Kind: captions
Language: en
[Music]
nick carter welcome to the show
thank you i was 30 minutes late it's
kind of
i wasn't gonna rat you out man it's all
good i am super excited to have you on
so for people that don't know you how do
you so i think of you as one of the
leading sort of philosophical voices in
bitcoin um how do you describe yourself
um that's a great question because
most people know me more as a writer as
opposed to an investor the main thing i
actually do is uh you know
invest through my venture fund
but yeah i enjoy
writing and
doing podcasts and things like that so i
guess it's a kind of a weird thing
whereby
the thing i'm known most for is not
actually my job
i know the feeling very well
uh so yeah that's
because when you're in front of a camera
that's what people begin to associate
you with but we're building a like true
studio like disney style studio but of
course what everybody knows me for is
interviews like this
i want to start somewhere really
specific so
about i don't know two years ago i
started to change the style of my
interviews and moved away from being
just purely mindset stuff and getting
into
things that matter and that ended up
leading me hardcore down the crypto
rabbit hole
and that brings us to today and i've
started covering this a lot because it's
become extraordinarily important in my
own life
and i'm very curious if
if somebody is from a 30 000 foot view
they are trying to navigate this world
well do you think bitcoin matters
um i think it depends it depends so
strictly speaking if you are an american
you probably don't 100
need bitcoin
for anything
all of that said
you may find it very useful in the
coming years
um i think it's probably important to
have a general awareness of sort of
monetary trends around you because
it's kind of one of those things that
you know people say um
you know you may not be interested in
politics but politics is interested in
you i think it's the same for you know
your monetary system
um
you may not care to learn about it
but it's gonna alter
uh your life your quality of life um
asset price inflation affects everyone
uh some for the better you know let's
say if you own property
uh you own financial assets and some for
the worse if you're starting a career
you're trying to save
and uh get on the property ladder and
things like that
uh you know currency devaluation affects
everyone inflation affects everyone
varying degrees
so
having a keen awareness of sort of where
you sit in the monetary landscape
uh and how you stand to win or lose
based on sort of inflationary trends
that certainly matters that's something
that you should pay attention to
um
some of us pay probably too much
attention to it as you're borderline
obsession
um and then bitcoin is a is a part of
that you know it's a part of the
landscape you've sovereign currencies
you have savings devices like
stocks uh it's effectively savings
device today uh property real estate
and then you know these commodities that
live outside of government control gold
has obviously historically been the most
popular one and in that same subcategory
i'd put bitcoin
and uh you know to that extent to the
extent you're trying to diversify away
from
you know these
systems of saving wealth that can be
interfered with
i think bitcoin is a pretty good choice
all right so there's a lot of sort of
fractal paths that we could go down but
i think the first
robert breedlove introduced me to a
really interesting concept which i think
you inevitably encounter as you begin to
go down the the finance rabbit hole and
i was somebody that i never wanted to
learn about finance i didn't find it
particularly interesting um it doesn't
speak to my skill set it doesn't even
necessarily speak to my natural
inclinations i'd always focused on
getting good at generating money rather
than investing money
and
as you begin to learn about it though it
begs the question what is money
so if you're talking to somebody who is
really
they believe us that they the financial
system cares about them even if they
don't care about it but how do you
explain like what it is what is money
and why does the financial system matter
the interesting thing is that your
answer that question tends to be laden
with actually
ideological or political views
and it's interesting because you'd think
it would be a factual question but
one's answer tends to reveal a lot of
how one thinks about the world
so
there's a big school of thought which
would say money is a
system of credit that effectively the
government underwrites and creates
and it can't exist without the state so
money is something that's sort of
brought into existence by the government
whether it's through striking coins
or you know cultivating a sort of
financial environment like the one we
have today
and then there's another school of
thought which is well
money is something that people sort of
spontaneously begin to use in order to
gain efficiencies and trade
uh so that we don't have to barter
and so you have sort of the commodity
theory of money which is the latter and
then sort of the credit theory which uh
sometimes referred to as chartalism and
those are pretty opposing uh views
because one of them sort of presupposes
that the state the government is sort of
the guarantor and instigator of the
whole system
and that you sort of money exists at the
pleasure of the state
and uh the other one is well no it's um
actually
uh it's a sort of a private sector thing
and it just happens spontaneously on a
bottom-up basis so that people can find
efficiencies uh in trade uh and and both
of those are laden with ideology right
um the four you know one is sort of the
collectivist one is sort of
individualist
and so the answer to the question and i
don't think either of those is precisely
the right answer the answer
is more about revealing
one's you know general predilections and
views
as opposed to nobody really tries to
answer in a straightforward way
is what i'm getting at um my my own
personal sort of best answer would be
you know it's a system of effectively
societal memory uh to
store
a record of sort of prior work done
and uh you know the quality of that
record uh you know varies
uh it doesn't have to be it doesn't have
to exist you know as a ledger it doesn't
have to exist uh instantiated in a
physical commodity that is struck into a
specific coinage
the form of that memory can differ
whether it's commodities whether it's a
piece of paper whether it's you know
record a database entry that exists in a
bank
the important thing is that you're
preserving
uh a somewhat honest account of
historical work done
um you know in order to
basically facilitate um the process of
taking that work uh storing it and then
actually
being able to sort of um
you know take advantage of the the
proceeds of that work in the future
all right so that's a really interesting
way to look at it and i don't know if
you'll agree with a slight shift in the
wording
but instead of calling it work it's
you're basically
accruing the value of your energy spent
across time so i have done a thing that
cost me time and energy and i'm able to
at least transmit some of my energy into
a monetary form that allows the
um and it gets it starts to get weird
and complex because the amount of
productivity that i get out of that time
and energy is going to vary wildly
across how people spend that time and
energy so you could have an entrepreneur
that pours his heart and soul into
something for 10 years and have nothing
to show for it at the end and then
conversely you could get somebody that
you know spends 10 months pouring their
time and energy and it makes them a
billionaire so it's that starts to get
