The following is a conversation with Michael sailor, one of the most prominent and Brilliant Bitcoin proponents in the world. He is the CEO of microstrategy founder of Sailor Academy, graduate of MIT. And Michael is one of the most fascinating and rigorous thinkers have ever gotten a chance to explore ideas with. He can effortlessly zoom out to the big perspectives of human civilization in human history and zoom back in to the technical details of blockchains markets.
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Let's start with the big question of Truth and wisdom. When Advanced humans are aliens are AI systems. Let's say five to ten centuries from now, look back at Earth on this early, 21st century. How much do you think they would say? We understood about money and economics or even about engineering science, Life Death, meaning intelligence Consciousness, all the big interesting questions.
I think they were
duh, probably give us a
B-minus on engineering on all the engineering things, the hard
Sciences a passing grade
up like we're doing, okay. We're working our way through rockets and jets and electric cars, and I'll electricity Transport Systems and nuclear power and space flight. And the like, and you know, if you if you look at the walls that Grace the great court at MIT, it's full of all the great thinkers and and
They're all pretty admirable. You know, if you could be with Newton or gals or Madame Curie or Einstein, you know, you would respect them. I would say they'd give us like a d-minus on economics. Like, you know, an f+ or a d-minus
used to have an optimistic Vision. First of all, optimistic vision of engineering because everybody you've listed not everybody but most people you've listed, it's just over the pass.
Last couple of centuries and maybe stretches a little farther back, but mostly all the cool stuff. We've done. Engineering, that is the past couple of centuries.
I mean,
Archimedes, you know, had his virtues,
you know, I study the history of science at MIT and I also studied aerospace engineering and and so I quickly have a bias in favor of Science. And if I look at the past 10,000 years and I consider all of the philosophy and the politics and their
Packed on The Human Condition. I think it's a wash for every politician that came up with a good idea. Another politician came up with a bad idea. Right? And it's not clear to me that, you know, most of the political and philosophical, you know, contributions to the to the human race and the human conditions have advanced so much. I mean, we're still taking, you know, and taking guidance and admiring Aristotle and Plato and Seneca, and the like, and
On the other hand, you know, if you think about what has made The Human Condition better?
Fire water harnessing of wind energy. Try to row across an ocean right at not
easy and for people who are just listening or watching this, a beautiful sexy ship from 16th and 17th century. This is a 19th century,
handmade model of a 17th century sailing ship, which is of the type that the Dutch East Indies company used to sail the world and trade. So
Was made the original was made sometime in the 1600s. And then this model is made in
the nineteen
Century by
individuals. Both the model in the ship itself is engineering at its best and just imagine just like, rockets, flying out to space. How much hope this filled people with exploring, the unknown, going into the mystery, both the, the entrepreneurs, and the business people and the engineers and just humans. What's out there? What's out there to be discovered?
Covered. Yeah, the metaphor of human beings leaving Shore sailing across the Horizon, risking their lives, in pursuit of a better. Life is incredibly powerful one in 1900. I suppose, the average life expectancy is 50.
During the Revolutionary War, you know, while our founding fathers, were fighting to establish, you know, life liberty, Pursuit of Happiness, the Constitution average life expectancy of like 32, some between 32 and 36. So, all the sound and the fury doesn't make you live past 32, but what does right? And I biotics conquest of infectious diseases. If we understand the science of infectious disease stare,
Sterilizing a knife and harnessing antibiotics, get you from 50 to 70 and then happened fast, right? That happens from 1900 to 1950 or something like that. And I think if you look look at The Human Condition you ever get on one of those rowing machines where they actually keep track of your watts output, when you're on the yeah. It's like 200 is a lot. Okay. 200 is a lot.
So a kilowatt-hour is like all the energy that human trained athlete can deliver in a day and probably not one percent of the people in the world could deliver, a kilowatt hour, and a day and the commercial value of a kilowatt hour. The retail value is 11 cents today and the wholesale value is 2 cents. And so you have to look at the contribution of politicians.
And philosophers and economists to The Human Condition and it's like a best to wash one way or the other. And then if you look at the contribution of John D Rockefeller when he delivered you a barrel of oil, yeah, and then, you know the energy and an oil liquid energy or the contribution of Tesla.
You know, as we deliver electricity and what's the impact on The Human Condition? If I have electric power, if I have chemical power, if I have wind energy, if I if I can actually set up a reservoir, create a damn spin, a turbine and generate energy from a hydraulic Source. That's extraordinary. Right? And and so, our ability to cross the ocean.
Our ability to grow food, our ability to live. It's technology that gets the human race from, you know, a brutal life where life expectancy has 32, a world where life expectancy is 80.
You gave a d-minus the economist's. So are they to let the politicians to wash in terms of there's good ideas and bad ideas. And in that tiny Delta between good and bad is how
You squeak past the f+ onto the D-
territory. I think most economic ideas are bad ideas, like most, all right, you know? Like take us back to MIT and you want to solve a fluid dynamics problem, like, like design the shape of the hull of that ship or you want to design a, an airfoil, a wing, or if you want to design an engine or a nozzle and a rocket ship, you wouldn't
What with simple arithmetic you wouldn't do it with a scale or there's not a single number, right? Affect. Its Vector math, you know, computational fluid dynamics is n dimensional higher level math, you know, complicated stuff. So when an economist says the inflation rate is 2%, that's a scalar. And when an economist says, it's not a problem to print more money because the velocity of the money is very low. Monetary velocity is low.
That's another scalar. Okay. So the truth of the matter is inflation is not a scalar. Inflation is an in dimensional Vector. Money velocity is not a scalar double saying, what's the velocity of money? Although it's slow or it's fast. It ignores. The question of what medium is the money moving through and the same way that, you know, what's the speed of sound?
Okay. Well, what is sound right? Sound you know, sound is, is a compression wave, its energy, moving through a medium, but the speed is different. So for example, the speed of sound through air is different than the speed of sound through water and a sound moves faster through water. It was faster through a solid and it moves faster to a stiffer solid. So there isn't
one. What is the fundamental problem with the way economists, reduce the world down to a
Well, is it too simple? Or is it just even the first principles of constructing? The model is wrong?
I think that the fundamental problem is, if you see the world as a scalar, you simply pick the one number which is, which supports whatever you want to do, and you ignore the universe of other consequences from your behavior
in general. I don't know if you've heard of the are quiet and has been talking.
But this with Gauge Theory. So different different kinds of approaches from the physics World from the mathematical world to extend past this scalar of view of Economics. So gauge theories one way that comes from physics. You find that
Way of exploring economics. Interesting. So outside of cryptocurrency outside of the extra Technologies. And so on just analysis of how economics Works. Do you find that interesting?
Yeah. I think that if we're going to want to really make any scientific progress, and economics will have to apply much, much more computationally intensive and richer forms of mathematics.
So stimulation, perhaps, or,
yeah, you know, when I sit in my tea, I studied systems
Some Dynamics, you know, they taught it at the Sloan school. It was developed by Jay Forrester who who was an extraordinary computer scientist. And when we've created models of economic behavior, they were all multi-dimensional nonlinear models. So, if you want to describe how anything works in the real world, you have to start with the concept of feedback if I double the price of something.
The demand will fall and attempts to to create Supply will increase and there will be a delay before the capacity increases. There will be an end to demand change and they'll be Rippling effects throughout every other segments of the economy Downstream and Upstream of such thing. So it's kind of common sense, but most economics most classical economics. It's always, you know, tall with linear models, you know, fairly simplistic.
Any other models and oftentimes even I'm really shocked today that the entire mainstream dialogue of economics has been captured by scalar arithmetic. For example, if you read, you know, read any article in New York Times or the Wall Street Journal, right? They just refer to there's an inflation number or the CPI or the inflation rate is X. And if you look at all the historic studies of the
Impact of inflation. Generally, they're all based upon the idea that inflation equals CPI, and then they try to extrapolate from that and you just get nowhere with it.
So at the very least, we should be considering inflation and other economics concept that's on nonlinear dynamical system. So non-linearity and also just embracing the full complexity of just how the variables interact, maybe through simulation, maybe some
Have some interesting models around that,
wouldn't it be for freshing of somebody for once published a table of the change in price of every product, every service, and every asset and every place over
time you said table, some of that also is the task of visualization how to extract from this complex set of numbers patterns that somehow indicate something fundamental about what's happening. So like summarization of data,
Still important, perhaps summarization not down to a single scalar value, but looking at that whole sea of numbers, you have to find patterns, like, what is inflation, a particular sector. What is it? Maybe change over time? May be different geographical regions, you know, the things of that nature. I think that's kind of really, you know, what that task is, you know, that's what you could look at machine learning. You can look at AI without perspective which is like
How do you represent? What's happening efficiently as efficiently as possible. That's never going to be a single number, but it might be a compressed model that captures, Something Something Beautiful. Something fundamental about what's happening.
It's an
opportunity for sure, right?
You know, if we
take, for example during the pandemic, the the response of the political apparatus was to lower interest rates to zero and to start start buying Assets in essence, printing money. And the defense was, there's no inflation.
But of course you had one part of the economy where it was locked down. So it was illegal to buy anything, but you could, you know, it was either illegal or it was Impractical so it would be impossible for demand to manifest. So of course, there is no inflation. On the other hand. There was instantaneous immediate inflation and another part of the economy. For example, you lower the interest rates to
Zero one point, we saw the swap rate on a 30-year. Note go to 72 basis points. Okay, that means that the value of a long dated Bond immediately inflate. So the bond market had hyperinflation within minutes of these financial decisions, the asset Market had hyperinflation. We had what you call a k shape recovery, what we affectionately, call a shake K shape, recovery Main Street, shut down wall.
Street recovered all within six weeks. The inflation was in the assets like in the stocks and the bonds, you know, if you look today you see that typical house according the case-shiller index today is up 19.2 percent year over year. So if you're a first time homebuyer, the inflation rate is 19%. The formal CPI, announced the 7.9 percent.
You can pretty much create any inflation rate you want by constructing a Market Basket, a weighted basket of products, or services, or assets that yields you the answer. I think that, you know, the fundamental failing of Economist is, is first of all, they don't really have a term for asset
inflation.
What's an asset was asset, hyperinflation? You mentioned Bond markets, swap rate and asset is the where the old majority of the hyperinflation happened. What's inflation? What's hyperinflation? What's an asset, most an asset market? And when I asked so many dumb
question, the conventional economic world you would, you would treat inflation as the rate of increase in price of a Market Basket of consumer products defined.
By a government
agency.
So that they have a like traditional things that a regular consumer would be buying the government selects like a toilet paper food, toaster refrigerator Electronics, all that kind of stuff. And it's a representative basket of goods that lead to a Content existence on this Earth for regular consumer.
They Define a synthetic metric, right? I mean, I I'm going to get say, you should have 1,000.
Our foot apartment and you should have a used car and you should eat, you know, three hamburgers a week. Now, 10 years go by and the apartment costs more. I could adjust the Market Basket by, you know, they call them hedonic adjustments. I could decide that used to be in nineteen, seventy, two thousand square feet, but in the year 2020, you only need 700 square feet because we've many or miniaturized televisions and we've got more of a
Efficient Electric appliances and because things have collapsed into the iPhone users. Don't need as much space. So now I, you know, it may be that the apartment cost 50% more, but after the hedonic adjustment, there is no inflation because I just downgraded the expectation of what a normal person should
have. So the synthetic nature of the metric allows for manipulation by people, in power,
pretty much, I guess, my criticism of Economist is rather than embracing inflation.
Based upon its fundamental idea, which is the rate at which the price of things go up, right? They've been captured by mainstream conventional thinking to immediately equate inflation to the government-issued CPI or government-issued pce or government-issued. PPI measure, which was never the rate at which things go up. It's simply the rate at which synthetic basket of
Of products and services to government wishes to track go up. Now, the problem with that is two big things. One thing is the government gets to create the Market Basket. And so they keep changing what's in the basket over time. So I mean if I keep trying, if I said three years ago, you should go see ten concerts a year and the concert tickets. Now cost $200 each now, it's two thousand dollars you to go see concerts. Now. I'm in charge.
Have calculating inflation. So I redefine, you know, your entertainment quota for the year to be eight, Netflix streaming concerts. And now they don't cost $2000. They cost nothing and there is no inflation, but you don't get your concerts, right? So the problem starts with continually changing the definition of the Market Basket, but in my opinion, that's not the biggest problem, the more, the more egregious problem.
Is the the fundamental idea that assets aren't products or Services assets can't be inflated with an asset house.
I share of Apple stock a bond. Any. A Bitcoin is an asset or a Picasso painting. So
not a consumable. Good. Not not, not, not Apple that you can
eat, right? If I throw away an asset, then I'm not on the hook to track the inflation rate for it. So what happens if I change the policy such that let's take
The classic example a million-dollar Bond at a 5% interest rate gives you 50 thousand dollars a year in risk-free income you might retire on fifty thousand dollars a year and a low-cost jurisdiction. So the cost of social security or early retirement is 1 million dollars when the interest rate is 5%.
During the crisis of March of 2020, the interest rate went on a 10-year bond, went to 50 basis points. So now the cost of that bond is 10 million dollars.
Okay, the cost of Social Security went from a million dollars to ten million dollars. So if you wanted to work your entire life, save money, and then retire risk free and live happily ever. After on a 50 thousand dollar salary, living on a beach in Mexico, wherever you want it to go. You had hyperinflation, the cost of your aspiration increased by a factor of 10. Over the course of, you know, some amount of time. In fact, in that case, that was like, over the course of about 12 years.
Right? As the inflation rate, ground down the asset traded up. But the you know, the conventional view is, oh, that's not a problem because it's good that that assets, it's good. That the bond is highly priced because we own the bond or what's the problem with the inflation rate in housing being 19 percent. It's an awful problem for a 22 year old that starting their first job that saving money to buy a house, but it would be
Characterized as a benefit to society by a conventional economists. Who would say well, housing asset values are higher because of interest rate, fluctuation. And now the economy is got more wealth. And, and so that's, that's viewed as a benefit.
So the, what's being missed here? Like the suffering of the average person, or the struggle, the suffering, the pain of the average person like much.
The captured that within the economic system is that, is it when you
talk Monument? I say it is a conventional view of inflation. As CPI understates the human misery, that's infect inflicted upon the working class and a non mainstream companies by by the political class. And so, it's a massive shift of wealth from the working class to the property class. It's a massive shift of power.
Power from the free market to the centrally governed, or the controlled Market. It's a massive shift of power from the people to the government and and maybe one one more illustrative Point here Lexus IS. What do you think the inflation rates been for the past hundred
years?
I will be talking about the scalar. Again.
If you if you took a survey of everybody on the street and you ask them. What do they think inflation was? What is it? You know. Remember when drawn Pals that are Target's 2% but we're
not there.
If you go around the corner, I have posted the deed to this house sold in 1930.
Okay, and the number on that deed is one hundred thousand dollars 1930. And if you go on Zillow and you get to see
estimate, is it higher than that?
Now, 30 million five hundred thousand dollars. Yeah. So that's 92 years, 1930 or 2022? And if and in 92 years, we've had 305 X increase in price of the house. Now, if you
We back calculate you. Can you come to a conclusion that the inflation rate was approximately six and a half percent a year every year.
For 92 years. Okay, and and there's nobody, nobody in government know, conventional economists, that would ever admit to an inflation rate of 7% a year and the US dollar over the last century. Now, if you, if you dig deeper, I mean 11 guy, that's done a great job working on. This is say fitting almost who wrote, who wrote the book the Bitcoin standard and he notes that on average, it looks like the inflation rate and
Money supply is about 7% a year all the way up to the year 2020.
If you look at the S&P index, which is a Market Basket of scarce, desirable stocks.
It returned about 10%.
If you talk to 10% a year for 100 years.
The money supply is expanding at 7%, 100 years. If you actually talked to Economist or you look at the the economy and you ask the question, how fast does the economy grow in? Its entirety year-over-year generally about two to three percent. Like the sum total impact of all this technology and human Ingenuity, might get you a two and a half. Three percent Improvement a
year as measured by GDP.
Are you okay
with that - sure, I'm not sure I'd go that far yet, but I would just say that.
If you had the human race doing stuff, yeah, and if you ask the question, how much more efficiently will we do the stuff next year than this year, or how what's the value of all of our Innovations and inventions and investments in the past? 12 months, you'd be hard-pressed to say, we get to percent better.
Typical investor thinks they're 10% better every year. So if you look at what's going on, really when you're holding a million dollars of stocks and you're getting a 10% gain a year. You're really going to seven percent expansion of the money supply. You're getting a two or three percent gain under best circumstances. And another way to say that is if the money supply stopped expanding at 7% a year, the SP yield might be 3% and not 10.
Sent it probably should be.
Now that gets you to start to ask a bunch of other fundamental questions, like if I borrow a billion dollars and pay 3% interest and the money supply expands at 7 to 10 percent a year and I ended up making a 10% return on a billion dollar investment paying 3% interest. Is that fair?
And who suffered so that I could do that because an environment where you're just inflating the money supply and you're holding the assets constant, it stands to reason that the price of all the assets is going to appreciate somewhat proportional to the money supply. And the difference in asset appreciation is going to be a function of the scarce desirable quality of the assets and to what extent can I make more of them? And to what extent?
They are they truly limited and Supply yet.
So, we'll get to a lot of the words. You said they're the scarcity and so good connected to how limited they are and the value of those assets. But you also said so the expansion of the money supply which is put another way as printing money and so is that always bad. The expansion of the money supply is this just put some terms on the table, so
I understand them.
You nonchalantly say it's always the an average expanding every year. The money supply is expanding every year by seven percent. That's a bad thing. This is this University bad thing. So awful.
I guess I guess to be precise. It's the currency that I mean my money I would say money is monetary energy or economic energy and the economic energy has to find its way into a medium. So if you want to move it.
Rapidly, as a medium of exchange has to find its way into currency, but the money can also flow into property like a house or gold. If the money flows into property, it'll probably hold its value much better if the money flows into currency, right? If you had put a hundred thousand dollars in this house, you would have 305 X return over 92 years, but if you would put the money, a hundred thousand dollars into safe deposit box and buried in the basement, you would have
Boss. 99.7% of your wealth over the same time. Period. So so the expansion of the currency crates, crates a massive and efficiency in the society. What I'll call an adiabatic lapse. It's what we're doing is, we're bleeding.
The civilization to death,
right? The antibiotic at abetik was that word
adiabatic laughs Eddie a basic right and aerospace engineering you want to solve any problem. They say they start with the phrase assume an adiabatic system and what that means is a closed system. Okay. So I've got it. I've got a container and in that container, no air leaves and no air enters, no energy, exits or enters. So it's a closed system.
