The Jordan B. Peterson Podcast

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00:00:57.420 Hello everyone watching on the YouTube platform and associated podcasts.

00:01:14.200 I'm here today with Roy Sabag, who I met about a year and a half ago,

00:01:19.080 continuing my investigation into the field of economics, I suppose, and monetary policy, monetary conceptualization as well.

00:01:27.420 Something I'm woefully undereducated in relationship to.

00:01:32.300 Roy's had a remarkable career as an entrepreneur, businessman, and as a thinker.

00:01:36.760 He's recently published a book, The Natural Order of Money, which is what we're going to talk about today.

00:01:43.740 Trying to puzzle through just exactly what constitutes money and how it might be productively contemplated,

00:01:51.280 psychologically, biologically to some degree, at least in terms of its potential biological implications.

00:01:57.780 Economically, sociologically, philosophically, theologically.

00:02:01.940 We're going to try to cover all the bases, as Roy's book does.

00:02:05.640 And so I thought we'd begin this conversation by having Roy talk about his background,

00:02:12.320 so that all of you who are listening have some reason to understand why he's doing what he's doing,

00:02:19.820 and perhaps why his ideas might be regarded as compelling and credible.

00:02:25.400 Yeah.

00:02:25.680 So, Roy, we met a year and a half ago.

00:02:29.180 You started to talk to me about the thought that you've put into the idea of money for, really, for decades, really.

00:02:37.340 And then you handed me this manuscript, which was an early version of the book.

00:02:41.200 And we've been talking about it to some degree ever since, or variants of it.

00:02:45.400 And so, through the history of the development of your businesses,

00:02:49.240 so people can get an idea of the range of activities that you engaged in.

00:02:54.000 So, what did you start with on the entrepreneurial front?

00:02:57.600 The first thing I started with on the entrepreneurial front was actually buying and selling physical minds.

00:03:03.840 And you did that at how old?

00:03:06.080 Probably 25.

00:03:07.320 Uh-huh.

00:03:07.620 Yeah, 25, 26.

00:03:09.060 So, that gave you a taste for real-world engagement, because there's something very concrete about mines.

00:03:15.280 And from what you've told me, you went and visited a number of mines.

00:03:18.540 Oh, yeah.

00:03:18.860 And so, how did you get involved in investing in something as complex as the mining industry at such a young age?

00:03:26.360 And why did you pick mining?

00:03:27.880 It's actually a good question.

00:03:29.400 So, when I started in finance, I was what you might call a value investor in the Graham and Dodd method,

00:03:38.300 which is the method espoused by Warren Buffett and a lot of the famous investors.

00:03:42.100 So, the idea was that you were looking at a share of stock as a piece of an actual business.

00:03:48.860 And your task as a security analyst was to essentially value the business, come up with an estimation of value known as intrinsic value.

00:03:59.620 And then you would seek to capitalize when the price in the market was at a discrepancy or a delta from that estimation of intrinsic value.

00:04:08.980 So, you had to learn to investigate something like intrinsic value conceptually right from the beginning.

00:04:15.620 Right from the beginning.

00:04:15.800 And that started you thinking about what intrinsic value might actually constitute in some deep sense, I would presume.

00:04:20.620 Absolutely.

00:04:21.140 But in this case, the method is simply an abstract one.

00:04:25.160 I mean, you know, you're looking at financial statements.

00:04:27.920 So, you're analyzing filings that companies that are publicly traded have to make,

00:04:33.080 such as 10K filings, 10Q filings, or annual reports in other countries.

00:04:38.020 And then you're learning to study basically three statements, the balance sheet, the income statement, and the cash flow statement.

00:04:44.160 And you're building models either in your mind or in actual spreadsheets.

00:04:48.160 And you're looking to see if you can make an estimation of intrinsic value.

00:04:52.660 Now, normally what you're doing is you're taking the sum total of potential cash flows that the business might earn.

00:05:00.020 And then you're discounting it back to the present at an appropriate discount rate.

00:05:04.740 Now, this becomes very important.

00:05:05.880 So, you're actually, what you're really doing is you're valuing time.

00:05:11.260 But I don't want to get into that just because it's a bit of a complex issue.

00:05:15.740 But the other aspect of this theory or method of investing is Benjamin Graham, the founder,

00:05:23.060 he had this view that the stock market had evolved into a kind of dual nature beast.

00:05:30.580 On the one hand, there were speculators that were just trying to buy something and sell it for the sake of, you know, like a hot potato.

00:05:38.300 But the actual owners—

00:05:39.840 And for a quick profit.

00:05:40.560 For a quick profit, right?

00:05:41.840 They were like the merchant in the bazaar that was just turning over their inventory.

00:05:46.740 But on the other hand, there were the business owners, the large shareholders, the proprietors.

00:05:52.140 And to them, the machinations in the market, the daily movements, were meaningless.

00:05:57.220 So, the way they looked at a business was actually what was the profitability of the business?

00:06:01.900 What would the potential dividends be?

00:06:03.980 What would the sum of parts of the business be in a liquidation?

00:06:07.540 And what he noticed was he called it Mr. Market.

00:06:10.360 You know, Mr. Market shows up every single day and tells you that your share of stock is worth this or that.

00:06:15.840 And he's kind of a schizophrenic.

00:06:17.780 You know, one day he says your shares are dear, and the other day, you know, they're not.

00:06:22.840 And your job as a security analyst is to disregard those daily machinations.

00:06:28.100 The only thing that's important for you are the actual business results.

00:06:32.280 Right.

00:06:32.440 So, you're trying in some sense as a value investor to put yourself in the seat of a legitimate business owner.

00:06:38.400 Yes.

00:06:38.780 And to see what the productive potential of the business is over time.

00:06:42.240 That's right.

00:06:42.800 Right, right.

00:06:43.340 And so, in some sense, you have to get down to whatever the fundamentals are.

00:06:47.420 And it's not so obvious what the fundamentals of a business might be.

00:06:50.840 That's right.

00:06:51.320 So, you have to familiarize yourself with a few things.

00:06:54.100 But on the surface, the idea behind the method is that you would take the financial information that's available to everyone.

00:07:02.260 You would come up with an estimation of intrinsic value.

00:07:05.280 You would use, you know, your discounting mechanism, whatever it is.

00:07:09.200 And then you would go out into the market and look for these situations where there was a large discrepancy.

00:07:14.760 Right.

00:07:14.900 So, essentially, you can buy—

00:07:15.300 So, you're looking for a good purchase.

00:07:17.340 Yeah.

00:07:17.520 You're looking to buy a dollar for 15 cents or for 50 cents.

00:07:21.140 Now, here's the problem.

00:07:22.080 Well, as Benjamin Graham famously said, in the short run, the market is a voting machine.

00:07:29.380 But in the long run, it's a weighing machine.

00:07:32.020 That long run, we never truly know how and why it happens.

00:07:36.180 But mysteriously, eventually, in time, companies will trade at their intrinsic value.

00:07:42.260 And what often happens is they'll overshoot their intrinsic value or they'll undershoot their intrinsic value.

00:07:48.540 Right.

00:07:48.780 Now, this idea—

00:07:49.660 Because the short term is trying to estimate that within parameters of error that are indeterminate.

00:07:54.100 That's right.

00:07:54.760 So, as you stretch the arrow of time, you find that the kind of volatility that you see in the short run somewhat disappears.

00:08:01.100 But there's a problem here because there's nothing guaranteeing that the share of stock, which is basically a security, it's a claim, especially for a minority owner with no rights to just take control of the business, shut it down, and cash out the intrinsic value.

00:08:16.300 There's not necessarily a forcing mechanism that would cause a share to appreciate its intrinsic value.

00:08:26.480 And oftentimes, or as would be believed in modern economic theory, the market is so efficient that if investors decide that a share of stock should trade below intrinsic value, there's a reason for it.

00:08:40.660 The market's sensing something in the future, whether it's—

00:08:44.640 There are hypotheses in some sense—correct me if I'm wrong—that value investing of that sort is in some way impossible to do consistently.

00:08:53.680 Consistently, that would be the efficient market hypothesis, right?

00:08:56.620 That all actionable information is in some sense already priced into the stock.

00:09:02.320 And then the hypothesis would be that even people who routinely outperform the market are doing that not because of any of their intrinsic wisdom, but because they're statistical outliers.

00:09:12.580 They've got lucky in some statistical sense, and sometimes even consistently.

00:09:16.660 Or the corollary that they'll tout is that those people are just providing liquidity at certain moments.

00:09:23.100 That's kind of the newer way of arguing it.

00:09:25.520 But that position is just plain wrong.

00:09:27.860 I mean, I wouldn't be where I am today if it were true.

00:09:30.120 Well, the problem I have with that position is that if that's true, it sort of invalidates the idea that intelligence is useful because the world is about as unpredictable as the stock market, and yet we seem to be able to use our intelligence to negotiate through it.

00:09:45.020 And so I have some, what would you say, sympathy for the proposition that an intelligent analyst might be able to get an edge on the perturbations of the market.

00:09:59.380 Anyways, you did do that, and you were quite successful.

00:10:03.100 And what do you think made you successful?

00:10:05.020 And you've continued to be successful financially and in other ways.

00:10:07.980 But what do you think it was that you brought to the problem, especially at such an early age, that enabled you to be successful?

00:10:14.880 And what did you learn by actually going to the mines and so forth?

00:10:18.100 Well, we're not at the mines yet.

00:10:19.140 So this would be me just basically picking stocks in a vanilla way, both long and short, but employing this method, which I definitely internalized at a very young age.

00:10:28.420 I would meet Warren Buffett and write him letters and have lunch with him and things like that.

00:10:33.760 There was nothing wrong with the method.

00:10:35.360 In fact, I think the method is the only way to outperform the market over time.

00:10:39.740 And that's why all the great investors are generally value investors.

00:10:43.240 For the last 15 years or so, 10 years or so, value investing has gone out of vogue.

00:10:48.400 But all of those investors are now making a comeback, many of which have produced really positive results in the last year, in 2022.

00:10:56.040 So if you're going to try and generate alpha, as it's called in hedge fund parlance, you need to be a value investor, in my opinion.

00:11:06.100 And alpha is the differential between the actual price and the assumed intrinsic value.

00:11:10.560 Well, it's outperformance over the index.

00:11:12.480 So if the S&P 500 is up.

00:11:13.900 Oh, sorry, I had that wrong.

00:11:15.420 It's overperformance over the index.

00:11:17.440 That's right.

00:11:17.880 Which is the average performance of the market.

00:11:20.020 That's right.

00:11:20.580 So you need to prove that you're able to generate a return that a monkey throwing darts can't generate.

00:11:26.100 Because, you know, there's the famous experiment where they had a monkey throwing darts at various stocks, and he basically produced the same.

00:11:32.060 Right.

00:11:32.420 Well, and the idea is that you can't beat random sampling in some sense.

00:11:35.820 That's right.

00:11:35.880 Yes, fooled by randomness.

00:11:37.360 So, no, there's nothing wrong with value investing.

00:11:40.700 But for me, I think it reached a point where it was no longer satisfying intellectually to just sit there and constantly analyze businesses.

00:11:51.040 Abstractly.

00:11:51.640 Abstractly, although I did enjoy learning about different industries.

00:11:56.200 And that's another very important thing.

00:11:57.840 You know, value investors need to be versatile enough to learn about the economy itself.

00:12:03.300 And one of the issues I had with the method intellectually or the school of value investing intellectually and some of the mentors that I had was they genuinely believed that they didn't need to care about the economy at all.

00:12:15.520 Their job was just to look at individual stocks and construct a portfolio of individual stocks.

00:12:20.240 So, they had detailed focal knowledge.

00:12:21.940 Yeah, and there used to be these adages in the community all the time.

00:12:25.260 I remember even as a young kid, you know, that nobody can understand macroeconomics.

00:12:31.740 You know, that stuff is just a fool's errand.

00:12:35.400 And, you know, you can't actually—but importantly, you can't actually value a commodity because a commodity has no balance sheet.

00:12:43.800 And they were kind of starting to—

00:12:45.660 How do you distinguish a commodity from a stock or another financial asset?

00:12:50.920 Well, a commodity is something that's physical.

00:12:53.080 So, its possessor is using it as an input.

00:12:57.080 So, if you buy wheat, you know, you might buy it electronically.

00:13:00.980 Then you take delivery of it and you use it to make flour, to produce bread.

00:13:05.280 So, we think of those as raw materials in some sense or natural resources.

00:13:08.840 That's right.

00:13:09.200 You're not buying it to sell it onwards.

00:13:10.760 You're buying it to consume it.

00:13:12.060 So, it's an input into another process that generates value from those initial raw materials.

00:13:17.840 That's right.

00:13:18.280 In fact, it's the fundamental input, as I'm sure we'll get into.

00:13:21.920 A stock is basically a contract, you know, a note, a piece of paper that says that you're entitled to a share of a corporation.

00:13:32.420 And corporations themselves are these interesting entities which are, you know, relatively new in the history of humanity, joint stock companies.

00:13:39.220 The idea before that was that you would normally create a partnership pool capital.

00:13:43.620 And then when you died, your other partners would have to buy you out.

00:13:46.680 But with stocks, you've created these entities that essentially live on forever with just the shares changing hands.

00:13:53.320 Right.

00:13:53.580 A more abstract form of ownership.

00:13:55.220 But what that...

00:13:56.000 ...to be more distributed, allows risk to be more distributed.

00:13:58.600 That's right.

00:13:58.960 Zoom allows people to diversify more easily.

00:14:01.460 That's right.

00:14:02.320 But what that achieves is a kind of illusion where once a stock is traded on a public exchange and it has shares slushing around every single day, investors begin to impart a sense of timelessness or entropy resistance to a share of stock.

00:14:21.680 Right.

00:14:21.840 Like it's a thing.

00:14:22.620 And yeah, you can't conceive that Apple will not be around in 100 years.

00:14:25.920 Right.

00:14:26.180 Well, and that ties into our psychology very interestingly because if you plot a stock and you see it going up, if you see a physical entity going up and it's still moving at a pretty decent rate, you assume it's going to continue to go up.

00:14:39.380 And it's very difficult to shake that when you're looking at a stock chart because you have this built-in embodied proclivity to assume things like inertia.

00:14:48.100 It's going down very rapidly and things going down rapidly tend to go down rapidly to continue that.

00:14:54.380 And there's no reason really to assume that that's the case at all with a stock because, well, if you could, then you could predict the stock and then, of course, you could make a lot of money.

