Lex Friedman Podcast - Michael Saylor

00:00:00,000 --> 00:00:04,640 Remember George Washington? You know how he died? Well-meaning physicians bled him to death,
00:00:04,640 --> 00:00:09,840 and this was the most important patient in the country, maybe in the history of the country,
00:00:10,880 --> 00:00:17,200 and we bled him to death trying to help him. So when you're actually inflating the money supply
00:00:17,200 --> 00:00:24,160 at 7% but you're calling it 2% because you want to help the economy, you're literally bleeding
00:00:24,160 --> 00:00:30,800 the free market to death. But the sad fact is George Washington went along with it because he
00:00:30,800 --> 00:00:38,000 thought that they were going to do him good, and the majority of the society, most companies,
00:00:38,640 --> 00:00:46,320 most conventional thinkers, you know, the working class, they go along with this because they think
00:00:46,320 --> 00:00:50,880 that someone has their best interests at mind, and the people that are bleeding them to death
00:00:50,880 --> 00:00:56,320 believe, they believe that prescription because their mental models are just so defective.
00:00:58,880 --> 00:01:03,280 The following is a conversation with Michael Saylor, one of the most prominent and brilliant
00:01:03,280 --> 00:01:10,080 Bitcoin proponents in the world. He is the CEO of MicroStrategy, founder of Saylor Academy,
00:01:10,080 --> 00:01:16,640 graduate of MIT, and Michael is one of the most fascinating and rigorous thinkers I've ever gotten
00:01:16,640 --> 00:01:21,840 a chance to explore ideas with. He can effortlessly zoom out to the big perspectives of human
00:01:21,840 --> 00:01:28,640 civilization and human history, and zoom back in to the technical details of blockchains, markets,
00:01:28,640 --> 00:01:34,240 governments, and financial systems. This is the Lex Friedman podcast. To support it,
00:01:34,240 --> 00:01:40,560 please check out our sponsors in the description. And now, dear friends, here's Michael Saylor.
00:01:40,560 --> 00:01:49,120 Here's Michael Saylor. Let's start with a big question of truth and wisdom. When advanced humans
00:01:49,120 --> 00:01:55,920 or aliens or AI systems, let's say five to ten centuries from now, look back at Earth on this
00:01:55,920 --> 00:02:03,600 early 21st century, how much do you think they would say we understood about money and economics,
00:02:03,600 --> 00:02:08,560 or even about engineering, science, life, death, meaning, intelligence, consciousness, all the big
00:02:08,560 --> 00:02:15,680 interesting questions? I think they would probably give us a
00:02:17,840 --> 00:02:22,960 B-minus on engineering, on all the engineering things, the hard sciences.
00:02:22,960 --> 00:02:28,720 A passing grade. Like we're doing okay. We're working our way through rockets and jets and
00:02:28,720 --> 00:02:36,320 electric cars and electricity transport systems and nuclear power and space flight and the like.
00:02:36,320 --> 00:02:46,400 And if you look at the walls that grace the great court at MIT, it's full of all the great thinkers
00:02:47,120 --> 00:02:55,840 and they're all pretty admirable. If you could be with Newton or Gauss or Madame Curie or Einstein,
00:02:57,200 --> 00:03:03,760 you would respect them. I would say they'd give us a D-minus on economics.
00:03:03,760 --> 00:03:08,960 Like an F-plus or a D-minus. You have an optimistic vision. First of all,
00:03:08,960 --> 00:03:14,000 optimistic vision of engineering, because everybody you've listed, not everybody,
00:03:14,000 --> 00:03:19,120 but most people you've listed, it's just over the past couple of centuries. And maybe it stretches
00:03:19,120 --> 00:03:24,000 a little farther back, but mostly all the cool stuff we've done in engineering is the past couple
00:03:24,000 --> 00:03:32,480 of centuries. I mean, Archimedes had his virtues. I studied the history of science at MIT,
00:03:32,480 --> 00:03:38,960 and I also studied aerospace engineering. And so I clearly have a bias in favor of science.
00:03:38,960 --> 00:03:46,080 And if I look at the past 10,000 years and I consider all of the philosophy and the politics
00:03:46,080 --> 00:03:51,520 and their impact on the human condition, I think it's a wash for every politician that came up with
00:03:51,520 --> 00:03:59,120 a good idea. Another politician came up with a bad idea. And it's not clear to me that most of
00:03:59,120 --> 00:04:06,400 the political and philosophical contributions to the human race and the human conditions
00:04:06,400 --> 00:04:14,240 have advanced so much. I mean, we're still taking guidance and admiring Aristotle and Plato and
00:04:14,240 --> 00:04:22,480 Seneca and the like. And on the other hand, if you think about what has made the human condition
00:04:22,480 --> 00:04:34,080 better, fire, water, harnessing of wind energy, try to row across an ocean, right? Not easy.
00:04:34,080 --> 00:04:39,680 And for people who are just listening or watching, there's a beautiful sexy ship from
00:04:40,400 --> 00:04:42,080 16th, 17th century?
00:04:42,080 --> 00:04:48,960 This is a 19th century handmade model of a 17th century sailing ship, which is of the type that
00:04:48,960 --> 00:04:56,080 the Dutch East India's company used to sail the world and trade. So that was made, you know,
00:04:56,080 --> 00:05:01,920 the original is made sometime in the 1600s. And then this model is made in the 19th
00:05:02,800 --> 00:05:04,320 century by individuals.
00:05:04,320 --> 00:05:08,320 So both the model and the ship itself is engineering at its best. And just imagine,
00:05:08,320 --> 00:05:13,760 just like rockets flying out to space, how much hope this filled people with exploring the unknown,
00:05:13,760 --> 00:05:20,640 going into the mystery. Both the entrepreneurs and the business people and the engineers and
00:05:20,640 --> 00:05:24,320 just humans, what's out there? What's out there to be discovered?
00:05:24,320 --> 00:05:29,440 Yeah, the metaphor of human beings leaving shore or sailing across the horizon,
00:05:29,440 --> 00:05:33,520 risking their lives in pursuit of a better life is an incredibly powerful one.
00:05:33,520 --> 00:05:42,000 In 1900, I suppose the average life expectancy is 50. During the Revolutionary War, you know,
00:05:42,000 --> 00:05:46,960 while our founding fathers were fighting to establish, you know, life, liberty, pursuit
00:05:46,960 --> 00:05:53,760 of happiness, the Constitution, average life expectancy of like 32, something between 32 and
00:05:53,760 --> 00:06:01,360 36. So all the sound and the fury doesn't make you live past 32, but what does, right? Antibiotics.
00:06:01,360 --> 00:06:08,080 Conquest of infectious diseases. If we understand the science of infectious disease, you know,
00:06:08,080 --> 00:06:15,600 sterilizing a knife and harnessing antibiotics gets you from 50 to 70. And that happened fast,
00:06:15,600 --> 00:06:24,320 right? That happens from 1900 to 1950 or something like that. And I think if you look at the human
00:06:24,320 --> 00:06:33,600 condition, you ever get on one of those rowing machines where they actually keep track of your
00:06:33,600 --> 00:06:35,680 watts output when you're on that? Yeah.
00:06:35,680 --> 00:06:45,760 Yeah, it's like 200 is a lot. Okay, 200 is a lot. So a kilowatt hour is like all the energy that a
00:06:45,760 --> 00:06:54,240 trained athlete can deliver in a day. And probably not 1% of the people in the world could deliver
00:06:54,240 --> 00:06:59,840 a kilowatt hour in a day. And the commercial value of a kilowatt hour, the retail value,
00:06:59,840 --> 00:07:09,280 is 11 cents today. And the wholesale value is 2 cents. And so you have to look at the contribution
00:07:10,000 --> 00:07:16,960 of politicians and philosophers and economists to the human condition. And it's like at best
00:07:16,960 --> 00:07:21,920 a wash one way or the other. And then if you look at the contribution of John D. Rockefeller
00:07:21,920 --> 00:07:30,720 when he delivered you a barrel of oil, the energy in oil, liquid energy, or the contribution of
00:07:30,720 --> 00:07:38,880 Tesla as we deliver electricity. And what's the impact on the human condition if I have
00:07:39,840 --> 00:07:47,200 electric power, if I have chemical power, if I have wind energy, if I can actually set up a
00:07:47,200 --> 00:07:54,720 reservoir, create a dam, spin a turbine, and generate energy from a hydraulic source?
00:07:56,000 --> 00:08:04,240 That's extraordinary, right? And so our ability to cross the ocean, our ability to grow food,
00:08:04,240 --> 00:08:12,960 our ability to live, it's technology that gets the human race from a brutal life where life
00:08:12,960 --> 00:08:21,760 expectancy is 30 to a world where life expectancy is 80. You gave a D-minus to the economists.
00:08:21,760 --> 00:08:27,120 So are they too like the politicians to wash in terms of there's good ideas and bad ideas and
00:08:27,920 --> 00:08:35,440 that tiny delta between good and bad is how you squeak past the F-plus onto the D-minus territory?
00:08:35,440 --> 00:08:46,240 RL I think most economic ideas are bad ideas. Take us back to MIT and you want to solve a fluid
00:08:46,240 --> 00:08:53,040 dynamics problem. Design the shape of the hull of that ship. Or you want to design an airfoil,
00:08:53,040 --> 00:09:02,560 a wing. Or if you want to design an engine or a nozzle in a rocket ship, you wouldn't do it with
00:09:02,560 --> 00:09:07,600 simple arithmetic. You wouldn't do it with a scalar. There's not a single number, right? It's
00:09:07,600 --> 00:09:16,320 vector math. Computational fluid dynamics is n-dimensional, higher-level math, complicated
00:09:16,320 --> 00:09:23,600 stuff. So when an economist says the inflation rate is 2%, that's a scalar. And when an economist
00:09:23,600 --> 00:09:29,680 says it's not a problem to print more money because the velocity of the money is very low,
00:09:29,680 --> 00:09:36,880 the monetary velocity is low, that's another scalar. Okay, so the truth of the matter is
00:09:38,240 --> 00:09:44,480 inflation is not a scalar. Inflation is an n-dimensional vector. Money velocity is not
00:09:44,480 --> 00:09:54,720 a scalar. Saying what's the velocity of money, oh, it's slow or it's fast, it ignores the question
00:09:54,720 --> 00:10:01,760 of what medium is the money moving through. In the same way that what's the speed of sound?
00:10:02,720 --> 00:10:11,760 Okay, well, what is sound, right? Sound is a compression wave, it's energy moving through
00:10:11,760 --> 00:10:16,640 a medium, but the speed is different. So for example, the speed of sound through air is
00:10:16,640 --> 00:10:21,760 different than the speed of sound through water. And sound moves faster through water. It moves
00:10:21,760 --> 00:10:26,480 faster through a solid and it moves faster through a stiffer solid. So there isn't one.
00:10:26,480 --> 00:10:32,160 TG What is the fundamental problem with the way economists reduce the world down to a model?
00:10:32,160 --> 00:10:37,360 Is it too simple or is it just even the first principles of constructing the model is wrong?
00:10:37,360 --> 00:10:44,880 RL I think that the fundamental problem is if you see the world as a scalar, you simply pick
00:10:44,880 --> 00:10:52,960 the one number which is, which supports whatever you want to do and you ignore the universe of
00:10:52,960 --> 00:10:58,880 other consequences from your behavior. TG In general, I don't know if you've heard of,
00:10:59,840 --> 00:11:04,560 like Eric Weisen has been talking about this with gauge theory. So different kinds of approaches
00:11:05,200 --> 00:11:12,720 from the physics world, from the mathematical world to extend past this scalar view of economics.
00:11:12,720 --> 00:11:20,080 So gauge theory is one way that comes from physics. Do you find that a way of exploring economics
00:11:20,080 --> 00:11:24,320 interesting? So outside of cryptocurrency, outside of the actual technologies and so on,
00:11:24,320 --> 00:11:28,320 just analysis of how economics works, do you find that interesting?
00:11:28,320 --> 00:11:35,920 RL Yeah, I think that if we're going to want to really make any scientific progress in economics,
00:11:35,920 --> 00:11:42,960 we have to apply much, much more computationally intensive and richer forms of mathematics.
00:11:42,960 --> 00:11:44,720 TG So simulation, perhaps? Or...
00:11:44,720 --> 00:11:50,480 RL Yeah, you know, when I was at MIT, I studied system dynamics. You know, they taught it at the
00:11:50,480 --> 00:11:59,280 Sloan School. It was developed by Jay Forrester, who was an extraordinary computer scientist.
00:11:59,280 --> 00:12:06,560 And when we've created models of economic behavior, they were all multi-dimensional
00:12:06,560 --> 00:12:13,440 nonlinear models. So if you want to describe how anything works in the real world, you have to
00:12:13,440 --> 00:12:19,920 start with the concept of feedback. If I double the price of something, demand will fall and
00:12:19,920 --> 00:12:28,000 attempts to create supply will increase, and there will be a delay before the capacity increases.
00:12:28,000 --> 00:12:33,440 There'll be an instant demand change, and there'll be rippling effects throughout every other segment
00:12:33,440 --> 00:12:38,720 of the economy downstream and upstream of such a thing. So it's kind of common sense,
00:12:39,440 --> 00:12:45,280 but most economics, most classical economics, is always, you know, taught with linear models,
00:12:46,080 --> 00:12:51,840 you know, fairly simplistic linear models. And oftentimes, I'm really shocked today
00:12:51,840 --> 00:12:59,040 that the entire mainstream dialogue of economics has been captured by scale or arithmetic.
00:12:59,840 --> 00:13:06,080 For example, if you read, you know, read any article in the New York Times or the Wall Street
00:13:06,080 --> 00:13:12,160 Journal, right, they just refer to it, there's an inflation number or the CPI or the inflation rate
00:13:12,160 --> 00:13:20,160 is X. And if you look at all the historic studies of the impact of inflation, generally, they're
00:13:20,160 --> 00:13:27,680 all based upon the idea that inflation equals CPI, and then they try to extrapolate from that,
00:13:27,680 --> 00:13:35,200 and you just get nowhere with it. So at the very least, we should be considering inflation
00:13:35,200 --> 00:13:41,920 and other economics concepts as a nonlinear dynamical system. So nonlinearity and also just
00:13:41,920 --> 00:13:46,480 embracing the full complexity of just how the variables interact, maybe through simulation,
00:13:46,480 --> 00:13:50,080 maybe some have some interesting models around that.
00:13:50,080 --> 00:13:55,760 Wouldn't it be refreshing if somebody for once published a table of the change in price of every
00:13:55,760 --> 00:14:00,480 product, every service, and every asset in every place over time?
00:14:01,280 --> 00:14:04,400 You said table, some of that also is the task of visualization,
00:14:04,960 --> 00:14:13,200 how to extract from this complex set of numbers patterns that somehow indicate something
00:14:13,200 --> 00:14:18,720 fundamental about what's happening. So like, summarization of data is still important,
00:14:18,720 --> 00:14:25,280 perhaps summarization not down to a single scale of value, but looking at that whole sea of numbers,
00:14:25,280 --> 00:14:33,680 you have to find patterns, like what is inflation in a particular sector, what is maybe a change
00:14:33,680 --> 00:14:39,600 over time, maybe different geographical regions, you know, things of that nature. I think that's
00:14:39,600 --> 00:14:45,680 kind of, I don't know even what that task is. You could look at machine learning, you can look
00:14:45,680 --> 00:14:51,600 at AI with that perspective, which is like, how do you represent what's happening efficiently,
00:14:52,320 --> 00:14:56,800 as efficiently as possible? That's never going to be a single number, but it might be a compressed
00:14:56,800 --> 00:15:01,280 model that captures something beautiful, something fundamental about what's happening.
00:15:01,280 --> 00:15:12,240 SF. It's an opportunity, for sure. If we take, for example, during the pandemic,
00:15:13,920 --> 00:15:20,720 the response of the political apparatus was to lower interest rates to zero and to start
00:15:21,920 --> 00:15:26,800 buying assets, in essence printing money, and the defense was there's no inflation.
00:15:26,800 --> 00:15:33,360 But of course, you had one part of the economy where it was locked down, so it was illegal to
00:15:33,360 --> 00:15:41,600 buy anything. It was either illegal or it was impractical, so it would be impossible for demand
00:15:41,600 --> 00:15:47,600 to manifest, so of course there is no inflation. On the other hand, there was instantaneous,
00:15:47,600 --> 00:15:54,560 immediate inflation in another part of the economy. For example, you lower the interest
00:15:54,560 --> 00:16:01,360 rates to zero. At one point, we saw the swap rate on a 30-year note go to 72 basis points.
00:16:02,560 --> 00:16:08,960 That means that the value of a long-dated bond immediately inflates, so the bond market had
00:16:08,960 --> 00:16:17,920 hyperinflation within minutes of these financial decisions. The asset market had hyperinflation.
00:16:17,920 --> 00:16:24,160 We had what you call a K-shape recovery, what we affectionately call a K-shape recovery. Main Street
00:16:24,160 --> 00:16:30,240 shut down, Wall Street recovered all within six weeks. The inflation was in the assets,
00:16:30,800 --> 00:16:38,880 like in the stocks, in the bonds. If you look today, you see that typical house,
00:16:38,880 --> 00:16:47,760 according to the Case-Schiller Index today, is up 19.2% year over year. If you're a first-time home
00:16:47,760 --> 00:16:59,520 buyer, the inflation rate is 19%. The formal CPI announced a 7.9%. You can pretty much create any
00:16:59,520 --> 00:17:06,720 inflation rate you want by constructing a market basket, a weighted basket of products or services
00:17:06,720 --> 00:17:14,400 or assets that yield you the answer. I think that the fundamental failing of economists is,
00:17:14,400 --> 00:17:22,320 first of all, they don't really have a term for asset inflation, right?
00:17:22,320 --> 00:17:28,480 What's an asset? What's asset hyperinflation? You mentioned bond market swap rate and asset
00:17:28,480 --> 00:17:35,040 is where the majority of the hyperinflation happened. What's inflation? What's hyperinflation
00:17:35,040 --> 00:17:40,800 and what's an asset? What's an asset market? I'm going to ask so many dumb questions.
00:17:40,800 --> 00:17:48,880 In the conventional economic world, you would treat inflation as the rate of increase in price
00:17:48,880 --> 00:17:54,080 of a market basket of consumer products defined by a government agency.
00:17:56,000 --> 00:18:00,320 So they have like traditional things that a regular consumer would be buying.
00:18:00,320 --> 00:18:09,920 The government selects like toilet paper, food, toaster, electronics, all that kind of stuff. And
00:18:09,920 --> 00:18:18,320 it's like a representative basket of goods that lead to a content existence on this earth for
00:18:18,320 --> 00:18:24,240 regular consumer. They define a synthetic metric, right? I mean, I'm going to say you should have
00:18:24,240 --> 00:18:31,280 a thousand square foot apartment and you should have a used car and you should eat, you know,
00:18:31,280 --> 00:18:38,240 three hamburgers a week. Now, ten years go by and the apartment costs more, I could adjust the
00:18:38,240 --> 00:18:43,600 market basket via, you know, they call them hedonic adjustments. I could decide that it
00:18:43,600 --> 00:18:50,080 used to be in 1970 to a thousand square feet, but in the year 2020, you only need 700 square
00:18:50,080 --> 00:18:56,640 feet because we've miniaturized televisions and we've got more efficient electric appliances
00:18:56,640 --> 00:19:01,280 because things have collapsed into the iPhone. You just don't need as much space. So now I,
00:19:01,280 --> 00:19:06,240 you know, it may be that the apartment costs 50% more, but after the hedonic adjustment,
00:19:06,240 --> 00:19:11,360 there is no inflation because I just downgraded the expectation of what a normal person should
00:19:11,360 --> 00:19:16,480 have. So the synthetic nature of the metric allows for manipulation by people in power.
00:19:16,480 --> 00:19:24,720 RL. Pretty much. I guess my criticism of economists is rather than embracing inflation
00:19:25,920 --> 00:19:31,680 based upon its fundamental idea, which is the rate at which the price of things go up, right?
00:19:33,440 --> 00:19:41,440 They've been captured by mainstream conventional thinking to immediately equate inflation to
00:19:41,440 --> 00:19:49,200 the government-issued CPI or government-issued PCE or government-issued PPI measure, which was never
00:19:49,200 --> 00:19:56,480 the rate at which things go up. It's simply the rate at which a synthetic basket of products and
00:19:56,480 --> 00:20:03,680 services the government wishes to track go up. Now, the problem with that is two big things.
00:20:03,680 --> 00:20:09,440 One thing is the government gets to create the market basket and so they keep changing what's
00:20:09,440 --> 00:20:17,440 in the basket over time. So, I mean, if I said three years ago, you should go see 10 concerts
00:20:17,440 --> 00:20:23,200 a year and the concert tickets now cost $200 each. Now it's $2,000 a year to go see concerts.
00:20:24,000 --> 00:20:29,840 Now I'm in charge of calculating inflation. So I redefine, you know, your entertainment quota for
00:20:29,840 --> 00:20:36,000 the year to be eight Netflix streaming concerts. And now they don't cost $2,000. They cost nothing
00:20:36,000 --> 00:20:41,680 and there is no inflation, but you don't get your concerts, right? So the problem starts with
00:20:42,800 --> 00:20:49,360 continually changing the definition of the market basket. But in my opinion, that's not the biggest
00:20:49,360 --> 00:20:59,200 problem. The more egregious problem is the fundamental idea that assets aren't products
00:20:59,200 --> 00:21:03,680 or services. Assets can't be inflated. What's an asset?
00:21:03,680 --> 00:21:15,360 A house, a share of Apple stock, a bond, a Bitcoin is an asset or a Picasso painting.
00:21:17,360 --> 00:21:22,400 Not a consumable good, not an apple that you can eat.
00:21:23,120 --> 00:21:30,400 Right. If I throw away an asset, then I'm not on the hook to track the inflation rate for it. So
00:21:30,400 --> 00:21:35,600 what happens if I change the policy such that, let's take the classic example, a million dollar
00:21:35,600 --> 00:21:42,080 bond at a 5% interest rate gives you $50,000 a year in risk-free income. You might retire on
00:21:42,080 --> 00:21:49,120 $50,000 a year in a low cost jurisdiction. So the cost of social security or early retirement is
00:21:49,120 --> 00:21:56,640 $1 million when the interest rate is 5%. During the crisis of March of 2020, the interest rate
00:21:56,640 --> 00:22:03,200 went on a 10-year bond, went to 50 basis points. So now the cost of that bond is $10 million.
00:22:04,800 --> 00:22:10,400 The cost of social security went from a million dollars to $10 million. So if you wanted to work
00:22:10,400 --> 00:22:16,880 your entire life, save money, and then retire risk-free and live happily ever after on a $50,000
00:22:16,880 --> 00:22:23,680 salary, live in on a beach in Mexico, wherever you wanted to go, you had hyperinflation. The cost of
00:22:23,680 --> 00:22:31,200 your aspiration increased by a factor of 10 over the course of some amount of time. In fact, in
00:22:31,200 --> 00:22:36,880 that case, that was over the course of about 12 years. As the inflation rate ground down, the
00:22:36,880 --> 00:22:45,440 asset traded up. But the conventional view is, oh, that's not a problem because it's good that
00:22:45,440 --> 00:22:53,040 assets, it's good that the bond is highly priced because we own the bond. Or what's the problem
00:22:53,040 --> 00:23:00,000 with the inflation rate in housing being 19%? It's an awful problem for a 22-year-old that's starting
00:23:00,000 --> 00:23:05,920 their first job, that's saving money to buy a house. But it would be characterized as a benefit
00:23:05,920 --> 00:23:12,720 to society by a conventional economist who would say, well, housing asset values are higher because
00:23:12,720 --> 00:23:18,960 of interest rate fluctuation, and now the economy has got more wealth. And so that's viewed as a
00:23:18,960 --> 00:23:29,520 benefit. So what's being missed here? The suffering of the average person or the struggle, the
00:23:29,520 --> 00:23:35,680 suffering, the pain of the average person, like metrics that captured that within the economic
00:23:35,680 --> 00:23:43,040 system. Is it when you talk about- One way to say it is a conventional view of inflation as CPI
00:23:43,040 --> 00:23:52,880 understates the human misery that's inflicted upon the working class and on mainstream companies
00:23:56,480 --> 00:24:01,440 by the political class. And so it's a massive shift of wealth from the working class to the
00:24:01,440 --> 00:24:09,040 property class. It's a massive shift of power from the free market to the centrally governed
00:24:09,040 --> 00:24:14,320 or the controlled market. It's a massive shift of power from the people to the government.
00:24:15,120 --> 00:24:22,960 And maybe one more illustrative point here, Alexis, is what do you think the inflation
00:24:22,960 --> 00:24:27,680 rate's been for the past 100 years? Oh, you're talking about the scalar again?
00:24:27,680 --> 00:24:32,560 If you took a survey of everybody on the street and you asked them what do they think inflation
00:24:32,560 --> 00:24:40,720 was? What is it? You remember when Jerome Powell said our target's 2% but we're not there? If you
00:24:40,720 --> 00:24:50,960 go around the corner, I have posted the deed to this house sold in 1930. Okay. And the number
00:24:50,960 --> 00:24:58,720 on that deed is $100,000, 1930. And if you go on Zillow and you get the Z estimate-
00:24:58,720 --> 00:25:00,160 Is it higher than that? No.
00:25:00,160 --> 00:25:15,840 $30,500,000. So that's 92 years, 1930 or 2022, and in 92 years we've had 305x increase in price
00:25:15,840 --> 00:25:22,320 of the house. Now, if you actually back calculate, you come to a conclusion that the inflation rate
00:25:22,320 --> 00:25:33,280 was approximately 6.5% a year every year for 92 years. Okay. And there's nobody in government,
00:25:33,280 --> 00:25:39,840 no conventional economists that would ever admit to an inflation rate of 7% a year in the US dollar
00:25:39,840 --> 00:25:48,800 over the last century. Now, if you dig deeper, one guy that's done a great job working on this
00:25:48,800 --> 00:25:54,800 is Seyfettin Amos who wrote the book The Bitcoin Standard. And he notes that on average, it looks
00:25:54,800 --> 00:26:01,520 like the inflation rate and the money supply is about 7% a year all the way up to the year 2020.
00:26:03,040 --> 00:26:07,680 If you look at the S&P index, which is a market basket of scarce desirable stocks,
00:26:09,120 --> 00:26:17,200 it returned about 10%. If you talk to 10% a year for 100 years, the money supply is expanding at
00:26:17,200 --> 00:26:23,360 7% a hundred years. If you actually talk to economists or you look at the economy and you
00:26:23,360 --> 00:26:30,400 ask the question, how fast does the economy grow in its entirety year over year? Generally about
00:26:30,400 --> 00:26:37,200 two to 3%. Like the sum total impact of all this technology and human ingenuity might get you a
00:26:37,200 --> 00:26:43,520 two and a half, 3% improvement a year. As measured by GDP. Are you okay with that?
00:26:43,520 --> 00:26:50,400 I'm not sure I'd go that far yet, but I would just say that if you had the human race doing stuff,
00:26:51,760 --> 00:26:56,720 and if you ask the question, how much more efficiently will we do the stuff next year
00:26:56,720 --> 00:27:03,120 than this year? Or what's the value of all of our innovations and inventions and investments
00:27:03,120 --> 00:27:10,640 in the past 12 months? You'd be hard pressed to say we get 2% better. Typical investor thinks
00:27:10,640 --> 00:27:17,680 they're 10% better every year. So if you look at what's going on, really, when you're holding a
00:27:17,680 --> 00:27:23,680 million dollars of stocks and you're getting a 10% gain a year, you really get a 7% expansion
00:27:23,680 --> 00:27:31,440 of the money supply. You're getting a two or 3% gain under best circumstances. And another way to
00:27:31,440 --> 00:27:38,800 say that is if the money supply stopped expanding at 7% a year, the S&P yield might be 3% and not
00:27:38,800 --> 00:27:46,560 10%. It probably should be. Now, that gets you to start to ask a bunch of other fundamental
00:27:46,560 --> 00:27:53,040 questions. Like if I borrow a billion dollars and pay 3% interest and the money supply expands
00:27:53,040 --> 00:28:00,880 at 7% to 10% a year, and I ended up making a 10% return on a billion dollar investment,
00:28:00,880 --> 00:28:10,240 paying 3% interest, is that fair? And who suffered so that I could do that? Because in an environment
00:28:10,240 --> 00:28:15,840 where you're just inflating the money supply and you're holding the assets constant, it stands the
00:28:15,840 --> 00:28:22,080 reason that the price of all the assets is going to appreciate somewhat proportional to the money
00:28:22,080 --> 00:28:28,160 supply. And the difference in asset appreciations is going to be a function of the scarce desirable
00:28:28,160 --> 00:28:34,640 quality of the assets. And to what extent can I make more of them? And to what extent are they
00:28:34,640 --> 00:28:42,480 truly limited in supply? Yeah. So we'll get to a lot of the words you said there, the scarcity
00:28:44,320 --> 00:28:50,880 and so connected to how limited they are and the value of those assets. But you also said,
00:28:50,880 --> 00:28:57,760 so the expansion of the money supply, which is put another way is printing money. And so is that
00:28:57,760 --> 00:29:04,000 always bad, the expansion of the money supply? Just to put some terms on the table so we understand
00:29:04,000 --> 00:29:12,000 them. You nonchalantly say it's always on average expanding every year, the money supply is expanding
00:29:12,000 --> 00:29:19,280 every year by 7%. That's a bad thing? That's universally a bad thing? It's awful. I guess to
00:29:19,280 --> 00:29:29,680 be precise, it's the currency. I would say money is monetary energy or economic energy.
00:29:30,320 --> 00:29:36,320 And the economic energy has to find its way into a medium. So if you want to move it rapidly as a
00:29:36,320 --> 00:29:40,880 medium of exchange has to find its way into currency. But the money can also flow into
00:29:40,880 --> 00:29:49,600 property, like a house or gold. If the money flows into property, it'll probably hold its value much
00:29:49,600 --> 00:29:56,400 better if the money flows into currency, right? If you had put $100,000 in this house, you would
00:29:56,400 --> 00:30:03,200 have 305X return over 92 years. But if you had put the money, $100,000 in a safe deposit box and
00:30:03,200 --> 00:30:11,280 buried it in the basement, you would have lost 99.7% of your wealth over the same time period.
00:30:13,280 --> 00:30:20,720 So the expansion of the currency creates a massive inefficiency in the society, what I'll call an
00:30:20,720 --> 00:30:28,800 adiabatic lapse. What we're doing is we're bleeding the civilization to death, right?
00:30:28,800 --> 00:30:30,880 What's the adiabatic, what's that word?
00:30:30,880 --> 00:30:32,880 Adiabatic lapse.