really fascinating but if you think
about it in terms of i have energy i
made that energy time and energy might
be a better way for my mind
i have time and energy that i put into
something and i make it productive to a
certain level that then goes into this
thing we're going to call money that
allows me to carry that with me across
time
now
if that's all it were i don't think i
ever would have become fascinated by it
and
here's the second part i've heard you
talk about it so i'm pretty sure you're
going to agree with this but
given that we live in a fiat system i'm
putting
all of that time and energy or i'm
converting it into something that people
can pull levers on that retroactively
affect the value of that
and it could go up as you're saying like
with if i have financial assets and the
system is being flooded with money like
it is now and we're gonna have to
explain what that means but then
the assets that i turned my time and
energy into will go up in value and yay
i love that people are pulling in the
levers but if i don't have those assets
and people pour money into the system
and now my buying power goes down they
have essentially devalued
my time and energy retroactively which
becomes very distressing but you can be
very blind to it and then just feel like
what is happening i don't understand
how do you help people like wrap their
head around that idea
yeah i mean that's that's absolutely
correct i think it's it's spot on i mean
that's effectively what what inflation
is
um and uh you know
devaluing the monetary medium that we
store our our work and and labor in
um is always redistributive
uh so it's effectively a way to
reapportion societal resources from some
group to another group can you walk
through the mechanism of that i've heard
you talk about there's a name for it i
forget but that your proximity to the
spigot of money basically how the money
is actually entering the system is like
a real thing there are some people that
actually are closer to that and benefit
from it can you walk people through the
mechanism
yeah certainly i mean it's a it's a big
concept so um there's this um economist
called i think richard cantillon well i
suppose you should pronounce it the
french way continue maybe
um
and and he posited that the flow of
money
as it's injected into the economy is
non-neutral
so
new money that comes into existence
through whatever mechanism
is not going to be evenly dispersed
throughout everyone it'll start with
whoever is the recipient
oftentimes the government and then
the folks who have the most proximity to
the new expenditures
benefit the most because it gets spent
into the economy before the economy
fully appreciates
the devaluation
effect of the new units of money and so
um if you know it goes to the elites
then the people that benefit are
immediately the elites and then it's the
people that the elites spend money on
how do you define elites that's become
like the the code term for you know like
shadowy secret coder it's like i don't
know what that means well in this
example it's it's simply who whoever is
the sort of initial recipient of the
money
but it you know money can take any
number of different trajectories through
the economy so
um you know in the last decade or so
it's primarily been uh injected through
the financial system so everyone that
works in finance has done great everyone
that owns financial assets has done
great because the government gets money
from the central bank and they go and
buy bonds like how is it actually
getting in
it's very obscure and opaque and that's
actually part of i mean it's
deliberately obscure right because um
if it were transparent people would be
pretty scandalized by the whole thing
and so it's mired in jargon and
impossible terminology deliberately
because you know the whole thing is
quite scandalous i would say
um and so
some people describe quantitative easing
as an asset swap but
and try and you know
mitigate it mitigate its impact but
what's happening is that um
the central bank is
um you know
effectively buying government debt that
would otherwise be bought by foreigners
and so that that keeps interest rates
low so if the central bank didn't exist
and they weren't buying that government
debt then households
investment trusts pension funds and
foreigners would have to buy the
government debt that the government is
issuing and that debt would be more
expensive
um and
if it was more expensive that would
impose more discipline on the government
because they'd have to pay a higher sort
of interest rate on that debt so because
there's this other buyer
the central bank that effectively buys
the debt and just kind of sterilizes it
sort of goes into this void this black
hole
because the central bank exists as a
buyer for the debt
the government is able to finance itself
by issuing structurally more debt than
they otherwise would
and so that's sort of effectively the
way
that um
you know
the government is able to grow itself
and finance its expenditures even if
foreigners and households don't want to
own government debt
um and so that's sort of the
quantitative easing process
um and that has the net effect of
driving up the value of financial assets
uh the fed now is buying all sorts of
stuff uh bonds in the secondary market
other central banks buy equities
directly
so there's all number of of assets that
end up being bought
um and
you know that that has you know pretty
deleterious effects on society i would
argue
why
well because it is uh redistribution
right um so can you do some
redistribution
um some segments of society being
empowered relative to others financially
speaking so right now that's that's like
a word people want to hear that wealth
is being redistributed
why do you think it's bad arguably we
should have a redistribution in sort of
the inverse way that we've had it and
maybe we're going to get that
um but
right now the redistribution's going in
the wrong direction which is that people
are the most proximate to the capital
spigot that work in finance which you
know has been engorged as a sector of
the economy it's too big it's bigger
than it should be
because finance is ultimately just
intermediation right intermitting
financial transactions it should only be
a certain size like we don't need that
much finance
everyone that works in that industry has
done well people that own financial
assets has done great but that is
partially what's driving up inequality
to
levels that are
enormously high historically i mean
truly truly like gilded age levels of
inequality and everyone's kind of aware
of this but they're not exactly sure
what the culprit is and i would say
people underrate the effect of the
federal reserve um and low interest
rates in
in you know they underwrite their level
of complicity basically
and as of right now the federal reserve
understands
that
quantitative easing money printing
does have the net effect of increasing
financial asset prices and thus by
extension
driving up inequality
alan greenspan
admitted as such today the fed won't
admit it but effectively
if financial asset prices go up that
causes
growth for gdp because there's a wealth
effect whereby people feel richer then
they spend more
like if the value if your 401k goes a
lot goes up a lot you're probably
willing to
buy that nice new car if the value of
your house goes up a lot you might you
know spend money on an expensive
vacation
so that is the transmission mechanism
through which
quantitative easing now actually
supports gdp supports economic growth
but the cost of all that is that
inequality continually increases because
most people don't have stocks most
people don't have financial assets and