00:15:02.920 Yeah, but there's actually an even greater problem, which is a historical fact that if you stretch time, none of these stocks ever survive.

00:15:12.980 Right, they hit zero at some point.

00:15:15.220 Well, they actually disappear.

00:15:16.120 They go bankrupt or they get reorganized.

00:15:18.140 And so when Charles Dow, who worked at the Wall Street Journal, or sorry, at the Dow Jones Company in the 19th century, formulated the initial Dow Index of 30 companies.

00:15:29.960 It's the same Dow Index you have today.

00:15:31.980 The index is the same.

00:15:33.480 However, there is not one constituent.

00:15:35.860 I think U.S. Steel—no, U.S. Steel is no longer in the Dow.

00:15:38.320 Yeah, there's not one constituent in the Dow today from 130 years ago.

00:15:42.760 Right, so you're trying to measure something that's—you're trying to measure something whose constituent elements are transforming constantly.

00:15:50.000 That's right.

00:15:50.500 But the double illusion there is that the index value itself becomes an object.

00:15:59.740 Right, yes.

00:16:00.380 It becomes a security in and of itself.

00:16:02.980 So people like all—I mean, you know, some of the greatest economic thinkers, Nobel laureates, will make this error.

00:16:11.200 But the whole industry makes this error.

00:16:13.180 And what they do is they'll say, the value of the index has gone up this much over this many years.

00:16:21.020 But the problem is that the index from 100 years ago was an entirely different group of stocks.

00:16:27.900 And every time you need to get rid of some stocks, there's costs associated with it.

00:16:33.620 And many times—

00:16:35.260 Is there—can you make an index that's large enough so that you overcome that problem statistically?

00:16:41.400 No.

00:16:41.940 No, because I suppose it would take just longer for it to transform entirely if it had more entities.

00:16:47.040 And I know most corporate entities don't last that long, even if they're highly successful, right?

00:16:50.900 It's about 30 or 40 years.

00:16:53.020 Yeah, right, right.

00:16:53.680 And that turnover is probably increasing.

00:16:56.180 And that's a good thing as far as capitalism is concerned because, you know, there's creative destruction and failure is an integral component of capitalism.

00:17:03.480 But going back to the switch, there was nothing wrong with value investing.

00:17:08.380 It was fine.

00:17:08.920 But there was a kind of intellectual—I became a little disinterested in the whole way of going about it.

00:17:16.460 And I had this problem that—

00:17:18.840 You were making money doing it.

00:17:20.380 Yes.

00:17:20.720 How old were you when you became financially independent?

00:17:23.640 I'd say early 20s.

00:17:25.020 Early 20s.

00:17:25.680 Okay, so despite the fact that you were making money, something was pulling you to investigate something different.

00:17:31.000 Yeah, yeah.

00:17:32.000 And did you know at that point what it was?

00:17:33.840 I mean, was it just a diminishment of your interest, or could you see interest in something specific otherwise making itself manifest?

00:17:40.780 I actually do remember one of the things it was.

00:17:43.220 It was me trying to purchase property and bidding on a few properties and learning about the real estate market and seeing the price of houses change nominally.

00:17:58.040 And at some point, like, asking myself the question, what exactly is driving the price of the house up?

00:18:05.020 I know it drives the price of a stock up.

00:18:07.940 I know that ultimately a stock is a share of a business, which generates income.

00:18:12.660 But what exactly is a house?

00:18:14.040 Like, why is a house worth more today versus yesterday?

00:18:17.220 And I remember thinking, like, very clearly, like, wouldn't the house actually be decaying over time?

00:18:21.040 Wouldn't it cost money to upkeep the house?

00:18:23.480 And so that was when I realized that value investing was insufficient for understanding economics.

00:18:30.380 And that what I was really interested in was trying to answer certain questions I had about how the economy works in and of itself.

00:18:39.900 And I also had this real problem that commodities were somehow excluded from the value investing method.

00:18:47.720 And so I started learning a lot about commodities.

00:18:53.360 And I was just fascinated with, you know, the periodic table and the fact that we had...

00:18:58.400 So it sounds like, to some degree, you were starting to become interested in basic, like, really basic philosophical notions of value per se, right?

00:19:07.760 I remember when I was a kid, 17 or so, I read this book, Zen and the Art of Motorcycle.

00:19:12.200 Oh, yes, wonderful.

00:19:13.000 It's a great book.

00:19:13.540 Yeah, well, it's really an investigation.

00:19:15.420 He called it an investigation into quality, right?

00:19:18.080 Into what is it that makes something of higher quality than another, which is really an investigation into value.

00:19:23.880 And my career was driven in large part by an investigation into value.

00:19:27.460 And that may be why our interests parallel to some degree, because you were interested in value very practically.

00:19:33.480 But then you also became interested in the idea of value, like, abstractly.

00:19:38.840 What constitutes value?

00:19:40.220 Why does it dynamically shift and change?

00:19:42.200 What drives that?

00:19:43.160 Is that merely a consequence of human interaction?

00:19:46.680 I mean, that's something that Persick investigated in Zen and the Art of Motorcycle Maintenance, right?

00:19:51.220 Because we could assume that value is no more than what we say it is, right?

00:19:55.580 It's merely a matter of human agreement.

00:19:58.420 But the fact that there are commodities, for example, and this is something your work points to, indicates that, well, it's not merely a matter of human agreement,

00:20:05.900 because there's something basic about basic commodities, right?

00:20:09.020 There are some things that we cannot do anything at all without.

00:20:13.960 And I suppose water would be the most basic of commodities or air in that particular case.

00:20:18.740 So there's some fundamental relationship between human subjectivity and the objective structure of the world.

00:20:24.880 And so maybe that's lurking at you underneath.

00:20:28.320 I think that's exactly what it is.

00:20:30.040 I would just change.

00:20:30.900 I don't love the word value.

00:20:32.380 I would say I was searching for truth.

00:20:34.540 And I think that there was always this inherent intuition that there is objective truth.

00:20:40.480 And what I couldn't reconcile—

00:20:41.720 Even in economic analysis.

00:20:43.500 Absolutely.

00:20:44.260 Economics is reflecting the real world.

00:20:46.340 And so my issue, I think, was that the commodities were objectively true.

00:20:53.560 You know, these were real entities that were at the heart of all human activity and cooperation.

00:20:59.360 But then when it came to the sort of sophisticated financial analysis, commodity trading was seen as a kind of, you know, inferior art form.

00:21:08.260 You know, the people in the Midwest did that in the futures market.

00:21:11.400 The real intelligent people were hedge fund managers in New York City.

00:21:15.580 But what do you think accounted for the prejudice, so to speak, the elitist prejudice against commodity trading?

00:21:21.500 Because you'd assume that if the goal was to understand and to make money, and maybe with the latter primary,

00:21:27.920 that why would there be any elitism in relationship to the methods of trading?

00:21:32.740 Was the idea that somehow it was simpler to analyze the commodities markets?

00:21:36.720 You'd think that would make it more attractive, though.

00:21:38.780 Well, the fact is it's not simpler because if it were, you know, you would have incredible investors in that space.

00:21:45.480 But they're a very small group of investors that have done well, primarily building and operating mines.

00:21:51.400 But in terms of trading the commodities themselves, there aren't, there's maybe a handful of good investors.

00:21:57.040 No, it actually has to do with, it's a mirror reflection of the state of our society and our economy.

00:22:03.080 So our economy became more abstract, more service-oriented, and the velocity of activity, you know, was increasing, the tenor of activity.

00:22:14.780 You know, if you just take a, you know, basic example of how publicly traded companies, you know, used to report their financials once a year.

00:22:21.780 Now they're being forced to report every 90 days.

00:22:24.520 Now they're making projections every 90 days to what they're going to report in 90 days.

00:22:29.080 So we're building an abstraction hierarchy on top of the commodity base.

00:22:35.380 And the, and, and status as an analyst seems to depend on your operation at the upper levels of the abstract.

00:22:43.280 I wonder if that's partly because...

00:22:44.480 Well, it's where you're going to make money, too.

00:22:45.920 So, so you're going to make money in all of these frontier so-called industries.

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00:24:28.080 Whether they're in STEM or whether they're in high finance, financial engineering, derivatives, complicated things.

00:24:36.380 Right, so there's a novelty contribution there is that the commodities trading, that's an ancient business.

00:24:42.780 Yeah, that's a physical business, physical clearing.

00:24:46.440 So remember, the issue with the stock is you buy it, and you never know if the stock will be weighed.

00:24:51.060 Benjamin Graham claims that it does over time.

00:24:53.540 But as I said, it might, and it does over time, but you never know exactly when.

00:24:59.600 Physical markets are entirely different.

00:25:01.140 Right, well, if you buy a pork belly's future and you don't trade it in, eventually you get the pork belly's.

00:25:07.440 Exactly, and once you get the pork belly, the transaction's closed.

00:25:10.600 Right, right.

00:25:11.060 You no longer own anything.

00:25:11.860 If you want to buy another pork belly future, you have to decide what month and delivery you want,

00:25:16.980 so that the farmer who's producing it will sell into that contract and settle the trade.

00:25:21.440 Right, so the fact that you have full clearing and settlement in physical commodities is very interesting from a financial lens

00:25:29.160 because it means that you always have that objective arbiter of truth.

00:25:33.840 You know, you can't just defer things indefinitely.

00:25:36.300 And I think that also attracted me very much to the industry.

00:25:40.000 But basically what I did was—

00:25:42.140 It's a fundamental corrective in some sense.

00:25:44.100 Yes.

00:25:44.400 A fundamental reminder of your union with an underlying structure that isn't arbitrarily,

00:25:50.000 arbitrarily, in some sense, isn't arbitrarily ordered by human beings.

00:25:53.680 That's right, that's right.

00:25:54.780 And I think that for me, I was trying to express what I had learned in value investing through the world of commodities.

00:26:03.340 And so this brings us back to the mining chapter.

00:26:05.240 What I ultimately estimated was that if you take a mine in a stable geopolitical jurisdiction,

00:26:14.020 so say in Canada or in the United States or in Europe, you know, depending where in Europe,

00:26:18.560 and the mine had already been geologically explored,

00:26:25.420 and thus there was an ore body which was delineated.

00:26:29.080 In other words, we've drilled holes into the ground.

00:26:30.980 We know what exists underground.

00:26:33.340 And you bought that mine, but you didn't actually mine.

00:26:38.120 You just bought the land.

00:26:40.520 What you were essentially doing was buying a call option on future weight of commodities in the future,

00:26:48.640 which you could always extract from the ground.

00:26:50.800 Okay, explain that a bit, call option.

00:26:52.800 So you're leaving it like it's a bank in some sense, right?

00:26:54.840 Yeah, it's a vault in the ground.

00:26:56.020 You're betting that the future value will be higher than the present value.

00:26:58.960 Otherwise, you'd mine now.

00:27:00.440 That's right.

00:27:01.020 But there's a reason why you don't want to mine now.

00:27:03.220 And the reason is that you're estimating that there's going to be more money floating around.

00:27:08.380 And so the price of the commodity will rise over time.

00:27:11.960 But you're also betting that the cost of extracting the commodity will not rise as fast as the price.

00:27:18.140 Or decline even possibly.

00:27:19.440 That's right.

00:27:19.860 Well, they don't normally decline.

00:27:21.200 They rise with inflation.

00:27:22.900 Okay.

00:27:23.260 Just like everything else, because you've got basically three inputs in mining any commodity.

00:27:26.900 Like you have three inputs in doing anything in the economy, which is energy, labor, and time.

00:27:32.020 And labor, you know, in inflation always rises and energy always rises.

00:27:35.840 And, you know, when you actually have inflation and you have to raise interest rates,

00:27:39.360 then you're basically increasing the cost of time as well, the price of time.

00:27:43.520 But that was my idea.

00:27:45.140 You know, it was a novel idea.

00:27:47.140 There were a few people that had done it successfully that I looked up to.

00:27:51.860 But I had the idea of kind of building an aggregation of these deposits.

00:27:56.740 And so I raised money from some investors.

00:27:59.260 I cashed out some of my own money.

00:28:01.040 And I did that.

00:28:02.040 And I chose a few commodities that I thought would be integral to society.

00:28:06.980 I was trying to make a prediction over my lifetime.

00:28:09.800 And I used to say, you know, to my investors that I'm trying to imagine, you know, like right before I die,

00:28:16.180 which commodities are still going to be the ones that are most important.

00:28:20.220 And so I chose copper, which is one of the most important metals that we have in the periodic table.

00:28:27.620 It's antimicrobial.

00:28:28.980 It conducts energy.

00:28:30.980 It's just a fascinating metal.

00:28:33.800 There's no end to the mysteries of copper.

00:28:35.860 I chose silver, which is the most reflective of metals and is also an incredible conductor of energy and antimicrobial.

00:28:45.240 And I chose zinc, which has medicinal properties and is used in a variety of applications.

00:28:52.220 Right.

00:28:52.500 So the periodic table, just so that everyone is following this, is the layout of the structure of the elements of the cosmos.

00:29:00.280 That's right.

00:29:00.520 And so if you decompose material structures to their most fundamental elements above the, like, say, subatomic level,

00:29:10.360 then you end up with about 116 fundamental elements.

00:29:15.060 The top 15 or so mostly are man-made, short-lived.

00:29:18.960 That's right.

00:29:19.340 So there's a very finite set of elements, and all the elements have quite spectacularly different properties.

00:29:24.980 Right.

00:29:25.120 Intrinsic to their nature.

00:29:27.020 Right, right.

00:29:27.460 Which is very important, because there's really nothing else like that.

00:29:31.060 Everything else reduces back to these elements, these material constituents of reality, essentially.

00:29:36.160 They're like the alphabet of reality in some sense.

00:29:39.300 Yes, yes.

00:29:40.880 Except that human beings didn't invent them.

00:29:43.040 Yeah.

00:29:43.320 I used to say they're like Legos.

00:29:45.260 You know, they're pre-given Legos, and then you can rearrange them and do more than just rearrange them.

00:29:50.980 But essentially what you're doing is you're rearranging them.

00:29:53.100 And so it was, yes, silver, copper, zinc, iron ore, which was a lot more interesting back when I was doing it.

00:30:02.820 These days it's less interesting as we're not building as many things.

00:30:06.600 But obviously iron ore is an input for steel or any kind of metal production.

00:30:13.380 Why did you focus on metals particularly?

00:30:16.100 Well, actually, there was a flaw in my thinking that was only corrected in the last six years.

