:06.000 | for a subset of people.

03:19:09.000 | It's like it's 10% as good if you did it

03:19:12.120 | with conventional payment rails.

03:19:14.880 | But what you can't do is the next idea,

03:19:19.600 | which is I want the orange badge to be used

03:19:23.720 | to give me safe passage through cyberspace,

03:19:26.200 | tripping across every platform.

03:19:28.720 | So how do I solve the denial of service attacks

03:19:33.080 | against a website?

03:19:34.040 | I publish a website, you hit it with a million requests.

03:19:38.760 | Okay, now how do I deal with that?

03:19:42.560 | Well, I can lock you out

03:19:44.160 | and I can make it a zero trust website.

03:19:46.440 | And then you have to be coming at me

03:19:48.480 | through a trusted firewall or with a trusted credential,

03:19:51.600 | but that's a pretty draconian thing.

03:19:54.880 | Or I could put it behind a lightning wall.

03:19:58.560 | A lightning wall would be, I just challenge you Lex,

03:20:02.600 | you wanna browse my website,

03:20:04.920 | you have to show me your 100,000 Satoshis.

03:20:07.960 | Do you have 100,000 Satoshis?

03:20:10.480 | Click.

03:20:11.360 | Okay, now you click away a hundred times or a thousand times

03:20:15.680 | and after a thousand times,

03:20:17.880 | well now Lex you're getting offensive

03:20:19.440 | I'm gonna take a Satoshi from you or 10 Satoshis,

03:20:22.400 | a micro transaction.

03:20:23.640 | You wanna hit me a million times?

03:20:24.800 | I'm taking all your Satoshis and locking you out.

03:20:27.240 | What you wanna do is you wanna go through

03:20:31.160 | 200 websites a day.

03:20:32.800 | And what you want, every time you cross a domain,

03:20:38.280 | you need to be able to in a split second,

03:20:41.520 | prove that you've got some asset.

03:20:43.520 | And now when you cross back, when you exit domain,

03:20:46.680 | you wanna fetch your asset back.

03:20:48.720 | So how do I in a friction-free fashion,

03:20:51.600 | browse through dozens or hundreds of websites,

03:20:55.320 | post a security deposit for safe passage

03:20:58.120 | and then get it back?

03:21:00.040 | You couldn't afford to pay a credit card fee each time.

03:21:03.160 | When you think about two and a half percent

03:21:06.280 | as a transaction fee,

03:21:08.320 | it means you trade the money 40 times and it's gone.

03:21:13.320 | - Yeah.

03:21:14.440 | - It's gone.

03:21:15.280 | - Yeah.

03:21:16.120 | So you can't do this kind of hopping around

03:21:17.360 | through the internet with this kind of verification

03:21:20.480 | that grounds you to a physical reality.

03:21:23.160 | It's a really, really interesting idea.

03:21:24.520 | Why hasn't that been done?

03:21:26.520 | - I think you need two things.

03:21:30.160 | You need an idea like a digital asset like Bitcoin,

03:21:33.720 | that's a bearer instrument for final settlement.

03:21:36.560 | And then you need a high-speed transaction network

03:21:39.600 | like Lightning, where the transaction cost

03:21:42.760 | might be a 20th of a penny or less.

03:21:46.640 | And if you roll the clock back 24 months,

03:21:49.680 | I don't think you had the Lightning network

03:21:53.960 | in a stable point.

03:21:55.400 | It's really just the past 12 months.

03:21:57.320 | It's an idea you could think about this year.

03:22:01.120 | And I think you need to be aware of Bitcoin

03:22:06.280 | as something other than like a scary speculative asset.

03:22:09.280 | So I really think we're just the beginning.

03:22:12.160 | - The embryonic stage.

03:22:14.080 | I have to ask Michael Saylor,

03:22:16.080 | you said before there's no second best to Bitcoin.

03:22:19.080 | What would be the second best?

03:22:22.000 | Traditionally, there's Ethereum with smart contracts,

03:22:24.240 | Cardano with proof of stake,

03:22:26.080 | Polkadot with interoperability between blockchains,

03:22:31.080 | Dogecoin has the incredible power of the meme.

03:22:35.680 | Privacy with Monero, that just can keep going.

03:22:39.440 | There's of course, after the block size wars,

03:22:44.440 | the different offshoots of Bitcoin.

03:22:48.240 | - I think if you decompose or segment the crypto market,

03:22:52.200 | you've got crypto property.

03:22:54.560 | Bitcoin is the king of that.

03:22:56.360 | You know, another Bitcoin forks

03:22:57.880 | that wanted to be a bearer instrument, store of value,

03:23:02.560 | would be a property, a Bitcoin cash or light coin,

03:23:05.760 | something like that.

03:23:07.120 | Then you've got crypto currencies.

03:23:10.480 | I don't think Bitcoin's a currency

03:23:12.200 | because a currency I define in nation state sense,

03:23:16.320 | a currency is a digital asset that you can transfer

03:23:20.080 | in a transaction without incurring a taxable obligation.

03:23:24.680 | So that means it has to be a stable dollar

03:23:27.440 | or a stable Euro or a stable Yen, a stable coin.

03:23:30.640 | So I think about cryptocurrencies,

03:23:32.200 | Tether, Circle, most famous.

03:23:34.840 | Then I think you've got crypto platforms,

03:23:36.800 | you know, and Ethereum is the most famous

03:23:38.600 | of the crypto platforms, the platform upon which,

03:23:41.160 | you know, with smart contract functionality, et cetera.

