The Jordan B. Peterson Podcast - 203. The Immaculate Conception： Bitcoin vs Fiat Standard ｜ Dr. Saifedean Ammous

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00:00:51.040 Welcome to the JBP Podcast, Season 4, Episode 58.

00:00:58.300 This episode was recorded on September 8th, 2021.

00:01:02.020 Saifedean Amos is a leading researcher, communicator, and educator in the field of Bitcoin.

00:01:08.120 He has successfully advised many corporations and private investors.

00:01:12.320 He earned his PhD from Columbia University and has since delved into energy, environmental, and political economics.

00:01:19.000 His research has also explored concepts like spontaneous or emergent order and the limitations of centralized planning.

00:01:26.800 Dr. Amos is the author of The Bitcoin Standard.

00:01:29.800 Published in 21 languages with thousands of Amazon reviews, it's widely considered the most important book for understanding the economics of Bitcoin.

00:01:38.260 We hope you enjoy this episode.

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00:03:32.640 Hello, everyone.

00:03:45.280 I'm pleased today to have with me Dr. Seyfadeen Amos.

00:03:50.640 He's an independent economist as well as a leading researcher, communicator, and educator in the field of Bitcoin.

00:03:57.680 He obtained his PhD at Columbia University.

00:04:02.060 Dr. Seyfadeen is the author of the Bitcoin Standard, which was published in 2018, and the newly released Fiat Standard.

00:04:10.820 He has advised corporations on Bitcoin strategy, helping many investors perform their due diligence on Bitcoin.

00:04:16.940 Dr. Amos teaches courses on the economics of Bitcoin and economics in the Austrian school tradition in his online learning platform, Seyfadeen.com, and also hosts the Bitcoin Standard podcast.

00:04:31.060 Thanks very much for agreeing to talk to me today, and I'm looking forward to learning a lot about things I know very little about today.

00:04:38.840 So tell us maybe to begin with about your books.

00:04:43.700 Let's start with the Bitcoin Standard and then move to the Fiat Standard.

00:04:47.260 So the Bitcoin Standard.

00:04:49.540 Yeah, well, first of all, thank you very much for having me on.

00:04:51.800 It's a true pleasure to be talking to you.

00:04:53.380 I published the Bitcoin Standard in 2018, and it was a book that tried to explain the economics of Bitcoin, why Bitcoin functions, why it functions the way it does, and what are the implications that you would expect from the continued growth of Bitcoin in the future.

00:05:11.920 And so I analyzed it from the perspective of the Austrian school, relying on the work of economists like Karl Menger and Ludwig von Mises and Murray Rothbard and Joe Salerno and Friedrich Hayek.

00:05:24.680 And I think the key insights that I – well, there are several key insights, but one of the most important ones in the book is that Bitcoin is the hardest money that has ever been invented.

00:05:36.240 Because we've essentially thrown away – the algorithm for making Bitcoin work has been set at producing a certain number of Bitcoin over time that's going to end at 21 million, and there's no way of making more Bitcoins.

00:05:52.600 And I think after 12 years of Bitcoin operating, we can pretty confidently say there's not going to be more than 21 million Bitcoin.

00:06:00.140 And so that makes Bitcoin truly unique as a monetary asset because it is the hardest monetary asset that we've ever found.

00:06:08.120 Let me ask you a question about that.

00:06:10.860 So why is it important that that limit exists?

00:06:15.180 And what do you mean by hardest currency compared to other currencies?

00:06:19.660 Yeah.

00:06:20.020 So the hardness here refers to the difficulty of making more currency units to add onto the existing supply.

00:06:27.620 And I think this is a big deal, and essentially the first four chapters of my book focus on explaining why this is such a big deal.

00:06:35.500 Because if you look historically at money, you find that money has been a contest of survival of the hardest.

00:06:43.000 People are always looking for the hardest money available, and the ones who manage to find the hardest money manage to store their wealth in it successfully,

00:06:50.080 whereas the ones who use an easy money will witness their wealth dissipate.

00:06:53.960 So people will learn, but even if they don't learn, the market will brutally teach them the lesson by discounting and reducing the wealth of the people who put in the easy money.

00:07:05.360 So the end result is that more and more wealth will be concentrated in the harder money.

00:07:09.400 And that's why, historically, when societies that had harder money came into contact with societies that had easier money,

00:07:17.460 the ones with the hard money were able to essentially buy up a lot of the resources of the easy money societies,

00:07:25.200 because they could continue to make more of their money and therefore devalue the money and increase the supply of it.

00:07:30.620 And there are many examples in my book about this.

00:07:33.920 Seashells and glass beads and limestones all were used as money when industry made them scarce in certain times and places.

00:07:42.320 But then when modern technology came and allowed for an increase in their supply, their value was declining.

00:07:48.820 And then in the 19th century, we see this happen between gold and silver too.

00:07:52.700 The price of gold and silver used to oscillate around 15 ounces of silver per one ounce of gold.

00:08:00.680 And in 150 years, it's now somewhere around 100.

00:08:03.820 It's gotten to around 120 recently.

00:08:07.100 So the price of silver has been declining next to gold.

00:08:10.500 And I think that can be explained by the fact that gold is harder.

00:08:13.540 The supply of silver is being increased at a faster rate.

00:08:16.240 And there was utility in the use of silver when money was physical.

00:08:21.520 But then with the creation of essentially financial instruments that were backed by gold,

00:08:27.520 you could use gold payments for small amounts of payments as well as large amounts of payments.

00:08:32.940 So that kind of obsoleted the role of silver.

00:08:35.800 And so everybody went with the harder money.

00:08:37.920 And then the harder money appreciated and the easier money continued to lose its monetary status.

00:08:43.200 Okay.

00:08:43.300 So let me see if I've got this straight.

00:08:46.280 So money is an abstract store of value.

00:08:51.160 And you always want it to represent value as such.

00:08:55.460 So something like the exchange of labor or the exchange of efficiency, something like that.

00:08:59.820 And you can correct me if I'm wrong there.

00:09:02.820 You have to use something to represent that abstraction.

00:09:05.840 And the problem with that is that there will be people who have control over the representation

00:09:10.580 rather than contributing to the value.

00:09:13.300 And those could be politicians who could print money or they could be people who, well, who find silver or who find gold or who mine it and so forth.

00:09:20.940 So anything that can be produced that's a representation is subject to devaluation if the production becomes more efficient.

00:09:28.940 And anything that's producible like a paper money can be toyed with by those who have control over its distribution.

00:09:39.320 And so your argument essentially and the Bitcoin argument in general is, well, here's something that we will never get more of no matter what we do.

00:09:47.000 So I'd like to know why I should believe that.

00:09:49.880 And the next thing I'd like to know about that maybe is, well, why Bitcoin and not 200 alternative cryptocurrencies?

00:09:57.620 So Bitcoin can't be produced, but cryptocurrencies can be.

00:10:01.540 And so why isn't that an indication of the softness of cryptocurrency, Bitcoin included?

00:10:07.760 Yeah.

00:10:07.940 Well, these are great questions.

00:10:09.200 So I think initially, yeah, you're absolutely spot on.

00:10:13.500 It's exactly that, that whatever gets chosen as money, it holds value because it has value on the market.

00:10:20.560 But as soon as it starts getting chosen as money, it gets into what I call the easy money trap,

00:10:24.980 which is the people who can make more of it will try and make more of it.

00:10:28.920 People will find a way and they will make more of it.

00:10:31.020 And so the things that have ended up being used as money were always the thing that resisted that the most,

00:10:36.560 the things that are the hardest.

00:10:37.560 And so gold did an excellent job with that because gold's chemistry naturally gives it that property because gold is indestructible.

00:10:45.420 So because we've been accumulating gold production over thousands of years,

00:10:50.160 no matter how much gold we produce this year,

00:10:52.120 it's still going to be a tiny fraction of all of the stuff that we've accumulated over the last 5,000 years.

00:10:56.840 And so every year, the gold supply increases by around 1.5%.

00:11:00.960 And that's why it beat everything out.

00:11:03.340 So the hardest thing ends up winning, whether people consciously realize that that is the case

00:11:07.940 or just because of the realities of supply and demand.

00:11:10.980 Every year, we're making 5% or 20% or 30% more silver and maybe 100% more copper

00:11:16.840 and larger quantities of all other commodities on the market,

00:11:20.760 but we're only making 1.5% or 2% gold.

00:11:23.280 So over time, gold holds on to its value.

00:11:25.200 And over time, that ends up being the best store of value.

00:11:28.440 So gold resisted that and then gold failed for issues we could talk about when we talk about the fiat standard.

00:11:35.600 But then Bitcoin offers us this possibility again, which is that nobody can break this algorithm.

00:11:42.560 And I must say, this is really the reasonable skepticism about Bitcoin is that,

00:11:49.060 yeah, well, it's just a line of code and then anybody can change it.

00:11:52.480 It's a line of code, you know, we can change lines of code all the time.

00:11:55.740 Somebody can get under the hood and change the code.

00:11:58.360 And it takes a lot of time to be able to understand why this is not exactly the case.

00:12:03.140 And I try and make that case in my book extensively in the latter chapters of the book.

00:12:07.760 But if I were to summarize it, I would say this.

00:12:11.800 With Bitcoin, what we had was that the person who created the code, he put it out there.

00:12:20.560 He was anonymous.

00:12:21.640 He worked on it for about a year or two.

00:12:24.460 And then he disappeared.

00:12:25.700 And that was it.

00:12:27.840 There was nobody in charge since then.

00:12:30.240 It's now been more than 10 years that he's been disappeared.

00:12:32.120 And there has not been anybody in charge of the project.

00:12:35.640 And what we've only had are users.

00:12:37.500 So Bitcoin only has users.

00:12:38.920 It doesn't have any admins.

00:12:40.360 There's nobody with a master key.

00:12:42.760 And we've, you know, this is kind of the simple way of thinking about it,

00:12:48.140 which is 10 years of this thing operating without anybody being in charge.

00:12:52.040 And with everybody who tried to change the consensus parameters, the most important parameters

00:12:56.600 of the network, everybody who tried to change these ended up basically failing.

00:13:01.240 And Bitcoin has maintained its consensus parameters to the point where you could run it according

00:13:05.760 to the same code that was available in 2009.

00:13:08.200 And you could still make it interoperable with the current chain.

00:13:12.200 And that's something that is unique about Bitcoin, which is that it is the coin that,

00:13:17.300 you know, I like to call it the immaculate conception.

00:13:19.440 Somebody made these coins.

00:13:22.380 Anybody could have mined the coins from the first day.

00:13:25.720 You know, they announced the currency and they said, I'm going to start running it on this

00:13:29.640 day.

00:13:31.200 And anybody could have joined.

00:13:32.560 And since then, everybody who got Bitcoin, got Bitcoin at the market price or because they

00:13:38.180 mined it and expended resources, which roughly cost them close to what the market price was.

00:13:44.700 So there are no insiders in Bitcoin.

00:13:46.180 And Bitcoin has operated this way for 12 years now.

00:13:50.380 And this is kind of the sociological explanations for it.

00:13:54.220 Now, to get more technical in terms of the explanations, basically, Bitcoin is a distributed

00:13:58.000 network.

00:13:58.780 And so anybody can run the code on their own computer and the network functions according

00:14:04.680 to the consensus parameters that everybody agrees upon.

00:14:08.320 OK, so I don't know what those are, the consensus parameters.

00:14:11.460 Can you tell me what those are?

00:14:13.800 What does that mean?

00:14:14.600 Basically, the main and most important rules according to which the network runs from the

00:14:20.060 beginning.

00:14:21.140 And one of them, perhaps the most important one.

00:14:24.800 Yes, it's like the constitution.

00:14:26.180 And perhaps the most important one is the number of coins that are generated.

00:14:30.180 So we have a very strict and clear schedule of how many coins are going to be produced

00:14:34.420 every day, essentially in perpetuity.

00:14:37.020 And if you abide by these consensus rules, then your computer can be in sync with the rest

00:14:45.240 of the network and you're in consensus with the network and you can buy and sell coins

00:14:50.320 and you can transact coins on the network.

00:14:52.460 But if you try and break those consensus parameters, you leave the coin.

00:14:55.900 So the miracle of Bitcoin, in a sense, is that it has managed to maintain these important consensus

00:15:02.900 parameters for 12 years now.

00:15:05.080 And it continues to get increasingly more ossified every day.

00:15:09.360 Bitcoin is the most conservative thing in human history, probably.

00:15:13.000 There's not going to be...

00:15:15.360 It just continues to get harder and harder to change the constitution of Bitcoin.

00:15:20.380 And nobody's been able to do it in 12 years.

00:15:23.140 So that's kind of the superficial or broad picture explanation of those things.

00:15:30.480 But you could also get into the software itself.

00:15:33.480 It's a distributed network.

00:15:34.780 So everybody needs to be in consensus with the network.

00:15:39.280 And then if you end up breaking the rules, if you end up trying to change the rules, which

00:15:43.720 a lot of people have tried to do, all that you will do is that you will end up with another

00:15:48.020 Bitcoin that is out there competing on the market with the original Bitcoin, but you've

00:15:52.580 got a lot less liquidity and you've got a lot less ability to compete.

00:15:56.880 And we've seen many people try and do that.

00:15:58.900 And all that has happened is that their coins have continued to change their consensus parameters

00:16:03.580 because once you break your duck once, then it just becomes much easier to do it.

00:16:09.720 And they devolved into civil strife between participants on the network.

00:16:15.320 And of course, they lost economic value and the value of the network is essentially dissipated

00:16:20.220 close to zero.

00:16:22.040 So Bitcoin continues to get stronger because it continues to demonstrate that it can do

00:16:26.640 those few very simple technological tasks and it can do them reliably and it can do them

00:16:32.300 according to the same rules that it has been doing them for 12 years.

00:16:35.920 That's kind of the value proposition.

00:16:37.580 It's immutable, it's decentralized, and the money supply is fixed.

00:16:42.100 So that's kind of a big deal if you put all of these all together.

00:16:45.940 Right.

00:16:46.480 And so it's hard for anyone to make a Bitcoin substitute that can catch up to it because

00:16:51.720 it's established a kind of primacy given its track history of reliability and its widespread

00:16:57.380 distribution.

00:16:58.520 That's part of the argument for its primacy.

00:17:01.660 Yes, but I think it's more than that.

00:17:03.140 It's not just, you know, Coca-Cola and Pepsi catching up to one another or McDonald's and

00:17:07.380 Burger King, there is a fundamental issue here, which is that what you would want the 0.98

00:17:13.020 most in this kind of digital currency, because after all, this is all numbers and ones and

00:17:17.080 zeros and programmers can change it.