00:30:22.280 I had thought always in terms of longevity, stretching time.

00:30:27.340 You know, how can I buy as much time as possible?

00:30:30.440 And my problem with the soft commodities or livestock was that I was thinking that, you know, they diminish faster.

00:30:40.220 So you're looking for permanence.

00:30:41.760 That's right.

00:30:42.440 And you associated that with metals.

00:30:44.020 Absolutely, because, you know, if I have, you know, 100 tons of wheat, I have to store it somewhere.

00:30:49.840 And it's literally decaying as I'm storing it.

00:30:51.940 Rats eat it.

00:30:52.360 That's right.

00:30:52.920 And even oil, if I try to store it, you know, is evaporating at 2% or 3% a year.

00:30:56.980 So you have to store it in salt caverns and inject water, and then that costs loads of money.

00:31:01.640 But with metals, you know, you mine them once, especially the precious metal.

00:31:05.140 The precious metals are the most unique ones.

00:31:06.680 But you mine them once, and what's cool about owning the mines is they're in the ground, so they're not oxidizing yet.

00:31:14.160 You know, it's only when you get them out of the ground that they start to oxidize.

00:31:17.360 Right, so they don't decay more further than they have already.

00:31:20.620 That's right.

00:31:21.360 And so that was the general idea.

00:31:23.820 And so I did that for a few years, and I learned so much about geology and the natural world, and I was just shocked to see that there were these intrinsic relationships, not only in the natural attributes that each of these elements possessed, but in terms of the relationships of the natural attributes to the other elements.

00:31:49.080 So in other words, you know, there's an important metric called crustal abundance, and that's basically the average rate at which an element exists in the Earth's crust.

00:32:02.040 And it's obviously an imperfect standard of data, because you might go in your backyard and drill a hole, and you will not find that, you know, material content.

00:32:12.480 Right, right.

00:32:12.680 It's not uniformly distributed.

00:32:13.760 It's not uniformly.

00:32:14.620 However, when you're talking about ore bodies, something that is actually being mined for the sake of extracting the resource, that is generally the average.

00:32:24.660 And you can infer and measure something like comparative rarity as a consequence, even if it isn't homogeneously distributed.

00:32:32.040 So one of the features of the periodic table of the elements is that all the elements are not equally distributed.

00:32:36.820 That's right.

00:32:37.480 There's an intrinsic inequality in the building blocks.

00:32:40.520 That's right.

00:32:41.480 But actually, it turns out that they are all relatively equally distributed, you know, on a continent or nation basis, you know, almost at a country level.

00:32:52.060 So if the geographic territory is large enough.

00:32:54.580 Yeah, and this is important for later when we get into the notion of scarcity and, you know, people always have qualms with, you know, but isn't it fair?

00:33:02.400 It's not fair that one country has this.

00:33:04.080 It turns out that pretty much every country has what they need in terms of the important elements.

00:33:10.100 And if they don't, they have something else that they can exchange for the important elements.

00:33:14.800 But so I learned a lot about that world and was fascinated by it and spent quite a bit of time with geologists.

00:33:21.960 Yeah, well, you told me a funny story last night.

00:33:25.260 We were talking about a Nobel laureate in economics that you had talked with who was convinced that the value of money was not attached in any fundamental sense to the structures of the real world in the manner that you claim it is.

00:33:39.680 And you told me that he didn't know that there was genuine natural variation in crustal abundance of different metals.

00:33:46.700 That's right.

00:33:47.060 So this was a Nobel laureate who said, and it is recorded somewhere, that the reason that copper is valued at X and gold is valued at Y is just subjective.

00:33:59.660 You know, people have decided to value copper at this level and gold at that level.

00:34:03.980 And I responded by saying, but don't you think it's a bit mysterious that the price of copper reflects the same crustal abundance of copper?

00:34:11.540 In other words, copper is 5,000 times more abundant than gold in the Earth's crust.

00:34:17.060 And if you look at the price of copper per ton in the market, it's roughly 5,000 times.

00:34:21.820 Right, right, right, right.

00:34:22.960 Well, this is a key point.

00:34:23.760 Sorry, gold is 5,000 times more expensive than copper.

00:34:25.720 Right, well, this is a key point, right, because that was part of what clued you into the idea that value per se, including financial value, was not merely something that was subjectively determined.

00:34:37.040 That it also bore a relationship to something like abundance and ease of access.

00:34:41.440 Now, there's an interaction between the two, but the fact of that abundance, in your hypothesis, places an intrinsic constraint on the parameters within which pricing might vary and is a data point that should usefully be taken into account both practically and conceptually.

00:34:59.940 And it's important here because partly what we're trying to understand is what is the relationship between human systems of value, that would be pricing, and the actual natural world as such.

00:35:10.180 And that's like an investigation into the relationship between brute empirical reality and the domain of philosophical value, right?

00:35:18.100 So it's a crucial issue, and practically it might help you invest better, and then you'd know what to do with your money, but it's also crucial conceptually.

00:35:28.320 And so, okay, so now you also said to me at one point that there is a rough equivalence in the ratio of the value of metals to one another across time in relationship to their relative abundance.

00:35:41.920 And so with silver, you see the same thing with silver in relationship to gold that you see with copper in relationship to gold.

00:35:48.360 Silver's rarer than copper.

00:35:49.780 Yeah, we never wake up one morning and see that an asteroid really did hit, and these relationships were upended entirely.

00:35:58.600 We never really see that, you know, all of a sudden, you know, zinc becomes the rarest element, you know, or aluminum becomes the rarest element.

00:36:09.140 We go back in history, and what we see is that something like gold was always understood for its intrinsic natural attributes, but also as being extremely rare, and that there are certain things that are more abundant than gold, and yet closer to gold in rarity than they are to something like oxygen.

00:36:28.140 So I see that as a kind of natural order, a natural law.

00:36:33.040 Right, right, well, yeah.

00:36:33.760 It's a limit that's imposed on us.

00:36:34.940 You think that there's a natural reason why people, for example, gravitated towards gold and silver and bronze often, but that's copper, essentially, as hallmarks of monetary value, right?

00:36:46.060 That's right.

00:36:46.320 That that was an attempt, an attempt, what would you say, practical and conceptual to tie the system of abstract value to some underlying natural phenomena, to keep the value system pegged to the structure of the world.

00:37:02.060 I would say it a little different.

00:37:03.440 I would say that there was no notion of abstract value, that basically you would have these different commodities that were produced for their utility, for their usefulness.

00:37:15.660 And as they were being produced, rather than having a coincidence of wants or barter or some kind of inefficient system, people recognized that each one of these commodities were a common measure and a reward of the other ones.

00:37:31.040 In other words, I can trade you two bushels of corn for one gram of copper.

00:37:36.720 And that wasn't an abstraction.

00:37:38.660 That was an even trade of intrinsic value.

00:37:41.560 It's literally a balance scale that's weighing the weight of these two different commodities.

00:37:46.860 And then eventually what happens—

00:37:48.340 So that's not precisely only social contract dependent.

00:37:51.460 No, it's not.

00:37:52.360 This is basically just—I would say it's metabolization at some point.

00:37:57.480 It's you have some energy that I need, and I'm going to give you something that you need.

00:38:01.760 And we're basically helping each other.

00:38:03.620 We're nourishing each other's souls.

00:38:05.340 But the thing is that at some point, one of these things begins to be the de facto measure for all the other things.

00:38:15.640 And so that is what you see with metallic money, whether it's gold or silver or bronze or even iron in some civilizations.

00:38:23.400 But it's important to remember that every civilization that deserves the name civilization in the historical record would have had a metal as money and would have had a monetary unit which had a weight rather than some abstract nominal value like a dollar or five dollars.

00:38:39.780 It would have been something like a pound.

00:38:41.900 So, you know, a pound in this country, sterling means silver.

00:38:45.040 A pound is a weight of silver.

00:38:46.960 That's what the pound would have been.

00:38:48.240 And so I was figuring all of this out, and it actually led me to a real appreciation of the exemplary qualities of this one element, which was gold.

00:39:01.140 So when you were analyzing mines, how did you learn which mines to invest in?

00:39:06.520 And then let's go that concrete route first and then back to the abstract.

00:39:10.600 What did you learn about value investing in relationship to mines in particular?

00:39:15.120 And then how did that inform your decision to focus more particularly on gold?

00:39:20.500 Well, actually, I did something quite novel even in regards to that.

00:39:24.840 I figured that as long as the mine truly had the material wealth embodied in the mine, because it was drilled out and it was audited and it was basically tested through a public disclosure file that has to go through a securities commission or something like that.

00:39:42.260 But it was worth owning that mine, even if it wasn't necessarily clear how you would get that mine permitted.

00:39:50.080 And so I was buying mines that, you know, some people might say would have a difficult time of being permitted.

00:39:58.280 And I felt that over time the communities would work these things out as the value of the wealth.

00:40:04.300 Well, that's an intrinsic value perspective to begin with.

00:40:08.680 Yes.

00:40:08.980 Because your notion there is that because that has intrinsic value, the market, which would be the regulatory environment in some sense, is going to converge on appreciation of the value.

00:40:18.020 And you can see that now in the UK where you're burning coal again.

00:40:21.760 Exactly.

00:40:22.180 Right.

00:40:22.360 That would be a perfect example.

00:40:23.620 So someone like me, I never invested in coal, but someone like me might have purchased a coal mine six years ago for pittance, you know, because people told them this will never be permitted again.

00:40:35.200 Right.

00:40:35.600 But it's coal.

00:40:36.720 Yes, exactly.

00:40:37.180 And you can burn it.

00:40:38.180 Yeah.

00:40:38.500 And I would argue that with coal, you know, the argument isn't so clear because you don't necessarily need, you know, coal is a great source of energy, of course, in terms of its energy density.

00:40:47.840 And in terms of the UK having a lot of coal nearby.

00:40:52.180 Cheap, too.

00:40:52.660 Yeah, but with metals, it's easier to make that estimation, you know.

00:40:55.920 So I can just give you a very basic example.

00:40:58.320 If the world truly wants to electrify the global fleet of cars, we basically don't really have enough copper to do that based on what we know today, the reserves, the economic reserves.

00:41:11.080 So at the very least, we're going to be taking down a lot of mountains around the world if we want to get just the amount of copper that we're estimating, you know, to sell 100 million cars a year.

00:41:22.660 And the same is true of something like nickel, which is—

00:41:25.420 We can just solve that by forbidding people to have cars.

00:41:28.140 Well, that seems like what might happen.

00:41:31.220 But with nickel, it's even easier.

00:41:33.140 And with gold, it's the easiest.

00:41:35.740 Easiest in what way?

00:41:36.980 In terms of you're always at a shortage of gold.

00:41:39.280 It's the hardest thing to get out of the ground.

00:41:41.000 And it just keeps getting harder and harder and harder.

00:41:44.260 So there's this difficulty curve.

00:41:46.360 It's almost like—

00:41:47.360 Is it harder than uranium?

00:41:48.720 Is it harder than even the heavy?

00:41:49.940 Oh, yeah.

00:41:50.700 Uranium is quite abundant, actually.

00:41:52.440 The thing about uranium is it needs to be enriched into U208 or whatever U209.

00:41:58.080 And so that's the real cost in it.

00:42:00.600 It's not the—I mean, there's quite a bit of uranium around the world.

00:42:04.340 And its crustal abundance is, you know, it's not special at all.

00:42:10.160 So why is gold particularly rare?

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00:43:19.680 That's a why question.

00:43:24.900 We will never know.

00:43:26.280 I mean, there are theoretical physicists that postulate about neutron stars colliding and things like that,

00:43:33.560 but I don't think we know the answers to these questions.

00:43:36.320 I think it's a mystery why it is that we have this pre-given set of Legos.

00:43:40.520 And they seem to be in use since time immemorial.

00:43:46.520 And in my book, there's appendices where I try and identify sort of the beginning of the use.

00:43:52.040 You know, it's kind of like when someone asks you, when was the wheel invented?

00:43:54.780 When was the plow invented?

00:43:55.920 When was writing invented?

00:43:57.160 I don't think we know because in the extant texts that we have, the oldest,

00:44:01.140 we already see a society, you know, pregnant with this activity.

00:44:04.760 So we see in museums and in archaeological discoveries just not only this knowledge of the elements, the metals,

00:44:14.280 but we see the techne, the ability to craft wonderful objects from these elements that have kind of moral significance.

00:44:21.340 And so I think when you take a step back, which was what was happening to me in my 20s,

00:44:25.740 and you look at the natural world with a sense of wonder,

00:44:29.600 in terms of my biographical arc, I was starting to come back to the natural world.

00:44:34.920 You know, I was starting to see that, you know, the theoretical physics and those explanations of reality

00:44:40.560 weren't going to satisfy my desire about the truth.

00:44:44.000 But the natural world was.

00:44:46.680 There was still that sense of wonder.

00:44:48.740 Just like that question you asked that I can't answer.

00:44:50.680 I don't know why gold is the way it is.

00:44:52.700 It's just a pre-given reality.

00:44:55.360 And so I, you know, became quite fascinated with gold and also invested in gold mines.

00:45:01.360 And at this point, I moved to Canada, to Toronto, where you're from, because that was kind of the mecca of mine finance.

00:45:08.620 You know, Toronto is the world's most important financial market for mining.

00:45:13.080 And unlike in the United States, where the great majority of companies, at least before the last crash, are service industry companies,

00:45:22.760 in Canada, the great majority are real mining companies.

00:45:25.720 And all the best engineers and geologists and banks that know how to deal with these companies are based in Canada.

00:45:32.200 So I learned a lot about that.

00:45:33.800 I invested in it.

00:45:34.640 And at some point, I made the mistake of trying to mine the gold, because I felt like some of the mines were ready to go,

00:45:42.760 or I invested in some companies that had mines that they had developed and were ready to mine.

00:45:47.180 And that was when I realized how hard it was to actually make a profit mining.

00:45:51.880 And I yearned for the days of value investing that my mentors used to tell me about.

00:45:57.320 And it hit me one day, just seeing these continued losses and unexpected, you know, vagaries of nature.

00:46:06.520 All of a sudden, something just goes terribly wrong that you weren't predicting.

00:46:10.060 All of a sudden, there's a flood.

00:46:11.480 Right, right.

00:46:12.400 And I realized, you know, you're actually better off just buying the gold and then holding on to it or using it than trying to get it out of the ground.

00:46:23.620 It's cheaper.

00:46:24.480 If you consider all of the costs, it's probably cheaper to do it that way.