So you got the closest time.
Okay, what's your question? Okay, I'm going to use a there's a leak in the ship. I'm going to use a physical metaphor for you because you're the Jiu-Jitsu write like this. Like you got ten pints of blood and your body. Mmm. And so before your next workout, I'm going to take one pint from you. Now, you're going to go exercise, but you're one point. You've lost 10% of your blood. Okay, you're not going to perform as well. It takes about one month for your body to replace the rug.
Blood platelets. So what if I tell you every month you got to show up and I'm going to bleed, you. Yeah. Okay. So so if I'm draining the energy, I'm drinking, I'm training the blood from your body. You can't perform. If you adiabatic lapse, is when you go up in altitude every thousand feet, you lose three degrees, you go, a 50,000 feet, you're 150 degrees colder than sea level. That's why, you know, you look at your instruments and instead of 80 degrees your minus 70 degrees.
Why is the temperature falling temperatures falling? Because it's not a closed system. It's an open system as the air expands the density Falls, right? The energy, the energy per per cubic, whatever, you know, Falls and therefore the temperature Falls, right? The Heat's falling out of the solution. So when you're inflating, let's say you're inflating the money supply, the currency Supply by 6%. You're sucking.
Six percent of the energy.
Out of the fluid that the economy is using to
function. So, the currency this kind of ocean of currency. That's a nice way. For the economy to function is the most kind of its being inefficient, when you expand the money supply, but it's that look, it's look at the liquid. I'm trying to find the right kind of adjectives here. It's how you do transactions at a scale of billions
currency is the asset. We used to move monetary energy.
Brown and you could use the dollar or you could use the peso or you could use the bowl of our
sewing houses and buying houses is much more inefficient or I'd like you can't transact between billions of people with
houses. Yeah properties. Don't make such good mediums of exchange. They make better stores of value and they have utility value of it. So if it's a ship or a house or or a plane or a bushel of corn, right?
Can I zoom out just for ya. Can we zoom out keep zooming out into a reach the origin of human civilization? But on the way ask you gave economists a d - I'm not even going to ask you what you give to governments. Do you think their failure economists and government? Failure is malevolence or
incompetence?
I think policymakers are well-intentioned, but generally, all, all government policy is inflationary and all government. It's inflammatory and inflationary. So what I mean by that is, you know, when you have a policy pursuing supply chain Independence, if you have an energy policy, if you have a labor policy, if you have a trade policy, if you have, you know, any any kind of foreign policy and domestic policy
A manufacturing policy. Every one of these medical policy, every one of these policies interferes with the free market and and generally prevents some rational actor from doing it in a cheaper more efficient way. So when you layer them on top of each other, they all have to be paid for if you want to shut down the entire economy for a year. You have to pay for it, right? If you want to fight a war, you have to pay for it.
Right. If you don't want to use oil or natural gas, you have to pay for it. If you don't want to manufacture semiconductors and China. And you want to manufacture them in the u.s. You got to pay for it. If I rebuild the entire supply chain in Pennsylvania and I hire a bunch of employees and then I unionize the employees then not only a my idol, the factory in the Far East it goes to 50% capacity. So so whatever it sells, it has to raise the price on.
And then I drive up the cost of labor for every other manufacturer in the u.s. Because I competing against them, right? I'm changing that condition. So everything gets less efficient, everything gets more expensive. And of course the government couldn't really pay for its policies and its Wars with taxes. We didn't pay for World War one with tax. We didn't pay for World War 2 with tax. We didn't pay for Vietnam attacks. In fact, you know when you trace this, what you realize is the government. Never
Pays for all of its policies with
tax exchange, for painful to ask to raise the taxes, to truly transparently. Pay for the things you're doing with taxes with taxpayer money because they
feel their pain. That's one interpretation or it, just too transparent. If people people understood the the true cost of War,
it wouldn't want to go to
war. If you were told that you would lose 95% of your assets, you know, and 90%
I think you will be ever will be taken from you. You might reprioritize your thought about a given policy and you might not vote for that
politician, but you're still saying incompetence not malevolence. So fundamentally government creates a bureaucracy of incompetence is kind of how you should look at it.
I think a lack of humility, right? Like like if people had more humility than they would realize
humility.
About how little they know how little they understand about the function of complex
system. Phrase from quantities towards movie Unforgiven, where he says, a man's got to know his limitations. I think that a lot of people overestimate, what they can accomplish and experience experience in life, causes you to re-evaluate that. So, I mean, I've done a lot of things in my life and and generally,
My mistakes were always my good ideas that I enthusiastically pursued to the detriment of my great ideas that required 150% of my attention to prosper. So I think people pursue too many good ideas, you know, they all sound good but there's just a limit to what you can accomplish and everybody underestimates the challenges of implementing an idea.
Right? And? And they always overestimate the benefits of the pursuit of that. And so I think it's an overconfidence that causes an over exuberance in pursuit of policies. And as the ambition of the government expands, so must the currency
Supply. Well,
you know, I could say the money supply, but let's say the currency Supply, you can triple the number of pesos in the economy.
But it doesn't triple the amount of manufacturing capacity in the set economy. And it doesn't triple the amount of Assets in the economy. It just triples the pesos. So as you increase the currency Supply, then the price of all those scarce desirable things will tend to go up rapidly and the confidence of all of the institutions, the corporations and the individual actors. And
Trading
partners will collapse. If we take a tangent, a tangent, and we will return soon to the the big human civilization question. So if Government naturally wants to buy stuff that can't afford. What's the best form of government anarchism libertarianism? So not even though there's not even armies. There's no
Borders, that's Anna Chasm. Then East the smallest possible, the smallest possible, the
less, the best government would be the least and the debate will be over. That
when you think about the stuff, do you think about, okay? Government is the way it is. I as a person that can generate great ideas. How do I operate in this world, or do you also think about the big picture? If we start a new civilization somewhere on Mars, do you think about what what's the ultimate form of government?
What's up, at least a promising thing to try?
You know, I have laser eyes on my profile. Yes, Twitter Lexus was that mean what significance of laser eyes is to focus on the thing that can make a difference? Yes, and if I look at the civilization, I would say
Half the problems in the civilization.
Are due to the fact that our understanding of economics and money is defective half 50%. I don't know what's worth 500 trillion dollars worth of problems, like money money represents all the economic energy in the civilization and it kind of equates to all the products, all the services and all the assets that we have and we're ever going to have. So that's half the other half of the problems in the civilization. Our
Cole and and Military, and political, and philosophical. And, you know, and natural. And I think that there are a lot of different solutions to all those problems. And they're all they are all honorable professions and and they all Merit a lifetime of consideration for the specialist in all those areas. I think that
What? I could offer its constructive is inflation is completely misunderstood. It's a much bigger problem than we understand it to be. We need to introduce engineering and science techniques into economics. If we want to further the Human Condition, all government policy is inflationary, you know, and another pernicious myth is inflation is always and everywhere a monetary phenomenon.
Phenomena, you know a famous quote by Milton Friedman. I believe it's like it's a monetary phenomenon that is inflation. Comes from expanding the currency Supply. It's a nice phrase and it's often times quoted by people that are anti-inflation. But again, it just signifies a lack of appreciation of what the issue is inflation is if I had a currency which was completely non-inflationary, if I never printed another dollar and if I eliminate
In fractional, Reserve banking from the face of the Earth. We'd still have inflation and we'd have inflation as long as we have government. That that is capable of pursuing any kind of policies that are in the in themself inflationary. And generally, they all are.
So in general, inflationary is the big characteristic of human nature that government's collection of groups that have power over others and allocate other people's resources.
Sources will try to intentionally or not hide the costs of those allocations and like in some tricky ways. Whatever the options of are available, you know
hiding the cost is like is like the the tertiary thing like that. The primary goal is the government will attempt to do good.
Right? And and that's the funding. That's the primary problem.
They will attempt to do good, and they will and they will do it. If they will do good in perfectly and they will create often times as much damage. More damage than the good they do, most government policy will be iatrogenic. It will it will create more harm than good in the pursuit of it, but it is what it is. The secondary the secondary issue is they will unintentionally pay.
For it by expanding the currency Supply without realizing that they're, they're actually paying for it in in a sub optimal fashion. They'll collapse their own currencies while they attempt to do good. The, the tertiary issue is they will miss measure how badly, they're collapsing the currency. So, for example, if you go to the Bureau of Labor Statistics, you know, and look at the numbers printed by the FED, they all say,
It looks like the dollar has lost 95 percent of its purchasing power over 100 years.
Okay, they sort of fess up those problem, but they make it 95 percent loss over a hundred years. What they don't do is realize, it's a 99.7% loss over 80 years. So they will miss measure just the horrific extent of the monetary policy in pursuit of the foreign policy and the domestic policy which they they overestimate their budget and their means.
To accomplish their ends. And they underestimate the cost and, and they're oblivious to the horrific damage that they do to the civilization. Because the mental models that they use, that are conventionally taught or wrong, right? The mental model that like, it's okay. We can print all this money because the velocity of the money is low.
Right. Because money velocity is a scalar and inflation is the scalar and we don't see 2 percent inflation yet. And the money velocity is low. And so it's okay if we print trillions of dollars. Well, the money velocity was immediate. Write the velocity of money through the crypto economy is 10,000 times faster.
Then the velocity of money through the consumer economy, right? It's, I think Nick pointed out when you spoke to him. He said, it takes two months for credit card transaction to settle, right? So you want to spend a million dollars in the consumer economy. You can move it six times a year. You put a million dollars in a gold, gold will sit in a vault for a decade. Okay. So the velocity of money through gold is point one, you put the money in the stock market and you can trade it.
So weak the settlement is t plus 2. Maybe you get 2 to 1 leverage, you might get to a money velocity of 100 a year in the stock market. You put your money into the crypto economy. And these people are settling on before ours. And, and, you know, if your offshore their trading with 20x leverage, so if you, if you settle every day and you trade the 20x leverage, you just went to 7,000. Yeah, so the velocity the velocity of the
The money varies. I think the politicians that they don't really understand inflation and they don't understand economic, but, but you can't blame them because the economist don't understand economics because the, because if they did, they would be creating multivariate computer simulations, where they actually put in the price of every piece of Housing and every city in the world, the full array of foods and the full array of products. And the full array of
Assets and then on a monthly basis, they would publish all those results and where and that's a high bandwidth requirement. And I think the people don't really want to embrace it and and also there's the most pernicious thing, but there's a phrase, you know, you can't tell people what to think but you can tell them what to think about the most pernicious thing is, is I get you to miss understand.
And the phenomena so that even when it's happening to you, you don't appreciate that. It's a bad thing and you think it's a good thing. So if housing prices are going up 20% year-over-year and I say, this is great for the American public because most of them are homeowners, then I have misrepresented phenomena, inflation is 20%.
Not seven percent and then I have misrepresented it as being a positive rather than a negative and people will stare at it. And you could even show them their house on fire and they would perceive it as being great because it's warming them up, and they're going to save on their heat
costs. It does seem that the cruder the model. Well, they're at the economics with their psychology. The easier it is to weave whatever the heck narrative you want and
In a malicious way, but just like it's a, some kind of like emergent phenomena. This narrative thing that would tell ourselves, so you can tell any kind of story about inflation. Inflation is good. Inflation is bad, like the cruder the model, the easier, it is to tell a narrative about it and that's what the so like if you take an engineering approach. Its I feel like it's becomes more and more difficult to run away from sort of a true deep understanding of the Dynamics.
Dynamics of the
system.
I mean, honestly, if he, if he went to 100 people on the street, you ask them to define inflation. How many would? How many would say it's a vector tracking the change in price of every product service asset in the world over time. Not me know if you if you went to them and you said, you know, do you think 2% inflation a year is good or bad?
The majority would probably say, well here it's good. You know, the majority of Economist would say 2% inflation. Here is good.
And of course, there's look at the ship next to us. What if I told you that the ship leaked 2%, right of its volume, every something right? The ship is rotting 2% a year. That means the useful life of the ship is 50 years now, ironically, that's true like a wooden ship. Had a 50-year 200-year life hundred be long, 50 years, not unlikely. So when we build ships out of wood, they had a useful life of about
Out 50 years and then they sunk they rotted. There's nothing good about it. Right? You build a ship out of steel, you know, and it's zero as opposed to two percent degradation and how much better is zero percent versus 2%. Well, two percent means you have a useful life of, you know, it's Half-Life a 35 years 2% is a half-life of 35 years. That's basically the half-life of money and gold if I store your life for
And gold under perfect circumstances. You have a useful life at 35 years 0% is a useful life of forever. So 0% is Immortal 2% is 35 years average, life expectancy. So that the idea that you would think the life expectancy of the currency and the civilization should be 35 years instead of forever is kind of a silly notion. But the tragic notion is it was it was, you know,
No, 7 in 270 or 10 years, it's been the money has had a half-life of 10 years. Except for the fact that, in week societies and Argentina are the, like, the half-life of the money is three to four years in Venezuela, one year. So the United States dollar and the United States economic system was the most successful economic system in the last hundred years in the world. We want every war we were the
All superpower our currency lost ninety-nine point seven percent of its value. And that means horrifically, every other currency lost everything, right? In essence. The other ones were 99.9 except for most that were 100% because they all completely failed. And you know, you've got to, you've got to mainstream economic Community. You know, that thinks that inflation is a number and 2 percent is desirable.
Bubble, it's kind of like, you know, remember George Washington, you know how he died?
Well, meaning Physicians blood him to death.
Okay. The last thing in the world you would want to do to a sick person is bleed them right in the modern world. I think we understand that that oxygen is carried by the blood cells and and, you know, and if you're not get, there's that phrase right triage phrase. What's the first thing you do in an injury?
Stop the bleeding single first thing, right? You show up after any action. I look at you. Stop the bleeding because you're going to be dead in a matter of minutes if you bleed out, so it strikes me as being ironic that Orthodox. Conventional wisdom was bleed, the patient to death. And this was the most important patient in the country, maybe in the history of the country and its and we bled him to death trying to help him. So when you're actually inflating,
Money supply at 7%, but you're calling it two percent because you want to help the economy. You're literally bleeding. The the free market to death, but the sad fact, is George Washington went along with it because he thought that they were going to do him good. And the majority of of the society, most companies, most most conventional thinkers, you know, the working class, they go along with this.
This because they think that someone has their best interests in mind and the people that aren't bleeding them to death. Believe, they believe that prescription because their mental models are just so defective and that understanding of energy and engineering and and, and the economics that are at play is is crippled by the judgmental
models, but that's both the bug. In the feature of human civilization. That ideas take hold the you
Itís. We believe in them and we make a lot of cool stuff happen by as an average sort of just the fact of the matter. A lot of people believe the same thing, they get together and they get some shit done because they believed that thing and then some ideas can be really bad and really destructive. But on average the ideas or seem to be progressing in a direction of good. Let me just step back.
What the hell are we doing here? I'll see you Mazon, this Earth. How do you think of humans? How special are humans? How did human civilization originated on this Earth? And what is this human project? They're all taking on. You mentioned, fire and water and apparently bleeding. You to death is not a good idea. I thought it was thought you can get the demons out in that way, but that was a reason I invention. So, what's this thing we're doing here.
I think what distinguishes human beings from all the other creatures on
the earth is is
our ability to engineer where Engineers
right to solve problems or just build incredible, cool things,
engineering harnessing energy and technique to make the world a better place than you found it.
Right. From the point that we actually started to play with fire. Right? That was a big Leap Forward harnessing, the power of of kinetic energy and missiles and others. Another step forward, every City built on water. Why water? Well, water is bringing energy, right? If you actually have, you actually put a turbine, you know on a river or you, you capture a change.
Elevation of water, you've literally harness gravitational energy, but in a water is also bringing you food. It's also giving you, you know, a cheap form of getting rid of your waist. It's also giving you free Transportation. You want to move one ton blocks around, you want to move them in water. So I think I mean the, the human story is really the story of engineering, a better world.
And, and the rise in The Human Condition is determined by those groups of people, those civilizations that were best at harnessing energy. Right? If you if you look, you know, the Greek civilization. They built it around around ports and seaports and and water and created a trading Network. The Romans were really good at harnessing all sorts of of engineering. I mean, the aquaducts are a great example.
If you go to any big city, you travel through cities in the med, you find that, you know, the carrying capacity of the city or the island is 5,000 people without running water. And then if you can find a way to bring water to it, increases by a factor of 10 and so human flourishing is really only possible through that channeling of energy, right? That eventually takes the form of air power, right? I
mean,
That
ship. I mean, look at the intricacy of those sales. I mean, it's just the model is intricate. Now think about all of the experimentation that took place to figure out how many sales to put on that ship and how to rig them, and how to repair them, and how to operate them,
as thousands of lives. Spent thinking through all the tiny little details, all to increase the efficiency of this, the effectiveness efficiency of this ship.
As it sails, the water and we should also note. There's a bunch of cannons in the side. So
obviously another form of engineering, right, energy harnessing with
explosives to achieve, what end that's another discussion exactly
what we're trying to get off the planet, right? I mean,
well, there's a selection mechanism going on. So natural selection, this whatever, however, Evolution works. It seems that one of the interesting inventions on Earth was the predator-prey dynamic.
That you want to be the bigger fish.
That violence seems to serve a useful purpose. If you look at Earth as a whole, we as humans now, like to think of violence is really a bad thing. It seems to be one of the amazing things about humans is were ultimately, tend towards cooperation. We want, if we like peace, if you just look at history, we want things to be nice and calm, and but just Wars break out every once in a while.
And lead to immense suffering and destruction and so on. And they have a kind of
like, resetting the pallet.
Affect, it's one that's full of just immeasurable human suffering, but it's like a way to start over.
We're quite the apex predator on the planet and I Google something. The other day, you know, what's the most common form of mammal, life, on Earth,
by number of organs and count by
count? The answer that came back was human beings. I was shocked. I couldn't believe it. Right? It says like apparently, if we're just looking at mammals. The answer was human. Beings are the most common which was very interesting to me. I must didn't believe it. But I
You know, eight billion or so human beings. Thought there's no other mammal. That's got more than 8 billion. If you walk through downtown, Edinburgh, and and Scotland, and you look up on this hill and there's Castle up on the hill, you know, and you talk to people and the story is, oh, yeah. Well, that was, that was a British car show before it's a Scottish Castle before it was picked Castle before as a Roman Castle before, it was, you know, some other Celtic Castle before. So, you know, then they found
Thirteen prehistoric castles Buried one under the other, under the other. And you get to you, get to conclusion that 100,000 years ago. Somebody showed up and grabbed the high point, the apex of the city, and they built a strong hole there and they flourish, and their family. Flourish, and their tribe. Flourish until someone came along and knocked him off the hill. And it's been, a Non-Stop, never-ending fight by the, the aggressive most
Entity family organization, municipality tribe, whatever off the hill for that one Hill, going back since time immemorial. And, you know, you scratch your head and you think it
seems like it's like just
this
never-ending but doesn't that legal if you just all kinds of metrics, that seems to improve the quality of our cannons and ships as a result like
It seems that war just like your laser eyes. Focuses. The mind on the engineering
tasks. It is that. And and and it does remind you that the winner is always the most powerful and and and we we throw that phrase out but no one thinks about what that phrase means like like who's the most powerful or the you know, or the most powerful side one, but they don't think about it and they think about power.
