Michael Saylor: Bitcoin, Inflation, and the Future of Money | Lex Fridman Podcast #276

Remember George Washington, you know how he died? Well-meaning physicians bled him to death and this was the most important patient in the country Maybe in the history of the country And it's and we bled him to death trying to help him So when you're actually inflating the money supply at seven percent, 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 because they think that Someone has their best interest at mind and the people that are bleeding them to death believe That they believe that prescription because their mental models are just so defective The following is a conversation with Michael Saylor one of the most prominent and brilliant bitcoin proponents in the world He is the ceo of micro strategy founder of Saylor academy graduate of MIT and Michael is one of the most fascinating and rigorous thinkers i've ever gotten a chance to explore ideas with he can effortlessly Zoom out to the big perspectives of human civilization and human history And zoom back in to the technical details of blockchains markets governments and financial systems This is the Lex Friedman podcast to support it. Please check out our sponsors in the description and now dear friends Here's Michael Saylor Let's start with a big question of truth and wisdom When advanced humans or aliens or 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 would uh, probably give us a A B-minus on engineering on all the engineering things the hard sciences a passing grade Like we're we're doing okay. We're working our way through rockets and jets and electric cars and electricity transport systems and nuclear power and space flight and the like and And you know if you if you look at the walls that uh 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 gauss or madam curie or einstein You know, you would respect them. I would say they'd give us like a a d-minus on economics Like you know an f-plus or a d-minus you used to have an optimistic vision first of all optimistic vision of engineering because everybody you've listed Not everybody most people you've listed is just over the past couple of centuries And maybe stretches a little farther back, but mostly All the cool stuff we've done in engineering that is the past couple of centuries I mean archimedes You know had his virtues You know, I I studied the history of science at mit and I also studied aerospace engineering And and so I clearly 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 impact 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 Uh contributions to the to the human race and the human conditions have advanced so much. I mean, we're still taking You know taking guidance and admiring aristotle and plato and seneca and the like and on the other hand You know if you think about uh, what has made the human condition better Fire water Or harnessing of wind energy like try to row across an ocean Right not easy and for people who are just listening or watching. There's 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 india's company used to sail the world and trade So that was made, you know, the original was made sometime in the 1600s And then this model is made in the 19th century by individuals both the model and 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 uh Both the entrepreneurs and the business people and the engineers and just humans what's out there what's out there to be discovered 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 it's like 32 Somewhere between 32 and 36 So all the sound and the fury doesn't make you live past 32, but what does right antibiotics? conquest of infectious diseases if we understand the science of of infectious disease stare, you know sterilizing a knife And harnessing antibiotics gets you from 50 to 70 and that happened fast, right that happens from 1900 to 1950 or something like that And I I think if you look Look at the human condition You ever get on one of those uh rowing machines where they actually keep track of your watts output when you're on the yeah Yeah, it's like 200 is a lot. Okay 200 is a lot. So a kilowatt hour Is like all the energy that a human a trained athlete can deliver in a day and probably not one percent of the people in the in the world could deliver a kilowatt hour in a day and the Commercial value of a kilowatt hour the retail value is 11 cents today And uh, the wholesale value is two cents and So you have to look at the contribution of politicians and philosophers And economists to the human condition And it's it's like at best a 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 uh, you know the energy and in oil liquid energy oil Energy and in oil liquid energy or the contribution of tesla You know as we deliver electricity you know 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 dam 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 it's technology that gets the human race from you know, a A brutal life where life expectancy is 30 To a world where life expectancy is 80 You gave a d minus the economists so are they too like the politicians to wash In terms of there's good ideas and bad ideas and and that tiny delta between good and And bad is how you squeak past the f plus onto the d minus territory I think most economic ideas are bad ideas like most you know like um 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 an airfoil a wing or if you want to design an engine or a a nozzle and a rocket ship You wouldn't do it with simple arithmetic You wouldn't do it with a scale or there's not a single number right? It's vector. It's vector math You know computational fluid dynamics is n-dimensional Higher level math, you know complicated stuff So when when an economist says the inflation rate is two percent, 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 n-dimensional vector Money velocity is not a scalar. Um, the saying what's the velocity of money? Oh, 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 uh is a compression wave is Sound is uh is a compression wave. It's 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 and a sound moves faster through water. It moves faster through a solid and it moves faster through a stiffer solid So there isn't one What is the fundamental problem with the way economists reduce the world down to a model? Is it too simple? Or is it just even the first principles of constructing the model is wrong. I think that uh, 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 um The eric weinstein has been talking about this with gauge theory. So different different kinds of approaches from the physics world from the mathematical world to extend past this Scalar view of economics. So gauge theory is one way that comes from physics. Do you find that? a way of exploring economics interesting so outside of Cryptocurrency outside of the actual technologies and so on just uh analysis of how economics works. Do you find that interesting? Yeah, I I think that if we're gonna want to really make any scientific progress in economics we have to apply much Much more computationally intensive and richer forms of mathematics So simulation perhaps or yeah, you know when I was at mit I studied system dynamics Uh, you know, they taught it at the sloan school. It was developed by jay forrester who who um Was an extraordinary computer scientist and um when we've created models of Economic behavior, they were all multi-dimensional non-linear 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 Anything demand will fall and attempts to to create supply will increase and there will be a delay Before the capacity increases There'll be an instant demand Change and there'll be rippling effects throughout every other segment of the economy downstream and upstream of such thing So it's kind of common sense but most economics most classical economics is always You know taught with linear models You know fairly simplistic linear models and oftentimes even i'm really shocked today That the entire uh mainstream dialogue of economics has been captured by scalar arithmetic For example If if you read, uh 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 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 is a non-linear 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 refreshing if somebody for once published a table Of the change in price of every product every service and every asset in 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 patterns that Somehow indicates something fundamental about what's happening so like Summarization of data is still important perhaps summarization not down to a single scale of value but looking at that whole sea of numbers you have to find Patterns like what is inflation in a particular sector? What is maybe a change over time? Maybe different geographical regions You know things of that nature. I think that's kind of I don't know even what that task is Uh, you know, that's what you could look at machine learning. You can look at ai with that 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. Um, you know if we take um, for example during the pandemic the uh, the response of the political apparatus was to lower interest rates to zero And to start to 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 couldn't 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 in another part of the economy for example, um You lower the interest rates, uh to zero at one point We saw the uh, the swap rate on the 30-year note go to 72 basis points Okay, that means that the value of a long-dated bond immediately inflates. So the bond market had hyperinflation within minutes of these Financial decisions the asset market had hyperinflation We had uh what you call a case-shape recovery what we affectionately call a shake case-shape recovery main street shutdown Wall street recovered all within six weeks The inflation was in the assets like in the stocks in the bonds uh You know if you look today, you see that uh, Typical house according to the case schiller index today is up 19.2 percent year over year so If you're a first-time home buyer, the inflation rate is 19 percent percent, uh, the formal cpi announced a 7.9 You can pretty much Create any inflation rate you want by constructing a market basket, right a weighted basket of products or services or assets that yield you the answer I think that You know the fundamental failing of economists is is first of all Well, they don't really have a term for asset inflation Right. What's an asset? What's asset hyperinflation? You mentioned bond market swap rate and asset is the where the all majority of the hyperinflation happen What's inflation what's hyperinflation? What's an asset? What's an asset market? I'm going to ask so many dumb questions in the conventional economic world you would you would treat inflation as Uh 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 like a representative a basket of goods Is that lead to a content existence on this earth for a regular consumer? They define a synthetic metric, right? I mean i'm going to say you should have a thousand square 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 a you know, they call them hedonic adjustments. I could decide that it used to be in 1970 You needed a thousand square feet, but in the year 2020, you only need 700 square feet because we've many miniaturized televisions And we've got more efficient electric appliances because things have collapsed into the iphone. You just don't need as much space So now I you know, it may be that the apartment costs 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 That I guess my criticism of economists 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 a synthetic basket of Products and services the 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 if I said three years ago You should go see 10 concerts a year and the concert tickets now cost 200 each now. It's 2000 a year to go see concerts Now i'm in charge of 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 $2,000 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. What's an asset a house? a share of apple stock um a bond Um any a bitcoin is an asset um, or uh a picasso painting so Not a consumable good Not a uh, not not not an apple that you can eat Right, right if I throw away an asset then uh, 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 five percent interest rate gives you fifty thousand dollars a year in risk-free income You might retire on fifty thousand dollars a year in a low-cost jurisdiction So the cost of social security or early retirement is one million dollars when the interest rate is five percent During the the crisis of march of 2020 the interest rate went on a 10-year bond went to 50 basis points Okay. So now the cost of that bond is 10 million dollars Okay, the cost of social security went from a million dollars to 10 million dollars 10 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 fifty thousand dollar salary live in on a beach in mexico wherever you wanted 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's starting their first job that's saving money to buy a house But it would be characterized as a benefit to society by a conventional economist who would say well Housing asset values are higher because of interest rate fluctuation and now the economy's got more wealth And uh, 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 The struggle the suffering the pain of the average person Like metrics that captured that within the economic system. Is that is it when you talk one way to say it is a conventional view of inflation as cpi Understates the human misery that's in fact inflicted upon the working class and and on mainstream companies By 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 from the free market. Uh 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. Alexis Is uh, what do you think the inflation rate's been for the past hundred years? Are we talking about the scalar again? If you if you took a survey of everybody on the street and you asked them, what do they think inflation was? What is it? You know? You remember when Jerome Powell said our target's two percent, but we're not there If you go around the corner I have uh posted the deed to this house sold in 1930 Okay, and uh the number on that deed is 100 000 1930 and if you go on zillow And you get the z estimate. Is it higher than that? No 30 million five hundred thousand dollars. Yeah, so That's uh, 92 years 1930 or 2022 And and in 92 years we've had 305 x increase in price 305 x increase in price of the house Now if you actually 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 no conventional economists that would ever admit to an inflation rate of seven percent a year in the u.s dollar over the last century now if you if you uh dig deeper I mean one one guy that's done a great job working on this is seifedeen almos who wrote Who wrote the book the bitcoin standard and he notes that on average it looks like? The inflation rate and the money supply is about seven percent 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 percent a year If you talk to 10 a year for 100 years The money supply is expanding at seven percent a hundred years If you actually talk to economists 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 Is that are you okay with that? I'm not 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 