03:23:45.760 | And then I think you've got just crypto securities.

03:23:47.840 | It's just like my favorite, whatever, meme coin.

03:23:51.600 | And I love it 'cause I love it.

03:23:52.880 | And it's attached to my game or my company

03:23:54.880 | or my persona or my whatever.

03:23:57.120 | I think if you, you know, push me and said,

03:24:00.720 | well, what's the second best?

03:24:01.800 | I would say the world wants two things.

03:24:04.120 | It wants crypto property as a savings account

03:24:06.920 | and it wants cryptocurrency as a checking account.

03:24:10.080 | And that means that the most popular thing really

03:24:13.960 | is going to be a stable coin dollar, right?

03:24:17.360 | And there's maybe a fight right now,

03:24:20.000 | it might be Tether, right?

03:24:21.640 | But a stable dollar, because I feel like the market,

03:24:27.240 | opportunity, it's not clear that there'll be one

03:24:29.600 | that will win.

03:24:30.480 | The class of stable dollars is probably

03:24:32.760 | a one to $10 trillion market easily.

03:24:35.600 | I think that in a crypto platform space,

03:24:39.320 | Ethereum will compete with Solana

03:24:41.200 | and Binance Smart Chain and the like.

03:24:44.520 | - Are there certain characteristics of any of them

03:24:46.560 | that kind of stand out to you?

03:24:48.040 | Don't you think the competition is based

03:24:51.520 | on a set of features?

03:24:53.080 | Also, so the set of features that a cryptocurrency provides,

03:24:57.480 | but also the community that it provides.

03:24:59.840 | Don't you think the community matters

03:25:01.440 | and sort of the adoption, the dynamic of the adoption,

03:25:04.200 | both across the developers and the investors?

03:25:06.120 | - If I'm looking at them, I mean, the first question is,

03:25:08.920 | what's the regulatory risk?

03:25:12.160 | How likely is it to be deemed a property versus security?

03:25:15.560 | And the second is, what's the competitive risk?

03:25:19.160 | And the third is, what's the speed and the performance?

03:25:21.360 | And all those things lead to the question

03:25:26.320 | of what's the security risk?

03:25:28.160 | How likely is it to crash and burn?

03:25:30.320 | And how stable or unstable is it?

03:25:34.080 | And then there's the marketing risk.

03:25:36.680 | I mean, there are different teams behind each

03:25:38.640 | of these things and communities behind them.

03:25:41.720 | I think that the big cloud looming over the crypto industry

03:25:46.720 | is regulatory treatment of cryptocurrencies

03:25:51.160 | and regulatory treatment of crypto securities

03:25:53.600 | and crypto platforms.

03:25:54.760 | And I think that won't be determined

03:25:56.280 | until the end of the first Biden administration.

03:25:58.480 | For example, there are people that would like

03:26:01.480 | only US FDIC insured banks to issue cryptocurrencies.

03:26:06.480 | They want JP Morgan to issue a crypto dollar

03:26:09.600 | backed one-to-one.

03:26:11.600 | But then in the US right now, we have Circle

03:26:13.840 | and we have other companies that are licensed entities

03:26:17.640 | that are backed by cash and cash equivalents,

03:26:19.960 | but they're not FDIC insured banks.

03:26:22.360 | There's also a debate in Congress

03:26:23.960 | about whether state chartered banks

03:26:25.880 | should be able to issue these things.

03:26:27.600 | And then we have Tether and others

03:26:31.600 | that are outside of the US jurisdiction.

03:26:34.520 | They're probably not backed by cash and cash equivalents.

03:26:36.880 | They're backed by stuff and we don't know what stuff.

03:26:40.280 | And then finally you have, you know, UST and DAI,

03:26:44.520 | which are algorithmic stable coins, right?

03:26:47.440 | That are even more innovative

03:26:50.440 | further outside the compliance framework.

03:26:52.520 | So if you ask who's gonna win, the question is really,

03:26:56.680 | I don't know, will the market decide

03:26:58.480 | or will the regulators decide?

03:27:00.800 | If the regulators get out of the way

03:27:02.240 | and the market fought out,

03:27:03.280 | well then it's an interesting discussion.

03:27:05.840 | And then I think that all bets are off

03:27:08.120 | if the regulators get more heavy handed with this.

03:27:11.560 | And I think you could have the same discussion

03:27:13.160 | with crypto properties, like the DeFi exchanges

03:27:16.600 | and the crypto exchanges.

03:27:18.200 | The SEC would like to regulate the crypto exchanges.

03:27:20.840 | They'd like to regulate the DeFi exchanges.

03:27:23.240 | That means they may regulate the crypto platforms

03:27:25.480 | and at what rate and in what fashion.

03:27:29.160 | And so I think that I could give you an opinion

03:27:32.360 | if it was limited to competition

03:27:34.880 | and the current regulatory regime.

03:27:37.880 | But I think that the regulations are so fast moving

03:27:43.040 | and it's so uncertain that you can't make a decision

03:27:48.040 | without considering the potential actions of the regulators.

03:27:55.720 | - I hope the regulators get out of the way.

03:27:58.120 | Can you steal me on the case that Dogecoin

03:28:00.960 | is I guess the second best cryptocurrency

03:28:03.720 | if you don't consider Bitcoin a cryptocurrency,

03:28:06.520 | but instead a crypto property?

03:28:08.880 | - I would classify it as crypto property

03:28:11.240 | because the US dollar is a currency.

