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- [00:00]
A
Today, I am happy to welcome Timur Curron to the network CA podcast. And Professor Couron is the author of Private Truths, Public Lies. And I have cited him many times over the years for people who want to understand the 2016 election, people who want to understand distributed consensus, anonymous consensus. People want to understand the fall of the Soviet Union. So I've been a fan for a long time and, you know, so that's how I came across Professor Kuran's account.
- [00:28]
B
And.
- [00:28]
A
And then I was tickled to see he followed me on X. And I wonder how you came across my account, because I don't think I've asked you this.
- [00:35]
B
I came across your account because people I follow forwarded your very interesting tweets. And I can't remember exactly what they were, but this was when I. This must have been around 2017 or 18, soon after I joined Twitter. And that's how I discovered you.
- [01:02]
A
Excellent. Well, so, you know, I want you to give a quick. We can talk about the kinds of things, you know, topics you're interested in. I'm always interested in, like, how people are interested in each other's intellectual currents because I do talk a lot about tech, but I talk a lot about politics and, you know, the future and history and pieces like that. So there may be strands that appeal to you or what have you. I wanted to go through your work, though, because I think private truths, public lies is something which has just started to break down in the US not just started, like last six months or so, we've seen an enormous preference cascade. And maybe you can describe, summarize the book and talk about what motivated it and then how you apply it in other places.
- [01:46]
B
Certainly. Well, let me start with a definition of preference falsification. It's the misrepresentation of one's wants under perceived social pressures. It involves, of course, self censorship, hiding one's actual preference from the. From the public. But also, and this is very important, the second component is extremely important. It involves pretending to like someone, something that would actually dislikes. And one engages in preference falsification to avoid social sanctions, to avoid ostracism, to avoid being called names, to avoid being associated with disreputable groups, to win favors. Now, the. There are many negative consequences that preference falsification has. One is that it distorts collective decisions. Let's imagine a department, an academic department, that is trying to decide whether to continue using standardized tests in admitting PhD students. Now, thousands of departments across the United States that faced exactly this issue because there were people who argued that standardized tests discriminate against marginalized communities. So they brought the matter to department meetings. Now imagine a department where the majority, even a very clear majority, large majority, believes that there's a great deal of valuable information in standardized tests. Even if you don't use standardized tests exclusively, do you look at other things as well? There's a great deal of valuable information in them, but these same people are afraid of being labeled as racist, as misogynist, sensitive, etc. And the people who are pushing hard for eliminating standardized tests are quite powerful. They may falsify their preferences and just to avoid the wrath of the promoters of eliminating standardized tests. And as a result, the department might eliminate. Eliminate standardized tests, even though a clear majority believes this is a bad decision. Now, preference falsification is accompanied by what I call knowledge falsification, which is that you, in the process of trying to project to the public a preference that you don't actually, that you don't actually have, you conceal what you know and you pretend that claims made by others that you believe to be false are actually true. So in the process, you distort knowledge. If you are pretending that, that if, if you believe that standardized tests are valuable, but you are pretending that they're not, you cannot publicly talk about all the virtues of standardized testing. You have to say things to be convincing you. To the people who want to eliminate standardized tests or want to, want to, want to retain, want to prevent their reinstatement, you have to pretend that you accept all the arguments made by the opponents of standardized testing.
- [06:14]
A
So one thing that I remember, you know, from your book that I thought was interesting was, you know, in my, in my head I was comparing it to a method actor. Because sometimes these people who are forced to mouth all of these falsehoods for a long enough time find themselves quasi believing the falsehood or rationalizing it to themselves. And the external lie sort of shapes the internal narrative, at least partially.
- [06:41]
B
It does. I mean, there are some people who actually come to believe their lies. Perfect falsification in a wide array of contexts, it's becoming habitual.
- [06:54]
A
It's like the Vaclav Havel thing about workers of the world unite, right?
- [06:58]
B
Yes. And they start, they, they, they get used to the notion that whatever slogans they're supposed to parrot, they, they will just parrot them. They know it's futile to, to question them, to inquire into their veracity, whether they mean anything. So they simply accept the worldview that is. Is presented to them and they start, start believing them. That's A very shallow belief, though it can be because it doesn't have much depth, because it doesn't involve actual evidence, because it doesn't involve a study of the mechanisms that might be driving certain, certain outcomes. It's quite, quite shallow. So it's, it's actually, it can be, it can be changed quite rapidly. But you're absolutely right that some people will come to believe the slogans that they are parroting. At the same time, there are people in society. This was certainly the case in Eastern Europe before the fall of the Berlin Wall. There were people who did not believe the lies that they were being told. They did not believe that central planning was provided a better economic system than a market based economy. But they had to conceal their knowledge, or many of them concealed their knowledge. The reasons they believed that market system would be more efficient and, and they had to, in order to advance at work, in order to retain acceptance in their communities, they had to pretend to accept the party's ideology. So that process distorts public knowledge and it affects what affects the ability of others to see the world correctly.