so society is just getting more driven
by these enormous structural differences
which is going to reach a breaking point
pretty soon
oh that's interesting so when you say
gonna reach a breaking point are you
talking um
upheaval or something else
well there's kind of like a mathematical
regularity to it whereby
if inequality reaches a certain point
you get
civil wars you get revolutions
you get debt defaults
uh something has to give basically
and
historically in the u.s once you've had
political polarization and inequality
reach enormous levels you've had the
civil war
or you had
strong movements in favor of labor as
opposed to capital
or you had really high inflation
so there needs to be a mechanism to
reset inequality back to a structurally
lower level
and i don't know what the mechanism is
going to be it's probably going to be
really disruptive
it could be
high inflation for a long time
high inflation would probably hurt
financial asset prices
um
but it could also redistribute though
like so is that just is that the
mechanism by which we make the rich
poorer and so we scrunch it down that
way rather than bringing the poor up
so bitcoiners have a weird discourse on
inflation which i kind of disagree with
where they say inflation
disproportionately hurts the working
class
if you look at it
that's actually not really the case like
inflation kind of just generally hurts
but it mostly actually hurts financial
asset prices because
what actually happens is
well and it certainly hurts the middle
class too but the working class often uh
benefits relatively speaking they may
lose in absolute terms so everybody may
lose but they may lose less
so
if you sell your labor for
a wage or salary
which is not fixed
and it can adjust to inflation you can
stay abreast of inflation you can swim
with the current and sort of keep your
head above water
if you're on a fixed
salary you might be continually losing
to inflation
because maybe your salary is only
renegotiated once a year
if you're on a fixed pension that's
non-inflation index you're also going to
lose to inflation
if you own financial instruments that
have a lot of government debt in them
you're going to lose to inflation so the
middle class generally suffers with
inflation professional classes suffer
with inflation
but
importantly and and you're not really
going to hear this acknowledge in
washington
high structural inflation does affect
asset prices
in a big way because corporations lose
the ability to forecast what their cost
of capital is going to be a few years
out they lose the ability to predict the
future right because what happens when
you get inflation you don't just get
inflation you have volatility in
inflation if you look at the 70s you
like the 40s
you get extreme levels of volatility so
they lose the ability to predict things
a few years out
often inflationary movements are come in
conjunction with
a growth of political power in favor of
of labor so it's always the struggle
between capital and labor
and
the two things are often in conjunction
so
i think that might be one way to sort of
reset this is
have inflation effectively
you know decrease the value of
government debt
and
crush financial asset prices
and effectively
reduce inequality that way
so it might actually be a genuine
objective of central bank policy at this
point to encourage inflation to sort of
run hot
whoa
but they're not openly discussing that
no because you know
if they admitted okay we are going to do
a soft default on government debt then
no one would own the debt i mean people
would anyone that could would try and
sell it i mean foreigners are already
divesting themselves of of us government
debt
but so they have to kind of uh luke
groman says ride two horses with one ass
basically so
they want to um
they want to hold interest rates down
and have inflation be high so that they
can reduce the level of government debt
in absolute terms
and they also want to convince their
creditors the people that hold the debt
that they're not going to screw them
over
but one of those has to give
and my guess is that
you know people that hold the debt are
going to lose money
and so in what way is one holding the
debt bonds
yeah so if you own treasuries you might
own a money market mutual fund
um
if you have a pension fund they are
often by mandate holders of government
debt
there's just a number of public
institutions banks you know that that
hold government debt
and so if the government debt has
terrible returns in a real sense over
the next decade and
just based on historical multiples it
probably should
um that might be passed on to you if you
have exposure to these sort of financial
instruments
okay so let's take the average person
right now
if so you've talked about when people
meddle in the financial system it does
not necessarily go anywhere good
if we could put a message out to the
public as we are doing right now would
we encourage them to learn about
financial assets so that there just
isn't this huge
discrepancy between the government when
they're
pouring money into the system that
they're pouring it into a system where
more people are like would that actually
solve the problem forget whether we can
actually get the behaviors but would
that solve the problem or is there
something that i'm still missing
i would encourage people to think
critically about the financial system
but
not necessarily to start engaging in you
know speculation or
trading financial assets or getting
really into stock picking because
i think one of the consequences of the
devaluation of the dollar is that
speculation increases and you see this
in all other historical episodes of
inflation
people feel that their money is a hot
potato so they want to trade it for
something or other whether it's foreign
or because i mean that seems like such a
complex idea to understand or does it
just happen in other ways
like with what's going on on robin hood
for instance the whole um game stop like
all of that is that part of this
phenomenon
i mean the growth of robin hood is
totally part of it i mean
it's not like people are looking at the
you know the the cpi statistics and
saying oh
you know like energy prices are up uh
you know seven percent year over year
and like used car prices are up 24
um they intuitively feel that things are
getting more expensive you know um
people go buy groceries they're like huh
this carton of eggs is like
you know and three dollars more
expensive than it should be and like
this steak is more expensive and
gas is expensive now and everything's
more expensive so
you know you don't have to like be a
genius to figure out wow like huh seems
like the value of the dollar is going
down it's not just that the prices of
everything are going up the dollar's
going down and that is a force that
pushes people into
wanting to get rid of the dollars
effectively their personal discount rate
goes goes up
do you think that inflation drives the
average person to get more involved in
investing they won't think of it as
investing but like you're saying they're
trying to find somewhere to put their
money and i ask this as somebody who got
into my mid-40s
and generated a substantial amount of
money but never thought about like oh
holding money into banks actually
devaluing it over time i just never even
thought like that so and look i'm not
the brightest guy ever but good lord if
i'm not even thinking about that i have
to imagine there are a lot of people for
whom the idea of i need to do something
with my money is just not a thing it's
like what's in my bank account or i'm
living check to check it's like
is it a class of person that finds