00:17:19.180 And so if your programmers can change the consensus parameters of the network, which

00:17:23.860 basically all the other digital currencies can do at will, you know, the other digital

00:17:27.800 currencies, they have these hard forks, which change the consensus parameters quite

00:17:31.300 frequently.

00:17:31.800 And particularly the successful ones, because the way that, you know, they managed to get

00:17:36.080 successful was essentially through active management.

00:17:38.960 And so they're more like companies rather than private protocols.

00:17:43.520 And the key thing is, as you said, there is a first mover advantage, but there's also the

00:17:49.140 problem of the immaculate conception.

00:17:50.860 You know, if you make a new Bitcoin that's going to start from scratch, you break consensus

00:17:58.000 parameters, or you start by imposing new consensus parameters, you're already, you know, not

00:18:03.120 starting with that immaculate conception.

00:18:05.000 You're already starting with the idea that there's somebody in charge.

00:18:08.600 And so there's now it's not 200 coins, there's about 10,000 coins.

00:18:13.420 And if you've heard about any of them other than Bitcoin, it's because there's a small group

00:18:17.300 of people that have been behind them.

00:18:19.220 And so that, as far as I'm concerned, makes it highly unlikely that they would have a monetary

00:18:26.420 role, because at the end of the day, you know, what you appreciate about Bitcoin, what makes

00:18:30.900 me pay attention to Bitcoin is that it is neutral money that nobody can control.

00:18:34.360 So you can see two banks in two different countries use Bitcoin, because that means they don't

00:18:41.140 need to resort to their own legal system and their own central banks and their own regulators

00:18:46.240 in order to carry out this transaction, because Bitcoin is just neutral.

00:18:49.560 They know, you know, it's like the N engine, you know, you click the right buttons, and then

00:18:54.480 the right smoke comes out and it does the right transaction that you want.

00:18:59.660 Okay, so I'm going to recapitulate that for a moment.

00:19:02.480 So because there's something in there, too, that's that's quite difficult to grasp, quite

00:19:08.700 difficult to believe, apart from the fact that the technical aspects are rather impenetrable

00:19:14.100 for an outsider.

00:19:14.920 Um, this, the way Bitcoin came about seems, it seems like a story that's virtually impossible

00:19:22.620 to believe you, you can't, you can't, you couldn't make it up.

00:19:26.280 Right?

00:19:26.860 So this unknown engineer, Satoshi, anonymous, created this, came up with this idea that no

00:19:34.360 one else had ever had, implemented it online, anonymized it, and then vanished, essentially

00:19:41.980 without a trace.

00:19:43.120 I mean, how much do people know about him?

00:19:45.480 Are we sure he's who invented it?

00:19:47.400 And what the hell was he up to?

00:19:48.980 And why did this happen?

00:19:50.040 And why should an outsider believe any of this?

00:19:52.480 Because it does seem like the plot of a bad science fiction novel.

00:19:57.260 The, I will confess that I did used to think about this in similar terms.

00:20:02.700 But I'll say this, you know, you use the wheel every day, but you don't know who invented

00:20:07.060 the wheel and we use a lot of things every day that you, you don't use them because you

00:20:11.600 trust the guy who made them.

00:20:12.800 You use them because they have a proven track record.

00:20:15.240 You know, you've spent your life seeing wheels working.

00:20:17.940 And so you're willing to trust a wheel next time you get into a car.

00:20:21.880 So, um, I think, you know, that's ultimately what, um, well, in a sense, it's kind of bad

00:20:29.000 press for Bitcoin, but like a lot of things about Bitcoin, it actually ends up being illustrating

00:20:34.180 its strength.

00:20:35.440 Yes.

00:20:35.620 This thing has a story that, you know, a PR person would tell you, just don't bother,

00:20:41.580 you know, start doing something else with your life rather than try and sell this thing.

00:20:45.780 And it doesn't need anybody to sell it.

00:20:48.900 That's kind of the point.

00:20:49.940 It doesn't have a story.

00:20:50.980 It doesn't have a PR person.

00:20:52.780 And the fact that it has this kind of ugly story where this person just came in and then

00:20:57.140 disappeared and who knows what happened?

00:20:58.540 Nobody really knows.

00:20:59.640 You know, he, maybe he died.

00:21:00.580 Maybe he has other things to keep him busy.

00:21:04.380 Maybe he's incapacitated in some way, but ultimately it doesn't matter because even if

00:21:08.640 he were to come back today, he has no ability to control the network any more than you and

00:21:14.360 I can control it.

00:21:15.500 You know, he can control the code that he runs on his computer, but at this point, the

00:21:19.400 project has worked 10 years without him.

00:21:21.480 So there's no reason why anybody in Bitcoin is going to defer to his judgment if he were

00:21:27.800 to come back.

00:21:28.840 But besides this, you know, I think the key point is that it works regardless of whether

00:21:33.660 this person is part of it or not.

00:21:37.820 Okay.

00:21:38.360 So fair enough.

00:21:41.740 I understand that.

00:21:43.200 So advantages of Bitcoin, you contrasted.

00:21:46.560 Oh yeah, a couple of questions.

00:21:47.680 Advantages of Bitcoin over fiat currency and that needs to be defined fiat currency.

00:21:53.600 And then I, I'm also curious as an outsider, you're, um, an advocate, I suppose, of the

00:22:00.480 Austrian school of economics and there are a variety of economic schools and maybe you

00:22:06.260 could briefly for everyone who's listening, outline the competing schools and what the

00:22:10.520 different propositions are and why there are competing schools and why you chose the

00:22:14.460 Austrian school.

00:22:15.340 So, okay, um, I'll, uh, I'll say this.

00:22:20.200 I think the main, um, the main split is between the Austrians and, um, everybody else, as far

00:22:27.200 as I'm concerned, when it comes to the main, uh, most important questions, because the Austrians 0.95

00:22:33.020 come at the question from, um, a different starting point, which is that value is subjective.

00:22:39.500 Economic value is subjective.

00:22:41.440 And that then leads to a whole different, uh, intellectual path with different methodologies

00:22:48.280 and different conclusions from what you get from essentially everybody within the mainstream.

00:22:53.420 And when I say the mainstream, you know, that includes, um, neoclassical economists, um,

00:22:58.960 Chicago school economists to some extent, um, Keynesian economists and all other different

00:23:04.300 flavors and even Marxist economists.

00:23:05.800 Because on the main and big questions, I think the Austrians stand on a completely different 1.00

00:23:12.060 ground, which is value is subjective.

00:23:15.180 So therefore, um, economic calculation is something that is done at an individual level.

00:23:20.480 And it is something that cannot be done objectively by a centralized authority, um, which is the kind

00:23:27.400 of physics envy that has, um, plagued mainstream economics throughout the 20th century.

00:23:32.220 So this leads to a difference in methodology, leads to a difference in conclusions, which

00:23:36.240 is, uh, if once you understand that value is subjective, you realize the best person who's

00:23:41.080 able to achieve the important values that, uh, matter to them is the person themselves.

00:23:46.380 And so you, you are more likely to be sympathetic to ideas of, uh, that give individuals more autonomy

00:23:52.620 over their own life in economic terms.

00:23:54.660 Whereas from the other schools, it's a question of what is the optimum policy and what kind of

00:23:59.260 policy should, um, government be using?

00:24:01.620 So, um, you know, the, entire, the questioning of the entire premise of the need for economic

00:24:06.840 policy and for the need of economic management by the government is one important difference.

00:24:11.640 So if you're, if you're working within the parameters of the Austrian economic school,

00:24:16.760 does that tilt you?

00:24:17.840 So that tilts you more towards appreciation of non-centrally controlled distributed networks

00:24:23.760 and, and, and the emphasis on the individual actor.

00:24:27.520 That's, that's.

00:24:28.220 Yes.

00:24:29.180 And to the mainstream economists, this is, you know, uh, uh, irredeemably ideological

00:24:33.880 and, uh, unscientific, but, you know, to the Austrian.

00:24:37.760 What's the rationale for that though?

00:24:40.100 Because it seems precisely the opposite.

00:24:42.240 I mean, if you're, if the, because it seems to me that that's more grounded in a kind of

00:24:46.780 humility, there's no way of, of determining once and for all what the best thing is for the

00:24:52.580 most people. So what we should try to do is establish, um, institutions that distribute

00:24:58.720 decision-making in as, what would, in as uncontrolled manner as possible, I suppose.

00:25:04.720 So, so that's like a rat in some sense, that's, is that a radically free market approach that

00:25:09.700 is applied to all sorts of institutions?

00:25:11.820 And, and the fundamental issue there is the decentralization of decision-making power.

00:25:17.080 Sure. Absolutely. And this is what, you know, from the mainstream perspective appears to

00:25:21.380 be, um, uh, ridiculous because in their mind, you know, the job of the economists is to figure

00:25:26.900 out how the government can fix the economy, you know, get rid of unemployment and, um, eliminate,

00:25:32.920 uh, wage disparities and get rid of inequality and all these other, uh, buzzwords that, uh, appear

00:25:38.020 to be, you know, profound economic scientific thinking when really it's just politics masquerading

00:25:43.100 as, um, science. Um, so, and then...

00:25:47.400 So what would, how would a mainstream economist react to that kind of statement if you were

00:25:52.300 playing devil's advocate to, to help me understand how they would criticize what, what they'd say

00:25:57.200 is, uh, I think, uh, what they'd say is the Austrian school made important contributions up

00:26:01.080 until the first world war to marginal analysis, but then the field advanced mathematically, you

00:26:08.960 know, with the improvement in mathematical techniques that happened around the world and with the

00:26:12.740 advancement of computers, um, there became so much more room for the application of mathematical

00:26:18.700 and quantitative methods into economics and the Austrian school failed to keep up with that.

00:26:23.400 And so they're still stuck in the past writing essays, shouting at the clouds, um, not making

00:26:30.240 much sense. Whereas, you know, the mainstream has moved on to the scientific management, which

00:26:34.440 is, you know, once you scratch under the surface, you realize there's very few differences

00:26:38.420 between, uh, modern macroeconomists, scientific management and, um, erstwhile socialist economists

00:26:45.140 and Soviet economists and their conception of central planning. It's, uh, in fact, you know,

00:26:49.320 one interesting anecdote, Paul Samuelson literally wrote the textbook on economics in post-World

00:26:55.820 world war to America and the world and his, uh, principles of economics textbook, which first

00:27:01.740 came out in the forties or fifties. I don't remember when was the first edition and it continued

00:27:05.920 to come out until his death, uh, about 10, 15 years ago, uh, up until the 1989 edition, the

00:27:14.420 book had continuously when discussing the Soviet economy, the book had continuously said the Soviet

00:27:19.560 economy will likely outperform the, uh, U S economy and it will overtake the U S economy within the next

00:27:27.160 few years. And there's a paper that is done that goes through all of these different editions. And as

00:27:32.040 Samuelson continues to move the goalposts, you know, they were supposed to overtake the U S in 68, but then

00:27:37.460 by the, you know, 65 edition, they're supposed to take the U S in 75 now, and then new edition

00:27:43.480 comes along. And I don't remember the exact dates, but, you know, they kept on kicking the can

00:27:48.000 downward down the road while continuously, you know, not challenging the, uh, essential idea,

00:27:54.320 which is that central planning of the economy works and the Soviet union is going to do a better job

00:27:58.560 than the U S but their defense against central planning of the economy is that it flies in the

00:28:04.680 face of democratic control of society. And we wouldn't want to infringe on people's freedom. So

00:28:09.260 for mainstream economists, the problem with Soviet economic planning was that it necessitated,

00:28:15.940 you know, breaking a few eggs and putting a few million people in gulags. And that's why we don't

00:28:21.220 want it, but it would work and it would give us more GDP. And so this continued to be published in

00:28:26.920 Paul Samuelson's textbooks up until 1989, uh, or 1990 or something like that, you know, students were

00:28:32.660 studying this in class as the Soviet union was collapsing. And of course, you know, this is

00:28:38.340 fiat academia, fiat world. Um, the next year they just take that section out and they continue to print

00:28:44.420 the textbooks that continue to teach kids in universities around the world today that,

00:28:48.500 you know, this is how economics works and economics is about central planning.

00:28:52.180 Were you, were you trained at Columbia as a classical economist?

00:28:57.860 Yeah, I took the foundational course for economics at Columbia. Yeah.

00:29:01.540 So my PhD was in sustainable development. It wasn't entirely economics, but we took the

00:29:05.380 foundational courses of economics basically.

00:29:07.860 So why did you become a deviant from that? Let's say what, what, what was your intellectual

00:29:12.980 journey? And I'm, I'm very curious about that. Uh, well, um, so I, my undergraduate background

00:29:21.220 was in mechanical engineering of all things. And in my PhD, it was in sustainable development

00:29:26.660 and we were supposed to study issues of, you know, energy and society and economics and, um,

00:29:32.580 approach it from multidisciplinary perspective. So my engineering background and then my new knowledge

00:29:37.780 and economics, uh, gave me that kind of, uh, what Hayek calls the fatal conceit of, I'm just going

00:29:44.020 to pick a topic in, um, uh, in energy economics and energy and engineering economics and, you know,

00:29:51.860 study it with the big brains of a Columbia PhD and then figure out what needs to be done basically.

00:29:58.900 And then, you know, you can maintain these illusions until you actually start digging into the

00:30:03.220 spreadsheets and then you start trying to actually mathematically model the complex world outside

00:30:09.780 and put it on a spreadsheet on your computer. And then you start realizing just how absurd

00:30:16.660 these things are, you know, the, yeah, well, you'd think if you could do that, then you could put

00:30:20.980 the stock market on a spreadsheet and run your economic wizardry and gather all the money in the

00:30:26.980 world with your capability to model the economic system and predict. And yet no one can do that.

00:30:32.420 Exactly.

00:30:33.460 So, so, and I, let me, what, one more comment about that. I mean, I see

00:30:40.020 that danger of that fatal conceit lurking underneath all the discussions of climate change.

00:30:48.020 Does that seem like a reasonable proposition to you? Because it's a justification for central planning,

00:30:53.860 masquerading as a masquerading as, well, we, we have to save the planet. We know what's wrong with it

00:30:59.380 and we know how to fix it. And our solutions are going to work and they're not going to produce

00:31:03.300 unintended consequences. And it's so dire that you need to leave us alone while we do this.

00:31:08.260 And we know better than you do.