00:30:32,880 --> 00:30:33,600 Adiabatic.
00:30:34,160 --> 00:30:39,520 Right? In aerospace engineering, you want to solve any problem, they start with the phrase,
00:30:39,520 --> 00:30:47,040 assume an adiabatic system. And what that means is a closed system. So I've got a container
00:30:47,040 --> 00:30:52,320 and in that container, no air leaves and no air enters, no energy exits or enters,
00:30:52,320 --> 00:30:53,680 so it's a closed system.
00:30:54,400 --> 00:30:56,320 So you got the closed system lapse.
00:30:56,320 --> 00:31:00,560 Okay. Okay. I'm going to use a-
00:31:00,560 --> 00:31:01,920 There's a leak in the ship.
00:31:01,920 --> 00:31:06,640 I'm going to use a physical metaphor for you because you're the jujitsu, right? Like you've
00:31:06,640 --> 00:31:13,520 got 10 pints of blood in your body. And so before your next workout, I'm going to take one pint from
00:31:13,520 --> 00:31:21,840 you. Now you're going to go exercise, but you've lost 10% of your blood. Okay? You're not going to
00:31:21,840 --> 00:31:27,600 perform as well. It takes about one month for your body to replace the red blood platelets.
00:31:27,600 --> 00:31:30,720 So what if I tell you every month you got to show up and I'm going to bleed you?
00:31:30,720 --> 00:31:31,680 Yeah.
00:31:31,680 --> 00:31:38,800 Okay. So if I'm draining the energy, I'm draining the blood from your body, you can't perform.
00:31:39,360 --> 00:31:44,400 If you, adiabatic lapse is when you go up an altitude, every thousand feet, you lose three
00:31:44,400 --> 00:31:51,440 degrees. You go 50,000 feet, you're 150 degrees colder than sea level. That's why you look at
00:31:51,440 --> 00:31:58,720 your instruments and instead of 80 degrees, you're minus 70 degrees. Why is the temperature falling?
00:31:58,720 --> 00:32:04,320 Temperature is falling because it's not a closed system. It's an open system. As the air expands,
00:32:04,320 --> 00:32:15,840 the density falls, right? The energy per cubic whatever falls and therefore the temperature
00:32:15,840 --> 00:32:21,760 falls, right? The heat's falling out of the solution. So when you're inflating,
00:32:21,760 --> 00:32:28,240 let's say you're inflating the currency supply by 6%, you're sucking 6% of the energy
00:32:29,600 --> 00:32:34,480 out of the fluid that the economy is using to function.
00:32:34,480 --> 00:32:39,680 So the currency, this kind of ocean of currency, that's a nice way for the economy to function.
00:32:39,680 --> 00:32:44,720 It's the most kind of, it's being inefficient when you expand the money supply, but it's
00:32:46,320 --> 00:32:52,960 the liquid. I'm trying to find the right kind of adjective here. It's how you do transactions
00:32:52,960 --> 00:32:59,840 at a scale of billions. Currency is the asset we use to move monetary energy around and you
00:32:59,840 --> 00:33:05,440 could use the dollar or you could use the peso or you could use the bolivar. Selling houses and
00:33:05,440 --> 00:33:13,440 buying houses is much more inefficient. Or like you can't transact between billions of people
00:33:13,440 --> 00:33:20,000 with houses. Yeah. Properties don't make such good mediums of exchange. They make better stores
00:33:20,000 --> 00:33:27,920 of value and they have utility value if it's a ship or a house or a plane or a bushel of corn,
00:33:28,480 --> 00:33:33,840 right? Can I zoom out just for, can we zoom out? Keep zooming out until we reach the origin of
00:33:33,840 --> 00:33:40,720 human civilization, but on the way, ask, you gave economists a D minus. I'm not even going to ask
00:33:40,720 --> 00:33:49,200 what you give to governments. Do you think their failure, economists and government failure is
00:33:49,200 --> 00:33:58,800 malevolence or incompetence? I think policymakers are well-intentioned, but generally all government
00:33:58,800 --> 00:34:04,800 policy is inflationary. It's inflammatory and inflationary. So what I mean by that is
00:34:06,000 --> 00:34:13,920 when you have a policy pursuing supply chain independence, if you have an energy policy,
00:34:13,920 --> 00:34:20,960 if you have a labor policy, if you have a trade policy, if you have any kind of foreign policy,
00:34:20,960 --> 00:34:28,400 a domestic policy, a manufacturing policy, every one of these, a medical policy, every one of these
00:34:28,400 --> 00:34:37,440 policies interferes with the free market and generally prevents some rational actor from doing
00:34:37,440 --> 00:34:43,440 it in a cheaper, more efficient way. So when you layer them on top of each other, they all have to
00:34:43,440 --> 00:34:48,880 be paid for. If you want to shut down the entire economy for a year, you have to pay for it,
00:34:48,880 --> 00:34:54,400 right? If you want to fight a war, you have to pay for it, right? If you don't want to use oil
00:34:54,400 --> 00:35:00,480 or natural gas, you have to pay for it. If you don't want to manufacture semiconductors in China
00:35:00,480 --> 00:35:05,440 and you want to manufacture them in the US, you got to pay for it. If I rebuild the entire supply
00:35:05,440 --> 00:35:10,640 chain in Pennsylvania and I hire a bunch of employees and then I unionize the employees,
00:35:11,360 --> 00:35:18,640 then not only am I, I idle the factory in the Far East, it goes to 50% capacity. So
00:35:18,640 --> 00:35:24,400 whatever it sells, it has to raise the price on. And then I drive up the cost of labor for every
00:35:24,400 --> 00:35:30,880 other manufacturer in the US because I'm competing against them, right? I'm changing that condition. So
00:35:31,440 --> 00:35:35,920 everything gets less efficient, everything gets more expensive. And of course, the government
00:35:35,920 --> 00:35:43,600 couldn't really pay for its policies and its wars with taxes. We didn't pay for World War I with tax.
00:35:43,600 --> 00:35:47,840 We didn't pay for World War II with tax. We didn't pay for Vietnam with tax. In fact,
00:35:47,840 --> 00:35:53,680 when you trace this, what you realize is the government never pays for all of its policies
00:35:53,680 --> 00:36:00,080 with taxes. Because it's too painful to ask to raise the taxes to truly transparently pay for
00:36:00,080 --> 00:36:05,680 the things you're doing with taxes, with taxpayer money, because they feel the pain. That's one
00:36:05,680 --> 00:36:12,400 interpretation or it's just too transparent. If people understood the true cost-
00:36:12,400 --> 00:36:15,120 Of war, they wouldn't want to go to war.
00:36:15,120 --> 00:36:22,960 If you were told that you would lose 95% of your assets, you know, and 90% of everything you will
00:36:22,960 --> 00:36:30,000 be ever will be taken from you, you might reprioritize your thought about a given policy
00:36:30,000 --> 00:36:33,760 and you might not vote for that politician. But you're still saying incompetence,
00:36:33,760 --> 00:36:39,680 not malevolence. So fundamentally, government creates a bureaucracy of incompetence,
00:36:39,680 --> 00:36:48,000 is kind of how you look at it. I think a lack of humility, like if people
00:36:48,000 --> 00:36:53,200 had more humility, then they would realize- Humility about how little they know,
00:36:53,760 --> 00:36:56,800 how little they understand about the function of complex systems.
00:36:56,800 --> 00:36:59,840 There's a phrase from Quanese to his movie Unforgiven, where he says,
00:36:59,840 --> 00:37:06,560 a man's got to know his limitations. I think that a lot of people overestimate
00:37:06,560 --> 00:37:17,600 what they can accomplish and experience. Experience in life causes you to re-evaluate that.
00:37:17,600 --> 00:37:24,000 So I mean, I've done a lot of things in my life and generally, my mistakes were always
00:37:24,000 --> 00:37:31,840 my good ideas that I enthusiastically pursued to the detriment of my great ideas that required
00:37:31,840 --> 00:37:40,080 150% of my attention to prosper. So I think people pursue too many good ideas. They all
00:37:40,080 --> 00:37:47,440 sound good, but there's just a limit to what you can accomplish. And everybody underestimates
00:37:47,440 --> 00:37:56,800 the challenges of implementing an idea. And they always overestimate the benefits
00:37:56,800 --> 00:38:03,760 of the pursuit of that. And so I think it's an overconfidence that causes an overexuberance
00:38:03,760 --> 00:38:11,600 in pursuit of policies. And as the ambition of the government expands, so must the currency supply.
00:38:13,200 --> 00:38:15,600 I could say the money supply, but let's say the currency supply.
00:38:17,360 --> 00:38:23,600 You can triple the number of pesos in the economy, but it doesn't triple the amount of
00:38:23,600 --> 00:38:29,040 manufacturing capacity in the said economy. And it doesn't triple the amount of assets
00:38:29,040 --> 00:38:34,640 in the economy, it just triples the pesos. So as you increase the currency supply,
00:38:35,600 --> 00:38:41,600 then the price of all those scarce desirable things will tend to go up rapidly.
00:38:42,400 --> 00:38:49,280 And the confidence of all of the institutions, the corporations, and the individual actors
00:38:49,280 --> 00:38:52,560 and trading partners will collapse.
00:38:52,560 --> 00:39:00,240 LW. If we take a tangent on a tangent, and we will return soon to the big human civilization question.
00:39:02,960 --> 00:39:08,560 So if government naturally wants to buy stuff it can't afford,
00:39:10,080 --> 00:39:17,840 what's the best form of government? Anarchism, libertarianism. So not even,
00:39:17,840 --> 00:39:22,480 there's not even armies, there's no borders, that's anarchism.
00:39:22,480 --> 00:39:23,120 RL. The least.
00:39:23,120 --> 00:39:26,720 LW. The smallest possible. The smallest possible.
00:39:26,720 --> 00:39:31,440 RL. The best government would be the least, and the debate will be over that.
00:39:31,440 --> 00:39:36,240 LW. When you think about this stuff, do you think about, okay, government is the way it is. I,
00:39:36,880 --> 00:39:42,080 as a person that can generate great ideas, how do I operate in this world? Or do you also think
00:39:42,080 --> 00:39:47,840 about the big picture, if we start a new civilization somewhere on Mars, do you think
00:39:47,840 --> 00:39:53,200 about what's the ultimate form of government? What's at least a promising thing to try?
00:39:58,960 --> 00:40:06,000 RL. You know, I have laser eyes on my profile on Twitter, Lex.
00:40:06,000 --> 00:40:07,280 LW. What does that mean?
00:40:07,280 --> 00:40:13,440 RL. And the significance of laser eyes is to focus on the thing that can make a difference.
00:40:14,240 --> 00:40:24,240 And if I look at the civilization, I would say half the problems in the civilization
00:40:25,600 --> 00:40:29,680 are due to the fact that our understanding of economics and money is defective.
00:40:29,680 --> 00:40:39,520 Half. 50%. I don't know, it's worth $500 trillion worth of problems. Like, money represents all the
00:40:40,080 --> 00:40:46,240 economic energy in the civilization, and it kind of equates to all the products, all the services,
00:40:46,240 --> 00:40:51,920 and all the assets that we have and we're ever gonna have. So that's half. The other half of
00:40:51,920 --> 00:41:01,120 the problems in the civilization are medical and military and political and philosophical
00:41:03,600 --> 00:41:10,960 and natural. And I think that there are a lot of different solutions to all those problems,
00:41:10,960 --> 00:41:19,760 and they are all honorable professions, and they all merit a lifetime of consideration
00:41:19,760 --> 00:41:27,440 for the specialists in all those areas. I think that what I could offer that's constructive is
00:41:30,320 --> 00:41:36,320 inflation is completely misunderstood. It's a much bigger problem than we understand it to be.
00:41:36,960 --> 00:41:42,000 We need to introduce engineering and science techniques into economics if we want to further
00:41:42,000 --> 00:41:49,840 the human condition. All government policy is inflationary. And another pernicious myth
00:41:50,400 --> 00:41:57,920 is inflation is always and everywhere a monetary phenomena. A famous quote by Milton Friedman,
00:41:57,920 --> 00:42:02,240 I believe, it's like, it's a monetary phenomena, that is inflation comes from expanding the
00:42:02,240 --> 00:42:08,560 currency supply. It's a nice phrase, and it's oftentimes quoted by people that are anti-inflation,
00:42:08,560 --> 00:42:13,680 but again, it just signifies a lack of appreciation of what the issue is.
00:42:14,320 --> 00:42:22,240 If I had a currency which was completely non-inflationary, if I never printed another
00:42:22,240 --> 00:42:26,800 dollar, and if I eliminated fractional reserve banking from the face of the earth,
00:42:27,440 --> 00:42:34,560 we'd still have inflation. And we have inflation as long as we have government that is capable of
00:42:34,560 --> 00:42:42,400 pursuing any kind of policies that are in themself inflationary, and generally they all are.
00:42:42,400 --> 00:42:49,840 So in general, inflationary is the big characteristic of human nature that
00:42:49,840 --> 00:42:54,560 government's collection of groups that have power over others and allocate other people's resources
00:42:55,680 --> 00:43:03,600 will try to intentionally or not hide the costs of those allocations. Like in some
00:43:03,600 --> 00:43:11,920 some tricky ways, whatever the options are available. Hiding the cost is like the tertiary
00:43:11,920 --> 00:43:21,280 thing. The primary goal is the government will attempt to do good. That's the primary problem?
00:43:21,280 --> 00:43:28,400 They will attempt to do good, and they will do good imperfectly, and they will create oftentimes
00:43:28,400 --> 00:43:34,480 as much damage, more damage than the good they do. Most government policy will be iatrogenic.
00:43:34,480 --> 00:43:38,960 It will create more harm than good in the pursuit of it, but it is what it is.
00:43:38,960 --> 00:43:48,400 The secondary issue is they will unintentionally pay for it by expanding the currency supply
00:43:48,400 --> 00:43:58,560 without realizing that they're actually paying for it in a suboptimal fashion.
00:43:58,560 --> 00:44:04,320 They'll collapse their own currencies while they attempt to do good. The tertiary issue is
00:44:04,320 --> 00:44:10,480 they will mismeasure how badly they're collapsing the currency. So for example, if you go to the
00:44:10,480 --> 00:44:16,080 Bureau of Labor Statistics and look at the numbers printed by the Fed, they'll say,
00:44:16,080 --> 00:44:22,080 oh, it looks like the dollar has lost 95% of its purchasing power over 100 years. Okay,
00:44:22,080 --> 00:44:27,680 they sort of fess up that there's a problem, but they make it 95% loss over 100 years. What they
00:44:27,680 --> 00:44:36,480 don't do is realize it's a 99.7% loss over 80 years. So they will mismeasure just the horrific
00:44:36,480 --> 00:44:45,200 extent of the monetary policy in pursuit of the foreign policy and the domestic policy,
00:44:45,200 --> 00:44:54,720 which they overestimate their budget and their means to accomplish their ends, and they
00:44:54,720 --> 00:45:02,880 underestimate the cost. And they're oblivious to the horrific damage that they do to the
00:45:02,880 --> 00:45:10,080 civilization because the mental models that they use that are conventionally taught are wrong,
00:45:10,080 --> 00:45:16,000 right? The mental model that, like, it's okay, we can print all this money because the velocity of
00:45:16,000 --> 00:45:23,360 the money is low, right? Because money velocity is a scalar and inflation is the scalar, and we
00:45:23,360 --> 00:45:28,960 don't see 2% inflation yet and the money velocity is low, and so it's okay if we print trillions of
00:45:28,960 --> 00:45:36,400 dollars. Well, the money velocity was immediate, right? The velocity of money through the crypto
00:45:36,400 --> 00:45:45,920 economy is 10,000 times faster than the velocity of money through the consumer economy, right? I
00:45:45,920 --> 00:45:50,480 think Nick pointed out when you spoke to him, he said it takes two months for a credit card
00:45:50,480 --> 00:45:56,160 transaction to settle, right? So you want to spend a million dollars in the consumer economy,
00:45:56,160 --> 00:46:02,480 you can move it six times a year. You put a million dollars into gold, gold will sit in a
00:46:02,480 --> 00:46:09,280 vault for a decade, okay? So the velocity of money through gold is 0.1. You put the money in the stock
00:46:09,280 --> 00:46:14,080 market and you can trade it once a week, the settlement is T plus 2, maybe you get to 2 to
00:46:14,080 --> 00:46:20,960 1 leverage. You might get to a money velocity of 100 a year in the stock market. You put your money
00:46:20,960 --> 00:46:27,840 into the crypto economy and these people are settling every four hours. And if you're offshore,
00:46:27,840 --> 00:46:34,480 they're trading with 20x leverage. So if you settle every day and you trade with 20x leverage,
00:46:34,480 --> 00:46:44,160 you just went to 7,000. So the velocity of the money varies. I think the politicians,
00:46:44,160 --> 00:46:49,440 they don't really understand inflation and they don't understand economics, but you can't blame
00:46:49,440 --> 00:46:55,760 them because the economists don't understand economics. Because if they did, they would be
00:46:55,760 --> 00:47:04,160 creating multivariate computer simulations where they actually put in the price of every piece of
00:47:04,160 --> 00:47:09,600 housing in every city in the world, the full array of foods, and the full array of products,
00:47:09,600 --> 00:47:16,320 and the full array of assets. And then on a monthly basis, they would publish all those
00:47:16,320 --> 00:47:24,000 results. And that's a high bandwidth requirement. And I think that people don't really want to
00:47:24,000 --> 00:47:32,880 embrace it. And also, the most pernicious thing, there's that phrase, you can't tell people what
00:47:32,880 --> 00:47:38,800 to think, but you can tell them what to think about. The most pernicious thing is, I get you
00:47:38,800 --> 00:47:47,920 to misunderstand the phenomena so that even when it's happening to you, you don't appreciate that
00:47:47,920 --> 00:47:53,440 it's a bad thing and you think it's a good thing. So if housing prices are going up 20% year over
00:47:53,440 --> 00:47:57,920 year and I say, this is great for the American public because most of them are homeowners,
00:47:58,480 --> 00:48:08,000 then I have misrepresented a phenomena. Inflation is 20%, not 7%. And then I have misrepresented it
00:48:08,000 --> 00:48:15,200 as being a positive rather than a negative. And people will stare at it and you could even show
00:48:15,200 --> 00:48:20,880 them their house on fire and they would perceive it as being great because it's warming them up
00:48:20,880 --> 00:48:25,920 and they're going to save on their heat cost. It does seem that the cruder the model, whether
00:48:25,920 --> 00:48:32,880 it's economics or their psychology, the easier it is to weave whatever the heck narrative you want
00:48:33,440 --> 00:48:42,160 and not in a malicious way, but just like it's some kind of emergent phenomena, this narrative
00:48:42,160 --> 00:48:46,960 thing that we tell ourselves. So you can tell any kind of story about inflation. Inflation is good,
00:48:46,960 --> 00:48:51,520 inflation is bad. The cruder the model, the easier it is to tell a narrative about it.
00:48:52,800 --> 00:48:58,880 So if you take an engineering approach, I feel like it becomes more and more difficult
00:48:59,520 --> 00:49:04,960 to run away from a true deep understanding of the dynamics of the system.
00:49:06,480 --> 00:49:10,480 I mean, honestly, if you went to a hundred people on the street and you asked them to define
00:49:10,480 --> 00:49:18,640 inflation, how many would say it's a vector tracking the change in price of every product
00:49:18,640 --> 00:49:26,240 service asset in the world over time? Not many. Now, if you went to them and you said,
00:49:28,080 --> 00:49:32,800 do you think 2% inflation a year is good or bad? The majority would probably say,
00:49:32,800 --> 00:49:38,640 well, I hear it's good. The majority of economists would say 2% inflation a year is good.
00:49:38,640 --> 00:49:49,200 And of course, look at the ship next to us. What if I told you that the ship leaked 2% of its
00:49:49,200 --> 00:49:54,880 volume every something, right? The ship is rotting 2% a year. That means the useful life of the ship
00:49:54,880 --> 00:50:01,440 is 50 years. Now, ironically, that's true. Like a wooden ship had a 50 year to a hundred year life,
00:50:01,440 --> 00:50:07,280 100 would be long, 50 years, not unlikely. So when we built ships out of wood, they had a useful
00:50:07,280 --> 00:50:14,480 life of about 50 years and then they sunk, they rotted. There's nothing good about it, right? You
00:50:14,480 --> 00:50:22,720 build a ship out of steel and it's zero as opposed to 2% degradation. And how much better is 0%
00:50:22,720 --> 00:50:33,360 versus 2%? Well, 2% means you have a useful life of, it's half-life of 35 years. 2% is a half-life
00:50:33,360 --> 00:50:38,320 of 35 years. That's basically the half-life of money and gold. If I store your life force in
00:50:38,320 --> 00:50:46,000 gold, under perfect circumstances, you have a useful life of 35 years. 0% is a useful life of
00:50:46,000 --> 00:50:57,120 forever. So 0% is immortal. 2% is 35 years average life expectancy. So the idea that you would think
00:50:57,120 --> 00:51:02,000 the life expectancy of the currency and the civilization should be 35 years instead of
00:51:02,000 --> 00:51:09,520 forever is kind of a silly notion. But the tragic notion is it was, you know, 7 into 7,
00:51:09,520 --> 00:51:17,360 or 10 years. The money has had a half-life of 10 years, except for the fact that in weak societies
00:51:17,360 --> 00:51:24,400 in Argentina or the like, the half-life of the money is three to four years, in Venezuela,
00:51:24,400 --> 00:51:32,080 one year. So the United States dollar and the United States economic system was the most
00:51:32,080 --> 00:51:38,160 successful economic system in the last 100 years in the world. We won every war. We were the world's
00:51:38,160 --> 00:51:46,320 superpower. Our currency lost 99.7% of its value. And that means, horrifically, every other currency
00:51:46,320 --> 00:51:53,920 lost everything. In essence, the other ones were 99.9%, except for most that were 100% because they
00:51:53,920 --> 00:52:04,480 all completely failed. And you've got a mainstream economic community that thinks that inflation is
00:52:04,480 --> 00:52:13,600 a number and 2% is desirable. It's kind of like, you know, remember George Washington? You know
00:52:13,600 --> 00:52:23,520 how he died? Well-meaning physicians bled him to death. Okay, the last thing in the world you would
00:52:23,520 --> 00:52:30,480 want to do to a sick person is bleed them, right? In the modern world, I think we understand that
00:52:30,480 --> 00:52:43,360 oxygen is carried by the blood cells. And there's that triage phrase, what's the first thing you do
00:52:43,360 --> 00:52:49,680 in an injury? Stop the bleeding. Single first thing, right? You show up after any accident,
00:52:49,680 --> 00:52:54,480 I look at you, stop the bleeding because you're going to be dead in a matter of minutes if you
00:52:54,480 --> 00:53:02,640 bleed out. So it strikes me as being ironic that orthodox conventional wisdom was bleed the patient
00:53:02,640 --> 00:53:08,080 to death. And this was the most important patient in the country, maybe in the history of the
00:53:08,080 --> 00:53:15,120 country, and we bled him to death trying to help him. So when you're actually inflating the money
00:53:15,120 --> 00:53:22,240 supply at 7%, but you're calling it 2% because you want to help the economy, you're literally
00:53:22,240 --> 00:53:29,360 bleeding the free market to death. But the sad fact is George Washington went along with it
00:53:30,000 --> 00:53:36,480 because he thought that they were going to do him good. And the majority of the society,
00:53:36,480 --> 00:53:44,960 most companies, most conventional thinkers, you know, the working class, they go along with this
00:53:44,960 --> 00:53:49,600 because they think that someone has their best interests at mind and the people that are bleeding
00:53:49,600 --> 00:53:55,600 them to death believe, they believe that prescription because their mental models are
00:53:55,600 --> 00:54:04,960 just so defective. And their understanding of energy and engineering and the economics that
00:54:04,960 --> 00:54:11,760 are at play is crippled by these mental models. But that's both the bug in the future of human
00:54:11,760 --> 00:54:16,720 civilization, that ideas take hold, they unite us, we believe in them,
00:54:16,720 --> 00:54:26,160 and we make a lot of cool stuff happen by, as an average, sort of, just the fact of the matter,
00:54:26,720 --> 00:54:31,600 a lot of people believe the same thing, they get together, and they get some shit done because
00:54:31,600 --> 00:54:36,960 they believe that thing. And then some ideas can be really bad and really destructive,
00:54:36,960 --> 00:54:43,280 but on average, the ideas seem to be progressing in a direction of good. Let me just step back.
00:54:43,280 --> 00:54:49,440 What the hell are we doing here, us humans on this earth? How do you think of humans? How special
00:54:49,440 --> 00:54:56,880 are humans? How did human civilization originate on this earth? And what is this human project
00:54:56,880 --> 00:55:03,760 that we're all taking on? You mentioned fire and water and apparently bleeding you to death is not
00:55:03,760 --> 00:55:09,360 a good idea. I always thought you can get the demons out in that way, but that was a recent
00:55:09,360 --> 00:55:19,520 invention. So what's this thing we're doing here? I think what distinguishes human beings from
00:55:19,520 --> 00:55:27,600 all the other creatures on the earth is our ability to engineer. We're engineers, right?
00:55:27,600 --> 00:55:35,120 To solve problems or just build incredible cool things? Engineering,
00:55:35,120 --> 00:55:41,840 harnessing energy and technique to make the world a better place than you found it, right?
00:55:41,840 --> 00:55:48,320 But from the point that we actually started to play with fire, right? That was a big leap forward.
00:55:49,840 --> 00:55:57,840 Harnessing the power of kinetic energy and missiles, another step forward. Every city
00:55:57,840 --> 00:56:07,440 built on water. Why water? Well, water is bringing energy, right? If you actually put a turbine
00:56:07,440 --> 00:56:13,920 on a river or you capture a change in elevation of water, you've literally harnessed gravitational
00:56:13,920 --> 00:56:22,240 energy. But water is also bringing you food. It's also giving you a cheap form of getting
00:56:22,240 --> 00:56:27,760 rid of your waste. It's also giving you free transportation. You want to move one ton blocks
00:56:27,760 --> 00:56:34,640 around. You want to move them in water. So I think, I mean, the human story is really the story
00:56:34,640 --> 00:56:45,520 of engineering a better world. And the rise in the human condition is determined by those groups
00:56:45,520 --> 00:56:52,400 of people, those civilizations that were best at harnessing energy, right? If you look, you know,
00:56:52,400 --> 00:56:58,960 the Greek civilization, they built it around ports and seaports and water and created a trading
00:56:58,960 --> 00:57:06,240 network. The Romans were really good at harnessing all sorts of engineering. I mean, the aqueducts are
00:57:06,240 --> 00:57:11,760 a great example. If you go to any big city, you travel through cities and you see all these
00:57:11,760 --> 00:57:17,440 people. If you go to any big city, you travel through cities in the Med, you find that, you
00:57:17,440 --> 00:57:22,640 know, the carrying capacity of the city or the island is 5,000 people without running water.
00:57:22,640 --> 00:57:26,720 And then if you can find a way to bring water to it, it increases by a factor of 10.
00:57:27,440 --> 00:57:33,760 And so human flourishing is really only possible through that channeling of energy,
00:57:33,760 --> 00:57:43,440 right? That eventually takes the form of air power, right? I mean, that ship, I mean, look
00:57:43,440 --> 00:57:48,880 at the intricacy of those sails, right? I mean, it's just the model is intricate. Now, think about
00:57:48,880 --> 00:57:53,520 all of the experimentation that took place to figure out how many sails to put on that ship and
00:57:53,520 --> 00:57:58,080 how to rig them and how to repair them and how to operate them.
00:57:58,080 --> 00:58:06,640 And it's thousands of lives spent thinking through all the tiny little details, all to increase the
00:58:06,640 --> 00:58:12,640 efficiency of this, the effectiveness, the efficiency of this ship as it sails through
00:58:12,640 --> 00:58:17,120 water. And we should also note there's a bunch of cannons on the side. So, obviously.
00:58:17,120 --> 00:58:22,480 Another form of engineering, right? Energy harnessing with explosives.
00:58:22,480 --> 00:58:25,280 To achieve what end? That's another discussion, exactly.
00:58:25,280 --> 00:58:30,160 Suppose we're trying to get off the planet, right? I mean...
00:58:30,160 --> 00:58:33,680 Well, there's a selection mechanism going on. So, natural selection,
00:58:33,680 --> 00:58:39,280 this, whatever, however evolution works, it seems that one of the interesting inventions on earth
00:58:39,280 --> 00:58:43,760 was the predator-prey dynamic, that you want to be the bigger fish.
00:58:45,200 --> 00:58:51,440 That violence seems to serve a useful purpose if you look at earth as a whole. We, as humans,
00:58:51,440 --> 00:58:56,320 now like to think of violence as really a bad thing. It seems to be one of the
00:58:56,960 --> 00:59:01,360 amazing things about humans is we're ultimately tend towards cooperation.
00:59:01,360 --> 00:59:09,280 We want to, we like peace. If you just look at history, we want things to be nice and calm and
00:59:11,200 --> 00:59:16,320 but just wars break out every once in a while and lead to immense suffering and destruction
00:59:16,320 --> 00:59:25,360 and so on. And they have a kind of, like, resetting the palette effect.
00:59:25,360 --> 00:59:32,400 It's one that's full of just immeasurable human suffering, but it's like a way to start over.
00:59:33,440 --> 00:59:39,040 We're quite the apex predator on the planet. And I googled something the other day,
00:59:39,040 --> 00:59:45,920 you know, what's the most common form of mammal life on the earth?
00:59:45,920 --> 00:59:48,000 By number of organisms?
00:59:48,000 --> 00:59:48,400 Count.
00:59:48,400 --> 00:59:49,120 By count.
00:59:49,120 --> 00:59:53,520 And the answer that came back was human beings. I was shocked. I couldn't believe it, right? It
00:59:53,520 --> 00:59:58,080 says, like, apparently, if we're just looking at mammals, the answer was human beings are the most
00:59:58,080 --> 01:00:03,920 common, which was very interesting to me. I almost didn't believe it, but I was trying to, you know,
01:00:03,920 --> 01:00:09,360 8 billion or so human beings. There's no other mammal that's got more than 8 billion.
01:00:10,080 --> 01:00:14,560 If you walk through downtown Edinburgh and Scotland and you look up on this hill and this
01:00:14,560 --> 01:00:21,680 castle up on the hill, you know, and you talk to people and the story is, oh, yeah, well, that was
01:00:22,560 --> 01:00:27,440 a British castle before it was a Scottish castle, before it was a Pict castle, before it was a Roman
01:00:27,440 --> 01:00:35,600 castle, before it was, you know, some other Celtic castle. Then they found 13 prehistoric castles
01:00:35,600 --> 01:00:42,400 buried one under the other under the other. And you get the conclusion that 100,000 years ago,
01:00:42,400 --> 01:00:49,600 somebody showed up and grabbed the high point, the apex of the city, and they built a stronghold
01:00:49,600 --> 01:00:53,680 there and they flourished and their family flourished and their tribe flourished until
01:00:53,680 --> 01:01:00,160 someone came along and knocked them off the hill. And it's been a nonstop, never-ending fight
01:01:00,160 --> 01:01:08,560 by the aggressive, most powerful entity, family, organization, municipality, tribe, whatever.