two percent better Typical investor thinks they they're ten percent 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 ten percent gain a year you really get a 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 Is if the money supply stopped expanding at seven percent a year the s&p yield might be three percent and not ten percent It probably should be Now that that gets you to start to ask a bunch of other fundamental questions like if I borrow a billion dollars and pay three percent interest and the money supply expands at seven to ten percent a year and I ended up making a ten percent return on a you know billion dollar investment paying three percent interest Is that fair? and who who who suffered so that I could do that because In an environment where you're just inflating the money supply and you're holding the assets constant It stands the reason that the price of all the assets is going to appreciate somewhat proportional to the money supply And the difference in asset appreciations 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 are they are they truly limited in supply? Yeah, so we'll get to a lot of the words you said there the scarcity uh And so 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 Is put in other ways printing money and so is is that always bad the expansion of the money supply? Is this just uh to put some terms on the table so we understand them? um You nonchalantly say it's always the on average expanding every year the money supply is expanding every year by seven percent That's a bad thing. That's a that's a universally a bad thing It's awful But I guess I guess to be precise Uh, it's the currency That I mean Money, uh, 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 in a safe deposit box and buried it in the basement You would have lost 99.7 percent of your wealth over the same time period so So the expansion of the currency currency Creates, uh creates a massive inefficiency 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 adiabatic. What's that word? That's adiabatic adiabatic Right and aerospace engineering you want to solve any problem? They 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 closed system lapse Okay What's a clue? Okay, i'm gonna use a there's a leak in the ship I'm gonna use a physical metaphor for you because you're the jujitsu right like yeah, like you got 10 pints of blood in your body Mm-hmm. And so before your next uh workout i'm gonna take one pint from you Now you're gonna 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 red blood platelets So what if I tell you every month you got to show up and i'm gonna bleed you Yeah, okay. So, uh, so if i'm draining the energy i'm draining i'm draining 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 50 000 feet. You're 150 degrees colder than sea level. That's why you you know, you look at your Instruments and instead of 80 degrees you're 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 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 the currency supply by six percent 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 it's a nice way for the economy to function. It's the most kind of uh, It's being inefficient when you expand the money supply, but it's uh, That look it's the liquid i'm trying to find the right kind of adjective here It's how you you do transactions at a scale of billions Currency is the asset we use To move monetary energy around and you could use the dollar or you could use the peso or you could use the boulevard Selling houses and buying houses is much more inefficient or 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 they have utility value if it's a Utility value if it's a if it's a ship or a house or or a plane or a bushel of corn Right. Can I zoom out just for yeah, can we zoom out keep zooming out until we reach the origin of human civilization? But on the way ask You gave economists a d-minus I'm, not even going to ask you what you give to governments Uh, do you think their failure economists and government failure is malevolence or incompetence? I think uh 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, uh 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 a You know any any kind of foreign policy a domestic policy a manufacturing policy Every one of these a 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 in china and you want to manufacture them in the us you got to pay for it If I rebuild the entire supply chain in pennsylvania and I hire a new Supply chain in pennsylvania, and I hire a bunch of employees and then I unionize the employees then not only am I I idle 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 their conditions, so Everything gets less efficient. Everything gets more expensive And of course the government couldn't really pay for Uh its policies and its wars with taxes We didn't pay for world war one with tax. We didn't pay for world war two with tax We didn't pay for vietnam with tax In fact, you know when you trace this what you realize is the government Never pays for all of its policies with taxes. It's too 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 that's one Interpretation or it's just too transparent Like if people if people understood the the the true cost of war They wouldn't want to go to war if you were told that you would lose 95 of your assets, you know and 90 of everything you will be ever will be taken from you you might Demoralize 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 look at it I think a lack of humility, right? like uh, like If if people had more humility than they would realize Uh humility about how little they know how little they understand about the function of complex systems The phrase from quinny's towards movie unforgiven where he says a man's got to know his limitations I I think that a lot of people overestimate What they can accomplish and experience experience in life causes you to uh To reevaluate that so I 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 to what you can accomplish and everybody underestimates the challenges of of implementing an idea right and uh, and they always overestimate the benefits Of the pursuit of that. 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, uh the amount of manufacturing capacity in the said 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 go up rapidly and the confidence of uh, all of the institutions the corporations and the individual actors And trading partners will will collapse if we take a tangent on a tangent and we will return soon to the uh, the big human civilization question So if government Naturally wants to buy stuff it can't afford What's the best form of government? uh anarchism Libertarianism so not even there's not even armies. There's no borders. That's anarchism the least the smallest possible The smallest possible the best the best government would be the least and the debate will be over that When you think about this 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 like what's the ultimate form of government? What's uh, at least a promising thing to try? You know, um I have laser eyes on my profile Yes, twitter lex. What does that mean? And the significance of laser eyes is to focus On the thing that can make a difference. Yes, and um If I look at the civilization um, 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. It'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 gonna have so that's half the other half of the problems in the civilization are medical and and military and political and philosophical and you know and uh natural And I think that there are a lot of different solutions To all those problems and they're all they are all uh Honorable professions and and they all merit a lifetime of consideration for the specialist in all those areas I I think that What I could offer is What I could offer it's constructive is um 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 uh inflation is always Is and everywhere a monetary 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 oftentimes quoted by people that are anti-inflation But again, it it just signifies a lack of appreciation of what the issue is Inflation is if I if I had a currency, which was completely Non-inflationary if if I never printed another dollar And if I eliminated 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 them self inflationary and generally they all are so in general Inflationary is the big uh characteristic of human nature that Government's collection of groups that have power over others and allocate other people's resources will try to Intentionally or not hide the costs of those Allocations like in some tricky ways, whatever the options that are available you know hiding the cost is like is like the the tertiary thing like The the primary goal is the government will attempt to do good Right, and that's the fundamental. That's the primary problem They will attempt to do good and they will and they will do it and they will do good imperfectly and they will create oftentimes, uh 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 uh, the secondary Issue is they will unintentionally pay for it by expanding the currency supply without realizing that they're uh They're actually paying for it in In a suboptimal fashion. They'll collapse their own currencies while they attempt to do good The the tertiary issue is they will mismeasure 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'll say oh, it looks like the dollar has lost 95 percent of its purchasing power over 100 years Okay, they sort of fess up there's a problem, but they make it 95 percent loss over 100 years. What they don't do is Realize it's a 99.7 percent loss over 80 years. So they will mismeasure just the horrific extent of the monetary policy in pursuit of the foreign policy and the domestic policy which they 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 are 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 two 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 Right the velocity of money through the crypto economy Is 10 000 times faster? Than 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 a 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 you put a million dollars into gold gold will sit In a vault for a decade. Okay, so the velocity of money through gold is 0.1 You put the money in the stock market and you can trade it once a week. The settlement is t plus two Maybe you get to two to one leverage. You might get to a money velocity of a hundred a year In the stock market You put your money into the crypto economy and these people are settling every four hours And and you know if you're offshore they're trading with 20x leverage So if you if you settle every day and you trade the 20x leverage, you just went to 7 000 Okay, so the the velocity of the money varies I think the politicians that they don't really understand inflation and they don't understand economics, but but you can't blame them Because the economists don't understand economics because the because if they did They would be creating They would be creating multivariate computer simulations where they actually put in The price of every piece of housing in 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 I think that people don't really want to embrace it and and also there's the most pernicious thing Like there's that phrase You know, you 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 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 most of Them are homeowners Then I have I have misrepresented a 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 Cost it does seem that the cruder the model whether it's economics or their psychology The easier it is to weave whatever the heck narrative you want And not in a malicious way, but just like it's it's some some kind of like Emergent phenomena this narrative thing that we 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 just to tell a narrative about it And that's what the so like if you take an engineering approach It's I feel like it becomes more and more difficult To run away from sort of a true deep understanding Of the dynamics of the system I mean honestly if you if you went to 100 people on the street and you asked 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 No, not me. No if if you if you went to them and you said You know, do you think two percent inflation a year is good or bad? The majority would probably say well here it's good. You know, I'm not sure The majority of economists would say two percent inflation a year is good And of course there's look at the ship next to us. What if I told you that? the ship leaked Two percent right of its volume every something right? The ship is rotting two percent 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 to 100 year life span 50 year to 100 year life 100 be long 50 years not unlikely. So when we built ships out of wood They had a useful life of about 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 two percent? well Two percent means you have a useful life of you know, it's half life at 35 years Two two percent is a half life of 35 years. That's basically the half life of money and gold If I store your life force in gold Under perfect circumstances you have a useful life at 35 years Zero percent is a useful life of forever So zero percent is immortal Two percent is 35 years average life expectancy 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 it's kind of a silly notion, but the tragic notion is It was it was you know 7 into 70 or 10 years it's the money has had a half life of 10 years except for the fact that in weak societies and Argentina or the like the half life of the money is Is three to four years in Venezuela one year so the United States dollar Uh, and the United States economic system was the most successful economic system in the last hundred years in the world We won every war we were the world superpower Our currency lost 99.7 of its value and that means horrifically every other currency Lost everything right in essence that the other ones were 99.9 except for most that were 100 because they all completely failed and uh You know, you've got a you've got a mainstream economic community, you know that thinks that Inflation is a number and two percent is desirable It's it's it's kind of like You know, remember george washington, you know how he died no Well-meaning physicians bled 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 uh You know, there's that phrase right? Uh, 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 it's and we bled him to death trying to help him So when you're actually inflating the money supply at seven percent, 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 And the majority of of uh the society most companies Most most conventional thinkers, you know the working class they go along with this because they think that Someone has their best interest at mind and the people that are bleeding them to death believe they they believe that prescription because their mental models are just so defective and their understanding of energy and engineering and and uh, and the economics that are at play is uh Is crippled by these mental models, but that's both the bug and the feature of human civilization that ideas take hold They unite us we believe in them uh And we make a lot of cool stuff happen by in 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 believe that thing And then some ideas can be really bad and really destructive But on average the ideas seem to be progressing In in the direction of good. Let me just step back What the hell are we doing here us humans on this earth? How do you think of humans? How special are humans? How did human civilization? Civilization originate on this earth and what is this human project? They're all taking on You mentioned uh fire and water and apparently bleeding you to death is not a good idea I thought I always thought you can get the demons out in that way, but Um, that was a recent Invention. So what what's this thing? We're doing here? I think what distinguishes uh human beings from all the other creatures on the earth is is Our ability to engineer We're 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 that was a big leap forward uh harnessing the power of of kinetic energy and missiles another another step forward Every city built on water. Why water? Well water is bringing energy right if you actually If you actually put a turbine, you know on a river or are you uh, Or you capture a change in elevation of water. You've literally harnessed gravitational energy Energy, but you know water is also bringing you food. It's also giving you you know A cheap form of uh getting rid of your waste. 