00:31:12.260 Exactly. And that's, that's exactly how I essentially went off the reservation because,

00:31:16.740 you know, the topic of the course, the topic of the PhD and the topic of the program was

00:31:21.060 about how you can use this kind of scientific management to solve these big problems like

00:31:25.860 climate change. And as I was studying in particular, my PhD was on the topic of biofuels. So, you know,

00:31:31.300 ethanol and biodiesel, which they make from plants, which is just an absolutely insane

00:31:36.500 abomination of humanity. It's insane that people do this. You know, you, you grow crops,

00:31:42.420 you use up land for a year to grow crops and then to process them and then to turn them into fuel

00:31:47.060 when you can just get fuel straight out of the earth and much cheaper, much more

00:31:50.180 and much better quality that doesn't degrade the car and that doesn't destroy the soil. And

00:31:57.700 as I was studying that, I was on the one hand, I was struck by the impossible complexity of the

00:32:04.260 question. And then on the other hand, I was noticing the inescapable conclusion that everything

00:32:11.460 that they're trying to do here is just making things worse. In fact, you know, the idea was that

00:32:17.380 we're going to save the earth from climate change by replacing fossil fuels with ethanol and biodiesel.

00:32:25.940 But the reality was that you were chopping down the Amazon and Indonesian palm forests and to turn them

00:32:33.700 into sterile farming land. The Midwest and the Mississippi Valley over the US was essentially degraded

00:32:42.660 from all of its soil. And then the the fertilizer that is just running off from the Mississippi is

00:32:48.020 causing all these enormous damage to the Gulf of Mexico. It's it's it's it's insane how much damage

00:32:54.500 is being done from this attempt to sort of centrally plant things from above. And Hayek has a saying where

00:33:01.380 he says, you know, we used to suffer from problems. We now suffer from solutions.

00:33:04.660 And this. So let me ask you about that. Like, look, I've been struck by exactly this problem,

00:33:10.420 right? This is the problem of unintended consequences and the irreducible complexity of things. So like,

00:33:16.740 we can talk about climate change, the problem of climate change, but there isn't those words are

00:33:23.060 unbelievably deceiving. Because there isn't a problem of climate change. There's 150,000 problems of climate

00:33:32.660 change. And every single one of those is an unbelievably difficult problem. And the solutions

00:33:38.740 to those problems could well exist in terrible contradiction to one another. And so but you get

00:33:44.260 deluded, you think, well, climate change, well, I can understand that the climate, that's easy to say,

00:33:48.980 I must be able to conceptualize that, of course, you can't. And then, and then it hides the fact that

00:33:55.780 it hides this under structure of complexity. Now you got a glimpse of that. And that instilled

00:34:02.580 in you this resistance to this fatal conceit. It instilled in you some humility.

00:34:07.380 Why doesn't that happen to other people? And why did it happen to you?

00:34:13.380 That's a good question. I don't know. I think, I don't know, different people react in different

00:34:20.020 ways. I just, I have an insatiable curiosity to continue to try and understand this question.

00:34:26.180 Whereas what I needed to do was to just sit down and run a bunch of equations on a spreadsheet and

00:34:35.380 say that this is the model. And, you know, as long as the thing was internally consistent, then

00:34:40.820 it gets the, uh, pass and then you get the degree. Maybe it was your training as an engineer.

00:34:47.620 Yes. I think actually that is a very good point. Yeah. Yeah. Cause engineers, they really like,

00:34:51.620 yeah. Engineers really like to build things that work.

00:34:54.340 Exactly. And you can't hide the fact, you know, like you have to trace the whole thing and how it

00:34:59.700 works. And you try and put, you, you have to conceptualize it in your brain and it has to make

00:35:04.420 sense. You know, think of the Rube Goldberg machine, whatever it is, you have to follow it through and

00:35:08.900 then you need to figure out where it breaks. And so thinking of trying to approach, uh, you know,

00:35:14.740 something as complex as the global energy market, as an engineer approaches something like an

00:35:20.980 engine, you know, a single engine, that's the fatal conceit because the engine is a product of

00:35:25.940 human design. It's a product of human constructive design. Somebody sat there with a pen and paper

00:35:30.820 or computer program and designed this engine and then they iterated on it. But, uh, things that are

00:35:36.820 societal institutions are the products of human action and not human design. You know, we don't,

00:35:42.820 nobody sat down and designed the global energy market. Everybody out there is helping shape the

00:35:48.180 global energy market every day with their consumption decisions and with their production

00:35:52.420 decisions. And everybody's kind of reacting to everybody else's actions in this kind of global

00:35:58.820 dance that we all do together that ends up, you know, rewarding the better ideas and punishing the

00:36:03.620 worst ideas. And nobody knows how it's going to evolve. That's ultimately, um, you know, Mises'

00:36:08.820 critique of socialism is, uh, primarily about property rights. It's, it's the issue of calculation

00:36:14.740 without property rights. It's impossible for people who don't own resources and who don't have an 1.00

00:36:19.300 opportunity cost, uh, to the use of resources to accurately and rationally estimate what is the

00:36:25.700 best use of those resources. It, it has to be real. You know, Mises has a beautiful quote. He says,

00:36:31.140 you know, capital is not a play, is not play pretend or something along those lines. It's not a game where

00:36:36.660 you can just let's pretend that this is my capital. I'm going to allocate it. No, it, it, it has to be

00:36:42.020 worth what it actually is worth to you individually so that the decision has the, uh, the weight.

00:36:48.980 Yes. The full weight of the reward and the full cost. You have to feel it in order to be able to

00:36:54.020 understand the decision. If you don't own it, then you don't understand the cost and you don't

00:36:58.660 understand, um, and you won't, can't make that decision. So that's one hand that it's the property

00:37:03.700 rights and calculation critique. And then on the other hand, there's the entrepreneurship critique,

00:37:07.860 which is even if we manage to, let's say, take over a capitalist functioning society and turn it

00:37:12.580 into socialist society today, it has no possibility for accommodating change. It has no possibility for

00:37:18.660 making change happen because it has no mechanism for consumers to impose their preferences for the

00:37:26.500 quality and, uh, quantity of goods that they want on the producers.

00:37:32.900 Right. So there's no, there's no way of gathering information about the state of the market.

00:37:36.500 Absolutely. Yeah. And about the future. And, and this is the crucial role of the entrepreneur

00:37:42.580 because the entrepreneurs, uh, plays a central role in Austrian economics, but not in mainstream

00:37:47.940 economics because in Austrian economics, you know, the entrepreneur is the one who foresees

00:37:52.020 possibilities and most entrepreneurs are likely wrong, perhaps maybe most or maybe close to most.

00:37:57.540 They're wrong about what they foresee in the world, but some of them are the ones who build the

00:38:02.660 right. Well, and there's a, there's a Darwinian issue there too, because look, part of the rationale

00:38:08.660 for evolution for the, for the, uh, what would you say for understanding why the idea of evolution

00:38:17.460 is necessarily true in some sense is exactly the problem of the complexity of the future.

00:38:22.980 It's unpredictable in principle. You're not going to get smart enough to predict it.

00:38:28.900 That's never going to happen. It may be, that would partly be, be because if you built a machine

00:38:34.020 that was smart enough to predict that the existence of a machine, that smart would change the way that

00:38:38.500 the future would manifest itself in a way that that machine couldn't predict. And so the way evolution

00:38:44.100 solves that problem is that it produces, it's like there's a million, one mosquito gives rise to a

00:38:51.940 million mosquitoes, but every mosquito doesn't produce a successful million offspring. We'd be 0.91

00:38:57.300 like knee deep in mosquitoes in no time. Hardly any of those mosquitoes live.

00:39:01.620 And they've, the ones that live vary a little bit from their parents in some unforeseen direction.

00:39:07.860 And if you get enough of that production of unforeseen variants, then some of those unforeseen variants

00:39:15.460 can match the unforeseeable future. And that's how, that's exactly how entrepreneurs work is most

00:39:20.580 entrepreneurs fail. And then when you look at successful entrepreneurs, you see that most of

00:39:25.780 their ideas failed. And so what you do is overproduce and cull. And that's not the same as logical

00:39:33.380 prediction. Now there is some role that intelligence plays, right? Because by all things considered,

00:39:38.420 you'd hope that more intelligent entrepreneurs, you would predict that more intelligent entrepreneurs

00:39:44.580 have a higher probability of success than less intelligent entrepreneurs. But it isn't necessarily

00:39:49.780 because they're better able to foresee the future. You know, it might be that they're making better

00:39:55.380 rational decisions of the sort of rational decision that intelligence can make. But so it's very

00:40:02.020 interesting to me that you say that the, so the entrepreneurs, in some sense, their function is to keep the

00:40:09.140 system modifying itself to keep up with the transforming present that we call the future.

00:40:18.340 That's the role of the entrepreneur. And even psychologically, that's the case. They're high in openness and

00:40:23.140 open people psychologically overproduce ideas. They're fascinated by ideas and they tend to be,

00:40:30.420 they have high verbal fluency. They have high fluency in the ability to generate images. So for example,

00:40:36.580 someone who's creative, if you say to someone creative, write down as many words as you can

00:40:42.020 that begin with the letter S in three minutes, the creative people will on average outperform the

00:40:47.780 uncreative people. That's, and that's a consequence of trade openness. And that's a consequence in part

00:40:52.900 of its association with high levels of G, fluid intelligence. So it's just speed in some sense.

00:40:59.780 And there's also very, the other thing that the creative people do is they'll produce more

00:41:04.980 divergent answers. How many different uses can you think of for a brick? You score that by number of

00:41:12.340 uses generated, but then also by the rarity of the use that specified extra points, so to speak,

00:41:20.580 are given for that. So, so the, so the way that nature solves the problem of the unpredictability of

00:41:26.900 the future, even within human psychological functioning is by overproduction and culling,

00:41:32.500 not by rational prediction. Yes. And you know, one saying, I think it's Popper who said this,

00:41:39.940 but it may be apocryphally attributed to him, but it is to predict the wheel is to invent the wheel.

00:41:47.140 That's, I think the issue of prediction. Like we're to predict the future is to basically

00:41:51.220 try and predict what the future of knowledge is. And we're at the limit of our knowledge right now.

00:41:57.060 So, you know, the invention of the wheel was a new thing. You had to actually invent it in order

00:42:01.620 to be able to predict it because you didn't even know that it was possible before you,

00:42:06.020 before it was invented. And this is ultimately where it's something, something new is by definition

00:42:11.300 outside of your domain of knowledge. It might even be outside the axiomatic structure of your domain

00:42:16.820 of knowledge if it's new enough. And so it's unpredictable by definition, or it wouldn't be new.

00:42:22.660 And it doesn't matter. You know, the creativity is not, you know, it's not like you can pick the 100

00:42:27.140 most creative people in the country and then put them in a room and tell them, come up with all the

00:42:31.220 creative things. The whole point is that it's, it's, it's a living ecosystem in which the creativity is

00:42:39.220 what makes the new ideas. And these are, these ideas are tested in the real world. You know,

00:42:43.460 they either sink or swim in the real world of the market. And it's, it's, it's specifically there,

00:42:49.140 you know, sinking or swimming is what determines their success because that's all that matters.

00:42:53.940 So you need those people to be out there in every field of life in order to be able to innovate

00:43:00.740 in those fields. You can't just isolate it. And so a system that is built on central planning,

00:43:06.020 and this, this is one of the critiques that Mises has leveled at socialism exactly a century ago,

00:43:10.900 1922, he wrote his book, Socialism. And until today, I don't think there has been a single

00:43:16.100 socialist that has actually illustrated their ability to comprehend this point and still disagree

00:43:22.020 with it. Like they all just completely ignore it. It's not something that anybody, they grapple

00:43:26.900 with his ideas on property rights, and they made some attempts to refute him and failed, in my opinion.

00:43:32.100 But on the entrepreneurship point, there's almost complete silence, because there's no way that you

00:43:38.660 can square the idea of letting, you know, every, every workshop worker have the opportunity to

00:43:45.300 create and innovate something new and try it out because they have their own money and then they

00:43:48.660 start their own shop. You know, there's no way that you can square that with having a committee that

00:43:54.260 decides all of these workshops that are doing this in this, this line of business, that all of their

00:43:59.700 capital, all of their work, all of their structure, all of their, everything that they do has to be

00:44:05.620 decided by central authority. Those two things are fundamentally incompatible.

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00:49:32.100 So we're still walking through the Bitcoin standard, at least in some sense. Shall we talk more about the

00:49:42.340 fiat standard, the book that you've just released? And so let's talk, first of all, tell everybody what

00:49:48.020 constitutes a fiat currency and contrast that with Bitcoin and have at her.

00:49:53.300 All right. So let me just conclude with one more thing about the Bitcoin standard and the Austrian

00:49:59.140 school because I think it's a good recap of everything we've discussed so far, which is that,

00:50:04.020 you know, practically speaking, where the rubber hits the road in terms of the difference between

00:50:08.900 the Austrians and everybody else is in the free market conception of money versus the status conception

00:50:16.500 of money. This is where, you know, the two worldviews are the most divergent because from the

00:50:21.380 mainstream perspective, everybody in the mainstream, you know, the money is the creation of the state.

00:50:27.300 And the only question is, what is the state's role in the management of money? But from the Austrian

00:50:32.820 perspective, money is a product of the market. And the state's not, the money is not the invention of

00:50:40.100 the state. And the state's meddling in money is actually not just, not just, you know, irrational in

00:50:49.940 the sense of it can't succeed for all the reasons that socialist central planning cannot succeed.

00:50:54.900 It's also at the root of the cause, it's also the root cause of the majority of economic problems

00:51:01.620 that all economists are concerned with. So once you, and I heard your discussion with Robert Murphy,

00:51:08.020 who did a great job explaining the business cycle. It's the, it's the corruption of money that ultimately leads

00:51:13.860 to the business cycle. And up until Bitcoin came about, this was an interesting philosophical

00:51:20.580 discussion and economic, academic discussion. But there was very few, there were very few Austrian

00:51:26.260 economists and the majority of everybody just went along with what the mainstream thought. But

00:51:30.180 the absolutely fascinating thing about Bitcoin, one of the many fascinating things about Bitcoin,

00:51:34.740 is that it is a live experiment in this question. Here we go, we have a form of money that is not

00:51:39.940 produced by the state, not regulated by the state, not controlled by the state. And it's functioning

00:51:45.780 as a form of money. And it tests, you know, it, it, it's continued survival refutes the state theory

00:51:52.500 of money. And perhaps even more deliciously, it refutes the inflationist theories of money,

00:51:58.820 which all of these other schools are inflationists. You know, they all argue about how much the money

00:52:03.140 supply should increase, and how should the money supply increase, and who should be in charge of the

00:52:06.980 money supply increase. But none of them has ever questioned the fundamental proposition, which is

00:52:11.700 the money supply should not increase, does not have to increase. And if we...

00:52:14.900 So why do they presume that it should increase?