01:01:08,560 --> 01:01:09,680 All for the hill.
01:01:09,680 --> 01:01:19,760 For that one hill going back since time immemorial. And, you know, you scratch your head and you
01:01:19,760 --> 01:01:24,160 think it seems like it's like just this never-ending wheel.
01:01:24,160 --> 01:01:30,240 But doesn't that lead, if you just, all kinds of metrics, that seems to improve the quality
01:01:30,240 --> 01:01:36,800 of our cannons and ships as a result. Like, it seems that war, just like your laser eyes,
01:01:36,800 --> 01:01:39,520 focuses the mind on the engineering tasks.
01:01:39,520 --> 01:01:47,520 It is that. And it does remind you that the winner is always the most powerful.
01:01:47,520 --> 01:01:53,280 And we throw that phrase out, but no one thinks about what that phrase means. Like,
01:01:53,280 --> 01:01:58,080 who's the most powerful or the, you know, or the most powerful side one, but they don't think
01:01:58,080 --> 01:02:05,280 about it. And they think about power, energy delivered in a period of time. And then you think
01:02:06,640 --> 01:02:11,280 a guy with a spear is more powerful than someone with their fist and someone with a bow and arrow
01:02:11,280 --> 01:02:16,560 is more powerful than the person with the spear. And then you realize that somebody with bronze
01:02:16,560 --> 01:02:21,280 is more powerful than without, and steel is more powerful than bronze. And if you look
01:02:21,280 --> 01:02:26,080 at the Romans, you know, they persevered, you know, with artillery and they could stand
01:02:26,080 --> 01:02:32,880 off from 800 meters and blast you to smithereens, right? You know, you study the history of the
01:02:32,880 --> 01:02:38,080 Balearic slingers, right? And, you know, you think we invented bullets, but they invented
01:02:38,080 --> 01:02:44,560 bullets to put in slings thousands of years ago. They could have stood off 500 meters and put a
01:02:44,560 --> 01:02:55,600 hole in your head, right? And so there was never a time when humanity wasn't vying to come up with
01:02:55,600 --> 01:03:01,360 an asymmetric form of projecting their own power via technology.
01:03:01,360 --> 01:03:09,920 And absolute power is when a leader is able to control a large amount of humans, they're
01:03:09,920 --> 01:03:15,600 facing the same direction, working in the same direction to leverage energy.
01:03:15,600 --> 01:03:17,920 The most organized society wins.
01:03:17,920 --> 01:03:18,880 Yeah.
01:03:18,880 --> 01:03:25,200 When the Romans were dominating everybody, they were the most organized civilization
01:03:25,200 --> 01:03:31,600 in Europe. And as long as they stayed organized, they dominated. And at some point they over
01:03:31,600 --> 01:03:38,160 expanded and got disorganized and they collapsed. And I guess you could say that, you know,
01:03:38,160 --> 01:03:44,320 the struggle of the human condition, it catalyzes the development of new technologies one after the
01:03:44,320 --> 01:03:52,560 other. It penalizes anybody that rejects ocean power, right? Gets penalized, you reject artillery,
01:03:52,560 --> 01:03:57,920 you get penalized, you reject atomic power, you get penalized. If you reject digital power,
01:03:57,920 --> 01:04:06,720 cyber power, you get penalized. And the underlying control of the property keeps shifting,
01:04:06,720 --> 01:04:13,680 property keeps shifting hands from, you know, one institution or one government to another
01:04:13,680 --> 01:04:19,440 based upon how rationally they're able to channel that energy and how well organized
01:04:19,440 --> 01:04:20,480 or coordinated they are.
01:04:20,480 --> 01:04:24,400 Well, that's a really interesting thing about both the human mind and governments
01:04:24,960 --> 01:04:29,040 that they, once they get a few good, and companies, once they get a few good ideas,
01:04:29,040 --> 01:04:35,600 they seem to stick with them. They reject new ideas. It's almost whether that's emergent or
01:04:35,600 --> 01:04:41,680 however that evolved, it seems to have a really interesting effect because when you're young,
01:04:42,560 --> 01:04:50,160 you fight for the new ideas. You push them through, then a few of us humans find success,
01:04:50,160 --> 01:04:57,600 then we get complacent, we take over the world using that new idea, and then the new young
01:04:57,600 --> 01:05:04,800 person with the better new idea challenges you and you, as opposed to pivoting, you stick
01:05:04,800 --> 01:05:10,240 with the old and lose because of it. And that's how empires collapse. And it's just both at
01:05:10,240 --> 01:05:14,160 the individual level that happens when two academics fighting about ideas or something
01:05:14,160 --> 01:05:21,360 like that. And at the human civilization level, governments, they hold on to the ideas of old.
01:05:22,240 --> 01:05:23,040 It's fascinating.
01:05:23,840 --> 01:05:29,680 An ever persistent theme in the history of science is the paradigm shift. And the paradigms
01:05:29,680 --> 01:05:36,080 shift when the old guard dies and a new generation arrives, or the paradigm shifts when there's a
01:05:36,080 --> 01:05:43,760 war, and everyone that disagrees with the idea of aviation finds bombs dropping on their head,
01:05:44,240 --> 01:05:48,880 or everyone that disagrees with whatever your technology is, has a rude awakening. And
01:05:48,880 --> 01:05:55,200 if they totally disagree, their society collapses and they're replaced by that new thing.
01:05:55,200 --> 01:06:01,680 A lot of the engineering you talked about had to do with ships and cannons and leveraging
01:06:01,680 --> 01:06:08,800 water. What about this whole digital thing that's happening, been happening over the past century?
01:06:10,000 --> 01:06:15,760 Is that still engineering in your mind? You're starting to operate in these bits of information.
01:06:17,120 --> 01:06:23,440 I think there's two big ideas. The first wave of ideas were digital information.
01:06:23,440 --> 01:06:29,760 And that was the internet wave been running since 1990 or so, for 30 years. And the second
01:06:29,760 --> 01:06:38,320 wave is digital energy. So if I look at digital information, this idea that we want to digitally
01:06:38,320 --> 01:06:46,880 transform a book, I'm going to dematerialize every book in this room into bits, and then I'm going to
01:06:46,880 --> 01:06:54,480 deliver a copy of the entire library to a billion people, and I'm going to do it for pretty much
01:06:54,480 --> 01:07:03,840 de minimis electricity. If I can dematerialize music, books, education, entertainment, maps,
01:07:05,440 --> 01:07:14,640 right? That is an incredibly exothermic transaction. It's a crystallization when we
01:07:14,640 --> 01:07:18,480 collapse into a lower energy state as a civilization, and we give off massive
01:07:18,480 --> 01:07:24,240 amounts of energy. If you look at what Carnegie did, the richest man in the world created libraries
01:07:24,240 --> 01:07:29,040 everywhere at the time, and he gave away his entire fortune. And now we can give a better
01:07:29,040 --> 01:07:35,840 library to every six-year-old for nothing. And so what's the value of giving a million books to
01:07:35,840 --> 01:07:42,320 eight billion people? That's the explosion in prosperity that comes from digital transformation.
01:07:42,960 --> 01:07:49,840 And when we do it with maps, I transform the map, I put it into a car, you get in the car,
01:07:49,840 --> 01:07:55,680 and the car drives you where you want to go with the map. And how much better is that than
01:07:55,680 --> 01:08:02,400 a Rand McNally atlas right here? It's like a million times better. So the first wave
01:08:02,400 --> 01:08:10,320 of digital transformation was the dematerialization of all of these informational things which are
01:08:10,320 --> 01:08:16,640 non-conservative. I could take Beethoven's Fifth Symphony, played for by the best orchestra in
01:08:16,640 --> 01:08:23,440 Germany, and I could give it to a billion people and they could play it a thousand times each at
01:08:23,440 --> 01:08:29,360 less than the cost of the one performance, right? So I deliver culture and education and education
01:08:29,360 --> 01:08:36,000 and intelligence and insight to the entire civilization over digital rails. And the
01:08:36,000 --> 01:08:41,520 consequences of the human race are first order, generally good, right? The world is a better
01:08:41,520 --> 01:08:47,040 place, it drives growth, and you create these trillion dollar entities like Apple and Amazon
01:08:47,040 --> 01:08:54,080 and Facebook and Google and Microsoft, right? That is the first wave. The second wave...
01:08:54,080 --> 01:09:02,960 I do mind, I'm sorry to interrupt, but that first wave, it feels like the impact that's positive,
01:09:03,760 --> 01:09:08,240 you said the first order impact is generally positive, it feels like it's positive in a way
01:09:08,240 --> 01:09:16,320 that nothing else in history has been positive. And then we may not actually truly be able to
01:09:16,320 --> 01:09:25,040 understand the orders of magnitude of increase in productivity, in just progress of human
01:09:25,040 --> 01:09:31,520 civilization, until we look back centuries from now. It just feels, or maybe I'm, like just
01:09:31,520 --> 01:09:40,640 looking at the impact of Wikipedia, the giving access to basic wisdom or basic knowledge and
01:09:40,640 --> 01:09:46,960 then perhaps wisdom to billions of people. If you can just linger on that for a second. What's
01:09:46,960 --> 01:09:48,960 your sense of the impact of that?
01:09:50,880 --> 01:09:57,360 You know, I would say if you're a technologist philosopher,
01:09:59,760 --> 01:10:06,000 the impact of a technology is so much greater on the civilization and the human condition
01:10:06,000 --> 01:10:12,000 than a non-technology that is almost not worth your trouble to bother trying to fix things
01:10:12,000 --> 01:10:19,440 a conventional way. So let's take an example. I have a foundation, the Saylor Academy, and the
01:10:19,440 --> 01:10:26,240 Saylor Academy gives away free education, free college education to anybody on Earth that wants
01:10:26,240 --> 01:10:32,320 it. And we've had more than a million students. And if you go and you take the physics class,
01:10:32,320 --> 01:10:37,840 the lecturers were by the same physics lecturer that taught me physics at MIT. Except when I was
01:10:37,840 --> 01:10:45,360 at MIT, the cost of the first four weeks of MIT would have drained my family's life, collective
01:10:45,360 --> 01:10:50,960 life savings for the first last hundred years. Like a hundred years worth of my father, my
01:10:50,960 --> 01:10:55,040 grandfather, my great-grandfather, they saved every penny they had after a hundred years. They
01:10:55,040 --> 01:11:01,120 could have paid for one week or two weeks of MIT, but they didn't. They didn't. They didn't.
01:11:01,120 --> 01:11:08,080 Two weeks of MIT, that's how fiendishly expensive and inefficient it was. So I went on scholarship.
01:11:08,080 --> 01:11:15,360 I was lucky to have a scholarship. But on the other hand, I sat in the back of the
01:11:15,360 --> 01:11:21,520 801 lecture hall, and I was like right up in the rafters. It's an awful experience on these
01:11:21,520 --> 01:11:26,880 uncomfortable wooden benches, and you can barely see the blackboard. And you got to be there
01:11:26,880 --> 01:11:32,960 synchronously. And the stuff we upload, you can start it and stop it and watch it on your iPad
01:11:32,960 --> 01:11:37,760 or watch it on your computer and rewind it multiple times and sit in a comfortable chair,
01:11:37,760 --> 01:11:43,120 and you can do it from anywhere on earth, and it's absolutely free. So I think about this,
01:11:43,120 --> 01:11:50,240 and I think you want to improve the human condition. You need people with postgraduate
01:11:50,240 --> 01:11:55,520 level education. You need PhDs. And I know this sounds kind of elitist, but you want to cure
01:11:55,520 --> 01:12:05,120 cancer, and you want to go to the stars, fusion drive. We need new propulsion. We need extraordinary
01:12:05,120 --> 01:12:14,720 breakthroughs in every area of basic science, be it biology or propulsion or material science or
01:12:14,720 --> 01:12:19,360 computer science. You're not doing that with an undergraduate degree. You're certainly not doing
01:12:19,360 --> 01:12:26,080 it with a high school education, but the cost of a PhD is like a million bucks. There's like 10
01:12:26,080 --> 01:12:31,760 million PhDs in the world if you check it out. There's 8 billion people in the world. How many
01:12:31,760 --> 01:12:38,800 people could get a PhD or would want to? Maybe not 8 billion, but a billion? 500 million? Let's just
01:12:38,800 --> 01:12:46,560 say 500 million to a billion. How do you go from 10 million to a billion highly educated people,
01:12:46,560 --> 01:12:52,880 all of them specializing in, and I don't have to tell you how many different fields of human
01:12:52,880 --> 01:12:58,160 endeavor there are. I mean, your life is interviewing these experts, and there's so many,
01:12:59,360 --> 01:13:06,960 right? It's amazing. So how do I give a multi-million dollar education to a billion
01:13:06,960 --> 01:13:14,320 people? And there's two choices. You can either endow a scholarship, in which case you pay $75,000
01:13:14,320 --> 01:13:21,760 a year. Okay, $75,000. Let's pay a million dollars a person. I can do it that way.
01:13:24,320 --> 01:13:30,160 Even if you had a trillion dollars, if you had $10 trillion to throw at the problem,
01:13:30,160 --> 01:13:36,640 and we've just thrown $10 trillion at certain problems, you don't solve the problem, right?
01:13:36,640 --> 01:13:40,880 If I put $10 trillion on the table and I said educate everybody, give them all a PhD,
01:13:40,880 --> 01:13:46,320 you still wouldn't solve the problem. Harvard University can't educate 18,000 people
01:13:47,200 --> 01:13:53,440 simultaneously, or 87,000, or 800,000, or 8 million. So you have to dematerialize the
01:13:53,440 --> 01:13:58,880 professor and dematerialize the experience. So you put it all as streaming, on-demand,
01:13:58,880 --> 01:14:05,600 computer-generated education, and you create simulations where you need to create simulations,
01:14:05,600 --> 01:14:15,360 and you upload it. It's like the human condition is being held back by 500,000 well-meaning
01:14:16,720 --> 01:14:23,440 average algebra teachers. I love them. I mean, please don't take offense if you're an algebra
01:14:23,440 --> 01:14:30,400 teacher, but instead of 500,000 algebra teachers going through the same motion over and over again,
01:14:30,400 --> 01:14:37,440 what you need is like one, or five, or 10 really good algebra teachers, and they need to do it a
01:14:37,440 --> 01:14:45,920 billion times a day, or a billion times a year for free. And if we do that, there's no reason
01:14:45,920 --> 01:14:53,120 why you can't give infinite education, certainly in science, technology, engineering, and math,
01:14:53,120 --> 01:15:00,800 right? Infinite education to everybody with no constraint. And I think the same is true,
01:15:00,800 --> 01:15:07,040 right? With just about every other thing. If you want to bring joy to the world, you need digital
01:15:07,040 --> 01:15:14,880 music. If you want to bring enlightenment to the world, you need digital education. If you want to
01:15:14,880 --> 01:15:20,160 bring anything of consequence in the world, you got to digitally transform it, and then you got
01:15:20,160 --> 01:15:27,040 to manufacture it something like a hundred times more efficiently as a start, but a million times
01:15:27,040 --> 01:15:36,480 more efficiently is probably, you know, that's hopeful. Maybe you have a chance. And if you look
01:15:36,480 --> 01:15:41,280 at all of these space endeavors and everything we're thinking about getting to Mars, getting off
01:15:41,280 --> 01:15:45,920 the planet, getting to other worlds, number one thing you got to do is you got to make a
01:15:45,920 --> 01:15:51,600 fundamental breakthrough in an engine. People dreamed about flying for thousands of years,
01:15:51,600 --> 01:15:58,720 but until the internal combustion engine, you didn't have enough, you know, enough energy,
01:15:58,720 --> 01:16:06,640 enough power in a light enough package in order to solve the problem. And the human race has all
01:16:06,640 --> 01:16:16,720 sorts of those fundamental engines and materials and techniques that we need to master. And each
01:16:16,720 --> 01:16:24,480 one of them is a lifetime of experimentation of someone capable of making a seminal contribution
01:16:25,040 --> 01:16:29,440 to the body of human knowledge. There's certain problems like education that could be solved
01:16:29,440 --> 01:16:37,120 through this process of dematerialization. And by the way, to give props to the 500k algebra teachers,
01:16:38,560 --> 01:16:44,480 when I look at YouTube, for example, one possible approach is each one of those 500,000 teachers
01:16:44,480 --> 01:16:49,360 probably had days and moments of brilliance. And if they had the ability to contribute to
01:16:50,160 --> 01:16:56,560 in the natural selection process, like the market of education where the best ones rise up,
01:16:56,560 --> 01:17:04,640 that's a really interesting way, which is like the best day of your life, the best lesson you've ever
01:17:04,640 --> 01:17:16,960 taught could be found and sort of broadcast to billions of people. So all of those kinds of ideas
01:17:16,960 --> 01:17:23,120 can be made real in the digital world. Now traveling across planets, you still can't solve
01:17:23,120 --> 01:17:30,320 that problem with dematerialization. What you could solve potentially is dematerializing the
01:17:30,320 --> 01:17:36,640 human brain where you can transfer, like you don't need to have astronauts on the ship.
01:17:36,640 --> 01:17:40,400 You can have a floppy disk carrying a human brain.
01:17:41,040 --> 01:17:46,320 Touching on those points, you'd love for the 500,000 algebra teachers to become 500,000
01:17:46,320 --> 01:17:52,800 math specialists, and maybe they clump into 50,000 specialties as teams and they all pursue
01:17:52,800 --> 01:17:59,360 50,000 new problems and they put their algebra teaching on autopilot. That's the same as when
01:17:59,360 --> 01:18:08,480 I give you 11 cents worth of electricity and you don't have to row a boat eight hours a day before
01:18:08,480 --> 01:18:15,120 you can eat. It would be a lot better that you would pay for your food in the first eight seconds
01:18:15,120 --> 01:18:20,640 of your day and then you could start thinking about other things, right? With regard to
01:18:21,600 --> 01:18:27,920 technology, one thing that I learned studying technology when you look at S curves is
01:18:28,960 --> 01:18:35,920 until you start the S curve, you don't know whether you're a hundred years from viability,
01:18:36,880 --> 01:18:41,120 a thousand years from viability, or a few months from viability.
01:18:41,120 --> 01:18:49,760 Isn't that fun? That's so fun. The early part of the S curve is so fun because you don't know.
01:18:49,760 --> 01:18:56,720 In 1900, you could have got any number of learned academics to give you 10,000 reasons why
01:18:56,720 --> 01:19:02,400 humans will never fly, right? And in 1903, the Wright brothers flew and by 1969,
01:19:02,400 --> 01:19:09,680 we're walking on the moon. So the advance that we made in that field was extraordinary,
01:19:09,680 --> 01:19:14,400 but for the hundred years and 200 years before, they were just back and forth and nobody was
01:19:14,400 --> 01:19:23,440 close. And that's the happy part. The happy part is we went from flying 20 miles an hour or whatever
01:19:23,440 --> 01:19:33,360 to flying 25,000 miles an hour in 66 years. The unhappy part is I studied aeronautical
01:19:33,360 --> 01:19:41,280 engineering at MIT in the 80s. And in the 80s, we had Gulfstream aircraft, we had Boeing 737s,
01:19:41,280 --> 01:19:48,160 we had the Space Shuttle. And you fast forward 40 years and we pretty much had the same exact
01:19:48,160 --> 01:19:58,960 aircraft. The efficiency of the engines was 20, 30% more, right? We slammed into a brick wall
01:19:58,960 --> 01:20:08,880 around 69 to 75. Like in fact, the Global Express, the Gulfstream, these were all engineered
01:20:08,880 --> 01:20:17,920 in the 70s, some in the 60s. The fuselage silhouette of a Gulfstream of a G5 was the
01:20:17,920 --> 01:20:23,440 same shape as a G4, is the same shape as a G3, is the same shape as a G2. And that's because they
01:20:23,440 --> 01:20:27,760 were afraid to change the shape for 40 years because they worked it out in a wind tunnel,
01:20:27,760 --> 01:20:32,880 they knew it worked. And when they finally decided to change the shape, it was like a
01:20:32,880 --> 01:20:40,080 $10 billion exercise with modern supercomputers and computational fluid dynamics.
01:20:40,640 --> 01:20:46,400 Why was it so hard? What is that wall made of that you slammed into?
01:20:46,400 --> 01:20:50,640 The right question is so why does a guy that went to MIT that got an aeronautical engineering degree
01:20:50,640 --> 01:20:55,120 spend his career in software? Like why is it that I never a day in my life,
01:20:55,120 --> 01:21:00,080 you know, with the exception of some Air Force Reserve work, I never got paid to be
01:21:00,080 --> 01:21:03,600 an aeronautical engineer and I worked in software engineering my entire career.
01:21:03,600 --> 01:21:07,120 Maybe software engineering is the new aeronautical engineering in some way.
01:21:08,400 --> 01:21:13,840 Maybe, like, maybe you hit fundamental walls uncertain until you have to return to it centuries
01:21:13,840 --> 01:21:17,040 later. Or no?
01:21:17,040 --> 01:21:21,200 The National Gallery of Art was endowed by a very rich man,
01:21:21,200 --> 01:21:28,320 Andrew Mellon, and you know how he made his money? Aluminum. Okay? And so,
01:21:29,200 --> 01:21:36,560 and you know what kind of airplanes you can create without aluminum? Nothing. Nothing, right?
01:21:36,560 --> 01:21:38,480 So it's a materials problem.
01:21:38,480 --> 01:21:46,000 Okay, so 1900, we made massive advances in metallurgy, right? I mean, that was US steel.
01:21:46,000 --> 01:21:52,640 That was iron to steel, aluminum, massive fortunes were created because this was a massive technical
01:21:52,640 --> 01:21:57,520 advance. And then we also had the internal combustion engine and, you know, the story of
01:21:57,520 --> 01:22:04,720 Ford and General Motors and Daimler Chrysler and the like is informed by that. So you have no jet
01:22:04,720 --> 01:22:10,400 engines, no rocket motors, no internal combustion engines, you have no aviation. But even if you had
01:22:10,400 --> 01:22:15,920 those engines, if you were trying to build those things with steel, no chance. You had to have
01:22:15,920 --> 01:22:23,200 aluminum. So there's like two pretty basic technologies. And once you have those two
01:22:23,200 --> 01:22:32,640 technologies, stuff happens very fast. So tell me the last big advance in like jet engines,
01:22:33,440 --> 01:22:39,280 there hasn't been one. Like there has the last big advance in rocket engines. Has it been one?
01:22:39,280 --> 01:22:44,560 The big advances in spaceship design from what I can see are in the control systems,
01:22:44,560 --> 01:22:51,120 the gyros and the ability to land, right, in a stable fashion. That's pretty amazing,
01:22:51,120 --> 01:22:52,480 landing a rocket.
01:22:52,480 --> 01:23:02,320 Also in the, at least according to Elon and so on, the manufacture of the more efficient
01:23:02,320 --> 01:23:07,840 and less expensive manufacture of rockets. So like it's a production, whatever that you call
01:23:07,840 --> 01:23:13,760 that discipline of at scale manufacture, at scale production, so factory work. But it's not 10X.
01:23:14,560 --> 01:23:17,840 I mean, maybe it's 10X over a period of a few decades.
01:23:17,840 --> 01:23:24,960 When we figure out how to operate a spaceship, you know, on the water in your water bottle for
01:23:24,960 --> 01:23:31,600 a year. Right? Now, then you've got a breakthrough. So the bottom line is propulsion, propellant,
01:23:31,600 --> 01:23:38,800 propulsion technology, propellants and the materials technology, they were critical to
01:23:38,800 --> 01:23:45,200 getting on that aviation S-curve. And then we slammed into a wall in the 70s. And the Boeing
01:23:45,200 --> 01:23:53,040 747, the Global Express, the Gulfstream, these things were the space shuttle. They were all
01:23:53,040 --> 01:23:57,280 pretty much reflective of that. And then we kind of, then we stopped. And at that point,
01:23:57,280 --> 01:24:04,000 you have to switch to a new S-curve. So the next equivalent to the internal combustion engine was
01:24:04,000 --> 01:24:10,240 the CPU. And the next aluminum equivalent was silicon. So when we actually started developing
01:24:10,240 --> 01:24:18,160 CPUs, the transistor gave way to CPUs. And if you look at the power, right, the bandwidth that we
01:24:18,160 --> 01:24:24,800 had on computers and Moore's law, right, what if the efficiency of jet engines had doubled
01:24:24,800 --> 01:24:32,480 every three years, right, in the last 40 years, where we'd be right now, right. So I think that
01:24:32,480 --> 01:24:40,480 if you're a business person, if you're looking for commercially viable application of your mind,
01:24:41,200 --> 01:24:48,480 then you have to find that S-curve. And ideally, you have to find it in the first five, six, ten
01:24:48,480 --> 01:24:56,160 years. But people always miss this. Let's take Google Glass, right? Google Glass was an idea
01:24:56,160 --> 01:25:02,640 2013. The year is 2022. And people were quite sure this was going to be a big thing.
01:25:02,640 --> 01:25:06,000 And it could have been at the beginning of the S-curve.
01:25:06,000 --> 01:25:11,920 But fundamentally, we didn't really have an effective mechanism. I mean, people getting
01:25:11,920 --> 01:25:13,200 vertigo and they're, you know.
01:25:13,200 --> 01:25:17,600 But you didn't know that at the beginning of the S-curve, right? I mean, maybe some people
01:25:17,600 --> 01:25:23,280 had a deep intuition about the fundamentals of augmented reality. But you don't know that.
01:25:23,280 --> 01:25:27,280 You don't have those. You're looking through the fog. You don't know.
01:25:27,280 --> 01:25:34,880 So the point is, we're year zero in 2013, and we're still year zero in 2022 on that augmented
01:25:34,880 --> 01:25:42,240 reality. And when somebody puts out a set of glasses that you can wear comfortably without
01:25:42,240 --> 01:25:49,360 getting vertigo, right, without any disorientation that managed to have the stability and the
01:25:49,360 --> 01:25:56,000 bandwidth necessary to sync with the real world, you'll be in year one. And from that
01:25:56,000 --> 01:26:02,720 point, you'll have a 70-year or some interesting future until you slam into a limit to growth.
01:26:02,720 --> 01:26:10,240 And then it'll slow down. And this is the story of a lot of things, right? I mean, John
01:26:10,240 --> 01:26:17,760 D. Rockefeller got in the oil business in the 1860s. And the oil business as we understood
01:26:17,760 --> 01:26:25,280 it, you know, became fairly mature, you know, by the 1920s, the 30s. And then it actually
01:26:25,280 --> 01:26:29,920 stayed that way until we got to fracking, which was like seven years later, and then
01:26:29,920 --> 01:26:32,240 it burst forward. So...
01:26:32,240 --> 01:26:37,520 The interesting story about Moore's law, though, is that you get this, like, constant burst
01:26:37,520 --> 01:26:42,720 of S curves on top of S curves on top of S curves. It's like the moment you start slowing
01:26:42,720 --> 01:26:48,720 down, or almost ahead of you slowing down, you come up with another innovation, another
01:26:48,720 --> 01:26:55,200 innovation. So Moore's law doesn't seem to happen in every technological advancement.
01:26:55,200 --> 01:27:00,720 It seems like you only get a couple of S curves and then you're done for a bit. So I wonder
01:27:00,720 --> 01:27:05,760 what the pressures there are that resulted in such success over several decades and still
01:27:05,760 --> 01:27:07,680 going.
01:27:07,680 --> 01:27:16,000 Humility dictates that nobody knows when the S curve kicks off and you could be 20 years
01:27:16,000 --> 01:27:22,400 early or 100 years early. Leonardo da Vinci, you know, they were Michelangelo, they were
01:27:22,400 --> 01:27:27,920 designing flying machines hundreds and hundreds of years ago. So humility says you're not
01:27:27,920 --> 01:27:32,800 quite sure when it's when you really hit that commercial viability. And it also dictates
01:27:32,800 --> 01:27:38,960 you don't know when it ends. Like, when will the party stop? When will Moore's law stop
01:27:38,960 --> 01:27:43,920 and we'll get to the point where they're exponentially diminishing returns on silicon
01:27:43,920 --> 01:27:51,920 performance? And just like we got exponentially diminishing returns on jet engines, you know,
01:27:51,920 --> 01:27:57,760 and it just takes an exponential increase in effort to make it 10% better. But while
01:27:57,760 --> 01:28:02,800 you're in the middle of it, then you know you can do things. So the reason that the
01:28:02,800 --> 01:28:10,320 digital revolution is so important is because the underlying platforms, the bandwidth of
01:28:10,320 --> 01:28:17,840 and the performance of the components, and I said the components are the radio protocols,
01:28:17,840 --> 01:28:27,600 mobile protocols, the batteries, the CPUs, and the displays, right? Those four components
01:28:27,600 --> 01:28:31,920 are pretty critical. They're all critical in the creation of an iPhone. I wrote about
01:28:31,920 --> 01:28:39,360 it in the book The Mobile Wave, and they catalyzed this entire mobile revolution. Because they
01:28:39,360 --> 01:28:46,480 have advanced and continue to advance, they created the very fertile environment for all
01:28:46,480 --> 01:28:55,280 these digital transformations. And the digital transformations themselves, right, they call
01:28:55,280 --> 01:29:01,920 for creativity in their own, right? Like, I think the interesting thing about, let's
01:29:01,920 --> 01:29:08,560 take digital maps, right? When you conceptualize something as a dematerialized map, right,
01:29:08,560 --> 01:29:14,960 it becomes a map because I can put it on a display like an iPad, or I can put it in a
01:29:14,960 --> 01:29:21,360 car like a Tesla. But if you really want to figure it out, you can't think like an engineer,
01:29:21,360 --> 01:29:26,320 you need to think like a fantasy writer. Like, this is where it's useful if you studied,
01:29:26,960 --> 01:29:30,640 if you read, played Dungeons and Dragons, and you read Lord of the Rings, and you
01:29:31,440 --> 01:29:36,880 studied all the fantasy literature. Because when I dematerialize the map,
01:29:38,080 --> 01:29:44,160 first I put 10 million pages of satellite imagery into the map, right? That's a simple
01:29:44,160 --> 01:29:51,680 physical transform. But then I start to put telemetry into the map, and I keep track of
01:29:51,680 --> 01:29:55,680 the traffic rates on the roads, and I tell you whether you'll be in a traffic jam if
01:29:55,680 --> 01:29:59,760 you drive that way, and I tell you which way to drive. And then I start to get feedback
01:29:59,760 --> 01:30:02,800 on where you're going, and I tell you the restaurant's closed, and people don't like
01:30:02,800 --> 01:30:08,400 it anyway. And then I put an AI on top of it, and I have it drive your car for you.