themselves suddenly speculating because
they can feel that things are going up
or is this really a phenomenon that just
blankly impacts humanity
well not everyone has to care about it
especially people that
you know
sell their labor on a short-term basis
and don't tend to hold a lot of money in
their bank account
um and also frankly you um you weren't
alive the last time we had a significant
experience
of inflation or certainly weren't
uh you know
probably financially active in the 70s
and so that's the thing it's just
there's not a lot of living memory of
the last time we had an inflationary
episode
and so no traders
are thinking about it
no
asset allocators have this embodied
understanding of what it's like to go
through very few
and so we've lost this societal
experience of inflation so it's not sort
of as ingrained into our culture
but now that it's returning
you do have to start thinking more
dynamically about what you're going to
do with cash
and of course i think one of the
dangerous things is that everyone
believes that public equity is a good
savings device uh which is kind of like
a you know the i call the cult of like
the bogle heads you know and this is
stock market public equity stock market
yeah i mean it may have initially been
good advice because like from the 70s to
now like public equity did return you
know seven ish percent on a real basis
you know after inflation
um
and we've just had 100 years of amazing
public equity market returns in the u.s
like incredible
uh you know the risk premium on u.s
equity of the last hundred years
probably been five to six percent real
which is very very very strong
um but so everybody got collectively
indoctrinated into this idea that stocks
always go up
but if you actually look at what you're
buying when you buy a stock you're
buying cash flows
and the share of the cash flows that
you're buying today
are minuscule relative to the price
you're paying for them so that's just
another way of saying that you know
price earnings ratios are at the highest
they've pretty much historically ever
been
and that's all you're buying with the
stock you're buying a claim on future
cash flows
but there is you know the price that you
pay for like a dollar of cash flows
really matters if you're paying 35
for a dollar of cash flows on a yearly
basis
you know that you're putting yourself at
risk
um and so i think that's one of the
issues with this sort of inflationary
period is people like well it's fine
i'll just put my money in stocks it'll
be my savings device
well you know the japanese stock market
after 1989 went sideways for 30 years
and that can happen in our stock market
too
okay so let's talk about how that ends
up happening so
what
when i look at japan japan's always the
thing that people talk about and you
know use as an example of stagflation
what brings that about
how do we trade sideways for that long
and
if
if that's a mechanism of inflation then
i have follow-on questions but first i
want to understand that
well i'm not going to sit here and claim
to be a japan expert but uh you know
they had the mother of all asset bubbles
in
the uh 80s and does what we're going
through now looks similar
arguably yes i mean certainly financial
asset bubble it was built on enormous
growth in japan if you know you recall
japan was like the china of their day
they were really the manufacturing
center of the world
you know they
built the best cars and you know they
had the best technology and things like
that
and
um i don't you know i can't claim to
know the exact mechanism but basically
financial markets got way ahead of their
skis in terms of pricing and
expectations of future growth right
because that's that's a lot of time how
you get bubbles is people just get too
excited about future growth
opportunities so they overpay and by
overpay you mean that they break some
sort of rational connection between the
cash flows and what they're paying for a
dollar of cash flow
yeah exactly and is there a normal
number that we should be at
uh for equities for instance um your
historical price earnings ratio is
something like 15.
um one dollar buys or sorry 15 buys me
one dollar of cash flow
on uh earnings on a annualized basis
yeah so in theory it would take you 15
years to recoup your investment
that's with stocks of course it depends
on the
you know the country in question like
countries with
um
you know weaker governance and less rule
of law
generally public equity markets traded a
lower price earnings ratio because
um
investors demand excess compensation in
exchange for taking the risk
of buying stocks in you know russia or
you know
iran or something like that
but yeah in the u.s i believe the
historical average is around 15.
and in japan you know things just got
completely crazy in particular with
property but also with public equity
and then there was sort of a slow
bust
and
a demographic crisis right the
population got older
the productivity and the dynamism in the
economy uh wasn't
uh you know what investors thought it
would be
uh the banks themselves
um you know had to be sort of bailed out
in this really slow motion way
there were a number of what's called
zombie corporations which is
corporations that sort of
should have failed but were kept afloat
uh and so that stripped a lot of the
dynamism out of the japanese economy
um and you know they've had this sort of
like
slow motion crisis for kind of the last
30 years
and even though you know they're one of
the richest nations in the world
um probably number two by gdp at some
point
the returns that public equity investors
had were absolutely terrible
and so that's all to say like it can
certainly happen here there's nothing
that you know
guarantees
that public equity investors in the us
are going to earn seven percent every
year for for you know for the rest of
all time
so let me ask the obvious layman's
question here so
been to japan it's amazing go there it's
wonderful it's beautiful clean
freakishly clean
uh does not feel like a country in
crisis so
what's the
problem with stagflation if that's
really what's going on
well i think i would say arguably they
had just structurally low inflation low
growth and low inflation
um
strictly speaking there's nothing like
that wrong with japan i mean they've uh
a birth rate crisis you know so their
their population is shrinking
do you think that's tied to there's no
growth there's no excitement and so
there's this just weird human factor of
there's no energy in the streets and and
this is why i started with bitcoin
there's some it factor about excitement
about energy flowing into a system
cultural momentum
and when we don't have that they're the
second and third order consequences is
that sort of the hypothesis of japan is
just it's fine it's stable but stable
isn't sexy well it certainly isn't fine
from a returns perspective just looking
back historically which was kind of the
lens i was approaching it with but you
know leaving finance aside for a moment
um
yeah if you look at uh gdp growth like
it's composed of two things um the
growth and sort of like the labor force
and then growth and productivity
and if your labor force is shrinking
your gdp is just not really going to
grow
even if you have you know productivity
growth
um and it's an interesting question like
when you talk about bitcoin as an
optimism
like do low interest rates and low
growth
are they a consequence of demographics
like people like to say demographics is
destiny
uh which i have a lot of time for that
or
um is it the other way around
um and and so like i'm not sure which
way the causality goes
um but
you know i i i think you know it could
well be the case that you have if you