00:52:19.140 Um, I mean, intellectually, you know, the whole field is shaped from the perspective of how should

00:52:26.740 the government manage the money successfully. And so there's no way that you, as somebody who's getting

00:52:32.740 paid from the increase of the supply, there's no, you know, the, the, the overton window of

00:52:37.620 acceptable answers for you through self-censorship, uh, more than, uh, or intellectual capture is,

00:52:43.460 you know, how do we increase the money supply? But, you know, if there's no money supply increase,

00:52:47.700 you most likely don't get a salary because your job is linked to that printer. And essentially,

00:52:53.620 I think, you know, a less charitable interpretation by an Austrian economist of a mainstream economist is that

00:52:59.380 they're essentially court jesters for the inflationary central banks. The central banks

00:53:04.740 need an intellectual apparatus that gets on TV and says, you know, we have to print all this money

00:53:09.940 in order to, uh, prevent, uh, unemployment from happening and to better, to prevent bad things

00:53:14.900 from happening. But really, uh, I think, you know, the bigger story here is the money printing,

00:53:19.060 of course, is highly lucrative for governments. And so, of course, governments are highly favorable of

00:53:24.500 people who, uh, want that. So, Bitcoin is powerful in this regard because a, um, you know,

00:53:30.740 economically it's succeeding and intellectually it's succeeding as well. I think it's a, it's a

00:53:35.700 massive challenge to the, um, mainstream economics establishment. Their complete inability to explain

00:53:42.180 it or to try and prevent, present an, um, a coherent explanation for why it behaves the way it does or

00:53:48.900 why it grows is absolutely astonishing. You know, it's been there for 12 years. It's worth a trillion

00:53:53.300 dollars right now. And the vast majority of university professors will tell you, oh,

00:53:58.820 it's just a tulip. Somehow they're convinced that the fact that, you know, um, agricultural

00:54:04.180 product prices went up for a few months in Amsterdam in the 17th century, somehow invalidates the fact

00:54:11.060 that we have a form of money that travels internationally and is hard and is completely

00:54:15.780 outside the state, the state, the control of the state. It's, it's, it's, it's argument by soundbite

00:54:21.380 almost. They haven't even given it much thought because there's not much, um, uh, to say.

00:54:26.660 It's argument by dismissive analogy.

00:54:30.020 Yes. Which is very common also in the, uh, climate change, uh, discussion as you always, uh, uh,

00:54:35.540 notice. Yeah. You see, I, it's not that, uh, I, I spend a lot of time looking at the climate

00:54:42.020 change literature and, and considering solutions for various reasons. And I can never stop being more

00:54:48.180 afraid of the solutions than the problem. And it's not like, I'm not afraid of the problem.

00:54:53.060 It's conceivable that human activity is producing global climate change. And I think the evidence

00:54:58.660 for that seems to be relatively robust, although the economic, how economically consequential that

00:55:04.340 will be is subject to tremendous debate because it's prediction out a hundred years or 50 years.

00:55:09.140 And like, good luck with that boys and girls, but the solutions terrify me. So, and in fact,

00:55:17.220 I discussed this in the fiat standard. Um, I use this as an, as an, uh, as an example of how fiat

00:55:24.420 corrupts the planet basically. So, um, in, in the Bitcoin standard, a lot of Bitcoin standard was

00:55:30.500 about government money, but, uh, you could always say more because it's just been so enormously important

00:55:35.220 over the last hundred years. So in the fiat standard, I take the same kind of analytical

00:55:40.580 lens that I used in the Bitcoin standard to look at Bitcoin, which was, you know, when I started

00:55:44.580 writing that book, it was this obscure thing that only a bunch of weirdos on the internet had heard

00:55:49.140 about. And I tried to kind of come at the same, uh, with the same kind of lens, uh, at the fiat system

00:55:57.220 and trying to ignore all the hoopla of a century of propaganda and academic work.

00:56:02.340 Yeah. Well, I, you know, sorry, your discussion already has made me aware of all sorts of

00:56:07.940 axioms of my thought that I didn't know I had. So for example, I basically just accepted in some sense

00:56:15.380 on faith, the idea that money is the government's fundamentally the money. I know we all have our

00:56:24.340 money and we own it, but it's a state construct. That's why each country has its own currency. And so

00:56:32.180 one of the functions of the government is to deal with money. And the idea that you could abstract

00:56:37.380 that away from the government, any government, any conceivable government, conceivably forever,

00:56:45.540 or at least forever, as far as we're concerned, it's hard to wrap, it's hard to wrap my head around

00:56:52.260 how radical an idea that is. I, I don't know what that would mean if it was actually true.

00:56:59.940 And so, and I, the idea that, I mean, the arguments that you've presented

00:57:08.180 that suggest that the notion that government control of, that the government has valid control

00:57:14.260 over money, and maybe that that should be subject in some sense to the democratic process,

00:57:18.820 rather than the market process. You know, it's going to take me a long time to think that through,

00:57:24.900 because that really is a radical, it's unbelievably radical proposition.

00:57:29.380 Yes. That's kind of why the Austrians are kind of, uh, ostracized and considered outside the pale

00:57:35.060 on this issue. But think about it, you know, no government declared gold as money. Gold emerged as

00:57:40.660 money all over the world independently because of its, uh, because of its properties. And then

00:57:46.180 governments had to use gold in their own currencies in order to give their currencies value. You know,

00:57:51.220 you know, if you wanted your, uh, picture on a coin and you wanted that coin to circulate

00:57:56.500 and for people to hold it and appreciate it, you had to make that coin out of gold. You couldn't just

00:58:00.740 make coins out of, um, anything and give it to people. And when people tried to do that, uh, hilarity

00:58:07.620 and calamity ensued in, uh, every case, you know, we have a long history of what happens when governments

00:58:14.500 debase currency. And, um, you know, it always happens in the same way. They begin by making

00:58:20.660 sound money. They, they specify the weight and they make it uniform, but then they almost always,

00:58:27.940 I think all every example in history has ended up with them, um, basically succumbing to the

00:58:32.420 temptation to increase the supply. If it was paper money backed by gold or to what they used to do

00:58:38.100 previously, which is a mix in base metals. Right. So wasn't it the case that

00:58:44.100 the, the ridges on these edges of coins were there because the coins were shaved by slightly.

00:58:50.820 And was that a government? Was that a state function or were people doing that to coins?

00:58:55.060 I'm sorry. I just, uh, this is just an example of how that solid, uh, uncorruptible currency can be,

00:59:01.860 you know, if you get a gold coin, you can, you can scrape some of the gold off. And if you have

00:59:06.020 enough gold coins, you can make a nice pile of gold dust and the gold coins still work, but you have

00:59:10.420 the gold. And so there's various ways of doing that. And I read that the ridges on the outside

00:59:14.740 of coins, why do they have them? They do you know, is that the case or am I just chasing something

00:59:21.140 that's not the case at all? Do you, I think I've heard stories like that. Yeah. There's so many

00:59:25.700 stories historically of governments finding creative ways of debasing their currencies.

00:59:30.100 You know, the, the most common one is, oh no, some people are making fake currency. So give us all of

00:59:36.260 your currency so we can mint it again into a new form so that we can make sure that it's, uh, right.

00:59:41.780 And then you get your currency back and then it has 5% less gold than it used to have. That's

00:59:46.260 something that was kind of the quantitative easing that they did before and that they take some of

00:59:50.100 that gold for themselves. Um, so that, that, that has always, that temptation has always been there.

00:59:55.140 And Bitcoin is essentially the most powerful defensive technology against that. It's, it's, uh,

01:00:02.660 it's an enormous quantum leap forward in the technology of money as a protection of value

01:00:11.380 against predation and against inflation, because, you know, the, the, you, you don't have to worry

01:00:16.260 about whether the coin has base metal inside it. You can verify everything with Bitcoin. And, um, it's,

01:00:22.500 it's, it's, uh, it's fully auditable. Everybody can see every single transaction

01:00:26.900 and, uh, everybody can verify the rules of the network. So it's the most powerful technology that

01:00:32.340 we have for money. And I think it's, it's a natural fit to anybody who's productive and wants to save

01:00:37.060 their value into the future. And it's not just a fit for them. I think the beautiful thing about it

01:00:41.060 is that it is, uh, it's a great reward for them. It's a great reward for those people to go and,

01:00:45.940 um, you know, um, save into the future. And this is why I think Bitcoin is, uh, uh, is, is so, um,

01:00:53.940 transformative to the individual because it, um, gives you a better way of saving for the future.

01:00:59.380 And I think this is something I discussed extensively in the Bitcoin standard. I think

01:01:02.740 that's, uh, highly related to the time preference of individuals, which is an enormously important

01:01:07.780 topic. So, uh, historically all throughout human history, you know, we're always moving to a harder

01:01:13.060 money because we're looking for a better form of money. And that culminated by the end of the 19th

01:01:18.100 century with everybody in the world being on the classical gold standard, basically the entire

01:01:22.740 planet was on the same currency, uh, one money chosen on the market, very hard to produce,

01:01:29.140 holding onto its value, offering anybody in the world, the ability to save for the future,

01:01:33.940 essentially for free. You know, you just, you get paid in the coin, you keep the coin safe.

01:01:38.100 And then 20 years later, that coin is not only held onto its value, it's likely appreciated

01:01:42.820 more because in those 20 years, we've made more cars, more houses, more apples,

01:01:48.580 more oranges, more everything, but we haven't made a lot more gold. So the gold coins remains

01:01:53.780 valuable. And so historically you see, this has coincided with a decline in interest rates,

01:02:00.180 which from the Austrian perspective is a measure of time preference. Time preference is what determines

01:02:04.340 the interest rate and time preferences, the degree of discounting for the future. So effectively,

01:02:09.060 as long as we're using harder and harder money, we're being able to provide for the future better.

01:02:14.820 And that's reducing our uncertainty of the future. You know, now you're, you can be

01:02:21.140 fairly confident that the money that you worked for today, that you can save it and it'll be there

01:02:24.980 for you in five years time. When you start thinking more about yourself in five years time,

01:02:29.140 and as our technology for money has improved and as our ability to save has improved,

01:02:34.980 our time horizon has expanded. Our time preference has dropped. We start thinking more and more about

01:02:39.540 the future. That encourages us to save more, to invest more. And then that leads to capital

01:02:45.700 accumulation, which leads to the increase in productivity. And I think the whole world was

01:02:52.340 basically lowering its time preference until the early 20th century. And then in the early 20th

01:02:57.140 century, this is kind of the central argument of the fiat standard by switching to an easy money,

01:03:02.820 where now, you know, in the 20th century, we move to government money, which has been increasing

01:03:06.740 on average, I calculate at something like roughly 14% a year globally. So you move from a money supply

01:03:14.180 that's being inflated at one or 2% as the average human being in the world, you had that same gold

01:03:18.420 coin. Now you're stuck with your government's local script that is inflating at on average 14%. You

01:03:25.140 know, some people have witnessed 200% inflation. So that on average, so you said worldwide,

01:03:30.020 if you just took Western democracies into account, say, relatively stable societies with

01:03:36.980 relatively admirable forms of government, what sort of inflation rate are you looking at? Do you know that?

01:03:44.500 Yeah, I've done the numbers in the fiat standard. The lowest averages you'll see are in the US,

01:03:50.820 Switzerland, Denmark and Sweden, and they're about six to seven percent per year over the last 50,

01:03:57.860 60 years. So that's really as good as it gets for fiat as a kind of average. So you're constantly,

01:04:02.980 you know, so you need a return of 6% or 7% just to keep up.

01:04:07.700 Basically, yeah. And, you know, 7% is not nothing. 7% means you basically lose half the value stored

01:04:15.940 in 10 years. And that's 7%. That's in the good cases. There are countries that have had an average

01:04:20.500 of 200% because, you know, they had years in which the money supply went up tenfold within one year.

01:04:25.700 And that has happened. So you think about the examples of people living in hyperinflationary

01:04:31.380 societies. And I used to live in Lebanon until recently. And you see that when the currency

01:04:36.260 collapses, you know, think about the stories about Weimar Germany or about any Latin American

01:04:41.460 country or Lebanon or Zimbabwe, when you hear about their inflation, you know, the stories are

01:04:46.500 of people that have been reduced to very, very, very short term thinking. Your money, you get paid

01:04:53.460 in the beginning of the month. Your money is going to be worth half of its price by the end of its,

01:04:58.340 by the end of the month. So you get paid and you run straight to the supermarket.

01:05:02.180 I remember I was a kid growing up in Brazil and I remember that, you know,

01:05:05.780 on the first day of the month, the supermarkets would be overrun and there would be people fighting

01:05:09.780 and things would be crazy because everybody's trying to get things now before everybody else gets

01:05:13.780 their paycheck and buys everything and then bids up the price. So your time horizon is shortened when

01:05:21.540 your money is losing its value.

01:05:23.460 Okay. So let me, let me ask, okay, let me ask you a question about that then too. So

01:05:30.740 one of the problems that the people who are concerned about the environment and about

01:05:36.820 global warming are, are trying to solve is they're trying to increase our sense of caring for,

01:05:44.740 let's call it the planet, the environment, right? Global concern, think globally, act locally.

01:05:50.660 You're supposed to be taking all these other things into account and not consuming like a madman and

01:05:55.060 just spoiling the planet. But implicit in your argument, as far as I can tell, is that if you

01:06:00.500 stabilize the currency so it can't be inflated and you make people's time horizon much longer, that

01:06:06.900 they're going to be concerned about a far greater variety of things that are distal from them, like the

01:06:13.300 environment because they can. They're now able to do that instead of having to fight for short-term

01:06:21.060 emergency survival continually.

01:06:22.820 Exactly. Exactly. That's it. So the more capital you accumulate, the more you can provide for the

01:06:28.900 future, the more you can secure the present and start thinking about the future.

01:06:32.580 And the more you care about the future then in some sense, or can care about it.

01:06:37.860 And, and, and, and, you know, you think about it like the, the fishermen who's able to move toward

01:06:42.420 building a fishing boat and a fishing rod, you know, they're able to now rest assured that any day

01:06:48.340 they just need a small amount of time to go out and catch the fish. It's not like the days when they

01:06:53.700 had nothing and they had to try and catch them with their hands every day. And so some days you might not

01:06:58.340 be able to even catch anything. So now your survival is more secure. And so you start thinking

01:07:04.020 more about the future. And money is an incredible technology for that, for lowering our time

01:07:08.580 preference. That's kind of one of my central arguments in the fiat standard, that money is

01:07:13.460 the best mechanism we have for moving value to the future. Because, you know, you could save a fishing

01:07:18.100 boat and you can save something else, but you don't know what's going to happen in the future. And you

01:07:21.860 don't know if you want to move away from where you are. Money itself is enormously important because

01:07:26.820 it's very useful. You save some money and then it doesn't matter what happens in your town,

01:07:30.660 you take the money and you can go away. So it protects you against the uncertainty of the future.