03:28:13.320 | So unless your crypto asset is pegged algorithmically

03:28:17.240 | or stably to the value of the dollar, it's not a currency.

03:28:20.200 | It's a property or it's an asset.

03:28:22.880 | - So then can you steal me on the case

03:28:25.360 | that Dogecoin is the best cryptocurrency then?

03:28:28.640 | Because Bitcoin is not even in that list.

03:28:32.800 | - The debate is gonna be whether it's property or security.

03:28:36.160 | And there's a debate whether it's decentralized enough.

03:28:39.120 | So let's assume it was decentralized.

03:28:41.680 | - Yeah.

03:28:42.640 | - Well, it's increasing at not quite five,

03:28:45.320 | what 5% a year inflation rate,

03:28:47.480 | but it's not 5% exponentially.

03:28:49.880 | It's like a plus 5 million, 5% something,

03:28:54.440 | captain is less, I forget the exact number,

03:28:57.560 | but it's an inflationary property.

03:29:00.120 | It's got a lower inflation rate than the US dollar

03:29:04.680 | and it's got a much lower inflation rate

03:29:06.840 | than many other fiat currencies.

03:29:10.080 | So I think you could say that.

03:29:11.880 | - But don't you see the power of meme,

03:29:14.280 | the power of ideas, the power of fun

03:29:19.080 | or whatever mechanism is used to captivate a community?

03:29:24.080 | - I do, but there are meme stocks.

03:29:27.360 | It doesn't absolve you of your ethical

03:29:30.200 | and securities liabilities if you're promoting it.

03:29:33.880 | So like, I don't have a problem

03:29:36.120 | with like people buying a stock.

03:29:38.200 | It's just, the way I divide the world is, right?

03:29:43.480 | There's investment, there's saving,

03:29:46.160 | and there's speculation and there's trading.

03:29:49.720 | So Bitcoin is an asset for saving.

03:29:53.200 | If you wanna save money for a hundred years,

03:29:55.680 | you don't really want to take on execution risk or the like.

03:30:00.680 | So you're just buying something to hold forever.

03:30:03.480 | For you to actually endorse something as a property,

03:30:07.640 | like if you said to me,

03:30:08.600 | "Mike, what should I buy for the next hundred years?"

03:30:11.240 | I say, "Well, some amount of real estate,

03:30:13.040 | some amount of scarce collectibles,

03:30:15.440 | some amount of Bitcoin, right?

03:30:17.560 | You can run your company, right?

03:30:20.080 | But running your company is an investment.

03:30:21.840 | So the savings are properties.

03:30:24.320 | If you said, "What should I invest in?"

03:30:25.640 | I'd say, "Well, here's a list of good companies,

03:30:28.240 | private companies, you can start your own company.

03:30:30.240 | That's an investment, right?"

03:30:33.840 | If you said, "What should I trade?"

03:30:36.200 | Well, trading is like a proprietary thing.

03:30:38.400 | Like I don't have any special insight into that.

03:30:42.640 | If you're a good trader, you know you are.

03:30:44.360 | If you said to me, "What should you speculate in?"

03:30:47.600 | We talk about meme stocks and meme coins,

03:30:51.560 | and it's kind of sits up there.

03:30:54.320 | It sits right in the same space

03:30:55.800 | with what horse should you bet on

03:30:57.720 | and what sports team should you gamble on

03:30:59.960 | and should you bet on black six times in a row

03:31:02.480 | and double down each time.

03:31:04.760 | I mean, it's fun, but at the end of the day,

03:31:09.440 | it's a speculation, right?

03:31:12.000 | You can't build a civilization-

03:31:14.680 | On speculation.

03:31:15.640 | On it.

03:31:16.480 | It's not an institutional asset.

03:31:18.200 | And in fact, where I'd leave it, right,

03:31:20.720 | is Bitcoin is clearly digital private,

03:31:23.520 | which makes it an institutional grade investable asset

03:31:26.880 | for a public company, a public figure, a public investor,

03:31:30.040 | or anybody that's risk adverse.

03:31:32.640 | I think that the top 100 other cryptos

03:31:37.320 | are like venture capital investments.

03:31:39.720 | And if you're a VC

03:31:41.080 | and if you're a qualified technical investor

03:31:43.200 | and you have a pool of capital

03:31:44.360 | and you can take that kind of risk,

03:31:46.760 | then you can parse through that and form opinions.

03:31:49.360 | It's just orders of magnitude more risky

03:31:52.520 | because of competition, because of ambition,

03:31:55.120 | and because of regulation.

03:31:56.680 | And if you take the meme coins,

03:31:59.360 | it's like when some rapper comes out with a meme coin,

03:32:03.600 | it's like maybe it'll peak when I hear about it, right?

03:32:07.360 | I mean, SHIB was created as a coin

03:32:11.240 | such that it had so many zeros after the decimal point

03:32:14.720 | that when you looked at it on the exchanges,

03:32:17.720 | it always showed zero, zero, zero, zero.

03:32:20.920 | And it wasn't until like six months after it got popular

03:32:24.200 | that they started expanding the display

03:32:26.120 | so you could see whether the price had changed.

03:32:27.880 | - Yeah, that's speculation.

03:32:29.280 | Maybe you can correct me,

03:32:32.640 | but you've been critical of Elon Musk in the past

03:32:35.520 | in the crypto space.

03:32:37.000 | Where do you stand on Elon's effect on Bitcoin

03:32:39.840 | and cryptocurrency in general these days?