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 um and and uh The the rise in the human condition is determined by those Uh 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 aqueducts 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 the form of uh Air power, right? I mean that ship I mean look at the intricacy of those sails I mean, it's just the model is intricate now think about all of the experimentation that took place to figure out how many sails to put on that ship and how to rig them and how to repair them and How to operate them It's thousands of lives Spent thinking through all the tiny little details All to increase the efficiency of this the effectiveness the efficiency of this ship As it sails through water and we should also note there's a bunch of cannons on the side. So obviously another form of engineering right energy harnessing with Explosives to achieve what end that's another discussion exactly I suppose 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 we're ultimately tend towards cooperation. We want to 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 palette Effect it's one that's full of just Immeasurable human suffering but it's like a way to start over We're clearly apex predator on the planet And I googled something the other day, you know, what's the most common form of mammal? life on earth By by number of organisms count by count and the answer that came back was I was shocked. I couldn't believe it right 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 almost didn't believe it but I was trying to you know, eight billion or so human beings So there's no other mammal that's got more than eight billion If you walk through downtown edinburgh and scotland and you look up on this hill and this castle up on the hill You know, it's it's a it's a it's a it's a it's a it's a it's a it's a hill You know and you talk to people and the story is oh, yeah Well, that was uh, that was a british castle before it's a scottish castle before it was a pic castle before as a roman castle Before it was, you know Some other celtic castle before you know, then they found 13 prehistoric castles buried one under the other under the other And you get to you get to conclusion that a hundred thousand years ago Somebody showed up and grabbed the high point the apex of the city And they built a stronghold there And they flourished and their family flourished and their tribe flourished until someone came along and knocked them off the hill and it's been a non-stop never-ending fight by the the aggressive most powerful 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 and you think it seems like it's like just this never-ending But doesn't that lead 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 fist and someone with a bow and arrow is more powerful than the person with the spear and Then you realize that somebody with 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 and blast you to smithereens right there You know you study the history of the belaric sling You know, you think we invented bullets, but they 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 uh when humanity wasn't vying To come up with an asymmetric form of projecting their own power via technology An absolute power is when a leader is able to control a large amount Of humans they're facing the same direction Working in the same direction to leverage Energy the most organized society wins Yeah, when the romans were were Dominating everybody they were the most organized civilization in europe As long as they stayed organized they they dominated and at some point they over expanded and got disorganized and they collapsed And uh, I guess you could say that, you know the struggle of 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 and you get a lot of Power right gets penalized you reject artillery you get penalized you reject atomic power you get penalized If you reject digital power cyber power you get penalized And uh and the the underlying control of the property keeps shifting hands from You know one institution or one government to another based upon how rationally they're able to channel that energy Energy and how well organized or coordinated they are. Well, that's a really interesting thing about both 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 uh, whether that's emergent or however that evolved 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 then we get complacent We take over the world using that new idea and then the the new young person with the better new idea Uh challenges you and you uh as opposed to pivoting you stick with the old and lose because of it And that's how empires collapse and they just both at the individual level that happens when two academics fighting about ideas or something like that and at the uh At the human civilization level governments, they hold on to the ideas of old It's fascinating Yeah, an ever persistent Theme in the history of science is the paradigm shifts and the paradigms shift when the old guard dies and a new generation arrives or the paradigm shifts when there's a 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 has a rude awakening and if they totally disagree their society collapses and they're replaced by that new thing A lot of the engineering you talked about had to do with ships and cannons And leveraging water. What about this whole digital thing that's happening been happening over the past century Is that still engineering in your mind? You're starting to operate in these bits of information I think there's two big ideas The first wave of ideas were digital information and that was the internet way been running since 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 uh is an incredibly like exothermic Transaction it gives it's a crystallization When we collapse into a lower energy state as a civilization and 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? Eight billion people right? Right? That's that's the explosion in prosperity that comes from digital transformation And uh 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 ram mcnally atlas right here? It's like it's like a million times better. Yeah, 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 fifth symphony Played for by the best orchestra in 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 of the human race are first order generally good 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 you mind i'm sorry to interrupt but that first wave um It feels like the impact that's positive That's positive. You said the first order impact is generally positive. It feels like it's positive in a way that nothing else in history Has been positive And then we may not actually truly uh be able to understand the orders and magnitude of increase in productivity in just progress of human civilization Until we look back centuries from now it just feel or maybe i'm like that just like 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 would say if you're a If you're a technologist Philosopher The impact of a technology is so much greater on the civilization and the human condition than A non-technology that is almost not worth your trouble to bother trying to fix things a conventional way. So let's take example I have a foundation the sailor academy and the sailor academy gives away a Free education free college education to anybody on earth that wants it And we've had more than a million students And if you go when you take the physics class The lectures were by the same physics lecturer that taught me physics at mit Except 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 Yes, I went on scholarship. I was lucky to have a scholarship but on the other hand I sat in the back of Of the 801 lecture hall and I was 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 synchronously and the stuff we upload you can start it and stop it and watch it on your ipad or watch it on your Computer and rewind it multiple times and 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 postgraduate 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 biology or propulsion or material science or computer science You're not doing that with an undergraduate degree. You're certainly not doing it with a 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 that if you check it out There's 8 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 I mean your life is interviewing these experts and There's so many Right, you know, it's it's it's amazing. So how do I give? A multi-million dollar education to a billion people and there's two choices You can either endow a scholarship in which case you pay seventy five thousand dollars a year Okay, seventy five thou let's pay a million dollars and 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 at certain problems Yeah, you don't solve the problem Right if I if I put 10 trillion dollars on the table and I said educate everybody give them all a phd You still wouldn't solve the problem harvard university can't educate 18 000 people Simultaneously or 87 000 or 800 000 or 8 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, um 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 one or five or ten really good algebra teachers And they need to do it a billion times a day or a billion times a year for free And if we do that There's no reason why you can't give infinite education Certainly in uh in science technology engineering and math, right? infinite education to everybody With no constraint and I I think the same is true, right with just about every other thing you if you want to Bring joy to the world. You need digital music if you want to bring, you know enlightenment to the world you need digital education if 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 A hundred times more efficiently as a start but a million times more efficiently Is is probably Optimistic, you know, that's that's hopeful. Maybe you have a chance and If you look at all of these uh space endeavors and everything We're thinking about getting to mars getting off the planet getting to other worlds 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 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 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 a seminal contribution To the body of human knowledge. There's certain problems like education that could be solved through 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 500 000 teachers Probably had days and 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 what you could solve potentially is Dematerializing the human brain where you can transfer transfer 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 Specialists 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 you 11 cents worth of electricity and you don't have to row You know row a boat eight hours a day before you can eat, right? Yes 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 could 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 in 1900 1900 you could have got any number of learned Academics to give you 10 000 reasons why humans will never fly Right and in 1903 the wright brothers flew and by 1969 we're walking on the moon so the advance 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 um And that's the 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 uh, gulfstream aircraft. We had boeing 737s We had the 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. Yeah, right what we slammed into a brick wall around 69 to 75 like in fact, uh You know the global express the gulfstream. These were all engineered in the 70s Some in the 60s that the actual that the actual the fuselage, uh silhouette of a gulfstream of a g5 was the same shape as a 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 when they finally decided to change the shape it was like a 10 billion dollar exercise with modern supercomputers and computational fluid dynamics Why was it so hard? What was? What is what is that wall made of that you slammed into the right question? Is so why does a guy that went to mit that got an aeronautical engineering degree spend 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 Maybe software engineering is the new aeronautical engineering in some way Maybe like maybe you hit fundamental walls in certain until you have to return to it centuries later Or no, 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? You can create without aluminum nothing nothing right so it's a material so it's a materialist problem. Okay, so 1900 we we made massive advances in metallurgy, right? I mean that was that was us 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 like 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 the last big advance in like jet engines There hasn't been one Like there has the last big advance in rocket engines Hasn't been one the big advances in spaceship design from what I can see are in the control systems The the gyros and the ability to land Right in a stable fashion. That's pretty amazing landing a rocket also in the I guess according to Elon and so on the manufacturer of the more efficient and Less expensive manufacturer of rockets. So like it's a production whatever that you call that discipline of At scale manufacture at scale production. So factory work, but it's not 10x 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 in your water bottle for a year Yeah, right now then you've got a breakthrough. So the bottom line is propulsion propellant propulsion technology uh propellants and the materials technology Technology they were critical to getting on that aviation s-curve and then we slammed into a wall in 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 Equivalent to the internal combustion engine was the cpu and the next aluminum equivalent 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 Right in the last 40 years where we'd be right now, right? so So I I think that if you're if you're a business person if you're looking for commercially viable application of your mind Then you have to find that s-curve and ideally You you have to find it in the