00:46:29.860 And this was also interlaced with me shifting my intellectual area of focus from, you know, finance to economics and monetary history.

00:46:41.380 And I realized that a lot of the questions I had about the inner workings of the economy centered on the question of what is money?

00:46:48.660 How do we cooperate?

00:46:50.320 What makes that cooperation sustainable?

00:46:52.060 And, you know, no surprise here in terms of the arc, it became clear to me that the money had to be rooted in nature.

00:46:59.780 And it had to be one of these physical things.

00:47:01.160 Right.

00:47:01.520 Now, that puts you at odds with most modern economists.

00:47:04.600 And value investors.

00:47:05.900 And value.

00:47:06.400 Okay.

00:47:06.640 So why modern economists?

00:47:08.280 And then why value investors as well?

00:47:10.800 Well, basically, the whole, you know, the word economics, economica or economia, you know, in Aristotle's politics, it means household management.

00:47:20.920 So it was something that was rooted in the family, in the land, in the house.

00:47:25.160 And over the course of, you know, 2,000 years, around the 19th century, the whole study of economics becomes denaturalized, you know, with people like Mill saying that, you know, the whole purpose of our activity is to conquer nature.

00:47:41.920 And figures such as Stanley Jeevons, who begin to postulate that, you know, every exchange of goods and services is just a ratio of two numbers.

00:47:50.380 There's no limit to human desires.

00:47:53.460 And so what happens in economics is a kind of mathematization of economics.

00:47:58.060 You know, it becomes the study of the abstract over the study of the real.

00:48:02.240 And economics, you know, for most of its history was a branch of natural philosophy.

00:48:06.620 But now it kind of becomes a social science or, you know, a science, a natural science.

00:48:11.580 It's like a postmodern revolution on the mathematical side.

00:48:15.000 Yeah, exactly.

00:48:15.660 It's exactly that.

00:48:17.020 And, you know...

00:48:18.060 Decoupling, because, I mean, the whole postmodern revolution, in some sense, decoupled meaning again in the same way from the world, right?

00:48:25.220 Meaning is just an arbitrary social construction, just like identity.

00:48:28.380 It's only encoded in the relationship between concepts.

00:48:31.680 That's right.

00:48:32.040 It's exactly the same idea operating in a different sphere.

00:48:36.320 Well, perhaps it was the economic turn that also influenced a lot of that.

00:48:40.660 And I think when I look at Austrian economics, for example, which is very popular, and it's, you know, loaded with this language of subjectivism from that philosophical turn that takes place,

00:48:51.100 I definitely think the seeds were planted with the denaturalization of the economy.

00:48:54.820 But the economy was always viewed.

00:48:56.580 I mean, there's nothing new in my book.

00:48:58.360 There's some contributions and perhaps a reminder.

00:49:01.960 And some rediscovery.

00:49:02.800 Like, there's some, perhaps some minor rediscoveries, but really it's a reminder of what we always thought about the economy.

00:49:09.840 And what we always thought was that if you were even going to use the word wealth, you were referring to something physical and something material.

00:49:16.500 And the reason for that is that if you observe reality objectively, the only place where you see growth is in that physical world of, you know, either biology through reproduction or when you plant one seed in the spring and you reap two in the fall.

00:49:33.800 Well, you're an interesting thinker in that regard because, I mean, you have a very materialist view of value, but you also have a philosophy that extends into a theology.

00:49:47.220 And you also believe that there is such a thing as spiritual wealth, right?

00:49:50.580 And I suppose in some sense the idea of spiritual wealth is also an abstraction of the idea of wealth.

00:49:56.520 And how do you conceptualize the relationship?

00:49:59.700 We haven't talked about this at all before.

00:50:01.740 How do you conceptualize the relationship between spiritual wealth that's abstracted, say, given that it's spiritual, and the material wealth that has to do with the actual tangible, like, grip on physical substances?

00:50:15.260 Well, if you believe in God, then you believe that the world was created.

00:50:20.600 And if the world is created, then, you know, ipso facto, the natural order itself is imbued with the order in the natural order, the regularity and the vagaries.

00:50:31.940 They're imbued with a sense of morality.

00:50:34.080 So you can't separate in the natural law itself encompasses both the moral realities, but also the material realities.

00:50:41.840 Okay, so for those who are listening who might not—

00:50:43.880 Sorry, but what that means is that the material world is a lot more spiritual than we might conceive of.

00:50:48.880 Well, one of the ways you can think about that, practically, because it sounds like a strange abstraction, is that if you and I decide that we're going to do a joint venture in relationship to mining,

00:50:59.560 and we don't treat each other fairly and honestly, the probability that our mining endeavor is going to be successful is pretty much zero.

00:51:06.720 Because we're going to run into so many entanglements over time that it's going to make the practical operations impossible.

00:51:13.000 And so you might say that in order to come to some concordant grip with the vagaries of the natural world, there's an ethic you have to manifest.

00:51:21.740 And that seems to be part and parcel of your sense, too, that to operate morally also means to align yourself with the proper rhythms of nature,

00:51:30.720 and to pay attention to the proper ratios of scarcity, and to take into account the limits that the natural world—

00:51:37.720 They're not so much limits.

00:51:39.220 There are principles of the natural world that you have to abide by in order to play a productive game.

00:51:44.020 And then you'd say there's a concordance between that bottom-up morality, which is practical, and the top-down morality, which is more spiritual and abstract.

00:51:51.300 The term in the 18th century was used by French economists, a term that now has come to dominate the libertarian economic thinkers of the day,

00:52:04.200 was laissez faire, laissez passer, which meant let nature take its course.

00:52:09.580 And so you don't want to do anything that prevents nature or inhibits nature.

00:52:15.500 You don't want to dam up the river.

00:52:17.000 You don't want to manipulate the material reality in this alchemical or gnostic way.

00:52:22.660 You want to let nature take its course, just like you want—

00:52:25.520 So there's a harmony there.

00:52:27.120 That's right.

00:52:28.000 And so you see nature as a gift.

00:52:30.220 You see the wealth that arises from nature as a gift.

00:52:33.060 And you see any kind of growth as being correlated to the material realities.

00:52:39.400 And the first thing that arises from that kind of a worldview, which again was first nature,

00:52:46.120 it was a first principle of economics until this denaturalization, is the importance of the farmer.

00:52:53.740 You know, a natural economy is predicated on the activity of the farmer.

00:52:59.740 Well, then that would be another potential reason why this denaturalization occurred.

00:53:05.640 I mean, how in 1880, what, 90% of people were basically employed on the farm, and now it's like 3%.

00:53:13.600 Yeah.

00:53:14.020 And so you could imagine that there'd be running away from the boundaries of nature that parallels urbanization

00:53:21.960 because it's an abstraction process in some real sense.

00:53:25.760 Absolutely.

00:53:26.120 But, you know, the importance of the farmer is key.

00:53:31.220 And remember when I said earlier, when you asked, why didn't you invest in some of the soft commodities?

00:53:36.440 I had missed this in my 20s.

00:53:39.420 I only rediscovered this in the last few years where I myself returned to my roots and began farming again.

00:53:45.940 See, what I missed was that the land that the farmer is tending to, coupled with the farmer's wisdom,

00:53:57.760 the farmer's toil, the farmer's ability to respond to failure and change to the caprices of nature,

00:54:05.940 that that coupled with the land produces a kind of yield, a kind of return, which over time does multiply.

00:54:16.940 So if you have a flock of sheep and you have 100 sheep, well, you know, you're usually going to get two and a half sheep per annum for each pregnant sheep that you have.

00:54:28.400 And so you will produce more than you had at the beginning of the year.

00:54:33.920 And it just becomes a function of how many sheep you can fit per acre of land to feed them.

00:54:39.200 But the excess sheep that you're producing, which you sell, allows you to purchase more land,

00:54:45.760 which allows you to then expand your farming activity.

00:54:48.260 And so livestock, it literally means, you know, a capital stock of biological organisms that are reproducing.

00:54:59.540 And, you know, it's not exactly the same with crops.

00:55:02.900 But what is true of crops is that the land that you have and the work that you're doing

00:55:08.340 is going to guarantee you a kind of material abundance from which you can at least sustain yourself.

00:55:17.020 But in most likely cases, you'll have a surplus, which you can then trade on for the things that you don't produce.

00:55:24.600 And again, there's nothing new in terms of my ideas in the book here.

00:55:29.480 Up until Jeevon's, the economy was always viewed to be broken into two classes,

00:55:36.180 the productive class and the unproductive class.

00:55:39.440 The unproductive class were generally called the artisans.

00:55:42.220 You know, they even had a nice name.

00:55:43.280 It was never an issue of, like, mutual hostility or elite versus, you know, inferior aristocracy.

00:55:49.680 It was just about there are people that work with nature to produce these physical things,

00:55:55.460 which then get traded on to this other group of people that use those things.

00:56:00.860 They improve them.

00:56:02.480 They change them.

00:56:03.780 They consume them.

00:56:04.940 But at the end of the year, those productive people have to go back and negotiate with nature.

00:56:10.740 Whilst the other group of people has that option.

00:56:15.060 They can either revert back to that activity or they can wait and hope that the service they're going to render,

00:56:21.600 and this includes manufacturing, you know, anything that requires the input from the land would be in the second category.

00:56:29.520 And so in my book, I call it the real economy versus the service economy.

00:56:33.940 So, okay, so the real economy, the more you're in the real economy, the more you're dealing directly with non-human nature.

00:56:41.100 That's right.

00:56:41.620 Right?

00:56:41.760 And so the less you're dealing with non-human nature.

00:56:45.020 So the more your financial transactions are only dependent on social relations, the more you're in the secondary economy, in the service economy.

00:56:52.320 And so part of your hypothesis, in some sense, is even though there is a disconnect between the real economy and the service economy that grows with time,

00:57:03.740 as more and more people are in the service economy, if the service economy doesn't bear the mark of the relationship with the underlying natural order,

00:57:12.760 it's going to evolve in ways that are eventually unsustainable and counterproductive.

00:57:19.080 Well, then it's just parasitic.

00:57:20.900 So it's demanding, it's dominating a class, a group of people.

00:57:26.160 Right.

00:57:26.440 That's providing.

00:57:26.940 It might also be exhausting them.

00:57:28.580 Well, and also exhausting them.

00:57:29.300 And exhausting the natural.

00:57:30.460 Well, because it's not heating the signals as well.

00:57:32.800 Yeah.

00:57:33.000 But that's a whole other thing.

00:57:34.760 I mean, I deal with that briefly in the book.

00:57:36.620 You know, for me, what was important was just to see that the activity, every exchange of goods and services,

00:57:43.840 whether it's taking place at the real economy or at the service economy,

00:57:47.780 ultimately needed to be measured in the same way that the farmer's activity is measured,

00:57:53.960 that the miner's activity is measured,

00:57:55.540 that the coal miner or oil rig worker's activity is measured.

00:58:01.620 And that that measure is not a human construct, that it's part of that natural order,

00:58:07.560 that the measure itself—

00:58:08.520 And you thought that was embodied or still think that that was embodied in some real sense in metal

00:58:13.020 and best embodied in gold.

00:58:15.120 It's actually embodied in anything that's natural.

00:58:17.560 Right, sorry, any commodity.

00:58:18.840 Yeah, it can even theoretically be embodied in a rock.

00:58:22.440 But the thing that it's going to be embodied best in is going to have two or three qualities.

00:58:31.940 First, it has to outlast time.

00:58:35.060 It has to be something that retains its material existence without change over time.

00:58:40.880 Right.

00:58:41.020 That makes it a reliable storehouse of value.

00:58:43.820 Or a reliable measure.

00:58:45.380 Or a reliable measure.

00:58:46.100 It's an inch that never changes.

00:58:47.680 It's an inch that's always an inch.

00:58:49.700 So a gram of gold will always—

00:58:51.400 It's a constant.

00:58:52.220 It's a constant, right?

00:58:53.800 The other thing that it has to have is it has to have a sense of difficulty.

00:58:58.840 And if possible—

00:58:59.740 That's like proof of work in Bitcoin.

00:59:01.160 Well, we all know that, you know, Satoshi was mirroring, you know, the process of gold mining.

00:59:07.380 Of course, with Bitcoin, there's forgeably scarce proof of work bits.

00:59:11.780 With mining, you have the physical gold that you get out of the ground, which you can then pass on to anyone.

00:59:18.900 So that difficulty, though, is not just how rare something is.

00:59:24.240 It also has to do with what are the attributes of the thing.

00:59:28.040 And so if you lay them out, you'll find that because these commodities are a common measure and a reward for each other,

00:59:37.540 that you can have one commodity act as a proxy for another.

00:59:45.420 Okay?

00:59:46.020 Now—

00:59:46.240 Sort of like the idea of an essence of commodity itself.

00:59:50.980 That's right.

00:59:51.380 So you'd say that gold is the essence of the idea of commodity itself.

00:59:55.580 That's—yes, exactly.

00:59:57.060 And it doesn't mean that gold is more important.

01:00:02.200 You know, obviously, if you're stuck in a room—

01:00:04.220 It's just a better measure.

01:00:05.540 Yes.

01:00:05.900 So if you're stuck in a room and you've got a glass of water—this is the famous diamond water paradox, but I'll use gold—

01:00:11.380 and you've got loads of gold and, you know, you're locked in the room, you know, you're obviously going to choose the water over the gold.

01:00:18.040 But that's not how a society that advances from subsistence, where it's just producing the things it needs,

01:00:25.760 which it then consumes, to post-subsistence, where there's a market economy that is developed,

01:00:31.180 where there's different people engaging in different specialized skills,

01:00:34.660 and where essentially the goods and services are exchanged.

01:00:38.240 In that post-subsistence society, at that point, everything is exchanged for everything else.

01:00:43.100 Right, right.

01:00:43.240 There's very few people—

01:00:44.320 So you need an emblem of that exchangeability.

01:00:46.500 Yeah, and the point is that in that society, people still have the right and the option to revert back to subsistence.

01:00:53.900 This is another thing that no modern economist really understands,

01:00:57.500 is there's always the option to pull out of the economy and go back to the land.

01:01:02.000 You know, it happens.

01:01:03.480 On YouTube, you can see it's quite trendy with—

01:01:06.520 It's a lot harder than people think, generally, but—

01:01:08.400 It's a lot harder, but it's more rewarding, you know, and I think a lot of people talk about that.

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01:02:28.920 You know, that infused morality that comes with that process.