Energy delivered in a period of time. And then you think?
A guy with a spear is more powerful than someone with their fists and some with a bow, and arrow is more powerful than the person with the spear. And then you realize that somebody would bronze is more powerful than without, and steel is more powerful than bronze. And if you look at the Romans, you know, they persevered, you know, with artillery and they could stand off from 800 meters in Blast you to Smithereens, right there, you know, you study the history of the Balearic Slingers, right? And you know, you think we
It bullets but that they invented bullets to put in slings. Thousands of years ago. They could have stood off 500 meters and put a hole in your head. Right? And so, there was never a time when when Humanity wasn't vying to come up with an asymmetric form, projecting their own power via
technology. And absolute power is when a leader is able to control large amount.
Out of humans. They're facing the same direction. Working in the same direction to leverage energy, the
most organized Society. When's yeah, when the Romans were were dominating everybody. They were the most organized civilization in Europe. And as long as they stayed organized, they they dominated. And at some point, they over expanded and got disorganized, and they collapsed.
And I guess you could say that, you know, the struggle, The Human Condition, it catalyzes, the development of new technologies, one, after the other. It penalizes. Anybody that rejects ocean power? Right gets, penalized you, reject artillery, you get penalized you reject Atomic power. You get penalized. If you reject digital power cyberpower, you get penalized and and the underlying control of the property.
Eddie keeps shifting hands from, you know, one institution, or one government to another based upon how rationally they're able to channel that energy and how well organized or coordinated they
are. Well, it's really interesting thing about both, the human mind and governments that they once they get a few good and companies. Once they get a few good ideas. They seem to stick with them. They reject new ideas. It's almost well that's emergent or however, that
Of it seems to have a really interesting effect. Because when you're young you fight for the new ideas, you push them through. Then a few of us humans, find success that we get complacent. We take over the world, using that new idea. And then the new young person with the better new idea challenges you, and you as opposed to pivoting, you stick with the old and lose.
Because of it. And that's how Empire's collapse. And it's just both at the individual level that happens when to academics fighting about ideas, or something like that. And at the at the human civilization level governments, they hold onto the ideas of old. It's fascinating.
Yeah. And ever persistent theme and the history of science is the paradigm shift in the Paradigm Shift, when the Old Guard dies and a new generation arrives or the Paradigm shifts when
War and everyone that disagrees with the idea of Aviation finds bombs dropping on their head or everyone that disagrees with whatever your technology is as a rude awakening. And if they totally disagree their society collapses and they're replaced
by that new thing, a lot of things you nearing you talked about had to do with ships and cannons and leveraging water. What about this whole digital thing that's happening.
You've been happening over the past Century.
Is that still engineering your mind? You're starting to operate in these bits of information.
I think there's two big Ideas. The first wave of ideas where digital information, and that was the internet, way been running since
1990 or so, for 30 years
and the second wave is digital energy. So if I look at digital information, this idea that we want to digitally transform.
A book.
I'm going to dematerialize every book in this room into bits. And then I'm going to deliver a copy of the entire library to a billion people. And I'm going to do it for pretty much de minimis electricity if I can dematerialize music, books, education, entertainment Maps, right? That that is an incredibly like,
A thermic transaction. It gives it's a crystallization when we collapse into a lower energy State as a civilization. We give off massive amounts of energy. Like if you look at what Carnegie did the richest man in the world, created libraries everywhere at the time and he gave away his entire fortune and now we can give a better library to every six year old for nothing. And so what's the value of giving a million books to a 8 billion people? That's
That's the explosion in prosperity, that comes from digital transformation. And when we do it with maps, you know, I I transform the map. I put it into a car, you get in the car and the car drives you where you want to go with the map. Right? And how much better is that than a Rand McNally? Atlas right here. It's like it's like a million times better. So the first wave of digital transformation was the dematerialization of all of these.
Informational things which are non conservative, that is, you know, I could take Beethoven's 5th Symphony played for by the best orchestra and Germany and I could give it to a billion people and they could play it a thousand times each at less than the cost of the one performance, right? So, so I deliver culture and education and erudition and intelligence and insight to the entire civilization over digital rails and the consequences. The human race, or
First order generally good, right. The world is a better place. It drives growth and you create these trillion-dollar entities, like ample and Amazon and Facebook and Google and Microsoft, right? That is the first wave. The second
wave do mine them aside to interrupt if that first wave, it feels like the impact that's positive. You said the first order impact is generally positive. It feels like it's positive.
Way that nothing else in history has been positive. And then we may not actually truly be able to understand the orders of magnitude of increase in productivity and just progress and human civilization, until we look back. Centuries from now, it just feel or maybe I'm like, the just, let's just looking at the impact of Wikipedia, right? The giving access to
Basic wisdom or basic knowledge and then perhaps wisdom to billions of people if you can just Linger on that for a second. What's your sense of the impact of that?
You know, I, I would say if you're a technologist philosopher, the impact of a technology is so much greater on the civilization and The Human Condition, then Anon.
That is almost not worth your trouble to bother trying to fix things a conventional way. So let's take the example. I have a foundation, the Sailor Academy, and the Sailor Academy gives away, free education, free college, education to anybody on art, that wants it and we've had more than a million students. And if you go and you take the physics class, the lecture is where by the same physics, lecture that taught me physics at MIT. Except when
When I was at MIT, the cost of the first four weeks of MIT would have drained my family's. Life Collective life savings for the first last hundred years. Yeah, like a hundred years worth of my father, my grandfather, my great-grandfather. They saved every penny they had after a hundred years. They could have paid for one week or two weeks of MIT. That's how fiendishly expensive and inefficient it was. So I went on scholarship. I was lucky to have a scholarship but
On
the other hand, I set and the back of the 801 lecture hall and always like, right up in the rafters. It's an awful experience on these like, uncomfortable, wooden benches. And you can barely see the Blackboard and you got to be there at synchronously and the stuff. We upload. You can start it and stop it and watch it on your iPad or watching on your computer and Rewind. It multiple times to sit in a comfortable chair and you can do it from anywhere on Earth and it's absolutely free.
So I think about this and I think you want to improve The Human Condition. You need people with post graduate level education, you need phds. And I know this sounds kind of elitist but you want to cure cancer and you know, you want to go to the Stars Fusion drive. We need new propulsion, right? We need, we need extraordinary breakthroughs in every area of basic science, you know, be it.
G or propulsion or Material Science or computer science, you're not doing that with an undergraduate degree. You're certainly not doing it with high school education, but the cost of a PhD is like a million bucks. There's like 10 million phds in the world. If you go do the, if you check it out. There's eight billion people in the world. How many people could get a PhD or would want to maybe not 8 billion. But a billion 500 million. Let's just say 500 million to a billion.
How do you go from 10 million to a billion? Highly Educated people. All of them specializing in and I don't have to tell you how many different fields of human endeavor. There. Are, you mean your life is interviewing these experts and there's so many right, you know, it's it's amazing. So how do I give a multimillion-dollar education to a billion people and there's two choices
You can either endow a scholarship in which case you pay 75 thousand dollars a year. Okay, 75,000. Let's pay a million dollars in a million dollars, a person. I can do it that way and you're never even if you had a trillion dollars, if you had 10 trillion dollars to throw at the problem and we've just thrown 10 trillion dollars of certain problems. You don't solve the problem, right? If I put 10 trillion dollars on the table, and I said,
I said, educate everybody give them all a PhD is still in solve the problem. Harvard University can't educate, 18,000 people simultaneously or 87,000 or 800,000 or eight million. So you have to dematerialize the professor and dematerialize the experience. So you put it all as streaming on demand, computer-generated education and you create simulations where you need to create simulations and you upload it.
It's like The Human Condition is being held back by 500,000 well-meaning, average, algebra teachers. I love them. I mean, please don't take offense if you're an algebra teacher, but instead of 500,000 algebra teachers going through the same motion over and over again. What you need is is like 1 or 5 or 10, really good, algebra teachers and
They need to do it a billion times a day or billion times a year for free. And if we do that, there's no reason why you can't give infinite education. Certainly in in science, technology, engineering and math, right? Infinite education to everybody with no constraint and I think the same is true, right? We're just about every other thing. You if you want to bring joy to the world.
It digital music. If you want to bring, you know, Enlightenment to the world, you need digital education. If you, you know, want to bring anything of consequence in the world, you got to digitally transform it and then you got to manufacture it, something like 100 times more efficiently as a start, but a million times more efficiently.
Is probably opt in. Oh, that's that's hopeful. Maybe have a chance. And if you look at all of these space Endeavors and everything, we're thinking about, getting to Mars, getting off the planet getting another world's. Number one thing you got to do, is you got to make a fundamental breakthrough in an engine people dreamed about flying for thousands of years. But until the internal combustion engine, you didn't have enough, you know, enough energy enough.
Enough power in a light enough package in order to solve the problem and what and the human race has, all sorts of those fundamental engines and materials. And techniques that we need to master. And each one of them is a lifetime of experimentation of someone capable of making seminal contribution to the body of human knowledge.
Decision problems like education, that could be
Salt that this process of dematerialization and by the way, to give props to the 500k. Algebra teachers, when I look at YouTube, for example, one possible approach is each one of those five hundred thousand teachers probably had days of moments of Brilliance, and if they had ability to contribute to in the natural selection process, like the market of Education, where the best ones rise up, that's that's a really interesting way which is like,
The best, the best day of your life. The best lesson you've ever taught could be found and sort of broadcast to billions of people. So all of those kinds of ideas can be made real in the digital world now traveling across planets. You still can't solve that problem with dematerialization where you could solve potentially is demon.
Realising the human brain where you can transfer transfer cute, like you don't need to have astronauts on the ship. You can have a floppy disk carrying a human
brain touching on those points. You'd love for the 500,000 algebra teachers to become 500,000, math specialist, and maybe they Clump into 50,000 Specialties as teams, and they all pursue 50,000 new problems and they put their algebra teaching on autopilot. That's the same. That's the same as when I give.
11 cents worth of electricity and you don't have to row in a row, a boat eight hours a day before you can eat right now. It would be a lot better. You know, that you would pay for your food in the first eight seconds of your day. And then you can start thinking about other things right with regard to technology, you know, one thing that I learned studying technology when you look at S curves is until you
Start the s-curve. You don't know whether you're a hundred years from viability, a thousand years from viability, or a few months from viability.
So, isn't that fun? That's so fun. The, the early part of the S curve is so fun because you don't
know and 1900. You could have got any number of learned' academics to give you ten thousand reasons. Why humans will never fly, right? And a 19.
Three the Wright brothers flew and by 1969, were walking on the moon. So the advanced that we made in that field was extraordinary, but for the hundred years and 200 years before they were just back and forth and nobody was close. And that's the happy part. The happy part is we went from flying 20 miles an hour or whatever to Flying 25,000 miles an hour in 66 years.
The unhappy part is, I studied Aeronautical Engineering at MIT in the 80s. And in the 80s, we had Gulfstream aircraft. We had Boeing 737s. We had to space shuttle and you fast-forward 40 years. And we pretty much had the same exact aircraft this, you know, that the efficiency of the engines was 20 30 percent more, right whip, we slammed into a brick wall around.
T 9275 like in fact, you know, the global Express, the Gulf Stream. These are all engineered in the 70s, some in the 60s that the actual the fuselage silhouette of a Gulfstream of a G5 was the same shape as the G4 is the same shape as a G3 is the same shape as a G2. And that's because they were afraid to change the shape for 40 years because they worked it out in a wind tunnel. I knew it worked and
and when they finally decided to change the shape, it was like a ten billion dollar exercise with modern super computers and computational fluid dynamics.
Well, is this a hard? What was what is the, what is that wall made of a slammed
into the right. Question is so why does the guy that went to MIT that got an aeronautical engineer degree, spent his career in software? Like why is it that I never a day in my life with the exception of some Air Force Reserve work? I never got.
Paid to be an aeronautical engineer and I worked in software, engineering my entire career
leave yourself. An engineering is the new Aeronautical Engineering in some way.
Maybe like, maybe you hit fundamental walls in certain until you have to return to its centuries later.
Or know.
The National Gallery of Art was endowed by a very rich, man, Andrew Mellon. And you know how he made his money aluminum. Okay, and and so and you know, what kind of airplanes you can create without aluminum
Nothing,
right? So material, suppose the materials brought.
Okay. So 1900. We did we made massive advances in Metallurgy. Right? I mean, that was, that was u.s. Steel that was iron to steel. Aluminum, massive fortunes were created because this is a massive, technical advance. And then we also had the internal combustion engine and, you know, the story of Ford and General Motors and Daimler Chrysler. And the lake is informed by that.
So you have no jet engines. No Rocket Motors. No internal combustion engines. You have no Aviation, but even if you had those engines, if you were trying to build those things with steel, no chance, you had to have aluminum. So there's like two pretty basic Technologies. And once you have those two technologies, stuff happens, very fast. So tell me the last big advance in like jet engines.
Hasn't been one. Like there, has the last big advance and Rocket engines. Has it been one the big advances in space ship design from what I can see or in the control systems that the Gyros and the ability to land right in a stable fashion. That's pretty amazing Landing. A rocket.
Also, in the case, according to the Elan, and so on the manufacturer of the much, more efficient and less expensive.
Pensive manufacturer of rockets. So like it's a production, whatever that you call that discipline of at scale manufacture at scale, Productions of factory work, but it's not 10x. I mean, maybe it's 10x over a period of a few decades.
When we figure out how to operate a spaceship, you know, on the water and your water bottle for a year. Right now, then you've got a breakthrough. So the bottom line is propulsion. Propellant, propulsion technology.
Propellants and the materials technology, they were critical to getting on that Aviation S curve and then we slammed into a wall and the 70s and the Boeing 747, the global Express, the Gulf Stream. These things were the space shuttle. They were all pretty much reflective of that. And then we kind of then we stopped. And at that point, you have to switch to a new S curve. So, the next is equivalent to the internal combustion engine was the
CPU, and the next aluminum equipment was silicon. So when we actually started developing CPUs, transistor gave way to CPUs, and if you look at the, the power, right? The bandwidth that we had on computers and Moore's Law, right? What if the efficiency of jet engines, had doubled every three years? Hmm, right. In the last 40 years, where we be right now, right? So so I think that if you're if you're
business person. If you're looking for commercially viable, application of your mind, then you have to find that s-curve and ideally you have to find it in the first five, six, ten years, but people always miss this. Let's take Google Glass, right? Google Glass was an idea 2013. The year is 2022, and people were quite sure this was going to be big thing, but it could have been
I've been
at the beginning of the
S curve but fundamentally we didn't really have an effective mechanism. I mean, people getting vertigo and
there he didn't know that at the beginning of this car, right? We may be some people had a deep intuition about the fundamentals of augmented reality, but you don't know that you don't have those. You're looking through the fog. You don't
know. So the point is where our year zero and 2013, and we're still years Eero and 2022.
Two on that, augmented reality. And when somebody puts out a set of glasses that you can wear comfortably without getting vertigo, right? Without any disorientation that managed of the stability and the bandwidth necessary to sync with the real world. You'll be in year one. And, and from that point, you'll have a 70-year, or some, some interesting future until you slam into a limit to growth.
And then it'll slow down and this hat. This is the story of a lot of things, right? I mean, John D Rockefeller. Got in the oil business and the 1860s and the oil business as we understood it, you know, became fairly mature, you know, by the 1920s, the 30s and then it actually stayed that way until we got the fracking and which was like 70 years later and then it bursts forward. So
the interesting story about
His law though, is that you get this like constant? Burst of SQ S curves on top of us. Girls on top of esker. It's like the moment you start slowing down or almost ahead of the you're slowing down. You come up with another Innovation. Another Innovation. So good Moore's Law doesn't seem to happen in every technological advancement. It seems like you only get a couple of S curves and then you're done for a bit. So I wonder what the pressure is. There are that resulted in such.
SS over several decades and still going
humility, dictates that? Nobody knows when the ash curb kicks off and you could be
20 years earlier, 100 years early, Leonardo DaVinci, you know, they were Michelangelo. They were designing flying machines. Hundreds and hundreds of years ago. So, humility says, you're not quite sure when it's when you really hit that commercial viability and it also dictates. You don't know when it ends. Like when will the party stopped? When will Moore's Law? Stop. And we'll get to the point where there are exponentially diminishing returns on Silicon performance.
And when you just like, we got exponentially diminishing returns on jet engines, you know, and it just takes an exponential increase in effort to make it 10% better. But while you're in the middle of it, then, you know, you can do things. So the reason that the digital Revolution is so important is because the underlying platforms the bandwidth of and the performance of the components. And I said, the components are the
D0 protocols, mobile, protocols, the batteries.
The CPUs and the displays, right? Those, those four components are pretty critical. They're all, they're all critical in the creation of an iPhone. I wrote about it in the book, The Mobile wave, and they catalyze this entire mobile Revolution because they have advanced and continue to advance. They created the very fertile environment for all these digital Transformations, and the digital transformations.
Self, right, they call for creativity and their own right? Like like I think the interesting thing about us take digital Maps, right? When you when you conceptualize something as a dematerialized map, right? It becomes a map because I can put it on a display like an iPad, or I can put it in a car like a Tesla.
But if you really want to figure it out, you can't think like an engineer. You need to think like, a fantasy writer. Like this is where it's useful. If you studied, if you read played Dungeons and Dragons and you read Lord of the Rings and you you study all the fantasy literature because because when I dematerialize the map first, I put 10 million pages of satellite imagery and to the map, right? That's a simple physical transform.
But then I start to put Telemetry and to the map and I keep track of the traffic rates on the roads and I tell you, whether you'll be in a traffic jam if you drive that way and I tell you which way to drive and then I start to get feedback on where you're going. And I tell you the restaurants close and people don't like it anyway, and then I put an AI on top of it. And I have a drive your car for you. And eventually the implication of digital transformation of maps is I get in a self-driving car and I say
Take me someplace cool where I can eat, right? And and how did you get to that last step? Right. It wasn't simple engineering. There's a bit of fantasy and they're a bit of
magic design art. Whatever the heck you call it. It's whatever ya fantasy. Injects magic into the Engineering Process like imagination.