first five six ten years But people always miss this. Let's let's take google glass Right google glass was a idea 2013 2013 the year is 2022 And people were quite sure this was going to be a big thing, but it could have been At the at the beginning of the s-curve, but fundamentally We didn't really have an effective mechanism. I mean people getting vertigo and there you didn't know that at the beginning Right. I mean, maybe some people had a deep intuition about the fundamentals of augmented reality But you don't know that you don't have those. Uh, you're looking through the fog. You don't know So the point is we're year zero in 2013 and we're still year zero in 2022 On that augmented reality and when somebody puts out a set of glasses That you can wear comfortably without getting vertigo right, uh without any Disorientation that managed to have 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 this is the story of a lot of things right? I mean john d rockefeller got in the oil business in the 1860s 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 to fracking and Which was like 70 years later and then it burst forward so the interesting story about moore's law though is that you get this like Constant burst of s curves on top of s curves on top of s curve. It's like the moment you start slowing down Or almost ahead of you slowing down you come up with another innovation another innovation So 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 pressures there are that resulted in such success over several decades and still going Humility dictates that nobody knows when the s curve kicks off and you could be 20 years early or 100 years early Leonardo da vinci, 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 uh, when will the party stop when will moore's law stop and we'll get to the point where they're 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 say the components are the radio protocols mobile protocols the uh, 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 continued to advance They created a very fertile environment for all these digital transformations and um the digital transformations themselves Right they they call for creativity in their own right like like I think the the interesting thing about Let's take uh 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, uh, if you read played dungeons and dragons and you read lord of the rings and you you studied all the fantasy literature because Because when I dematerialize the map First I put 10 million pages of satellite imagery into the map, right? That's a simple physical transform But then I start to put telemetry Into 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 restaurant's closed 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 Yeah, and and how did you get to that last step right? It wasn't simple Engineering there's a bit of fantasy in there a bit of magic design art, whatever the heck you call it It's whatever. Yeah, yeah fantasy injects magic into the engineering process like imagination Like precedes Great revolutions in engineering. It's like imagining a world like Of what you can do with the display. How will the 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 moan shot. They tried it didn't work. But to their credit they stopped trying right? Oh, and then there's new people they keep dreaming. There's dreamers all about all around us I love those dreamers and most of them fail and suffer because of it, but Some of them win win nobel prizes or become billionaires but what I would say is If half the civilization Dropped what they were doing tomorrow And eagerly started working On launching a rocket to alpha centauri it might not be the best use of our resources because It's 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 till you get to aluminum and you're not going to get to aluminum till 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 that 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 you might be better off to work on the aqueduct Or to focus upon sales or something. So if if I look at this today, I say There's massive profound Environment civilization advances 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? It's 10 years old what we've been seeing We're we're living through different manifestations of that story today too, though like social media Uh that the effects of that is very interesting because ideas spread even you talk about velocity of money the velocity of ideas Is keeps increasing. Yeah, so like wikipedia is a passive store. It's a store of knowledge twitter is like a uh it's like a Water hose or something. It's like spraying you 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 Ability for misinformation for propaganda to take hold so we get to learn about ourselves We get to learn about the technology that 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 and 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's extraordinarily lucrative that's going to generate a monetary or a wealth increase is a way to increase the net energy in the civilization and ultimately If we had 10 times as much of everything we'd have a lot more free resources to pursue all of our advanced scientific and mathematical and theoretical endeavors So let's take twitter Right twitter something that could be 10 times more valuable than it is, right? Twitter's twitter could be made 10 times better Oh, by the way, I should say that people should follow you on twitter. Your twitter account is awesome. Thank you It could be made 10 times better. Yeah. Yeah, twitter can be made 10 times better. Uh, if we take 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? Uh breakthrough in materials or technology to do that the 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 actually met those requirements They could provide a hundred x as much education for one one hundredth of the cost and they could do it with no new technology that's a a marketing and political Challenge, so I don't think every objective Every objective Is equally practical and I think the benefit of being an engineer or or thinking about uh, practical achievements is When the government pursues an impractical objective or when anybody an entrepreneur Not so bad with entrepreneur because they don't have that much money to waste when a government pursues an impractical objective They squander trillions and trillions of dollars and achieve nothing Whereas if they uh pursue a practical objective or if the or 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 profound impact on the human civilization and if I if I look at The world we're in today I think that there there are Multi-trillion 10 20 50 trillion dollars worth of opportunities in the digital information realm yet to be obtained um But there's hundreds of trillions of dollars of opportunities in the digital energy realm that Not only are they not obtained 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 in every every respect so you mentioned in the digital world digital information Information is one digital energy is two 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 He had 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 for you know ashes to ashes dust to dust I can turn a tree into light. I can turn light back into a tree If if I consider the entire universe and it's very important because we don't really think this way. Let's take the new york disco model What if I walk into a nightclub and there's loud music blaring in new york city? What's really going on there? Right, if if you blast out 15 14 billion years ago, the universe is formed. Okay, that's a low frequency thing the universe Is four and a half billion years ago the sun maybe the earth are formed The continents are 400 million years old the schist that new york city is on is some hundreds of millions of years But the hudson river is only 20 000 years There's a building that's probably 50 years old. There's a company operating that disco or that that club Which is five to ten years old And there's a person a customer walking in there for an experience for a few hours There's music That's uh oscillating at some kilohertz and then there's light right 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 is a question of at what frequency do you want to perceive the world? and um I I think that once you start to think that way you you're catalyzed to think about what would digital energy look like and and Why would I want it? and um 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 linger on that? bitcoin is uh, it's a Uh, so it's digital asset that has monetary value What is a digital asset? What is monetary? Why use those terms versus the words of money and and currency? Is there something interesting in that disambiguation of different terms? I would call it 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 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 a decentralized proof of work network right satoshi's solution was I'm going to establish protocol running on a distributed set of computers That will maintain a constant supply of never more than 21 million bitcoin Subdividable by a hundred million satoshis each transferable via transferring private keys now the innovation is uh to create that in a Ethical Durable fashion, right? The the ethical innovation is I want it to be property and not a security Property and not a security a bushel of corn an 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 commodity is 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 u.s You have a barrel of oil Right, and it doesn't matter what the premier in in japan Or the mayor of miami beach thinks about your barrel They cannot wave 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 and sorry to I may interrupt occasionally Why 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 is 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 pursuant to fair disclosures So, uh, I'll give you maybe practical example Um the mayor of chicago. I give a speech my speech I say 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. Well at that point you've entered into a conflict of interest because what you're doing is you're promoting um 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 president of the united states said I really think americans should all buy apple stock You would you know, especially if you work to google or but you worked anywhere you'd be like, why isn't he saying buy mine? Right a security is um Is a proprietary asset in some way shape or form That 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 uh, i'm going to say that i'm going to say that i'm going to say that If uh, i'm going to sell you securities or i'm going to promote securities as a 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 and everybody buys mikey coin and then I give 10 million to you and don't tell the public right i've cheated them Maybe if if I have mikey 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 kid's gonna die And I have this ethical reason to print 500 000 more mikey coin or else people are gonna die and everybody 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 um ethics laws Um everywhere in the world Uh, they all boil down to having a clause which says that if you're a public figure you can't endorse Any a security you can't endorse something that would cause you to have a conflict of interest So if you're a mayor 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 security 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, uh, 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 protocol If it's not open, right if it's proprietary and I know what the code is Open right if it's 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 uh If it's uh 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 um so so when I talk about uh 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 a non-sovereign bearer instrument open permissionless not censorable 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 of that property Irregardless of the opinion of any politician or any company or anybody else in the world uh 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 uh 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 due influence to make it successful so open permissionless non-censorable 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 a barrel of oil. Um, what's the difference between a barrel of oil and a bitcoin? to you what is the because you kind of Mentioned that both are property is uh, you mentioned russia and china and so on Is is it the ability of the government to confiscate? in the end governments can probably confiscate no matter what the asset is, but you want to lessen the um effort involved a barrel oil is a bucket of physical property liquid property and 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 than things in cyberspace Much easier. So that's not universally true. Some things in the digital space are actually easier to confiscate because um 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 that bitcoin is the most difficult property That the human race possesses or has yet invented to confiscate Right, 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 means that it's harder than every other thing you might own if you in 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 right anything imaginable They would all be easier by orders and orders of magnitude to seize so that so digital property in the form of a you know, a 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 network 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, I think the same about micro strategy stock mstr That's a 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 micro strategy stock whereas 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 42 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 and your life ends and 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 Lex, I think you ought to get a farm I think you should be a farmer. I think a chicken in every pot. You should get a horse I think you'd be better. I mean, these are all uh, they're all um 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 don't 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 legally sell this stuff to the general public or promote it 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 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 or in china, right? It's not even legal 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 a hundred trillion dollars worth of economic value on twitter stock if there's a board of directors and a Ceo that could just get up and like take half of it tomorrow the answer is no So if you want to if you want to build a better world based on digital energy You need to start with constructing a digital property and i'm using property here and open permissionless in the 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 The million dollars of economic energy into a structure called a house Maybe and 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. The frequency means what here? Uh how quickly It changes state how quickly does something vibrate? so If uh, if I transfer ten dollars from me to you for a drink And then you turn around and 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 um Of a of a transaction in real estate is every 10 years every five years. It's much lower frequency