03:32:42.440 | - I believe that Bitcoin is a massive breakthrough

03:32:46.080 | for the human race

03:32:47.240 | that will cure half the problems in the world

03:32:49.840 | and generate hundreds of trillions of dollars

03:32:52.040 | of economic value to the civilization.

03:32:55.200 | And I believe that it's in an early stage

03:33:00.200 | where many people don't understand it

03:33:02.280 | and they're afraid of it and there's FUD

03:33:04.960 | and there's uncertainty, there's doubt and there's fear.

03:33:08.360 | And it's a very noisy crypto world

03:33:10.640 | and there's 15,000 other cryptos that are seeking relevance.

03:33:15.640 | And I think most of the FUD is actually fueled

03:33:20.760 | by the other crypto entrepreneurs.

03:33:22.880 | So the environmental FUD and the other types of uncertainty

03:33:27.600 | that surround Bitcoin,

03:33:28.560 | generally they're not coming

03:33:30.880 | from legitimate environmentalists.

03:33:32.960 | They don't come from legitimate critics.

03:33:36.200 | They actually are guerrilla marketing campaigns

03:33:39.800 | that are being financed and fueled

03:33:42.240 | by other crypto entrepreneurs

03:33:46.080 | because they have an interest in doing so.

03:33:48.680 | So if I look at the constructive path forward,

03:33:52.760 | first, I think it'd be very constructive

03:33:56.120 | for corporations to embrace Bitcoin

03:33:58.960 | and build applications on top of it.

03:34:03.160 | You don't need to fix it.

03:34:05.600 | There's nothing wrong with it, right?

03:34:07.480 | Like when you put it on a layer two and a layer three,

03:34:09.720 | it moves a billion times a second at the speed of light.

03:34:13.080 | So every beautiful, cool DeFi application,

03:34:17.920 | every crypto application,

03:34:19.720 | everything you could imagine you might wanna do,

03:34:22.160 | you can do with a legitimate company

03:34:26.880 | and a legitimate website or mobile application

03:34:31.000 | sitting on top of Bitcoin or lightning if you want to.

03:34:36.000 | So I think that to the extent that people do that,

03:34:40.320 | that's gonna be better for the world.

03:34:42.800 | If you consider what holds people back,

03:34:45.040 | I think it's just misperceptions about what Bitcoin is.

03:34:49.640 | So I'm a big fan of just educating people.

03:34:53.480 | If you're not going to commercialize it,

03:34:57.080 | then just educate people on what it is.

03:34:59.320 | So for example, Bitcoin's the most efficient

03:35:02.880 | use of energy in the world by far, right?

03:35:07.040 | Most people don't,

03:35:07.880 | they don't necessarily perceive that or realize that,

03:35:10.200 | but if you were to take any metric, energy intensity,

03:35:14.360 | you put like $2 billion worth of electricity

03:35:17.320 | in the network every year, and it's worth $850 billion.

03:35:22.240 | There is no industry in the real world, right?

03:35:25.960 | That is that energy efficient.

03:35:28.720 | Not only that energy efficient,

03:35:30.120 | it's also the most sustainable industry.

03:35:32.120 | We just, we do surveys,

03:35:34.160 | 58% of Bitcoin mining energy is sustainable.

03:35:38.200 | So there's a very good story.

03:35:40.840 | In fact, every other industry, planes, trains,

03:35:42.760 | automobiles, construction, food, medicine, everything else,

03:35:47.760 | it's less clean, less efficient.

03:35:50.600 | So I would like to, I wouldn't say there is a debate.

03:35:56.200 | I would just say that to the extent

03:35:58.080 | that the Bitcoin community had any issue with Elon,

03:36:00.120 | it was just, you know, the, just this environmental,

03:36:04.680 | you know, uncertainty that he fueled

03:36:07.720 | in a couple of his tweets, right?

03:36:10.920 | Which I think just is very distracting.

03:36:13.320 | - But that was one of them.

03:36:14.360 | But I think it's like the Bitcoin maximalists,

03:36:17.080 | but generally the crypto community,

03:36:18.480 | what you call the crypto entrepreneurs are,

03:36:22.720 | you know, it's also, they're using it for,

03:36:26.280 | I mean, for investment, for speculation,

03:36:29.840 | and therefore get very passionate

03:36:31.920 | about people's kind of celebrities,

03:36:35.320 | including you, like famous people.

03:36:37.560 | - Right.

03:36:38.760 | - Saying positive stuff about any one particular crypto,

03:36:43.760 | thing you can buy in Coinbase.

03:36:48.600 | And so they might be unhappy with Elon Musk

03:36:51.680 | that he's promoting Bitcoin and then not,

03:36:54.600 | and then promoting Dogecoin, then not,

03:36:57.000 | and this kind of, there's so much emotion tied up

03:37:02.000 | in the communication on this topic.

03:37:05.440 | And that's, I think that's where a lot of the-

03:37:08.640 | - Look, I don't have a criticism of Elon Musk.

03:37:11.800 | He's free to do whatever he wishes to do.

03:37:13.720 | It's his life.

03:37:14.560 | In fact, Elon Musk is the, you know,

03:37:17.680 | the second largest supporter of Bitcoin in the world.

03:37:21.440 | I think that the Bitcoin community

03:37:22.920 | tends to eat its own quite a bit.

03:37:24.920 | - Yeah.

03:37:25.760 | - Like it tends to be very, very self-critical.