- [09:16]
A
A couple of things on that. I think a lot of people, not, certainly not you, but many people don't understand just how crazy, crazily taboo capitalism was in communist countries like in Maoist China, you know, people were executed for, you know, having some grain held back rather than throwing it all into the common pool. The Xiaogang thing, which is maybe apocryphal about the villagers who asked, do I own the teeth in your head? And they said, no, the teeth in your head belong to the collective. And they signed a contract amongst themselves and hid it in the roof of a hut because, you know, the split of property and private property rights were so taboo that these were capitalist running dogs and reactionary. So like capitalism was punishable by death. Right. And part of what justified that is that so much blood had been spilt, you know, against the evil capitalists. What do you want to let them back in, these selfish, crazy capitalists? Are you a traitor? So it got mixed up with nationalism and you had this crazy level of taboo against something that we don't think of as being taboo. And then another piece of it is in the, in like the Soviet Union especially. And you know, I'm less familiar exactly how it's played on in China, but there are only two kinds of people who are capitalists which were A, these sort of intellectuals who could see beyond their own society and whisper about it in psalms, literature and so on and so forth. And then B, the Black marketeer who'd cut you for a tomato and who lived down to all of the regime's stereotypes about capitalism. Right. Because they were selfish, they were greedy, they were fraudulent, they were, they just cared about money, they didn't care about the people, and so. And so forth. So it's a little bit like the, you know, if guns are outlawed, only outlaws have guns kind of thing, where if truths are outlawed, only outlaws have truths. And that's a secondary effect of the, you know, public lies, private truths kind of thing. Right. Because it pushes the truth to the margins and the people who voice them tend to be either intellectual or disreputable. I'd love to know your thoughts on that.
- [11:28]
B
Yeah, no, no, this is, this is, this is absolutely true. But also makes it. Let's pursue your, your example. Under central planning, even, even the heads of enterprises that were, that were given quotas to fulfill production quotas, to fulfill their quotas, they had to use black markets. So they all knew that these markets worked. They all had personal knowledge that these free markets worked. They pretended, the many communist leaders pretended to, that they were implementing central planning when they knew very well that the only way to approximate their goals involved using shadow prices.
- [12:36]
A
Quasi capitalism.
- [12:37]
B
Exactly, the shadow prices and so on, and that all this was going on, but they maintained a facade of commitment to central paying. Students were taught in schools and in universities. They were taught that central planning works. And it's, it's so much more ethical, it's so much more efficient than, than capitalism. Yes.
- [13:01]
A
It's similar to, in the US System, using your university diploma as a proxy, socially acceptable proxy for like IQ or SAT scores or something like that. Sort of like a proxy score, like a shadow price. Right. And the, because you know, the College Board and SAT tests are, or colleges can administer them, but private employers couldn't for a long time. But one, one thought I have is so I, you know, you know, you're mathematical enough person to, you know, you know, the difference between a vector and a scalar, I assume.
- [13:36]
B
Yes.
- [13:37]
A
Okay, so one thought that I've had, which kind of builds off of your point just now about these individual administrators. They knew that the system was broken. One thing I observed, especially during the Biden administration was, you know, obviously people were lying about Biden being senile, but they were also faking employment statistics and they were faking inflation stats and they're faking these different things in ways that they themselves. Like for example, Larry Summers put out a post, said something like if you included shelter and like the the rise in costs of loans and other kinds of things. Actual inflation rates, like in double digits or something along those lines. Right. So he was. He was somebody who was expert enough to understand how this particular agency was faking their particular thing. And then David Sachs and I looked at some, like, employment data, and we're like, why is it beating expectations so many months in a row? This is, like, kind of weird. And it keeps getting revised downward afterwards. And now there's, like, some revelation that, oh, actually it was fake after all. And. Of course, but. So the point is, though, that each of these kind of administrators was putting a thumb on the scales or faking things or whatever you want to call it, in a way that it would be hard to figure out how they were doing it unless you had some domain expertise there. But then they were also seeing everybody else's fake numbers as if they were real. Right. So you have, like, 50 pieces of fake information out there and 49 of them. You have no internal information on how it's being faked. For the 50th one, that administrator is faking it. So they think maybe the system is okay, and then, like, it's only their piece, which is a little, you know, questionable or something like that. So you can't build an overall system map of how it's broken. Let me know your thoughts on that.
- [15:27]
B
Actually, there were many people who did sense that the entire system was increasingly built on lies. And that is one of the reasons why Trump, who is a very flawed man in many respects, has received so much support in three elections in a row, winning two of them, because many people outside of the Washington bubble, outside of the centers of major influence, of major power in the United States, they have sensed that it's not just one number that is fake, that there are many, many numbers that are faked. And they can imagine. They can imagine that if the press has been systematically hiding the explanation for Covid, if it's. If it refused to for a long time allow genuine debate on. On Covid, it must be happening in a lot of other areas.