transaction and um So when you think about uh, what's going on here you have extremely low frequency things Which we'll call property then you have mid frequency Things i'm going to call them money or currency And then you have high frequency And 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 energy 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 It's easy to create something digital Right every coupon and every skin on fortnite and roblox and and apple tv credits and all these things They're all digital something but they're securities Right chairs of stock are securities whenever anybody Transfers when you transfer money on paypal or apple pay you're transferring in essence a security or an iou you and so transferring a bearer instrument with final settlement in in the internet domain or in cyberspace That's a critical thing and and Anybody in the crypto world can do that? All the cryptos can do that. But what they can't do what 99% of them fail to do is be property They're securities. Well, there's a line there. I'd like to explore a little further for example uh What about when you? Like coinbase or something like that when there's an exchange that you buy bitcoin is uh 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 um Nonsensical 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 Other places that remove the aspects of property. So I mean maybe you can comment on that Let me give you a good model for that If you think about the layer one of bitcoin The layer one is is the property settlement layer and we're we're going to do 350 000 transactions or less a day 100 million transactions a year is the bandwidth on the layer one and It would be an ideal layer one to move a billion dollars from point a to point b with the 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 I can move With security I can move any amount of bitcoin in a matter of minutes for dollars on layer one The 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 uh, and that's That's what we want to solve with layer one and and the best real metaphor in new york city would be the the granite or the schist What you want is a city block of a 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 Yeah, in fact the single thing that's most important is that it not deflect If it deflects a foot in a hundred years, it's too much if it deflects an inch in a hundred years You might not want that So the layer one of bitcoin is a foundation upon which you put weight. How much weight can you put on it? You put a trillion ten trillion a hundred trillion a quadrillion How much weights on on the bedrock and in 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 100 trillion dollar layer one that would stand for a hundred years. That is the revolutionary breakthrough First time and the fact that it's ethical right it's ethical and it's common property global permissionless Extremely unlikely that would happen People tried 50 times before and they all failed they tried 15 000 times after and they've all been They've all generally failed 98 have failed and a couple have like been less successful, but for the most part That's an extraordinary thing now just really quickly pause just to define some terms if you people don't know layer one is uh that michael's referring to is in general what people know of as the bitcoin technology originally Defined which is the blockchain. There's a consensus mechanism of proof of work a low number of transactions, but you can move a very large amount of money The reason he's using the term layer one is now that there's a lot of ideas that are coming out of bitcoin The reason he's using the term layer one is now that there's a lot of ideas of layer two technologies built on top of this bedrock That allow you to move a much larger number of transactions So sort of uh Higher frequency. I don't know how what terminology I want to use but basically be able to use now something that is based on bitcoin to then Uh buy stuff be a consumer to transfer money to use it as currency Um, just to define some terms Yeah So the layer one is the foundation for the entire cyber economy and um We don't want it to move fast what we want what we want is is immortality incorrupt immortal incorruptible indestructible indestructible Right that that's what you want integrity from the layer one Now there's layer two and layer three and layer two I would define as an open permissionless non-custodial protocol That uses uh the underlying layer one token as its as its gas fee So what's custodial mean and how does the different markets like is lightning network? So lightning network would be an example of a layer two non-custodial So the lightning network will sit on top of uh of layer one. It'll sit on top of bitcoin and it solves the What you want to do is solve the problem of It's 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 it's kind of simple if I if I put If I lower my security requirement by a factor of a million I could probably move the stuff a million times faster, right? And that's how lightning works It's non-custodial because there is no there's no corporation or custodian or counterparty you're trusting Right. There's a there's the risk of moving through the channel but um Lightning is an example of how I go from 350 000 transactions a day 300 000 transactions a day to 350 million transactions a day So on that layer two 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 um and in theory Any any other crypto network that was deemed to be property deemed to be Non-security you would all you could also think of as potentially a layer two to bitcoin Right. There's a debate about are there any and what are they and and we can leave that for a later time But why do you think of them as layer two as opposed to contending? for layer one Yeah, actually if they're using their own token Mm-hmm, then they are layer one if you create an open protocol that uses the bitcoin token as the as the fee I got then it becomes a layer two. Okay, right Bitcoin itself right incentivizes his own transactions with its own token and that's what makes it layer one Okay, what's layer three then layer three is a custodial layer So if you want to move bitcoin in milliseconds for free You move it through binance or coinbase or cash app So this is a very straightforward thing I mean it seems pretty obvious when you think about it that there are going to be hundreds of thousands of layer threes There may be dozens of layer twos. There might I mean lightning is a one but it's not the only one anybody can invent something right and We can have this debate, uh about custodial non-custodial um Don't you think there's a monopoly monopolization possibilities at layer three so You know coin you mentioned binance coin coinbase what if they start to dominate and basically everybody is using them Practically speaking and then it becomes too costly to memorize the uh, the private key in your brain I mean or like a cold storage of layer one technology the idealist Fear the layer threes because they think and especially they detest They would detest a bit There's almost like a layer four by the way If you want to a layer four 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 it's a proprietary example and i'll give you an example of that. That would be like, um grayscale If I own a share of gbtc 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 To get out of the security market at layer four. Am I understanding this correctly? I don't know if I would say I don't not all securities are layer four, but but anything that's a proprietary Product based upon with bitcoin embedded in it where you can't withdraw the bitcoin Is another application of bitcoin? So if if you think about different ways you can use this You can either stay completely on the layer one and use the base chain for your transactions Or you can limit yourself to layer one and layer two lightning and the purist would say we stay there Get your bitcoin off the exchange But you could also go to the layer three when cash app, uh supported bitcoin They made it very easy to buy it and then they gave you the bill to withdraw When paypal or I think robinhood let you buy it Let you buy it they wouldn't let you withdraw it and there was a big community uproar and people want They want these layer threes to 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 is 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 Yeah, 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 let 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 if you had bonds and sovereign debt with fidelity if you own some some You know mutual funds and some other random limited partnerships with fidelity None of those things can be removed from the custodian, but the bitcoin you can take off, uh the exchange you can remove from the custodian, so So, uh 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 assets 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 counter party 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 Optionality with any other form of property on earth. And so what what makes digital property distinct? Is the fact that it 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 threes It moves in seconds or less than seconds on layer twos. It moves in minutes on the layer one 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 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 the new york model, you really wanted a block of granite a building and a company That's what makes the economy Right if you said 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 a hundred 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 well It's it's got to be this l1 or that l1 not really and sometimes people think well, I don't really want any l3 but companies It's not an even or companies are better than uh 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? uh, we know 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 Decentralize certain forms of banking and insurance because they will become illegal in the political jurisdiction of their end So unless you're a crypto anarchist and you believe in no companies and no nation states right 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 uh, that's let you acquire bitcoin and withdraw bitcoin Mm-hmm. There are there are other applications to let you acquire but not withdraw it And and they're 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 uh Into cash app so that makes it more that makes it advantageous versus uh an application that doesn't incorporate lightning if you think about The big picture the big picture is eight billion people with mobile phones served by a hundred million companies doing billions of transactions an hour 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 uh proprietary layers like layer three and then on occasion people are shuffling assets across custodians with lightning layer two Because you don't want to pay five dollars to move fifty dollars. You want to pay a a twentieth of a penny to move fifty dollars and so All of these things create efficiency in the economy And lex if you want to consider how much efficiency If 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, no amount of money. Give me 10 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 level because because You know, you wouldn't be able to implement a system that interfaced with somebody else's system if it's not in the right political jurisdiction on the other hand three entrepreneurs in 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 want to 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 in this most Difficult of states the 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 bitcoin's a universal trust protocol, right a universal energy protocol if you will English is one. Okay. Um, what I see is a bunch of fragmentation of applications For example, you know the russian payment app is not going to work in ukraine, right? The ukraine payment app is not going to work in russia The you know us payment apps won't work either of those places as far as I know so You know and and argentina their payment app may not work in certain parts of africa You know and and argentina their payment app may not work in certain parts of africa. So what you have is Is a different local economies where people spin up their own applications compliant with their own local laws or you know in in war zones not compliant, but just Just spinning up, you know, so 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 free yourself from the constraint. So here's the thing The when a nation is really at war Is it's the the especially if it's an authoritarian regime? It's going to try to control the pipe like 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 the flow of money Outside the legal constraints placed on you by the government. So basically break the law um Is that metaphorically speaking if you want to break out of the constraints of your culture you learn to speak english For example, it's not illegal to speak english or and even if it is right doesn't matter But but english works everywhere in the world if you can speak it and then you can tap into a global 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 manner you can because the problem is it's still very difficult to move bitcoin around in russia and ukraine now doing war and there was a 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 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 very embryonic here 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 the and the human race's Race is adoption of it is embryonic. We're like one two percent down that adoption curve If you take lightning for example the you know, the first real commercial applications of lightning are just in the last 12 months Yeah, so we're like year one. We we might be approaching year two of commercial lightning adoption. And if you look at lightning adoption lightning is not built into Coinbase is not built into binance is not built into ftx It'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 wallets circulating out there So I think that you know, we're probably going to be 36 months of software development at the point that um every android phone and every iphone has um Has a bitcoin wallet or a crypto wallet in it of sorts That's a big deal if if apple embraced lightning that's a big deal So the adoption is the thing like in a war zone adoption um, the people who struggle the most in war are people who are Weren't doing that great before the war started. They don't have the technological sophistication The hackers and all those kinds of people will 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 in this layer three 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 this 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 that 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 To eight billion people on the planet That's the same as asking the question How do you give a full education? Through phd to eight billion people on the planet And the answer is a 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 for everybody on earth So I think when jack looks at it, he's very sensitive to the plight of everybody in africa If you look at africans, right like you're going to give them banks, you're not going to put a bank branch on every corner That's an 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 