01:02:35.080 But the point is that, you know, you may hate gold because it symbolizes something,

01:02:40.060 but you can't dispute the natural properties of gold.

01:02:43.320 And so, you know, one of the things that really troubles me is

01:02:45.260 when I see people automatically label gold as some kind of a right-wing conservative thing.

01:02:52.800 And I think that's just so ridiculous.

01:02:55.040 I mean, it's an element on the periodic table.

01:02:57.620 And it's part of nature itself.

01:03:00.780 You know, it's a beautiful element that's used in art,

01:03:03.820 and it's used in your cell phone,

01:03:05.240 and it's used in, you know, so many applications,

01:03:07.960 whether you're going out to space and there's only one thing.

01:03:10.340 Right, well, it doesn't corrode, for example.

01:03:11.680 Yeah, and so you can't say that gold or any commodity belongs to a class or a group of ideas.

01:03:18.380 What you can say objectively, and if you speak to any chemist or geologist,

01:03:24.600 they'll all tell you this, that there are just exemplary properties to this element.

01:03:28.740 And so as a result, the property of being rare and outlasting everything else,

01:03:34.460 you know, the tomatoes will have to be reproduced.

01:03:36.300 The sheep are going to be eaten and reproduced.

01:03:38.580 The oil is going to be consumed for movement.

01:03:40.680 We have to produce more oil.

01:03:42.180 The gold is produced once, and then it begins to serve as a measure and a reward for everything else.

01:03:48.040 And how universal was that among archaic societies, that gold was a standard of value?

01:03:52.600 It's basically every single society.

01:03:55.160 You know, you go to Mesopotamia and you look at Hammurabi.

01:03:58.480 You know, it's primarily silver in Hammurabi.

01:04:00.220 You look at, you know, all of the Hebrew Bible.

01:04:05.360 You know, I have an appendix where I go through the Hebrew Bible and just the amount of passages where, you know,

01:04:11.480 the Israelites are required by God in law to have, you know, honest balance, honest scales, honest measures.

01:04:20.460 You know, obviously King Solomon famously says, all things were made by God according to number, measure, and weight.

01:04:28.940 Weight is very important here.

01:04:30.760 Weight is not like number.

01:04:33.100 There's a distinction in kind between what weight is and what a number is.

01:04:38.540 And so things definitely have to be weighed.

01:04:41.760 And, you know, there's many examples.

01:04:44.200 And weight always means comparison of one thing to another.

01:04:46.540 Well, I actually think weight, yeah.

01:04:47.580 And I think weight is just almost saying like justice.

01:04:50.520 You know, it's like what is the justice?

01:04:52.180 Well, we use the scales as a measure of justice.

01:04:54.720 Yeah, yeah.

01:04:55.420 So, you know, there's examples of Abraham buying a field and literally, you know, using the silver earrings of Sarah to pay.

01:05:03.340 Putting them on the balance scales, weighing them.

01:05:05.420 So there's another misconception in economics and economic history and monetary history, which is, you know, parroted all the time,

01:05:12.020 is that somehow gold coins were just used from the time of King Koisis in Lydia in, you know, 700, in the year 700.

01:05:23.280 And that's not true.

01:05:24.420 That's just when a king decided to basically get into the business of, you know, minting the money.

01:05:30.860 But before that, people would just actually weigh the metal.

01:05:34.380 And they would just go somewhere and say, this is how much metal I have.

01:05:38.260 I'm weighing it.

01:05:39.100 And in many cases, they might just not be weighing – they may not just be weighing metal.

01:05:42.940 They're weighing, you know, other commodities that they have.

01:05:45.720 But the idea that you would give someone something, some kind of product of your toil or render a service and not get anything in return.

01:05:54.820 You know, this is a famous idea of David Graeber, the late anthropologist who I deal with in the book.

01:06:03.660 I just don't think that's true.

01:06:05.660 I think that that might be true in a subsistence society where the bonds of kinship and just a sense of altruism to your neighbor, you know, are kind of familial bonds.

01:06:16.680 I think that –

01:06:17.680 Yeah, but you forget.

01:06:18.560 Like, even then.

01:06:19.340 Like, I've noticed in contracts I've made with people, we'll be discussing extremely weighty financial matters.

01:06:25.880 And you think, well, this will burn it in on your memory.

01:06:28.100 And then six months later, a dispute comes up.

01:06:30.280 And you think, well, we all knew what we were talking about six months ago.

01:06:33.240 But you forget.

01:06:34.140 Your memory itself decays.

01:06:35.780 Exactly.

01:06:36.280 You need a marker that's independent of the transitoriness.

01:06:39.960 Even of memory when it's motivated by goodwill.

01:06:43.020 That's right.

01:06:43.420 And that's, I think, what's really interesting about jewelry.

01:06:45.960 And, you know, I also have a jewelry brand which produces 24-karat gold jewelry, and we sell it by weight.

01:06:51.020 You know, not a coincidence.

01:06:52.040 And it's called menet, which is the ancient Aramaic word for a weight of gold or silver.

01:06:57.680 But one of the things that I learned in starting the jewelry brand was just that the role of jewelry itself and the choice of precious elements for jewelry expresses something that essentially what you just said,

01:07:11.380 where you're trying to wrap a moment in time or a memory.

01:07:15.380 In this case, you know, I am betrothed.

01:07:17.840 You know, I'm marrying you.

01:07:19.300 It has to not decay.

01:07:20.800 It has to be portable.

01:07:21.980 It has to be hideable.

01:07:23.040 That's right.

01:07:23.560 It has to be memorable.

01:07:24.680 That's right.

01:07:24.940 It has to attract attention.

01:07:26.300 Yes.

01:07:26.660 The glitteriness would be part of that.

01:07:27.920 Yes.

01:07:28.300 It's almost like, you know, its purpose is to do this.

01:07:31.760 Right.

01:07:32.000 And it's a token.

01:07:34.100 You know, that's why we call it a token.

01:07:35.460 So we're wrapping some kind of event that's fleeting because time is always moving us forward.

01:07:42.220 You know, it's interesting.

01:07:43.000 In the case of gold, you have this perfection of the element, which is its incommensurability with other elements.

01:07:48.580 So the alchemists regard gold as noble morally because it didn't mate promiscuously with other metals, right?

01:07:56.000 And you can deride that as a kind of primordial superstition, but it's not because part of the reason that gold was admirable was because its lack of proclivity to alloy or to erode makes it permanent.

01:08:10.440 And then in the case of precious stones, there's a perfection to them, which is the absolute regulation of their crystalline structure.

01:08:22.080 And it's the fact of that regularity that allows them to reflect light.

01:08:27.280 And that idea that something precious reflects light has a spiritual element because you say, well, that's what it means to be illuminated is so because you reflect light under those circumstances.

01:08:36.400 So there's this weird mythological parallel between the atomic structure, let's say, of both gold and of precious jewels that isn't just arbitrary, right?

01:08:51.460 It's got this, it's got a metaphorical reality that's overlaid on top of its physical reality.

01:08:57.220 It's almost like a semiotic claim here.

01:08:59.160 Yeah, yeah.

01:08:59.820 But, you know, it's important just to stress, though, that the gems are much different from elements because they're compounds of elements, lumen oxides and things like that.

01:09:08.540 And so they're actually not as rare as people think either.

01:09:11.200 Diamonds are not that rare.

01:09:12.560 And because they're basically a crystal of carbon, you know, you can also produce them by compressing carbon.

01:09:18.660 But it is interesting to note that, you know, Isaac Newton was obsessed with alchemy and tried for, I think, almost a decade to transmute other elements into gold.

01:09:28.820 And it was when he finally recognized that this wasn't going to be possible that he was made the master of the mint of the Bank of England in 1694.

01:09:43.040 And one of his first acts was establishing a gold standard.

01:09:48.940 And so it's almost like he tried to hack gold for so many years.

01:09:52.680 And then failing to manage it.

01:09:53.460 And then gave up and recognized, you know, this is how I'm going to create monetary order out of the chaos of an economy that doesn't have one.

01:10:00.940 So he became convinced of the immutability of gold.

01:10:03.720 And that made him a good candidate for someone who was establishing the foundations or in charge of, what would you say, guarding the foundations of the monetary system itself.

01:10:14.020 Yeah, there's a curious passage in the optics.

01:10:16.340 I don't think I can recall it because I read it many years ago.

01:10:18.460 But it's something like, in the beginning, it's clear that in the beginning, God formed all matter in such a way where it was truly indestructible.

01:10:25.640 And then he says something about gold shortly thereafter.

01:10:28.060 But, yeah, no, I think that that—and remember, like, Newton is someone that appreciated the laws of nature, helped advance humanity's knowledge of those laws in ways that are just unfathomable today.

01:10:39.500 But he recognized that this was an element that was exemplary and that money needed to be something that was physical, rooted in nature.

01:10:46.840 So prior to this conversation, we've talked about the advantages and disadvantages of decoupling the monetary system from this underlying—the underlying principles of or constraints of reality.

01:10:57.220 And people who are, like, late followers of Keynes have made the proposition, if I have it correct, that one of the advantages to bringing the monetary system under only human control is that you can inflate or deflate the money supply to smooth out business cycles.

01:11:14.920 And that would be the oscillation between bust and boom that can otherwise be somewhat destabilizing and upsetting.

01:11:19.720 Now, there's plenty of controversy about whether it's even possible to de-oscillate the business cycle.

01:11:25.260 It's not obvious to me that it is, but also there are the—so the advantage is a little bit of extension of political and voluntary control.

01:11:34.880 But the disadvantage is—or one of the disadvantages is the production of devaluation of the currency, inflation, essentially.

01:11:43.560 And so let's talk about that a little bit, and then let's turn specifically to the order of the topics in the book.

01:11:49.720 Sure. Well, let's look at a few examples.

01:11:53.680 In the natural world, you have cycles of generation and degeneration.

01:11:59.740 So that means that production has to come before consumption.

01:12:04.260 In an inverted economy, we see that consumption is brought forward before consumption.

01:12:10.060 That's debt?

01:12:11.020 No, just in the sense that we're trying to stimulate the economy as though if we stimulate consumption, demand, we will somehow produce more.

01:12:20.980 But in the natural world, you first have to produce so that you have the privilege to consume.

01:12:27.000 You know, the farmer has to produce his crop first.

01:12:29.260 In the natural economy, we see that these cycles also breed growth and decay.

01:12:39.420 So we don't see anything like infinite growth in the natural economy.

01:12:43.180 Whereas in the inverted economy, we look at these abstract metrics like GDP, nominal growth,

01:12:49.460 and we become obsessed with this idea that we're not only temporally exceptional,

01:12:53.420 but we're constantly just, you know, piercing through reality itself and growing and growing and growing.

01:12:59.260 In the natural economy, in the natural world, frugality and savings is a function of your cooperation with nature.

01:13:06.160 You absolutely have to produce more than you consume.

01:13:09.040 And you have to reserve a surplus of seed for the following year so that you can, you know, sow the seeds and reap them again.

01:13:15.700 It's this cycle where you first have to sow, then you reap.

01:13:19.380 In the inverted economy, we see that, you know, people are incentivized to consume first.

01:13:25.020 Again, just like in the previous example, but not necessarily save, you know, not really look out for the future,

01:13:31.140 to do as much as they can to increase the velocity of their activity as much as they can and sort of pursue this limitless growth.

01:13:39.240 In the natural economy, we see that people have a respect for the land and that they basically want to work in the land

01:13:47.180 and follow in the activity of their ancestors because we see that, you know, to have an economy in the first place,

01:13:53.800 we have to produce these material things.

01:13:56.200 In an inverted economy, you see everyone being told that they have to go to university

01:14:00.140 or become, you know, in service of the power structure.

01:14:03.100 You know, it's idealized to work at Google.

01:14:05.740 The farmer's daughter is told that she should go to university.

01:14:08.840 She shouldn't stay and work the land and produce things.

01:14:11.360 But how can that be true?

01:14:12.420 If everyone worked at Google, we wouldn't have the things that we need to produce.

01:14:15.640 So there's also like this sense of prestige that's lost in the inverted economy.

01:14:20.440 And then there's also this feature of the natural economy where people have to cooperate in a decentralized way.

01:14:26.140 You know, if you just look at a community and the plots of land that surround it,

01:14:29.160 different farmers doing different tasks and cooperating,

01:14:31.760 and then you have a blacksmith and a metalsmith and a, you know, barber and a baker.

01:14:35.500 And in the inverted economy, we see prosperity as coming centrally,

01:14:40.720 from a centrally controlled spigot, you know, top down.

01:14:43.460 And so it comes from the center to the periphery instead of from the periphery and building up into a center.

01:14:51.720 And so, and then when you get into something like the rate of interest, you know,

01:14:54.980 in a natural economy, your rate of interest, if you had one,

01:14:58.760 if that was how the society wants to organize itself,

01:15:01.360 it's not the only way through lending.

01:15:03.780 But if it does, it would be a function of the material prosperity, you know,

01:15:08.260 the harvest that season, the amount of capital you produced from the earth.

01:15:13.200 And in the inverted economy, you know,

01:15:15.880 a bunch of people sit in a room and decide arbitrarily what the rate of interest should be.

01:15:20.800 And as we see, they can be coerced by political interests, you know,

01:15:26.220 to bail out political failures or folly.

01:15:28.860 And so just, you know, take another...

01:15:30.740 So you're saying in some part that as you abstract away from the natural order,

01:15:35.220 you introduce the possibility, an increased possibility of merely human manipulation

01:15:40.460 for purposes that have nothing to do with the maintenance and stabilization of the productive natural order.

01:15:46.440 So you're devolving away from the natural ethic that's imposed on you by the principles and constraints.

01:15:52.920 Now, how do you distinguish that from just a romanticization of the state of nature, you know?

01:15:58.520 Because there's echoes of that in some sense in what you're saying.

01:16:02.580 Well, I'll give you an example.

01:16:03.840 So let's look at a live example.

01:16:06.440 We see that in Europe there's a war.

01:16:09.480 And we see that politicians are saying that, you know,

01:16:12.920 the issue with the war, economically speaking,

01:16:16.700 is it's creating an energy shortage, a shortage of energy.

01:16:20.520 And so our job as politicians is to solve this problem

01:16:24.060 so that we can steer the economy back to the track that it was before.

01:16:28.520 And so my question would be, what exactly is that track?

01:16:32.380 Like, were we on the right track before?

01:16:34.820 In what data set were we on the right track?