have more optimism structurally you're
likely to have more kids um and so like
bitcoiners actually
kind of you just anecdotally like have a
lot of kids they tend to be like pretty
family oriented and things like that
really
um i i would love to see a survey of
that actually that's interesting
yeah i think there's like a correlation
between you know general societal
optimism
a belief in the you know
quality of the future the belief that
the future can be better than the past
and then but through the lens of finance
this is where this gets so interesting
so here's why i found you just
incredibly fascinating
you take like a values approach to
bitcoin you talk a lot about the values
of it that there's this thing that like
undergirds everything that is distinctly
human
and you know when i think about japan
and look i'm totally ignorant to this
stuff but i actually think that it gives
me a way of looking at it which is just
psychology based so
you
right now there's something
so
insane happening in the transition to
um everything becoming digitized i'll
sum it up that way because to me it
isn't um it isn't just around currencies
it's around like all the new ways that
we're finding to
put value in some way shape or form onto
uh into a digital space so nfts has been
my lens that was what drew me into all
of this stuff and and sort of
accidentally taught me about finance
made me start asking the question of
what is money
was all through that lens
because i realized as an entrepreneur it
opened up vistas that weren't there
before and so i get into it and all of a
sudden i can feel this energy and
there's all this excitement and there's
just like you know open c does 3.8 or
whatever billion dollars in august alone
it's just like pandemonium and you spend
any time with these people and there's
the euphoria right and so just made me
start going whoa like
what is this as a cultural movement
this is very intriguing and as an
entrepreneur your ability to understand
i'm sure the same is true as an investor
your ability to understand cultural
momentum where is it going where is the
energy pouring because that's going to
be where there's growth and if you're
viewing this through the lens of finance
and obviously growth is what you want
but the real
like mind [ __ ] is when you understand
that all of that
is simply a function of psychology far
more than it is a function of like first
principles reality
it is a function of psychology
and
that's why
and i always love asking a question to
which i don't know the answer and i
wasn't sure what you would say about
whether bitcoin is a meaningful part of
someone trying to navigate this world
well
but to me given the importance of
understanding where energy is flowing
given that i think we do have to
redistribute
wealth but in a way that like the people
decide based on things that they like
and are excited about and want to move
towards instead of just moving away
crypto seems like the right answer
and then i'll bring it all together
but the question is
what behavior you want the masses to do
now i'm perfectly willing to accept them
delusional and just they're never going
to do it and so we can't deal with the
system in that way
but i look at it and i have
built over the last whatever seven years
a megaphone and now i'm using it to to
say you at least need to research
cryptocurrency the blockchain nfts you
may reject it and say that it's dumb i
can't see the future so you should
definitely do your own research but you
need to look at it it seems like the
most important thing happening right now
well to answer your question i wouldn't
ordain anything because that's pretty
contrary to the principles of sort of
you know bottom-up like markets approach
um but i think as like you know an
entrepreneur
in the crypto space um and uh someone
who allocates capital
my best hope is to sort of
uh create the tools and uh
the systems that regular folks can use
to potentially escape a ruinous fiat
system
uh and i think uh bitcoin
on cryptocurrency more generally
is one of the most profound tools that's
ever been created to give people the
option to opt out should they choose it
now we can't so really fast just remind
people the difference between what fiat
is and why bitcoin isn't
fiat
well if you uh look at if you if you
want to go to the latin uh fiat uh means
kind of let it be i believe uh so in the
bible uh the latin version uh in genesis
it says fiat lux let there be light and
if you think about what god was saying
at that point it was a command right it
was an an ordainment right uh there will
be light um regardless of what you you
know may may want
um and so you know in english fiat came
to mean a decree
uh so
something that was handed on down from
on high
um
ordaining a certain state of affairs
and um so so that's what fiat money is
that's money government money basically
yeah but it you know it could be some
other source of authority
but yeah it's money created by decree
and of course that's not saying that the
value of money is being enforced at the
point of a gun that's actually not how
the dollar works people sort of stylize
it that way
but um you know there aren't any like
police officers like you know bashing
down my door i'm like that you better
like treat that five dollar bill as if
it's worth five dollars you know that's
not how it works the government
cultivates an environment in which the
dollar has has value they have certain
like tools to do that uh one is tax
policy so you have to pay your taxes in
dollars so they create a tax liability
on all of us
um and then you have to satisfy that
liability in dollars
so it's that's kind of like a dirty
trick but it works pretty well um then
they sell their debt four dollars
right so uh all securities markets in
this country and they're uh enormously
sort of rich and robust uh you have to
use dollars to sort of participate in
the game
right
and so so there's you know and then of
course there's laws there's legal tender
laws
legal thunder laws don't actually
mandate the use of dollars you could
create a you could start a store which
just accepts gold and that actually
would not be illegal that would be
completely fine but what legal tender
laws say the dollar is a permissible way
to satisfy debts in this country
you have the option to use it and so the
dollar is kind of like privileged in a
certain way and then so if you look at
actually el salvador where the dollar
and now now bitcoin are on the same
they're on a par
um the way the government did that was
with tax policy they said uh bitcoin is
not subject to capital gains taxes
because when your dollars appreciate in
this country you don't have to pay taxes
on the dollar going up but you do have
to pay taxes on if something else
appreciates property stocks even foreign
currency so the dollar is privileged in
a certain way
mainly through tax policy
so very long-winded way of saying um
you know fiat money is money that is uh
you know uh privileged by state edict by
decree that's literally what fiat means
decreed money and now commodity money is
something that does just come to have
value
regardless of what the government thinks
about it so gold is the perfect example
it's a spontaneous thing it came to have
money of course many governments did
embrace gold and we had the gold
standard for hundreds and hundreds of
years today governments hold gold but
they don't give any special status to
gold
so you know gold is a commodity money
it's still you know worth 10 trillion
dollars
similarly bitcoin i would say is a
commodity money
its value is spontaneous
at one point it was worth zero and then
it was worth something right i think the