They precedes. Great Revolutions in engineering. It's like imagining a world like of what you can do with the display. How will it interaction? Be? That's where Google Glass actually came in. Augmented reality. Virtual reality. People are playing in the space of sci-fi imagination.
They called a moon shot. They tried. It didn't work, but to their credit, they stopped trying right?
So, and then there's new people, they keep dreaming. There's dreamers all above all around us. I love those dreamers. And most
of them fail and suffer because of it, but some of them will win Nobel prizes are become
billionaires. What I would say is, if half the civilization dropped, what they were doing tomorrow and eagerly started working on launching a rocket Alpha Centauri.
It might not be the best use of our resources because it's kind of like if half of Athens in the year, 500 BC eagerly started working on flying machines. If you went back and you said, what advice would you give them? Don't you would say, you know, it's not going to work to you, get to aluminum and you're not going to get to aluminum to you, work out the steel and and certain other things and you're not going to get to that until you work out the calculus of variations and some Metallurgy. And there's a
Dude, Newton, it won't come along for quite a while and he's going to give you the calculus to do it and until then it's hopeless. So you might be better off to work on the aquaduck or to focus upon sales or something. So if I look at this today I say
There's massive profound environment civilization advanced has to be made through digital transformation of information and you can see them like that. This is the story of today. This is not the story of today. Right? Is 10 years old, what we've been
seeing? We're living through different manifestations of that story. Today to though, like social media that the effects of that is very interesting because ideas spread, even you talk about velocity of money. The velocity of idea.
Is keeps increasing. Yeah, so like Wikipedia is a passive store. It's a store of knowledge. Twitter is like a it's like a water hose or something. It's like spraying it with knowledge whether you want it or not. It's like social media is just like this explosion of ideas and then we pick them up and then we try to understand ourselves because the drama of it also plays with our human psyche. So sometimes there's more
More ability for misinformation for propaganda. Take hold. So we get to learn about ourselves. We get to learn about the technology. They can decelerate the propaganda, for example, all that kind of stuff. But like the reality is we're living. I feel like we're living through a singularity in the digital information space and we are not. We don't have a great understanding of exactly how it's Transforming Our
Lives. This is where money is useful as a, as a metaphor for significance because
If money is the is the economic energy of the civilization, then something that extraordinarily lucrative that's going to generate a monetary or wealth. Increase is a way to increase the net energy in the civilization. And ultimately if we had ten times as much of everything, we'd have a lot more free resources to pursue all of our Advanced scientific and mathematical theoretical Endeavors. So let's take Twitter, right?
Twitter something, it could be 10 times more valuable than it is. Right. Twitter's Twitter could be made ten times better.
Now, by the way, I should say that. People should follow you on Twitter. Your Twitter account. Has awesome. Thank you. Thank you. Be made ten times better.
Yeah. Yeah. Twitter can be made ten times better. If we take, if we take YouTube or take education.
We could generate a billion phds. And and the question is, do you need any profound breakthrough in materials or technology to do? That? Answer is not really, right. So if you want to, you could make apple Amazon Facebook, Google Twitter, all these things better. The
The United States government, if they took one percent of the money, they spend on the Department of Education and they simply poured it into digital education and they gave degrees to people that I actually met those requirements. They could provide 100x as much education for one one-hundredth of the cost, and they could do it with no new technology. That's a marketing, and political challenge. So I don't think every of
Active is equally practical and I think the benefit of being an engineer or or thinking about practical achievements is when the government pursues an in Practical objective or when anybody an entrepreneur, not so bad, an entrepreneur because I don't that much money. A waste, when a government pursues, an in Practical objective, they squandered trillions and trillions of dollars and achieve nothing.
Whereas if they pursue it practical objective or if the or if they simply get out of the way and do nothing and they allow the free market to pursue the Practical objectives, then I think you can have a profound impact on the human civilization. And if I if I look at
The world were in today. I think that there are there are
multi trillion 10, 20 50 trillion dollars worth of opportunities in the digital information realm yet to be obtained, but there's hundreds of trillions of dollars of opportunities in the digital energy realm. That not only are they not obtain. The majority of people don't even know what digital energy is. Most of them would reject the concept. They're not looking.
For it, they're not expecting to find it. It's inconceivable because it is a paradigm shift. But in fact, it's completely practical right under our nose. It's staring at us and it could make the entire civilization work dramatically better and every word every respect.
So you mentioned in the digital world. Digital information is one, digital energy is 2 and the possible
impact on the world and the set of opportunities available in the digital energy space is much greater. So, how do you think about digital energy? What is it?
So I'll start with Tesla, get a very famous quote. He said, if you want to understand the universe think in terms of energy vibration and frequency.
And it gets you thinking about what is the universe? And of course, the universe is just all energy and then what is matter? Matter is low frequency energy. And what are we, you know, we're vibrating from, you know, ashes to ashes dust to dust. I can turn a tree into light. I can turn light back into a tree if I consider the entire universe. And it's very important because we don't really think this way.
The New York disco model. What if I walk into a nightclub? And there's loud music, blaring and New York City. What's really going on there? Right? If you blast out 15 14, billion years ago. The universe is formed. Okay, that's a low-frequency. Think the universe 49 billion years ago, the sun maybe the Earth are formed. The continents are 400 million years old the schist that New York.
The city is on is some hundreds of millions of years, but the Hudson river is only twenty thousand years. There's a building that's probably 50 years old. There's a company operating that disco or that club which is 5 to 10 years old. There's a person a customer walking in there for an experience for a few hours. There's music.
That's oscillating, is some kilohertz and then there's light and you and you have all forms of energy all frequencies, right? All, layered all, moving through different medium and the and how you perceive the world's the question of at. What? Frequency do you want to perceive the world? And I think that, once you start to think that way your
Wise to think about what would digital energy look like and why would I want it? And what is it? So why don't we just start right there? What is it? The most famous manifestation of digital energy is Bitcoin. Bitcoin is a crypto asset. It's a crypto asset that has monetary
value. Can we just linked on that Bitcoin is sa? So it's
Our last at the, as monetary value. What is the digital asset? What is monetary? Why use those terms versus the words of money and currency. Is there something interesting in that disambiguation of different terms?
I'd called a crypto asset Network. The goal is to create a billion-dollar block of pure energy in cyberspace. One that I could that I could then move.
With no friction at the speed of light, right? It's the equivalent to putting a million pounds in orbit. How do I actually launch something into orbit? Right? How do I launch something into cyberspace that such that, it moves friction-free. And the solution is a, you know, decentralized proof-of-work Network, right? Satoshi's solution was I'm going to establish protocol running on it.
Tributed set of computers. That will maintain a constant supply of never more than 21 million Bitcoins sub dividable by 100 million satoshi's each transferable via transferring private Keys. Now, The Innovation is to create that in a ethical
Durable fashion, right? That the ethical Innovation is, I wanted to be property and not a security, a bushel of corn, and acre of land, a stack of lumber and a bar of gold, and a Bitcoin are all property. And that means they're all commonly occurring elements in the world. You could call them Commodities, but Commodities a little bit misleading and I'll tell you why in a second, but they're all distinguished by the fact that no one.
Entity or person, or government controls them? If you have a barrel of oil and you're in Ukraine versus Russia versus Saudi Arabia versus the US, you have a barrel of oil.
Right? And it doesn't matter what the premier and Japan or the mayor of Miami Beach thinks about your bill. They cannot waive their hand and make it not a barrel of oil or a cord of wood. Right? And so property is just a naturally occurring element in the universe. Right?
And I use the word ethical, sorry, too. I mean, interrupt occasionally, why ethical assigned to
property?
Because if it's a security, a security would be an example of a share of a stock or a crypto token controlled by a small team and, and in the event that something a security because some small group, or some identifiable, group can control its nature character Supply. Then it really only becomes ethical to promote it or sell it.
It pursuant to Fair disclosures.
So, I give you maybe practical example, the mayor of Chicago. I give a speech my speech. I said, I think everybody in Chicago should own their own farm and have chicken a chicken in the backyard and their own horse and an automobile.
That's ethical.
I give the same speech and I say, I think everybody in Chicago, should buy Twitter stock, sell their house, or sell their cash, and buy Twitter stock. Is that ethical? Not really, but, at that point, you've entered into a conflict of interest because what you're doing is you're promoting an asset, which is substantially controlled by a small group of people. The board of directors or the CEO of the company. So if you know, how would you feel the presence?
The United States said, I really think Americans should all Buy Apple stock.
You would especially if you work to Google but you worked anywhere you'd be like, why isn't he saying by mine? Right? I security is is a proprietary asset in some way, shape, or form the and the whole nature of Securities Law. It starts from this Ancient Ancient idea, Thou shalt not lie cheat or steal. Okay. So if if I'm going to sell you Securities, or I'm going to promote Securities as
Public figure or as an influencer or anybody else? Right? If if I create my own yo-yo coin or Mikey coin and then there's a million of them and I tell you that I think that it's a really good thing. And Mikey coin will go up forever. Right? Nobody buys Mikey coin and then I give 10 million to you and don't tell the public, right? I cheated them. Maybe if, if I have my key coin and I think there's only two million Mikey coin.
And I swear to you. There's only two million and then I get married, and I have three kids. And my third kid is in the hospital and my kids going to die. And I have this ethical reason to print 500,000 more, Mikey coin, or else, people are going to die, and every tells me, it's fine. You know, I've still abused, you know, the investor, right? It's, it's a ethical challenge. If you look at ethics laws.
Everywhere in the world.
They all boil down to having a clause, which says that if you're a public figure, you can't endorse any security. You can't endorse something that would cause you to have a conflict of interest. So if you're a mayor or a governor, a country, a public figure, an influencer and you want to promote, or promulgate, or support, something using any public influence or funds or resources, you may have it needs to be property. It can't be secure.
So it goes beyond that, right? I mean, like what the Chinese want to support an American company, right? As soon as you look at what's in the best interest of the human race, the civilization, you realize that if you want an ethical path forward, it needs to be based on common property, which is fair. And the way you get to a common property is through an open permissionless.
Call if it's not open, right? If its proprietary and I know what the code says and you don't know what the code says. That's that makes it a security. If if it's permissioned if you're not allowed on my network, or if you can be censored or booted off my network, that also makes it a security. So so when I talk about property, I mean the challenge here is how do I create?
Something that's equivalent to a barrel of oil in cyberspace. And that means it has to be a non-sovereign bearer. Instrument open permissionless. Not sin, Cyril Bowl, right? If I could do that, then I could deliver. You 10,000 dematerialized, barrels of oil and you would take settlement of them and you would know that you have possession.
None of that property irregardless of the opinion of any politician or any company or anybody else in the world that that's a really critical characteristic and and it actually is it's probably one of the fundamental things that makes Bitcoin. Special Bitcoin isn't just a crypto acid Network. It's easy to create a crypto acid Network. It's very hard to create an ethical.
Crypto asset Network because you have, you have to create one without any government, or corporate Corporation, or investor exercising in to influence to make it
successful. So open permissionless, nonsense herbal. So basically no way for you without explicitly saying so Outsourcing control to somebody else. So it's a kind of you have full
Control, even with the barrel of oil is it. What's the difference between a barrel of oil and a Bitcoin to you? What is the because you kind of mention that both our property is, you mentioned Russia and China. And so on. Is it the ability of the government to confiscate in the end governments can probably confiscate no matter what the acid is but you want to lessen the effort
involved a barrel oil is a bucket of physical.
Be liquid. That's pretty scary. Bitcoin is a digital property,
but it's easier to confiscate a barrel of oil.
It's easier to confiscate things in the real world and things in cyberspace, much easier.
So that's not University true. Some things in the digital space are actually easier to confiscate because you just the nature of how things move easily with information.
Right? So I think in the Bitcoin world, what we would say is that is the
Bitcoin is the most difficult property that the human race possesses or has yet invented to confiscate and that's by virtue of the fact that you could take possession of it via your private key. So, you know, if you got your 12 seed, phrases in your head, then that would be the highest form of property, right? Because I literally have to crack your head open and read your mind to take it. It doesn't mean I couldn't extract it from you under duress, but it
Instead it's harder than every other thing you might own. If you and fact it's exponentially harder. If you consider every other thing, you might own a car, a house, a share of stock gold diamonds property rights, intellectual property rights movie, rights music, write anything imaginable. They would all be easier by orders and Orders of magnitude to seize. So that so digital property and the form of a, you know, a set of
Private Keys is by far, the Apex property of the human race in terms of Ethics. I want to make one more point. It's like, I might say to you Lex. I think Bitcoin is the is the best most secure, most durable crypto asset. Not work in the world is going to go up forever and there's nothing better in the world. I might be right, I might be wrong.
But the point is because it's property. It's ethical for me to say that if I were to turn around and say, you know, Lex the, I think the same about microstrategy stock mstr. That's the security. Okay, if I'm wrong about that. I have civil liability or other liability because because I could go to a board meeting tomorrow and I could actually propose, we issue a million, more shares of microstrategy stock.
As the thing that makes Bitcoin ethical for me to even promote is the knowledge that I can't change it. If if I knew that I could make it forty two million instead of 21 million and I had the button back here. Yeah, right then then I have a different degree of ethical responsibility. Now I could tell you your life will be better if you buy Bitcoin and it might not, you might go buy Bitcoin. You might lose the keys and be bankrupt in your life ends in your life, is not
Better because you bought Bitcoin, right? But it wouldn't be my ethical liability. Any more than if I were to say.
Lacks, I think you ought to get a farm. Think you should be a farmer. I think a chicken in every pot. You should get a horse. I think it'd be better. I mean, these are all, they're all opinions expressed about property which may or may not be right that you may or may not agree with but in in a legal sense, if we read the law, if we understand Securities Law, and I would say, you know, most people in the crypto industry, you know, they do.
They didn't take companies public and so they're not really focused on the Securities Law. They don't even know the Securities Law. If you focus on the Securities Law, that would say you just can't legally sell this stuff to the general public or promoted without a full set of continuing disclosures signed off on by a regulator. So. So there's a fairly bright line there with regard to Securities, but when you get to the, when you get to the secondary,
The issue. It's how do you actually build a world based on digital property if public figures can't can't embrace it or endorse it? You see? So you're not going to build a better world based upon Twitter stock if that's your idea of property because Twitter stock is a security and Twitter stock is never going to be a non-sovereign bearer instrument in Russia, right? Orange.
Right, smuggling illegal in China, right? So, it's not a global permissionless open thing. It will never be trusted by the rest of the world and legally, it's impractical. But, you know, would you really want to put 100 trillion dollars worth of economic value on Twitter stock of? There's a board of directors and a CEO that could just get up and like, take half of it tomorrow. Answer. No, so if you want to, if you want to build a better world based on digital energy, you need to start with
Instructing a digital property and I'm using property here.
Open permissionless
legal sense. Okay, but I would also go to the next step and say property is low frequency money. So if you, if I give you a million dollars.
And you want to hold it for a decade. You might go buy a house with it. Right? And the house is low frequency money. You converted the million dollars of economic energy into a structure called a house. Maybe an after a decade. You might convert it back into energy, you might sell the house for currency and it'll be more worth more or less. Depending upon the monetary climate frequency,
means what here, how quickly?
It changes
state how quickly to something vibrate.
So, if I, if I transfer ten dollars from me to you for a drink and then you turn around, you buy another right? We're vibrating on a frequency of every few hours, right? The energy is changing hands, but it's not likely that you sell and buy houses every few hours, right? The frequency of a transaction in real estate is every ten years every five years. It's a much lower frequency transaction and
So when you think about what's going on here, you have extremely low frequency things, which will call property. Then you have mid-frequency things. I'm going to call them money or currency, and then you have high frequency, that's energy. And that's why I use the illustration of you. Got the building. You got the light and you got the sound and they're all just,
Be moving at different frequencies. Now Bitcoin is magical and it's it is truly The Innovation. It's like a singularity because it represents the first time in the history of the human race that we managed to create a digital property properly understood. It's, it's easy to create something digital, right? Every coupon and every scan on Fortnight and Roblox and
And Apple tv credits, and all these things. They're all digital, something but their Securities, right? Shares of stock or Securities. Whenever anybody transfers when you transfer money on PayPal or a Philippe, you're transferring an Essence, a security or an IOU. And so, transferring a bearer instrument, with final settlement in in the Internet domain, or in cyberspace.
That's a critical thing. And anybody in the crypto world can do that. All the crypto is going to do that. But what they can't do, what 99% of them failed to do is be property their Securities.
Well, there's a line there. I'd like to explore further. For example, what about when you like coinbase or something like that? When there's an exchange that you buy Bitcoin is in, you start to move away from this.
Kind of some of the some of the aspects that you said makes up a property which is this nonsense, herbal and permissionless and open. So in order to achieve the convenience, the effectiveness of the, the transfer of energy, you have to leverage some of these places that remove the aspects of property. So I mean, maybe you can come
Comment on that. Let me give you a good model for that.
If you think about the layer 1 a Bitcoin, the layer one is, is the property settlement layer and where we're going to do three hundred fifty thousand transactions or less a day. 100 million transactions. A year is the bandwidth on the layer one and it would be an ideal layer of wanted to move a billion dollars from point. A to point B, with massive security, the role of the layer one is is two things.
One thing is, I want to move a large sum of money through space with security. I can move any amount of Bitcoin in a matter of minutes for dollars on layer 1. That the second important feature of the layer one is I need the money to last forever.
Right. I need the money indestructible Immortal. So so the bigger trick is not to move a billion dollars from here. To Tokyo. The big trick is to move a billion dollars from here to the year, 2140.
And, and that's, that's what we want to solve with layer 1, and, and the best real metaphor New York City would be the granite or the schist. What you want is a city block of bedrock and how long has it been there? Like millions of years. It's been there and how fast you want it to move. You. Don't. In fact the single thing. That's most important is that it not deflect if it deflects a foot and a hundred years.
Too much if it deflects an inch and a hundred years, you might not want that. So the layer want a Bitcoin is the foundation upon which you put weight. How much weight can you put on it? You put a trillion 10 trillion, 100 trillion quadrillion. How much weight Senate on the Bedrock and Manhattan, right? Think about hundred story buildings so that the real key, there is the foundational asset needs to be there at all. So the fact that you can create
Ate a hundred trillion dollar layer one. That would stand for 100 years. That is the Revolutionary breakthrough first time and the fact that it's ethical right as ethical. And it's common property, Global permissionless, extremely unlikely that would happen. People tried 50 times before and they all failed. They try 15,000 times after and they've all been. They've all generally failed 98% of failed than a couple of have like been less successful.