01:16:37.340 In the fact that over the last 30 years, we just see, you know, rich people getting richer,

01:16:42.540 the fact that it's harder to buy a house, harder to pay for, you know, education, for health care,

01:16:46.900 inflation run amok, the quality of our products diminishing, the craftsmanship.

01:16:52.640 Obviously, within the technology bubble, we might argue that we're seeing some phenomenal things.

01:16:58.360 And that may be true.

01:16:59.400 You know, it may be true that materially, as regards to material technological peripherals,

01:17:06.340 things are incredible.

01:17:07.640 But in almost everything else, you know, the quality of your clothes

01:17:10.720 and the quality of your, you know, actual artifacts that are made by hand, they're terrible.

01:17:16.560 And so I don't think that we have observed, you know, this system working in the sense

01:17:24.360 of producing material abundance or prosperity.

01:17:27.560 I've said this before, but the whole notion of prosperity has become divorced from the tangible

01:17:34.680 side of it, you know, which is basically food on the table, a warm place to live, you know,

01:17:39.920 knowing that if I work hard, my children will have an opportunity to do better than me.

01:17:44.240 And I think-

01:17:44.860 Well, but more people around the world seem to be experiencing that proportionally,

01:17:49.160 say, than 50 years ago.

01:17:51.160 Yes.

01:17:51.360 And so that's sort of what I meant by the romanticization.

01:17:54.140 I mean-

01:17:54.500 Oh, you think more people are doing better today than 50 years ago?

01:17:57.400 Well, proportionally-

01:17:58.200 I don't think that's true.

01:17:59.440 Yeah.

01:17:59.860 I mean, maybe in the developing nations, but-

01:18:01.520 No, that's what I meant.

01:18:02.400 I meant in the developing nations.

01:18:03.620 Yeah, but they're doing that because their economies are more oriented towards the real.

01:18:07.880 So they're the ones producing all the things that we in the West-

01:18:10.620 So you think we've hit a kind of asymptote in some fundamental sense in the developed

01:18:14.480 countries that's reflected in such things as the ever-escalating price of housing for

01:18:18.940 young people?

01:18:19.780 Yeah.

01:18:20.120 And just, you know, it also expresses itself in society and just, you know, the decadence

01:18:25.320 of the Western society and the individualism and selfishness and the subjectivity that's

01:18:30.440 creeped into our objective disciplines in school, in academia, in our culture.

01:18:35.380 And you also think that's a consequence of being decoupled in some sense from the natural

01:18:39.120 order?

01:18:39.440 Absolutely.

01:18:40.460 I think that's anything that's contrary to the natural order of things is going to

01:18:45.760 find, you know, itself at the center of our culture.

01:18:48.960 Well, it's an interesting philosophical claim because you could imagine the Western culture

01:18:55.120 is really an intermixture of two ideas of logos, right?

01:19:00.300 So there was an objective logos idea that was primarily Greek, which was the idea that in

01:19:05.760 the natural order, there's an implicate order of things and that there's a moral structure

01:19:11.700 to that that's implicit in the world as such, right?

01:19:15.320 And then on the more Judeo-Christian side, the idea of order was exemplified more particularly

01:19:22.280 on the spiritual and personality side.

01:19:25.760 And then the West, in some sense, is the laying of the personal logos on top of the objective

01:19:32.660 logos and the proposition that there's an isomorphism between the two.

01:19:36.580 And your argument seems to be to some degree.

01:19:38.500 So the Nietzschean argument is that we've dispensed with God and are floundering about in nihilism

01:19:43.860 or ideological possession as a consequence.

01:19:46.120 But your argument is, well, we've done the same thing from the bottom up.

01:19:49.620 We've divorced ourself from the implicate order of the actual world.

01:19:53.020 And that's also destabilizing us while morally and practically.

01:19:56.560 Is that a reasonable?

01:19:58.680 Absolutely.

01:19:59.440 I think that, you know, I don't make arguments to that extent in the book.

01:20:03.180 I give hints at it.

01:20:04.340 And I actually have a footnote where I say I think this would be profitable for other people

01:20:07.780 to do.

01:20:09.180 But I certainly think that the relationship between that natural standard of measure and

01:20:14.920 reward, which the real economy is subject to, and the rest of society having that ability

01:20:21.000 to temporarily forget about that standard, decouple from that standard, it's a fact of nature.

01:20:25.200 So at some point, the natural order exerts its force.

01:20:27.420 Well, you know, I've often liked, I like dealing with real scientists.

01:20:31.060 I like dealing with engineers.

01:20:32.420 I like dealing with craftsmen and high-quality workmen.

01:20:36.080 And I think the reason for that is that they're always testing their abstractions against something

01:20:40.920 that isn't merely arbitrarily human.

01:20:43.540 So they pop themselves out of the postmodern bubble.

01:20:45.860 Yes.

01:20:46.120 And their orientation in the world isn't a mere consequence of their rationality, right?

01:20:51.380 It's got this empirical element to it.

01:20:53.260 And within that empirical element, there's a kind of an ethical logos.

01:20:57.880 And so it keeps the conversation honest.

01:20:59.680 Let me turn to your book, okay?

01:21:01.300 So again, for everyone watching, the book that Roy has recently published, and he self-published

01:21:07.140 it for reasons we may get into later, perhaps on the Daily Wire side of this, the book is

01:21:11.620 called The Natural Order of Money.

01:21:12.860 It's quite a beautiful book.

01:21:13.960 It's very elegant.

01:21:15.000 It's a very short book.

01:21:16.080 And it's very tightly edited, although it's also a book that, for me, indicated, you know,

01:21:22.640 one of the ways that you can distinguish high-quality thought in some sense from low-quality thought

01:21:27.120 is that you can tell in a high-quality book that every sentence has been thought through

01:21:34.220 using multiple sentences that aren't in the book, right?

01:21:37.540 So there's a depth of idea that has been compacted into the concepts, and there's an elegance

01:21:43.740 of presentation.

01:21:44.700 And it's a beautiful book, and so that's also extraordinarily interesting.

01:21:47.880 But it's very straightforwardly written.

01:21:50.100 It reminds me in that sense of Matthew Paggio's recent book called The Language of Creation,

01:21:56.760 which is about this long.

01:21:58.260 And it's analogous to this book in some ways, although more on the theological side.

01:22:01.700 So this book has eight chapters.

01:22:06.000 And so I'll start—there's little chapter summaries at the beginning, and I'll just throw

01:22:09.780 them at Roy for now, and he can comment on them.

01:22:12.600 So chapter one, what makes cooperation possible and sustainable between people in the natural

01:22:17.560 world?

01:22:18.060 We must turn to the natural order.

01:22:20.280 Modern economic theory deals with analysis in a mathematical vacuum removed from its wider

01:22:25.100 ecological environment.

01:22:26.800 This work, this book, is an exercise in natural philosophy that is occupied with the synthesis

01:22:31.360 of the living, breathing economy.

01:22:33.860 Now, we probably covered that, Paul C.

01:22:36.000 Time is the fundamental, superseding law of nature.

01:22:39.540 It moves forward and is irreversible.

01:22:41.940 Human action is beholden to the requirements of the present.

01:22:45.300 Contemporary economics tends to ignore the condition of our temporality.

01:22:49.020 There's one.

01:22:49.840 We haven't delved into that particularly.

01:22:52.720 So what do you mean by that?

01:22:53.920 Contemporary economics tends to ignore the condition of our temporality.

01:22:57.000 So the moment that you take the moment of production or activity and you abstract it into some kind

01:23:09.480 of symbolic value, you're representing something.

01:23:14.400 There is some truth there.

01:23:16.320 But as you aggregate those values and you begin to refer to them in the way that you refer to either a stock index or a GDP graph over time,

01:23:27.600 you've completely stripped that measure from anything real.

01:23:34.380 So you're adding layers of abstraction.

01:23:37.100 Yes.

01:23:37.620 And it gets more untenable as the abstraction layers multiply.

01:23:41.340 It's measuring nothing.

01:23:42.780 At the very least, everything has changed since the time you've published the measure.

01:23:47.820 You know, like at the very least, that's one problem.

01:23:51.680 But the real issue is that you're trying to—you're lying to yourself.

01:23:57.240 You're saying that somehow I can quantify all of this multifarious economic activity.

01:24:04.900 And you also allow yourself to have another party, in this case the government, run deficits or spend money and get the G in the GDP by growing it.

01:24:15.600 And so it's just a false metric.

01:24:18.640 You know, it's kind of like grading your own paper.

01:24:20.400 If you could conceive of the best—

01:24:22.080 Well, we had started to talk a little bit about the dangers of abstraction away from the fundamental economy.

01:24:28.940 And one of the dangers there is, well, the danger of government-produced inflation.

01:24:32.960 Yes.

01:24:33.120 Because one of the things that governments can do, they're supposed to be printing money, let's say, to smooth out the business cycle.

01:24:38.580 But the problem is, of course, that when you're using a fiat currency that isn't grounded to something fundamental is that you can print money more or less at whim.

01:24:46.100 Yes.

01:24:46.420 And then you rob the people who are saving, essentially.

01:24:50.280 And as you print fiat money, the GDP increases nominally.

01:24:53.660 Right, right.

01:24:54.140 So your measure looks good.

01:24:55.700 Yeah.

01:24:56.120 It's basically like—

01:24:56.940 But it doesn't reflect the underlying sustainability.

01:24:59.020 It reflects nothing.

01:25:00.220 You want to look at, you know, more tangible measures.

01:25:03.220 If you're looking to measure the health of an economy, start with the fertility rate.

01:25:06.860 Because that's going to be where your real growth comes from.

01:25:09.560 And so—or start with the amount of weight of products that you produce.

01:25:13.020 Right.

01:25:13.360 So we should just point out, for everyone who's listening, that's actually a pretty radical proposition.

01:25:17.800 Because the ethos of our time is that a low birth rate is better because there's too many damn people on the planet anyways.

01:25:24.420 And you just made the proposition that a more fundamental measure of human flourishing would actually be a positive birth rate.

01:25:31.620 Absolutely.

01:25:32.380 But I don't think we even know if we're at that limit or not because we don't compare the fertility rate to what our productive capacity is in the nation.

01:25:40.960 You know, we're mixing services with real economic activity and then we're measuring them.

01:25:46.820 And so the services can be measured.

01:25:48.580 There's a lot of really incredible analyses and products that central banks and academic economists come out with,

01:25:57.300 which I think do shed light on a lot of very interesting questions within the service economy, within the subjective side of the economy.

01:26:04.360 But they cannot be the national lodestar.

01:26:08.540 You know, it just goes back to what I said.

01:26:10.280 The majority—I mean, I actually think the majority of the people should probably be in the real economy.

01:26:15.220 I think it's bizarre that you have this situation where a great majority of the people are not working in the land or are not involved with the extraction of these fundamental things.

01:26:25.500 And I think that what ends up happening in a recession of the kind that we're facing now but also of the kind we're going to keep facing given where we are in this overall arc of the Western development of the economy since the suspension of the redeemability of money into gold in 1971 is people will revert back to the natural economy.

01:26:46.280 You know, they will recognize that it's becoming a fool's errand trying to live in a city and make ends meet and have, you know, terrible air quality and all of these things when they can literally buy a plot of land somewhere and, you know, start a homestead and live off their land.

01:27:02.800 And so I think that that's literally what happens in a recession that's a natural recession if the government doesn't get involved and try to stimulate and try to keep all the cogs in the machine.

01:27:11.820 It decomposes the excess levels of abstraction.

01:27:14.940 Yeah, and, you know, the objector will respond and say, well, what are you talking about?

01:27:18.600 You know, look at the Great Depression.

01:27:19.920 What were people supposed to do?

01:27:21.320 They were in soup, you know, they were standing in line for their bread.

01:27:24.780 Where would they go?

01:27:26.460 And the answer is that, well, but what was the government policy leading up to the Great Depression?

01:27:30.920 You know, the government incentivized stock market speculation.

01:27:34.340 Millions of people owned stocks.

01:27:36.460 There were bucket shops on every corner of the street.

01:27:38.740 Well, it is an open question always how much of that cyclical activity you actually want to suppress, right?

01:27:43.980 So the idea would be to suppress the cyclical activity and produce a linear growth.

01:27:48.040 The idea would be to let nature take its course.

01:27:50.320 Well, the problem with that is that even within us, our life is actually a very, very delicate balance between proper death and proper regeneration.

01:28:01.460 So any cell lines that you have that don't die are cancerous, right?

01:28:05.520 So, I mean, the only reason you're able to live is because you're dying optimally all the time.

01:28:10.780 Yes.

01:28:11.040 So the idea that life is nothing but growth, that's what cancer is, is life that's nothing but growth.

01:28:16.540 So there has to be death and replacement as a precondition for life in some real sense.

01:28:22.500 So if you flatten that out of the economy, there's no, your point, I think, is that there's no signal that you've gone astray.

01:28:29.620 If you artificially suppress, like a recession, because a recession is a form of death in some sense, right?

01:28:35.460 Yes.

01:28:36.180 That line you mentioned, I've read it before somewhere, yeah, that the policy of a cancer cell is infinite growth.

01:28:42.480 Right, exactly.

01:28:43.000 The philosophy of a cancer cell.

01:28:44.120 Yes, yes, yes.

01:28:44.900 Yeah, that's a great line.

01:28:47.380 Yeah.

01:28:48.480 No.

01:28:48.940 Well, and you can see that reflected in certain kinds of environmentalist fatalism, right?

01:28:52.980 But remember—

01:28:53.480 That human beings are cancers on the planet, right?

01:28:55.340 Because they pursue this infinite growth policy, and we want people to be more prosperous, but that doesn't mean that growth can—and this is where I think your work is so interesting.

01:29:04.220 It doesn't mean that growth can occur in a completely abstracted manner that doesn't take into account the underlying fundamental principles of the principles of the natural world.

01:29:16.280 And it does go back to time, though, with regards to this, because the whole point we're trying to say is that time moves forward and is irreversible.

01:29:25.340 So any of your actions are always taking place in what we call the present.

01:29:29.440 You know, you're always living in the present.

01:29:31.060 The past is, you know, available to you through recollection, and the future is coming, but it's sort of like always a present that's becoming the future and becoming the present.

01:29:41.040 But at some point, you do know that it's finite.

01:29:44.240 You know that you're going to die.

01:29:45.900 And everything grows and decays.

01:29:49.380 And so the idea of infinite growth is already an illusion in the sense that it's lying to you as though you're going to outlive, you know, your own life some way through your economic contributions.

01:30:02.040 And you're not.