03:37:29.160 | And instead of saying, well, Elon is more supportive

03:37:33.720 | of Bitcoin than the other 10,000 people in the world,

03:37:38.600 | you know, with serious amounts of money,

03:37:40.240 | they're like, they focus upon, you know.

03:37:43.000 | - Yeah, this is strange.

03:37:44.480 | Eating your own is just-

03:37:46.200 | - Yeah, so I mean, I think he's free

03:37:47.760 | to do what he wants to do.

03:37:48.880 | Like, and I think he's done a lot of good for Bitcoin

03:37:52.080 | in putting it on the balance sheet of Tesla and holding it.

03:37:56.100 | And I think that sent a very powerful message.

03:37:58.940 | - Do you have advice for young people?

03:38:02.440 | So you've had a heck of a life.

03:38:04.720 | You've done quite a lot of things,

03:38:08.000 | start before MIT, but starting with MIT.

03:38:11.720 | Is there advice you have for young people

03:38:13.200 | in high school and college,

03:38:15.280 | how to have a career they can be proud of,

03:38:20.280 | how to have a life they can be proud of?

03:38:24.000 | - I was asked by somebody for quick advice

03:38:28.600 | for his young children.

03:38:31.080 | He had twins when they enter adulthood.

03:38:34.040 | He said, "Give me your advice for them in a letter.

03:38:37.640 | "I'm gonna give it to them when they turn 21 or something."

03:38:41.840 | So then he handed, I thought, I was at a party,

03:38:44.920 | and then he handed me this sheet of paper.

03:38:46.560 | I thought, oh, he wants me to write it down right now.

03:38:48.080 | So I sat down, I started writing,

03:38:49.800 | and I figured, well, what would you wanna tell

03:38:51.680 | someone at age 21?

03:38:53.040 | - You wrote it down.

03:38:55.200 | - So I wrote it down.

03:38:56.040 | - Awesome. - And then I tweeted it,

03:38:56.880 | and it's sitting on Twitter, but I tell you what I said.

03:38:58.880 | - Mm-hmm. - My advice

03:39:00.400 | if you're entering adulthood.

03:39:02.400 | Focus your energy, guard your time,

03:39:06.680 | train your mind, train your body,

03:39:12.360 | think for yourself, curate your friends,

03:39:17.940 | curate your environment, keep your promises,

03:39:24.120 | stay cheerful and constructive,

03:39:28.700 | and upgrade the world.

03:39:30.260 | Like that was the 10.

03:39:32.540 | - Upgrade the world, that's an interesting choice of words.

03:39:35.780 | Upgrade the world, upgrade the world.

03:39:39.900 | - It's like an engineer's training.

03:39:40.740 | - Focus your energy.

03:39:41.580 | It's a very, yeah, it's a very engineering-themed,

03:39:45.300 | keep your promises too.

03:39:49.260 | That's an interesting one.

03:39:50.660 | - I think most people suffer because they just,

03:39:54.340 | they don't focus.

03:39:56.300 | Like you gotta figure out,

03:39:57.300 | I think the big risk in this world

03:39:59.380 | is there's too much of everything.

03:40:00.980 | - Yeah.

03:40:01.900 | - Like you can sit and watch chess videos 100 hours a week,

03:40:06.100 | and you'll never get through all the chess videos, right?

03:40:08.940 | There's too much of every possible thing,

03:40:13.460 | too much of every good thing.

03:40:14.760 | So figuring out what you wanna do,

03:40:18.440 | and then everything will suck up your time, right?

03:40:21.620 | There's 100 streaming channels to binge watch on.

03:40:24.500 | So you gotta guard your time,

03:40:26.300 | and then train your body, train your mind,

03:40:30.260 | and control who's around you, control what surrounds you.

03:40:35.080 | So ultimately, in a world

03:40:37.700 | where there's too much of everything,

03:40:39.960 | then your success--

03:40:42.900 | - It's like those laser eyes.

03:40:44.300 | It's like those laser eyes.

03:40:45.460 | You have to focus on just a few of those things.

03:40:50.460 | - Yeah, I mean, I got 1,000 opinions we could talk about,

03:40:55.020 | and I could pursue 1,000 things,

03:40:56.580 | but I don't expect to be successful.

03:40:58.380 | And I'm not sure that my opinion in any of the 999

03:41:03.380 | is any more valid than the leader of thought in that area.

03:41:08.620 | So how about if I just focus upon one thing,

03:41:13.700 | and then deliver the best I can in the one thing?

03:41:17.780 | That's the laser eye message.

03:41:20.780 | The rest get you distracted.

03:41:22.580 | - Well, how do you achieve that?

03:41:24.140 | Do you find yourself, given the way you are in life,

03:41:26.820 | having to say no a lot?

03:41:28.420 | Or just focus comes naturally

03:41:31.820 | when you just ignore everything around you?

03:41:34.100 | So how do you achieve that focus?

03:41:35.740 | - I think it helps if people know what you're focused on.

03:41:40.300 | - So everything about you just radiates that people know.

03:41:43.460 | People know this is--

03:41:44.300 | - If they know what you're focused on,

03:41:46.020 | then you won't get so many other things coming your way.

03:41:50.460 | If you dally, or if you flirt with 27 different things,

03:41:55.460 | then you're gonna get approached by people

03:42:00.980 | in each of the 27 communities, right?

03:42:03.900 | - You mentioned getting a PhD,

03:42:06.300 | and giving your roots at MIT.

03:42:09.460 | Do you think there's all kinds of journeys

03:42:12.620 | you can take to educate yourself?

03:42:14.740 | Do you think a PhD or school is still worth it?