first price was like point zero zero
zero eight
dollars
um back in 2010 so
no government uh well until this year um
did anything to encourage bitcoin to
have value el salvador has now in a
small way
uh you know gently encouraged the
adoption in in that country but that's
not really the reason bitcoin has value
it's because the market spontaneously
decided this is an interesting
commodity that we can sort of store our
wealth in
okay so the bitcoin story i'm going to
take uh
a more aggressive approach i think
you will be the the balancing force here
and you know far more about it than i do
but
what bothers me so i've worked in the
inner cities a lot and i've seen really
incredible people that that are truly
bright but their
perspective on life is nonsensical and
because that's just what they've been
taught right and so because of their
frame of reference they don't behave in
a way that moves them forward
and that has given me a very deep
passion around trying to help people
that aren't necessarily getting
useful information from the school
system or from their parents or from
their friends to tap into the internet
basically and say hey it doesn't matter
where you grew up you can now learn from
anybody so now let's look at things that
can really move you forward
now
bitcoin and we'll keep it relatively
tight to that though i find uh more
currencies than that interesting but
bitcoin is a highly volatile asset so
you could lose everything that you put
in so it's super important that people
be clear on that but you and i are
recording this at a time where bitcoin
is doing extraordinarily well and so
just looking at how my portfolio is
going up i'm like we can't do this again
where it's like the whether it's elite
because i have information that other
people don't have or that i have the
capital to put in the system whatever
like
i i have found a potential opportunity
again it could go to zero but like
if people don't at least look at this
it's so insane the gains are so
potentially outsized that i feel a moral
obligation to get people to do the
research
i think that's fair um
i
moral is an interesting lens to put on
it um i mean i think money is sort of
imbued with morality um but
you know i i at this point i i don't um
try and evangelize bitcoin uh too much
um just because you try to evangelize do
you want to see
um
i'll give you the universal i want to
see i want to see every human being who
meets what i call minimum requirements
intellectually to research finance to
understand that your money can be safe
in a bank and losing value every day and
that you need to understand that to
protect yourself
against that devaluing substantially
over time so i want everyone to take
that action do you have an action that
around finance that you think people
should take
that's a great question yeah i i mean i
i think that's a good framing um i
would just suggest that people
look into the rate of money issuance in
this country
which is substantial
and
don't let don't buy the narratives
coming from the fed because remember the
fed does not have your best interest at
heart what they're telling you about
inflation being transitory about being
there not being a connection between the
rate of money creation and the price of
money which doesn't make any sense of
course like it's funny like you've econ
phd's telling you something and it's
like anybody that's sensible
you know that hasn't been indoctrinated
into sort of like their dogma would be
like well this doesn't make any sense
what do you mean like
you like you're telling me there's no
relationship between the quantity of
money and the price of money is like
completely nonsensical so just you know
apply a skeptical lens to what they're
saying
um and then in terms of direct action
yeah i mean just look look at the data
and look at uh where where the
inflationary trends are going look at
energy prices
uh look at the shortages we see in the
economy uh and consider uh okay well
what historical epics could this be like
you know could this be like the 70s
could this be like the 40s
it could be like the 1850s
you know um so there's a lot of work to
do there uh but i think the first thing
is just not
uh not accepting
uh uncritically the narratives coming
out of sort of our monetary elites in
this country
all right so we have a system by decree
fiat we
have grown up with it for so long that
it just seems so second nature
that most people don't look at the fact
that the us government makes you pay
your tax bill in u.s dollars is like a
sneaky trick to make sure that u.s
dollars essentially stick
it just is the way that things are
and as
this moves forward and we are printing
money and we've got potential inflation
coming
um
why does it matter if we're looking at
bitcoin and thinking of a way to okay
potentially they need to do their own
research but potentially get into
something like that
what is it about the values
of the
of bitcoin versus the values of a fiat
system
that caused satoshi to create it in the
way that he she did
satoshi was actually pretty deliberate
in terms of
putting the pieces to bitcoin together
and
they
were chosen for kind of a specific
reason so the first thing to understand
is
monetary discretion and so that means
is there anyone that can control
the flow of monetary creation does
anyone have the choice in that
and in fiat
the government has that choice so they
can choose to ramp it up they can ramp
it down
everything in between in the last few
years in the us the rate of monetary
creation has been enormous truly
enormous
um and and you know we're told that
that's to sort of save us from a
recession
but of course we still have financial
crises and the rates of financial crises
and recessions has not gone down
since you know the federal reserve was
created certainly hasn't gone down and
the severity of those recessions hasn't
gone down since the 1970s when we fully
got into the fiat system so
the claim that you know we need
government to put their thumb on the
scale and periodically change things
you know change you know tune pull that
lever of you know interest rates and
monetary creation things like that
that claim doesn't seem very sound to me
uh and so if you look at what bitcoin
does it just
fixes the variable it sets it completely
fixed so
um
you know there's going to be 21 million
units ever
and the first 50 percent were created in
the first four years the next 25 percent
created in the subsequent four years
next 12 and a half percent so it's a
decaying curve
um so right now the rate of issuance for
bitcoin is 1.8 percent per year that's
gonna get cut in half in three years cut
in half cut in half cut in half until we
hit 21 million
um and so
that curve that rate of emission is
totally fixed um i don't think anybody
has the authority to change that
uh satoshi said it that way and that's
kind of what we got
um and it you know the thing that that
compares to would be a non-state
monetary commodity like gold now gold is
an attractive thing to use to backstop
your monetary system
for much of the same reason which is
that no one really controls the rate of
gold issuance either
over the last few hundred years it's
kind of fluctuated between about
one to two percent and it very rarely
exceeds two percent
even when
uh the conquistadors found all the gold
in the new world
people think that was you know that
caused rampant inflation
that caused the rates of inflation uh to
increase by you know one to one and a
half percent a year for about a hundred
years
so that wasn't even that significant in
terms of like new gold issuance
so
that's a natural feature of the world
because gold is really well distributed
in the earth's crust and there's not