a decent life That the metaphor I think is is relevant here. The biological metaphor lex is uh type one diabetic Uh, 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 you can't form fat 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 a an organic battery or an economic battery to civilization it 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 I yeah, I pay you your money you take your life savings you put it in the 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 or I use it to buy weapons And then you find a loaf of bread cost triple next month is what it costs and your life savings is worthless And so in that environment Everybody'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 points it at your head And just takes your life savings. So So I think from jack's point of view he thinks that life is This is maybe too strong. But I these are my words life is hopeless for a lot of people And bitcoin is hope Right because because it gives everyone um 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 counter party 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 to trade cross borders Is so great, right? Yeah, like uh I you know, you like ai so i'll give you a beautiful notion Maybe one day there'll be an artificially intelligent creature in cyberspace That is self-sufficient and rich Like that we would have sovereignty you mean can a robot Own money or property How about can a tesla car? Can I actually put enough enough money in a car for it to drive itself and maintain itself forever? Or can I create an artificially intelligent creature in cyberspace that is endowed? Such that it would live a thousand years and continue to do so 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 go on in perpetuity But what if I wanted to perpetuate? a software program and With uh with something like digital property with bitcoin and lightning you could do it and on the other hand With uh banks and credit cards You couldn't Right You couldn't ever so so you can create things that are beautiful and lasting uh 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 trade with a few million people in the world after it takes them six months of application the impedance Is like a 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, right? Putting putting freedom in orbit and and he said it many times And he said it many times. He 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 a hundred? Kilohertz and the answer is only If it's a pure digital construct Mm-hmm permissionless and open And so I think he that he's enthusiastic as the technologist and he's enthusiastic as the humanitarian And what he's doing Is to support both those areas. He's supporting the bitcoin and the lightning protocol by building them into his products, 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 And they're related And I should also say he's just a fascinating person. I 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 was 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 directly as a 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 web3 and the beef between Jack and Mark Andreessen is exactly? Did you see what happened? sorry to have you analyze Twitter like it's Shakespeare, but Can you please explain to me why why there is any any drama over this topic? first of all web3 is a term that's used to refer to You know the part of the economy that's that's token finance So if I'm launching an application and my idea is to is to create a token along with the application And issue 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 web3 there are other interpretations too and rain so I'm just gonna refer to that one and I think the beef In a nutshell not articulated, but I'll 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 gonna put on my Bitcoin hat here Yeah, right all the tokens that are being if it's driven by a venture capitalist Well, it's a security if there's a CEO and a CTO. It's a security all these projects. They're companies Foundations or companies 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 if there's a pre mine an IPO an ICO a foundation or any kind of Any kind of Protocol where there is a a group of engineers that have influence over it then to a securities lawyer or You know to most Bitcoiners and definitely to anybody that's steeped in securities law you look and say well that passes the Howey test It's 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 well, the the ethical issue is if You're trading 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, you're you keep leaning on this let me push back on that part maybe you can educate me, but you keep leaning on this line of securities law as if it with all due respect to lawyers as As if that line somehow defines what it what is and isn't ethical. I think there's a lot of Correlation as you've discussed, but and I'd like to leave the line aside I if the law calls something as a security doesn't mean in my eyes that it 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 there's a project lead that's fundamentally Well that that to you is fundamentally different than the the structure of Bitcoin It's not that creating securities is unethical. I I created security. I took a company public right that that's not the unethical part It's completely ethical to create securities, you know block is a security all companies are security 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 whole promotion. That's also a technical thing because you're Like what counts is not as promotion 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 right to promote and not you know To me propaganda is unethical, but it's usually not illegal If you're all caught back 20 years Right all the boiler room pump and dump schemes were all about someone pitching a penny stock. Sure, you know selling Swampland in Florida and and if you roll the clock back forward 20 years and I create my own Company and I represent it 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 that maybe We could forget about whether the security laws are ethical or not, right? I will leave that alone 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 right we need we need at least one digital property What is because zero 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 that's not the point. I'm gonna make I would say we know there is it as there is at least one digital property And that is Bitcoin If you can create a truly decentralized non-custodial You know bearer instrument That is not under the control of any organization That is fairly distributed, you know, 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 create competitive things is a massive waste of time and its diversion of human Human creativity, it's like we have an ethical good thing Yeah, 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 talked about properties and securities. Let's talk about conflict of interest So you said you could advertise public you have a popular Twitter account 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 it 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 a proprietary security a security in general is a 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 say micro strategy stock will go up forever Right. I'm not promoting a security MST are Because at the end of the day MST are is a security it is proprietary. I have proprietary interest in it. I have a disproportionate amount of control and influence on the direction The controls the problem the controls the problem because you have interest in both You can very if Bitcoin is a successful as we're talking about You are very possibly can become the richest human on earth Given how much you own in Bitcoin, right the wealthiest not the richest. I don't know what those words mean I I would benefit economically economic you would benefit economically. That's true so the the reason that's not conflict of interest is because the word property Bitcoin is an idea and It's because I don't open it. You know, I don't control it In essence that the the ethical line here is Could I print myself 10 million more Bitcoin or not? Right? I Can anyone right? It's not just you it's a can can anyone Because can you promote somebody else's? Yes, I guess you can Like if you can you promote us? Apple I think 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? You're not gonna get wealthier if you promote camping Because you can't own a staking. I mean You own a lot of Bitcoin. What is that? What is that? What is the game? Don't you own the 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 you're a fan of the idea You believe in the idea and the power of the idea Yeah, I think you can't take that idea away from others Let's come back to let me give you some maybe 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 coin, you know When they when they get their next stripe and then I'm gonna give you you know I'm gonna 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 yeah, if the head of the Marine Corps started promoting anything that looked like a security Now if the head of the Marine Corps started promoting canoeing You might think he's kind of wacky like maybe like that's kind of a waste of time and distraction so but but but to the extent that Canoeing is not a security not a problem unless you you know Ultimately the issue of decentralization is really a critical not having a head one. So is it something? Can Bitcoin be replicated? be replicated So the all the things that you're saying that make it a property can that 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 if you try to replicate a project Is that the fundamental flaw? I I look I think the real fundamental issue is you just never want it to change like like If you really want something decentralized you want Genetic template that substantially is not going to change for a thousand years So I think Satoshi said at one point he said the nature of the software is such that by version point one 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 the issue of who's influencing That changes. Yeah, so what you really want is Is a very very simple idea right the simplest idea I'm just going to keep track of who owns 21 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 threes because now cash app 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 to a given entity and you're trusting the Counterparty you're gonna promote the layer 1 or at most the layer 2 Okay, so one of the fascinating things About Bitcoin and sorry to romanticize certain notions, but Satoshi Nakamoto that the founders anonymous Maybe you can speak to whether that's useful But also I just like the psychology of that to imagine that there's a human being that was able to create something special and walk away So first are you Satoshi Nakamoto? I'm certain I'm not No, I actually I you know, I think the provenance is really important and if I were to look at the highlighted points, I think Having a founder that was anonymous or sit anonymous is important. I think the founder disappearing is also important I think that the fact that the Satoshi coins never moved is also important. I Think the 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. You know, I I think that The simplicity of the protocol And is very important. 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 in Disha indicators of a digital property as opposed to security if there was a Satoshi sitting around sitting on top of 50 billion dollars worth of Bitcoin it would I don't think it would Cripple Bitcoin as property, but I think it would undermine Its digital property and I if I wanted to undermine a crypto asset network I would do the opposite of all those things. I would launch one myself I would sell 25% or 50% of the general public I would keep some of the initial I would pre mine some stuff or early mine it, you know And I would keep an influence on it Those are all the opposite of what you would 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 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 I mean just so fascinating to me that one person could be so brave and Thoughtful or do you think a lot of his accident like the block size wars the decision to make a block a certain size? All 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 We'll try it for they tried 40 of them, right? I mean, I 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 sparked and 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 that characterizes it's fair All right, the whole point of the network is it's a fair launch a fair distribution Like yeah, I have Bitcoin, but I bought it In fact, I you know at this point we've paid four billion dollars of you real cash to buy it if if I was sitting on the same position and I had it for free Then there's always this question of did I pay you know? I bought it for a nickel a coin or a penny a coin The question is wasn't 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 clock 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 and 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 ten 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 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 you know, a lot of sound and fury along the way. How do you psychoanalyze? 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 into this entire Activity, I think the risk has never been lower if you look at all the risks right the risk the risks in the early years are Is the engineering protocol proper like one megabyte block size ten minute clock frequency? Cryptography is first will it be hacked or will it crash? Mm-hmm. Seven hundred 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 interesting a target as it is with a hundred billion and when it gets to be worth a trillion Then it's a bigger target. So So the risk has been bleeding off over time as the network monetized I think the second question is will it be banned? You couldn't know it could literally could have been banned at any time many times early on in fact in 2013 I tweeted on that subject. I thought it would be banned. I Made very famed infamous tweet from this tweet. I thought it was it was gonna 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 as property and then the question is would it be hacked or what to be copied? Will it 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 their networks crashed 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 micro strategy 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 Tesla bought Bitcoin Square bought 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 the end of this quarter so you're looking at 36 publicly traded companies and you've got 50 at least in a range of 50 billion dollars on the balance of Bitcoin on the balance sheet of publicly traded companies and hundreds of billions of dollars of market cap Bitcoin exposed companies, so I would say the asset Decade one was entrepreneurial Experimental Decade two is a rotation from entrepreneurs to institutions and is becoming institutionalized So maybe decade one you go from zero to a trillion and a decade to you go from one trillion to a hundred trillion What about governments? Government adoption institutional adoption is our government's important in this maybe making it some governments incorporating it into as a currency into their banks All that kind of stuff. Is that important and if it is when when will it happen? It's not essential for the success of the asset class, but I think it's it's inevitable in 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 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 a big tech stock and 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 are opportunities for governments that are much more profound, right if a government started to adopt Bitcoin as a Treasury Reserve asset That's much bigger than just a an asset investment. That's a hundred 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 as well 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 that the relevant decision that any institution makes whether they're a non-profit and University a corporation or a government is what's your Treasury Reserve asset? 