01:07:34.820 And when that money is compromised, your ability to think of the future is massively compromised as

01:07:40.660 well. And I think, you know, the hyperinflationary examples are an extreme example of that. But I think

01:07:46.020 the 20th century itself was one global slow train wreck of watching humanity's time preference rise

01:07:53.620 as, you know, generation after generation of people all over the world witnessed their currency

01:08:00.020 devalued. Everybody saw it. There isn't a single people in the world that has escaped this. You

01:08:03.940 know, it doesn't matter if you live in Western Europe or Africa or Latin America. Everybody has

01:08:08.260 been screwed by inflation in the 20th century. And everybody has a story in their family about

01:08:12.820 somebody who saved up and worked hard and diligently. And then one day they woke up and all their money

01:08:18.420 was gone. And all the wealth that they worked for was gone. Everybody has gone through this.

01:08:23.140 And it leaves a mark. It leaves a mark. It tells you, you know, don't be the sucker who saves for

01:08:28.100 tomorrow because, you know, you missed out on all. You see, like in Weimar Germany, 0.96

01:08:35.060 you think about the people who are punished by that hyperinflation. Those were people who were

01:08:39.060 productive and who, and who had foresight because they put away something for the future.

01:08:44.500 It, it, the ants were published, punished, not the grasshoppers.

01:08:49.540 You know, exactly. Yeah. And that's a terrible thing to do to a society, to take the most creative

01:08:54.820 people who also have the ability to delay gratification and then to just cut them off at

01:09:01.380 the knees for daring to, to do both of those things. You couldn't do a worse thing to a society

01:09:06.980 in some sense than that, to punish people for, for, for creativity, productivity,

01:09:12.180 and the capacity to save instead of the pursuit of impulsive pleasure. So it is really a catastrophe.

01:09:19.300 And so absolutely yes. And, and maybe that's not much improved when it's a slow train wreck

01:09:25.140 rather than a quick one. I mean, who knows? Right. So, um, all right. Yeah. I mean, the speed has varied,

01:09:31.460 but I think, um, this has been the story of the 20th century and on the flip side of it,

01:09:36.500 which is kind of the, you know, the, the, the two sides of the story that I tell in the fiat

01:09:39.780 standard on the one hand, you know, you had individual productive people and businesses

01:09:44.340 having their wealth robbed from them continuously throughout the 20th century because it's constantly

01:09:48.420 devaluing. And on the other hand, you had government bureaucracies being given essentially

01:09:53.860 unlimited financing to do whatever they want because they were connected to the printing press.

01:09:58.580 And all that you needed was to just have the right story in the ear of the right person to get

01:10:04.740 the printing press to run for you. And so, you know, not only are you punishing the most productive

01:10:10.420 people in society and the people that are the best at saving for the future and thinking of the future,

01:10:16.020 you're also essentially rewarding heavily people who are good at playing politics and, uh,

01:10:21.940 people who can, you know, get into government and people who can use government power because

01:10:27.220 you are giving those people unlimited power. So naturally you're going to, our prime minister,

01:10:32.340 our prime minister managed to get a billion dollars into the hands of one of the charities

01:10:36.980 he's associated with. Yes, I've heard of that. Your prime minister has been an excellent lesson in, um,

01:10:43.780 what happens when a seemingly idealist people with beautiful sounding cliches get into power and then,

01:10:49.060 uh, have that power foisted upon them. And then, um, that they, they see a great opportunity to, um,

01:10:56.180 capitalize on that to their own benefit and to their own aggrandizement. Um, the, you know,

01:11:02.020 the, and all the while justifying it by reference to their, their, their, the moral standards they

01:11:08.180 hold that exceed those of everyone else. Absolutely. Absolutely. And then, you know,

01:11:14.020 you think about it first. So there's the aspect of the corruption of the fact that, you know, um,

01:11:19.060 playing politics pays, but then there's the other aspect, which to go back to the energy discussion

01:11:24.500 and the food discussion, which I discussed in the fiat standard, these markets then become heavily

01:11:30.820 regulated and influenced by a government that has an infinite printing press to the point where, um,

01:11:37.860 they've been made almost dysfunctional at this point. So, uh, if you think in, in terms of energy,

01:11:44.100 we've had, and, and, and in both energy and food, you know, the, the, the current hysteria that you

01:11:49.140 hear around, Oh no, we're going to boil the oceans, uh, because we're driving cars or, you know,

01:11:54.740 we're going to boil the ocean because we're eating cows and cows are farting. And, you know,

01:11:58.180 four and a half billion years of earth was doing fine until the cows started to fart. Now the whole

01:12:03.860 earth is going to hell. Um, both of these hysteria incidentally have their roots in the

01:12:09.780 inflation of the 1970s. It was when the prices of food and energy rose in the 1970s that all these

01:12:17.380 cranky, kooky ideas about, you know, earth punishing us, uh, and, uh, there's not enough, uh, uh,

01:12:24.740 resources for us to be able to live. And we need to limit the global population and we're destroying

01:12:29.700 the earth. All of that stuff started to come about in the 1970s and it was highly politically,

01:12:35.300 um, conducive at that point. It was likely to be popular because it was providing a very

01:12:44.340 useful alibi to the government when it comes to inflation. You know, the reason we are witnessing

01:12:50.420 massive increases in the price of oil and food has nothing to do with the fact that your currency

01:12:54.740 is being printed and debased. It's because we've reached the natural carrying limits of

01:12:59.860 the earth and we're going to boil the oceans and we're going to destroy the planet. And so,

01:13:04.660 you know, you need to repent by moving away from consuming hydrocarbon energy, you know,

01:13:09.780 oil and gas and coal and all of those things that made our modern world and the things that are,

01:13:15.220 the reason that we have our modern world and modern technology, we can't live without them.

01:13:18.660 They're 80% of energy consumption around the globe. And, um, that's not declining in any

01:13:25.140 meaningful sense anytime soon, unless we want to go back to pre-industrial societies. And so,

01:13:30.900 you know, by fiat, we've, uh, tried to, we fought these energy sources for 50 years and subsidized

01:13:38.660 these feel good, uh, essentially pre-industrial, unworkable technologies, which rely on biomass.

01:13:44.580 So biofuels, that's an example, you know, you're burning plants like your ancestors 500 years ago

01:13:49.860 had to do in order to survive or wind, which again, you know, your ancestors could use occasionally, but

01:13:56.340 it didn't build them. Uh, it didn't build them Apple, uh, computers and it didn't build the internet

01:14:02.820 and solar energy, which, you know, also we've always used, but again, it won't build you a car.

01:14:07.700 Um, in order to have all of these modern conveniences that we have, we need those energies and

01:14:13.140 people in the fiat world are completely dissociated from this reality. They almost

01:14:16.820 wanted, they almost want to overrule thermodynamics by fiat that we just want to, we want to have the

01:14:22.740 same cars, better cars, but we don't want them to run on fuels. We want them to run on

01:14:28.740 wind and solar and all that. And the result of that, I think, you know, when I was doing my PhD,

01:14:33.860 I saw this for the grift that it was. Um, and I was not interested in it intellectually because,

01:14:39.300 you know, who cares a bunch of people like Al Gore are going to become billionaires from this,

01:14:43.140 but you know, a lot of, uh, hucksters get rich in a lot of ways, uh, no reason to get worked up.

01:14:48.820 But now I think I'm beginning to realize this is actually a serious, serious threat to

01:14:55.780 industrialization and civilization itself. I mean, our planet will witness massive catastrophes and

01:15:02.580 calamities. If reduction, if we have a serious reduction in the consumption of these energy sources,

01:15:07.700 which, you know, plants are being decommissioned all over the world based on the idea that we're

01:15:11.780 going to be replacing it with wind and solar. And the result is energy prices are rising massively.

01:15:17.300 And, um, uh, you know, energy is becoming less and less reliable and you're witnessing more and

01:15:22.260 more grid failures. Yeah. All right. So onto the fiat standard. Yes. So in the fiat standard,

01:15:32.900 looking at the, uh, looking at the way that the fiat money works as, um, you know, from first

01:15:37.780 principles trying to understand how it works, I think that the, the fundamental idea is that

01:15:43.380 in the fiat system, the way that you mind a new currency into existence is through lending.

01:15:49.380 You, when you, when your bank makes a new loan, they don't take somebody else's money and give it

01:15:54.660 to you. They make new money essentially out of thin air and they hand it to you and they put it in

01:16:00.660 in your bank account. So this I think is a very key insight. So in Bitcoin, we have that walk

01:16:05.220 through that. So everyone understands exactly what the banks are doing, because that is not something

01:16:09.220 that people know or understand. Yeah. So it's, it's not like there's a fixed sum of money that

01:16:14.980 the bank has to deal with, wherein, you know, they need to get depositors money and then they need to

01:16:19.780 lend it out to borrowers. If you have a lending license, if you're a bank, you're licensed by your

01:16:24.180 local central bank, the mere fact that you have that lending license means that you can issue loans

01:16:29.140 and essentially create new money and add new money to the money supply and put it in your

01:16:36.020 client's bank account. So now obviously they can't just do this limitlessly. There are regulations

01:16:42.740 and rules by the central bank that determine how much lending is done. And so what are the rules

01:16:47.540 approximately? Well, the rules is, you know, the person who borrows has to have a good credit

01:16:54.020 history and good credit standing and a good idea, good reason for why they want to borrow it.

01:16:58.580 But obviously these things are getting less and less strict over time as monetary expansion

01:17:04.500 picks up and political pressure for more and more monetary expansion increases.

01:17:08.100 You saw that with the housing, with the housing crash.

01:17:12.900 Yeah. Yeah. Housing is one example. But I think, you know, perhaps the even bigger example is the

01:17:18.260 financial industry, which is constantly receiving enormous amounts of new credit from the central

01:17:23.700 bank directly in the form of quantitative easing. That's a huge one. So, you know, in Bitcoin,

01:17:30.420 we have Bitcoin mining, which is an extremely sophisticated industry in order to produce new

01:17:36.740 Bitcoins. You know, we have about six and a quarter Bitcoins produced every 10 minutes. And in order to

01:17:42.260 produce these, people expend a lot of resources in order to be able to make them. Roughly, the cost of

01:17:48.180 making a Bitcoin fluctuates around the market price of Bitcoin. But both vary, but it's roughly around

01:17:54.980 it. With gold, the same is true as well. You know, it's costly and expensive to find new gold. You have

01:17:59.700 to dig it. You have to process it. And it's there.

01:18:02.580 Okay. So why bother mining it? And why not just cap Bitcoin where it is now? Why bother producing more?

01:18:08.900 Why is that built into the system? Why 21 million and not just where we are now?

01:18:13.860 Well, 21 million is as good as any number. It could have been 500 trillion. It could have been five.

01:18:18.580 It could have been anything. Any number is good enough as long as it's divisible. And that's kind

01:18:22.500 of the key insight from the Austrians that made me specifically very interested in Bitcoin. The Austrians

01:18:27.380 were the only one who said, yeah, the quantity of money doesn't matter. You could run any economy on any

01:18:31.220 size of the money. And then as the economy grows, the value of the money increases. And that's a great

01:18:37.300 thing. That's the golden period. That's the golden age of the West.

01:18:41.220 So it's sort of an illusion in some sense, the cap, because, well, there's 21 million Bitcoin,

01:18:46.820 let's say, but they could be worth anywhere from like $2 to a million dollars each. And because it's

01:18:53.940 fractionable, right? So there is no, in that sense, there's no limit to how much money there is,

01:19:00.420 even though there's a limit to how many tokens there are.

01:19:03.140 Exactly. There's no limit to the value that the network can carry, but there's a limit to the

01:19:07.620 tokens that represent that value. So you don't corrupt the tokens of the system in order to make

01:19:13.060 more tokens, in order to enrich the insiders. You just keep packing more value into it.

01:19:17.860 Into the tokens. Okay. So why was it allowed to be mined at all then?

01:19:24.660 So that the distribution of the coins would be a fair distribution, so that anybody could enter into the

01:19:29.060 network and secure coins. Because if you just made the first 21 million, who owns them in the first

01:19:36.660 day? Who's going to be owning the 21 million? How are you going to distribute them? This is not an easy

01:19:41.220 question. And I think most people wouldn't have thought something like Bitcoin to be possible

01:19:49.300 had it not because of this issue. How are you going to start off an upstart currency and give everybody

01:19:54.580 in the world a new balance? So it was to get it going. Exactly. So, you know, it's kind of like

01:19:59.860 just for the first 130 years of Bitcoin's history, we're going to need to have mining, but then

01:20:05.300 Bitcoin operates without any more mining. Right. So you have some, you need some gold for gold to work.

01:20:11.140 And so you need to have a mechanism for mining the gold. And so this is some mechanism for producing

01:20:15.860 Bitcoin so that there are some Bitcoins so it can work. And they're distributed across the people who

01:20:21.380 have done the mining. And so you already have a bit of an economy there because all those people

01:20:26.180 are vested in it. And it's completely open and perfectly competitive. Anybody in the world can

01:20:31.700 mine. Anybody can bring their computer onto the network and mine and, you know, benefit from the

01:20:37.460 mining. And it's, it rewards only the most successful miners. It rewards only the most economic miners

01:20:44.180 because it has this thing called the difficulty adjustment, which is my favorite part of Bitcoin.

01:20:49.860 Bitcoin. It's, it's really the magic glue that holds Bitcoin together. And I discuss it in the

01:20:53.860 Bitcoin standard and in the fiat standard. What happens is that, you know, if more miners try and

01:21:00.740 mine copper or gold or silver, you end up with a lot more copper or gold or silver. But with Bitcoin,

01:21:06.980 the more miners that get into the network, you still get the same number of Bitcoin as was predetermined

01:21:13.220 earlier. But the difference is that you don't get, but, but it just gets harder for the individual

01:21:20.740 miners to get into the network. So it's, it's more like a sports competition where, and there's one

01:21:28.340 trophy and then the more competitors get in it, the trophy just gets harder to win. It doesn't get,

01:21:33.780 uh, you don't get more trophies handed out. So how, how in the world did Satoshi figure this out?

01:21:40.580 How did he, I don't understand how he could conceptualize this. It just doesn't make sense

01:21:46.580 to me. It's an incredible work of genius. When you think about just the, the, the amount of, uh,

01:21:52.260 expertise that he had to have in different fields of knowledge to bring this monster together,

01:21:56.900 is absolutely astounding. Yeah. Well, just, just the conceptualization to begin with,

01:22:01.300 let alone the, the implementation, the engineering implementation. It's to be fair. I mean, this is,

01:22:06.580 it wasn't like he invented this problem. It's, it's a problem that had been around for many decades.