that much of it and it's really hard to
get out and so because of those natural
physics based features we get a monetary
outcome which is
if you link your currency to gold your
currency is not going to be created at a
rapid rate
i want to say that in a really basic way
for people because this was a big sort
of moment for me when i realized
gold is valuable not so much because it
can be melted and turned into jewelry or
whatever it's valuable because stars had
to explode
and
you know get coalesced into the crust of
this earth so that there is a finite
amount that is really hard to get out
and so it literally becomes proof of
work as they call it that
i know this was hard to get so there's
no way that somebody is like secretly in
the back room like making more gold and
putting it into the system which would
essentially be counterfeiting so it
becomes an anti-counterfeiting
anti-inflation mechanism and that is
what makes gold valuable and so it's
like wait a second the very thing that
makes gold valuable you're saying that
the fiat money just like hey [ __ ] it
like make it rain like you know money
printer go bur it's like you you start
to get sketched out of like that scandal
you talked about where it's like
what is happening so yeah do you buy
into the narrative that bitcoin is like
the ultimate digital gold and that it
perfects those elements of scarcity well
that's why i introduced gold i mean you
know i'm not a gold bug or anything but
bitcoin mirrors and it's actually a
synthetic attempt to recapture those
qualities of gold right
and now of course gold wasn't perfect
either because
um technological innovations or gold
fines like in california in 1848
uh 48 yeah um would increase the rate of
gold creation so that would be you know
a shock right you don't necessarily want
the money supply to increase
dramatically based on a technological
change
but it even so it didn't increase it
that much and so what bitcoin took was
this relatively
strong but not perfect commitment to not
increase the money supply too rapidly to
just give us strong predictability which
worked very very well for hundreds of
years and bitcoin made it even stronger
it made it a perfectly
sound commitment which is we're going to
adhere to this monetary schedule
and we're never going to change it and
this is just what you got and no one has
the authority to change it ever
and it's gonna be perfectly predictable
so it's like the most hardcore version
of gold possible
gold gets those traits from
the explosions of stars and the nature
of the earth's crust and also the atomic
nature of gold it's not radioactive
doesn't corrode so it's very stable
which is important
uh because you know it's not going to
decay or rot or anything like that
and then bitcoin gets those traits by
looking at the natural world and
creating a synthetic version of that
which is designed to recapture those
ideas
and satoshi compared bitcoin to gold a
lot that wasn't a coincidence
the proof-of-work function satoshi
compares to the mining of gold
because it's expensive and difficult to
get the gold out it's expensive and
difficult to get the new bitcoins out
too
and it should be that way it shouldn't
be easy to create the money should be
really hard and the people that create
the money shouldn't have a huge
um you know advantage in doing so so
gold extraction
you know the gold mining companies sure
they're worth a little bit but
the people that mine gold are not like
these princes of the universe that
control everything they have to compete
in the free market like everyone else so
they eke out a margin it's the same with
bitcoin miners bitcoin miners aren't
princes of the universe either they you
know earn a return doing it but it's
just kind of a normal corporate activity
it's not something that endows you with
fabulous unfathomable wealth and that's
by design that's because it's a free
market equilibrium where if the miners
were earning too wide a margin
other miners would come into the
industry and and compete with them and
compress that margin so the fact that
it's a competitive free market process
that
bitcoin inherits that from gold but
that's also a great feature
so a lot of bitcoins design arguably is
kind of inspired by gold
so now we get into
the other day i was thinking about you
know i'll get asked a lot like who's the
person that you want to interview that
you uh you know haven't yet and i was
like satoshi i want to interview satoshi
now i understand why people would not
want me to interview satoshi
but i am utterly fascinated by the
mystery around satoshi i know at one
point you said somebody should write a
book maybe you going through like all
the different things that satoshi said
and i'm really curious what were they
saying like when you think about the
value system that's driving this and
this gets into my core thesis around
there's something happening culturally
right now and the the value system of
cryptocurrency is resonating with people
in like a crazy way so going to that
idea of demographics or destiny there's
something here where the the upcoming
demographics really resonate with what i
lovingly call the [ __ ] the man
philosophy of decentralization
so what what is the the value system of
bitcoin yeah i think that's such an
important and great question because
we've had all these sort of civil wars
about it actually um you know this all
these internal conflicts and
bitcoin in many ways is kind of a
reflection of your own expectations and
your your beliefs and so no two people
come at bitcoin and consider it to be
the same thing so that's where we get
all this conflict from i mean a lot of
people thought it was this peer-to-peer
internet
payment system like a high-powered venmo
some people thought okay well it's more
of a digital gold type product some
people are like well actually it's a
programmable substrate for the new
internet
and all of those conceptions imply
different development directions
and they imply taking different angles
on the trade-offs within bitcoin from an
architectural perspective so
that's why we had all these wars all
these conflicts
they're not fully resolved arguably and
part of the reason i think is because
satoshi left so early after a year or
two and we didn't get that much guidance
from satoshi
did satoshi say he was gonna bounce or
did he just disappear
um yeah satoshi sort of suggested that
uh they you know they could leave and
the project would be okay without them
um but still you know i don't know
if it's a good thing i mean
i suppose it's for the best that satoshi
isn't here because it eliminates a point
of centralization and
you know satoshi has apparently never
spent any of the coins that they mined
so it seems to have been a very
sacrificial thing whereby they didn't
capture the spoils of their wealth so
crazy creating the system which is
incredible so you know i think it was a
very sort of humble thing to do no one
knows who satoshi was so they didn't get
any of the clout that comes with
creating bitcoin
they apparently didn't financially um
you know take their reward or anything
like that you know something like a
million coins
uh so
so you know that's all very important
but the trade-off is that now
it's a tug of war between all the
different factions and bitcoin trying to
determine what bitcoin actually is
and what it should be
but i think undergirding all of those
conflicts there still are a few things
that you can say
yeah these are the sort of key
fundamental values of bitcoin
and you know
one would be
a very strong respect for property
rights so of course
the anti-inflationary characteristics
are key because inflation is a way to