03:42:20.300 | Or is there other paths through life that--

03:42:23.500 | - Is it worth it if you have to pay for it?

03:42:24.940 | Is it worth it if you have to spend the time on it?

03:42:27.300 | - The time and the money is a big cost.

03:42:31.020 | - I think--

03:42:32.940 | - Time probably the bigger one, right?

03:42:34.780 | - It seems clear to me that the world wants more specialists.

03:42:39.780 | It wants you to be an expert and to focus on one area.

03:42:47.340 | And it's punishing generalist jack of all trades,

03:42:52.340 | especially people that are generalists

03:42:54.540 | in the physical realm.

03:42:55.880 | 'Cause if you're a specialist in the digital realm,

03:42:57.900 | you might very well,

03:42:58.780 | you're the person with 700,000 followers on Twitter,

03:43:03.700 | and you show them how to tie knots.

03:43:05.900 | Or you're the banjo player with 1.8 million followers,

03:43:10.480 | and whenever everybody types banjo, it's you, right?

03:43:14.220 | And so the world wants people that do something well,

03:43:19.220 | and then it wants to stamp out 18 million copies of them.

03:43:24.560 | And so that argues in favor of focus.

03:43:28.540 | Now, I mean, the definition of a PhD

03:43:30.980 | is someone with enough of an education

03:43:33.500 | that they're capable of or have made.

03:43:35.580 | I guess to get a PhD,

03:43:37.220 | technically you have to have done a dissertation

03:43:40.860 | where you made a seminal contribution

03:43:43.480 | to the body of human knowledge, right?

03:43:45.780 | And if you haven't done that,

03:43:47.180 | technically you have a master's degree,

03:43:49.340 | but you're not a doctor.

03:43:51.180 | So if you're interested in any of the academic disciplines

03:43:56.180 | that a PhD would be granted for,

03:43:59.080 | then I can see that being a reasonable pursuit.

03:44:02.420 | But there are many people that are specialists.

03:44:04.920 | You know the Agimator?

03:44:07.500 | Yeah, yeah, yeah.

03:44:09.220 | The Agimator on YouTube?

03:44:10.260 | Yeah, yeah, yeah.

03:44:11.160 | He's the world's greatest chess commentator.

03:44:13.960 | Yeah.

03:44:14.800 | And I've watched his career

03:44:16.280 | and he's got progressively better and he's really good.

03:44:18.880 | He's gonna love hearing this.

03:44:20.800 | Yeah, the Agimator over here is this,

03:44:22.600 | I'm a big fan of the Agimator.

03:44:24.520 | I have to cut myself off, right?

03:44:26.120 | Because otherwise you'll watch

03:44:27.480 | the entire Paul Morphy saga for your weekend.

03:44:30.840 | But the point really is YouTube is full of experts

03:44:34.960 | who are specialists in something

03:44:37.600 | and they rise to the top of their profession.

03:44:40.360 | And Twitter is too and the internet is.

03:44:45.360 | So I would advocate that you figure out

03:44:50.140 | what you're passionate about and what you're good at

03:44:54.620 | and you do focus on it,

03:44:57.420 | especially if the thing that you're doing can be automated.

03:45:02.000 | The problem is,

03:45:04.680 | you know, back to that 500,000 algebra teacher type comment.

03:45:08.880 | The problem is if it is possible to be automated,

03:45:12.280 | then over time, someone's probably gonna automate it.

03:45:16.000 | And that squeezes, you know,

03:45:20.660 | the state space of everybody else.

03:45:22.760 | It's like, like after the lockdowns,

03:45:25.300 | it used to be there are like all these local bands

03:45:28.080 | that played in bars and everyone went to the bar

03:45:30.840 | to see the local band.

03:45:32.400 | And then during the lockdown,

03:45:33.800 | you would have like the six super groups

03:45:36.840 | and they would all get 500,000 or a million followers

03:45:40.540 | and all these smaller local bands

03:45:42.980 | just got no attention at all.

03:45:47.840 | - Well, the interesting thing is

03:45:49.320 | one of those 500,000 algebra teachers

03:45:52.040 | is likely to be part of the automation.

03:45:54.360 | So it's like, it's an opportunity for you to think,

03:45:57.040 | where's my field, my discipline evolving into?

03:46:02.040 | I talked to a bunch of librarians,

03:46:04.460 | just happened to be friends with librarians.

03:46:06.640 | And that's, libraries will probably be evolving

03:46:10.620 | and it's up to you as a librarian

03:46:12.140 | to be one of the few that remain in the rubble.

03:46:17.140 | - If you're gonna give commentary on Shakespeare plays,

03:46:20.900 | I want you to basically do it for every Shakespeare play.

03:46:23.640 | Like I want you to be the Shakespeare dude

03:46:25.600 | because once, just like Lex, you're like-

03:46:29.880 | - I don't know what kind of-

03:46:31.400 | - You're the deep thinking podcaster, right?

03:46:35.440 | You're the podcaster that goes

03:46:38.140 | after the deep intellectual conversations.

03:46:42.620 | And once I get comfortable with you and I like you,

03:46:47.120 | then I start binge watching Lex.

03:46:49.120 | But if you changed your format through 16 different formats

03:46:55.220 | so that you could compete with 16 different

03:46:57.400 | other personalities on YouTube,

03:46:59.640 | you probably wouldn't beat any of them, right?

03:47:02.900 | You would probably just kind of sink into the,

03:47:04.740 | you're the number two or number three guy.