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 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 it 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 it'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 the sources of shock and And you wonder if there is a switch to Bitcoin whether it will be a bang or a whimper Like what is the nature of the shock of the transition? I think that The year 2022 is pretty catalytic For digital assets in general and for for Bitcoin in particular the Canadian trucker crisis I think educated hundreds of millions of people and And made them start questioning their property rights and their banks. I think the Ukraine war Was a second shock, but I think that the Russian sanctions was a third shock Yeah, I think all three of them and I I think hyperinflation And the rest of the world is a fourth shock and then persistent in 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 trust the bank and if I'm politically at odds with with The leader of my own country. I'm gonna lose my property and If I'm politically at odds with the owner of another country, I'm still gonna lose my property and When push comes to shove the banks will freeze my assets and seize 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 lira to the dollar I'm going to convert my weak property to strong property. I'm gonna sell my building downtown Moscow and I'd rather own a Building in New York City. I'd rather I'd rather own in a powerful nation than a Then be stuck with a building in Nigeria or a building in Argentina or whatever So I'm gonna sell my weak properties to buy strong properties. I'm gonna convert my physical assets to digital assets I'd rather own a digital building than own a physical building Because if I had a billion dollar building in Moscow, who can I rent that to? 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 gonna freeze your money convert it to lira devalue the lira and then feed it back to you over 17 years, right so self custody assets would be layer one Bitcoin self custody assets, it's like If I if I got my own hardware wallet and I've either got Your highest form of Your your highest form of self custody would be Bitcoin on your own hardware wallet or Bitcoin in 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 stable coin? on your mobile phone in dollars 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 in stable coins to 200 billion Yeah in the last 24 months. Yeah, so I do think there's massive demand for crypto dollars in the form of a US dollar asset and there's And everybody in the world would say yeah, I want 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 a Bitcoin price has gone through quite a roller coaster What do you think is the high point is gonna hit? I don't go forever. Right? I mean, I think the Bitcoin is is going to it's going to climb in a serpentine fashion It's going to advance and come back and it's going to keep It's gonna 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 500% 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 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 as Digital gold, you know the market cap goes to between 10 and 20 trillion but Gold is remember gold is is defective property gold is dead money You have a billion dollars of gold that sits in a 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 that doesn't generate much of a yield So for that reason most people wouldn't store a billion dollars for a decade in 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 an access of the maintenance cost. So if you consider digital property That's a hundred to two hundred trillion dollar Addressable market so I would think it you know It goes from ten trillion to a hundred trillion as people start to think of it as digital property What does that mean in terms of price? per coin at five hundred thousand Right, that's a ten trillion dollar asset at five million. That's a hundred trillion dollar asset Do you think it crosses a million it can go even higher? Yeah, I think it keeps going up forever I mean, there's a reason we're gonna go to ten million 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 to 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 a hundred trillion in bonds. There's 50 to 100 trillion in other currency derivatives and then and then and these are all conventional use cases, right? I I think that there's three hundred Fifty trillion to five hundred trillion dollars worth of currency currency derivatives in the world Mm-hmm 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 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 Lapse inflate which we call inflation or monetary expansion Monetary expansion. Can we switch? Subject to talk about the energy side of it like the the innovative piece Yeah, let's just start with this idea that I've got a hotel what the billion dollars with a thousand rooms Mm-hmm when it becomes a dematerialized hotel, I Love that word so much by the way, do you materialize? We're crossing the fountain below here. Imagine the fountain blow is dematerialized Yeah the problem with the physical hotel is I got to hire real 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 if 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 hour and I can rent it by the room minute and so I start to chop my hotel up into a hundred thousand room hours that 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 and 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 I tapped into the benefits of cyberspace. I Created a global property. I Started monetizing at 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 to digital property, it's not just a little bit better It's a lot better and what I just described Lex is like the DeFi Vision right? It's it's the beauty of DeFi 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 2 and layer 3 technologies on top of that, it's like Then maybe you can correct me if I'm wrong but for all these hotels and all these kinds of ideas it's always touching humans at some point and You know consumers or 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 to use pleasant Effective all those kinds of things so you have to build in a whole economy on top of that Yeah, I happen to think that won't be done by the crypto industry at all. I think that'll be done by centralized applications. I Think it'll be you know, the citadels of the world the high-speed traders of the world the New Yorkers I think I think it'll be Binance FTX and coinbase as a as a layer 3 Exchange that will give you the yield and will give you the loan and the best terms Because ultimately you have to jump these compliance hoops It's it comes in like block Phi 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 give you a loan on it or give you yield on it 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 flow to Singapore I can't send 10 city blocks of LA to Singapore to rent during a 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 is there second-order asset for example? Maybe you're an American citizen and you own 10 Bitcoin and someone in Singapore will generate 27% yield in the Bitcoin But legally you can't send the money to them or the Bitcoin to them It doesn't matter because the fact that that exists 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 u.s. 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 and cyberspace if there's only one Digital Manhattan, and so there's there's a dynamic there, which is profound because it's 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 maybe a more innovative idea the first generation of the 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 are full of garbage Your Twitter DMS are full of garbage YouTube is full of scams Every 15 minutes. There's a Michael Saylor Bitcoin giveaway spun up on YouTube. Yeah, my office 365 inbox It's full of garbage Millions of spam messages. I'm running four 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 you've been a victim of it and Twitter I'm you know, you go on Twitter and 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'd have to post a credit card and then if I smash the place up to be economic consequences Maybe to be criminal consequences There might be reputational consequences You know a lamp might fall on me, but in the worst case 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 anonymously, right 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 your 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 and all of these products 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 20,000 transactions a day Mm-hmm. So how do you do that? Well, um, I Let everybody on Twitter post a thousand or ten thousand Satoshi's via 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 an 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 I view have you ever applied for a blue check? No, there are 360 thousand people on Twitter with a blue check. There are 300 million people on Twitter Mm-hmm. So the conventional way to verify Accounts is elitist Archaic, yeah, how does it how does it work? How do you get blue check? I mean you got to apply and wait six months and you have to post, you know Like three articles in the public mainstream media that illustrates you're 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 who you are You say you are right, but the question is why isn't everybody verified? Right, and there's there's a couple of threads on that one is some people don't want to be doxed. They want to be anonymous here But but they're even anonymous people that should be verified because otherwise You're you're subjecting their entire following to phishing attacks and scams and and hostility But the other the other what's the orange of verification? So the the this idea can you actually elaborate a little bit more if you put up 20 bucks? Yeah, I think everybody on Twitter ought to be able get an orange check if they could come up with like $10 And what is the power of that orange check? What what does 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 $10 once in your life you can basically show that you're creditworthy and That's your pledge to me that you're gonna act responsibly. So You put the 10 or the $20 into the lightning wallet you get an orange check Then Twitter just gives you a setting where I can say the only people who could DM me 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 $10 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 ninety seven hundred 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 of your life They just spent up another 97 kazillion because they've got a Python script spinning 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 hat they could just seize the $10 or seize the $20 because it's a bot It's it's a malicious criminal act or whatever it via as a violation of 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 I can to the kind of friction you have in the physical world. You're tying you have consequences You have real consequences putting concert conservation of energy conservation of energy. There's no friction. There's no nothing on this earth Right. I mean you can't walk across the room without friction, right? So the friction is not bad right on unnecessary friction is bad So in this particular case you're introducing consequences 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 spend up 10 million fakes fake less Freedman's Right, it's gonna cost you a hundred million dollars to spend up 10 million fake Lexus 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 a bit more if You did do it with the dollar then the question is how does six billion people deposit the dollars? Right because what you're doing is yeah, could you do it with a credit card? Like how do you send dollars? Well, you have to dock yourself Like I it's not easy. So you're talking about inputting 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 Credit, you know 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 a $20 deposit and maybe you could do a kluge version of this for a subset of people It's like it's 10% as 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 solve 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 or with a trusted credential, but that's That's a pretty draconian thing or I could put it behind a lightning wall a Lightning wall would be you know, I just challenge you Lex you want to browse my website You have to show me your hundred thousand Satoshi's. Do you have a hundred thousand Satoshi's? Click. Okay. Now you click away a hundred times or a thousand times and after a thousand times, you know Okay. Well now Lex you're getting offensive. I'm gonna take a Satoshi from you or ten Satoshi's a Microtransaction you want to hit me a million times. I'm taking all your Satoshi's and locking you out What what you want to do is you want to go through 200 websites a day? 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 state 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 40 times and it's gone Yeah, it's gone. Yeah. Yes, you can't do this kind of hopping around through the internet with this kind of Verification that grounds you to a physical reality. 