01:30:02.660 What's going to happen is you can make a contribution to the economy and through your offspring, perhaps, you know, bequeath something to them, which then, you know, imparts on them a sense of responsibility both to the land, to the community, to the state, et cetera, et cetera.

01:30:21.160 But it's really not all about that.

01:30:22.900 You know, in Latin, you know, the word otium means leisure, and the word negotium means business.

01:30:32.760 So business is defined as not leisure.

01:30:35.720 And I think that's another thing that we lose when we denaturalize the economy.

01:30:41.260 We lose the fact that our goal here is to work for the sake of leisure.

01:30:47.180 It's not to work every single day for the rest of our lives.

01:30:50.980 There's a time for work, and there's a time for leisure.

01:30:54.900 And I think that in general, in modern society, most people are working all the time, you know, even in the way that they—

01:31:03.920 They may have forgotten how to have leisure at all.

01:31:06.020 Yeah, even in the way that they're ostensibly having leisure, it's still this very quantitative, technical, work-based, gamified experience where there's a zero sum.

01:31:17.380 You know, how many likes did I get?

01:31:18.520 How many tweets did I do today?

01:31:19.700 How many followers do I have?

01:31:21.480 Did you see this person over here?

01:31:23.100 Did you see that?

01:31:23.780 Everything is just constantly being ranked in this quantitative way, which is actually entirely subjective and manipulable.

01:31:30.560 Whereas what they're really supposed to do is produce a surplus, which then allows them to either have a family, bequeath that surplus to the family,

01:31:39.440 or live off their remaining days in pursuing some form of leisure.

01:31:44.040 It could be playing golf, or it could be coming closer to God.

01:31:47.300 You know, that is within their free will and rights to do.

01:31:51.300 But this idea of constantly working, or even a country just constantly working, is so bizarre.

01:31:58.940 And, you know, this is actually what China does.

01:32:02.760 China is a corporation disguised as a country.

01:32:05.760 You know, they're basically generating a profit on the back of out-competing with the rest of the world.

01:32:12.200 And so on an economic level, that's a problem because it's true, and the West has to deal with that.

01:32:19.500 But on a philosophical level, on a cultural level, that's one of the advantages we might have in that they don't really tend towards leisure in the way that I think we can.

01:32:30.980 We used to here in the West.

01:32:34.100 So that's also part of the manner in which the ethic, in some sense, has gone astray.

01:32:38.200 You have ever more work tracing, ever more growth, forgetting the fact that the purpose of work, in some sense, is, you said, to enable leisure.

01:32:46.400 I'd say to enable play.

01:32:47.880 Yes.

01:32:48.840 Play, perhaps, being the opposite of toil.

01:32:51.200 Yes.

01:32:51.500 And that that's a true loss of richness in life, right?

01:32:54.880 Now, we're supposed to work, but there has to be a balance.

01:32:58.120 Mm-hmm, mm-hmm.

01:32:59.700 Chapter four.

01:33:01.040 The human cooperative system is also thermodynamic.

01:33:03.540 There's a chain of temporal energy dependency in which the first cause of an economy is those who work with nature to source foods, fuels, and elemental substances.

01:33:11.940 The real economy generates energy embodiments.

01:33:15.180 The surface economy only consumes them.

01:33:17.480 So what do you mean by energy embodiments?

01:33:19.300 So energy embodiments is anything that's produced from the Earth that can be weighed, divided, and shared.

01:33:25.960 And I specifically say anything that's produced, you know, by the work of the human hand from the Earth.

01:33:32.080 So it can be salt, it can be cattle, it can be gold, it can be silver.

01:33:37.700 It's any commodity, essentially.

01:33:39.720 Well, it's very interesting that you tie that into thermodynamics.

01:33:42.980 I was talking to a neuroscientist recently whose name momentarily escapes me, Friston.

01:33:50.100 And we discussed the relationship of human emotion to entropy.

01:33:56.480 So imagine you can calculate entropy by computing the distance between your goal and your current reality.

01:34:03.860 And that's a path length, right?

01:34:05.560 So there's a certain distance that you have to traverse to get to where you're going.

01:34:08.660 And that distance requires a certain amount of energy.

01:34:11.860 And that energy, that distance is equivalent to the entropy of the distance between your vision and your goal.

01:34:19.760 If that distance increases rapidly, that's an entropy increase.

01:34:24.240 That's what happens when a tool fails, right?

01:34:26.180 Because you don't know how to use it in relationship to the goal.

01:34:29.160 It makes you anxious.

01:34:30.380 Anxiety is actually a signal of unexpected entropy increase.

01:34:33.860 And then positive emotion, interestingly enough, is a signal of entropy decrease.

01:34:38.800 So you feel positive emotion, for example, when you're moving towards a goal, so decreasing entropy.

01:34:43.680 And the movement works, so now you're closer to the goal.

01:34:47.660 So the whole emotional system is also thermodynamic fundamentally in its essence.

01:34:52.440 And you're making the point that the point of the primary economy is to produce the commodities that have an intrinsic entropy reduction.

01:35:03.700 It's not just entropy, right?

01:35:04.920 Because it's also the provision of material resources like direct food.

01:35:08.040 I know that some of that's energy.

01:35:09.380 Some of it's the reconstitution of the material substrate as well.

01:35:13.500 Yeah.

01:35:13.840 So I think I'm using energy and entropy, I think, in a different way from how a physicist might use it and perhaps even how you just used it.

01:35:20.720 The way I think about energy and entropy after wrestling with this concept for a long time is I think energy is best described as the generative force in nature.

01:35:31.660 And entropy is best described as the degenerative force in nature.

01:35:34.960 Yeah.

01:35:36.000 I'd say that's the same.

01:35:37.520 It's the same.

01:35:38.300 I concentrated on a different element.

01:35:40.020 Yeah, of course.

01:35:41.040 Yeah.

01:35:41.300 But like, so, you know, the rose blooming in springtime is energy.

01:35:45.560 And that same rose withering, literally dying in front of your eyes is entropy.

01:35:51.600 But then, but nature, you know, dies and then is reborn again.

01:35:56.580 You know, it's the same nature, the same plant will die and then give birth all over again.

01:36:03.580 It's like it dies and renews.

01:36:06.040 And I think that's just really…

01:36:07.560 Well, you know, Schrodinger, the physicist, basically defined life as an anti-entropic phenomenon.

01:36:14.320 That's right, yeah.

01:36:14.920 So there's something very fundamental about this.

01:36:16.740 I'm going to read three chapters specifically, and then I think we'll close this out concentrating on what they concentrate on because this turns to the issue of money.

01:36:26.260 Ecological accountability is a fact of nature of all human cooperative systems.

01:36:31.440 So the idea there would be if you transgress against the principles of ecology, you're playing a non-playable game.

01:36:36.960 You're going to fail.

01:36:38.020 Only the service economy is able to artificially and temporarily ignore ecological accountability.

01:36:44.160 The environmentalists make a case like that, although it's more of an explicitly anti-industrial case, right?

01:36:49.600 When ecological accountability is manipulated or forgotten, so that's the relationship between the economy and the underlying environmental structure,

01:36:57.620 the relationship between the real and service economies becomes parasitic.

01:37:03.080 Very interesting turn of phrase there, parasitic, because it means a parasite actually destroys the source of value while consuming it, right?

01:37:10.600 Yeah, yeah, yeah.

01:37:11.440 So there's nothing about it that renews and revivifies.

01:37:15.080 The natural standard must be reified and extended to all members, ensuring that ecological accountability remains at the heart of cooperation.

01:37:22.420 So the idea there, in some sense, this natural standard, to be reified means that the signal that it contains has to be propagated reliably through the abstractions of the system.

01:37:32.620 That's right.

01:37:33.060 Okay.

01:37:33.800 Ecological accountability, this is where it gets more practical, is not an ideal or promise, but a lived reality.

01:37:40.000 And then we switch to money.

01:37:41.680 Money extends the natural standard.

01:37:44.360 So that's the key element of your book in some real sense, right?

01:37:47.200 Yes.

01:37:47.340 Because genuine money extends the natural standard in an ecologically valid manner.

01:37:54.140 That's right.

01:37:54.500 That's your claim.

01:37:55.220 Because it's taking that natural standard and it's reflecting it in the object itself.

01:37:59.500 It has two features.

01:38:01.040 Any commodity has two features.

01:38:02.880 It's a measure in the sense that it's a weight of something relative to other things, relative to the farmer's harvest this season, relative to the amount of land that you would put.

01:38:09.880 Right, so it contains an intrinsic information.

01:38:11.900 Yes, but this information is changing relative to the natural order, but the natural order is the arbiter.

01:38:18.420 But then it's also a reward in the sense that irrespective of whether it's a good measure or a bad measure, it's something you need as an input.

01:38:27.320 You can do something with it.

01:38:28.820 It's useful.

01:38:30.420 And so every commodity has that feature.

01:38:34.100 And so when we use—

01:38:35.640 So your notion with fiat money is that it's stripped of its intrinsic information.

01:38:39.380 It's neither a measure nor a reward.

01:38:41.020 I mean, it's a reward.

01:38:42.020 Which is why the Nobel laureate would have been able to say, well, the only difference between copper and gold is subjective desire.

01:38:47.240 Yeah, yeah.

01:38:47.780 But, you know, it's funny because Aristotle in the politics says that money shouldn't be pursued for its own sake.

01:38:53.180 It has to be something that's a good, that's useful.

01:38:57.220 And the fiat money is something that's just pursued for its own sake.

01:39:01.480 You don't receive the fiat money so you can do anything.

01:39:03.940 Right, so that's another place where it's ethically uncoupled is because it doesn't have that intrinsic value.

01:39:10.100 Or usefulness.

01:39:10.660 You get the idea that—

01:39:11.320 Right, usefulness.

01:39:12.560 And remember, in the cryptocurrency space, they've been trying to tell us now, and, you know, I have a great respect for the cryptocurrency space.

01:39:20.700 But they've been trying to tell us, well, things can have utility by virtue of them just being a medium of exchange, by being able to exchange onwards.

01:39:27.440 And they build scarcity into it.

01:39:29.660 Yes, but I just don't think that's true.

01:39:31.560 Right, right.

01:39:31.980 You know, I think that nobody—think about it even in financial markets.

01:39:36.440 Nobody just wants to have fiat money sitting in their bank account.

01:39:39.820 They want to invest the fiat money to generate some interest.

01:39:43.140 They want to buy a stock.

01:39:44.360 They want to buy property.

01:39:46.060 So nobody actually wants to just sit and own the fiat currency unless they're buying it on leverage relative to some other fiat currency like the Japanese yen.

01:39:54.340 Well, why can't you say the same thing about gold?

01:39:56.820 Because the gold always has that embedded optionality to its owner.

01:40:00.300 I can sell it to someone that needs to turn it into jewelry.

01:40:03.400 Or I can sell it to NASA, which needs to add it to a rocket.

01:40:06.000 Or I can sell it to Apple, which needs to use the phone.

01:40:07.320 Right, so at minimum it always has that fundamental utility.

01:40:09.360 Yeah, your choice to take the gold and treat it as what's called a storehouse of value doesn't change its intrinsic natural utility.

01:40:17.560 Okay, so then you say, money extends the natural standard, promoting cooperation while reflecting ecological accountability.

01:40:26.260 That's a very nice sentence, by the way.

01:40:27.580 It's a good example of the elegance of your writing, I would say, because that's a very tight sentence.

01:40:32.100 Promoting cooperation while reflecting ecological accountability.

01:40:36.040 You can think about that ethically because what that means is if it promotes cooperation, then it's a medium of exchange that helps us play socially sustainable games.

01:40:44.540 That's right.

01:40:44.840 But if it can also simultaneously reflect the natural order, then not only does it help us play socially sustainable games, it helps us play the small class of socially sustainable games that are also environmentally sustainable.

01:40:58.220 Right, so then you get a balance of that logo, top-down logos order and bottom-up.

01:41:02.200 Okay, okay, okay, okay.

01:41:03.140 What I'm doing there is I'm basically going back 150 years to the point at which William Stanley G. Vaughns in 1875 introduces these terms, unit of account, medium of exchange, store of value, and to a lesser extent standard of value, which have become de rigour in any discussion about money these days.

01:41:19.600 And I'm trying to show that the main function of money goes beyond—it's more than the function of just allowing the farmer who has a surplus of corn to sell his corn for money so that the barber can basically buy the corn with the money that someone pays him.

01:41:39.040 It's actually making sure that every single member of the economy is accountable to the real wealth that's being produced.

01:41:45.960 And I think that the whole notion of a store of value follows from that because today we're told that anything can be a store of value—

01:41:53.040 That's why you say money is more than its incidental features.

01:41:56.480 Yes, yes.

01:41:56.920 And today we're told that anything can be a store of value if someone subjectively decides to just hold on to it.

01:42:02.980 Right, right.

01:42:03.120 So we say, you know, art is a store of value.

01:42:05.580 But when you think about it, the way that money was understood before this denaturalization of the economy was that it was a store of value not because I just subjectively want it, and I don't care what it's worth, but hopefully it's scarce and it'll be worth more one day.

01:42:20.100 It was that I want to hold on to this thing because I know that everyone else recognizes that this thing is something that they might need in the future.

01:42:32.200 Right, right.

01:42:32.660 And that has a deep intrinsic value that's tied to nature itself.

01:42:35.980 Another anti-postmodern argument in some sense.

01:42:38.460 So, chapter 7, this is where we turn to the nature of money itself as a signal and medium of exchange, but also as something that contains intrinsic information about the structure of the world and sustainability in the world.

01:42:54.280 A superior money will be resistant to entropy, so that would be decay, so it's permanent, a storehouse, and reliable and unchanging, spatially as well, and rare or difficult to extract from nature.

01:43:08.060 Because otherwise it would be so plentiful, you can't use air as a medium of exchange.

01:43:13.020 True money will neither be food nor fuel, because it's consumable then, but rather an elemental substance.

01:43:19.720 Elements are naturally scarce, meaning that each element exhibits certain unchanging qualities, and then at the apex, gold is the apex element within the natural order of money.

01:43:30.180 Expand on that a bit.

01:43:31.460 Now, that has to do with its scarcity and its nobility as a noble metal.

01:43:35.660 But it's important to state that when I say true money there, I'm saying in a post-subsistence society.

01:43:41.520 So, as the society has matured and it's become complex, there's a division of labor and there's a market, at that point, it wouldn't make sense to use the most necessary inputs, the food.