03:47:07.120 | You're not the number one guy in the format.

03:47:09.960 | And I think that the algorithm, right?

03:47:14.440 | The Twitter algorithm and the YouTube algorithm,

03:47:16.720 | they really reward the person that's focused,

03:47:19.840 | on message, consistent.

03:47:22.440 | The world wants somebody they can trust

03:47:24.560 | that's consistent and reliable.

03:47:27.120 | And they kind of wanna know what they're getting into

03:47:29.560 | because, and this is taken for granted maybe,

03:47:33.320 | but there's 10 million people

03:47:37.240 | vying for every hour of your time.

03:47:40.100 | And so the fact that anybody gives you any time at all

03:47:43.980 | is a huge privilege, right? - It's amazing.

03:47:46.120 | - And you should be thanking them

03:47:48.140 | and you should respect their time.

03:47:50.620 | - It's interesting.

03:47:51.900 | Everything you said is very interesting.

03:47:53.540 | But of course, from my perspective

03:47:55.020 | and probably from your perspective,

03:47:57.260 | my actual life has nothing to do with,

03:48:00.040 | it's just being focused on stuff.

03:48:01.880 | And in my case, it's like focused on

03:48:03.940 | doing the thing I really enjoy doing

03:48:08.140 | and being myself and not caring about anything else.

03:48:11.340 | Like I don't care about views or likes or attention.

03:48:13.940 | And that just maintaining that focus

03:48:17.380 | is the way from an individual perspective,

03:48:19.280 | you live that life.

03:48:20.920 | But yeah, it does seem that there's the world

03:48:24.580 | and technology is rewarding the specialization

03:48:27.980 | and creating bigger and bigger platforms

03:48:29.820 | for the different specializations.

03:48:31.860 | And that lifts all both actually,

03:48:35.180 | 'cause the specializations get better and better and better

03:48:37.820 | at teaching people to do specific things

03:48:40.260 | and they educate themselves.

03:48:41.540 | And it's just everybody gets more and more knowledgeable

03:48:44.820 | and more and more empowered.

03:48:46.460 | - The reward for authenticity more than offsets

03:48:50.380 | the specificity with which you pursue your mission.

03:48:53.120 | Another way to say it is like,

03:48:56.580 | nobody wants to read advertising.

03:48:58.860 | Like if you were to spend $100 million advertising

03:49:03.020 | your thing, I probably wouldn't wanna watch it.

03:49:05.700 | But if you-- - That's so fascinating.

03:49:08.860 | - Yeah, we see the death of that.

03:49:11.260 | And so the commercial shows are losing their audiences

03:49:16.020 | and the authentic specialist or the authentic artist

03:49:20.340 | are gaining their audience.

03:49:24.540 | - And that's a beautiful thing.

03:49:26.420 | Speaking of deep thinking,

03:49:29.000 | you're just a human, your life ends.

03:49:31.960 | You've accumulated so much wisdom, so much money,

03:49:37.400 | but the ride ends.

03:49:38.560 | Do you think about that?

03:49:39.760 | Do you ponder your death, your mortality?

03:49:43.560 | Are you afraid of it?

03:49:44.720 | - When I go, all my assets will flow into a foundation

03:49:51.040 | and the foundation's mission is to make education free

03:49:53.780 | for everybody forever.

03:49:55.360 | And if I'm able to contribute to the creation

03:50:00.360 | of a more perfect monetary system,

03:50:05.720 | then maybe that foundation will go on forever.

03:50:08.400 | - The idea, the foundation of the idea.

03:50:12.640 | So not just the, each of the foundations.

03:50:17.040 | - It's not clear we're on the S-curve of immortal life yet.

03:50:19.920 | Like that's a biological question

03:50:21.860 | and you ask that on some of your other interviews

03:50:25.120 | a lot.

03:50:26.160 | I think that we are on the threshold

03:50:28.160 | of immortal life for ideas or immortal life

03:50:33.160 | for certain institutions or computer programs.

03:50:38.120 | So if we can fix the money,

03:50:40.480 | then you can create a technically perfected endowment.

03:50:45.480 | And then the question really is what are your ideas?

03:50:49.200 | What do you want to leave behind?

03:50:51.040 | And so if it's a park, then you endow the park, right?

03:50:54.480 | If it's free education, you endow that.

03:50:56.960 | If it's some other ethical idea, right?

03:51:01.960 | - Does it make you sad that there's something

03:51:06.080 | that you've endowed some very powerful idea

03:51:11.080 | of digital energy that you put out into the,

03:51:14.200 | you help put it into the world and your mind,

03:51:19.080 | your conscious mind will no longer be there

03:51:22.440 | to experience it.

03:51:25.360 | It's just gone forever.

03:51:27.280 | - I rather think that the thing that Satoshi taught us

03:51:31.960 | is you should do your part during some phase of the journey

03:51:36.160 | and then you should get out of the way.

03:51:37.760 | (laughing)

03:51:39.080 | And I think Steve Jobs said something similar

03:51:43.120 | to that effect in a very, very famous speech one day,

03:51:46.880 | which is, you know, death is a natural part of life

03:51:49.960 | and it makes way for the next generation.

03:51:52.280 | And I think the goal is you upgrade the world, right?

03:51:57.800 | You leave it a better place, but you get out of the way.

03:52:00.440 | And I think when that breaks down,

03:52:05.440 | you know, bad things happen.

03:52:09.200 | I think nature cleanses itself.

03:52:12.040 | There's a cycle of life.