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 in 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 Saylor you said before There's no second best to Bitcoin What would be the second best traditionally? There's a theorem with smart contracts card on with proof-of-stake polka-dot with Interoperability between blockchains dogecoin has the incredible power of the meme Privacy with Monero I just can 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 decompose or segment the crypto market, you've got crypto property Bitcoin is the king of that, you know another Bitcoin forks the one to be an you know, a bearer instrument store of value It 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 bitcoins a currency because a currency I define in nation-state sense a Currency is an a digital asset that you can transfer as a 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 crypto currencies tether circle most famous Then they've got crypto platforms, you know And a theorem is the most famous of the crypto platforms the platform upon which you know with smart contract functionality Etc. And then 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 push me and said what's the second best? I would say the world wants two things It wants crypto property as a savings account and it wants crypto Currency as a checking account and that means that the that the most popular thing really is going to be a stable coin dollar right, and as there's a maybe a fight right now might be tether right but A stable dollar because I feel like the market Opportunity it's not clear that there'll be one that will win the class of stable dollars is probably a 1 to 10 trillion dollar market easily I I think that in a crypto platform space a theory and will compete with Solana and finance smart chain and and the like are there certain characteristics of any of them that kind of stand out to you would you Don't you think the competition is based on a set of features Also, so the set of features that a that a cryptocurrency provides but also the community that it provides Does you think the community matters and sort of the adoption the dynamic of the adoption both across the developers and the investors? I'm 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 marketing risk I mean there are different teams behind each of these things and and communities behind them. I think that the the big cloud looming over the crypto industry is Is regulatory treatment of cryptocurrencies and regulatory treatment of crypto securities and crypto platforms? And I think that won't be determined until the end of the first Biden administration for example There are people that would like only us US FDIC insured banks to issue cryptocurrencies. They want JP Morgan to issue a crypto dollar backed one-to-one But then in the US 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 backed by cash and cash equivalents. They're backed by stuff and we don't know what stuff and Then finally you have you know US T and die which are algorithmic stable coins Right that are even More innovative further outside the compliance framework. So if you ask who's gonna win the question is really I Don't know will the market decide or will the regulators decide if the regulators 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 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 and 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 and the current regulatory regime but I think that the regulations are so fast moving and it's so uncertain that it's It it you can't make a decision without considering The potential actions of the regulators. I hope the regulators get out of the way Can you steal me on the case that dogecoin is I guess the second best cryptocurrency? If you don't consider Bitcoin a cryptocurrency, but instead of crypto property I would classify it as crypto property because the US dollar is a currency So unless your crypto asset is pegged algorithmically or stably to the value the dollar is not a currency It's a property or it's an asset So then can you steal man the case that dogecoin is the best cryptocurrency 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. Yeah Well, it's increasing it not quite five what five percent a year inflation rate, but it's it's not five percent 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 inflation rate than than Many other fiat currencies, so I think you could say that but don't you see the power of meme the power of? ideas the power of fun or whatever mechanism is used to Captivate a community I do but let our 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 with like people buying a stock it's just The way I divide the world is right. There's investment. There's saving and There's speculation and there's trading So Bitcoin is an asset for saving if you want to save money for a hundred years You don't really want to take on execution risk or the like so you're just buying something to hold forever for that for you to actually Endorse something as a property like if you said to me Mike, 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 running 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 as like a proprietary thing. Like I'm I don't 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? Mm-hmm. We talk 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? 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. It's not an institutional asset and in fact Where I'd 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 cryptos are like venture capital Investments and if you're a VC and if you're a 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 meme coins, it's 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? It's like I I Mean shib 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 zero zero zero zero Mm-hmm 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 had changed that 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 in the world and generate hundreds of trillions of dollars of economic value to the civilization and I believe that it's in an early stage where many people don't understand it and they're afraid of it and there's FUD and There's uncertainty. There's doubt and there's fear and it's a very noisy crypto world and there's 15,000 other cryptos that are are seeking relevance and I think most of the FUD Is actually fueled by the other crypto world and it's a very noisy world It's actually fueled by the other crypto entrepreneurs. So the environmental FUD and the other types of Uncertainty that surround Bitcoin generally, they're not coming from legitimate environmentalists. 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 There's nothing wrong with it, right? Like when you put it on a layer two and a layer three it moves a billion times a second at the speed of light so every beautiful cool DeFi application Every crypto application everything you could imagine you might want to do you can do with a legitimate company and 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're if you're not if you're not going to commercialize it then just educate people on what it is So for example Bitcoin is 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 construction food medicine everything else It's less clean less efficient so So the basic debate I would like to 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 Well, that was one 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 they're 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, right? Saying positive stuff about any one particular Crypto thing thing you can buy in coinbase and so They might be unhappy with Elon Musk that he's promoting Bitcoin and then not and then 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 I don't have I don't have a criticism of Elon Musk He's free to do whatever he wishes to do. It's his life In fact, Elon Musk is the you know, the second largest supporter of Bitcoin in the world So I think that the Bitcoin community tends to eat its own quite a bit. Yeah, it tends to be very very self-critical and instead of saying Well, Elon is more supportive of Bitcoin than the other 10,000 people in the world, you know with serious amounts of money. They're like they focus upon You know, yeah, this is strange eating your own just 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 and And putting it on the balance sheet of Tesla and holding it and I think that sent a very powerful message Do you have advice for young people so you you've had a heck of a life You've done quite a lot of things Start before MIT but starting with MIT. Is there advice here for young people in high school and college? how to Have a career they can be proud of how to have a life they 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 gonna 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 I sat down I started writing and I figured what would you want to tell someone at age 21? You wrote it down. So I wrote it down and 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 ten upgrade the world. That's an interesting choice of words upgrade the world Upgrade the world. It's like an engineer's 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 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 chess videos a hundred hours a week and you'll never get through all the chess 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 I'll suck up your time, right? there's a hundred 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 surrounds you? So ultimately in a world where there's too much of everything Then your laser eyes, it's like those laser eyes you have to focus On just a few of those things. Yeah, 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 nine hundred and ninety nine is any more valid than the leader of thought in that area, so how about if I just focus upon one thing and And then and then deliver the best I can in the one thing. That's that's the laser eye message The rest get you distracted. Well, how do you achieve that? Do you find yourself? Given the way you are in life having to say no a lot Or just focus comes natural when you just ignore everything. So how do you achieve that focus? I Think it helps if people know what you're focused on So you everything about you just radiates that people know people know this if they know what you're focused on then you won't get So many other things coming your way if you You know if you dally Or if you if you flirt with 27 different Things then you're gonna get approached by people in each of the 27 communities, right? you mentioned beginning a PhD and Giving giving your roots at MIT. Do you think there's there's all kinds of Journeys you can take to educate yourself. Do you think a PhD or school is still worth it? Or is there other paths through life that is it worth it if you have to pay for it? Is it worth it spend the time on it the time and the money is a big cost? I I think Um time probably the bigger one, right? It seems clear to me that the world wants more specialists It wants it wants you to be an expert in and to focus on in 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 seven hundred thousand 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 he 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 And so that argues in favor of focus now I mean the definition of a PhD is 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 have done a dissertation where you made a you know A seminal contribution to the body of human knowledge Right, and and if you haven't done 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 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 agitator Yeah He's the world's greatest chess commentator, yeah, and I've watched his career and he's got progressively better and he's really good He's gonna love hearing this Yeah, yeah, the agitator over here is this I'm a big fan of the agitator. 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 too 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 comment the problem is if it is possible to be automated then over time someone's probably gonna automate it and and That that squeezes, you know the state space of everybody else It's like like after the lockdowns It used to be there like all these local bands that played in bars And everybody went to the bar to see the local band and then during the lockdown you would have like these six Super groups 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's my Field my discipline evolving into I talked to a bunch of librarians just happen to be friends of librarians and 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 In the rubble if you're gonna 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 you're you're the deep thinking Podcaster right or you're you're the you're the podcaster 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 change your format Yeah through 16 different formats so that you could compete with 16 different other personalities on YouTube You probably wouldn't beat any of them, right? You would probably just kind of sink into the you're you're the number two Or number three guy. You're not the number one guy in the format And I think that that the algorithm Right the Twitter algorithm and the YouTube hours. They really reward the person that's focused on message consistent the world wants somebody they can trust that's consistent and reliable and they 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 Privilege right and you should be thanking them and and you should respect their time It's interesting like 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 else. 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 yeah and then that lifts all both 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 and more empowered the reward for authenticity more than offsets the specificity with which you pursue your mission, it's like Like yeah, another 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 a fascinating. Yeah, we see the death of that Yeah, and so that the commercial shows are losing their audiences and the authentic specialist or the authentic artists 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 a more perfect monetary system Then maybe that foundation will go on forever. The idea the foundation of the idea So not just the Each of the foundations. It's not clear. We're on the s-curve of a mortal life yet Like that's a biological question and you asked that, you know on some of your other interviews a lot I think that we are on the threshold of of Immortal life for ideas or a mortal life for certain institutions or computer programs, 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 endow 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 world, 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 in 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 I think The goal is you upgrade the world, right? You leave it a better place, but you get out of the way 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 is George Washington So hopefully when you get out of the way, nobody's bleeding you To death in hope of helping you What 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. It seems like we're engineers at heart. We'll 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 of us like why do we do that this There's both 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 why we're here we're here to we're they're here to entertain ourself or we're here to 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 the first person that built a bridge crossing a chasm or the first person to work out the problem of how to get running water to a village On the first person to figure it out how to you know dam up a river or mastered agriculture The guy that figured out, you know how to grow fruit on trees or created orchards, you know And maybe one day had like ten fruit trees. He's pretty proud of himself So that's functional But there is also something to that just like you said that's just beautiful. It does get you closer to Like you said the divine 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 Yeah You know and 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 You know, yeah, 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 a heck of a responsibility Don't screw it up If I dropped you five hundred thousand years ago, I said figure out steel refining or or you know Fig figure out rate is silicon chips fabric production or or whatever it is. Why or fire? 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 right and that means 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're an incredible human. It's a huge honor. You would sit down with me Thank you so much for talking to you. Thanks for having me Lex Thanks for listening to this conversation with Michael Saylor 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