01:30:08,400 --> 01:30:14,800 And eventually, the implication of digital transformation of maps is, I get in a self
01:30:14,800 --> 01:30:21,440 driving car, and I say, take me someplace cool where I can eat. Right? And how did you
01:30:21,440 --> 01:30:28,800 get to that last step, right? It wasn't simple engineering. There's a bit of fantasy in there,
01:30:28,800 --> 01:30:34,320 a bit of magic. Design, art, whatever the heck you call it. It's whatever, yeah, fantasy
01:30:34,320 --> 01:30:44,960 injects magic into the engineering process. Imagination precedes great revolutions in
01:30:44,960 --> 01:30:51,040 engineering. It's like imagining a world of what you can do with the display. How will
01:30:51,040 --> 01:30:54,640 the interaction be? That's where Google Glass actually came in. Augmented reality, virtual
01:30:54,640 --> 01:30:59,280 reality, people were playing in the space of sci-fi. Imagination.
01:30:59,280 --> 01:31:03,280 They called a moan shot. They tried. It didn't work. But to their credit, they stopped trying,
01:31:03,280 --> 01:31:10,000 right? And then there's new people. They keep dreaming. Dreamers all around us. I love those
01:31:10,000 --> 01:31:16,000 dreamers. And most of them fail and suffer because of it. But some of them win Nobel
01:31:16,000 --> 01:31:23,680 Prizes or become billionaires. Well, what I would say is, if half the civilization dropped
01:31:23,680 --> 01:31:31,840 what they were doing tomorrow, and eagerly started working on launching a rocket to Alpha
01:31:31,840 --> 01:31:40,160 Centauri, it might not be the best use of our resources. Because it's kind of like if half
01:31:40,160 --> 01:31:46,800 of Athens in the year 500 BC eagerly started working on flying machines, if you went back
01:31:46,800 --> 01:31:51,680 and you said, what advice would you give them? You would say, it's not going to work until
01:31:51,680 --> 01:31:54,640 you get to aluminum. And you're not going to get to aluminum until you work out the
01:31:54,640 --> 01:31:58,960 steel and certain other things. And you're not going to get to that until you work out
01:31:58,960 --> 01:32:03,760 the calculus of variations and some metallurgy. And there's a dude, Newton, that won't come
01:32:03,760 --> 01:32:07,920 along for quite a while. And he's going to give you the calculus to do it. And until
01:32:07,920 --> 01:32:13,920 then, it's hopeless. So you might be better off to work on the aqueduct or to focus upon
01:32:14,560 --> 01:32:22,080 sales or something. So if I look at this today, I say there's massive, profound
01:32:23,680 --> 01:32:28,400 civilization advances to be made through digital transformation of information. And you can see
01:32:28,400 --> 01:32:34,720 them. This is the story of today. This is not the story of today, right? It's 10 years old,
01:32:34,720 --> 01:32:39,040 what we've been seeing. We're living through different manifestations of that story today,
01:32:39,040 --> 01:32:45,680 too, though. Like social media, the effects of that is very interesting. Because ideas
01:32:45,680 --> 01:32:52,480 spread even, you talk about velocity of money, the velocity of ideas keeps increasing. So like
01:32:52,480 --> 01:33:02,400 Wikipedia is a passive store. It's a store of knowledge. Twitter is like a water hose or
01:33:02,400 --> 01:33:06,400 something. It's like spraying you with knowledge, whether you want it or not. It's like social
01:33:06,400 --> 01:33:13,120 media is just like this explosion of ideas. And then we pick them up. And then we try to
01:33:13,120 --> 01:33:18,640 understand ourselves because the drama of it also plays with our human psyche. So sometimes
01:33:18,640 --> 01:33:24,000 there's more ability for misinformation, for propaganda to take hold. So we get to learn
01:33:24,000 --> 01:33:28,560 about ourselves. We get to learn about the technology that can decelerate the propaganda,
01:33:28,560 --> 01:33:32,880 for example, all that kind of stuff. But like the reality is we're living, I feel like we're
01:33:32,880 --> 01:33:39,360 living through a singularity in the digital information space. And we're not, we don't have
01:33:39,360 --> 01:33:44,800 a great understanding of exactly how it's transforming our lives. This is where money is
01:33:44,800 --> 01:33:53,200 useful as a metaphor for significance. Because if money is the economic energy of the
01:33:53,200 --> 01:34:01,360 civilization, then something that's extraordinarily lucrative that's going to generate a monetary or
01:34:01,360 --> 01:34:06,160 wealth increase is a way to increase the net energy in the civilization. And ultimately,
01:34:06,880 --> 01:34:13,680 if we had 10 times as much of everything, we'd have a lot more free resources to pursue all of
01:34:13,680 --> 01:34:18,240 our advanced scientific and mathematical and theoretical endeavors. So let's take Twitter.
01:34:19,200 --> 01:34:25,760 Twitter is something that could be 10 times more valuable than it is. Twitter could be made 10 times
01:34:25,760 --> 01:34:29,440 better. No, by the way, I should say that people should follow you on Twitter. Your
01:34:29,440 --> 01:34:34,160 Twitter account is awesome. Thank you. It could be made 10 times better. Yeah. Yeah,
01:34:34,160 --> 01:34:40,720 Twitter can be made 10 times better. If we take YouTube or take education,
01:34:40,720 --> 01:34:46,720 we could generate a billion PhDs. And the question is, do you need any profound
01:34:47,280 --> 01:34:51,120 breakthrough in materials or technology to do that? And the answer is not really.
01:34:52,080 --> 01:34:57,840 Right. So if you want to, you could make Apple, Amazon, Facebook, Google, Twitter,
01:34:57,840 --> 01:35:05,520 all these things better. The United States government, if they took 1% of the money they
01:35:05,520 --> 01:35:11,840 spend on the Department of Education, and they simply poured it into digital education, and they
01:35:11,840 --> 01:35:19,600 gave degrees to people that actually met those requirements, they could provide 100x as much
01:35:19,600 --> 01:35:25,520 education for one one-hundredth of the cost, and they could do it with no new technology. That's a
01:35:25,520 --> 01:35:34,800 marketing and political challenge. So I don't think every objective is equally practical. And I think
01:35:34,800 --> 01:35:44,000 the benefit of being an engineer or thinking about practical achievements is when the government
01:35:44,000 --> 01:35:51,840 pursues an impractical objective, or when anybody, an entrepreneur, not so bad with entrepreneur,
01:35:51,840 --> 01:35:56,320 because they don't have that much money to waste. When a government pursues an impractical objective,
01:35:56,320 --> 01:36:02,240 they squander trillions and trillions of dollars and achieve nothing. Whereas if they pursue a
01:36:02,240 --> 01:36:10,000 practical objective, or if they simply get out of the way and do nothing, and they allow the free
01:36:10,000 --> 01:36:15,920 market to pursue the practical objectives, then I think you can have profound impact on the human
01:36:15,920 --> 01:36:28,960 civilization. And if I look at the world we're in today, I think that there are multi-trillion,
01:36:29,520 --> 01:36:36,560 10, 20, 50 trillion dollars worth of opportunities in the digital information realm yet to be
01:36:36,560 --> 01:36:46,080 obtained. But there's hundreds of trillions of dollars of opportunities in the digital energy
01:36:46,080 --> 01:36:53,040 realm that not only are they not obtained, the majority of people don't even know what digital
01:36:53,040 --> 01:36:59,600 energy is. Most of them would reject the concept. They're not looking for it. They're not expecting
01:36:59,600 --> 01:37:07,680 to find it. It's inconceivable because it is a paradigm shift. But in fact, it's completely
01:37:07,680 --> 01:37:15,280 practical. Right under our nose, it's staring at us, and it could make the entire civilization
01:37:15,280 --> 01:37:22,720 work dramatically better in every respect. So you mentioned in the digital world, digital
01:37:22,720 --> 01:37:31,600 information is one, digital energy is two, and the possible impact on the world and the set of
01:37:31,600 --> 01:37:38,400 opportunities available in the digital energy space is much greater. So how do you think about
01:37:38,400 --> 01:37:45,600 digital energy? What is it? So I'll start with Tesla. He had a very famous quote. He said,
01:37:45,600 --> 01:37:53,360 if you want to understand the universe, think in terms of energy, vibration, and frequency. And
01:37:53,360 --> 01:37:57,680 it gets you thinking about what is the universe. And of course, the universe is just all energy.
01:37:58,720 --> 01:38:05,920 And then what is matter? Matter is low-frequency energy. And what are we? You know, we're
01:38:05,920 --> 01:38:13,760 vibrating from, you know, ashes to ashes, dust to dust. I can turn a tree into light. I can turn
01:38:13,760 --> 01:38:21,200 light back into a tree. If I consider the entire universe, and it's very important because we don't
01:38:21,200 --> 01:38:28,800 really think this way. Let's take the New York disco model. If I walk into a nightclub, and
01:38:28,800 --> 01:38:35,840 there's loud music blaring in New York City, what's really going on there? Right? If you
01:38:35,840 --> 01:38:42,240 blast out 14 billion years ago, the universe is formed. Okay, that's a low-frequency thing,
01:38:42,240 --> 01:38:47,360 the universe. Four and a half billion years ago, the sun, maybe the earth, are formed.
01:38:48,560 --> 01:38:54,240 The continents are 400 million years old. The schist that New York City is on is some hundreds
01:38:54,240 --> 01:39:00,400 of millions of years. But the Hudson River is only 20,000 years. There's a building that's
01:39:00,400 --> 01:39:07,440 probably 50 years old. There's a company operating that disco or that club, which is five to 10 years
01:39:07,440 --> 01:39:13,040 old. There's a person, a customer walking in there for an experience for a few hours.
01:39:13,760 --> 01:39:19,760 There's music that's oscillating at some kilohertz, and then there's light.
01:39:20,720 --> 01:39:28,080 And you have all forms of energy, all frequencies, right? All layered, all moving through different
01:39:28,080 --> 01:39:34,960 medium. And how you perceive the world is the question of at what frequency do you want to
01:39:34,960 --> 01:39:45,600 perceive the world? And I think that once you start to think that way, you're catalyzed to
01:39:45,600 --> 01:39:54,320 think about what would digital energy look like? And why would I want it? And what is it? So,
01:39:55,760 --> 01:40:01,440 why don't we just start right there? What is it? The most famous manifestation of digital energy
01:40:01,440 --> 01:40:08,080 is Bitcoin. Bitcoin is a crypto asset. It's a crypto asset that has monetary value.
01:40:08,080 --> 01:40:17,200 Can we just link on that? Bitcoin is a digital asset that has monetary value.
01:40:18,480 --> 01:40:23,920 What is a digital asset? What is monetary? Why use those terms versus the words of
01:40:23,920 --> 01:40:29,760 money and currency? Is there something interesting in that disambiguation of different terms?
01:40:29,760 --> 01:40:39,760 I'd call it a crypto asset network. The goal is to create a billion dollar block of pure energy
01:40:39,760 --> 01:40:47,840 in cyberspace, one that I could then move with no friction at the speed of light.
01:40:49,440 --> 01:40:56,320 It's the equivalent to putting a million pounds in orbit. How do I actually launch
01:40:56,320 --> 01:41:02,160 something into orbit? How do I launch something into cyberspace such that it moves friction-free?
01:41:02,160 --> 01:41:11,680 And the solution is a decentralized proof-of-work network. Satoshi's solution was I'm going to
01:41:11,680 --> 01:41:18,400 establish a protocol running on a distributed set of computers that will maintain a constant supply
01:41:18,400 --> 01:41:24,560 of never more than 21 million Bitcoin subdividable by 100 million Satoshis each.
01:41:24,560 --> 01:41:39,360 Transferable via transferring private keys. Now, the innovation is to create that in an ethical,
01:41:40,320 --> 01:41:47,360 durable fashion. The ethical innovation is I want it to be property and not a security.
01:41:47,360 --> 01:41:55,280 A bushel of corn, an acre of land, a stack of lumber, and a bar of gold and a Bitcoin
01:41:55,280 --> 01:42:01,120 are all property. And that means they're all commonly occurring elements in the world. You
01:42:01,120 --> 01:42:05,360 could call them commodities, but commodity is a little bit misleading, and I'll tell you why in a
01:42:05,360 --> 01:42:11,520 second. But they're all distinguished by the fact that no one entity or person or government
01:42:11,520 --> 01:42:18,320 controls them. If you have a barrel of oil, and you're in Ukraine versus Russia versus Saudi
01:42:18,320 --> 01:42:26,560 Arabia versus the US, you have a barrel of oil, right? And it doesn't matter what the premier
01:42:26,560 --> 01:42:34,000 in Japan or the mayor of Miami Beach thinks about your barrel of oil. They cannot wave their hand
01:42:34,000 --> 01:42:41,520 and make it not a barrel of oil or a cord of wood, right? And so property is just a naturally
01:42:41,520 --> 01:42:48,320 occurring element in the universe, right? And- Why use the word ethical? And sorry to- I may
01:42:48,320 --> 01:42:53,040 interrupt occasionally. Why ethical assigned to property?
01:42:54,640 --> 01:43:00,000 Because if it's a security, a security would be an example of a share of a stock,
01:43:00,000 --> 01:43:08,320 or a crypto token controlled by a small team. And in the event that something is a security, because
01:43:09,280 --> 01:43:15,680 some small group or some identifiable group can control its nature, character, or supply,
01:43:17,440 --> 01:43:25,120 then it really only becomes ethical to promote it or sell it pursuant to fair disclosures.
01:43:25,120 --> 01:43:33,120 So I give you maybe practical example. I'm the mayor of Chicago. I give a speech. My speech,
01:43:33,120 --> 01:43:38,720 I say, I think everybody in Chicago should own their own farm and have chicken, a chicken in
01:43:38,720 --> 01:43:46,880 the backyard and their own horse and an automobile. That's ethical. I give the same speech and I say,
01:43:46,880 --> 01:43:50,640 I think everybody in Chicago should buy Twitter. I think everybody in Chicago should buy Twitter.
01:43:50,640 --> 01:43:55,520 I give the same speech and I say, I think everybody in Chicago should buy Twitter stock,
01:43:57,520 --> 01:44:00,240 sell their house or sell their cash and buy Twitter stock.
01:44:01,760 --> 01:44:07,360 Is that ethical? Not really. But at that point, you've entered into a conflict of interest,
01:44:07,360 --> 01:44:14,240 because what you're doing is you're promoting an asset, which is substantially controlled by
01:44:14,240 --> 01:44:19,760 a small group of people, the board of directors or the CEO of the company. So if, you know,
01:44:19,760 --> 01:44:24,480 how would you feel if the president of the United States said, I really think Americans should all
01:44:25,120 --> 01:44:31,040 buy Apple stock, especially if you worked at Google. But you worked anywhere. You'd be like,
01:44:31,040 --> 01:44:40,480 why isn't he saying buy mine? Right? A security is a proprietary asset in some way, shape, or form.
01:44:41,360 --> 01:44:44,800 And the whole nature of securities law, it starts from this ancient,
01:44:44,800 --> 01:44:54,720 ancient idea, thou shalt not lie, cheat, or steal. Okay? So if I'm going to sell you securities,
01:44:54,720 --> 01:45:00,720 or I'm going to promote securities as a public figure or as an influencer or anybody else,
01:45:02,320 --> 01:45:07,600 if I create my own yo-yo coin or Mikey coin, and then there's a million of them,
01:45:08,160 --> 01:45:12,800 and I tell you that I think that it's a really good thing and Mikey coin will go up forever,
01:45:12,800 --> 01:45:18,640 right? And everybody buys Mikey coin, and then I give 10 million to you and don't tell the public,
01:45:18,640 --> 01:45:25,040 right? I've cheated them. Maybe if I have Mikey coin, and I think there's only 2 million Mikey
01:45:25,040 --> 01:45:30,240 coin, and I swear to you, there's only 2 million, and then I get married, and I have three kids,
01:45:30,240 --> 01:45:36,080 and my third kid is in the hospital, and my kid's going to die, and I have this ethical reason to
01:45:36,080 --> 01:45:40,480 print 500,000 more Mikey coin, or else people are going to die, and everybody tells me it's fine.
01:45:40,480 --> 01:45:47,040 You know, I've still abused, you know, the investor, right? It's an ethical challenge.
01:45:47,920 --> 01:45:56,880 If you look at ethics laws everywhere in the world, they all boil down to having a clause
01:45:56,880 --> 01:46:02,960 which says that if you're a public figure, you can't endorse any security. You can't endorse
01:46:02,960 --> 01:46:08,000 something that would cause you to have a conflict of interest. So if you're a mayor, a governor,
01:46:08,000 --> 01:46:15,120 a country, a public figure, an influencer, and you want to promote or promulgate or support
01:46:15,120 --> 01:46:22,880 something using any public influence or funds or resources you may have, it needs to be property.
01:46:22,880 --> 01:46:29,760 It can't be security. So it goes beyond that, right? I mean, like would the Chinese want to
01:46:29,760 --> 01:46:35,600 support an American company, right? As soon as you look at what's in the best interest of the
01:46:35,600 --> 01:46:44,560 human race, the civilization, you realize that if you want an ethical path forward, it needs to be
01:46:44,560 --> 01:46:52,720 based on common property, which is fair. And the way you get to a common property is through an
01:46:52,720 --> 01:46:59,040 open permissionless protocol. If it's not open, right, if it's proprietary, and I know what the
01:46:59,040 --> 01:47:04,320 code says, and you don't know what the code says, that makes it a security. If it's not open,
01:47:04,320 --> 01:47:14,000 it's a security. If it's permissioned, if you're not allowed on my network, or if you can be
01:47:14,000 --> 01:47:24,720 censored or booted off my network, that also makes it a security. So when I talk about property,
01:47:24,720 --> 01:47:30,640 I mean, the challenge here is how do I create something that's equivalent to a barrel of oil
01:47:30,640 --> 01:47:37,840 in cyberspace? And that means it has to be a non-sovereign bearer instrument, open,
01:47:37,840 --> 01:47:47,760 permissionless, not censorable, right? If I could do that, then I could deliver you 10,000
01:47:47,760 --> 01:47:55,440 dematerialized barrels of oil, and you would take settlement of them. And you would know that you
01:47:55,440 --> 01:48:02,320 have possession of that property, irregardless of the opinion of any politician or any company
01:48:02,320 --> 01:48:09,920 or anybody else in the world. That's a really critical characteristic. And it actually is,
01:48:11,040 --> 01:48:16,720 it's probably one of the fundamental things that makes Bitcoin special. Bitcoin isn't just
01:48:16,720 --> 01:48:22,560 a crypto asset network. It's easy to create a crypto asset network. It's very hard to create
01:48:22,560 --> 01:48:31,840 an ethical crypto asset network because you have to create one without any government or
01:48:32,720 --> 01:48:37,280 corporation or investor exercising in-do influence to make it successful.
01:48:37,280 --> 01:48:41,280 LR So open, permissionless, non-censorable.
01:48:42,480 --> 01:48:50,560 So basically no way for you without explicitly saying so outsourcing control to somebody else.
01:48:50,560 --> 01:48:57,760 So it's a kind of, you have full control. Even with the barrel of oil, what's the
01:48:57,760 --> 01:49:05,440 difference between a barrel of oil and a Bitcoin to you? What is the, because you kind of mentioned
01:49:05,440 --> 01:49:11,920 that both are property. You mentioned Russia and China and so on. Is it the ability of the
01:49:11,920 --> 01:49:17,440 government to confiscate? In the end, governments can probably confiscate no matter what the asset
01:49:17,440 --> 01:49:21,280 is, but you want to lessen the effort involved.
01:49:21,280 --> 01:49:23,520 LR A barrel of oil is a bucket of physical
01:49:23,520 --> 01:49:27,680 property, liquid property, and Bitcoin is a digital property.
01:49:27,680 --> 01:49:31,360 LR But it's easier to confiscate a barrel of oil.
01:49:31,360 --> 01:49:38,160 LR It's easier to confiscate things in the real world than things in cyberspace. Much easier.
01:49:38,160 --> 01:49:40,640 LR So that's not universally true. Some things
01:49:40,640 --> 01:49:48,000 in the digital space are actually easier to confiscate because just the nature of how things
01:49:48,000 --> 01:49:50,000 move easily with information, right?
01:49:50,000 --> 01:49:52,160 LR I think in the Bitcoin world, what we would
01:49:52,160 --> 01:50:01,040 say is that Bitcoin is the most difficult property that the human race possesses or has yet invented
01:50:01,040 --> 01:50:05,920 to confiscate. And that's by virtue of the fact that you could take possession of it via your
01:50:05,920 --> 01:50:12,320 private key. So if you got your 12 seed phrases in your head, then that will be the highest
01:50:12,320 --> 01:50:17,120 form of property right because I literally have to crack your head open and read your
01:50:17,120 --> 01:50:23,920 mind to take it. It doesn't mean I couldn't extract it from you under duress, but it means
01:50:23,920 --> 01:50:29,680 that it's harder than every other thing you might own. In fact, it's exponentially harder.
01:50:29,680 --> 01:50:36,400 If you consider every other thing you might own, a car, a house, a share of stock, gold,
01:50:36,400 --> 01:50:42,880 diamonds, property rights, intellectual property rights, movie rights, music rights, anything
01:50:42,880 --> 01:50:49,680 imaginable, they would all be easier by orders and orders of magnitude to seize. So digital
01:50:49,680 --> 01:50:57,120 property in the form of a set of private keys is by far the apex property of the human race.
01:50:57,120 --> 01:51:01,840 In terms of ethics, I want to make one more point. It's like I might say to you, Lex,
01:51:02,400 --> 01:51:08,080 I think Bitcoin is the best, most secure, most durable crypto asset network in the world is
01:51:08,080 --> 01:51:13,680 going to go up forever and there's nothing better in the world. I might be right. I might be wrong.
01:51:15,360 --> 01:51:21,920 But the point is because it's property, it's ethical for me to say that if I were to turn
01:51:21,920 --> 01:51:28,560 around and say, Lex, I think the same about microstrategy stock, MSTR, that's a security.
01:51:29,840 --> 01:51:37,920 If I'm wrong about that, I have civil liability or other liability because I could go to a board
01:51:37,920 --> 01:51:42,880 meeting tomorrow and I could actually propose we issue a million more shares of microstrategy stock.
01:51:43,600 --> 01:51:50,800 Whereas the thing that makes Bitcoin ethical for me to even promote is the knowledge that I can't
01:51:50,800 --> 01:51:58,800 change it. If I knew that I could make it 42 million instead of 21 million and I had the button
01:51:58,800 --> 01:52:06,640 back here, then I have a different degree of ethical responsibility. Now, I could tell you
01:52:06,640 --> 01:52:10,400 your life will be better if you buy Bitcoin and it might not. You might go buy Bitcoin,
01:52:10,400 --> 01:52:14,880 you might lose the keys and be bankrupt and your life ends and your life is not better because you
01:52:14,880 --> 01:52:21,600 bought Bitcoin, right? But it wouldn't be my ethical liability any more than if I were to say,
01:52:22,880 --> 01:52:28,080 Lex, I think you ought to get a farm. I think you should be a farmer. I think a chicken in
01:52:28,080 --> 01:52:36,320 every pot, you should get a horse. I think you'd be better. I mean, these are all opinions expressed
01:52:36,320 --> 01:52:43,840 about property, which may or may not be right, that you may or may not agree with. But in a legal
01:52:43,840 --> 01:52:49,600 sense, if we read the law, if we understand securities law, and I would say most people
01:52:49,600 --> 01:52:55,120 in the crypto industry, they didn't take companies public and so they're not really
01:52:55,120 --> 01:52:59,600 focused on the securities law, they don't even know the securities law. If you focus on the
01:52:59,600 --> 01:53:05,760 securities law, that would say you just can't legally sell this stuff to the general public
01:53:05,760 --> 01:53:13,920 or promote it without a full set of continuing disclosures signed off on by a regulator. So
01:53:15,120 --> 01:53:22,640 there's a fairly bright line there with regard to securities, but when you get to the secondary
01:53:22,640 --> 01:53:31,120 issue, it's how do you actually build a world based on digital property if public figures
01:53:31,120 --> 01:53:39,280 can't embrace it or endorse it? You see, so you're not going to build a better world based upon
01:53:40,240 --> 01:53:46,240 Twitter stock, if that's your idea of property, because Twitter stock is a security and Twitter
01:53:46,240 --> 01:53:52,480 stock is never going to be a non-sovereign bearer instrument in Russia, right, or in China, right?
01:53:52,480 --> 01:53:57,760 It's not even legal in China, right? So it's not a global permissionless open thing. It will never
01:53:57,760 --> 01:54:04,560 be trusted by the rest of the world and legally, it's impractical, but would you really want to
01:54:04,560 --> 01:54:08,960 put $100 trillion worth of economic value on Twitter stock if there's a board of directors
01:54:08,960 --> 01:54:15,040 and a CEO that could just get up and like take half of it tomorrow? The answer is no. So if you
01:54:15,040 --> 01:54:22,160 want to build a better world based on digital energy, you need to start with constructing a
01:54:22,160 --> 01:54:32,720 digital property and I'm using property here in the legal sense, but I would also go to the next
01:54:32,720 --> 01:54:43,440 step and say property is low frequency money. So if I give you a million dollars and you want to
01:54:43,440 --> 01:54:50,240 hold it for a decade, you might go buy a house with it, right? And the house is low frequency
01:54:50,240 --> 01:54:57,040 money. You converted the million dollars of economic energy into a structure called a house.
01:54:57,040 --> 01:55:02,880 Maybe after a decade, you might convert it back into energy. You might sell the house for currency
01:55:03,680 --> 01:55:07,200 and it'll be more worth more or less depending upon the monetary climate.
01:55:07,200 --> 01:55:12,800 The frequency means what here? How quickly it changes state?
01:55:12,800 --> 01:55:22,720 How quickly does something vibrate? So if I transfer $10 from me to you for a drink
01:55:23,520 --> 01:55:27,680 and then you turn around and you buy another, right? We're vibrating on a frequency of every
01:55:27,680 --> 01:55:33,680 few hours, right? The energy is changing hands, but it's not likely that you sell and buy houses
01:55:33,680 --> 01:55:41,200 every few hours, right? The frequency of a transaction in real estate is every 10 years,
01:55:41,200 --> 01:55:45,360 every 10 years, every five years. It's a much lower frequency transaction.
01:55:48,480 --> 01:55:55,760 So when you think about what's going on here, you have extremely low frequency things,
01:55:56,560 --> 01:56:02,880 which we'll call property. Then you have mid frequency things. I'm going to call them money
01:56:02,880 --> 01:56:10,080 or currency. And then you have high frequency and that's energy. And that's why I use the
01:56:10,080 --> 01:56:15,760 illustration of you got the building, you got the light and you got the sound and they're all just
01:56:16,320 --> 01:56:26,160 energy moving at different frequencies. Now, Bitcoin is magical and it is truly the innovation.
01:56:26,160 --> 01:56:32,240 It's like a singularity because it represents the first time in the history of human race
01:56:32,240 --> 01:56:39,760 that we managed to create a digital property properly understood. It's easy to create
01:56:39,760 --> 01:56:48,880 something digital, right? Every coupon and every scan on Fortnite and Roblox and Apple TV credits
01:56:48,880 --> 01:56:53,360 and all these things, they're all digital something, but they're securities, right?
01:56:53,360 --> 01:56:59,280 Shares of stock are securities. Whenever anybody transfers, when you transfer money on PayPal or
01:56:59,280 --> 01:57:06,960 Apple Pay, you're transferring an essence, a security or an IOU. And so transferring a bearer
01:57:06,960 --> 01:57:15,280 instrument with final settlement in the internet domain or in cyberspace, that's a critical thing.
01:57:15,920 --> 01:57:22,560 And anybody in the crypto world can do that. All the cryptos can do that. But what they can't do,
01:57:22,560 --> 01:57:27,760 what 99% of them fail to do is be property. They're securities.
01:57:27,760 --> 01:57:31,040 Well, there's a line there I'd like to explore a little further. For example,
01:57:31,040 --> 01:57:37,440 what about when you, like Coinbase or something like that, when there's an exchange that you buy
01:57:37,440 --> 01:57:47,120 Bitcoin is in, you start to move away from this kind of, some of the aspects that you said makes
01:57:47,120 --> 01:57:58,880 up a property, which is this non-sensible and permissionless and open. So in order to achieve
01:57:58,880 --> 01:58:06,400 the convenience, the effectiveness of the transfer of energy, you have to leverage some of these
01:58:07,840 --> 01:58:12,640 places that remove the aspects of property. So I mean, maybe you can comment on that.
01:58:12,640 --> 01:58:17,360 Let me give you a good model for that. If you think about the layer one of Bitcoin,
01:58:18,400 --> 01:58:25,440 the layer one is the property settlement layer, and we're going to do 350,000 transactions or
01:58:25,440 --> 01:58:31,920 less a day, 100 million transactions a year is the bandwidth on the layer one. And it would be an
01:58:31,920 --> 01:58:37,520 ideal layer one to move a billion dollars from point A to point B with the massive security.
01:58:38,720 --> 01:58:45,280 The role of the layer one is two things. One thing is I want to move a large sum of money
01:58:46,000 --> 01:58:53,440 through space with security. I can move any amount of Bitcoin in a matter of minutes,
01:58:53,440 --> 01:59:01,120 for dollars on layer one. The second important feature of the layer one is I need the money to
01:59:01,120 --> 01:59:08,800 last forever. I need the money indestructible, immortal. So the bigger trick is not to move a
01:59:08,800 --> 01:59:13,920 billion dollars from here to Tokyo. The big trick is to move a billion dollars from here to the year
01:59:13,920 --> 01:59:23,600 2140. And that's what we want to solve with layer one. And the best real metaphor in New York City
01:59:23,600 --> 01:59:30,800 would be the granite or the schist. What you want is a city block of bedrock. And how long has it
01:59:30,800 --> 01:59:35,760 been there? Like millions of years it's been there. And how fast do you want it to move?
01:59:36,320 --> 01:59:40,720 You don't. In fact, the single thing that's most important is that it not
01:59:40,720 --> 01:59:48,160 deflect. If it deflects a foot in 100 years, it's too much. If it deflects an inch in 100 years,
01:59:48,160 --> 01:59:54,240 you might not want that. So the layer one of Bitcoin is a foundation upon which you put weight.