01:22:11.140 People have been trying to build a digital form of money for decades, you know, since the 1970s

01:22:16.500 and eighties and nineties, there've been attempts to do something like this. And the, um, you know,

01:22:22.260 the different attempts to produce something like this always came up against, uh, uh, a technical

01:22:27.380 problem called the Byzantine generals problem. And then Satoshi figured out a solution to it through

01:22:32.180 the proof of work system, which is absolutely astounding. So tell me about that. That sounds,

01:22:38.740 if we can do that without deviating too much. So what is that problem and how did he solve it?

01:22:44.100 Um, well, the problem is, uh, essentially about how to get all the different, uh, nodes on the network

01:22:50.660 to agree on the same version of what's going to happen together. You know, how did, how do they

01:22:55.940 all agree without having a central command authority? That's really the issue. So, um,

01:23:02.180 And why was that the Byzantine generals problem?

01:23:05.460 You know, uh, shame to say it, but I'm not up very much up on my history. I'm not sure where the

01:23:10.980 history of the term comes from. Okay. Okay. Well, I won't torture you with that then, but,

01:23:15.700 but he solved, solved the problem of consensus verification without a central authority.

01:23:19.940 Exactly. And the way to do it was to have this expensive, uh, ritual called proof of work being

01:23:26.820 performed before any of the members of the network proposes a block of transactions to be added onto

01:23:33.940 the record of transactions. So Bitcoin is, um, you know, uh, it's a record of transactions that exist

01:23:40.260 over tens of thousands of computers. And the issue is how are you, how do you make sure that people don't

01:23:45.380 put in fake transactions in this record? Well, the way he did it was that anybody,

01:23:49.460 anywhere in the world could come in and propose new transactions. But in order to have your

01:23:53.700 transactions added, you must first solve this problem, this mathematical problem, the proof of

01:24:00.180 work mathematical problem. And that's actually expensive to solve. You know, it takes your computer

01:24:05.220 running for many, many hours to be able to try and figure out the solution to those things. And,

01:24:09.460 um, you know, for it to get lucky once every 10 minutes. So you have to spend serious money in

01:24:14.820 order to be able to commit, uh, to make the claim of the new transactions. And so once, you know, it's

01:24:20.980 like, uh, if you just allow everybody to present their record of transactions, then there's no mechanism

01:24:26.660 of coordinating between everybody. Whose record do we pick from all those thousands of people? But if

01:24:31.780 you put currently, you know, the reward is about six, uh, six and a half, seven bitcoins. So that's

01:24:36.740 about $350,000. The Bitcoin network is giving out $350,000 every 10 minutes. You can have them as

01:24:44.100 long as you provide the proof of work solution, which roughly costs you around $350,000 more or less.

01:24:50.340 So how do we make sure that we can all agree on this? Uh, all the members of the network, we don't

01:24:56.580 evaluate any claim for the transactions. We only evaluate the claim that has done the work and that

01:25:02.980 has spent the money. So why would, why would someone make that claim then if it's so difficult?

01:25:07.780 What's the advantage to that? You get $350,000, you get six or seven bitcoins.

01:25:13.700 And how is that? How is that related? That's the mining process. That's the mining.

01:25:18.420 That is the mining process. That is the mine. Okay, good. Okay. Now I got it. That's the mining process.

01:25:23.700 Exactly. So to mine new bitcoins, you have to solve that problem. So this is why it's

01:25:28.180 portrayed as mining. It's like those computers are digging in the ground, trying to find the

01:25:31.940 solution of the, um, mathematical problem. It costs money to be able to arrive at that solution

01:25:37.700 on average around $350,000 currently at current prices. Um, so that's in order to be able to make

01:25:46.180 a claim to get that, you know, your claim doesn't get looked at unless you've solved the problem.

01:25:50.820 And it's very cheap for everybody on the network to see that you have the right

01:25:55.060 solution to the problem, but it's very expensive to arrive at that solution. So the solution is like

01:25:59.780 this very difficult key to find, but once you found it, it's trivial to verify that this is the right

01:26:04.740 key because you just put it in the lock and it works. So it's instantaneous and very cheap for members

01:26:10.340 of the network to figure out that this thing is correct. So you set up this massive hurdle,

01:26:15.860 essentially. Um, if anybody wants to come and get this reward, they first need to spend...

01:26:21.300 Why wouldn't they just buy Bitcoin? It seems to be to be a lot simpler than mining it.

01:26:25.460 Then if it costs $350,000 to make $350,000, why bother with the mining?

01:26:31.700 You know, you said it rewards more efficient people.

01:26:35.220 Exactly. The short answer is if you have a way of securing electricity at less than five cents per

01:26:40.580 kilowatt hour, then, um, you should get into Bitcoin mining business, uh, which is, you know,

01:26:46.420 lower than most rates everywhere in the world. So if you have a source of energy that is isolated

01:26:51.540 from the grid, or if you have a cheap way of securing energy, then Bitcoin is a great, uh,

01:26:55.780 weight. Mining Bitcoin is great, but for the most...

01:26:58.740 So does that mean that Bitcoin is a very good way of moving resources from places that can produce

01:27:04.660 electricity very cheaply to other places where electricity is more expensive? Does that actually

01:27:09.460 make the electricity, the cheap electricity? It makes the cheap electricity much more valuable.

01:27:14.500 Absolutely. It's, uh, this is...

01:27:16.660 Weird. That's a weird thing.

01:27:18.500 It's, it's very weird. I think it's going to have a very profound impact on the global

01:27:21.940 energy market because for the first time in history, we have a way to sell energy that is

01:27:26.900 location independent. So a lot of places in the world have a lot of energy, but it's very

01:27:32.100 expensive to get that to the population center. So the north of Canada has an...

01:27:36.020 So you don't need wires.

01:27:36.980 Exactly.

01:27:38.100 Jesus. That's weird. That's a really strange thing.

01:27:41.460 Yeah. To get electricity from the north of Ontario to Toronto really needs a lot of wires,

01:27:46.740 or you need to, you know, if it was gas, you need to put it on tankers or on trains or in pipelines.

01:27:52.340 All of that stuff is pretty expensive. But with Bitcoin, you just need an internet connection. You

01:27:56.420 take the Bitcoin miners to where that energy is, and then you can monetize that energy and turn it into

01:28:01.700 Bitcoin. It's magic.

01:28:02.740 So what's the net effect of that on the price of electricity worldwide? Is that deflationary with

01:28:09.860 regards to electricity cost?

01:28:11.300 I think so. I think this is a point that I make in the fiat standard, which is that, you know,

01:28:14.980 we've had fiat subsidize all these dysfunctional forms of energy over the last 50 years that have

01:28:19.700 led to the grid becoming unreliable. And we have Bitcoin, like the vigilante savior that it is,

01:28:27.220 coming in and providing a global subsidy for anybody who can make electricity at a cheap rate

01:28:33.300 to monetize that. And I think...

01:28:35.380 Well, not only at a global subsidy, but it's so interesting because not only you could go

01:28:42.100 to where the energy is cheap with virtual certainty that you're going to make more and more money as

01:28:48.340 the value of the Bitcoin increases by investing there. Assuming you assume that the value of

01:28:53.300 Bitcoin is going to continually increase, which is a logical presupposition if it's as stable as

01:28:59.380 is claimed and it's finite in the way that you're describing and increasingly widely accepted by vast

01:29:08.340 numbers of people. So it's also an investment that's likely to increase in value over time rather than

01:29:15.460 decrease. So it takes some of the uncertainty out of investing in cheap electricity generating

01:29:22.260 processes that are geographically isolated. That's, I just can't believe that's true. It's,

01:29:27.940 it's amazing that I, I think I must be misunderstanding because it seems like you can move the

01:29:33.780 value of the electricity, electricity magically without any of the problems of transportation.

01:29:39.460 Yes, exactly. Wow, that's really something. And in terms of, you know, think about it in terms of

01:29:46.180 independence. I think the implications are pretty good because if you have an energy source, you know,

01:29:50.260 it becomes far more sustainable to be able to exploit that energy source if you have a steady way of

01:29:55.940 monetizing it. So I think it can help people get off the grid. It can help people become more

01:30:00.260 independent. You know, you have your own energy sources and you have your own monetary system that you

01:30:06.100 use to trade with the rest of the world. You don't need much of the control of the grid on you,

01:30:13.380 which is getting more and more suffocating every day.

01:30:16.420 Yes. And as, as this idea that we're despoiling the planet and our technical activities,

01:30:21.940 our industrial activities, our high standard of living, all that's immoral because we're doing

01:30:26.260 immeasurable long-term harm to this pristine biosphere. Like that, you can just feel the moral

01:30:32.580 pressure growing there just intensely, intensely, intensely.

01:30:37.060 Yeah. And I think it's, it's, it's completely ridiculous because, uh, you know, every action

01:30:40.980 has a cost. This is the thing about it. You learn from economics. Everything has a cost. Everything

01:30:45.300 has an opportunity cost. And people like to present this idea as if, you know, there's an evil cabal of

01:30:50.420 oil producers that are out there forcing our governments to make our lives dependent on these

01:30:56.100 oils. And what we need to do is to just have the political will to transition to these more advanced

01:31:00.740 forms of energy that are going to save the planet. And it's just completely ridiculous. 0.76

01:31:05.460 Well, people, people don't understand, like people don't understand things as simple as 0.80

01:31:09.540 the fact that there's a finite amount of solar energy that falls on a square yard of, of territory.

01:31:15.940 That, that, at that basic level of physics, it's just, well, the sun is an inexhaustible source of

01:31:20.420 energy. It's like, well, that's true. But practically speaking, that's not exactly the issue.

01:31:25.540 Exactly. Because what you need is the power. What you want is to convert that high quantity of

01:31:29.460 energy into high power, which is a lot of energy over a small, short period of time.

01:31:34.020 And to do that, this is, this is really understanding that the, what humans look for is not energy,

01:31:38.900 because energy is everywhere. You know, there's sun and there's wind and all of that stuff.

01:31:42.100 But being able to channel that in order, in, in order to use it in high power applications,

01:31:47.060 that's what makes everything that we value possible. That's what makes surviving the winter

01:31:51.780 a breeze for the vast majority of us, you know. And this is why we have our modern life. This is why we

01:31:56.660 we have transportation is because we have high power. And the way that we've managed to secure

01:32:00.900 high power, the way that we built our world is modern hydrocarbons. And so the thing that carbon,

01:32:08.020 people who are afraid of carbon dioxide need to present is they need to make the case that,

01:32:13.140 you know, stopping hydrocarbons is going to have such a noticeable effect on the climate that it

01:32:21.380 outweighs the benefits of taking it back to the 1500s.

01:32:24.580 Yeah, they're not going to do that. Because like, you look, you look at how, how this works out is that,

01:32:29.540 you know, we're, we're trying to calculate the economic consequences of climate change and

01:32:34.740 the economic consequences of our interventions over this, this has to do with the time preference

01:32:39.140 over say 50 to 100 years. But the errors in your measurements and your predictions grow and grow

01:32:44.740 and grow as you move out decades into the future, it's that those justifications will never be

01:32:49.300 forthcoming. They're, they're, they're technically impossible. And so it does, it does go down to

01:32:54.420 basic principles. It's like, do you believe this is a problem that can be solved by intelligent,

01:32:58.420 well-meaning people who are doing central planning? And I've toyed with those ideas and worked on UN

01:33:03.380 committees that are devoted to what are the UN millennium goals. And I looked at how that central

01:33:10.180 planning was done. And that's an interesting story in and of itself, because it isn't even

01:33:14.580 cabals of experts. So this committee I was on was composed of, you know, ex presidents and prime

01:33:20.820 ministers and people like that from all over the world. And so you think, well, they have some

01:33:24.580 political and economic expertise, they're putting together these, the new vision of the UN for the

01:33:29.780 new millennium, let's say, but those aren't the people who are actually making the decisions,

01:33:33.540 because they're completely occupied, they already have lives that are absolutely full. So then the

01:33:38.100 decision making power falls down the bureaucracy until it lands on the shoulders of someone who has spare

01:33:44.020 time for one reason or another. And they make the decisions in the name of that person. And then

01:33:49.540 all those decisions are aggregated. And there isn't anybody who's in some sense taking central

01:33:54.820 responsibility for that. So the document that I worked on, to begin with, looked like it was

01:34:00.500 written by people who were stuck in the 1980s. It was all Cold War ideology, essentially, the Northern

01:34:06.740 Hemisphere against the Southern Hemisphere. And so we just stripped all that out. We just took it out.

01:34:11.940 And the reason we were able to get away with that was that we rewrote it. And no one else wanted to

01:34:18.580 re-rewrite our rewrite. And so it just stuck. And then there was these 200 millennial goals, essentially.

01:34:25.620 And I looked at that, and I thought, well, why those goals? And the answer was, well, there was

01:34:30.000 constituencies of interest for each of those goals. And then I thought, well, we need to rank order these,

01:34:34.920 because there's no bloody way we're going to do all 200. And there was no rank ordering. And the reason for that

01:34:41.940 all the constituencies. And I thought, well, you get this weird aggregation of things we need to do.

01:34:48.580 And then the impossibility of rank ordering, that means you don't have a priority. Like,

01:34:53.220 what's the most important? And how do you decide that? Well, that problem just wasn't addressed at all.

01:34:59.860 And so this, well, it was an object lesson in how these sorts of things work.

01:35:03.300 It was central planning, but it was so dysfunctional in some way. It's not like it's partly because there

01:35:12.500 wasn't anyone in the world who had enough intelligence, enough knowledge to make those

01:35:18.660 sorts of decisions. No one, no one exists like that. So, well, so, well, I'm going to stop with that. But

01:35:26.500 Yeah, I think the ultimate issue, I think, in these things, I'd go back to Mises' point, which is that

01:35:33.220 none of these people is making calculations with opportunity cost. That's the great thing about

01:35:37.940 the fiat world is that everybody has essentially a fake fiat job wherein they get paid regardless of

01:35:45.100 actual results. You know, in the fiat world, results are optional because your money doesn't come from

01:35:49.780 the customer for many of those people. Their money comes from the money printer from up above. So,

01:35:54.140 it's not about how you serve the customer. It's about whether you do the things that the

01:35:59.820 people providing the funding. Right. So dissociated, it's dissociated from

01:36:03.980 the actual environment because the consumer is the actual environment. The consumer is an actual

01:36:08.580 living being. And if you're serving the consumer, then you have nature there as your witness and your

01:36:15.940 judge. And then there can be all sorts of intermediaries between that, which is what you're

01:36:20.100 discussing. And then that moves the producer away from feedback from the consumer.

01:36:24.140 And it corrupts the signal. It corrupts the information signal.

01:36:29.980 Precisely. And that's kind of the other central point in the fiat standard. So, on the one hand,

01:36:34.400 you're robbing people of the purchasing power. On the other hand, you're putting the decisions

01:36:39.140 about people's lives in the hands of people who essentially face no opportunity cost.