Fall. But for the most part that's an extraordinary thing.
Now just really quickly, pause just to Define some terms of people don't know. Layer one is that Michaels referring to is in general with people know of as the Bitcoin technology originally defined, which is the blockchain. There's a consensus mechanism of proof-of-work, low number of transactions, but you can move
You've a very large amount of money. The reason is using the term layer. One, is now that there's a lot of ideas of layer 2 Technologies is built on top of this Bedrock that. Allow you to move much larger number of transactions. So sort of higher frequency. I don't know how with terminology you want to use but basically be able to use. Now something that is based on bitcoin, to then buy stuff, be it.
Zoomer to transfer money to use it as currency just to Define some terms.
Yeah. So the layer one is the foundation for the entire cyber economy and
We don't want it to move fast. What we want. What we want is is immortality incorrupt, Immortal and corruptible, indestructible. Right? That? That's what you want Integrity from the layer 1. Now, there's layer 2 and layer 3 and later to I would Define as an open permissionless non-custodial. Protocol that uses the underlying layer 1 token as its as its gas fee.
So
What custodial mean and how does the different markets like is lightning
Network? So lightning Network would be an example of a layer to non-custodial. So the lightning network will sit on top of layer 1 it will sit on top of Bitcoin and it solves the what you want to do is solve the problem of its well and fine. I don't want to move a billion dollars every day. What I want to move is five dollars a billion times a day.
So if I want to move five dollars a billion times a day, I don't really need to put the entire trillion dollars of assets at risk. Every time I move, five dollars. All I really need to do is put a hundred thousand dollars in a Channel or a million dollars in a channel. And then I do 10 million transactions where I have a million dollars at risk, and of course, it's kind of simple if I if I put
If I lower my security requirement by a factor of a million, I can probably move the stuff a million times faster and that's how lightning works what's non-custodial? Because there is no there's no Corporation or custodian or counterparty, you're trusting right? There's there's the risk of moving through the channel but lightning is an example of how I go from. 350 thousand transactions, a day to 300.
Million transactions a day. So, on that layer to you could move the Bitcoin in seconds for fractions of pennies. Now, that's not the end, all be all, because the truth is, there are a lot of open. Protocols lightning probably won't be the only one there, you know, there's a open market competition of other permissionless, open source, protocols, to do this work. And in theory any any other crypto Network that was deemed to be
Property deemed to be non a security, you would all you could also think of as potentially a layer to, to bitcoin, right? There's a debate about are there any and what are they? And we can leave that for a later time.
But why do you think of them as layer 2 as opposed to contending for layer 1.
Yeah, actually if they're using their own token, then they are layer 1. If you create an open protocol, that uses the Bitcoin token as the as the fee, then it
To Layer Two. Okay, right Bitcoin itself, right incentivizes his own transactions with its own token, and that's what makes it layer
1.
Okay, what's the layer 3
then? Layer 3 is a custodial layer. So if you want to move Bitcoin in milliseconds for free.
You move it through by Nance, or coinbase, or cash app. So this is a very straightforward thing. I mean, it seems pretty obvious. When you think about it that they're going to be hundreds of thousands of layer threes. There may be dozens of layer 2. So there might I mean, lightning is a one but it's not the only one. Anybody can invent something, right? And, and we can have this debate about custodial non-custodial.
Don't you think there's a man of monopolization possibilities at layer 3. So, you know coin you mentioned by Nancy coinbase. What if they start to dominate and basically everybody's using them practically speaking and then it becomes too costly to memorize the the private key in your brain. I mean or like cold storage of layer 1
technology, the idea.
Realist, fear. The layer 3 is, because they think and especially, they did tests, they would detest a bit. There's almost like a layer for, by the way. If you want to layer for would be, I've got Bitcoin on an application, but I can't withdraw it. So, I've got an application that's backed by Bitcoin. But the Bitcoin is sealed. It's a proprietary example. And I'll give you an example. That that would be like grayscale if I own a share of
And and so I own a security, actually, you know, you could own mstr. If you own a security or you own, a product that has Bitcoin embedded in it, you get the benefits of Bitcoin, but you don't have the ability to withdraw the
asset together. The security Market at the lair, for my understanding this
correctly. I don't know if I were to say I don't not all Securities are layer for but but anything that's a proprietary.
We product based upon what with Bitcoin embedded in it, where you can't withdraw the Bitcoin is another application of Bitcoin. So, if you think about different ways you can use this. You can either stay completely on the layer 1 and use the base chain for your transactions, or you can limit yourself to layer 1 and layer 2 Lightning. And the purest would say, we stay there. Get your Bitcoin off the exchange, but you could also go to the layer.
Three when cash shop supported Bitcoin, they made it very easy to buy it. And then they gave you the bill that would draw when PayPal or I think Robin Hood let you buy it. They wouldn't let you withdraw it and it was a big Community uproar and people want they want these layer threes to make it possible to withdraw the Bitcoins. You can take it to your own private wallet or and get it off the exchange. I think the answer to the question of well is this corruption possible is
Corruption is possible in all human institutions and all governments everywhere. The difference between digital property and physical property is when you own a building in Los Angeles and the city politics, turn against you, you can't move the building. And when you own a share of a security, that's like a u.s. Traded security and you wish to move to some other country. You can't take the security with.
You either? And when you own a bunch of gold and you try to get through the airport, they might not let you take it. So Bitcoin is advantageous versus all those because you actually do have the option to withdraw your asset from The Exchange. And if you, you know, if you had Bitcoin with Fidelity and you had shares of stock with Fidelity and have you had bonds and sovereign debt with Fidelity and if you own some, some, you know,
mutual funds and some other random limited Partnerships of the Fidelity. None of those things can be removed from the custodian. But the Bitcoin, you can take off the exchange. You can remove from the cost Odeon. So so
it's still possible. There's a
deterrent. There's a deterrent that's an anti corrupting element and the phrase is an armed. Society is a polite Society, right? Because you have the optionality to withdraw, all your ass.
That's from the crypto exchange. You can enforce fairness. And at the point where you disagree with their policies, you can within an hour move your assets to another counterparty or take personal custody of those assets. And you don't have that option with most other forms of property. Maybe you don't have as much optionality with any other form of property on Earth. And so what makes digital property distinct is the fact that it has
Has the most optionality for custody. Now, coming back to this digital energy issue. The real key point is the energy moves in milliseconds for free on, layer 3. S. It moves in seconds or less than S on layer 2. Is it moves in minutes on the layer 1? And I don't think it makes any sense to even think about trying to solve all three problems on the layer one, because it's impossible to achieve the security.
30. And, and the incorruptibility and immortality, if you try to build that much speed and that functionality and performance.
In fact, if you come back to New York model, you really wanted a block of granite, a building and a company. That's what makes the economy, right? If you say, if I said to you, you're going to build a building, but you can only have one company in it for the life of the building. It would be very fragile. Like very brittle. What company 100 years ago is still relevant. Today. You want all three layers because they all oscillate at different frequencies and and, you know,
There's a tendency to think while it's got to be this L1 or lateral one. Not really and sometimes people think, well, I don't really want any L3 but companies, it's not an even more companies are better than crypto asset networks at certain things. If you want complexity, you want to implement complexity or you want to implement compliance or customer service, right companies. Do these things? Well,
Right, we know that you couldn't decentralize apple or Netflix, or even YouTube the performance wouldn't be there and the subtlety wouldn't be there. And you can't really legally decentralised, certain forms of banking and insurance because they will become illegal in the political jurisdiction there in. So, unless you're a crypto Anarchist, and you believe in no companies and no nation states.
Which is just not very practical not anytime soon. Once you allow that nation states will continue and companies have a role. Then the layered architecture follows and the free market determines who wins. For example, there are layer threes that that's let you acquire Bitcoin and withdraw Bitcoin. There are out. There are other applications let you okay.
Fire, but not withdraw it. And and there they don't get the same market share, but they might give you some other Advantage. There are there are certain layer threes. Like Jack dorsey's cash app where they just Incorporated lightning an implementation of it so into Cash app, so that makes it more. That makes it advantageous versus on an application. That doesn't incorporate lightning.
If you think about the big picture, the big picture is 8 billion people with mobile phones, served by 100 million companies doing billions of transactions and our and and the companies are settling with each other on the base layer in blocks of 80 million at a time. And then the companies are trading with the consumers, right? In proprietary layers.
Layer 3. And then on occasion, people are shuffling assets across custodians, with lightning layer 2 because you don't want to pay $5 to move $50. You want to pay a 20th of a penny to move $50 and so all of these things, create efficiency in the economy and Lex. If you want to consider how much efficiency if you gave me a billion dollars in 20 years. I couldn't find a way to trade.
With another company or a counterparty in Nigeria, like no amount of money. You give me ten billion dollars. I couldn't do it because you get shut down at the banking level. You can't link up a bank in Nigeria with the bank in the US. You get shut down at this credit card level because they don't have the credit card. So they won't clear you get shut down at the at the compliance fcpa last level because
Because, you know, you wouldn't be able to implement A system that enter faced with somebody else's system. If it's not in the right protocol jurisdiction, on the other hand, three entrepreneurs and Nigeria on the weekend, could create a website that would trade in this lightning economy using open protocols without asking anybody's permission. So you're talking about something that's like a million times cheaper, less friction and faster to do it. If you
I want it if you want to get money to
move. What do you think that looks like? So that now there's a war going on in Ukraine. There's other Wars Yemen going out throughout the world in this most difficult of State than Nation can be in which is at war, Civil War or war with other nations. What's the role of Bitcoin in this
context?
I mean, Bitcoins are Universal trust protocol, a universal energy protocol if you will English is one. Okay. What I see is a bunch of fragmentation of applications, for example, you know, the Russian payment app is not going to work at Ukraine, right? The Ukraine payment app is not going to work in Russia. They, you know, u.s. Payment apps won't work either those places as far as I know. So, you know, and, and, and Argentina their payment up may not
Work in certain parts of Africa. So what you have is is different local economies where people spend up their own applications compliant with their own local laws or you know and warzones not compliant, but just just spinning up. You know, how do you build something?
That's not compliant. What is the Revolutionary act here? When you don't agree with the government or what you want to
To free yourself from the consider. So, here's the thing. The one a nation is really at War. It's the the especially if it's an author, a Terran regime, it's going to try to control the populace, lock everything down. Yeah. The spread of information. How do you break through that? Do you do the thing that you mentioned, which is you have to build another app essentially that allows you to flow of money outside, the legal constraints placed on You by the government. So basically break the law.
Santa Berkeley speaking. If you want to break other constraints of your culture, you learn to speak English, for example, it's not illegal to speak English or even if it is. Right, does it matter but but English works everywhere in the world if you can speak it and then you can tap into a global Commerce and intelligence Network. So Bitcoin is a language. So you learn to speak Bitcoin or you learn to speak lightning and then you tap into that Network in, you know, whatever.
A manner you
can. This is a problem is it's still very difficult to move Bitcoin around in Russia and Ukraine now doing war. And there was a sense to me that the cryptocurrency in general could be the Savior for helping people. There's millions of refugees. They're moving all around. It's very, it's very difficult to move money around in that space to help people.
I think we're very early, like, like we're a very end.
Rihanna
care. If you look at the who's we sorry? And we as a human civilization, are we operating in the
cryptocurrency space? I think the entire crypto economy is very embryonic and and the human race is adoption of. It is embryonic. We're like 12 percent down that adoption curve. If you take lightning, for example, the, you know, the first real commercial applications of lightning or just in the last 12 months. So we're like year one, we might
Be approaching year to of commercial lightning adoption. And if you look at lightning adoption lightning is not built into. Coinbase is not built into by Nance is not built into f t X's, you know cash app just implemented the first implementation but not all the features are built into it. There's a few dozen a dozen lightning wallet circulating out there. So I think that, you know, we're probably going to be 36 months of software development.
At the point that every Android phone and every iPhone has has a Bitcoin wallet or crypto wallet in it of sorts.
That's a big deal if Apple Embrace lightning. That's a big
deal. So the adoption is the thing like in a war zone, adoption the people who struggle the, most and War, are people who are weren't doing that great before the war started. They don't have the technological sophistication, the the hackers, and all those kinds of people find a way. It's just regular people who are just struggling to make day by day living. And so, if the adoption,
Permeates the entire culture. Then you can start to move money around in the digital space. What if from a cycle if you can psychoanalyze Jack Dorsey for a second, so he's one of the early adopters or he's one of the people pushing the early adoption this layer 3. So inside cash app, what do you make of the man?
Of this decision as a business owner, as somebody playing in the space, like what why did he do it? And what does that mean? For others at the scale? That might be doing the same. So incorporating lightning, networking incorporating Bitcoin, into their
products. I think he's been pretty clear about this. He feels the Bitcoin is an instrument of economic empowerment for billions of people that are unbanked and have no property rights.
in the
world, if you want to give
An Incorruptible Bank.
28 billion people on the planet. That's the same as asking the question. How do you give a full education through PhD to 8 billion people on the planet? And the answer is a digital version of the 20th century thing running on a mobile phone. And Bitcoin is a bank in cyberspace is run by Incorruptible software and it's very buddy on Earth.
So I think when Jack looks at it, he's very sensitive to the plight of everybody in Africa. We look at Africans, right? Like you're going to give them Bank. You're not going to put a bank branch on every corner that's obscene waste of energy. You're not going to run copper wires across the continent. That's an obscene waste of energy. You're not going to give them gold and you know, so so, how are you going to
Provide people with the decent life that the metaphor I think is relevant here. The biological amount of 4 lakhs is type 1 diabetic. If you're a type one diabetic, you can't form fat, and if you can't form fat, then you can't store excess energy. So that means that I mean fat is the ultimate organic battery. And if you've got 30 pounds of it, you can go 60 days without eating, but if you can't generate insulin, you can't form fat cells and we can't form.
Cells and store energy, then you can eat yourself to death. I mean you will eat and you will die. You'll starve to death. So the lack of property rights is like being a type one diabetic. And so if you look at most people everywhere in the world,
they don't have property rights. They don't have effective bank and they don't, and their currency is broken. Like, what are the, what are the two things that in theory would serve as the equivalent of a, of an organic battery, or an economic battery to civilization would be? I have a currency which holds its value and I can store it in a bank. So a risk
A risk-free currency derivative.
Yeah, I pay you your money. You take your life savings. You put it in a bank, you save up for your retirement. You'll have happily ever after. That's the American dream, right? That's the idyllic situation. The real situation is there are no banks. You can't get a bank account. So I give you your pay in currency and then I double the supply and I give it to my cousin or I give it to whatever cause I want our usual to buy weapons and then you find a loaf of bread cost trip.
Next month is what it cost, and your life savings is worthless. And so, in that environment ever, he's ripped back to Stone Age barter and the problem with that, even Stone Age barter is, you're going to carry your life savings on your back. And what happens when the guy with a machine gun pointed at your head and just takes your life-saving. So so I think from Jack's point of view. He thinks that life is
This is maybe too strong. But these are my words. Life is hopeless for a lot of people and Bitcoin is Hope.
Right? Because because it gives everyone an engineered monetary asset. That's a bearer instrument and it gives them a bank on their mobile phone and they they don't have to trust their government or another counterparty.
With their life force. So there's a secondary thing. I think he's interested in, which is the first thing is, the human rights issue. And the second thing would be the friction to trade cross borders is so great, right? Yeah, like, you know, you're like AI. So I'll give you a beautiful notion, maybe one day, they'll be an
Intelligent creature in cyberspace that is self-sufficient and Rich.
Like that, we would have someone T.
You can can a robot.
Own money or property. How about kind of Tesla car? Can I actually put enough money and a car for it to drive itself and maintain itself forever? Or it can I create an artificially intelligent creature in cyberspace? That is endowed such that it would live a thousand years and continue to do its job, right? You know, we have a word for that in the real world is institution Harvard. Cambridge Stanford, right? There are institutions with endowments that
On in perpetuity, but what if I wanted to perpetuate a software program and with with something like, digital property with Bitcoin and lightning, you could do it. And on the other hand.
With banks and credit cards, you couldn't write, you couldn't ever so so you can create things that are beautiful and Lasting. And what's the difference in speed? Well, it's so I can either trade with everybody in the world at the speed of light friction-free in 24 hours, writing a python script or I can spend a hundred billion dollars to
Aid with a few million people in the world after it takes them six months of application, the impedance
Is like 10 million to one difference, right? And the metaphors are literally, like, launching something in orbit versus almost orbit or vacuum. Sealing something. Does it last forever and does it orbit forever or does it go up and come down and burn up right and I think Jack is interested in you know, putting freedom in orbit. All right, putting freedom freedom in orbit and
Said it many times. You said this is the the internet needs a native currency. Yeah, right. And and no political construct, or security can be a native currency. You need a property and you need a property that can be moved a million times a second. Can you oscillate it at 10 kilohertz, or 100 khz? And the answer is only if it's a pure digital construct, permissionless, and open.
And so I think he that he's enthusiastic as the technologists and his enthusiastic as the humanitarian and what he's doing is Sport, both those areas. He's supporting the Bitcoin in the lightning protocol by building them into his product. But he's also building the applications which you need at the cash app level in order to commercialize and deliver the functionality and compliance necessary, and they're
related and
I should also say he's just a fascinating person that for a random reason that I couldn't even explain. If I tried, I met him a few days ago and gave him a great big hug in the middle of nowhere. There's no explanation. He just appeared. That's a fascinating human. His relationship with art with the world with human suffering. With technology is fascinating. I don't know what his path looks like, but it's interesting that people like
That exist. And in part I'm saddened that he no longer is involved with Twitter. I directly as its CEO because I was hoping something inside Twitter would also integrate some of these ideas of what you're calling digital energy to see how social networks, something. I'm really interested in and passionate about could be transformed. Let me ask you just for educational purposes. What's the
Can you please explain to me? What web 3 and the beef between Jack and Marc Andreessen is exactly? Did you see what happened? Sorry to have you analyzed Twitter like it's Shakespeare. But can you please explain to me? Why? Why? There was any any drama over this topic?
First of all web 30 is a term that's used to refer to, you know, the part of the economy. That's the token Finance. So if I'm launching an application and my ideas,
Is to is to create a token along with the application and issued the token to the community. So as to finance the application and build support for it, I think that I think that that's the most common interpretation of web 3. There are other interpretations to and ring. So, I'm just going to refer to that one. And I think the beef in a nutshell, not articulated, but all articulate. It is whether or not you should focus all your energy creating applications on
Top of an ethical digital property like Bitcoin or whether you should attempt to create a competitor to it, which generally would be deemed as a security by the Bitcoin community. So I'm going to put on my Bitcoin hat here. Yeah, right. All the tokens that are, if it's driven by a venture capitalist while security, if there's a CEO and a CTL, it's a security. There's all these projects, their companies foundations are
He's right. If you call them a project or a foundation, it doesn't make it not a security. They're all in essence collections of individuals that are issuing equity in the form of a token. And if there's a pre mine and IPO and Ico a foundation, or any kind of any kind of protocol, where there is a group of Engineers that have influence over it.