01:59:54,240 --> 02:00:00,400 How much weight can you put on it? You put a trillion, 10 trillion, 100 trillion, a quadrillion.
02:00:00,960 --> 02:00:07,600 How much weight's on the bedrock in Manhattan, right? Think about 100-story buildings. So
02:00:07,600 --> 02:00:14,320 that the real key there is the foundational asset needs to be there at all. So the fact that you can
02:00:14,320 --> 02:00:22,960 create $100 trillion layer one that would stand for 100 years, that is the revolutionary breakthrough
02:00:22,960 --> 02:00:29,120 first time. And the fact that it's ethical, right? It's ethical. And it's common property, global,
02:00:29,120 --> 02:00:34,480 permissionless. Extremely unlikely that would happen. People tried 50 times. People tried
02:00:34,480 --> 02:00:41,280 50 times before, and they all failed. They tried 15,000 times after, and they've all generally
02:00:41,280 --> 02:00:47,760 failed. 98% have failed, and a couple have been less successful. But for the most part,
02:00:48,800 --> 02:00:51,760 that's an extraordinary thing. Now-
02:00:51,760 --> 02:00:58,400 Just really quickly pause, just to define some terms. If people don't know, layer one that
02:00:58,400 --> 02:01:05,600 Michael's referring to is in general what people know of as the Bitcoin technology originally
02:01:05,600 --> 02:01:12,160 defined, which is the blockchain. There's a consensus mechanism of proof of work, a low
02:01:12,160 --> 02:01:20,480 number of transactions, but you can move a very large amount of money. The reason he's using the
02:01:20,480 --> 02:01:25,600 term layer one is now that there's a lot of ideas of layer two technologies built on top of this
02:01:25,600 --> 02:01:36,240 bedrock that allow you to move a much larger number of transactions, sort of higher frequency.
02:01:36,240 --> 02:01:41,440 I don't know what terminology you want to use, but basically be able to use now something that is
02:01:41,440 --> 02:01:48,400 based on Bitcoin to then buy stuff, be a consumer, to transfer money, to use it as currency.
02:01:49,920 --> 02:01:51,360 Just to define some terms.
02:01:51,360 --> 02:02:02,800 Yeah. So the layer one is the foundation for the entire cyber economy, and we don't want it to move
02:02:02,800 --> 02:02:13,440 fast. What we want is immortality, immortal, incorruptible, indestructible, right? That's what
02:02:13,440 --> 02:02:18,240 you want, integrity from the layer one. Now there's layer two and layer three, and layer
02:02:18,240 --> 02:02:27,360 two I would define as an open, permissionless, non-custodial protocol that uses the underlying
02:02:27,360 --> 02:02:30,880 layer one token as its gas fee.
02:02:30,880 --> 02:02:36,800 So what's custodial mean and how does the different markets, like is lightning network?
02:02:36,800 --> 02:02:42,080 So lightning network would be an example of a layer two, non-custodial. So the lightning
02:02:42,080 --> 02:02:50,720 network will sit on top of layer one, it'll sit on top of Bitcoin, and what you want to do is
02:02:50,720 --> 02:02:56,480 solve the problem of, it's well and fine, I don't want to move a billion dollars every day, what I
02:02:56,480 --> 02:03:03,920 want to move is five dollars a billion times a day. So if I want to move five dollars a billion
02:03:03,920 --> 02:03:10,480 times a day, I don't really need to put the entire trillion-dollar-a-day, billion-dollar-a-day
02:03:10,480 --> 02:03:18,320 trillion dollars of assets at risk every time I move five dollars. All I really need to do is put
02:03:18,320 --> 02:03:22,720 a hundred thousand dollars in a channel or a million dollars in a channel, and then I do
02:03:22,720 --> 02:03:28,000 ten million transactions where I have a million dollars at risk. And of course it's kind of
02:03:28,000 --> 02:03:36,320 simple, if I put, if I lower my security requirement by a factor of a million, I can
02:03:36,320 --> 02:03:42,480 probably move the stuff a million times faster. And that's how lightning works. It's non-custodial
02:03:42,480 --> 02:03:51,520 because there's no corporation or custodian or counterparty you're trusting. There's the risk
02:03:51,520 --> 02:04:00,400 of moving through the channel. But lightning is an example of how I go from 350,000 transactions a day
02:04:00,400 --> 02:04:06,640 to 350 million transactions a day. So on that layer too, you could move the bitcoin in seconds
02:04:06,640 --> 02:04:12,640 for fractions of pennies. Now that's not the end-all be-all, because the truth is there are
02:04:12,640 --> 02:04:18,880 a lot of open protocols. Lightning probably won't be the only one. There's an open market competition
02:04:18,880 --> 02:04:27,920 of other permissionless open source protocols to do this work. And in theory, any other crypto
02:04:27,920 --> 02:04:35,280 network that was deemed to be property, deemed to be non-security, you could also think of
02:04:35,280 --> 02:04:40,320 as potentially a layer two to bitcoin, right? There's a debate about are there any and what
02:04:40,320 --> 02:04:46,480 are they, and we can leave that for a later time. But why do you think of them as layer two,
02:04:46,480 --> 02:04:52,480 as opposed to contending for layer one? Yeah, actually, if they're using their own token,
02:04:52,480 --> 02:04:58,800 then they are a layer one. If you create an open protocol that uses the bitcoin token as the fee,
02:04:58,800 --> 02:05:06,720 then it becomes a layer two. Bitcoin itself incentivizes its own transactions with its
02:05:06,720 --> 02:05:12,880 own token, and that's what makes it layer one. Okay, what's layer three then?
02:05:12,880 --> 02:05:19,280 Layer three is a custodial layer. So if you want to move bitcoin in milliseconds for free,
02:05:19,280 --> 02:05:25,840 you move it through Binance or Coinbase or Cash App. So this is a very straightforward thing. I
02:05:25,840 --> 02:05:30,640 mean, it seems pretty obvious when you think about it that there are going to be hundreds of thousands
02:05:30,640 --> 02:05:37,040 of layer threes. There may be dozens of layer twos. I mean, Lightning is a one, but it's not
02:05:37,040 --> 02:05:45,600 the only one. Anybody can invent something, right? And we can have this debate about custodial,
02:05:45,600 --> 02:05:54,320 non-custodial. Don't you think there's a monopoly, monopolization possibilities at layer three?
02:05:55,520 --> 02:06:02,480 So, you know, Coin, you mentioned Binance, Coinbase, what if they start to dominate,
02:06:02,480 --> 02:06:08,320 and basically everybody's using them, practically speaking, and then it becomes too costly to
02:06:08,320 --> 02:06:16,640 memorize the private key in your brain? I mean, or like the cold storage of layer one technology.
02:06:16,640 --> 02:06:22,320 The idealists fear the layer threes because they think, and especially they detest,
02:06:22,880 --> 02:06:28,080 they would detest it. There's almost like a layer four, by the way, if you want to.
02:06:28,080 --> 02:06:33,680 A layer four would be, I've got bitcoin on an application, but I can't withdraw it.
02:06:33,680 --> 02:06:37,840 So, I've got an application that's backed by bitcoin, but the bitcoin is sealed.
02:06:38,640 --> 02:06:42,320 It's a proprietary example. And I'll give you an example of that. That would be like
02:06:43,200 --> 02:06:52,560 Grayscale. If I own a share of GBTC, and so I own a security, actually, you know, you could own MSTR.
02:06:53,360 --> 02:06:58,800 If you own a security or you own a product that has bitcoin embedded in it, you get the benefits
02:06:58,800 --> 02:07:03,920 of bitcoin, but you don't have the ability to withdraw the asset.
02:07:03,920 --> 02:07:08,480 So, you can have the security market at layer four? Am I understanding this correctly?
02:07:09,200 --> 02:07:16,640 I don't know if I would say, not all securities are layer four, but anything that's a proprietary
02:07:16,640 --> 02:07:22,240 product based upon, with bitcoin embedded in it, where you can't withdraw the bitcoin,
02:07:22,800 --> 02:07:24,880 is another application of bitcoin.
02:07:24,880 --> 02:07:32,000 So, if you think about different ways you can use this, you can either stay completely on the layer
02:07:32,000 --> 02:07:38,480 one and use the base chain for your transactions, or you can limit yourself to layer one and layer
02:07:38,480 --> 02:07:43,680 two lightning. And the purist would say, we stay there, get your bitcoin off the exchange.
02:07:44,400 --> 02:07:50,720 But you could also go to the layer three. When Cash App supported bitcoin, they made it very easy
02:07:50,720 --> 02:07:56,080 to buy it, and then they gave you the ability to withdraw. When PayPal, or I think Robinhood,
02:07:56,080 --> 02:07:59,440 let you buy it, they wouldn't let you withdraw it, and there was a big community uproar,
02:07:59,440 --> 02:08:05,120 and people want, they want these layer threes to make it possible to withdraw the bitcoin.
02:08:05,120 --> 02:08:09,120 So, you can take it to your own private wallet and get it off the exchange.
02:08:10,080 --> 02:08:16,560 I think the answer to the question of, well, is corruption possible? Is corruption as possible
02:08:16,560 --> 02:08:22,560 in all human institutions and all governments everywhere? The difference between digital
02:08:22,560 --> 02:08:28,720 property and physical property is, when you own a building in Los Angeles, and the city
02:08:29,280 --> 02:08:36,160 politics turn against you, you can't move the building. And when you own a share of a security
02:08:36,720 --> 02:08:42,080 that's like a US traded security, and you wish to move to some other country,
02:08:42,080 --> 02:08:48,320 you can't take the security with you either. And when you own a bunch of gold and you try to get
02:08:48,320 --> 02:08:56,480 through the airport, they might not let you take it. So, bitcoin is advantageous versus all those,
02:08:56,480 --> 02:09:01,120 because you actually do have the option to withdraw your asset from the exchange.
02:09:02,080 --> 02:09:08,400 And if you had bitcoin with Fidelity, and you had shares of stock with Fidelity, and if you had
02:09:08,400 --> 02:09:17,360 bonds and sovereign debt with Fidelity, if you own some mutual funds and some other random limited
02:09:17,360 --> 02:09:22,560 partnerships with Fidelity, none of those things can be removed from the custodian. But the bitcoin,
02:09:22,560 --> 02:09:33,760 you can take off the exchange, you can remove from the custodian. So, there's a deterrent that's an
02:09:33,760 --> 02:09:41,680 anti-corrupting element. And the phrase is an armed society is a polite society, right? Because you
02:09:41,680 --> 02:09:49,920 have the optionality to withdraw all your assets from the crypto exchange, you can enforce fairness.
02:09:49,920 --> 02:09:55,920 And at the point where you disagree with their policies, you can, within an hour, move your
02:09:55,920 --> 02:10:03,520 assets to another counterparty or take personal custody of those assets. So, you can't move your
02:10:03,520 --> 02:10:10,080 assets. And you don't have that option with most other forms of property. Maybe you don't have as
02:10:10,080 --> 02:10:15,920 much optionality with any other form of property on Earth. And so, what makes digital property
02:10:15,920 --> 02:10:23,680 distinct is the fact that it has the most optionality for custody. Now, coming back to
02:10:23,680 --> 02:10:30,480 this digital energy issue, the real key point is the energy moves in milliseconds for free on layer
02:10:30,480 --> 02:10:37,920 three's. It moves in seconds or less than seconds on layer two's. It moves in minutes on the layer
02:10:37,920 --> 02:10:45,680 one. And I don't think it makes any sense to even think about trying to solve all three problems on
02:10:45,680 --> 02:10:52,000 the layer one because it's impossible to achieve the security and the incorruptibility and immortality
02:10:52,960 --> 02:10:57,040 if you try to build that much speed and that functionality and performance.
02:10:57,040 --> 02:11:03,120 In fact, if you come back to the New York model, you really wanted a block of granite, a building,
02:11:03,120 --> 02:11:09,600 and a company. That's what makes the economy, right? If I said to you, you're going to build
02:11:09,600 --> 02:11:14,000 a building, but you can only have one company in it for the life of the building, it would be very
02:11:14,000 --> 02:11:20,640 fragile, like very brittle. What company a hundred years ago is still relevant today? You want all
02:11:20,640 --> 02:11:27,680 three layers because they all oscillate at different frequencies. And there's a tendency
02:11:27,680 --> 02:11:33,920 to think, well, it's got to be this L1 or that L1, not really. And sometimes people think, well,
02:11:33,920 --> 02:11:43,520 I don't really want any L3. But companies, it's not an even or, companies are better than crypto
02:11:43,520 --> 02:11:48,720 asset networks at certain things. If you want complexity, you want to implement complexity,
02:11:48,720 --> 02:11:56,400 you want to implement compliance or customer service, right? Companies do these things well,
02:11:56,400 --> 02:12:05,920 right? We know you couldn't decentralize Apple or Netflix or even YouTube. The performance wouldn't
02:12:05,920 --> 02:12:13,120 be there and the subtlety wouldn't be there. And you can't really legally decentralize certain
02:12:13,120 --> 02:12:18,560 forms of banking and insurance because they will become illegal in the political jurisdiction they're
02:12:18,560 --> 02:12:24,480 in. So unless you're a crypto anarchist and you believe in no companies and no nation states,
02:12:25,680 --> 02:12:32,640 right? Which is just not very practical, not anytime soon. Once you allow that nation states
02:12:32,640 --> 02:12:41,840 will continue and companies have a role, then the layered architecture follows and the free market
02:12:41,840 --> 02:12:49,920 determines who wins. For example, there are layer threes that let you acquire Bitcoin and
02:12:49,920 --> 02:12:56,080 withdraw Bitcoin. There are other applications that let you acquire it but not withdraw it.
02:12:56,880 --> 02:13:01,920 And they don't get the same market share, but they might give you some other advantage.
02:13:02,960 --> 02:13:08,720 There are certain layer threes like Jack Dorsey's cash app where they just incorporated lightning
02:13:08,720 --> 02:13:19,920 and implementation of it. So that makes it more advantageous versus an application that doesn't
02:13:19,920 --> 02:13:26,880 incorporate lightning. If you think about the big picture, the big picture is 8 billion people with
02:13:26,880 --> 02:13:36,320 mobile phones served by 100 million companies doing billions of transactions an hour. And the
02:13:36,320 --> 02:13:43,120 companies are settling with each other on the base layer in blocks of 80 million at a time.
02:13:43,920 --> 02:13:53,200 And then the companies are trading with the consumers in proprietary layers like layer three.
02:13:53,200 --> 02:14:00,640 And then on occasion, people are shuffling assets across custodians with lightning layer two because
02:14:00,640 --> 02:14:06,800 you don't want to pay $5 to move $50. You want to pay a 20th of a penny to move $50.
02:14:07,600 --> 02:14:14,720 And so all of these things create efficiency in the economy. And Lex, if you want to consider
02:14:14,720 --> 02:14:21,120 how much efficiency, if you gave me a billion dollars in 20 years, I couldn't find a way to
02:14:21,120 --> 02:14:29,520 trade with another company or a counterparty in Nigeria. Like no other company in the world
02:14:29,520 --> 02:14:37,200 would. No amount of money. Give me $10 billion. I couldn't do it because you get shut down at the
02:14:37,200 --> 02:14:44,000 banking level. You can't link up a bank in Nigeria with a bank in the US. You get shut down at this
02:14:44,000 --> 02:14:48,960 credit card level because they don't have the credit card, so they won't clear. You get shut
02:14:48,960 --> 02:14:58,960 down at the compliance FCPA level because you wouldn't be able to implement a system that
02:14:58,960 --> 02:15:02,720 interfaced with somebody else's system if it's not in the right political jurisdiction.
02:15:04,080 --> 02:15:09,920 On the other hand, three entrepreneurs in Nigeria on the weekend could create a website that would
02:15:09,920 --> 02:15:15,440 trade in this lightning economy using open protocols without asking anybody's permission.
02:15:16,320 --> 02:15:22,400 So you're talking about something that's like a million times cheaper, less friction and faster
02:15:22,960 --> 02:15:26,880 to do it if you want to get money to move.
02:15:26,880 --> 02:15:31,120 LW- What do you think that looks like so that now there's a war going on in Ukraine,
02:15:31,760 --> 02:15:40,800 there's other wars, Yemen going out throughout the world, in this most difficult of states that a
02:15:40,800 --> 02:15:48,320 nation can be in, which is at war, civil war or war with other nations. What's the role of Bitcoin
02:15:49,200 --> 02:15:50,160 in this context?
02:15:50,160 --> 02:15:57,200 FCPA- Bitcoin is a universal trust protocol, a universal energy protocol, if you will.
02:15:58,320 --> 02:16:05,040 English is one. What I see is a bunch of fragmentation of applications. For example,
02:16:06,000 --> 02:16:10,800 the Russian payment app is not going to work in Ukraine. The Ukraine payment app is not going to
02:16:10,800 --> 02:16:16,400 work in Russia. The US payment apps won't work either of those places as far as I know.
02:16:16,400 --> 02:16:25,120 And in Argentina, their payment app may not work in certain parts of Africa. So what you have is
02:16:27,280 --> 02:16:32,640 different local economies where people spin up their own applications compliant
02:16:33,360 --> 02:16:40,880 with their own local laws or in war zones not compliant but just spinning up.
02:16:40,880 --> 02:16:43,760 LW- So how do you build something that's not compliant?
02:16:43,760 --> 02:16:50,480 FCPA- What is the revolutionary act here when you don't agree with the government
02:16:50,480 --> 02:16:56,080 or you want to free yourself from the constraint? So here's the thing, when a nation is really at
02:16:56,080 --> 02:17:02,960 war, especially if it's an authoritarian regime, it's going to try to control the
02:17:02,960 --> 02:17:07,600 public, lock everything down. The spread of information, how do you break through that?
02:17:07,600 --> 02:17:11,760 Do you do the thing that you mentioned, which is you have to build another app essentially
02:17:11,760 --> 02:17:18,080 that allows the flow of money outside the legal constraints placed on you by the government. So
02:17:18,080 --> 02:17:24,000 basically break the law. Is that possible? LW- Metaphorically speaking, if you want to
02:17:24,000 --> 02:17:28,640 break out of the constraints of your culture, you learn to speak English. For example, it's not
02:17:28,640 --> 02:17:34,560 illegal to speak English or even if it is, right? It doesn't matter. But English works everywhere
02:17:34,560 --> 02:17:40,880 in the world if you can speak it and then you can tap into a global commerce and intelligence
02:17:40,880 --> 02:17:46,560 network. So Bitcoin is a language. So you learn to speak Bitcoin or you learn to speak lightning
02:17:47,120 --> 02:17:52,480 and then you tap into that network in whatever manner you can.
02:17:52,480 --> 02:17:58,160 FCPA- But the problem is it's still very difficult to move Bitcoin around in Russia and Ukraine now
02:17:58,160 --> 02:18:05,600 during the war. And there was a sense to me that the cryptocurrency in general could be the savior
02:18:05,600 --> 02:18:11,760 for helping people. There's millions of refugees that are moving all around. It's very, it's very
02:18:11,760 --> 02:18:16,880 difficult to move money around in that space to help people.
02:18:17,440 --> 02:18:22,400 LW- I think we're very early. Like, like we're very embryonic here. If you look at the-
02:18:22,400 --> 02:18:27,520 FCPA- Who's we, sorry? We as a human civilization or we operating in the cryptocurrency space?
02:18:27,520 --> 02:18:34,000 LW- I think the entire crypto economy is very embryonic and the human race's
02:18:34,000 --> 02:18:39,680 adoption of it is embryonic. We're like one, 2% down that adoption curve.
02:18:41,360 --> 02:18:46,240 If you take lightning, for example, the, you know, the first real commercial applications
02:18:46,240 --> 02:18:52,000 of lightning are just in the last 12 months. So we're like year one, we might be approaching
02:18:52,000 --> 02:18:55,840 year two of commercial lightning adoption. And if you look at lightning adoption,
02:18:56,880 --> 02:19:02,640 lightning's not built into Coinbase, it's not built into Binance, it's not built into FTX.
02:19:02,640 --> 02:19:08,640 It's, you know, Cash App just implemented the first implementation, but not all the features
02:19:08,640 --> 02:19:14,080 are built into it. There's a few dozen, a dozen lightning wallets circulating out there.
02:19:15,120 --> 02:19:20,880 So I think that, you know, we're probably going to be 36 months of software development
02:19:21,920 --> 02:19:30,240 at the point that every Android phone and every iPhone has a Bitcoin wallet or crypto
02:19:30,240 --> 02:19:37,280 wallet in it of sorts. That's a big deal. If Apple embraced lightning, that's a big deal.
02:19:37,280 --> 02:19:45,680 LW- So the adoption is the thing, like in a war zone adoption, the people who struggle the most
02:19:45,680 --> 02:19:51,520 in war are people who weren't doing that great before the war started. They don't have the
02:19:51,520 --> 02:19:56,000 technological sophistication. The hackers and all those kinds of people will find a way.
02:19:56,000 --> 02:20:01,920 LW- It's just regular people who are just struggling to make day by day living. And so
02:20:01,920 --> 02:20:09,840 if the adoption permeates the entire culture, then you can start to move money around in the
02:20:09,840 --> 02:20:16,240 digital space. What if from a psycho, if you can psychoanalyze Jack Dorsey for a second.
02:20:17,200 --> 02:20:21,920 So he's one of the early adopters, or he's one of the people pushing the early adoption, this layer
02:20:21,920 --> 02:20:30,320 three. So inside Cash App, what do you make of the man of this decision as a business owner,
02:20:31,200 --> 02:20:38,800 as somebody playing in the space? Like what, why did he do it? And what does that mean for others
02:20:39,600 --> 02:20:43,360 at the scale that might be doing the same? So incorporating lightning networking,
02:20:43,360 --> 02:20:45,680 incorporating Bitcoin into their products.
02:20:45,680 --> 02:20:51,760 LW- I think he's been pretty clear about this. He feels that Bitcoin is an instrument of economic
02:20:51,760 --> 02:20:58,560 empowerment for billions of people that are unbanked and have no property rights in the world.
02:20:59,600 --> 02:21:10,960 If you want to give an incorruptible bank to 8 billion people on the planet,
02:21:12,560 --> 02:21:20,640 that's the same as asking the question, how do you give a full education through PhD to 8 billion
02:21:20,640 --> 02:21:28,720 people on the planet? And the answer is a digital version of the 20th century thing running on a
02:21:28,720 --> 02:21:34,480 mobile phone. And Bitcoin is a bank in cyberspace. It's run by incorruptible software and it's for
02:21:34,480 --> 02:21:39,360 everybody on earth. So I think when Jack looks at it, he's very sensitive to the plight of everybody
02:21:39,360 --> 02:21:44,240 in Africa. If you look at Africans, right, like you're going to give them banks, you're not going
02:21:44,240 --> 02:21:48,560 to put a bank branch on every corner. That's an obscene waste of energy. You're not going to run
02:21:48,560 --> 02:21:54,240 copper wires across the continent. That's an obscene waste of energy. You're not going to
02:21:54,960 --> 02:22:02,720 give them gold and, you know. So how are you going to provide people with a decent life?
02:22:03,840 --> 02:22:09,040 The metaphor I think is relevant here, the biological metaphor, lacks is type 1 diabetic.
02:22:10,160 --> 02:22:14,000 If you're a type 1 diabetic, you can't form fat. And if you can't form fat,
02:22:14,000 --> 02:22:20,640 then you can't store excess energy. So that means that, I mean, fat is the ultimate organic battery
02:22:20,640 --> 02:22:26,480 and if you've got 30 pounds of it, you can go 60 days without eating. But if you can't generate
02:22:26,480 --> 02:22:31,600 insulin, you can't form fat cells. And if you can't form fat cells and store energy,
02:22:31,600 --> 02:22:36,640 then you can eat yourself to death. I mean, you will eat and you will die. You'll starve to death.
02:22:36,640 --> 02:22:44,320 So the lack of property rights is like being a type 1 diabetic. And so if you look at most people
02:22:44,320 --> 02:22:51,680 everywhere in the world, they don't have property rights, they don't have effective bank, and they
02:22:51,680 --> 02:22:57,760 don't, and their currency is broken. Like what are the two things that in theory would serve
02:22:57,760 --> 02:23:05,040 as the equivalent of an organic battery or an economic battery to civilization? It would be
02:23:05,040 --> 02:23:14,400 I have a currency which holds its value and I can store it in a bank. So a risk-free currency
02:23:14,400 --> 02:23:21,360 derivative. I pay you your money, you take your life savings, you put it in a bank, you save up
02:23:21,360 --> 02:23:26,800 for your retirement, you'll have happily ever after. That's the American dream, right? That's
02:23:26,800 --> 02:23:33,600 the idyllic situation. The real situation is there are no banks, you can't get a bank account,
02:23:33,600 --> 02:23:39,760 so I give you your pay in currency and then I double the supply and I give it to my cousin
02:23:40,320 --> 02:23:45,520 or I give it to whatever cause I want or I use it to buy weapons and then you find a loaf of bread
02:23:45,520 --> 02:23:52,000 cost triple next month is what it costs and your life savings is worthless. And so in that
02:23:52,000 --> 02:23:58,480 environment, everybody's ripped back to Stone Age barter. And the problem with that even Stone Age
02:23:58,480 --> 02:24:06,640 barter is you're gonna carry your life savings on your back and what happens when the guy with the
02:24:06,640 --> 02:24:12,160 machine gun points it at your head and just takes your life savings. So I think from Jack's point of
02:24:12,160 --> 02:24:19,600 view, he thinks that life is, this is maybe too strong, but these are my words, life is hopeless
02:24:19,600 --> 02:24:30,320 and Bitcoin is hope, right? Because it gives everyone an engineered monetary asset that's
02:24:30,320 --> 02:24:38,800 a bearer instrument and it gives them a bank on their mobile phone and they don't have to
02:24:38,800 --> 02:24:49,040 trust their government or another counterparty with their life force. So there's a secondary
02:24:49,040 --> 02:24:54,320 thing I think he's interested in, which is the first thing is the human rights issue and the
02:24:54,320 --> 02:25:06,880 second thing would be the friction to trade cross borders is so great, right? You're like AI,
02:25:07,520 --> 02:25:14,240 so I'll give you a beautiful notion. Maybe one day there'll be an artificially intelligent
02:25:14,240 --> 02:25:28,080 creature in cyberspace that is self-sufficient and rich. Can a robot own money or property?
02:25:28,800 --> 02:25:34,640 How about can a Tesla car? Can I actually put enough money in a car for it to drive itself and
02:25:34,640 --> 02:25:40,880 maintain itself forever? Or can I create an artificially intelligent creature in cyberspace
02:25:40,880 --> 02:25:47,280 that is endowed such that it would live a thousand years and continue to do its job, right?
02:25:48,640 --> 02:25:53,440 We have a word for that in the real world is institution, Harvard, Cambridge, Stanford,
02:25:53,440 --> 02:25:59,600 right? There are institutions with endowments that go on in perpetuity, but what if I wanted
02:25:59,600 --> 02:26:10,160 to perpetuate a software program? And with something like digital property with Bitcoin
02:26:10,160 --> 02:26:18,880 and lightning, you could do it. And on the other hand, with banks and credit cards,
02:26:19,680 --> 02:26:25,600 you couldn't, right? You couldn't ever. So you can create things that are beautiful
02:26:26,880 --> 02:26:35,360 and lasting. And what's the difference in speed? Well, so I can either trade with everybody in
02:26:35,360 --> 02:26:43,920 the world at the speed of light, friction-free in 24 hours writing a Python script, or I can
02:26:43,920 --> 02:26:49,920 spend a hundred billion dollars to trade with a few million people in the world after it takes
02:26:49,920 --> 02:26:59,440 them six months of application. The impedance is like a 10 million to one difference, right?
02:26:59,440 --> 02:27:06,240 And the metaphors are literally like launching something in orbit versus almost orbit or vacuum
02:27:06,240 --> 02:27:12,080 sealing something. Does it last forever and does it orbit forever or does it go up and come down
02:27:12,080 --> 02:27:21,360 and burn up, right? And I think Jack is interested in putting freedom in orbit, right?
02:27:21,360 --> 02:27:23,040 Putting freedom.
02:27:23,040 --> 02:27:26,480 Putting freedom in orbit. And he said it many times, he said,
02:27:26,480 --> 02:27:34,640 this is the internet needs a native currency, right? And no political construct or security
02:27:35,360 --> 02:27:40,880 can be a native currency. You need a property and you need a property that can be moved a million
02:27:40,880 --> 02:27:47,520 times a second. Can you oscillate it at 10 kilohertz or a hundred kilohertz? And the answer
02:27:47,520 --> 02:27:56,480 is only if it's a pure digital construct, permissionless and open. And so I think he's
02:27:56,480 --> 02:28:02,800 enthusiastic as the technologist and he's enthusiastic as the humanitarian. And what he's
02:28:02,800 --> 02:28:08,720 doing is support both those areas. He's supporting the Bitcoin and the lightning protocol by building
02:28:08,720 --> 02:28:15,440 them into his products, but he's also building the applications which you need at the cash app level
02:28:15,440 --> 02:28:20,560 in order to commercialize and deliver the functionality and the compliance necessary.
02:28:20,560 --> 02:28:22,400 And they're related.
02:28:23,760 --> 02:28:30,880 And I should also say he's just a fascinating person. For a random reason that I couldn't
02:28:30,880 --> 02:28:37,360 even explain if I tried, I met him a few days ago and gave him a great big hug in the middle
02:28:37,360 --> 02:28:43,120 of nowhere. There was no explanation. He just appeared. That's a fascinating human. His
02:28:43,120 --> 02:28:48,560 relationship with art, with the world, with human suffering, with technology is fascinating.
02:28:50,080 --> 02:28:55,520 I don't know what his path looks like, but it's interesting that people like that exist.
02:28:56,880 --> 02:29:03,840 And in part, I'm saddened that he no longer is involved with Twitter directly as a CEO because
02:29:03,840 --> 02:29:10,960 I was hoping something inside Twitter would also integrate some of these ideas of what you're
02:29:10,960 --> 02:29:17,440 calling digital energy to see how social networks, something I'm really interested in and passionate
02:29:17,440 --> 02:29:25,920 about, could be transformed. Let me ask you just for educational purposes, can you please
02:29:25,920 --> 02:29:32,160 explain to me what Web3 and the beef between Jack and Marc Andreessen is exactly? Did you see what
02:29:32,160 --> 02:29:38,640 happened? Sorry to have you analyze Twitter like it's Shakespeare, but can you please explain to
02:29:38,640 --> 02:29:47,840 me why there was any drama over this topic? First of all, Web3 is a term that's used to refer to
02:29:48,880 --> 02:29:54,800 the part of the economy that's token financed. So if I'm launching an application and my idea
02:29:54,800 --> 02:30:01,040 is to create a token along with the application and issue the token to the community so as to
02:30:01,040 --> 02:30:09,440 finance the application and build support for it, I think that that's the most common interpretation
02:30:09,440 --> 02:30:14,320 of Web3. There are other interpretations too. So I'm just going to refer to that one.