03:52:13.520 | - And speaking of one of great people

03:52:17.400 | who did also get out of the way is George Washington.

03:52:19.880 | So hopefully when you get out of the way,

03:52:21.800 | nobody's bleeding you to death in hope of helping you.

03:52:26.800 | What do you think, to do a bit of a callback,

03:52:32.600 | what do you think is the meaning of this whole thing?

03:52:34.920 | What's the meaning of life?

03:52:36.280 | Why are we here?

03:52:37.440 | We talked about the rise of human civilization.

03:52:40.040 | It seems like we're engineers at heart.

03:52:42.320 | We build cool stuff.

03:52:43.780 | Better and better use of energy,

03:52:47.120 | channeling energy to be productive.

03:52:49.680 | Why?

03:52:50.960 | What's it all for?

03:52:52.320 | - You're getting metaphysical on me.

03:52:57.040 | - Very, there's a beautiful boat to the left of us.

03:52:59.360 | Like, why do we do that?

03:53:00.560 | This boat that sailed the ocean.

03:53:04.000 | Then we build models of it to celebrate

03:53:06.000 | great engineering of the past.

03:53:08.560 | - To engineer is divine.

03:53:11.000 | You can make lots of arguments as to why we're here.

03:53:14.360 | We're either here to entertain ourself

03:53:16.480 | or we're here to create something.

03:53:19.740 | That's beautiful or something that's functional.

03:53:22.340 | I think if you're an engineer,

03:53:23.380 | you entertain yourself by creating something

03:53:25.340 | that's both beautiful and functional.

03:53:27.600 | So I think all three of those things,

03:53:29.340 | it's entertaining, but it's ethical.

03:53:32.040 | You know, you got to admire, you know,

03:53:35.260 | the first person that built a bridge,

03:53:38.260 | crossing a chasm or the first person

03:53:41.300 | to work out the problem of how to get

03:53:42.780 | running water to a village.

03:53:44.460 | On the first person to figure it out,

03:53:47.480 | how to, you know, dam up a river.

03:53:50.540 | Or mastered agriculture.

03:53:54.300 | The guy that figured out, you know,

03:53:55.740 | how to grow fruit on trees or created orchards,

03:53:58.420 | you know, and maybe one day had like 10 fruit trees.

03:54:00.980 | He's pretty proud of himself.

03:54:02.680 | - So that's functional.

03:54:05.700 | There is also something to that,

03:54:07.340 | just like you said, that's just beautiful.

03:54:10.020 | It does get you closer to,

03:54:12.180 | like you said, the divine.

03:54:15.580 | Something, when you step back

03:54:20.560 | and look at the entirety of it,

03:54:22.880 | a collective of humans using a beautiful invention

03:54:27.880 | or creation or just something about this instrument

03:54:32.920 | is creating a beautiful piece of music.

03:54:36.760 | That seems just right.

03:54:40.220 | That's what we're here for.

03:54:41.680 | Whatever the divine is, it seems like we're here for that.

03:54:44.920 | And I, of course, love talking to you

03:54:46.540 | because from the engineering perspective,

03:54:48.880 | the functional is ultimately the mechanism

03:54:50.920 | towards the beauty.

03:54:51.920 | - Isn't there something beautiful about

03:54:56.140 | making the world a better place for people that you love?

03:54:59.180 | Your friends, your family, or yourself?

03:55:02.100 | You know, when you think about the entire arc

03:55:08.860 | of human existence and you roll the clock back

03:55:13.360 | 500,000 years and you think about every struggle

03:55:16.800 | of everyone that came before us

03:55:18.880 | and everything they had to overcome

03:55:20.840 | in order to put you here right now,

03:55:22.980 | you know, you kind of, you got to admire that, right?

03:55:28.120 | You got to respect that.

03:55:30.160 | - That's a heck of a gift they gave us.

03:55:32.040 | It's also a heck of a responsibility.

03:55:35.380 | Don't screw it up.

03:55:37.400 | - If I dropped you 500,000 years ago

03:55:41.600 | and I said, figure out steel refining,

03:55:44.320 | or, you know, figure out silicon chips, fabric production,

03:55:49.320 | or whatever it is.

03:55:52.440 | - Fly or fire.

03:55:54.600 | - And so now we're here.

03:55:56.000 | And I guess the way you repay them is

03:55:58.200 | you fix everything in front of your face you can, right?

03:56:01.560 | And that means to someone like Elon,

03:56:05.440 | it means get us off the planet, right?

03:56:08.900 | To someone like me, it's like, I think,

03:56:11.540 | you know, fix the energy in the system.

03:56:14.900 | - And that gives me hope.

03:56:16.100 | Michael, this was an incredible conversation.

03:56:18.060 | You're an incredible human.

03:56:19.260 | It's a huge honor you would sit down with me.

03:56:21.860 | Thank you so much for talking to me.

03:56:23.860 | - Yeah, thanks for having me, Lex.

03:56:26.020 | - Thanks for listening to this conversation

03:56:27.540 | with Michael Saylor.

03:56:28.880 | To support this podcast,

03:56:30.260 | please check out our sponsors in the description.

03:56:33.020 | And now let me leave you with a few words

03:56:35.460 | from Francis Bacon.

03:56:37.420 | Money is a great servant, but a bad master.

03:56:41.940 | Thank you for listening and hope to see you next time.

03:56:45.840 | (upbeat music)

03:56:48.420 | (upbeat music)

03:56:51.000 | [BLANK_AUDIO]

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

Chapters