01:36:44.160 And they have these jobs regardless of whether they perform them because they're

01:36:47.620 linked to this magic printer that continues to finance them. So, they don't lose their job.

01:36:51.340 And they always can continue to do whatever it is that they're doing and facing no accountability.

01:36:58.180 And, you know, the impact across life, I think, is enormous. It leads to all kinds of central

01:37:04.820 planning. It leads to – and the fundamental problem with this, which you see in the climate

01:37:10.240 change debate and you see it in the coronavirus restrictions and response, is that all of these

01:37:15.700 people don't understand the concept of opportunity cost. You know, the Zoom warrior class, the people 1.00

01:37:21.220 whose lives can be conducted from their internet connection, they're just completely blind to the

01:37:26.700 idea that other people need to leave the house and eat. It's astonishing to watch it because in

01:37:31.820 their mind, you know, you can call for something like let's lock everybody at home for, you know,

01:37:36.080 a year and a half so that nobody gets sick.

01:37:38.320 Except for being locked from being locked at home.

01:37:43.220 Yeah. Well, of course, if you don't think about, you know, if you don't think about the

01:37:45.980 downsides of the thing, then it's a brilliant idea. Everything is great if you just ignore

01:37:50.840 the downsides. And that's essentially what governments can afford to do because they don't

01:37:55.660 have the market's discipline to essentially correct them. And that's what Bitcoin brings.

01:38:03.700 Well, the discipline, the discipline is exactly, the lack of discipline is exactly, you know, so we

01:38:09.740 could depersonalize this to some degree and think about it as a technical problem, right? Is that

01:38:14.880 as you stack up intermediaries between the producer and the consumer, because the signal is degraded,

01:38:21.620 the responses aren't going to be accurate reflections of what's necessary in the environment.

01:38:25.860 And that's sort of ideologically agnostic. What you derive from that is you want to set up

01:38:30.800 systems where those intermediaries don't exist, because then the signal isn't corrupt and we can

01:38:35.060 act properly in concert with the dictates of the genuine environment.

01:38:40.440 Yes, exactly. And in fact, I begin the second section of my Fiat Standard books called Fiat Life.

01:38:45.720 It begins with this idea that all living things face this natural order of the world in which they

01:38:51.720 need to produce more than they consume in order to survive. There's just every cell, every animal,

01:38:57.040 every plant needs to do this. You know, they're constantly working.

01:39:00.460 Or they die.

01:39:01.680 Or they die, exactly. And the only exception to this is essentially the Fiat human, 0.99

01:39:07.240 because they don't need to produce, because they can just live off the money printer that comes from

01:39:14.420 them from above. And so I think we've had an enormous section of the population that is not

01:39:21.460 used to the concept of productive work. It's destroyed the concept of, you know, the moral

01:39:29.180 imperative of work as service to others. When you take away the fact that work is also the only way

01:39:36.940 to eat. You know, when work becomes optional, it becomes much easier to, it becomes much easier to

01:39:43.960 philosophize it away and philosophize duty and responsibility away. And that's, I think,

01:39:48.160 what Fiat does. And you combine that with the fact that it raises time preference because it

01:39:53.420 discourages provision for the future and it discourages people to think a lot of the future.

01:39:58.500 And you can see that a lot of the problems, a lot of the pathology, pathologies of the 20th

01:40:03.340 century, I think, have their root in highly inflationary Fiat currency.

01:40:09.360 A couple of objections to Bitcoin, let's say. It's not easily usable. Like, I can't, I can't just go to

01:40:17.480 the store and buy something with Bitcoin. It's not easy. And I don't see that improving very

01:40:22.460 radically. Now, maybe it's a store of value and there will be systems built on top of it that make

01:40:27.940 those sorts of transactions possible. So, but maybe you could address that. You just brushed over

01:40:34.320 the issue of the multiplicity of cryptocurrencies. But you made a very telling statement there,

01:40:43.760 which is, you said, all of them, people have tried to make Bitcoin variants and they all failed.

01:40:48.820 All the other cryptocurrencies are more like companies. And so they have someone centrally

01:40:53.760 involved. And so why are people like Elon Musk, for example, interested in coins like it's Dogecoin?

01:41:01.900 Is that do only good every day coin? Is that it? And it was sort of a parody coin to begin with,

01:41:06.740 as far as I, my limited understanding enables me to. So Bitcoin isn't that usable. That's a problem.

01:41:13.400 Why, why shouldn't we just be skeptical of cryptocurrency as such, given the multiplicity

01:41:19.820 of cryptocurrencies? So, yeah. So in terms of the usability, I think the limit, the reason that

01:41:27.260 you don't use Bitcoin currently to buy things from your shop is not the technological use issue.

01:41:34.140 It's simply the liquidity issue. It's the fact that for the vast majority of people right now,

01:41:38.760 well, overall, the money balances over the world, Bitcoin constitutes somewhere in the range of 1%

01:41:46.480 of the world's money balances. So the odds that you are going to be trading with somebody who has

01:41:51.860 enough Bitcoin that they are willing to take the other end of the trade, you know, let's say you

01:41:56.320 want to buy a sandwich and they're willing to lose some, to accept some extra Bitcoin to add it onto

01:42:03.320 their balance sheet is very low because most people have zero Bitcoin and most people haven't heard of

01:42:08.200 Bitcoin. So it's still very early. So that problem is, in my mind, it's just an issue of liquidity. It's not

01:42:17.080 an issue of interface or user. You know, you don't know how your refrigerator works, your car, a lot of

01:42:22.520 machines, we have no idea how they work, but you know how to operate them. And so Bitcoin is like that. And we saw in El Salvador,

01:42:29.080 you know, now McDonald's and Starbucks are accepting Bitcoin. It's just, there is a very easy way to do it.

01:42:36.200 In El Salvador?

01:42:37.680 In El Salvador, yeah.

01:42:38.600 Why? Why?

01:42:40.200 So it was announced as a national currency, as a legal tender in Salvador. In fact, you know,

01:42:46.480 we're recording just one day after that law went into effect. So now El Salvador has two official

01:42:51.780 currencies, the U.S. dollar and Bitcoin. They used to run on...

01:42:54.840 And why did they do that?

01:42:55.780 Yeah. It's an interesting move from the president of El Salvador. I think...

01:43:01.020 Yeah, it's a radical move. It's amazing. I can't believe it.

01:43:04.160 Yeah. One motivation is that a lot of El Salvadorians send remittances back to their country.

01:43:09.240 And there's a lot of money in that. So they could save with it on Bitcoin.

01:43:12.640 Right. So that's a place where Bitcoin could really get wide usages. It's a replacement for

01:43:18.580 things like Western Union. That's a big deal, given how much money passes from first world countries to

01:43:23.880 third world countries. It's a huge issue.

01:43:26.920 Yes. And I think, you know, still over time, I still think, you know, it's going to be a while

01:43:33.880 until the whole world can move on to a Bitcoin-based economy because it's just, you know, you don't...

01:43:40.540 There's a hundred trillion dollars of money out there in the world. We're not going to...

01:43:44.520 Bitcoin can't eat all of that in a weekend.

01:43:46.520 No, but it's stunning that it's even 1% of that. I mean, that's unbelievable. That's a huge percentage

01:43:52.280 of it.

01:43:53.160 It's a huge percentage because, you know, the vast majority of that, the vast majority of

01:43:57.600 currencies are under 1%. Bitcoin is bigger than the vast majority of currencies. There's only like

01:44:01.960 maybe five or six currencies that are bigger than Bitcoin, the big ones, you know, and then all the

01:44:05.740 other ones are just tiny little fractions next to it. So it's astonishing that we've gotten so far.

01:44:10.360 But I think, you know, in terms of the interface issue, it's... Let me just put it this way. All

01:44:15.960 of the solutions that you currently use for paying with your fiat can be adapted for Bitcoin. You

01:44:19.960 know, Visa could add, you know, Visa already provides the US dollar and the Canadian dollar

01:44:24.760 and the Euro and 160 currencies from all over the world. They can add 161 and then you'll be able

01:44:30.520 to pay with Bitcoin.

01:44:31.320 Okay. So you think that's a threshold issue. Enough users, that'll just start to happen. The

01:44:35.960 market will drive that. Okay.

01:44:37.480 And we have the Bitcoin native solutions as well.

01:44:40.280 Okay. Now the issue of the other cryptocurrencies, the other cryptocurrencies, I think in my mind,

01:44:46.600 they are dilutive of each other, but they are not dilutive of Bitcoin because Bitcoin continues

01:44:52.280 to grow very rapidly. And I think, you know, the other cryptocurrencies, their value proposition rests

01:44:59.800 on some kind of special feature that they provide. None of them is really trying to compete with Bitcoin

01:45:04.920 on being this neutral money neutral protocol. None of them can claim in any kind of serious sense to

01:45:11.560 be doing that. So...

01:45:14.040 Okay. So let me ask you about that. So does that mean that Bitcoin is addressing the issue of the

01:45:21.560 store of value, the long-term permanent store of value decentralized in the most philosophically

01:45:28.200 profound possible manner in some sense? These other cryptocurrencies, they have other features,

01:45:34.120 but that's not the problem they're essentially trying to address.

01:45:38.680 Yes.

01:45:39.080 So they're in a different category.

01:45:40.680 Yeah. All the currencies that try to market themselves as a competitor to Bitcoin in this

01:45:45.720 field have sunk without a trace. And the ones that have stuck around have introduced a whole bunch

01:45:51.880 of buzzwords about other things that they're supposed to be doing.

01:45:54.600 Like what? Like what? What's been popular?

01:45:59.320 So there's all kinds of things like, you know, smart contracts and decentralized finance.

01:46:05.000 Honestly, if you ask me, like, none of that stuff has shown any sign of being anything more than a,

01:46:12.040 basically a pump and dump scheme, wherein, you know, people come in and they buy the token.

01:46:18.520 There's a story, like there's a story about how this thing is going to be used for, you know,

01:46:22.280 there was talk about betting markets and smart contracts and real estate on the blockchain.

01:46:29.400 And now they're putting pictures on the blockchain and they're selling art on the blockchain.

01:46:35.640 And all of these fads come and go. But ultimately, none of them needs its own

01:46:43.000 monetary system in order for it to function. And I think the accurate interpretation here is that

01:46:50.040 these things are just monetary systems that have a side story that they're selling you about what

01:46:55.480 their application is. But nobody's really buying them in order to buy these applications because they

01:46:59.880 don't really perform anything that Bitcoin cannot do or that, you know, any kind of real world use

01:47:08.360 case. It's just people are buying these currencies and they're speculating on the price. And the value

01:47:14.520 of all of these currencies is going up because, you know, we're starting from a very small level. However,

01:47:19.880 I think, you know, the distinction is that in the long run, these currencies need to continue to invent

01:47:25.640 new stories and continue to invent new narratives to continue to drive more attention to them.

01:47:31.000 But whatever story you invent in your currency, you know, there will be other currencies that will

01:47:34.360 come and invest in, you know, promoting this in a better way. So I think they are diluted for each

01:47:41.880 other because whatever value proposition you have, you know, let's say our blockchain network does the

01:47:46.760 best smart contracts. Well, what's stopping somebody else from copying that? There's nothing that you can't

01:47:51.720 copy about it. They can just move the same thing and start another network that does it.

01:47:57.080 Which is essentially the equivalent of printing money. It's the electronic equivalent of printing

01:48:01.880 money in that currency. Exactly. And so I think, you know, maybe this speculative game won't run long,

01:48:08.360 but ultimately altcoins are easy money because they individually, you can increase their supply.

01:48:15.080 There's a group of people that can sit down and change the money supply for all of these coins.

01:48:18.920 And that's the case with, you know, the second biggest currency after Bitcoin. They've changed

01:48:24.440 their monetary policy six times, maybe since creation. And that's which platform?

01:48:29.160 Ethereum. Ethereum. Right, right. And yeah, yeah. So they've changed the monetary supply. So

01:48:35.080 they could change it in any case. And, you know, if anything tells us that there's always reasons

01:48:40.200 why you want to print money. So there will come times in which you're going to need to print money

01:48:45.160 and there will be pressure. And they did go through a case where, you know, somebody hacked

01:48:48.200 their, somebody hacked one of their contracts, took a lot of money out of it from the people that

01:48:55.240 were pretty influential in it. And they did roll it back. They effectively essentially ran an admin

01:49:00.920 move where they froze everybody's account. Well, not exactly froze, but they reversed the transactions

01:49:06.120 in order to secure their own. They reset the day. Exactly. Exactly. So that's, that's, you know,

01:49:11.560 that's, that's the best competitor when it comes to Bitcoin. So none of them can really establish

01:49:16.040 the scarcity. So for me, in the long run, I would not recommend, I don't feel comfortable

01:49:21.080 recommending any of this. Of course, you could make money in the short run. There's a lot of

01:49:24.760 fluctuation, but in the long run, you know, these things continue to make more and the supply continues

01:49:29.640 to increase. And you need, you need a base of people that continue to hold them for the long run

01:49:34.920 in order for the value to stay in them. And I don't see any compelling narrative for people to want

01:49:39.560 to store serious value in these currencies in the long run. And I don't see that they could trust it

01:49:46.760 because of the fact that it can be increased. And I think it, you know, it individually can be

01:49:51.960 increased, but collectively, all of them, you know, you're constantly making new currencies that trading

01:49:57.240 on this novelty. So the market for novelty, you know, the demand for novelty, even if it's larger than

01:50:02.840 the demand for the store of value of Bitcoin is getting dissipated at the, all the extra inflation of

01:50:08.120 all these novelty coins that are being added every year. And, you know, I, I don't pay much attention

01:50:14.200 to this world because in my mind, I've paid enough attention and seen the patterns, which is that it's,

01:50:21.480 you know, these stories are generally there to sell the story of the currency that exists there.

01:50:28.520 But I think Bitcoin is really all you need. Bitcoin is the one that I, that I can trust will be there in

01:50:33.320 10 years, 15 and 20 and 50. Okay. So let me ask you about one more thing. I want to,

01:50:38.440 I want you to talk about your online learning platform and why you built that, why you're doing

01:50:43.160 that, what you think the implications are, what you offer people, uh, what that means for the future

01:50:48.680 of education, let's say, why you aren't in the traditional university system. I know that's a lot,

01:50:53.480 but I do really want to hear what you have to say about it.

01:50:55.800 Um, I was in the traditional university system, but, um, you know, the internet changes everything.