02:30:14,320 --> 02:30:19,360 And I think the beef, in a nutshell, not articulated, but I'll articulate it, is
02:30:20,000 --> 02:30:26,320 whether or not you should focus all your energy creating applications on top of an ethical digital
02:30:26,320 --> 02:30:34,640 property like Bitcoin, or whether you should attempt to create a competitor to it, which
02:30:35,440 --> 02:30:41,520 generally would be deemed as a security by the Bitcoin community. So I'm going to put on my
02:30:41,520 --> 02:30:47,920 Bitcoin hat here. All the tokens, if it's driven by a venture capitalist, well, it's a security.
02:30:47,920 --> 02:30:54,400 If there's a CEO and a CTO, it's a security. All these projects, they're companies. Foundations
02:30:54,400 --> 02:30:58,880 are companies, right? If you call them a project or a foundation, it doesn't make it
02:30:59,520 --> 02:31:06,560 not a security. They're all in essence collections of individuals that are issuing equity in the form
02:31:06,560 --> 02:31:19,760 of a token. And if there's a pre-mine, an IPO, an ICO, a foundation, or any kind of protocol
02:31:19,760 --> 02:31:28,080 where there's a group of engineers that have influence over it, then to a securities lawyer,
02:31:28,080 --> 02:31:33,680 or to most Bitcoiners and definitely to anybody that's steeped in securities law, you look at it
02:31:33,680 --> 02:31:40,640 and say, well, that passes the Howey test. It looks like a security. It should be sold to the
02:31:40,640 --> 02:31:48,960 public pursuant to disclosures and regulations. And you're just ducking the IPO process,
02:31:48,960 --> 02:31:57,280 right? And so now we get back to the ethical issue. The ethical issue is if you're trading it
02:31:57,280 --> 02:32:03,520 as a commodity and representing it as a commodity while truthfully it's a security, then it's a
02:32:03,520 --> 02:32:08,160 violation of ethics rules and it's probably illegal. Well, you keep leaning on this. Let
02:32:08,160 --> 02:32:12,640 me push back on that part. Maybe you can educate me, but you keep leaning on this line of securities
02:32:12,640 --> 02:32:22,800 law as if it would all do respect to lawyers, as if that line somehow defines what is and isn't
02:32:22,800 --> 02:32:29,200 ethical. I think there's a lot of correlation as you've discussed, but I'd like to leave the line
02:32:29,200 --> 02:32:37,920 aside. If the law calls something a security, it doesn't mean in my eyes that it is unethical. I
02:32:37,920 --> 02:32:42,720 mean, there could be some technicalities and lawyers and people play games with this kind of
02:32:42,720 --> 02:32:47,920 stuff all the time. But I take your bigger point that if there's a CEO, if there's a project lead,
02:32:47,920 --> 02:32:53,520 that's fundamentally, well, that to you is fundamentally different than the structure of
02:32:53,520 --> 02:32:58,400 Bitcoin. It's not that creating securities is unethical. I created a security. I took a company
02:32:58,400 --> 02:33:04,160 public, right? That's not the unethical part. It's completely ethical to create securities.
02:33:04,160 --> 02:33:09,600 You know, block is a security. All companies are securities. The unethical part is to
02:33:09,600 --> 02:33:15,840 represent it as property when it's a security and to promote it or trade it as such.
02:33:16,560 --> 02:33:25,840 This whole promotion, that's also a technical thing because what counts not as promotion
02:33:25,840 --> 02:33:31,360 is a legal thing and you get in trouble for all these things, but that's the game that lawyers
02:33:31,360 --> 02:33:36,560 play. There's an ethical thing here, which is like, what's right to promote and not, you know?
02:33:37,840 --> 02:33:42,400 To me, propaganda is unethical, but it's usually not illegal.
02:33:44,400 --> 02:33:47,040 If you roll the clock back 20 years,
02:33:47,840 --> 02:33:52,880 right? All the boiler room pump and dump schemes were all about someone pitching a penny stock,
02:33:52,880 --> 02:33:59,600 you know, selling Swampland in Florida. And if you roll the clock back forward 20 years
02:33:59,600 --> 02:34:05,200 and I create my own company and I represent it as the same thing and I don't make the disclosures,
02:34:05,200 --> 02:34:12,160 right? You're just one step removed from the boiler room scheme and that's what's distasteful
02:34:12,160 --> 02:34:18,880 about it. There are ways to sell securities to the public, but there are expectations. Maybe
02:34:20,160 --> 02:34:25,760 we could forget about whether the security laws are ethical or not, right? I will leave that alone.
02:34:25,760 --> 02:34:32,800 We'll just start with the biblical definition of ethics. Don't lie, cheat or steal. So if I'm going
02:34:32,800 --> 02:34:41,040 to sell something to you, I need to fully disclose what I'm selling to you, right? And that's a
02:34:41,040 --> 02:34:47,440 matter of great debate right now. And so I think that that's part of the debate. But the other
02:34:47,440 --> 02:34:58,240 part of the debate is whether or not we need more than one token. Like we need at least one,
02:34:58,240 --> 02:35:05,440 right? We need at least one digital property because zero means there is no digital economy.
02:35:05,440 --> 02:35:10,880 Yes. And by the way, you know, the conventional view of maximalists is they think there's only
02:35:10,880 --> 02:35:16,080 one and everything else isn't. That's not the point I'm going to make. I would say we know
02:35:16,080 --> 02:35:24,880 there is at least one digital property and that is Bitcoin. If you can create a truly decentralized,
02:35:24,880 --> 02:35:33,920 non-custodial, you know, bearer instrument that is not under the control of any organization
02:35:34,480 --> 02:35:40,880 that is fairly distributed, then you might create another or multiple and there may be others out
02:35:40,880 --> 02:35:50,560 there. But I think that the frustration of a lot of people in the Bitcoin community, and I share
02:35:50,560 --> 02:35:56,480 this with Jack, is we could create 100 trillion dollars of value in the real world simply by
02:35:56,480 --> 02:36:04,640 building applications on top of Bitcoin as a foundation. And so continually trying to reinvent
02:36:04,640 --> 02:36:15,600 the wheel and create competitive things is a massive waste of time and it's diversion of
02:36:17,840 --> 02:36:25,440 human creativity. It's like we have an ethical good thing and now we're going to try to create
02:36:25,440 --> 02:36:31,920 a third or a fourth one. Why? Well, let's talk about it. So first of all, I'm with you, but
02:36:31,920 --> 02:36:37,040 let me ask you this interesting question because we talked about properties and securities. Let's
02:36:37,040 --> 02:36:43,440 talk about conflict of interest. So you said you could advertise, you have a popular Twitter account.
02:36:44,240 --> 02:36:52,960 It's hilarious and insightful. You do promote Bitcoin in a sense. I don't know if you would
02:36:52,960 --> 02:36:59,040 say that. But do you think there's a conflict of interest in anyone who owns Bitcoin promoting
02:36:59,040 --> 02:37:06,720 Bitcoin? Is it the same as you promoting the farming? I would say no, there's an interest.
02:37:08,400 --> 02:37:18,160 I think that you can promote a property or an idea to the extent that you don't control it.
02:37:18,880 --> 02:37:25,440 I think that the point at which you start to have a conflict of interest is when you're promoting
02:37:25,440 --> 02:37:31,280 a proprietary product or a proprietary security. A security in general is a proprietary asset.
02:37:32,080 --> 02:37:37,520 So for example, if you look at my Twitter, you will find that I make lots of statements about
02:37:37,520 --> 02:37:42,720 Bitcoin. You won't ever see me making a statement that say microstrategy stock will go up forever.
02:37:43,600 --> 02:37:51,600 I'm not promoting a security MSTR because at the end of the day, MSTR is a security. It is
02:37:51,600 --> 02:37:58,320 proprietary. I have proprietary interest in it. I have a disproportionate amount of control
02:37:58,320 --> 02:38:03,840 and influence on the direction. The control is the problem. The control is the problem
02:38:03,840 --> 02:38:11,200 because you have interest in both. If Bitcoin is as successful as we're talking about,
02:38:11,200 --> 02:38:18,160 you are very possibly can become the richest human on earth given how much you own in Bitcoin.
02:38:18,160 --> 02:38:21,840 Right? The wealthiest, not the richest. I don't know what those words mean.
02:38:22,480 --> 02:38:24,880 I would benefit economically.
02:38:24,880 --> 02:38:26,240 You would benefit economically.
02:38:26,240 --> 02:38:26,880 That's true.
02:38:26,880 --> 02:38:33,360 So the reason that's not conflict of interest is because the word property,
02:38:34,320 --> 02:38:38,960 that Bitcoin is an idea and Bitcoin is open.
02:38:38,960 --> 02:38:46,720 It's because I don't own it. I don't control it. In essence, the ethical line here is could I print
02:38:46,720 --> 02:38:49,920 myself 10 million more Bitcoin or not? Right?
02:38:51,120 --> 02:38:54,640 Or can anyone, right? It's not just you. It's can anyone?
02:38:55,440 --> 02:38:58,560 Because can you promote somebody else's? Yes, I guess you can.
02:38:59,600 --> 02:39:04,720 Like if you can promote us, Apple, when you have no stake.
02:39:04,720 --> 02:39:11,280 You could have a Twitter account where you promote oil or you promote camping or you promote
02:39:11,280 --> 02:39:16,800 family values or promote, you know, a carnivore diet or promote the Iron Man, right?
02:39:17,520 --> 02:39:22,720 You're not going to get wealthier if you promote camping because you can't own a stake.
02:39:24,960 --> 02:39:30,480 You own a lot of Bitcoin. What is that? What is that? Don't you own the stake in the idea?
02:39:31,600 --> 02:39:33,520 Yeah, I would grant you that.
02:39:34,720 --> 02:39:40,400 But the lack of control is the fundamental ethical line that you just you don't have
02:39:40,400 --> 02:39:44,800 all you are is you're a fan of the idea. You believe in the idea and the power of the idea.
02:39:46,240 --> 02:39:49,200 Yeah, I think you can't take that idea away from others.
02:39:49,680 --> 02:39:53,440 Let's come back to let me give you some maybe easier examples.
02:39:53,440 --> 02:40:01,200 If you were the head of the Marine Corps, right? And someone came to you and said,
02:40:01,200 --> 02:40:08,640 I created Marine coin and the twist on Marine coin is I want you to tell every Marine that
02:40:08,640 --> 02:40:13,760 they'll get an extra Marine coin, you know, when they when they get their next stripe.
02:40:14,560 --> 02:40:18,160 And then I'm going to give you, you know, I'm going to let you buy Marine coin now.
02:40:18,160 --> 02:40:23,200 And then after you buy Marine coin, I want you to, like, promote it to them.
02:40:24,160 --> 02:40:31,040 Right. At some point, if if you start to have a disproportional influence on it,
02:40:31,040 --> 02:40:35,040 or if you're in a conversation with people with disproportionate influence becomes conflict of
02:40:35,040 --> 02:40:40,240 interest, and it would make you profoundly uncomfortable, I think. Yeah. If the head of
02:40:40,240 --> 02:40:46,240 the Marine Corps started promoting anything that looked like a security. Now, if the head of the
02:40:46,240 --> 02:40:52,080 Marine Corps started promoting canoeing. You might think he's kind of wacky, like maybe,
02:40:52,720 --> 02:40:59,120 like that's kind of a waste of time and distraction. So but but but to the extent that
02:40:59,120 --> 02:41:05,040 that canoeing is not a security, not a problem unless you you know, ultimately,
02:41:05,040 --> 02:41:11,360 the the issue of decentralization is really a critical one. So not having a head. So is it
02:41:11,360 --> 02:41:20,560 something can Bitcoin be replicated? So the all the things that you're saying that make it a
02:41:20,560 --> 02:41:25,680 property, can that be replicated? Have any other... I think it's possible to create other crypto
02:41:25,680 --> 02:41:33,760 properties. Does it does the having a head, like of a project, a thing that limits its ability to
02:41:33,760 --> 02:41:40,400 be a property? If you if you try to replicate a project? Is that the fundamental flaw?
02:41:41,520 --> 02:41:45,440 Look, I think the real fundamental issue is you just never want it to change.
02:41:46,560 --> 02:41:54,080 Like, like, if you really want something decentralized, you want a genetic template
02:41:54,080 --> 02:42:00,480 that substantially is not going to change for a thousand years. So I think Satoshi said at one
02:42:00,480 --> 02:42:05,920 point, he said the nature of the software is such that by version point one, its genetic code was
02:42:05,920 --> 02:42:12,880 set. If if there was any development team that's continually changing it, you know, on a routine
02:42:12,880 --> 02:42:19,760 basis, it becomes harder and harder to maintain its decentralization because now now there's the
02:42:19,760 --> 02:42:30,000 issue of who's influencing the changes. So what you really want is is a very, very simple idea,
02:42:30,000 --> 02:42:35,200 right? The simplest idea. I'm just going to keep track of who owns 21 million parts of energy.
02:42:36,000 --> 02:42:42,560 And when someone proposes big functional upgrades, you almost don't you don't really want that
02:42:42,560 --> 02:42:46,960 development to go on the base layer. You want that development to go on the layer threes because
02:42:46,960 --> 02:42:53,760 now cash app has a proprietary set of functionality and it's a security. And if you're going to
02:42:53,760 --> 02:43:00,400 promote the use of this thing, you're not going to you're not going to promote the layer three
02:43:00,400 --> 02:43:06,000 security because that's a an edge to a given entity and you're trusting the counterparty,
02:43:06,000 --> 02:43:10,800 you're going to promote the layer one or at most the layer two.
02:43:10,800 --> 02:43:18,400 Okay, so one of the fascinating things about Bitcoin, and sorry to romanticize certain notions,
02:43:18,400 --> 02:43:24,960 but Satoshi Nakamoto, that the founder is anonymous. Maybe you can speak to whether that's
02:43:25,520 --> 02:43:30,960 useful, but also I just like the psychology of that to imagine that there's a human being that
02:43:30,960 --> 02:43:36,720 was able to create something special and walk away. So first are you Satoshi Nakamoto?
02:43:36,720 --> 02:43:45,680 I'm certain I'm not. No, actually, I, you know, I think the providence is really important. And
02:43:45,680 --> 02:43:51,680 if I were to look at the highlighted points, I think having a founder that was anonymous or
02:43:51,680 --> 02:43:56,960 synonymous is important. I think the founder disappearing is also important. I think that
02:43:56,960 --> 02:44:03,760 the fact that the Satoshi coins never moved is also important. I think the the last thing that
02:44:03,760 --> 02:44:10,880 is also important. I think the lack of an initial coin offering is also important. I think the lack
02:44:10,880 --> 02:44:17,840 of a corporate sponsor is important. I think the fact that it traded for 15 months with no commercial
02:44:17,840 --> 02:44:29,120 value was also important. You know, I think that the simplicity of the protocol is very important.
02:44:29,120 --> 02:44:35,120 I think that the outcome of the block size wars is very important. And all of those things
02:44:36,320 --> 02:44:43,920 add up to common property. They're all indicia, indicators of a digital property as opposed to
02:44:43,920 --> 02:44:51,520 security. If there was a Satoshi sitting around sitting on top of $50 billion worth of Bitcoin,
02:44:51,520 --> 02:44:59,360 it would I don't think it would cripple Bitcoin as property, but I think it would undermine
02:45:00,720 --> 02:45:05,520 its digital property. And if I wanted to undermine a crypto asset network,
02:45:05,520 --> 02:45:11,360 I would do the opposite of all those things. I would launch one myself. I would sell 25 percent
02:45:11,360 --> 02:45:16,480 or 50 percent of the general public. I would keep some of the initial I would pre mine some stuff
02:45:16,480 --> 02:45:23,360 or early mine it, you know, and I would keep an influence on it. Those are all the opposite
02:45:23,360 --> 02:45:31,120 of what you would do in order to create common property. And so I see the entire story as Satoshi
02:45:31,120 --> 02:45:37,920 giving a gift of digital property to the human race and disappearing.
02:45:38,560 --> 02:45:41,680 Do you think it was one person? Do you have ideas of who it could be?
02:45:41,680 --> 02:45:44,160 I don't care to speculate.
02:45:44,160 --> 02:45:46,960 Okay. But do you think it was one person?
02:45:48,160 --> 02:45:52,000 It was one person, maybe in conjunction with a bunch of others. I mean,
02:45:52,000 --> 02:45:56,240 it might have been a group of people that were working together, but certainly there's a Satoshi.
02:45:56,240 --> 02:46:02,160 I mean, it's just so fascinating to me that one person could be so brave and thoughtful. Or do
02:46:02,160 --> 02:46:07,360 you think a lot of his accent, like the block size wars, the decision to make a block a certain size,
02:46:07,360 --> 02:46:13,040 all all the things you mentioned led up to the characteristics that make Bitcoin property.
02:46:14,000 --> 02:46:18,160 Do you think that's an accident or it was deeply thought through?
02:46:18,160 --> 02:46:20,800 Like, how does this is almost like a history of science question.
02:46:20,800 --> 02:46:24,800 I think people tried it for they tried 40 of them, right? I mean, I think there's a there's
02:46:24,800 --> 02:46:29,120 a history of attempting to create something like this. And it was tried many, many times and,
02:46:29,520 --> 02:46:34,880 and they failed for different reasons. And I think that it's like Prometheus tried to start a fire
02:46:34,880 --> 02:46:41,040 47 times and maybe the 48th time it sparked. And that's how I see this. This is the first one that
02:46:41,040 --> 02:46:50,000 sparked. And it sets a roadmap for us. And I think if you're looking for any one word that
02:46:50,000 --> 02:46:54,880 characterizes it, it's fair, right? The whole point of the network is it's a fair launch,
02:46:54,880 --> 02:47:05,280 a fair distribution. Like, yeah, I have Bitcoin, but I bought it. In fact, you know,
02:47:05,280 --> 02:47:13,760 at this point, we've paid $4 billion of you real cash to buy it. If I was sitting on the same
02:47:13,760 --> 02:47:19,760 position, and I had it for free, then there's always this question of, did I, you know,
02:47:19,760 --> 02:47:25,360 or I bought it for a nickel, a coin or a penny, the question is, was it fair? And that's a very
02:47:25,360 --> 02:47:33,280 hard question to answer, right? Did you acquire the Bitcoin that you own fairly? And if you roll
02:47:33,280 --> 02:47:37,840 the clock back, you know, you could have bought it for a nickel or a dime, but that was when it
02:47:37,840 --> 02:47:44,560 was a million times more likely to fail, right? When the risk was greater, the cost was lower.
02:47:44,560 --> 02:47:51,840 And then over time, the risk became lower and the cost became greater. And the real critical thing
02:47:51,840 --> 02:48:00,640 was to allow the marketplace absent any powerful interested actor, right? If Satoshi had held a
02:48:00,640 --> 02:48:05,920 million coins and then stayed engaged for 10 more years, tweaking things in the background,
02:48:05,920 --> 02:48:11,600 there'd still be that question. But what we've got is really a beautiful thing. We've got a
02:48:11,600 --> 02:48:19,120 we've got a chain reaction in cyberspace or an ideology spreading virally in the world
02:48:20,560 --> 02:48:29,360 that has seasoned in a fair ethical fashion. Sometimes it's a very violent, brutal fashion
02:48:29,360 --> 02:48:35,120 with all the volatility, right? And there's been a lot of, you know, a lot of sound and fury along
02:48:35,120 --> 02:48:41,920 the way. How do you psychoanalyze? How do you deal from a financial, from a human perspective
02:48:41,920 --> 02:48:46,800 with the volatility? You mentioned you could have gotten it for a nickel and the risk was great.
02:48:47,360 --> 02:48:54,000 Where's the risk today? What's your sense? You know, we're 13 years into this entire activity.
02:48:54,000 --> 02:49:00,480 I think the risk has never been lower. If you look at all the risks, right? The risks in the
02:49:00,480 --> 02:49:08,800 early years are, is the engineering protocol proper? Like one megabyte block size, 10 minute
02:49:08,800 --> 02:49:17,760 clock frequency cryptography is first, will it be hacked or will it crash? 730,000 blocks and it
02:49:17,760 --> 02:49:22,160 hasn't crashed. Will it be hacked? Hasn't been hacked. But you know, it's a Lindy thing, right?
02:49:22,160 --> 02:49:27,680 You wait 13 years to see if it'll be hacked. But on the other hand, with a billion dollars,
02:49:27,680 --> 02:49:32,160 it's not as interesting a target as it is with a hundred billion. And when it gets to be worth
02:49:32,160 --> 02:49:41,600 a trillion, then it's a bigger target. So the risk has been bleeding off over time as the network
02:49:41,600 --> 02:49:48,400 monetized. I think the second question is, will it be banned? You couldn't know. It literally could
02:49:48,400 --> 02:49:54,000 have been banned many times early on. In fact, in 2013, I tweeted on that subject, I thought it would
02:49:54,000 --> 02:50:01,920 be banned. I made a very infamous tweet. I thought it was going to be banned. In 2014, the IRS
02:50:02,720 --> 02:50:08,720 designated it as property and gave it property tax treatment, okay? So they could have given
02:50:08,720 --> 02:50:14,960 it a tax treatment where you had to pay tax on the unrealized capital gains every year and it
02:50:14,960 --> 02:50:23,360 probably would have crushed it to death, right? So it could have been in any number of places
02:50:23,360 --> 02:50:29,040 banned by a government, but in fact, it was legitimized as property. And then the question
02:50:29,040 --> 02:50:32,240 is, would it be hacked or would it be copied? Would it be something better than that? And it
02:50:32,240 --> 02:50:39,440 was copied 15,000 times. And you know the story of all those. And they either diverged to be
02:50:39,440 --> 02:50:46,400 something totally different and not comparable or someone trying to copy a non-sovereign bearer
02:50:46,400 --> 02:50:53,920 instrument store of value found that their networks crashed to be 1% of what Bitcoin is. So now we're
02:50:53,920 --> 02:51:00,480 sitting at a point where all those risks are out of the way. I would say that year one of
02:51:00,480 --> 02:51:08,480 institutional adoption is it started August 2020. That's when MicroStrategy bought $250 million
02:51:08,480 --> 02:51:13,040 worth of Bitcoin and we put that out on the wire. We were the first publicly traded company to
02:51:13,040 --> 02:51:18,400 actually buy Bitcoin. I don't think you could have found a $5 million purchase from a public
02:51:18,400 --> 02:51:24,880 company before we did that. So that was kind of like a gun going off. And then in the next 12
02:51:24,880 --> 02:51:31,920 months, Tesla bought Bitcoin, Square bought Bitcoin. And I'd say now we're in year two
02:51:31,920 --> 02:51:38,000 of institutional adoption. And there are about 24, should be 24 publicly traded Bitcoin miners
02:51:38,000 --> 02:51:44,320 by the end of this quarter. So you're looking at 36 publicly traded companies and you've got
02:51:47,760 --> 02:51:54,240 at least in the range of $50 billion of Bitcoin on the balance sheet of publicly traded companies
02:51:54,880 --> 02:52:00,880 and hundreds of billions of dollars of market cap of Bitcoin exposed companies.
02:52:00,880 --> 02:52:08,240 So I would say the asset, decade one was entrepreneurial, experimental.
02:52:10,240 --> 02:52:16,320 Decade two is a rotation from entrepreneurs to institutions and is becoming institutionalized.
02:52:16,320 --> 02:52:20,560 So maybe decade one you go from zero to a trillion and in decade two you go from one trillion to
02:52:20,560 --> 02:52:26,320 a hundred trillion. What about governments, government adoption, institutional adoption?
02:52:26,320 --> 02:52:33,920 Are governments important in this? Maybe making it some governments incorporating it into as a
02:52:33,920 --> 02:52:41,360 currency into their banks, all that kind of stuff. Is that important? And if it is, when will it
02:52:41,360 --> 02:52:48,880 happen? It's not essential for the success of the asset class, but I think it's inevitable in various
02:52:48,880 --> 02:52:58,800 degrees over time. But the most likely thing to happen next is large acquisitions by institutional
02:52:58,800 --> 02:53:06,880 investors of Bitcoin as a digital gold, where they're just swapping out gold for digital gold
02:53:06,880 --> 02:53:11,280 and thinking of it like that. And the government entities most likely to be involved with that
02:53:11,280 --> 02:53:15,920 would be sovereign wealth funds. If you look at all the sovereign wealth funds that are holding
02:53:15,920 --> 02:53:20,960 big tech stock equities, the Swiss, the Norwegians, the Middle Easterners,
02:53:22,160 --> 02:53:29,280 if you can hold big tech, then holding digital gold would be not far removed from that. That's
02:53:29,280 --> 02:53:36,720 a non-controversial adoption. I think there are opportunities for governments that are
02:53:36,720 --> 02:53:45,360 much more profound. If a government started to adopt Bitcoin as a treasury reserve asset,
02:53:45,360 --> 02:53:55,040 that's much bigger than just an asset investment. That's 100x bigger. And you could imagine that's
02:53:55,040 --> 02:54:00,960 like a trillion dollar opportunity. Any government that wanted to adopt it as a treasury reserve asset
02:54:00,960 --> 02:54:08,240 would probably generate trillions of dollars, a trillion or more of value. And then the thing
02:54:08,240 --> 02:54:15,120 that people think about is, well, will oil ever be priced in Bitcoin or any other export commodity?
02:54:16,000 --> 02:54:22,240 I think there's like $1.8 trillion or more of export commodities in the world. And right now,
02:54:22,240 --> 02:54:27,200 they're all priced in dollars. I think that this is a colorful thing, but it's not really that
02:54:27,200 --> 02:54:33,760 relevant. You could sell all that stuff in dollars. The relevant decision that any institution makes,
02:54:33,760 --> 02:54:37,840 whether they're a nonprofit, a university, a corporation, or a government,
02:54:38,560 --> 02:54:44,160 is what's your treasury reserve asset? And if your treasury reserve asset is the peso,
02:54:44,160 --> 02:54:54,240 and if the peso is losing 20% or 30% of its value a year, then your balance sheet is collapsing
02:54:54,240 --> 02:55:01,600 within five years. And if the treasury reserve asset is dollars and currency derivatives and
02:55:01,600 --> 02:55:09,440 US treasuries, then you're getting your seven. Right now, it's probably 15% or more
02:55:10,240 --> 02:55:15,040 monetary inflation. We're running double the historic average. You could argue triple,
02:55:15,040 --> 02:55:21,440 somewhere between double and triple, depending upon what your metric is. So do I think it'll
02:55:21,440 --> 02:55:25,040 happen? I think that they're conservative, but they have to be shocked. And I think there is a
02:55:25,040 --> 02:55:33,520 shock. The late Russian sanctions are a big shock. When the West sees $300 billion worth
02:55:33,520 --> 02:55:39,200 of Russian gold and currency derivatives, I think you got the famous quote by Putin that
02:55:40,160 --> 02:55:47,120 we have to rethink our treasury strategies. And that pushes everybody toward a commodity strategy.
02:55:47,120 --> 02:55:51,840 What commodities do I want to hold? I think that's got a lot of people thinking. I think it's got
02:55:51,840 --> 02:55:58,000 the Chinese thinking. Everybody wants to be the reserve currency, right? So if I buy $50 billion
02:55:58,000 --> 02:56:11,520 worth of dollars every year, then I buy $500 billion over a decade, and I probably pay $250
02:56:11,520 --> 02:56:21,120 billion of inflation cost on the backs of my citizens in a decade. So inflation could be one
02:56:21,120 --> 02:56:28,240 of the sources of shock. And you wonder if there is a switch to Bitcoin, whether it will be a bang
02:56:28,240 --> 02:56:36,080 or a whimper. Like what is the nature of the shock or the transition? I think that the year 2022 is
02:56:36,080 --> 02:56:43,280 pretty catalytic for digital assets in general and for Bitcoin in particular. The Canadian trucker
02:56:43,280 --> 02:56:50,960 crisis, I think, educated hundreds of millions of people and made them start questioning their
02:56:50,960 --> 02:56:59,840 property rights and their banks. I think the Ukraine war was a second shock. But I think
02:56:59,840 --> 02:57:09,760 that the Russian sanctions was a third shock. I think hyperinflation in the rest of the world is
02:57:09,760 --> 02:57:16,080 a fourth shock. And then persistent inflation in the US is a fifth shock. So I think it's a perfect
02:57:16,080 --> 02:57:23,360 storm. And if you put all these events together, what do they signify? They signify the rational
02:57:23,360 --> 02:57:30,720 conclusion for any person thinking about this is, I'm not sure if I can trust my property.
02:57:31,520 --> 02:57:34,720 I don't know if I have property rights. I don't know if I can trust the bank.
02:57:35,440 --> 02:57:43,120 And if I'm politically at odds with the leader of my own country, I'm going to lose my property.
02:57:43,120 --> 02:57:48,880 And if I'm politically at odds with the owner of another country, I'm still going to lose my
02:57:48,880 --> 02:57:55,440 property. And when push comes to shove, the banks will freeze my assets and seize them.
02:57:56,240 --> 02:58:01,760 And I think that that is playing out in front of everybody in the world,
02:58:03,760 --> 02:58:13,680 such that your logical response would be, I'm going to convert my weak currency to a strong
02:58:13,680 --> 02:58:20,960 currency. I'll convert my peso and lira to the dollar. I'm going to convert my weak property
02:58:20,960 --> 02:58:28,160 to strong property. I'm going to sell my building downtown Moscow. And I'd rather own
02:58:28,960 --> 02:58:36,080 a building in New York City. I'd rather own in a powerful nation than be stuck with a building
02:58:36,080 --> 02:58:42,160 in Nigeria or a building in Argentina or whatever. So I'm going to sell my weak properties by strong
02:58:42,160 --> 02:58:47,760 properties. I'm going to convert my physical assets to digital assets. I'd rather own a
02:58:47,760 --> 02:58:53,520 digital building than own a physical building. Because if I had a billion dollar building in
02:58:53,520 --> 02:58:59,040 Moscow, who can I rent that to? But if I have a billion dollar digital building, I can rent it to
02:58:59,040 --> 02:59:06,160 anybody in any city in the world, anybody with money. And the maintenance cost is almost nothing,
02:59:06,160 --> 02:59:09,680 and I can hold it for 100 years. So it's an indestructible building.
02:59:09,680 --> 02:59:15,920 And then finally, I want to move from having my assets in a bank with a counterparty
02:59:15,920 --> 02:59:23,440 to self-custody assets. And this is not just Ukraine, but this is like the story in Turkey,
02:59:23,440 --> 02:59:30,640 Lebanon, Syria, Afghanistan, Iraq, South America. You don't really want to be sitting with $10
02:59:30,640 --> 02:59:38,160 million in a bank in Istanbul. The bank's going to freeze your money, convert it to lira, devalue
02:59:38,160 --> 02:59:42,400 the lira, and then feed it back to you over 17 years, right?