effectively compromise your property
rights
two is the ability to have strong
seizure resistance so if you own bitcoin
it's you can
very plausibly defend yourself against a
powerful adversary that wants your
bitcoin
particularly through legal means or
through intimidation or force
um you know as a fully digitized money
it's something that you can store in
your brain for instance if you can
memorize 12 words you can store an
unlimited amount of value in your brain
and so that you know
is you know part of the property rights
idea
and then
eliminating centralized points of
control i think is a political idea
which is to say
we want a monetary standard that
is not
something that can politically be
interfered with and so the architectural
design is inherited from that core idea
and satoshi even said
look at these other historical digital
cache systems like satoshi talked about
digit cache
it failed because it was centrally
controlled but if you look at these p2p
systems like tor
um
and sort of like bittorrent style stuff
satoshi says will those succeeded so
let's inherit those ideas in terms of
our design our architecture
and so you know if you think about it
these are actually political ideas first
and then
they get processed into technological
designs
but the designs are not arbitrary the
designs are a function of the underlying
idea
and so that's why bitcoin is the way
that it is
because satoshi had some pretty definite
ideas about the world
yeah this gets really interesting so
um the more i look at like the sovereign
individual the book the sovereign
individual and think through some of the
implications of what it means to say
to have demographics that already
at least some faction of them have a
anti-establishment
bent
they're young they're tech savvy
they immediately understand the idea of
digitizing anything whether it's art you
know and nfts is born from that or
whether it's
money and obviously bitcoin ethereum are
examples of that
but they take to this really fast and
then as nobody knows better than you
this space moves so fast if you put your
head down on a different project for
three weeks
you will be disoriented when you come
back up because things will have changed
that rapidly
and that's going to make it a nightmare
for
regulators to try to stay on top of this
what do you think is going to happen
as this upends the apple cart you talked
about you know there can be enough
disparity in wealth um that you get
these moments of revolution
what do you think the government
response is going to be like really
really when they start realizing holy
hell like there is a flight from the us
dollar let's say into bitcoin
well
i think political power is always
litigated you know between individuals
and between the state and uh it's kind
of a tug of war
and
you know one of those sides may believe
a sort of set of conditions holds that
doesn't hold anymore and i think that's
the case where we've reached this nexus
of political centralization right now
um you know big tech companies have
completely
uh like enormous levels of power that
we've virtually never seen before in
history in terms of
a small number of individuals being able
to exercise control over a large number
of individuals and some governments
co-opt that technology like the chinese
government
and they wield it directly in the us
it's wielded sort of indirectly where
effectively big tech companies like work
alongside the government today i know
not everyone sees it that way but there
seems to be a convergence of objectives
there
and so
you know we're at this historical zenith
in centralization whether it's corporate
or state power
and i mean if you just look at
you know the trends of authoritarianism
happening in the west like it's very
real
and you know the question is like
what will the pendulum swinging back
look like
and i think states aren't prepared to
witness that
they believe that people are still
geographically
you know indexed to their particular
location so they can't be portable
they believe that people's assets
are linked to the state ultimately to
the banking system to the financial
system
and they're not portable and
once those assumptions prove to be false
they're going to be taken by surprise
and so
the crypto industry is so interested
because it's created two trillion
dollars of wealth
for
young
um
kind of
mobile
very driven
sort of very technical
talented
people globally not not just in the us
and
those people are engaged whether they
know it or not in a
negotiation versus their governments
and
should the governments misbehave
they can you know convert the rest of
their wealth into you know crypto native
format such that it can be untethered
from its local context which was never
really possible before never possible
and
if necessary they can sort of flee and
you're not just fleeing with the clothes
on your back you're fleeing with your
wealth and your assets intact
and that's a kind of a new thing right i
mean historically if you were fleeing
the nazis you'd have to sew the gold
into your clothing and you know you
wouldn't really be able to escape with
any of your wealth and now everything's
digitized you can escape with you know
the wealth in your brain
and so we have this class of like mobile
entrepreneurial
you know skilled individuals that are
effectively breaking the linkage the
linkage between themselves and their
governments
and they don't really feel uh much
allegiance to the government anymore
because it's not working for them
um and so like i'm like a miniature
version of this because i moved within
the us
from somewhere that i felt was like
pretty authoritarian and hostile to
crypto to someone somewhere that was the
opposite
um but this is going to happen on a
global scale and it's this exact
sovereign individual
idea
and now we've been technologically
enabled to actually do this
and so you'll see some states that are
very slow that will try and ban crypto
and and uh you know stem the capital
flow and maybe they'll insert uh capital
controls and extremely onerous tax
policies and then a number of other
states will realize
well we can create a special crypto
economic zone and attract all these
people
and get this concentration of wealth and
talent
uh so that's obviously what we're going
to do and then we're going to win out
with regards you know relative to all
these other states so
i think we're right on the brink of
seeing that
yep
yeah this is uh man this is such a an
interesting and crazy time and my goal
is just to get people to pay attention
to it i think you're one of the voices
to listen to
where can people follow along with you
so i'm on twitter nick underscore
underscore carter that's two underscores
and if i get banned from there which is
very possible my personal website is
nick carter.info hopefully i don't get
banned from the internet so that will
always be up
awesome dude i really hope that we get
uh round two round three this has been
really incredible um i will be following
you closely thank you for putting out
what you put out
and uh yeah keep doing what you're doing
guys if you haven't already certainly
dive into this world i i can't say this
enough i just think it's so important
for people to do the research and to
figure out what's happening because
there is something tremendous happening
right now and i will say miss it at your
peril again you need to do your research
when i say miss it i just mean look at
it look at it if you look at it and
reject it fair enough but don't just
reject it without looking at it speaking
of things you should look at if you
haven't already be sure to subscribe and
until next time my friends be legendary
take care peace