01:43:54.040 Not only because they're subject to entropy, you know, a lettuce lasts six days, but also because it's better for the economy to use those inputs rather than just hold on to them for the sake of measuring and rewarding.

01:44:06.480 There's something that—

01:44:07.040 So gold's got that weird balance where it has a utility.

01:44:09.900 Yes.

01:44:10.280 But the utility isn't so overwhelming and so immediate that it can't be used as a bank.

01:44:16.020 Its utility as money is more important for a well-functioning post-subsistence society than its utility as a commodity.

01:44:25.600 Right, right, right.

01:44:26.060 That doesn't mean that it doesn't oscillate.

01:44:28.140 It still oscillates.

01:44:29.500 Yeah, yeah, yeah.

01:44:29.600 Well, that's a very interesting proposition, right, that gold has that strange balance.

01:44:33.760 It's not so useful that you have to use it.

01:44:36.460 That's right.

01:44:36.820 But it's not so useless that it has no intrinsic value.

01:44:39.820 That's right.

01:44:40.180 Right, that's very interesting.

01:44:40.720 Whereas with silver, we find that it's a lot more industrial—it has a lot more industrial use.

01:44:46.600 So even though silver might be embraced as money, you still need loads of it for industry.

01:44:52.240 The thing about gold is it has—you know, there's an aspect of elements called specific gravity.

01:44:56.680 It's one of these features, qualitative features.

01:44:59.120 And gold has a specific gravity that's so high, which means that as you condense more weight of it, it occupies a very small volumetric space.

01:45:08.540 Right, right.

01:45:09.040 So if you were to take a sugar cube sized of pure silver or a sugar cube size of pure gold, you would find that the gold is just heavier, even though it occupies the same volumetric space.

01:45:20.060 And so what I'm trying to say is that the amount of gold that we have—

01:45:24.040 So it's value density?

01:45:25.360 It's something like that?

01:45:26.300 Yeah, you might say value density.

01:45:27.800 Like energy density?

01:45:28.980 You could say that.

01:45:30.040 Definitely.

01:45:30.600 I mean, in terms of the amount of energy that it took to produce the gold, the gold is representing in less space than anything else.

01:45:37.520 Right, right, right.

01:45:38.000 So it's an efficient estimate of—

01:45:39.880 Yeah, and in my company, GoldMoney, you know, we have a warehouse.

01:45:42.360 Let's say we have a billion dollars of silver.

01:45:44.640 Well, that's going to be warehouse upon warehouse upon warehouse of silver.

01:45:48.440 You're walking through aisles of silver bars.

01:45:50.640 Whereas a billion dollars of gold would fit right here in this little room.

01:45:54.200 Right, right, right.

01:45:54.980 And so—

01:45:55.660 So it's also got that property of efficiency.

01:45:57.800 That's right.

01:45:58.800 And that, I think, makes it also very efficient in terms of exchange as being something that pays for its own movement.

01:46:06.360 You know, it's not—it's inexpensive to move.

01:46:08.500 It doesn't require as much energy to move.

01:46:10.300 Right, right, right.

01:46:10.560 And easy to hide in some real sense, too.

01:46:13.000 Yeah, perhaps.

01:46:14.220 But—

01:46:14.540 Well, that could be real relevant when someone's after your storehouse of value, let's say.

01:46:19.100 Yeah, but the thing is there is that because of that feature of gold, you don't need so much of it volumetrically for industry.

01:46:29.060 What ends up happening is that we use, as a society, the lowest amount of gold, the smallest amount of gold that we need to do the things that we can't do with any other element.

01:46:38.420 So in your phone, there's a part of your phone, there's certain soldered connecting joints where we have to use gold.

01:46:45.740 Apple doesn't want to use the gold.

01:46:47.100 Right, right.

01:46:47.660 But it has to, so it uses just the bare minimum that it needs, but it's still a couple of dollars worth of gold per phone.

01:46:53.700 And so we're constantly using just kind of the lowest amount of gold that we need.

01:46:57.940 Yeah, so it's interesting what you're proposing in some sense.

01:47:00.960 Like, a good game is bound by rules, which isn't really a good way of thinking about it because rules and laws sound like they're walls.

01:47:09.460 But that's not really true.

01:47:11.040 A good game has principles that enable a lot of activity, right?

01:47:15.200 And the best game has the best rules in some real sense.

01:47:20.320 And so the best game, we've already alluded to this to some degree, the best game is one we both want to play and that can play for a long time and that maybe even improves as we play it.

01:47:32.700 But that would also be a game that we could do that with that would allow us to stay in harmony in some real sense with the natural world.

01:47:40.400 Yes.

01:47:40.660 So we want a set of principles that enables cooperation.

01:47:43.380 That's the next thing you say here, actually.

01:47:45.200 When money is gold, this is probably the key sentence, certainly to the introduction, and you repeat it.

01:47:52.380 This is a repetition about an appropriate one.

01:47:55.620 When money is gold, cooperation between people and nature is sustainable.

01:48:01.540 Well, that's the thesis of your book, fundamentally, in one sentence, right?

01:48:04.680 And part of the reason I'm talking to you today is because I'm still trying to evaluate that thesis.

01:48:10.280 It's a bold thesis.

01:48:11.400 In some real sense, if it's true, I haven't been able to figure out why it might not be true.

01:48:18.080 Because I do believe that, obviously, we can't decouple our economic system from empirical reality any more than we can decouple our conceptual systems from biology.

01:48:29.100 Or if we do, we're going to pay a big price for it, I believe.

01:48:32.440 Well, let me propose a solution to that quandary.

01:48:35.260 You know, some of the greatest errors in history have begun as, you know, logical axioms that made sense at some level.

01:48:49.080 Yes, like Marxism.

01:48:50.360 Yeah, and then you conceptualize it and you realize, you know, it's like that meme where you see the domino and you, you know, you push one domino and then you end up, you know.

01:48:56.700 Yeah, yeah, yeah.

01:48:57.260 So, right, the axioms sound good in principle.

01:49:00.780 Yeah, so my response to that would be, well, if you're on the side of what I just said, you're essentially on the side of all of the traditional wisdom that has characterized the development of the Western world.

01:49:14.000 And if you're on this other side, you're in a brief period of history to which we observe a great deal of issues.

01:49:21.120 And then I would raise you and say, well, what is the other alternative?

01:49:25.200 Because I'm not going to be convinced that the current system that we have is a valid alternative.

01:49:31.460 I think it's a terrible system.

01:49:33.200 It's a parasitic system.

01:49:34.940 It has dyspeptic symptoms such as inflation and wealth inequality and I think also environmental damage.

01:49:41.540 And to that end, the germ in the environmental movement is coming from the right place.

01:49:47.020 They've identified that our ways are antagonistic to nature.

01:49:50.340 But their solution is arrogant in the sense that—

01:49:53.940 It's also top-down and centralizing and abstract.

01:49:56.640 Exactly.

01:49:57.100 They're not trolling.

01:49:57.800 They're not letting nature take its course.

01:50:00.660 And the real solutions to any potential—

01:50:03.860 Now, I'm not—

01:50:04.280 This is a bottom-up solution, right, in some real sense.

01:50:06.620 This is decentralized.

01:50:06.960 Well, that's why you said—

01:50:08.340 The other thing I like about it, it's got this fractal nature in some sense, right?

01:50:12.020 So your notion is that if gold, in some real sense, reflects the natural order and use gold as the signal of measure that permeates the entire system, the system is being corrected at all of its subsidiary levels simultaneously.

01:50:29.100 It's not a top-down corrective.

01:50:30.620 And I'll give you a perfect example.

01:50:32.200 If gold is money, when you have growth, you get deflation.

01:50:37.320 Prices come down because the gold is always that rarest, longest-lasting thing.

01:50:41.700 So when you produce more things relative to the gold, that means the price of those things declines.

01:50:47.740 Conversely, when you have a slowdown in economic activity relative to a past point, prices are going to rise.

01:50:54.160 But the prices rising are basically telling people that they have to go out and produce more real things.

01:51:00.320 And it's a concept that's so hard to conceive of.

01:51:02.720 You know, we've lived with inflation for so many years now.

01:51:05.200 It is possible to have inflation under gold standard, of course, but that would reflect a slowdown of economic activity or a shortage of certain things.

01:51:11.820 Right, right.

01:51:12.400 Gold.

01:51:12.740 Right.

01:51:13.060 Well, that wouldn't be inflation exactly.

01:51:14.620 That would be scarcity.

01:51:15.400 Yeah, but doesn't it sound amazing that you could live in an economy where, as you were prospering, prices were lower?

01:51:23.720 And don't you remember in the tech world where we saw that, like with flat-screen TVs, there was this productivity where, you know, or even with certain vehicles.

01:51:32.680 That used to be the way of the world for every industry.

01:51:36.120 You know, and that was the engine which actually allowed—

01:51:38.420 Well, people still argue that that's occurring.

01:51:40.400 You know, I interviewed Marion Toopey who wrote the book Super Abundance that makes some claims that are contrary to yours.

01:51:48.180 But you're concentrating more on the rise in asset prices like housing, very, very basic asset prices that seem to be, you know, in some sense escaping from people's grip.

01:51:58.620 Well, he and I—I would disagree with the methodology in his book, and, you know, I'd be happy to talk about it, but I—

01:52:05.220 We'll get the two of you together on a podcast at some point.

01:52:07.680 On that, yeah, I'd love to.

01:52:09.080 On that sense, you know, if you talk to anyone on the street that's over, you know, 30 years old, they will tell you that in their lifetime, the cost of everything has gone up.

01:52:20.520 Every single person will tell you that.

01:52:22.840 Now, when those people have to express that view politically, they're being offered two kinds of responses, irrespective of a political party.

01:52:30.840 One response is, it's true, I'm going to help you.

01:52:35.400 Vote for me.

01:52:36.740 But then there's another—

01:52:37.720 But that's a centralizing control issue again there.

01:52:39.960 But then there's another response, which is, oh, no, no, no, you're wrong, you're wrong.

01:52:44.320 Let me bedazzle you with quantitative abstractions.

01:52:47.700 Let me show you why you're wrong.

01:52:50.500 Well, it is tricky because we do have these remarkable cell phones, for example.

01:52:54.300 It's not easy to quantify their value, let's say.

01:52:56.700 Well, yeah, but what is the value of all the bookshops that we lost because of, you know, Amazon?

01:53:02.040 And what is the value of the record shops that we lost?

01:53:03.880 And what is the value of all—

01:53:04.660 And the diversity that was there.

01:53:05.700 Yeah, and the diversity and decentralization, you know, were basically—

01:53:08.300 Well, this is an issue of measurement, isn't it?

01:53:10.200 Right.

01:53:10.560 In the Cold War, one of the great arguments for the superiority of the West versus Russia was that you'd go into a supermarket and you would see just so many brands.

01:53:19.920 Diversity and abundance.

01:53:20.700 But today, you go to a Western supermarket and it's basically the same kind of packaging.

01:53:24.660 The brands—you know, Kraft Heinz owns half the aisles.

01:53:27.920 Right, so your argument, in some sense, with Turkey is that because our measurements are wrong, like, fundamentally, none of the calculations that we're making in relationship to abundance are actually valid.

01:53:40.600 Yeah, and I would also have a quarrel with this metric of GDP per hour's worked.

01:53:46.060 I don't think that that—

01:53:47.300 Well, we'll arrange this discussion at some point and see what we can hash out.

01:53:51.460 I'm going to read the rest of the summary of Chapter 8, and then I guess we'll bring this part to a halt.

01:53:56.840 I'm going to talk to Roy for another half an hour.

01:53:59.620 You all know this by now, or many of you who are listening on the Daily Wire Plus platform.

01:54:03.640 I often walk through someone's life biographically.

01:54:07.520 I might do that with Roy, but there's other places we can take this, so I'm still deciding on that.

01:54:12.820 Anyways, here's the summary of the eighth and final chapter.

01:54:15.800 When money is gold—and as I said, that's the fundamental thesis of the book—

01:54:20.340 When money is gold, cooperation between people and nature is sustainable.

01:54:25.460 That's a hell of a claim, that.

01:54:27.020 It'd be interesting to see what people make of that in the comments.

01:54:30.380 When money is gold, cooperation between people and nature is sustainable.

01:54:34.340 Gold money remains a stable measure and reward in both generative and degenerative cycles.

01:54:41.240 And then he concludes with this, we live in an age of contrived monies, reflected, let's say, in voluntary inflation, the printing of money, and parasitic economies.

01:54:52.460 The definition there would be economies that are bubbling upward, but not replenishing the source.

01:54:59.460 That's a good way of thinking about it.

01:55:01.620 A solution must be given by nature and not the service economy.

01:55:07.580 And then the closing is, gold—it's quite a claim.

01:55:14.100 Gold is the perfect mirror of ecological accountability.

01:55:18.020 So, well, it's hard for me to evaluate the book, you know, because I'm not an expert in these topics.

01:55:26.860 I've read a lot of books.

01:55:28.540 This seems to me to be a very good book.

01:55:30.460 It's very clear.

01:55:31.200 I found the argument very compelling.

01:55:32.700 It's a very interesting argument, at least.

01:55:34.740 There may be things wrong with it that I certainly don't understand.

01:55:37.600 There's probably things wrong with it that you don't understand.

01:55:39.900 But I definitely enjoyed reading it, and it's given me an awful lot to think about.

01:55:43.800 And I do think it's beautifully written and is also a beautiful book.

01:55:47.040 So that's The Natural Order of Money.

01:55:48.640 If you're interested in this discussion, I would recommend the book.

01:55:51.820 It's a pretty short read.

01:55:52.760 It's pretty damn clear.

01:55:54.280 And I'd like to thank Roy for talking to me today.

01:55:57.200 Thank you, Roy.

01:55:57.620 And for all of you watching and listening on YouTube and the associated podcasts, thank

01:56:01.860 you very much for your time and attention.

01:56:03.560 To the film crew that's here today, they came in from London suddenly and unexpectedly, let's

01:56:10.860 say.

01:56:11.080 So that was very helpful.

01:56:11.940 To the Daily Wire Plus people, thank you for facilitating these conversations.

01:56:16.040 And I guess it's not too late in the year to wish everyone Happy New Year one more time.

01:56:19.720 Thank you for your time and attention.

01:56:23.380 Hello, everyone.

01:56:24.800 I would encourage you to continue listening to my conversation with my guest on dailywireplus.com.

01:56:31.320 Thank you.

330. The Natural Order of Money ｜ Roy Sebag

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