02:59:42,400 --> 02:59:45,680 So self-custody assets would be layer one Bitcoin?
02:59:46,480 --> 02:59:52,720 Self-custody assets, it's like, if I got my own hardware wallet, and I've either got
02:59:55,040 --> 03:00:00,400 your highest form of self-custody would be Bitcoin on your own hardware wallet or Bitcoin
03:00:00,400 --> 03:00:06,160 in your own self-custody. And the other thing people think about is how do I get crypto dollars
03:00:06,160 --> 03:00:12,640 like Tether, like some stable coin. Like I'd rather, if you had a choice, would you rather
03:00:12,640 --> 03:00:19,040 have your money in a bank in a war zone in dollars or have your money in a stable coin
03:00:19,040 --> 03:00:25,840 on your mobile phone in dollars, right? I mean, you take the latter risk rather than
03:00:25,840 --> 03:00:27,920 the former risk. In a war zone, definitely, yeah.
03:00:28,560 --> 03:00:33,200 And you can see that happening. Like we've gone from 5 billion in stable coins to 200 billion
03:00:33,200 --> 03:00:42,160 in the last 24 months. So I do think there's massive demand for crypto dollars in the form
03:00:42,160 --> 03:00:48,480 of a US dollar asset. And everybody in the world would say, yeah, I want that.
03:00:49,520 --> 03:00:54,000 Well, unless you're just an extreme patriot, but most people in the world would say, I
03:00:54,000 --> 03:00:58,640 want that. And then a lesser group of people would say, I think I want to be able to carry
03:00:58,640 --> 03:01:03,280 my property in the palm of my hand so I have self-custody of it.
03:01:04,240 --> 03:01:09,280 So the Bitcoin price has gone through quite a roller coaster. What do you think is the
03:01:09,280 --> 03:01:14,240 high point it's going to hit? I think it'll go forever, right? I mean,
03:01:14,240 --> 03:01:21,760 I think the Bitcoin is going to climb in a serpentine fashion. It's going to advance
03:01:21,760 --> 03:01:28,080 and come back and it's going to keep climbing. I think that the volatility
03:01:28,080 --> 03:01:34,800 attracts all the capital into the marketplace. And so the volatility makes it the most interesting
03:01:34,800 --> 03:01:40,960 thing in the financial universe. It also generates massive yield and massive returns for traders.
03:01:42,080 --> 03:01:48,080 And that attracts capital. Like we're talking about the difference between 5% return and 500%
03:01:48,080 --> 03:01:56,960 return. So the fast money is attracted by the volatility. The volatility has been decreasing
03:01:56,960 --> 03:02:03,600 year by year by year. I think that it's stabilizing. I don't think we'll see as much
03:02:03,600 --> 03:02:11,440 volatility in the future as we have in the past. I think that if we look at Bitcoin and model it as
03:02:12,880 --> 03:02:20,720 digital gold, the market cap goes to between 10 and 20 trillion. But gold is, remember,
03:02:20,720 --> 03:02:26,480 gold is defective property. Gold is dead money. You have a billion dollars of gold that sits in
03:02:26,480 --> 03:02:31,920 a vault for a decade. It's very hard to mortgage the gold. It's also very hard to rent the gold.
03:02:31,920 --> 03:02:35,920 You can't loan the gold. No one's going to create a business with your gold.
03:02:36,560 --> 03:02:41,360 So gold doesn't generate much of a yield. So for that reason, most people wouldn't store
03:02:41,360 --> 03:02:45,920 a billion dollars for a decade in gold. They would buy a billion dollars of commercial real estate
03:02:45,920 --> 03:02:52,160 property. And the reason why is because I can rent it and generate a yield on it that's in
03:02:52,160 --> 03:02:59,520 excess of the maintenance cost. So if you consider digital property, that's 100 to 200 trillion
03:03:01,440 --> 03:03:06,880 addressable market. So I would think it goes from 10 trillion to 100 trillion as people start to
03:03:06,880 --> 03:03:11,840 think of it as digital property. What does that mean in terms of price per coin?
03:03:11,840 --> 03:03:20,880 At 500,000, that's a 10 trillion dollar asset. At 5 million, that's a 100 trillion dollar asset.
03:03:20,880 --> 03:03:23,600 So I think it crosses a million. It can go even higher.
03:03:24,320 --> 03:03:27,760 Yeah, I think it keeps going up forever. I mean, there's no reason it couldn't go to 10 million
03:03:27,760 --> 03:03:32,480 a coin, right? Because digital property isn't the highest form, right?
03:03:32,480 --> 03:03:38,800 Gold was that low frequency money. Property is a mid frequency money. But when I start to
03:03:40,880 --> 03:03:50,560 program it faster, it starts to look like digital energy. And then it doesn't just replace property.
03:03:50,560 --> 03:03:57,600 Then you're starting to replace bonds. It's 100 trillion in bonds, there's 50 to 100 trillion
03:03:57,600 --> 03:04:04,240 in other currency derivatives. And these are all conventional use cases, right? I think that
03:04:05,280 --> 03:04:13,760 there's 350 trillion to 500 trillion dollars worth of currency derivatives in the world.
03:04:15,360 --> 03:04:20,000 And when I say that, I mean things that are valued based upon fiat cash flows.
03:04:20,000 --> 03:04:26,160 Any commercial real estate, any bond, any sovereign debt, any currency itself,
03:04:26,160 --> 03:04:32,400 any derivatives to those things, they're all derivatives. And they're all defective.
03:04:32,400 --> 03:04:35,840 And they're all defective because of this persistent 7% to 14%
03:04:37,760 --> 03:04:42,560 lapse, which we call inflation or monetary expansion. Can we switch,
03:04:43,120 --> 03:04:47,600 so I'm just going to talk about the energy side of it, like the innovative piece.
03:04:47,600 --> 03:04:50,400 Yeah. Let's just start with this idea that
03:04:50,400 --> 03:04:56,480 I've got a hotel worth a billion dollars with a thousand rooms. When it becomes a dematerialized
03:04:56,480 --> 03:05:00,880 hotel. I love that word so much, by the way, dematerialized hotel.
03:05:00,880 --> 03:05:04,400 We're crossing the fountain blow here. Imagine the fountain blow is dematerialized.
03:05:05,200 --> 03:05:10,560 The problem with a physical hotel is I got to hire real people moving subject to the speed of sound
03:05:10,560 --> 03:05:15,360 and physics laws and Newton's laws. And I can rent it to people in Miami beach.
03:05:15,360 --> 03:05:18,240 Mm-hmm. But if it was a digital hotel,
03:05:18,240 --> 03:05:22,240 I could rent the room to people in Paris, London, and New York every night.
03:05:23,200 --> 03:05:27,760 And I can run it with robots. And as soon as I do that, I can rent it by the room hour.
03:05:28,320 --> 03:05:33,840 And I can rent it by the room minute. And so I start to chop my hotel up into
03:05:34,560 --> 03:05:42,000 100,000 room hours that I sell to the highest bidder anywhere in the world. And you can see
03:05:42,000 --> 03:05:50,160 all of a sudden the yield, the rent, and the income of the property is dramatically increased.
03:05:50,800 --> 03:05:56,080 I can also see the maintenance cost of the property falls. I get on Moore's law,
03:05:56,800 --> 03:06:01,920 and I'm operating in cyberspace. So I got rid of Newton's laws. I got rid of all the friction and
03:06:01,920 --> 03:06:09,520 all those problems. I tapped into the benefits of cyberspace. I created a global property.
03:06:09,520 --> 03:06:15,600 I started monetizing it at different frequencies. And of course, now I can mortgage it to anybody
03:06:15,600 --> 03:06:21,680 in the world. You're not going to be able to get a mortgage on a Turkish building from someone
03:06:22,240 --> 03:06:27,360 in South Africa. You have to have to find someone that's local to the culture you're in.
03:06:28,320 --> 03:06:34,880 So when you start to move from analog property to digital property, it's not just a little bit
03:06:34,880 --> 03:06:42,000 better. It's a lot better. And what I just described, Lex, is the DeFi vision. It's the
03:06:42,000 --> 03:06:52,160 beauty of DeFi flash loans, money moving at high velocity. At some point, if the hotel is
03:06:52,160 --> 03:07:00,080 dematerialized, then what's the difference between renting a hotel room and loaning a block of stock?
03:07:00,080 --> 03:07:05,440 Right? I'm just finding the highest best use of the thing. It feels like the magic really emerges
03:07:05,440 --> 03:07:11,920 though when you build a lot, a market of layer two and layer three technologies on top of that.
03:07:11,920 --> 03:07:18,560 It's like, maybe you can correct me if I'm wrong, but for all these hotels and all these kinds of
03:07:18,560 --> 03:07:27,920 ideas, it's always touching humans at some point. And you know, consumers or humans, business
03:07:27,920 --> 03:07:32,960 owners and so on. And so you have to create interface. You have to create services that
03:07:32,960 --> 03:07:38,960 make all that super efficient, super fun to use, pleasant, effective, all those kinds of things.
03:07:38,960 --> 03:07:41,440 And so you have to build in a whole economy on top of that.
03:07:41,440 --> 03:07:46,000 Yeah. And I happen to think that won't be done by the crypto industry at all. I think that'll be
03:07:46,000 --> 03:07:52,320 done by centralized applications. I think it'll be, you know, the citadels of the world, the high
03:07:52,320 --> 03:08:00,800 speed traders of the world, the New Yorkers. I think it'll be Binance, FTX, and Coinbase as a
03:08:00,800 --> 03:08:07,760 layer three exchange that will give you the yield and will give you the loan and the best terms.
03:08:08,320 --> 03:08:13,920 Because ultimately you have to jump these compliance hoops. It comes like BlockFi can give
03:08:13,920 --> 03:08:19,120 you yield, but they have to do it in a compliant way with the United States jurisdiction.
03:08:19,120 --> 03:08:27,040 So ultimately, those applications to use that digital property and either generate a loan,
03:08:27,040 --> 03:08:31,760 give you a loan on it, or give you yield on it are going to come from companies. But the difference,
03:08:32,720 --> 03:08:39,200 the fundamental difference is it could be companies anywhere in the world. So if a company in
03:08:39,200 --> 03:08:46,720 Singapore comes up with a better offering, right, then the capital is going to start to flow in
03:08:46,720 --> 03:08:54,880 to Singapore. I can't send 10 city blocks of LA to Singapore to rent during a festival,
03:08:54,880 --> 03:09:01,520 but I can send 10 blocks of Bitcoin to Singapore. So you've got a truly global market that's
03:09:01,520 --> 03:09:07,840 functioning in this asset. And as a second order asset, for example, maybe you're an American
03:09:07,840 --> 03:09:13,840 citizen and you own 10 Bitcoin and someone in Singapore will generate 27% yield in the Bitcoin,
03:09:13,840 --> 03:09:19,520 but legally, you can't send the money to them or the Bitcoin to them. It doesn't matter, because
03:09:19,520 --> 03:09:25,840 the fact that that exists means that someone in Hong Kong will borrow the 10 Bitcoin from somebody
03:09:25,840 --> 03:09:31,680 in New York, and then they will put on the trade in Singapore. And that will create a demand for
03:09:31,680 --> 03:09:37,600 Bitcoin, which will drive up the price of Bitcoin, which will result in an effective tax-free yield
03:09:37,600 --> 03:09:42,400 for the person in the US that's not even in the jurisdiction. And that's going to create
03:09:42,400 --> 03:09:48,800 a tax-free yield for the person in the jurisdiction. So there's nothing that's going on in Singapore
03:09:48,800 --> 03:09:55,200 to drive up the price of your land in LA. But there is something going on everywhere in the
03:09:55,200 --> 03:10:01,440 world to drive up the price of property in cyberspace if there's only one digital Manhattan.
03:10:01,440 --> 03:10:09,280 And so there's a dynamic there, which is profound because it's global. But now let's go to the next
03:10:09,280 --> 03:10:16,640 additional idea, which is let's just loan the money fast on a global network, and let's just
03:10:16,640 --> 03:10:25,040 rent the hotel room fast in cyberspace. But let's move to maybe a more innovative idea.
03:10:25,040 --> 03:10:31,040 The first generation of internet brought a lot of productivity, but there's also just a lot of
03:10:31,040 --> 03:10:37,840 flaws in it. For example, Twitter is full of garbage. Instagram DMs are full of garbage. Your
03:10:37,840 --> 03:10:43,440 YouTube is full of scams. Every 15 minutes, there's a Michael Saylor Bitcoin giveaway spun up on
03:10:43,440 --> 03:10:51,600 YouTube. My Office 365 inbox is full of garbage, millions of spam messages. I'm running four
03:10:51,600 --> 03:10:58,480 different email filters. My company spends million dollars a year to fight denial of service attacks
03:10:58,480 --> 03:11:04,560 and all sorts of other security things. There are denial of service attacks everywhere against
03:11:04,560 --> 03:11:10,240 everybody in cyberspace all the time. It's extreme. And we're all beset with hostility,
03:11:10,240 --> 03:11:16,960 right? You've been a victim of it in Twitter. You go on Twitter and people post stuff they would
03:11:16,960 --> 03:11:21,440 never say to your face. And then if you look, you find out that the account was created like
03:11:21,440 --> 03:11:29,440 three days ago, and it's not even a real person. So we're beset with phishing attacks and scams
03:11:29,440 --> 03:11:35,440 and spam bots and garbage. And why? And the answer is because the first generation of
03:11:35,440 --> 03:11:40,640 internet was digital information, and there's no energy. There's no conservation of energy
03:11:40,640 --> 03:11:48,240 in cyberspace. The thing that makes the universe work is conservation of energy. Like, if I went
03:11:48,240 --> 03:11:55,680 to a hotel room, I'd have to post a credit card. And then if I smash the place up, there'd be
03:11:55,680 --> 03:12:01,840 economic consequences. Maybe there'd be criminal consequences. There might be reputational
03:12:01,840 --> 03:12:08,160 consequences. You know, a lamp might fall on me. But in the worst case, I can only smash up one
03:12:08,160 --> 03:12:15,200 hotel room. Now, imagine I could actually write a Python script to send myself to every hotel room
03:12:15,200 --> 03:12:23,280 in the world every minute, not post a credit card and smash them all up anonymously, right?
03:12:23,280 --> 03:12:29,280 The thing that makes the universe work is friction, speed of sound, speed of light, and the
03:12:29,280 --> 03:12:35,200 fact that ultimately it's conservative. You're either energy or you're matter. But once you've
03:12:35,200 --> 03:12:42,720 used the energy, it's gone, and you can't do infinite everything. That's missing in cyberspace
03:12:42,720 --> 03:12:49,600 right now. And if you look at all of the moral hazards and all of the product defects that we
03:12:49,600 --> 03:12:57,360 have in all of these products, most of them, 99% of them, could be cured if we introduced
03:12:58,560 --> 03:13:05,920 conservation of energy into cyberspace. And that's what you can do with high-speed digital
03:13:05,920 --> 03:13:12,000 property, high-speed Bitcoin. And by high-speed, I mean not 20 transactions a day. I mean 20,000
03:13:12,000 --> 03:13:22,560 transactions a day. So how do you do that? Well, I let everybody on Twitter post 1,000 or 10,000
03:13:22,560 --> 03:13:30,000 Satoshis via lightning wallet, a lightning badge, give me an orange check. If you put up 20 bucks
03:13:30,000 --> 03:13:38,080 once in your life, you could give 300 million people an orange check. Right now, you don't have
03:13:38,080 --> 03:13:42,880 a blue check, Lex. You're a famous person. I don't know why you don't have a blue check. Have you
03:13:42,880 --> 03:13:48,480 ever applied for a blue check? No. There are 360,000 people on Twitter with a blue check.
03:13:48,480 --> 03:13:58,320 There are 300 million people on Twitter. So the conventional way to verify accounts is elitist,
03:13:59,120 --> 03:14:04,400 archaic. Yeah, how does it work? How do you get a blue check? You got to apply and wait six months,
03:14:04,400 --> 03:14:11,520 and you have to post three articles in the public mainstream media that illustrates you're a person
03:14:11,520 --> 03:14:18,800 of interest. Interesting. Generally, they would grant them to CEOs of public companies. The whole
03:14:18,800 --> 03:14:25,280 idea is to verify that you are who you say you are. But the question is, why isn't everybody
03:14:25,280 --> 03:14:31,200 verified? And there's a couple of threads on that. One is, some people don't want to be doxxed.
03:14:31,200 --> 03:14:36,480 They want to be anonymous. Sure. But there are even anonymous people that should be verified.
03:14:36,480 --> 03:14:44,960 Right. Because otherwise, you're subjecting their entire following to phishing attacks and scams and
03:14:44,960 --> 03:14:52,080 hostility. But the other- What's the orange verification? So this idea, can you actually
03:14:52,080 --> 03:14:56,640 elaborate a little bit more if you put up 20 bucks? Yeah, I think everybody on Twitter ought to be
03:14:56,640 --> 03:15:02,320 able to get an orange check if they could come up with like $10. And what is the power of that orange
03:15:02,320 --> 03:15:08,400 check? What does that verify exactly? You basically post a security deposit for your
03:15:08,400 --> 03:15:15,360 safe passage through cyberspace. So the way it would work is, if you've got $10 once in your life,
03:15:16,160 --> 03:15:22,240 you can basically show that you're credit worthy. And that's your pledge to me that you're going to
03:15:22,240 --> 03:15:29,520 act responsibly. So you put the 10 or the $20 into the lightning wallet, you get an orange check.
03:15:30,240 --> 03:15:34,880 Then Twitter just gives you a setting where I can say, the only people that could DM me are orange
03:15:34,880 --> 03:15:39,760 checks. The only people that can post on my tweets are orange checks. So instead of locking out the
03:15:39,760 --> 03:15:47,120 public and just letting your followers comment, you lock out all the unverified. And that means
03:15:47,120 --> 03:15:52,320 people that don't want to post $10 security deposit can't comment. Once you've done those
03:15:52,320 --> 03:16:00,720 two things, then you're in position to monetize malice, monetize motion or malice for that matter.
03:16:00,720 --> 03:16:09,280 But let's just say, for the sake of argument, you post something and 9700 bots spin up and pitch
03:16:09,280 --> 03:16:17,280 their whatever scam. Right now, you sit and you go report, report, report, report, report, report,
03:16:17,280 --> 03:16:22,880 and if you spend an hour, you get through half of them. You waste an hour of your life. They just
03:16:22,880 --> 03:16:27,440 spend up another $97 because they've got a Python script spending it up, so it's hopeless.
03:16:28,160 --> 03:16:34,160 But on the other hand, if you report them and they really are a bot, Twitter's got a method to
03:16:34,160 --> 03:16:39,600 actually delete the account. They know that they're bots. The problem is not they don't know
03:16:39,600 --> 03:16:43,280 how to delete the account. The problem is there are no consequences when they delete the account.
03:16:43,920 --> 03:16:50,480 So if there are consequences, Twitter could give, they could just seize the $10 or seize the $20
03:16:50,480 --> 03:16:56,880 because it's a bot. It's a malicious criminal act or whatever. It is a violation of the platform
03:16:56,880 --> 03:17:03,360 rules. You end up seizing $10,000, give half the money to the reporter and half the money to the
03:17:03,360 --> 03:17:09,200 Twitter platform, and- That's a really powerful idea, but that's tying it, that's adding friction
03:17:09,920 --> 03:17:15,040 akin to the kind of friction you have in the physical world. You're tying, you have consequences.
03:17:15,040 --> 03:17:19,360 You have real consequences. It's putting conservation of energy. Conservation of energy.
03:17:19,360 --> 03:17:24,480 There's no friction. There's no nothing on this earth. Right? I mean, you can't walk out of this
03:17:24,480 --> 03:17:30,640 earth, right? I mean, you can't walk across the room without friction, right? So friction is not
03:17:30,640 --> 03:17:40,160 bad, right? Unnecessary friction is bad. So in this particular case, you're introducing
03:17:40,160 --> 03:17:45,680 conservation of energy. And in essence, you're introducing the concept of consequence or truth
03:17:45,680 --> 03:17:54,320 into cyberspace. And that means if you do want to spin up 10 million fake-less Freedmen's, right?
03:17:54,320 --> 03:17:59,280 It's going to cost you a hundred million dollars to spin up 10 million fake Lexus.
03:17:59,280 --> 03:18:06,320 But the thing is you could do that with the dollar, but you're saying that it's more tied
03:18:06,320 --> 03:18:11,520 to physical reality when you do that with Bitcoin. Yeah. Well, let's follow up on that idea a bit
03:18:11,520 --> 03:18:18,800 more. If you did do it with the dollar, then the question is how do 6 billion people deposit the
03:18:18,800 --> 03:18:24,800 dollars, right? Because what you're doing is, yeah, could you do it with a credit card? Like,
03:18:24,800 --> 03:18:32,640 how do you send dollars? You have to dox yourself. It's not easy. So you're talking about inputting
03:18:32,640 --> 03:18:37,920 a credit card transaction, doxing yourself, and now you've just eliminated the 2 billion people
03:18:37,920 --> 03:18:42,240 that don't have credit cards or don't have banks. You've also got a problem with everybody that
03:18:42,240 --> 03:18:49,760 wants to remain anonymous. But you've also got this other problem, which is credit cards are
03:18:49,760 --> 03:18:57,040 expensive transactions, low frequency, slow settlement. So do you really want to pay two and
03:18:57,040 --> 03:19:04,560 a half percent every time you actually show a $20 deposit? And maybe you could do a Kluge version
03:19:04,560 --> 03:19:13,200 of this for a subset of people. It's like it's 10% as good if you did it with conventional payment
03:19:13,200 --> 03:19:23,200 rails. But what you can't do is the next idea, which is I want the orange badge to be used to
03:19:23,200 --> 03:19:30,800 give me safe passage through cyberspace, tripping across every platform. So how do I solve the
03:19:30,800 --> 03:19:37,200 denial of service attacks against a website? I publish a website. You hit it with a million
03:19:37,200 --> 03:19:45,040 requests. OK, now how do I deal with that? Well, I can lock you out and I can make it a zero trust
03:19:45,040 --> 03:19:50,960 website. And then you have to be coming at me through a trusted firewall with a trusted credential.
03:19:50,960 --> 03:19:58,720 But that's a pretty draconian thing. Or I could put it behind a lightning wall. A lightning wall
03:19:58,720 --> 03:20:05,760 would be, I just challenge you, Lex, you want to browse my website, you have to show me your
03:20:05,760 --> 03:20:13,840 100,000 satoshis. Do you have 100,000 satoshis? Click. OK, now you click away a hundred times
03:20:13,840 --> 03:20:18,880 or a thousand times. And after a thousand times, I'm like, well, now, Lex, you're getting offensive
03:20:18,880 --> 03:20:23,920 over to take a satoshi from you or 10 satoshis, a microtransaction. You want to hit me a million
03:20:23,920 --> 03:20:30,000 times? I'm taking all your satoshis and locking you out. What you want to do is you want to go
03:20:30,000 --> 03:20:38,400 through 200 websites a day. And what you want every time you cross a domain, you need to be
03:20:38,400 --> 03:20:44,160 able to, in a split second, prove that you've got some asset. And now when you cross back,
03:20:44,160 --> 03:20:51,040 when you exit domain, you want to fetch your asset back. So how do I, in a friction-free fashion,
03:20:51,040 --> 03:20:57,920 browse through dozens or hundreds of websites, post a security deposit for safe passage and then
03:20:57,920 --> 03:21:05,920 get it back? You couldn't afford to pay a credit card fee each time. When you think about 2.5% as
03:21:05,920 --> 03:21:14,080 a transaction fee, it means you trade the money 40 times and it's gone. It's gone.
03:21:14,080 --> 03:21:18,160 Yeah. So you can't do this kind of hopping around through the internet with this kind of
03:21:18,160 --> 03:21:22,880 verification that grounds you to a physical reality. It's a really, really interesting idea.
03:21:22,880 --> 03:21:24,720 Why hasn't that been done?
03:21:25,920 --> 03:21:31,920 I think you need two things. You need an idea like a digital asset, like Bitcoin,
03:21:31,920 --> 03:21:37,840 that's a bearer instrument for final settlement. And then you need a high-speed transaction network
03:21:37,840 --> 03:21:45,920 like Lightning, where the transaction cost might be a 20th of a penny or less. And if you roll the
03:21:45,920 --> 03:21:54,160 clock back 24 months, I don't think you had the Lightning network in a stable point. It's really
03:21:54,160 --> 03:22:00,960 just the past 12 months. It's an idea you could think about this year. And I think you need to
03:22:02,720 --> 03:22:09,280 be aware of Bitcoin as something other than like a scary speculative asset. So I really think we're
03:22:09,280 --> 03:22:10,320 just the beginning.
03:22:10,320 --> 03:22:16,880 The embryonic stage. I have to ask Michael Saylor, you said before, there's no second best to Bitcoin.
03:22:18,320 --> 03:22:22,800 What would be the second best? Traditionally, there's Ethereum with smart contracts, Cardano
03:22:22,800 --> 03:22:31,440 with proof of stake, Polkadot with interoperability between blockchains. Dogecoin has the incredible
03:22:31,440 --> 03:22:38,320 power of the meme. Privacy with Monero, I just can keep going. There's the
03:22:38,320 --> 03:22:46,160 there's, of course, after the block size wars, the different offshoots of Bitcoin.
03:22:46,160 --> 03:22:53,120 I think if you decompose or segment the crypto market, you've got crypto property. Bitcoin is
03:22:53,120 --> 03:22:59,440 the king of that. And other Bitcoin forks that wanted to be a bearer instrument store of value
03:23:00,400 --> 03:23:06,160 would be a property, a Bitcoin cash or Litecoin, something like that. Then you've got crypto
03:23:06,160 --> 03:23:12,240 currencies. I don't think I don't think Bitcoin's a currency because a currency I define in nation
03:23:12,240 --> 03:23:19,680 states since a currency is a digital asset that you can transfer as a, you know, in a transaction
03:23:19,680 --> 03:23:26,000 without incurring a taxable obligation. So that means has to be a stable dollar or a stable euro
03:23:26,000 --> 03:23:31,360 or a stable yen, a stable coin. So I think that crypto currencies, Tether, Circle, most famous.
03:23:31,360 --> 03:23:36,240 Then you've got crypto platforms, you know, and Ethereum is the most famous of the crypto platforms,
03:23:36,240 --> 03:23:42,640 the platform upon which, you know, with smart contract functionality, etc. And then I think
03:23:42,640 --> 03:23:48,480 you've got just crypto securities. It's just like my favorite whatever meme coin. And I love it
03:23:48,480 --> 03:23:52,960 because I love it. And it's attached to my game or my company or my persona or my whatever.
03:23:53,600 --> 03:23:59,120 I think if you if you, you know, push me and said, what's the second most popular
03:23:59,120 --> 03:24:04,000 push me and said, what's the second best? I would say the world wants two things.
03:24:04,000 --> 03:24:10,080 It wants crypto property as a savings account and it wants cryptocurrency as a checking account.
03:24:10,080 --> 03:24:16,240 And that means that the that the most popular thing really is going to be a stable coin dollar.
03:24:17,120 --> 03:24:24,560 Right. And there's a maybe a fight right now. It might be Tether. Right. But a stable dollar,
03:24:24,560 --> 03:24:30,400 because I feel like the market opportunity, it's not clear that there'll be one that will win.
03:24:30,400 --> 03:24:35,280 The class of stable dollars is probably a one to ten trillion dollar market easily.
03:24:37,040 --> 03:24:41,760 I think that in a crypto platform space, Ethereum will compete with Solana and
03:24:41,760 --> 03:24:44,400 Binance Smart Chain and the like.
03:24:44,400 --> 03:24:47,600 Are there certain characteristics of any of them that kind of stand out to you?
03:24:49,920 --> 03:24:52,400 Don't you think the competition is based on a set of features?
03:24:52,400 --> 03:24:57,360 There's also so the set of features that that cryptocurrency provides,
03:24:57,360 --> 03:25:01,680 but also the community that it provides. So do you think the community matters and sort
03:25:01,680 --> 03:25:05,840 of the adoption, the dynamic of the adoption, both across the developers and the investors?
03:25:05,840 --> 03:25:12,080 If I'm looking at them, I mean, the first question is, is what's the regulatory risk?
03:25:12,080 --> 03:25:16,480 How likely is it to be deemed a property versus security? And the second is,
03:25:17,360 --> 03:25:21,440 is what's the competitive risk? And the third is what's the speed and the performance and
03:25:21,440 --> 03:25:28,080 the, you know, all those things, you know, lead to the question of what's the security risk?
03:25:28,080 --> 03:25:34,640 How likely is it to crash and burn and how stable or unstable is it? And then there's the
03:25:35,680 --> 03:25:40,720 marketing risk. I mean, there are different teams behind each of these things and communities behind
03:25:40,720 --> 03:25:50,080 them. I think that the big cloud looming over the crypto industry is regulatory treatment of
03:25:50,080 --> 03:25:54,640 cryptocurrencies and regulatory treatment of crypto securities and crypto platforms.
03:25:54,640 --> 03:25:58,400 And I think that won't be determined until the end of the first Biden administration.
03:25:58,400 --> 03:26:05,680 For example, there are people that would like only US FDIC insured banks to issue
03:26:05,680 --> 03:26:10,560 cryptocurrencies. They want JP Morgan to issue a crypto dollar backed one to one.
03:26:11,440 --> 03:26:16,000 But then in the US right now, we have Circle and we have other companies that are licensed
03:26:16,000 --> 03:26:21,440 entities that are backed by cash and cash equivalents, but they're not FDIC insured banks.
03:26:22,160 --> 03:26:26,480 There's also a debate in Congress about whether state chartered banks should be able to issue
03:26:26,480 --> 03:26:33,440 these things. And then we have Tether and others that are outside of the US jurisdiction.