Then to a Securities lawyer or you know to most bitcoiners and definitely anybody that's steeped in Securities Law. You looking to say well that passes the Howey test, its it looks like a security. It should be sold to the public, pursuant to, you know, disclosures and regulations. And you're just ducking the IPO process, right? And and so now we get back to the ethical issue on the the
Issue is if you're trading at it as a commodity and representing it as a commodity while truthfully, it's a security, you know, then it's a violation of Ethics rules and it's probably illegal. Well, your you
keep leaning on this. Let me push back on that part. Maybe you can educate me, but you keep leaning in this line of Securities Law as if it with all due respect to lawyers as if that line, somehow defines what it what is and isn't ethical. I think there's a lot of
Of correlation as you've discussed, but I'd like to leave the line aside if the law calls something as security doesn't mean in my eyes that it is unethical. I mean there could be some technicalities and lawyers and people play games with this kind of stuff all the time. But I take your bigger point that if there's a CEO of there's a Project Lead that's fundamentally. Well that that you is fundamentally different than the the structure
of Bitcoin. It's not
A creating Securities as an ethical. I create a security. I took a company public, right? That's not the unethical part. It's completely ethical to create Securities. You know, block is a security. All companies are securities. The unethical part is to represent it as property when it's a security and and to promote it or trade it as
such this little promotion. That's also a technical thing because you're like what counts is not as
Motion is a legal thing and you get in trouble for all these things. But that that's the game that lawyers play. There's an ethical thing here, which is like what's the right to promote a not, you know, to me propaganda is unethical but it's usually not illegal
and it's the clock back, 20 years, right? All the boiler-room pump and dump schemes were all about someone pitching a penny stocks, you know, selling swampland in, Florida.
And if you roll the clock back forward, 20 years, and I create my own company. And I represented as the same thing, and I don't make the disclosures right here. You're just one step removed from the Boiler Room scheme, and that's what's distasteful about it. There are ways to sell Securities to the public but there are but there are expectations. Maybe we could forget about whether the security laws are ethical or not, right? I will leave that alone.
And we'll just start with the biblical definition of ethics. Yes. Don't lie, cheat or steal. So if I'm going to sell something to you, I need to fully disclose what I'm selling to you. Right? And and that, that's a matter of great debate right now. And so I think that that's part of the debate, but the other part of the debate is
whether or not we need more than one token, like
We need at least one Frank. We need at least one digital property. One is because 0 means, there is no digital economy. Yes. And by the way, you know, the conventional view of maximalist is they think there's only one and everything else isn't? That's not the point. I'm going to make. I would say we know that it is as there is at least one digital property and that is Bitcoin. If you can create a truly decentralized
Custodial, you know, Bearer instrument that is not under the control of any organization. That is fairly distributed. Then you might create another or multiple and there may be others out there, but
I think that the frustration of a lot of people in the Bitcoin community and I share this with Jack is we could create a hundred trillion dollars of value in the real world simply by building applications on top of Bitcoin as a foundation and so continually trying to reinvent the wheel and and Crete competitive things is a massive waste of time.
And it's diversion of human human creativity. It's like we have an ethical good thing and now we're going to try to create a third or a fourth one. Why
let's talk about it. So first of all, I'm with you but let me ask you this interesting question because we talk about properties insecurities. Let's talk about conflict of interest. So you said, you could advertise public, you have a popular Twitter account, it
It's it's hilarious and insightful you do. Promote Bitcoin in a sense. I don't know if you would say that, but do you think there's a conflict of interest in anyone who owns Bitcoin promoting Bitcoin? Is that the same as you promoting the farming?
I would say, no, there's an interest. I think that I think that you can promote.
A property or an idea to the extent that you don't control it. I think that the point at which you start to have, a conflict of interest is when you're promoting a proprietary product or proprietary security, a security in general is proprietary asset. So for example, if you look at my Twitter, you will find that I make lots of statements about Bitcoin. You won't ever see me making a statement. That's a
Strategy stock will go up forever. I'm not promoting and security mstr. Because at the end of the day, mstr is a security. It is proprietary. I have proprietary interest and it I have a disproportionate amount of control and influence on the direction,
where goes the problem, the controls, the problem because you have interest in both, you can vary if Bitcoin is the successful as we're talking about,
You are very possibly can become the richest human on earth given how much you own a Bitcoin, right? The wealthiest not the richest. I don't know what those words.
Mean. I would benefit
economically economic you would benefit economically, that's true. So, the reason that's not conflict of interest is because the word property that Bitcoin is an idea and
it's because one is open. You do. I don't control it.
It in essence that the the ethical line here is, could I print myself 10 million more Bitcoin or not? Right? Like,
why can't anyone, right? It's not just you. It's a, can anyone because can you promote somebody else's? Yes, I guess you can. Like if you can promote us Apple, which we have mistake.
You could have a Twitter account where you promote oil or you promote camping or you promote.
Family values or promote, you know, a carnivore diet or promote the Iron Man,
right? The general going to get wealthier if you promote camping because you can't own a stake. And I mean, you own a lot of Bitcoin. What is that? What is that? What is the game? Don't you own a stake in the idea?
I would I would grant you that
but the lack of control is the fundamental ethical line that you just you don't have.
All you are is your fan of the idea, you believe in the idea and the power the idea.
Yeah, I think you
can't take that idea. Away from
others. Let's come back to. Let me give you some may be easier examples if you were the head of the Marine Corps.
Right? And, and someone came to you and said I created Marine coin and, and the Twist on Marine coin is, is I want you to tell every Marine that they'll get an extra Marine Corps line, you know, when they when they get their next stripe, and then I'm going to give you and I'm going to let you buy marine coin now. And then after you buy marine coin, I want you to like promote it to them right? At some point.
If,
if you start to have a disproportional influence on it, or if you're in a conversation with people with disproportionate influence, becomes conflict of interest, and it would make you profoundly uncomfortable. I think. If the head of Marine Corps started promoting anything that looked like a security. Now, if the head of Marine Corps started promoting canoeing,
You might think he's kind of wacky like maybe like that's kind of a waste of time a distraction. So but but but to the extent that canoeing is not a security, not a problem. Unless, you know, ultimately the the issue of decentralization is really a
Critic, not having a head one. So is it something get can Bitcoin be replicated? So the all the things that
Saying that make it a property cannot be replicated, have any
other possible to create other crypto
properties? Does it does the having a head like of a project? A thing that limits its ability to be a property if you try to replicate a project? Is that the fundamental
flaw? I walk? I think the real fundamental issue is you just never want it to change. Like like if you really want.
Being decentralized. You want genetic template that substantially is not going to change for 1000 years. So I think Satoshi said it. At one point. He said the nature of the software is such that by version .1. Its genetic code was set. If if there was any development team, that's continually changing it, you know, on a routine basis, it becomes harder and harder to maintain its decentralization. Because now now there's
Issue of who's influencing the changes. Yeah. So what you really want is is a very, very simple idea. Write the simplest idea. I'm just going to keep track of who owns twenty 1 million parts of energy and when someone proposes big functional upgrades, you almost don't, you don't really want that development to go on the base layer. You want that development to go on the layer 3 is because now cash
Shop has a proprietary set of functionality and it's a security and if you're going to promote the use of this thing, you're not going to, you're not going to promote the layer 3 security, because that's a, an edge do a given entity and you're trusting the counterparty. You're going to promote the layer 1 or most the layer 2.
Okay. So one of the fascinating things about Bitcoin and sorry to report
At the size certain Notions, but Satoshi Nakamoto that the founders Anonymous, maybe you can speak to whether that's useful. But also I just liked the psychology of that to imagine that. There's a human being, those able to create something special and walk away. The first, are you Satoshi Nakamoto? I'm sorry. No, I'm not.
No. I actually, I, you know, I think the provenance is really important and if
If I were to look at the highlighted points, I think having a Founder that was Anonymous or pseudonymous is important. I think the founder disappearing is also important. I
think that the fact that Satoshi
coins never moved is also important. I think the lack of an initial coin offering is also important. I think the lack of a corporate sponsor is important. I think the fact that it traded for 15 months with no commercial value.
Was also important. And I think that the Simplicity of the protocol is very important and I think that the, the outcome of the block size Wars is very important and all of those things, add up to Common property. They're all indicia indicators of a digital property as opposed to a security. If there was a Satoshi sitting around sitting on top of it.
50 billion dollars worth of bitcoin it would I don't think it would.
Cripple
Bitcoin is property. But I think it would undermine its digital property. And if I wanted to undermine a crypto asset, not work, I would do the opposite of all those things. I would launch one myself. I would sell 25 percent or 50 percent of the general public. I would keep some of the initial I would pre mind some stuff or early minded, you know, and I would keep an influence on it. Those are all the opposite of what you would do.
Do in order to create common property? And so I see the entire story is Satoshi, giving a gift of digital property to the human race and disappearing.
Do you think it was one person? Do you have ideas of who could be,
don't care to speculate?
But do you think it was one person? Like it
was one person. Maybe in conjunction, with a bunch of others. I mean, it might have been a group of people that were working together.
But certainly the, there's a Satoshi, and he's just so fascinating to me, that one person could be so brave and thoughtful. Or do you think a lot of his accent like the block size Wars, the decision to make a block, a certain size, all the things you mentioned, led up to the characteristics that make Bitcoin property. Do you think that's an accident or it was deeply thought through? Like, how does this is almost like a history of Science
question, tried it for fear. They tried 40 of them, right?
I mean, I think there's a, there's a history of attempting to create something like this and it was tried many many times and and they failed for different reasons. And I think that it's like Prometheus tried to start a fire 47 times and maybe the 48th time it's parked and that's how I see this. This is the first one that sparked.
And and it sets a roadmap for us and I and I think if you're looking for any one word characterize, it's fair. The whole point of the network is it's a fair launch of fair distribution, like, yeah, I have Bitcoin, but I bought it.
In fact, I, you know, at this point, we've paid for billion dollars of you real cash to buy it. If I was sitting on the same position and I had it for free, then there's always this question of, did I, you know, I bought it for a nickel, a coin, or a penny a coin. The question is, was it fair? And, and that's a very hard question to answer. Right? Did you acquire the Bitcoin that you own fairly? And if you roll the
Look back, you know you could have bought it for a nickel or a dime. But that was when it was a million times more likely to fail, right? When the risk was greater. The cost was lower and then over time the risk became lower in the cost became greater. And the real critical thing was to allow the marketplace absent, any powerful interested actor.
Right. It's almost like if Satoshi had held a million coins and then stayed engaged for 10 more years, tweaking things in the background. There's still be that question. But what we've got is really a beautiful thing. We've got a, we've got a chain reaction in cyberspace or an ideology spreading virally in the world that that has seasoned in a fair, ethical fashion. Sometimes it's a very violent.
Brutal fashion with all the volatility, right? And there's been a lot of a lot of Sound and Fury along the
way. How do you say cool? Analyze? How do you deal from a financial from a human perspective? With the volatility? You mentioned you could have gotten it for a nickel and the risk was great. Where's the risk today? What's your sense? You
know, we're 13 years and there's an entire activity. I think the risk is never been lower. If you look at all the
Risks, right? The risk. The risk is in the early years. Are is the engineering protocol. Proper like one megabyte block size 10-minute clock. Frequency, cryptography is first. Will it be hacked or will it crash seven and thirty thousand blocks and it hasn't crashed. Will it be hacked? Hasn't been hacked. But you know, it's a Lindy thing, right? You wait 13 years, to see if it'll be hacked, but on the other hand with a billion dollars, it's not as
A Target is it is with 100 billion and when it gets to be worth a trillion, that is a bigger Target. So so the risk has been bleeding off over time as the network monetized. I think that it's second. Question is, will it be banned? You couldn't know. It could have literally could have been banned at any time. Many times early on, in fact, in 2013. I tweeted on the subject. I thought it would be banned. I think I made a very famous Infamous to wait for must. We thought it.
It was going to be banned in 2014, the IRS designated it as property and gave it property tax treatment. Okay, so they could have given it a tax treatment where you had to pay tax on on the unrealized capital gains every year and it probably would have crushed it to death, right, you know, so so it could have been in any in any number of places banned by a government. But in fact, it was legitimized this property.
And then the clashes would it be hacked our what to be copied while it'd be something better than that. And it was copied 15,000 times and you know the story of all those and and they either diverge to be something totally different and not comparable, or someone trying to copy a non-sovereign bearer instrument store of value. Found that the Network's crash to be 1% of what Bitcoin is. So now we're sitting
At a point where all those risks are out of the out of the way, I would say that year, one of institutional adoption. Is it started August 2020? That's when microstrategy bought 250 million dollars worth of bitcoin and we put that on the wire. We were the first publicly traded company to actually buy Bitcoin. I don't think you could have found a five million dollar purchase from a public company before we did that. So that was kind of like a gun going off. And then in the next 12 months,
Lunch Tesla bought Bitcoin Square about Bitcoin and I'd say now we're in year two of institutional adoption and about 24 should be 24 publicly traded Bitcoin miners by end of this quarter. So you're looking at 36 publicly traded companies and you've got 50,
At least in the range of 50 billion dollars on the ballot. A Bitcoin, on the balance sheet of publicly traded companies, and hundreds of billions of dollars of market cap of Bitcoin exposed companies. So I would say the asset decade one was entrepreneurial experimental.
Decade to is a rotation from entrepreneurs institutions and is becoming institutionalized. So maybe decade when you go from zero to a trillion and a decade to you go from one trillion to 100
trillion. What about government's government adopts? These should institutional adoption is our governments important. In. This may be making it some governments incorporating it into as a currency into their Banks. All that kind of stuff. Is that important. And if
Is when will it happen?
It's not essential for the success of the asset class, but I think it's inevitable and various degrees over time. But the most likely thing to happen. Next is large acquisitions by institutional investors of Bitcoin as a digital gold where they're just swapping out gold for for a digital gold and thinking of it like that and the government entities.
Most likely to be involved with that would be Sovereign wealth funds. If you look at all the Sovereign wealth funds that are holding big Tech, stock equities, the Swiss, the Norwegians, the middle easterners, if you can hold big Tech then holding digital gold would be, you know, not not far removed from that. That's a non-controversial adoption. I think there are there opportunities for governments that are much more profound, right? If a
Man started to adopt Bitcoin as your treasury. Reserve asset. That's much bigger than just a, an asset investment. That's 100 x bigger. And you could imagine that's like a trillion dollar opportunity, like any government that wanted to adopt it as a treasury. Reserve asset would probably generate trillions of dollars trillion or more of value. And then, you know, the thing that people think about is well.
L will oil ever be priced in Bitcoin or any other export commodity. I think there's like 1.8 trillion dollars or more of export Commodities in the world. And right now they're all priced in dollars. I think that this is a colorful thing, but it not really that relevant. Like, you could sell all that stuff in dollars. That the relevant decision that any institution makes whether they're a non-profit University, a corporation, or a government, is what your treasury Reserve.
Set. And if your treasury Reserve asset is the peso. And if the pesos losing 20% or 30% of its value a year, then, you know, your, your balance sheet is collapsing within five years. And if the treasury Reserve asset is is dollars and currency derivatives and us treasuries.
Then you're getting your seven right now. It's probably 15% or more monetary inflation. We're running double the historic average, You could argue triple somewhere between double and triple depending upon what your metric is. So, you know, do I think it'll happen? I think that they're conservative, but they have to be shocked and I think there is a shock.
The late Russian sanctions are a big shock that when the West sees 300 billion dollars worth of Russian gold and currency derivatives. I think, you know, you got the famous quote by Putin that you know, we have to rethink our our treasury strategies. And that pushes everybody toward a commodity strategy. What Commodities do I want to hold?
I think that's got a lot of people thinking I can. He's got the Chinese thinking, everybody wants to be the reserve currency. Right? So if I buy 50 billion dollars worth of dollars every year, then I buy 500 billion over a decade and I probably pay 250 billion dollars of inflation cost on the backs of my citizens in a decade. So
so inflation could be one of
Sources of shock. And you wonder if there is a switch to bitcoin, whether it would be a bang or a whimper. Like what is the nature of the shock of the
transition? I think that they are 2022 is pretty catalytic for digital assets and general information. Coin in particular, the Canadian trucker crisis. I think educated hundreds of millions of people and made them start questioning their
Pretty rights and their Banks, I think the Ukraine war.
Was the second shock, but I think that the Russian sanctions was a third shock.
Yeah, I think all three of the and I think hyperinflation in the rest of the world is a fourth shock, and then persistent inflation. The u.s. Is a fifth shock. So I think it's a perfect storm. And if you put all these events together, what do they signify? They signify the rational, conclusion for any person thinking about this is. I'm not sure if I can trust my property. I don't know if I property rights. I don't know if I can.
The bank, and if I'm politically at odds, with with the leader of my own country, I'm going to lose my property and if I'm politically at odds, with the owner of another country, I'm still going to lose my property. And when push comes to shove the banks will freeze my assets and sees them. And I think that that that is playing out in front of everybody in the world.
Such that your logical response would be. I'm going to convert my weak currency to a strong currency. Like, I'll convert my peso and layer it to the dollar. I'm going to convert my weak property to strong property. I'm going to sell my building downtown Moscow, and I'd rather own a building in New York City. I rather, I'd rather own in a powerful.
And then a, then be stuck with a building in Nigeria or a building in Argentina or whatever. So, I'm going to sell my weak Properties by strong properties. I'm going to convert my physical assets to digital assets. I'd rather own a digital building, then on a physical building.
Because if I had a billion dollar building in Moscow, who can I rent that too, but if I have a billion dollar digital building, I can rent it to anybody in any city in the world, anybody with money and the maintenance cost is almost nothing and I can hold it for a hundred years. Okay, so it's indestructible building. And then finally, I want to move from having my Assets in a bank with a counterparty to self custody assets.
Right, so, and, and this is not, it's not just Ukraine. But this is like the story in Turkey. Lebanon, Syria, Afghanistan, Iraq, South America. You don't really want to be sitting with 10 million dollars in a bank in Istanbul. The bank's going to freeze your money, converted to Lira devalue the Lira, and then feed it back to over 17 years, right?