01:51:01.160 And, um, towards the time when I, um, started learning about Bitcoin, it really changed the

01:51:07.000 way that I think about the world and gave me an understanding of the power of technology and

01:51:13.080 the power of innovation and the power of the internet. And, um, I started realizing just the

01:51:18.680 limitation of the physical university model, which is you're stuck in a small classroom with

01:51:23.000 students. Many of them are there just because they want the credentials, not for the actual

01:51:27.560 learning. And the economics of it are, uh, not very good because, you know, the students pay a

01:51:32.680 lot of money and the professors don't get paid a lot of money. And then a lot of money gets lost in

01:51:37.320 the middle in the gigantic bureaucracy, which expands way faster than the faculty and, and continually

01:51:43.880 undermines the power of the faculty with the faculty's own, uh, what would you call, they're

01:51:47.800 concentrating on the research and they're politically naive and they get, they get,

01:51:51.720 their power gets inflated away to a tremendous degree every year. I warned my colleagues about

01:51:58.120 this sort of thing continually when I was a faculty member and they never paid attention.

01:52:04.680 I said, you, you're, you just have no idea what you're giving away. And well, okay.

01:52:09.320 So, so, and I, you know, I've had the same experience as you, I think, I mean, I was,

01:52:14.040 I've had a lot of health problems recently, but I was thinking about going back to the university.

01:52:18.200 I've resigned from the university of Toronto and my, my original position, I'm a professor

01:52:22.840 emeritus now, but I thought if I'm well enough to go back to the university and teach,

01:52:29.160 I'm well enough to teach on the net. And if I teach on the net, I can talk to people like you

01:52:34.520 every day. I never have to teach the same course twice. I can learn while I'm teaching

01:52:42.120 and I can teach to like 500,000 to a million people continually. So why in the world with

01:52:49.400 no administrative overhead whatsoever direct to consumer?

01:52:52.600 Exactly. So that was, that was really it. And, um, for me, I think the most, uh, frustrating

01:52:59.080 part of, um, uh, academia is, uh, the, the, uh, peer reviewed journal nonsense. It's just

01:53:06.200 an enormously frustrating ritual where you. That's no, no, the grant, the grant writing

01:53:11.320 system is worse. Yeah. Well, I'm in my defense, I never went that far. I could never get myself

01:53:16.920 to. Well, you know, the typical, the typical researcher in the United States in particular,

01:53:21.720 you get big grants in the U S but they're impossible to get. Whereas in Canada, you get

01:53:25.880 small grants. And if you do a grant proposal properly, you probably get a grant small, but in

01:53:30.840 the States, the typical scientist spends 40% of his or her time writing grant proposals.

01:53:37.560 And that, that is not what they're good at. Like that's not the same as being an entrepreneurial

01:53:42.680 researcher. It isn't the same skillset at all. Yeah. It's, it's a, so it's a, and then you don't

01:53:49.000 get the grants. Yeah. And in particular, teaching is massively, massively undervalued in the modern

01:53:54.200 university. You know, your university hires you mostly for how many publications you can get.

01:53:59.240 No, no, no, no, no. Now it hires you mostly for you, the quality of your diversity statement.

01:54:06.120 No, I'm not kidding. I'm not kidding. This is really happening in California,

01:54:09.320 according to, but not also not research. Now it's literally the case that in the UC systems,

01:54:15.480 the diversity statement, which is just something that, that crept in say five, six years ago,

01:54:20.360 you have to provide a diversity statement along with your research statement that has more weight

01:54:25.240 with regards to the hiring procedure than the research history and teaching. Well, it's like,

01:54:31.800 who cares about the damn undergraduates? Right. So yeah. Yeah. Education is another chapter in 1.00

01:54:37.720 the fiat standard where, you know, I take my experience from the university world where essentially,

01:54:43.400 again, it's the same story. The financing doesn't come from the customers for the students,

01:54:47.800 whether it's at the university or school level, it comes from above. And so the bureaucracy

01:54:51.720 is optimized for sucking more money from above. And, um, it essentially uses the students as the

01:54:58.920 props to do that. In fact, you know, universities get a lot of money, uh, a lot more money from,

01:55:04.600 uh, governments, uh, directly or indirectly, you know, governments subsidize the loans for the

01:55:08.760 students. So even student money is effectively government money. And so, uh, they're, they're, uh,

01:55:15.000 optimized and focusing on, uh, kissing the hand that feeds them. And that's why the university is

01:55:20.520 becoming so politicized. It's also part of fiat. It's, it's, it's, it's not the case when, uh,

01:55:27.560 it's not how universities function under the gold standard. They were at far more integrity because

01:55:32.440 the money had integrity. And so the only way that you could get your university to have money was,

01:55:37.400 you know, to teach people useful things so that they would be happy and they would tell their friends

01:55:41.640 to go to that university and they would donate money. But this kind of cycle is breaking now.

01:55:46.840 That's why we see so many, um, God, even the economist, even the economist miracle of miracles

01:55:52.920 has published, uh, articles in the last month pointing out that the politicization of the

01:55:58.920 university campus, which is something that I've been observing for like 20 years and

01:56:03.480 I've been warning people about is having these massive downstream consequences throughout society.

01:56:09.480 It's like, and that's definitely the case. And so why is that politicization occurring?

01:56:13.640 Right. So exactly. And so for me, you know, it was, I wanted to just, um, I, I, it was like,

01:56:20.040 you know, Bitcoin, like Uber, it's a sidestep, the entire, uh, monster and figure out what it is.

01:56:26.920 What is the essence of what it is that I'm good at? I like to teach. I enjoy teaching. So I'm going

01:56:31.880 to build a website and I'm going to, you know, I, I, the, the, the writing the Bitcoin standard was, uh,

01:56:37.000 what allowed me the courage to take this move. And I, I, I regret not doing it earlier. Um, but

01:56:42.680 once I had a little bit of a global audience that I could follow, you know, it was, I could teach many

01:56:48.040 more students that I could teach in a physical classroom where much more interested. And you

01:56:52.920 know, this, this is what I learned from Austrian economics. You want to follow the place where you're

01:56:57.400 able to create more value. That's what you need to follow. So people seem to like what I was doing

01:57:01.880 online. And so I thought I'm going to try and figure it out. So, uh, it's how long has this

01:57:06.920 been? Yeah. How long has it been in operation? That's safedean.com. Safedean.com. Yeah. It's

01:57:12.760 two years now. I've had it running for, uh, to actually, yeah, just turned two years, uh,

01:57:18.040 a couple of weeks ago. I didn't make a big deal. Well, congratulations. So, so, so tell me,

01:57:22.840 tell me like, um, what size audience are you serving? How is it growing? What have you learned? How are you

01:57:30.360 generating revenue? The first couple of years have focused on building rather than, um, getting

01:57:36.200 a bigger audience. I've made it a little bit more, uh, it's, it's mainly focused on, you know,

01:57:41.320 my audience on Twitter. They're the ones who sign up. Uh, I haven't promoted it widely. I haven't

01:57:45.800 done any advertisement. I haven't raised funds. I've been focused for the first couple of years on just,

01:57:49.800 uh, learning, um, how to do the courses online and to putting the courses online and focusing on the

01:57:56.120 topic itself, you know, how to make an actual online course rather than marketing this and growing it

01:58:00.920 and also writing my two books. So it's like the platform for me to, um, intellectually stimulate

01:58:08.600 myself and discuss things with students as I write the book. It was enormously valuable for me to

01:58:13.800 writing the book. And it's, you know, I remember in the university, the teaching process is something

01:58:18.120 that gives you the ideas for writing. And I wanted to make sure that I had that as I left the university,

01:58:23.320 I didn't want to just write. I wanted to have seminars where I discuss things. So I could, I have

01:58:28.120 two live seminars every week with, uh, members of safeindeed.com. Uh, twice a week, we, uh, get together

01:58:34.200 and we discuss, um, my books, my work, my courses, uh, Bitcoin in general, Austrian economics, and all kinds

01:58:40.120 of other issues. And, uh, so now, now it's a little bit, uh, it's being done on a smaller scale as I was

01:58:45.720 focusing on the courses and the books. The plan is, you know, starting next year, I'm going to start, uh, hopefully

01:58:50.760 expanding the operation as I have my books completed and my next two books. I'm also writing an economics

01:58:56.680 textbook as well. So, you know, the, the next problem to solve for the decentralization of

01:59:02.280 education, I've been thinking about this for a long time as, as it's possible to learn more and more

01:59:08.520 online is accreditation is where all the value is all of it. And I've talked to many wise academics,

01:59:17.080 like seriously wise academics who know perfectly well that there's almost zero financial utility

01:59:24.040 in the knowledge that universities are dispensing to students. It's not zero, but it's, it's low,

01:59:28.840 but there's tremendous residual value in the accreditation. So the next big revolution is going

01:59:36.680 to be the decentralization, hopefully the decentralization of accreditation so that there's a,

01:59:43.240 a, and there's a, there's a way of providing verifiable accreditation. So I've been thinking

01:59:50.200 about that. So you, to some degree, so you can imagine something like a set of exams where only 10%

01:59:58.440 of the people who take them pass, or maybe it's 20%, that's bronze, 10%, that's silver, 5%, that's gold.

02:00:05.880 You can retake the exams multiple times, but you keep it scarce. And so the accreditation,

02:00:14.520 there's tremendous economic value in the decentralization of, of educational accreditation,

02:00:19.800 because the content is going to be provided right by people like you, perhaps by people like me,

02:00:24.360 that's going to just keep happening. And that's going to find its own market. So, well, so I don't

02:00:30.600 know how that problem might be solved, but. Yeah. Uh, the way that I solved it in my first two years

02:00:35.960 was that I just told people, you know, um, I'm going to only give knowledge. I'm not going to

02:00:42.040 do any test. Right, right, right. Yeah. And that, that's, that's a, that's a reasonable approach too,

02:00:48.120 you know, and, and, and it sort of relies on your trust in the students themselves in some sense,

02:00:53.000 right? You, you don't have to sit through this. You're not going to get anything out of it except

02:00:56.280 the knowledge. That's a reasonable approach. And maybe it's the right one is just to,

02:01:01.400 for those who wish to educate, to do so and to let the chips fall where they're going to fall.

02:01:07.720 And also, I think, you know, there, there, there is, there are some downsides to testing that

02:01:12.440 you have to kind of formulate the education in a way that is, uh, amenable for testing and that can,

02:01:19.560 corrupt the system. Exactly. And I kind of,

02:01:22.840 it's like predicting the future, right? It's the same problem. It's like,

02:01:27.480 which part of the knowledge that you've learned is relevant? And can we form? And so there's the

02:01:33.240 hypothesis that we can formalize that now, you know, you might be able to do it in some ways by,

02:01:38.200 because maybe you can test something like, uh, literary literacy, right? Because that's a,

02:01:44.440 that's a broad scale skill. That's you useful across multiple domains. And so maybe there's a

02:01:50.840 a role there for, for testing to specify level of skill, but it gets much more difficult in other

02:01:57.480 areas. So that's, that's partly why the accreditation problem is a real tough one to solve, to do it

02:02:02.360 properly. I don't know. I go back and forth on whether accreditation really is such a big deal

02:02:08.120 or whether if it's going, whether the whole issue of accreditation is going to be devalued over time,

02:02:13.000 because in a sense, I can see how it was valuable in the pre-internet world where,

02:02:18.920 you know, going to a university and spending four years taking courses with the experts on a topic

02:02:23.880 next to a physical library that actually contained the books on the topic was, um, basically the only

02:02:30.360 way that you could establish confidence in the topic and getting a degree that you've ticked all

02:02:36.520 of the boxes was a very reliable signal that you did do that. But now, you know, the knowledge is all

02:02:42.760 out there and, um, the people looking to hire you are becoming increasingly practical, increasingly

02:02:49.560 specialized about what they're looking for. You know, it's not that big of a deal, whether you

02:02:53.560 have a degree in all of those, um, fascinating topics that you learned about, um, you know,

02:02:59.640 can you build a mousetrap that catches mine? Right, exactly. Have you? So that might mean

02:03:04.280 that the accreditation problem is actually downloaded to the people who consume the students,

02:03:08.760 so to speak, right? And that that's the people who are doing the hiring. I mean, the hiring people

02:03:13.880 have a tough job and they were using accreditation as a shortcut to doing their job properly, relying on

02:03:19.640 the institutional validity of the universities to select the proper students. And they were,

02:03:24.120 universities were basically doing that on the basis of it, of, uh, making it difficult to get

02:03:31.480 into the universities and, and by proxy selecting people who had high levels of, of G fluid intelligence.

02:03:38.680 So basically, yeah. And it's, it's becoming less and less valuable as a signal, as knowledge becomes

02:03:47.480 everywhere, it becomes available everywhere. You don't need to go to a physical library and you don't

02:03:51.480 need to be next to the professor. You can download the lectures online and you can discuss things with

02:03:57.240 students online. You can recreate the entire university experience online, uh, basically.

02:04:02.120 Now, is it as fun as going onto a campus? Well, no, but you know, when you think about the difference

02:04:07.720 in costs, you could learn an entire undergraduate degree for a couple of hundred bucks online.

02:04:12.440 Um, you know, think about all the extra money that you save and all the extra time that you save.

02:04:17.400 I don't think about how much fun you could have with that. And that's when it becomes a fair comparison,

02:04:22.920 I think.

02:04:25.720 Well, look, that was great. I learned a tremendous amount. You really made me think, uh, you cleared

02:04:31.160 up a lot of the questions I had about cryptocurrency and about, uh, about Bitcoin. I understand how it

02:04:37.240 functions better. Some of it was absolutely fascinating. Like that idea that you can monetize energy

02:04:43.400 production in, in, in areas that wouldn't be able to ship the electricity to market. That's a,

02:04:49.720 that's absolutely mind boggling. It'll take me like five years to think that through. It's so,

02:04:53.800 and it seems to completely contradict the idea that Bitcoin is a waste of, of, of the world's

02:04:59.240 resources, right? It's, it's, it's got, it's a complete opposite. If that, if this monetization

02:05:05.000 idea is actually true. So that's really, really, really interesting. So yeah, that was great. I'd like to

02:05:12.760 talk to you again at some point. So, um, we'll see how people respond to this and what sort of

02:05:18.120 questions they have and what sort of things they might like us to discuss. But, uh, I really enjoyed

02:05:22.520 the conversation. So thanks a lot for, for, for all that and good luck with your book, your new book.

02:05:27.960 So that new book, so everyone remembers the two books are, um, the Bitcoin standard and the fiat

02:05:35.080 standard. And my, you're going to learn a lot by reading those books an awful lot. I learned a lot

02:05:40.520 about the Austrian school of economics too, and about its fundamental philosophical differences.

02:05:44.760 And that was really useful to me as well. So lots of, lots of pieces fell into place,

02:05:49.720 the sign of a good conversation when that happens. So thank you. Thank you very much. It was an

02:05:55.240 absolute pleasure as well. I, uh, enjoyed talking to you very much and I hope we do it again.

02:06:11.480 Thank you very much.

02:06:17.160 You

The Jordan B. Peterson Podcast - November 15, 2021

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

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