03:26:34,480 --> 03:26:38,160 They're probably not backed by cash and cash equivalents. They're backed by stuff
03:26:38,160 --> 03:26:44,720 and we don't know what stuff. And then finally you have, you know, UST and DAI, which are
03:26:44,720 --> 03:26:52,000 algorithmic stable coins that are even more innovative further outside the compliance
03:26:52,000 --> 03:26:57,840 framework. So if you ask who's going to win, the question is really, I don't know, will the market
03:26:57,840 --> 03:27:02,800 decide or will the regulators decide? If the regulators get out of the way and the market
03:27:02,800 --> 03:27:09,040 fall out, well then it's an interesting discussion. And then I think that all bets are off if the
03:27:09,040 --> 03:27:13,200 regulators get more heavy handed with this. And I think you could have the same discussion with
03:27:13,200 --> 03:27:19,680 crypto properties. Like the DeFi exchanges and the crypto exchanges, the SEC would like to regulate
03:27:19,680 --> 03:27:24,160 the crypto exchanges. They'd like to regulate the DeFi exchanges. That means they may regulate the
03:27:24,160 --> 03:27:31,520 crypto platforms and at what rate and in what fashion. And so I think that I could give you
03:27:31,520 --> 03:27:39,680 an opinion if it was limited to competition and the current regulatory regime, but I think that
03:27:39,680 --> 03:27:50,000 the regulations are so fast moving and it's so uncertain that it's, you can't make a decision
03:27:51,200 --> 03:27:55,680 without considering the potential actions of the regulators.
03:27:55,680 --> 03:27:59,840 I hope the regulators get out of the way. Can you steal me on the case
03:27:59,840 --> 03:28:05,040 that Dogecoin is I guess the second best cryptocurrency if you don't consider Bitcoin
03:28:05,040 --> 03:28:11,520 a cryptocurrency, but instead a crypto property. I would classify it as crypto property because
03:28:11,520 --> 03:28:18,400 the US dollar is a currency. So unless your crypto asset is pegged algorithmically or stably to the
03:28:18,400 --> 03:28:22,080 value of the dollar is not a currency, it's a property or it's an asset.
03:28:22,880 --> 03:28:28,480 So then can you steal me on the case that Dogecoin is the best cryptocurrency then?
03:28:29,440 --> 03:28:31,840 Because Bitcoin is not even in that list.
03:28:31,840 --> 03:28:36,320 The debate is going to be whether it's property or security. And there's a debate whether it's
03:28:36,320 --> 03:28:44,000 decentralized enough. So let's assume it was decentralized. Well, it's increasing at not quite
03:28:44,000 --> 03:28:50,560 five, what, 5% a year inflation rate, but it's not 5% exponentially. It's like a plus 5 million,
03:28:52,080 --> 03:28:59,200 5% something captain is less. I forget the exact number, but it's an inflationary property. It's
03:28:59,200 --> 03:29:06,960 got a lower inflation rate than the US dollar. And it's got a much lower inflation rate than
03:29:07,520 --> 03:29:11,680 than many other fiat currencies. So I think you could say that.
03:29:11,680 --> 03:29:17,040 But don't you see the power of meme, the power of ideas, the power of
03:29:18,640 --> 03:29:25,280 fun or whatever mechanism is used to captivate a community?
03:29:25,280 --> 03:29:30,800 I do, but there are meme stocks. It doesn't absolve you of your ethical and securities
03:29:30,800 --> 03:29:37,760 liabilities if you're promoting it. So I don't have a problem with people buying a stock.
03:29:40,960 --> 03:29:45,520 The way I divide the world is there's investment, there's saving,
03:29:46,080 --> 03:29:53,840 and there's speculation and there's trading. So Bitcoin is an asset for saving. If you want to
03:29:53,840 --> 03:30:01,040 save money for 100 years, you don't really want to take on execution risk or the like. So you're
03:30:01,040 --> 03:30:06,880 just buying something to hold forever. For you to actually endorse something as a property,
03:30:07,520 --> 03:30:11,600 like if you said to me, Mike, what should I buy for the next 100 years? I say, well,
03:30:11,600 --> 03:30:16,800 some amount of real estate, some amount of scarce collectibles, some amount of Bitcoin,
03:30:16,800 --> 03:30:21,680 right? You can run your company, right? But running your company is an investment.
03:30:21,680 --> 03:30:26,080 So the savings are properties. If you said, what should I invest in? I'd say, well,
03:30:26,080 --> 03:30:30,160 here's a list of good companies, private companies, you can start your own company,
03:30:30,160 --> 03:30:37,440 that's an investment, right? If you said, what should I trade? Well, I'm trading as like a
03:30:37,440 --> 03:30:43,600 proprietary thing. I don't have any special insight into that. If you're a good trader,
03:30:43,600 --> 03:30:49,200 you know you are. If you said to me, what should you speculate in? We talk about meme stocks
03:30:49,200 --> 03:30:56,880 and meme coins and it's kind of sits up there. It sits right in the same space with what horse
03:30:56,880 --> 03:31:01,840 should you bet on and what sports team should you gamble on and should you bet on black six
03:31:01,840 --> 03:31:08,240 times in a row and double down each time. I mean, it's fun, but at the end of the day,
03:31:09,920 --> 03:31:17,280 it's a speculation, right? You can't build a civilization on it. It's not an institutional
03:31:17,280 --> 03:31:24,000 asset. And in fact, where I'd leave it, right, is Bitcoin is clearly digital, which makes it
03:31:24,000 --> 03:31:30,000 an institutional grade investable asset for a public company, a public figure, a public investor,
03:31:30,000 --> 03:31:37,920 or anybody that's risk adverse. I think that the top 100 other cryptos are like
03:31:37,920 --> 03:31:43,120 venture capital investments. And if you're a VC and if you're a qualified technical investor and
03:31:43,120 --> 03:31:48,400 you have a pool of capital and you can take that kind of risk, then you can parse through that and
03:31:48,400 --> 03:31:55,040 form opinions. It's just orders of magnitude more risky because of competition, because of ambition,
03:31:55,040 --> 03:32:00,800 and because of regulation. And if you take the meme coins, it's like, you know,
03:32:00,800 --> 03:32:06,800 when some rapper comes out with a meme coin, it's like, maybe it'll peak when I hear about it,
03:32:06,800 --> 03:32:14,640 right? I mean, SHIB was created as a coin such that it had so many zeros after the decimal point
03:32:14,640 --> 03:32:22,400 that when you looked at it on the exchanges, it always showed 0000. And it wasn't until like six
03:32:22,400 --> 03:32:26,800 months after it got popular that they started expanding the display so you could see whether
03:32:26,800 --> 03:32:32,880 the price had changed. That's speculation. You've been, maybe you can correct me, but you've been
03:32:32,880 --> 03:32:39,120 critical of Elon Musk in the past in the crypto space. Where do you stand on Elon's effect on
03:32:39,120 --> 03:32:45,840 Bitcoin and cryptocurrency in general these days? I believe that Bitcoin is a massive breakthrough
03:32:45,840 --> 03:32:50,720 for the human race that will cure half the problems in the world and generate hundreds
03:32:50,720 --> 03:32:58,880 of trillions of dollars of economic value to the civilization. And I believe that it's in an early
03:32:58,880 --> 03:33:04,080 stage where many people don't understand it, and they're afraid of it, and there's FUD,
03:33:04,800 --> 03:33:10,480 and there's uncertainty, there's doubt, and there's fear. And it's a very noisy crypto world,
03:33:10,480 --> 03:33:18,000 and there's 15,000 other cryptos that are seeking relevance. And I think most of the FUD
03:33:19,360 --> 03:33:24,720 is actually fueled by the other crypto entrepreneurs. So the environmental FUD
03:33:24,720 --> 03:33:31,040 and the other types of uncertainty that surround Bitcoin, generally they're not coming from
03:33:31,040 --> 03:33:37,520 legitimate environmentalists. They don't come from legitimate critics. They actually are guerrilla
03:33:37,520 --> 03:33:44,720 marketing campaigns that are being financed and fueled by other crypto entrepreneurs
03:33:45,920 --> 03:33:52,400 because they have an interest in doing so. So if I look at the constructive path forward,
03:33:52,400 --> 03:33:59,520 first, I think it'd be very constructive for corporations to embrace Bitcoin and build
03:33:59,520 --> 03:34:06,320 applications on top of it. You don't need to fix it. There's nothing wrong with it, right? Like
03:34:06,320 --> 03:34:10,880 when you put it on a layer two and a layer three, it moves a billion times a second at the speed
03:34:10,880 --> 03:34:18,320 of light. So every beautiful, cool DeFi application, every crypto application,
03:34:18,320 --> 03:34:24,960 everything you could imagine you might want to do, you can do with a legitimate company
03:34:25,600 --> 03:34:32,960 and a legitimate website or mobile application sitting on top of Bitcoin or Lightning,
03:34:33,520 --> 03:34:39,920 if you want to. So I think that to the extent that people do that, that's going to be better
03:34:39,920 --> 03:34:45,920 for the world. If you consider what holds people back, I think it's just misperceptions
03:34:45,920 --> 03:34:53,840 about what Bitcoin is. So I'm a big fan of just educating people. If you're not going to
03:34:53,840 --> 03:35:00,000 commercialize it, then just educate people on what it is. So for example, Bitcoin is the most
03:35:00,000 --> 03:35:06,800 efficient use of energy in the world by far, right? Most people don't, they don't necessarily
03:35:06,800 --> 03:35:11,280 perceive that or realize that. But if you were to take any metric, energy intensity,
03:35:11,280 --> 03:35:18,720 you put like $2 billion worth of electricity in the network every year and it's worth $850 billion.
03:35:19,280 --> 03:35:26,320 There is no industry in the real world, right, that is that energy efficient. Not only that
03:35:26,320 --> 03:35:33,440 energy efficient, it's also the most sustainable industry. We do surveys, 58% of Bitcoin mining
03:35:33,440 --> 03:35:42,880 energy is sustainable. So there's a very good story. In fact, every other industry, planes,
03:35:42,880 --> 03:35:50,880 trains, automobiles, construction, food, medicine, everything else is less clean, less efficient.
03:35:52,000 --> 03:35:54,880 So the basic debate was-
03:35:54,880 --> 03:35:59,520 I wouldn't say there is a debate. I would just say that to the extent that the Bitcoin community
03:35:59,520 --> 03:36:08,400 with Elon, it was just this environmental uncertainty that he fueled in a couple of his
03:36:08,400 --> 03:36:14,240 tweets, right? Which I think just is very distracting. Well, that was one of them.
03:36:14,240 --> 03:36:18,880 But I think it's like the Bitcoin maximalists, but generally the crypto community, what you call
03:36:18,880 --> 03:36:28,160 the crypto entrepreneurs are, it's also they're using it for, I mean, for investment, for
03:36:28,160 --> 03:36:36,240 speculation, and therefore get very passionate about people's kind of celebrities, including you,
03:36:36,240 --> 03:36:47,280 like famous people, saying positive stuff about any one particular crypto thing you can buy in
03:36:47,280 --> 03:36:54,400 Coinbase. And so they might be unhappy with Elon Musk that he's promoting Bitcoin and then not,
03:36:54,400 --> 03:37:03,760 and then promoting Dogecoin, then not. There's so much emotion tied up in the communication
03:37:03,760 --> 03:37:07,840 on this topic. And I think that's where a lot of the-
03:37:08,480 --> 03:37:14,880 Look, I don't have a criticism of Elon Musk. He's free to do whatever he wishes to do. In fact,
03:37:15,440 --> 03:37:22,400 Elon Musk is the second largest supporter of Bitcoin in the world. So I think that the Bitcoin
03:37:22,400 --> 03:37:30,080 community tends to eat its own quite a bit. It tends to be very, very self-critical. And instead
03:37:30,080 --> 03:37:38,000 of saying, well, Elon is more supportive of Bitcoin than the other 10,000 people in the world,
03:37:38,880 --> 03:37:41,440 with serious amounts of money, they focus upon-
03:37:42,800 --> 03:37:46,000 Yeah, this is strange. Eating your own is just-
03:37:46,000 --> 03:37:50,480 That's right. I mean, I think he's free to do what he wants to do. And I think he's done a lot
03:37:50,480 --> 03:37:56,800 of good for Bitcoin in putting it on the balance sheet of Tesla and holding it. And I think that
03:37:56,800 --> 03:38:04,320 sent a very powerful message. Do you have advice for young people? So you've had a heck of a life.
03:38:05,680 --> 03:38:12,560 You've done quite a lot of things before MIT, but starting with MIT. Is there advice here for
03:38:12,560 --> 03:38:21,120 young people in high school and college, how to have a career they can be proud of,
03:38:21,120 --> 03:38:27,440 how to have a life they can be proud of? I was asked by somebody for quick advice
03:38:28,640 --> 03:38:35,600 for his young children. He had twins when they enter adulthood. He said, give me your advice
03:38:35,600 --> 03:38:44,800 for them in a letter. I'm going to give it to them when they turn 21 or something. I was at a party,
03:38:44,800 --> 03:38:47,760 and then he handed me this sheet of paper. I thought, oh, he wants me to write it down right
03:38:47,760 --> 03:38:51,840 now. So I sat down, I started writing, and I figured, well, what would you want to tell someone
03:38:51,840 --> 03:38:55,040 at age 21? You wrote it down.
03:38:55,040 --> 03:38:58,480 So I wrote it down. And then I tweeted it, and it's sitting on Twitter, but I tell you what I
03:38:58,480 --> 03:39:06,400 said. I said, my advice if you're entering adulthood, focus your energy, guard your time,
03:39:08,160 --> 03:39:17,520 train your mind, train your body, think for yourself, curate your friends,
03:39:17,520 --> 03:39:28,080 curate your environment, keep your promises, stay cheerful and constructive, and upgrade the world.
03:39:29,120 --> 03:39:30,160 Like that was the 10.
03:39:30,160 --> 03:39:37,680 Upgrade the world. That's an interesting choice of words. Upgrade the world. Upgrade the world.
03:39:37,680 --> 03:39:39,200 It's like an engineering training.
03:39:39,200 --> 03:39:43,040 Focus your energy. It's a very, yeah, it's a very engineering-themed,
03:39:43,040 --> 03:39:50,560 very engineering-themed, keep your promises too. That's an interesting one.
03:39:50,560 --> 03:39:57,520 I think most people suffer because they just, they don't focus. You got to figure out,
03:39:57,520 --> 03:40:00,960 I think the big risk in this world is there's too much of everything.
03:40:00,960 --> 03:40:01,200 Yeah.
03:40:01,840 --> 03:40:06,720 Like you can sit and watch chess videos a hundred hours a week, and you'll never get
03:40:06,720 --> 03:40:14,720 through all the chess videos. There's too much of every possible thing, too much of every good thing.
03:40:14,720 --> 03:40:22,000 So figuring out what you want to do and then everything will suck up your time. There's
03:40:22,000 --> 03:40:26,480 a hundred streaming channels to binge watch on. So you got to guard your time and then
03:40:27,600 --> 03:40:34,800 train your body, train your mind, and control who's around you, control what surrounds you.
03:40:34,800 --> 03:40:41,600 So ultimately in a world where there's too much of everything, then you're successful.
03:40:41,600 --> 03:40:45,360 It's like those laser eyes. It's like those laser eyes. You have to focus
03:40:47,600 --> 03:40:49,440 on just a few of those things.
03:40:50,160 --> 03:40:55,200 Yeah. I mean, I got a thousand opinions we could talk about and I could pursue a thousand things,
03:40:55,200 --> 03:41:02,880 but I don't expect to be successful. And I'm not sure that my opinion in any of the 999 is any more
03:41:02,880 --> 03:41:11,520 valid than the leader of thought in that area. So how about if I just focus upon one thing
03:41:12,480 --> 03:41:18,480 and then deliver the best I can in the one thing. That's the laser eye message.
03:41:19,440 --> 03:41:21,040 The rest get you distracted.
03:41:21,040 --> 03:41:24,000 Well, how do you achieve that? Do you find yourself,
03:41:24,000 --> 03:41:30,160 given the way you are in life, having to say no a lot, or just focus comes
03:41:30,160 --> 03:41:34,400 naturally when you just ignore everything around you? So how do you achieve that focus?
03:41:35,600 --> 03:41:37,920 I think it helps if people know what you're focused on.
03:41:39,120 --> 03:41:43,360 So everything about you just radiates that people know. People know this is-
03:41:43,360 --> 03:41:49,200 If they know what you're focused on, then you won't get so many other things coming your way.
03:41:49,200 --> 03:41:58,160 If you, you know, if you dolly or if you flirt with 27 different things,
03:41:58,160 --> 03:42:02,800 then you're going to get approached by people in each of the 27 communities, right?
03:42:03,760 --> 03:42:11,360 You mentioned getting a PhD and giving your roots at MIT. Do you think there's all kinds of
03:42:12,080 --> 03:42:18,400 journeys you can take to educate yourself? Do you think a PhD or school is still worth it?
03:42:20,160 --> 03:42:23,360 Or is there other paths through life that-
03:42:23,360 --> 03:42:26,640 Is it worth it if you have to pay for it? Is it worth it if you spend the time on it?
03:42:26,640 --> 03:42:30,960 Yeah. The time and the money is a big cost.
03:42:30,960 --> 03:42:31,680 I think-
03:42:32,960 --> 03:42:34,720 Time probably the bigger one, right?
03:42:34,720 --> 03:42:43,360 It seems clear to me that the world wants more specialists. It wants you to be an expert
03:42:43,360 --> 03:42:53,360 and to focus on one area. And it's punishing generalists, jack of all trades, especially
03:42:53,360 --> 03:42:57,520 people that are generalists in the physical realm. Because if you're a specialist in the digital
03:42:57,520 --> 03:43:04,000 realm, you might very well- You're the person with 700,000 followers on Twitter and you show
03:43:04,000 --> 03:43:10,400 them how to tie knots. Or, you know, you're the banjo player, you know, with 1.8 million followers.
03:43:10,400 --> 03:43:19,200 And when everybody types banjo, it's you, right? And so the world wants people that do something
03:43:19,200 --> 03:43:28,000 well. And then it wants to stamp out 18 million copies of them. And so that argues in favor of
03:43:28,000 --> 03:43:33,760 focus. Now, I mean, the definition of a PhD is someone with enough of an education that they're
03:43:33,760 --> 03:43:40,720 capable of or have made. I guess to get a PhD, technically, you have to have done a dissertation
03:43:40,720 --> 03:43:46,800 where you made a seminal contribution to the body of human knowledge, right? And if you haven't done
03:43:46,800 --> 03:43:52,800 that, technically, you know, you have a master's degree, but you're not a doctor. So if you're
03:43:52,800 --> 03:43:59,920 interested in any of the academic disciplines that a PhD would be granted for, then I can see
03:43:59,920 --> 03:44:06,400 that being a reasonable pursuit. But there are many people that are specialists. You know,
03:44:06,400 --> 03:44:15,760 the agitator? Yeah, yeah, yeah. He's the world's greatest chess commentator. And I've watched his
03:44:15,760 --> 03:44:19,840 career, and he's got progressively better, and he's really good. He's gonna love hearing this.
03:44:20,640 --> 03:44:25,760 Yeah, if the agitator hears this, I'm a big fan of the agitator. I have to cut myself off,
03:44:25,760 --> 03:44:32,160 right? Because otherwise you'll watch the entire Paul Morphy saga for your weekend. But the point
03:44:32,160 --> 03:44:39,040 really is YouTube is full of experts who are specialists in something. And they rise to the
03:44:39,040 --> 03:44:49,040 top of their profession, and Twitter is too, and the internet is. So I would advocate that you
03:44:49,040 --> 03:44:56,320 figure out what you're passionate about, and what you're good at, and you do focus on it.
03:44:57,280 --> 03:45:05,520 Especially if the thing that you're doing can be automated. The problem is, you know, back to that
03:45:05,520 --> 03:45:13,200 500,000 algebra teacher type comment. The problem is, if it is possible to be automated, then over
03:45:13,200 --> 03:45:22,640 time, someone's probably gonna automate it. And that squeezes the state space of everybody else.
03:45:22,640 --> 03:45:29,600 It's like after the lockdowns, it used to be there are all these local bands that played in bars,
03:45:29,600 --> 03:45:33,920 and everybody went to the bar to see the local band. And then during the lockdown, you would
03:45:33,920 --> 03:45:40,800 have like these six super groups, and they would all get 500,000 or a million followers. And all
03:45:40,800 --> 03:45:49,840 these smaller local bands just got no attention at all. Well, the interesting thing is one of those
03:45:49,840 --> 03:45:55,760 500,000 algebra teachers is likely to be part of the automation. So it's like, it's an opportunity
03:45:55,760 --> 03:46:04,400 for you to think, where's my field, my discipline evolving into? I talked to a bunch of librarians,
03:46:04,400 --> 03:46:10,560 just happened to be friends with librarians. And that's, libraries will probably be evolving,
03:46:10,560 --> 03:46:17,360 and it's up to you as a librarian to be one of the few that remain in the rubble.
03:46:18,000 --> 03:46:22,400 If you're going to give commentary on Shakespeare plays, I want you to basically do it for every
03:46:22,400 --> 03:46:28,240 Shakespeare play. Like I want you to be the Shakespeare dude, because once, just like Lex,
03:46:28,240 --> 03:46:31,360 you're like... I don't know what kind of...
03:46:31,360 --> 03:46:39,680 You're the deep thinking podcaster, right? You're the podcaster that goes after the deep
03:46:39,680 --> 03:46:46,480 intellectual conversations. And once I get comfortable with you, and I like you,
03:46:46,480 --> 03:46:54,640 then I start binge watching Lex. But if you changed your format through 16 different formats,
03:46:54,640 --> 03:47:00,320 so that you could compete with 16 different other personalities on YouTube, you probably wouldn't
03:47:00,320 --> 03:47:05,360 beat any of them, right? You would probably just kind of sink into the... You're the number two
03:47:05,360 --> 03:47:12,800 or number three guy. You're not the number one guy in the format. And I think that the algorithm,
03:47:12,800 --> 03:47:18,320 the Twitter algorithm and the YouTube algorithm, they really reward the person that's focused
03:47:18,320 --> 03:47:25,520 on message, consistent. The world wants somebody they can trust that's consistent and reliable,
03:47:25,520 --> 03:47:31,440 and they kind of want to know what they're getting into, because... And this is taken for granted
03:47:31,440 --> 03:47:39,760 maybe, but there's 10 million people vying for every hour of your time. And so the fact that
03:47:39,760 --> 03:47:45,280 anybody gives you any time at all is a huge privilege, right? And you should be thanking
03:47:45,280 --> 03:47:51,760 them and you should respect their time. It's interesting. Everything you said is very interesting.
03:47:51,760 --> 03:47:56,960 But of course, from my perspective, and probably from your perspective, my actual life has nothing
03:47:56,960 --> 03:48:04,640 to do with... It's just being focused on stuff. And in my case, it's like focus on doing the thing I
03:48:04,640 --> 03:48:10,160 really enjoy doing, and being myself, and not caring about anything else. I don't care about
03:48:10,160 --> 03:48:16,800 views or likes or attention. And just maintaining that focus is the way, from an individual
03:48:16,800 --> 03:48:24,400 perspective, you live that life. But yeah, it does seem that the world and technology is rewarding
03:48:24,400 --> 03:48:30,320 the specialization and creating bigger and bigger platforms for the different specializations. And
03:48:30,320 --> 03:48:34,800 that lifts all boats, actually, because the specializations get better and better and better
03:48:34,800 --> 03:48:40,080 at teaching people to do specific things, and they educate themselves, and it's just... Everybody
03:48:40,080 --> 03:48:45,600 gets more and more knowledgeable and more and more empowered. The reward for authenticity
03:48:45,600 --> 03:48:53,680 more than offsets the specificity with which you pursue your mission. Another way to say it is,
03:48:53,680 --> 03:49:02,960 like, nobody wants to read advertising. If you were to spend a hundred million dollars advertising
03:49:02,960 --> 03:49:12,720 your thing, I probably wouldn't want to watch it. We see the death of that. And so the commercial
03:49:12,720 --> 03:49:20,080 shows are losing their audiences, and the authentic specialists or the authentic artists
03:49:20,080 --> 03:49:27,600 are gaining their audience. And that's a beautiful thing. Speaking of deep thinking,
03:49:29,280 --> 03:49:36,560 you're just a human. Your life ends. You've accumulated so much wisdom, so much money,
03:49:37,200 --> 03:49:43,760 but the ride ends. Do you think about that? Do you ponder your death, your mortality? Are you
03:49:43,760 --> 03:49:52,160 afraid of it? When I go, all my assets will flow into a foundation, and the foundation's mission
03:49:52,160 --> 03:50:00,880 is to make education free for everybody forever. And if I'm able to contribute to the creation of
03:50:02,720 --> 03:50:08,080 a more perfect monetary system, then maybe that foundation will go on forever.
03:50:08,080 --> 03:50:16,240 Right. The idea, the foundation of the idea. Each of the foundations.
03:50:16,960 --> 03:50:21,280 It's not clear we're on the S-curve of immortal life yet. That's a biological
03:50:21,280 --> 03:50:27,200 question, and you ask that on some of your other interviews a lot. I think that we are on the
03:50:27,200 --> 03:50:36,000 threshold of immortal life for ideas, or immortal life for certain institutions
03:50:36,000 --> 03:50:43,200 or computer programs. So if we can fix the money, then you can create a technically perfected
03:50:43,200 --> 03:50:50,000 endowment. And then the question really is, what are your ideas? What do you want to leave behind?
03:50:50,000 --> 03:50:56,000 And so if it's a park, then you endow the park, right? If it's free education, you endow that.
03:50:56,000 --> 03:51:01,200 If it's some other ethical idea, right?
03:51:01,200 --> 03:51:10,160 Does it make you sad that there's something that you've endowed, some very powerful idea
03:51:11,040 --> 03:51:16,480 of digital energy that you put out into the world, you help put it into the world,
03:51:17,360 --> 03:51:26,560 and your mind, your conscious mind will no longer be there to experience it. It's just gone forever.
03:51:26,560 --> 03:51:32,320 SFX I rather think that the thing that Satoshi taught us is,
03:51:32,320 --> 03:51:37,120 you should do your part during some phase of the journey, and then you should get out of the way.
03:51:39,760 --> 03:51:46,800 I think Steve Jobs said something similar to that effect in a very famous speech one day,
03:51:46,800 --> 03:51:51,920 which is, death is a natural part of life, and it makes way for the next generation.
03:51:51,920 --> 03:51:57,520 And I think the goal is, you upgrade the world, right? You leave it a better place,
03:51:57,520 --> 03:52:07,680 but you get out of the way. And I think when that breaks down, you know, bad things happen.
03:52:08,880 --> 03:52:12,080 I think nature cleanses itself. There's a cycle of life.
03:52:13,440 --> 03:52:18,640 And speaking of one of great people who did also get out of the way is George Washington. So
03:52:18,640 --> 03:52:25,360 hopefully, when you get out of the way, nobody's bleeding you to death in hope of helping you.
03:52:27,360 --> 03:52:33,360 What do you think, to do a bit of a callback, what do you think is the meaning of this whole thing?
03:52:33,360 --> 03:52:38,400 What's the meaning of life? Why are we here? We talked about the rise of human civilization.
03:52:38,400 --> 03:52:45,040 It seems like we're engineers at heart. We build cool stuff, better and better use of energy,
03:52:45,040 --> 03:52:49,920 channeling energy to be productive. Why? What's it all for?
03:52:53,440 --> 03:52:55,120 You're getting metaphysical on me.
03:52:55,120 --> 03:53:00,400 Very. There's a beautiful boat to the left of us. Like, why do we do that? This boat that sailed
03:53:00,400 --> 03:53:05,520 the ocean. Then we build models of it to celebrate great engineering of the past.
03:53:06,480 --> 03:53:12,880 To engineer is divine. You can make lots of arguments as to why we're here. We're here
03:53:12,880 --> 03:53:19,040 to entertain ourself or we're here to create something that's beautiful or something that's
03:53:19,040 --> 03:53:23,440 functional. I think if you're an engineer, you entertain yourself by creating something that's
03:53:23,440 --> 03:53:28,400 both beautiful and functional. So I think all three of those things, it's entertaining, but
03:53:29,040 --> 03:53:38,640 it's ethical. You got to admire the first person that built a bridge, crossing a chasm, or the
03:53:38,640 --> 03:53:44,640 first person to work out the problem of how to get running water to a village. The first person
03:53:44,640 --> 03:53:54,000 to figure out how to dam up a river or mastered agriculture. The guy that figured out how to grow
03:53:54,000 --> 03:53:59,520 fruit on trees or created orchards, and maybe one day had like 10 fruit trees, he's pretty
03:53:59,520 --> 03:54:06,000 proud of himself. So that's functional. There is also something to that, just like you said,
03:54:06,000 --> 03:54:18,080 that's just beautiful. It does get you closer to, like you said, the divine. When you step
03:54:18,080 --> 03:54:26,640 back and look at the entirety of it, a collective of humans using a beautiful invention or creation
03:54:26,640 --> 03:54:37,200 or just something about this instrument is creating a beautiful piece of music. That seems
03:54:37,200 --> 03:54:42,400 just right. That's what we're here for. Whatever the divine is, it seems like we're here for that.
03:54:42,400 --> 03:54:47,360 And I, of course, love talking to you because from the engineering perspective, the function
03:54:47,360 --> 03:54:54,240 is ultimately the mechanism towards the beauty. Isn't there something beautiful about making
03:54:54,240 --> 03:54:59,760 the world a better place for people that you love, your friends, your family, or yourself?
03:55:03,200 --> 03:55:11,840 When you think about the entire arc of human existence and you roll the clock back 500,000
03:55:11,840 --> 03:55:17,040 years and you think about every struggle of everyone that came before us and everything
03:55:17,040 --> 03:55:25,760 they had to overcome in order to put you here right now, you got to admire that, right? You
03:55:25,760 --> 03:55:32,640 got to respect that. That's a heck of a gift they gave us, but it's also a heck of a responsibility.
03:55:33,920 --> 03:55:40,880 Don't screw it up. If I dropped you 500,000 years ago and I said, figure out steel refining,
03:55:40,880 --> 03:55:48,960 or figure out silicon chips, fab reproduction, or whatever it is.
03:55:48,960 --> 03:55:50,560 Fly or fire.
03:55:50,560 --> 03:55:56,000 And so now we're here, and I guess the way you repay them is you fix everything in front of
03:55:56,000 --> 03:56:03,440 your face you can, right? And that means to someone like Elon, it means get us off the planet,
03:56:03,440 --> 03:56:09,840 right? To someone like me, it's like, I think, you know, fix the energy in the system.
03:56:09,840 --> 03:56:13,760 And that gives me hope. Michael, this is an incredible conversation. You're an incredible
03:56:13,760 --> 03:56:18,640 human. It's a huge honor you would sit down with me. Thank you so much for talking to me.
03:56:18,640 --> 03:56:20,080 Yeah, thanks for having me, Lex.
03:56:20,960 --> 03:56:25,280 Thanks for listening to this conversation with Michael Saylor. To support this podcast,
03:56:25,280 --> 03:56:28,880 please check out our sponsors in the description. And now,
03:56:28,880 --> 03:56:36,720 let me leave you with a few words from Francis Bacon. Money is a great servant, but a bad master.
03:56:36,720 --> 03:56:58,480 Thank you for listening, and hope to see you next time.