So self custody assets would be layer one. Bitcoin itself,
custody assets. It's
Like, if I got my own Hardware wallet and I've either got your highest form of self custody would be Bitcoin on your own Hardware, wallet or Bitcoin, and your own self custody. And the other. The other thing people think about is how do I get crypto dollars like tether? Like some stable coin? Yeah. Like I'd rather if you had a choice, would you rather have your money in a bank in a war zone in dollars? Or have your money in a
Table coin on your mobile phone in dollars, right? I mean you take the latter risk rather than the
former risk war zone. Definitely. Yeah,
and you can see that happening like we've gone from five billion and stable coins to 200 billion. Yeah. In the last 24 months. So I do think there's massive demand for crypto dollars in the form of a u.s. Dollar asset and there's and everybody in the world would say. Yeah, I want
Ain't that well, unless you're just an extreme Patriot, but most people in the world would say I want that and then a lesser group of people would say, I think I want to be able to carry my property in the palm of my hand. So I have self custody of
it. So the Bitcoin price has gone through quite a roller coaster. What do you think is the high point? It's going to hit
our they'll go up forever. Right? I mean, I think the Bitcoin is going to, it's going
To climb in a serpentine fashion is going to advance and come back and it's going to keep, it's going to keep climbing. I think that the volatility attracts all the capital into the marketplace. And so the volatility makes it the most interesting thing in the financial Universe. It also generates massive yield, and massive returns for Traders and that attracts Capital. Like we're talking about the difference between 5% return and five hundred percent.
Return. So,
The fast money is attracted by the volatility. The volatility has been decreasing year by year by year. I think that that it's stabilizing. I don't think we'll see as much volatility in the future as we have in the past. I think that if we look at Bitcoin and model it is digital gold, you know, the market cap goes to between 10 and 20 trillion, but gold is
I remember gold is is defective property. Gold is dead money. You have a billion dollars of gold assist in the vault for a decade. It's very hard to mortgage the gold. It's also very hard to rent the gold. You can't loan the gold. No one's going to create a business with your gold. So gold. It doesn't generate much of a yield. So for that reason, most people wouldn't store billion dollars for a decade and gold. They would buy a billion dollars of commercial real estate property. And the reason why is because I can rent it and
Generate a yield on it, that's in excess of the maintenance cost. So, if you consider digital property, that's 100 to 200 trillion dollar addressable market. So, I would think it, you know, it goes from 10 trillion, do 100 trillion as people start to think of it as digital
property. What does that mean in terms of price per coin
at 500,000, right? That's a ten trillion dollar asset at 5 million. That's 100 trillion.
Dollar
asset. They think it crosses a million. It can go even
higher. Yeah, I think it keeps going up forever. I mean is there we're gonna go to 10 million a coin, right? Because digital property isn't the highest form, right? Gold was that low frequency money property is a mid-frequency money. But when I start, when I start to program it faster, it starts to look like digital energy and and then it doesn't just replace.
Property then you're starting to replace bonds. It's 100 trillion in bonds. There's 50 to 100 trillion, another currency, derivatives. And then the, and then and these are all conventional use cases. Right? I think that there's three hundred fifty trillion to 500 trillion dollars worth of currency currency, derivatives, and the world and that. And when I say that, I mean things that are valued based upon Fiat cash flows.
Any commercial real estate, any bond, any sovereign debt any currency itself, any derivatives to those things? They're all derivatives, and they're all defective and they're all defective because of this persistent seven to fourteen percent.
Flaps inflate, which we call inflation or monetary expansion. Can we switch subjects to talk about the energy side of it? Like the Innovative piece? Yeah. Let's just start with this idea that I've got a hotel. What the billion dollars worth a thousand rooms when it becomes a dematerialized hotel.
I love that word so much. By the way, dematerialize
Hotel. We're across in the fountain blow here. Imagine the found. Whoa is dematerialized. Yeah, the problem with the physical hotel as I got a higher.
All people moving subject to the speed of sound and physics laws and Newton's laws and I can rent it to people in Miami beach, but it was a digital Hotel. I could rent the room to people in Paris London and New York every night and I can run it with robots. And as soon as I do that, I can rent it by the room, our and I can run it by the room minute. And so I start to chop my hotel up into 100,000 room hours that I
I sell to the highest bidder anywhere in the world and you can see all the sudden, the yield, the rent, and the income of the property is dramatically improved increased. I can also see the maintenance cost of the property falls. I get on Moore's Law and I'm operating in cyberspace. So, I got rid of Newton's Laws. I got rid of all the friction and all the all those problems. I tapped into the benefits of cyberspace.
I created a global property. I started monetizing a different frequencies. And, of course, now I can mortgage it to anybody in the world. Right? I mean, you're not going to be able to get a mortgage on a Turkish building from someone, you know, in South Africa. You have to have to find someone that's local to the culture you're in. So when you start to move from analog property, digital property, it's not just a little bit better. It's a lot better.
And what I just described lacks is like the defy Vision, right? It's it's the beauty of defy, flash loans, Money. Moving at high-velocity, at some point. If, if the hotel is dematerialized, then what's the difference between renting a hotel room and loaning a block of stock, right? I'm just finding the highest best use of the
thing. It feels like the magic really emerges.
Though when you build a lot, a market of layer, two layer three Technologies, on top of that. It's like they maybe you can correct me if I'm wrong, but the for all these hotels and all these kinds of ideas. It's always touching humans at some point and the, you know, consumers or do humans business owners and so on. So you have to create interface, you have to create services that make all that super efficient. Super fun.
Use Pleasant effective, all those kinds of things as you have to build a whole economy on top of
that. And I happen to think that won't be done by the crypto industry at all. I think that will be done by centralized applications. I think it'll be, you know, the citadel's of the world, the high-speed traders of the world, the New Yorkers. I think, I think it'll be financed FTX and coinbase as a layer 3 exchange that will give you the yield and we'll give you the
Loan and the best terms because ultimately, you have to jump these compliance Hoops. It's it comes to like block fi can give you yield, but they have to do it in compliant way with the United States jurisdiction. So, ultimately those applications to use that digital property. And either either generate a loan. I'll give you a loan on it or give you yield on an are going to come from companies, but the difference
The fundamental difference is.
It could be companies anywhere in the world. So if a company in Singapore comes up with a better offering.
Right, then the capital is going to start to float a single port. I can't send ten city blocks of l.a. To Singapore, to rent during Festival, but I can send 10 blocks of Bitcoin to Singapore. So you've got a truly Global Market that's functioning and this asset and answer second-order asset. For example, maybe you're an American citizen and you own 10 Bitcoin, and someone in Singapore, will generate 27 percent yield in the Bitcoin. But lie.
Lee, you can't send the money to them, or the Bitcoin to them. It doesn't matter, because the fact that that exist means that someone in Hong Kong will borrow the 10 Bitcoin from somebody in New York and then they will put on the trade in Singapore and that will create a demand for Bitcoin, which will drive up the price of Bitcoin, which will result in an effective tax, free yield for the person in the US. That's not even in the jurisdiction. So there's nothing that's going on in Singapore.
To drive up the price of your land in LA, but there is something going on everywhere in the world to drive up the price of property in cyberspace. If there's only one digital Manhattan, and so there's there's a dynamic there, which is profound because its global.
But now, let's go to the next extreme. I'm still giving you a fairly conventional idea, which is let's just loan the money fast on a Global Network. And let's just rent the hotel room fast in cyberspace. But now, let's move to a maybe a more Innovative idea. The first generation of Internet, you know, brought a lot of productivity, but there's also just a lot of flaws in it. For example, Twitter is full of garbage Instagram.
DMS or full of garbage. Your Twitter, dams are full of garbage. YouTube is full of scams, every 15 minutes. There's a Michael sailor. Bitcoin giveaway spun up on YouTube. Yep. My Office 365 inbox is full of garbage. Millions of spam messages. I'm running for different email filters.
My company spends million dollars a year to fight denial of service attacks and all sorts of other security things. There are denial of service attacks everywhere against everybody, in cyberspace all the time. It's extreme and we're all beset with hostility. Right? You've been a victim of an in Twitter. I'm, you know, you go on Twitter and people post stuff. They would never say to your face. And then if you look, you find out that the account was created like three days ago, and it's not even a real person.
So, you know, we're beset with phishing attacks and scams and spam Bots and garbage and why. And the answer is because the first generation of internet was digital information and there's no energy. There's no conservation of energy in cyberspace. The thing that makes the universe work is conservation of energy. Like if I went to a hotel room, I have to post a credit card. And then if I Smash the Place up,
The be Economic Consequences may be the be criminal consequences. There. Might be reputational consequences, you know, lamp might fall on me. But in the worst case, a I can only smash up one hotel room. Now, imagine I could actually write a python script to send myself to every hotel room in the world every minute, not post a credit card and smash them all up anonymously.
The thing that makes the universe work is friction speed of sound, speed of light and the fact that that it's ultimately, it's conservative. You're either energy or matter. But once you've used the energy, it's gone and you can't do infinite everything that's missing in cyberspace right now. And if you look at the look at all of the moral hazards, and all of the product defects that we have in all of these products.
The most of them 99% of them could be cured. If we introduced conservation of energy into cyberspace and that's what you can do with high-speed digital property high-speed Bitcoin. And and by high-speed, I mean not 20 transactions a day. I mean, 20 thousand transactions a day. So how do you do that? Well, I let everybody on Twitter post.
Center 10,000, satoshi's vile, lightning wallet. A lightning badge. Give me an orange. Check if you put up 20 bucks once in your life. You could give 300 million people in Orange. Check right now. You don't have a blue check, Lex. You're a famous person. I don't know why, you don't have a blue check of you. Have you ever applied for a blue check know? There are three hundred sixty thousand people on Twitter with the blue, check their 300 million people on Twitter.
So the conventional way to verify account is elitist archaic. You know, how does it, how does it work? How do you get blue chick? I mean, if you want to apply and wait six months and you have to post, you know, like three articles in the public, mainstream media that illustrates your a person of interest interesting. Generally, they would grant them to CEOs of public companies or the whole idea is to verify that, you know, that you
Are you who you are, who you say you are? All right, but
the question is, why isn't everybody verified? And there's there's a couple of threads on that one. Is some people don't want to be doxxed. They want to be anonymous here. But but they're even Anonymous people that should be verified, right? Because otherwise, you're you're subjecting their entire following to phishing attacks and scams and hostility, but the other, the
other, the orange verification, so the
Idea can actually elaborate a little bit more if you put up, 20
bucks. Yeah, I think everybody on Twitter audible, get an orange check, if they could come up with like ten
dollars. And what is the power of that orange? Check? What, what is that verify?
Exactly. You basically post a security deposit for your safe Passage through cyberspace. So the way it would work is if you if you've got ten dollars once in your life, you can basically show that your credit worthy and that's your pledge to me.
The you're going to act responsibly. So you put the 10 of the 20 dollars into the lightning wallet. You get an orange check. Then Twitter just gives you a setting where I can say, the only people I could DME or orange checks. The only people that can post on my tweets or orange checks. So instead of locking out the public and just letting your followers, you know, comment you lock out all the unverified and that means people that don't want to post ten dollar security deposit can't comment.
Once you've done those, two things, then you're in position to monetize malice right? Monetize motion or malice for that matter, but, let's just say for the sake of argument, you post something and 9700 Bots spin up, you know, and Pitch their whatever scam right now, you sit and you go report report report, report report report, and if you spend an hour you get through half of them, you waste an hour.
Your life, they just spent up another 97 because they lien because they've got a Python scripts bending it up. So it's hopeless. But on the other hand, if you report them and they really are a bot. It's Twitter's got a method to actually delete the account. They know that their boss, the problem is not, they don't know how to delete the account. The problem is, there are no consequences when they delete the account. So if there are consequences, Twitter could give how they could just sees the $10 or sees the $20 because it's a
w. It's a malicious criminal act or whatever. Advisor is a violation of the platform rules.
You end up seizing, ten thousand dollars, give half the money to the reporter and half the money to the Twitter platform
and it's a really powerful idea. But that that's tying it that's adding friction akin to the kind of friction you have in the physical world, you're tying. The you have consequences you have real
consequences for in concert conservation of
energy conservation of energy leaving
friction. There's no nothing on this Earth, right? I mean, you can't walk across the room without friction, right? So that friction is not bad.
Add right, unnecessary, friction is bad. So in this particular case, you're introducing conservation of energy. And in essence, you're introducing the concept of consequence or truth into cyberspace. And that means, if you do want to spin up 10 million, fakes fake less Friedman's, right? Going to cause it's going to cost you a hundred million dollars to spin up, 10 million, fake
Lex's. The thing is, you could do.
That with the dollar but your case you're saying that it's more tied to physical reality when you do that with Bitcoin.
Yeah. Well, let's follow up on that idea. Bit more. If you did do it with the dollar then the question is how to six billion people deposit the dollars, right? Because what you're doing is could you do it with a credit card? Like how do you send dollars? Huh? You have to Doc's yourself like
It's not easy. So you're talking about em, putting a credit card transaction, doxing yourself. And now you've just eliminated. The two billion people that don't have credit cards or don't have Banks. You've also got a problem with everybody that wants to remain anonymous, but you've also got this other problem which is critic and on credit cards are expensive transactions, low frequency, slow settlement. So do you really want to pay two and a half percent? Every time you actually show
show a twenty dollar deposit and maybe you could do a kludgy version of this for a subset of people. It's like, it's 10% is good. If you did it with conventional payment rails, but what you can't do is the next idea, which is I want the orange badge to be. Used to give me safe Passage through cyberspace tripping across every platform. So, when I, how do I
Solved the denial of service attacks against a website. I publish a website. You hit it with a million requests.
Okay. Now, how do I deal with that? Well, I can lock you out and I can make it a zero trust website. And then you have to be coming at me through a trusted firewall with a trusted trusted credential. But that's, that's a pretty Draconian thing. Or I could put it behind a lightning wall, lightning wall would be, you know, I just challenged you. Lex. You want to browse my website. You have to show me your hundred thousand satoshi's. Do you have 100,000 satoshi's?
Click, ok. Now you click away a hundred times or a thousand times and after a thousand times, you know, I'm well. Now Lex you're getting a fence over to take a Satoshi from you and tends to Toshi's, microtransaction. You want to hit me a million times. I'm taking all your satoshi's and locking you out.
What you want to do, is you want to go through 200 websites today?
And what you want every time you cross a domain, you need to be able to in a Split Second.
Prove that you've got some asset. And now, when you cross back, when you exit domain, you want to fetch your asset back. So how do I in a friction free fashion browse through dozens or hundreds of websites? Post, a security deposit for stay safe passage and then get it back. You couldn't afford to pay a credit card fee. Each time. It's when you think about two and a half percent as a transaction fee. It means you trade the money for tea time.
Times and it's gone.
Yeah, it's gone. Yeah. Yes, he can't do this kind of hopping around to the internet with this kind of verification that grounds you to physical reality is it's a really really interesting idea. Why haven't that hasn't that
been done?
I think you need two things. You need an idea, like a digital asset like Bitcoin. That's a bearer instrument for final settlement. And then you need a high-speed transaction Network like lightning where the transaction cost might be a 20th of a penny or or less. And if you roll the clock back, 24 months
I don't think you had the lightning Network and a stable point. It's really just the past 12 months. It's an idea you could think about this year and I think you need to you need to be aware of Bitcoin as something other than like a scary speculative asset. So I really think we're just the beginning. The embryonic stage.
I have to ask Michael sailor. You said before? There's no second best to bitcoin.
What would be the second best traditionally? There's a theorem with smart contrast cardano's proof of stake polkadot with interoperability between blockchains Dogecoin has the incredible power of the meme privacy, with Manero. I just can keep going. There's the there's of course after the block size Wars, the different offshoots of Bitcoin.
I think, if you, if you did
Pose our segment, the crypto Market, you've got crypto property. Bitcoin is the king of that, you know, and other Bitcoin Forks, the one to be a, you know, a bearer instrument store of value would be a property, a Bitcoin cash or Litecoin something like that. Then you've got crypto currencies. I don't think I don't think Bitcoin is a currency because a currency I Define and Nation States since a currency, isn't a digital asset that you can transfer.
As, you know, in a transaction without incurring, a taxable obligation, so that means has to be a stable dollar or a stable Euro or a stable Yen, a stable coin. So I think that cryptocurrencies tether, Circle, most famous, then you've got crypto platforms, you know, and aetherium is the most famous of the crypto platforms, the platform upon which, you know, with smart contract functionality, Etc.
I know I think you got just crypto Securities. It's just like my favorite, whatever, meme coin, and I love it because I love it and it's attached to my game or my company or my Persona or my whatever. I think. If you if you you know pushed me and said, what's the second best? I would say the world wants two things at once, crypto property as a savings account. And I wants cryptocurrency as a checking account. And that means that the that the most popular thing really is going to be
Stable coin dollar, right? And as there's a, maybe a fight right now might be tether, right? But it's a stable dollar because I feel like the market opportunity. It's not clear that they will be one that will win the class of stable dollars is probably a one to 10 trillion dollar market easily.
I think that in the crypto platform space, a theorem or compete with salon by Nan, smart chain, and and the
like there's certain characteristics of any of them that kind of stood out to you g. The don't you think the competition is based on a set of features? Also the set of features that are that are cryptocurrency provides but also the community that it provides. Don't you think the community matters and sort of the adoption the dynamic of the adoption both across the developers and
the
You're looking at them. I mean the first question is, is what's the regulatory risk? How likely is it to be deemed a property versus security? And the second is, is what's the competitive risk? And the third is, what's the speed and the performance and and the, you know, all those things, you know, lead to the question of, what's the security risk? How likely is it to crash and burn? And and how stable or unstable is it? And then there's the mark, you know, the
Risk, I mean, her different teams behind each of these things and and communities behind them. I think that the big cloud looming over the crypto industry is regulatory treatment of cryptocurrencies and Regulatory, kreitman of crypto Securities and crypto platforms. And I think that won't be determined until the end of the first byte in administration. For example, there are people that would like, only u.s. U.s. Fdic-insured banks to issue crypto.
Oh currencies, they want JPMorgan to issue a crypto dollar, backed one-to-one. But then in the u.s. Right now, we have Circle and we have other companies that are licensed entities that are backed by cash and cash equivalents, but they're not, FDIC insured Banks. There's also a debate in Congress about whether state-chartered Banks should be able to issue these things and then we have tether and and others that are outside of the US jurisdiction. They're probably not back by cash.
Cash equivalents they're back by stuff. And we don't know what stuff and then finally, you have, you know, UST and die. Which are algorithmic stable coins, right? That are even more Innovative further outside the compliance framework. So if you ask who's going to win, the question is really, I don't know. Will the Market? Decide or will the regulator's decide? If the regulator's, get out of the way in the market fought out. Well, then it's an interesting discussion. Yeah, and
Then I think that all bets are off, if, if The Regulators get more heavy-handed with this and I think you could have the same discussion with crypto properties, like like the defy exchanges in the crypto exchanges. The SEC would like to regulate the crypto exchanges. They like to regulate the defy exchanges. That means they may regulate the crypto platforms and at what rate and in what fashion. And so I think that I could give you an opinion. If it was limited to competition on the current regulatory.
Regime, but I think that the regulations are so fast moving and it's so uncertain that it's it. You can't make a decision without considering the potential actions of the
regulator's. I hope the regular is get out of the way. Can you steal me on the case that Dogecoin is? I guess the second best cryptocurrency of you don't consider Bitcoin and cryptocurrency.
Yeah, but instead of crypto
property, I would classify it as crypto property because the u.s. Dollar is a currency. So unless your crypto asset is pegged algorithmic way or stabili to the value of the dollar is not a currency. It's a property or it's an
asset. So then Can you steal men? The case that Dogecoin is the best cook though currency, then, because Bitcoin is not even in that list, the debate is going to
be, whether it's property or security.
And there's a debate whether it's decentralized enough. So let's assume it was decentralized. Yep. Well, I'm saying it's increasing it not quite 5, what 5 percent a year inflation rate, but it's not 5% Exponentially. It's like a plus, five million, five percent something Captain is less. I forget the exact number, but it's an inflationary property. It's got a lower inflation rate than the US dollar and it's got a much lower in.
Malaysian rate than many other fiat currency. So I think you could say that. But don't you see the
power of meme, the power of ideas, the power of fun, whatever mechanism is used to Captivate a community.
I do. But there are meme stocks. It doesn't absolve you of your ethical and securities liabilities. If you're, you know, if you're promoting it so like, like I don't have a problem.
It's like people buying a stock.
It's just the way I divide the world is right, there's investment. They're saving and there's speculation and there's trading. So Bitcoin is an asset for saving. If you want to save money for 100 years. You don't really want to take on execution risk or the like, so you're just buying something to hold forever for you to actually endorse something as a property. Like, if you said to me, my
What should I buy for the next hundred years? I say, well, some amount of real estate some amount of scarce Collectibles some amount of Bitcoin, right? You can run your company, right? But but run, your company is an investment. So the savings are properties. If you said, what should I invest in? I'd say, well, here's a list of good companies. Private companies. You can start your own company. That's an investment, right? If you said, what should I trade? Well, I'm trading is like a proprietary thing.
Like I'm I don't have any special insight into that. If you're a good Trader, you know, you are. If you said to me, what should you speculate in? We talked about meme, stocks and meme coins and and it's kind of sits up. There. It sits right in the same space with what horse should you bet on and what sports team, should you gamble on and should you bet on black six times in a row and double down each time? It's I mean, it's fun, but
At the end of the day, it's it's a speculation, right? You can't build a civilization on speculation on, it's not an Institutional asset. And in fact Where I Leave It Right is Bitcoin is clearly digital progress, which makes it an Institutional grade investable asset, for a public company. A public figure, a public investor or anybody that's risk adverse. I think that the other the top 100 other
toes are like Venture Capital Investments. And if you're a VC and of your qualified technical investor, and you have a pool of capital and you can take that kind of risk, then you can parse through that and form opinions. It's just orders of magnitude more risky because of competition, because of ambition. And because of Regulation,
And if you take the mean coins, like, you know, when some rapper comes out with a meme coin, it's like maybe it'll Peak when I hear about it, right? I was like, let me ship was created as the coin such that. It had so many zeros after the decimal point. That when you looked at it on the exchanges, it always showed 0000 and it wasn't until like six months after it got popular, that they started expanding the display. So you could see whether the price
Changed the speculation. You you've been, maybe you can correct me. But you've been critical of Elon Musk in the past in the crypto space. Where do you stand on elon's effect on bitcoin and cryptocurrency? In general, these days.
I believe that Bitcoin is a massive breakthrough for the human race that will cure half the problems and the world and generate hundreds of trillions of dollars of economic value to the civilization. And I believe that
It's an early stage, where many people don't understand it and they're afraid of it, and there's Fudd and there's uncertainty. There's doubt there's fear and there's a very noisy crypto world, and there's 15,000 other cryptos that are are seeking relevance. And I think most of the Fudd is actually fueled by the other crypto entrepreneurs. So the environmental Fudd and the other types of
That's around Bitcoin. Generally, they're not coming from legitimate environmentalist. They don't come from legitimate critics. They actually are guerrilla marketing campaigns that are being financed and fueled by other crypto entrepreneurs because they have an interest in doing so. So if I look at the constructive path, forward first, I think it'd be very constructive for corporations.
To embrace Bitcoin and and build applications on top of it. You don't, you don't need to fix it. It's nothing wrong with it. Right? Like when you put it on a layer 2 and layer 3. It moves a billion times a second at the speed of light. So every beautiful col, defy application, every crypto, application, everything you could imagine you might want to do, you can do with a legitimate company.
A legitimate website or mobile application sitting on top of Bitcoin or lightning if you want to. So, I think that to the extent that people do that, that's going to be better for the world. If you consider what holds people back. I think it's just misperceptions about what Bitcoin is. So I'm a big fan of just educating people if we, if you're not, if you're not going to commercialize it.
Just educate people on what it is. So for example, Bitcoins the most efficient.
use of energy in the world by far, right, most people don't, they don't necessarily perceive that or realize that, but if you were to take any metric energy, intensity,
You put like two billion dollars worth of electricity in the network every year and it's worth 850 billion dollars. There is no industry in the real world, right, that that is that energy efficient? Not only that energy efficient. It's also the most sustainable industry. We just we do surveys 58% of Bitcoin. Mining energy is sustainable. So there's a very good story. In fact, every other industry Planes Trains automobiles.
Food medicine, everything else. It's less clean less efficient. So
so the basic debate
was I wouldn't say there is a debate. I would just say that to the extent that the Bitcoin Community had any issue. With Elon. It was just, you know, the just this environmental, you know, uncertainty that he fueled in a couple of his tweets, right, which I think just is very distracting,
but those one of
Of them, but I think it's like the Bitcoin maximalist but General, the crypto Community, what you call the the crypto entrepreneurs are, you know, it's also the using it for, I mean, for investment for speculation. And therefore get very passionate about people's kind of celebrities including you like famous people. Write saying, positive stuff about anyone in particular.
I do think thing you can buy and coinbase and so they might be unhappy with the ELA monster. He's promoting Bitcoin and then not and promoting Dogecoin then not, and this kind of there's so much emotion tied up in the communication on this topic. And that's, I think that's where a lot of the guys don't
have. I don't have a criticism of Elon Musk. He's free to do whatever he wishes to do.
His like in fact, but Elon Musk is the, you know, the second largest supporter of Bitcoin in the world. I think that the Bitcoin Community tends to eat. It's own quite a bit. Yeah. It tends to be very very self-critical and instead of saying.
Elon is more supportive of Bitcoin than the other 10,000 people in the world, you know, with serious amounts of money. They like they focus upon, you know.
Yeah, this is strange eating your own is just
so, I mean, I think he's free to do what he wants to do like and I think he's done a lot of good for Bitcoin, in in putting it on the balance sheet of Tesla and holding it. And I think that sent a very powerful message.
G of advice for
People see you. You've had a heck of a life. You've done quite a lot of things start before I Mighty, but starting with MIT. Is there advice you have for young people in high school and college? How to
Have a career that can be proud of how to have a life that can be proud of.
I was asked by somebody for quick advice for his young children. He had he had twins when they enter adulthood. He said, give me give me your advice for them in a letter. I'm going to give it to them when they turn 21 or something. So then he had, I thought I was at a party and then he handed me this sheet of paper. I thought, oh, he wants me to write it down right now. So I said,
And I started writing and I figured well, what do you want to tell someone at age 21
the eroded done?
So I wrote it down. I tweeted it and it's sitting on Twitter. But I tell you what I said, I said my advice, if you're entering adulthood Focus, your energy.
Guard your time.
Train your mind.
Train your body.
Think for yourself.
Curate, your friends.
Curate, your environment.
Keep your
promises.
Stay cheerful and constructive.
And upgrade the world. Like that was the 10.
Upgrade the world. That's an interesting choice of words. Upgrade the world. Upgrade the world. It's like an engineered your energy. It's a very yeah is a very engineering themed.
Keep your promises to. That's an interesting one.
I think most people suffer because they they just they don't Focus. Like you got to figure out. I think the big risk in this world is there's too much of everything.
Yeah,
like you can sit and watch chest videos 100 hours a week and you'll never get through all the chest videos, right? There's there's too much of every possible thing every too much of every good thing. So figuring out
What you want to do and then everything will suck up your time, right? There's 100 streaming channels to binge watch on. So you got to guard your time and then train your body, train your mind and control who's around, you control. What's around you? So, ultimately, in a world where there's too much of everything.
Then
your 6th laser eyes. It's like those laser eyes. You have to focus.
On just a few of those things.
Yeah, that I mean, I got a thousand opinions we could talk about and I could pursue a thousand things but I don't expect to be successful. And I'm not sure that my opinion in any of the 999 is any more valid than the leader of thought in that area. So how about if I just focus upon one thing?
And then and then deliver the best I can in the one thing. That's that's the laser iMessage
the rescue distracted. Well, how do you achieve the do you find yourself given where you are in life having to say? No a lot?
Or just focus comes natural when you just ignore everything around you. So how do you achieve that Focus?
I think it helps the people know what you're focused on.
So you everything about you just radiates that people know, people know
this stay if they know what you're focused on. Then you won't get so many other things coming your way. If you know, if you dial a or if you if you flirt with 27 different things, then you're going to get approached by people in each of the 27 communities, right?
You mentioned, beginning a PhD.
Giving your roots at MIT. You think there's there's all kinds of Journeys. You can take to educate yourself. Do you think PhD or school still worth it?
Or is there other paths through life?
That is it worth it? If it to pay for it, is it worth it to spend the time on
the time and the money is a big
cost. All right, I think
time probably the bigger one, right? It
seems clear to me that the world wants more specialist. It wants it wants you to be an expert in and to focus on and one area.
And it's punishing generalist jack of all trades, but especially people that are generalists in the Physical Realm because if you're a specialist in the digital realm, you might very well, you're the person with 700,000 followers on Twitter and you show them how to tie knots or you know, you're the banjo player, you know, with 1.8 million followers. And whenever be types banjo, it's you right there. And so the world wants
People that that do something well and then it wants to Stamp Out, 18 million copies of them. And so that argues in favor of focus now, I mean the definition of a PhD is someone with enough of an education that they're capable of or have made I guess, I guess to get a PhD. Technically you have to have done a dissertation where you made a, you know, a seminal contribution to the body of human knowledge. And if you haven't done that,
That technically, you know, you have a master's degree, but you're not a doctor. So if you're interested in any of the academic disciplines that a PhD would be granted for then I can see that being a reasonable Pursuit. But there are many people that are Specialists, you know, you know, the Azure Mater. Yeah. Yeah. Yeah. He's the world's greatest chess commentator. Yeah, and I've watched his career and he's got progressively.
Right better and he's really good. He's gonna love hearing this. Yeah, the Azure made over here is this. I'm a big fan of the Azure Mater on. I have to cut myself off, right? Because otherwise, you'll watch the entire Paul. Morphy Saga for your weekend, but the point really is YouTube is full of experts who are specialists in something and they rise to the top of their profession and Twitter is 2. And the internet is. So I I would
Advocate that you figure out what you're passionate about and what you're good at and you do focus on it, especially if if the thing that you're doing can be automated. The problem is, you know, back to that 500,000 algebra teacher type common. The problem is, if it is possible to be automated then over time. Someone's probably going to automate it and
And that that squeezes, you know, the state space of everybody else is like, like, after the lockdowns. It used to be there. Like all these local bands that played in bars and nobody went to the bar to see the local band and then during the lockdown, you would have liked the six supergroups and they would all get 500,000 or a million followers and all these smaller local bands. Just got no attention.
At
all. Well, the interesting thing is one of those 500,000 algebra teachers is likely to be part of the automation. So it's like, it's an opportunity for you to think. Where is my field, my discipline evolving into. I talked to a bunch of librarians just having to be friends of librarians and that's libraries will probably be evolving and it's up to you as a librarian to be one of the one of the one of the few that remain. Yeah.
Rubble,
if you're going to give commentary on Shakespeare plays, I want you to basically do it for every Shakespeare play. Like I want you to be the Shakespeare, dude, because once I once just like Lex, you're like, I don't know what kind of your the deep thinking podcaster, right? Or you're the you're the podcast that goes after the Deep intellectual conversations and once I get comfortable with you and I like you
Then I start binge watching Lex. Yeah, but but if you changed your format, yeah, through 16 different formats so that you could compete with 16 different other personalities on YouTube. You'd probably wouldn't beat any of them. Right? You would probably just kind of sink into the your the number two or number three guy. You're not the number one guy in the format and I think the that the the algorithm, right, the Twitter algorithm and the YouTube albums, they
They reward the person that's focused on a message consistent, the world wants somebody, they can trust, that's consistent and reliable and they kind of want to know what they're getting into because this is taken for granted, maybe, but but there's 10 million people vying for every hour of your time. And so, the fact that anybody gives you any time at all
is a huge is amazing privilege,
right? And you should be thanking.
Seeing them and you should respect their time.
It's interesting. The get everything you said is very interesting. But of course, from my perspective and probably from your perspective. My actual life has nothing to do with, it's just being focused on stuff. And in my case, it's like focus on doing the thing. I really enjoy doing and being myself and not caring about anything out. Like, I don't care about views or likes or attention and that just maintaining that.
Focus is the way from an individual perspective. You live that life. But yeah, it does seem that there's the world and technology is rewarding the specialization and creating bigger and bigger platforms for the different specializations. And and that in that lifts all boats actually because the specializations get better and better and better at teaching people to do specific things and they educate themselves and it's just everybody gets more and more knowledgeable and more more empowered the
Word
for authenticity more than offsets the specificity with which you pursue your mission. It's like it's like no other way to say it is like nobody wants to read advertising. Like if you were to spend a hundred million dollars advertising your thing. I probably wouldn't want to watch it. Yeah,
but that's if you think yeah,
absolutely. We see the death of that. And so the commercial shows are losing their audiences and the
Kick Specialists are the authentic artists are are gaining Their
audience. And that's a beautiful thing. Speaking of deep thinking. You're just a human, your life ends. You've accumulated so much wisdom, so much money, but the ride ends. Do you think about that? Do you Ponder your death? Your mortality? Are you afraid of
it?
When I go all my assets will flow into a foundation and the foundation's mission is to make education free for everybody forever. And if if I'm able to contribute to the creation of of a more perfect monetary system, then maybe that foundational go on forever,
the idea, the foundation of the idea. So that is the the each of the foundations.
It's not clear on the S curve of a mortal life yet. Like, that's a biological question and you ask that, you know, on some of your other interviews a lot. I think that we are on the threshold of immortal life, for ideas or a mortal life for certain institutions, or computer program. So if we can fix the money, then you can create a technically, perfected endowment. And then
The question really is. What are your ideas? What do you want to leave behind? And so if it's a park then you endow the park, right? If it's if it's free education, you and dial that. If it's if it's some other ethical idea right?
Does it make you sad that there's something that you've endowed some very powerful idea of digital energy that you put out into the you help.
Put it into the world and your mind, your conscious mind will no longer be there to experience it. It's just gone
forever. I rather think that the
the thing that Satoshi taught us is you should do your part during some phase of the journey and then you should get out of the way. And I think Steve Jobs said something similar to that effect and a very, very famous speech. One day, which
is, you know,
death is a natural part of life and it makes way for the next generation and I think the goal is you upgrade the world, right? You leave it a better place, but you get out of the way.
a, and
I think, when
When that breaks down, you know, bad things happen.
I think nature cleanses itself. There's a cycle of life
and speaking one of great people who did also get out of the way as George Washington. So hopefully, when you get out of the way, nobody's bleeding you to death in Hope of helping you, what do you think do a bit of a callback? What do you think is the meaning of this whole thing? What's the meaning of life? Why are we here? We talked about the rise of human civilization.
Seems like were engineers at heart will build cool stuff, better and better use of energy channeling energy to be productive. Why what's it all for?
You're getting metaphysical
on me. Very. There's a beautiful boat to the left us. Like, why do we do that? This, this boat that. Sailed the ocean, then we build models of it, to celebrate. Great engineering of the past
to engineer is
divine.
You can make lots of arguments as while. We're here. We're here to either here to entertain ourselves for a. We're here to create something that's beautiful or something. That's functional. I think if you're an engineer, you entertain yourself by creating something, that's both, beautiful and functional. So I think all three of those things it's entertaining, but it's ethical
You know, you got to admire, you know, the first person that built a Bridge Crossing a Chasm. The first person to work out the problem of how to get running water to a village.
First person have figured out how to, you know, damn up a
river
or mastered agriculture or the guy that figure it out, you know, how to grow fruit on trees or created Orchards, you know, and maybe one day had
like 10 fruit trees is pretty proud of himself. So that's functional. There is also something to that just like you said, that's just beautiful. It does get you closer to. Like you said that.
Find something.
When you when you step back and look at the entirety of it, a collective of humans using a beautiful invention or creation or just, just something about this instrument is creating a beautiful piece of music.
That seems just right. That's what we're here. For. Whatever the Divine is. It seems like we're here for that. That and I of course, love talking to you because from the engineering perspective. The functional is ultimately the mechanism towards the beauty.
Isn't there something beautiful about about making the
world a better place for people that you love your
friends, your
family or yourself, you know, enough.
When you think about the the entire Arc of human existence and you roll the clock back five hundred thousand years and you think about every struggle of everyone that came before us and everything they had to overcome in order to put you here right now.
Now, you know, you kind of you got to admire that right. You got to respect that.
That's a heck of a gift. They gave us. It's also heco responsibility. Don't screw it up.
If I dropped you 500,000 years ago. I said, figure out steel refining or or you know, fig figure out, rate is silicon chips, Fab reproduction or or whatever it is.
A liar. And so now we're here and I guess the way you repay them is, you fix everything in front of your face. You can write. And I mean to someone like Elon it means get us off the planet, right? To someone like me. It's like, I think, you know, fix the energy and in the system
and that gives me hope Michael. This is an incredible conversation. You an incredible human is a huge honor. You would sit down with me. Thank you so much for
Talking to you. Thanks for having me likes. Thanks for listening to this conversation with Michael sailor to support this podcast. Please. Check out our sponsors in the description. And now let me leave you with a few words from Francis. Bacon money is a great servant but a bad master.
Thank you for listening and hope to see you next time.