- [16:45]
A
So I want to. I want to show you something that maybe get your reactions to this. So, you know, this is a post I wrote. It's about two years ago. Too fake to tell. You know, like, too big to fail. Right? So, because, you know, Sachs and I, you know, Sachs made this offhand tweet, hot jobs. I don't know where they're finding all these jobs. All I see are layoffs. And it got four and a half million views. So clearly like this just struck a nerve because nobody, they wouldn't have gotten so mad if it didn't. Hadn't actually been like, fake in some way. Right. And so, you know, and trusted media as you, you know, as we were just talking about, half of Americans now believe news organizations deliberately mislead them. But it's one thing to kind of have an overall suspicion, and then it's like another thing to have a specific suspicion. And one of the things that I was just doing, so I was thinking about a bunch of issues where it's clear the information was false. And there's a. There's a whole spectrum between like, you know, maliciously faked and, you know, true. And some of them include, like Bernanke talking about the great moderation, how it means to attain macroeconomic volatility before the financial crisis. That was just like, you know, incorrect. Right. Because obviously, you know, volatility was coming back with a vengeance. Cheney saying defson don't matter. Bush and Clinton blew up the market bubble. Bernanke saying we might see a mild recession. The ratings agency in 2008 called Subprime Mortgages AAA before the collapse. Globe Economy S and P got retaliated against for downgrading things. So this is a really interesting one where the guys who put out true information where they were downgrading US debt, they got retaliated against, Right? Then they. Bernanke said, QE isn't money printing. Powell saying it was. GreenSpan saying the US can never default because it could just print money. Erroneous projections of unemployment rates. This is like this graph that I don't know if you remember from almost 10 years ago that showed, by the.
- [18:38]
B
Way, I didn't know that unemployment rates and growth rates were systematically being tampered with. But the, but that information reminded me of a thesis that was written under my supervision a number of years ago by a Chinese student who studied Chinese growth numbers and official growth numbers that are issued quarterly. And what she found was a systematic pattern whereby the numbers were inflated when they were announced. And before the next quarterly announcement, the previous quarter's numbers were systematically reduced.
- [19:35]
A
Yeah, exactly.
- [19:37]
B
Making the new number, new exaggerated number look even better.
- [19:43]
A
Yes, exactly.
- [19:45]
B
That this was a systematic, systematic process. Yeah.
- [19:49]
A
So this is us had a few job, fewer jobs pastured than initially reported. 2024 admission, and now 2025, just a few months ago. Now that the new admin is there. And of course the, you know, other people would say that these guys are, you know. But the Biden administration claimed to have added 400k jobs from July through September in order to win re election. New data suggest none of those jobs ever existed. They overestimate the number of jobs. And so point is that there's basically a very severe dispute over of course Trump in his own way has a reality TV of many things in particular, like you know, a lot of the stuff around trade and tariffs and so on and so forth is, is incorrect. But anyway, my point, here's my, my thinking on this and I'd love your thoughts because this gets, I think a deep overlap of where we think about things. So if you go through all these things, all these different economic stats, that's 20 years of economic fakery. But it's not all just lies. Some of it is error, some of it is very material revisions, some of it is spin, like quantitative easing isn't printing debt ceiling, doesn't matter, it was tribalism, some of it's like pseudoscience. The AA mortgage backed securities arguably outright flawed and then transitory inflation in 2021 was all of the above. It was error, it was revision, it was spin, it was tribalism, it was pseudoscience and eventually it was outright fraud because everybody who bought treasuries in 2021 bought them on the false pretense that rates were going to be low forever. And they weren't, they were hiked radically in the next few months. Right? So the reason I say this is when you have the centralized authority, that you have some local information and you can compare it to what the centralized authority is putting out and you can see that based on your local information, it doesn't match up with what they're saying. Right? You know you're mugged by reality, but what are you going to believe? Them or your lying eyes? Right? You've got local sensor data, right? You can diff it and you can say that centralized authority is false and I know what is true in this local area, right? But you, it's hard to form a system perspective because can they actually truly be lying about everything? Well, are they lying about whether it rained in Panama like the Weather Channel or something like that? Can you really go and check that for yourself? Can they be lying about everything? No, you need to have some decision rule to figure out what is true and what is false. And that's really expensive because it's essentially reinventing the centralized institution again. And that leads to the, you know. You know the concept of Gelman amnesia by Michael Crichton?
- [22:24]
B
No.
- [22:25]
A
Okay, so he has this concept which is, which you'll like he basically says, you know, there's this great physicist that he. Murray Gel man, famous Nobel laureate. And basically Michael Crichton said if when you go and you read the paper on any subject, you know, they reverse cause and effect, they get everything wrong. You know, they're just like. They just. Just get it wrong. And because you have local knowledge and then you flip the page and you read about Japan or you read about steel, and you forget that they just completely messed up the area that, you know, you read those other stories and you have amnesia and. And his friend called it gel man amnesia, where anytime they wrote a story about physics, Mario Gel man would find out all the errors and so on about it. Then he'd flip the page to read about Japan or Korea as if it was true. Right? And the way I think about this is if you imagine, let's say the New York Times or legacy media as like. Or the US Government is like a centralized institution, a hub in the center, right? Then you're a spoke over here and you. You have, let's say, local knowledge on. On Duke, on academia. Right? And I might have local knowledge on biotech and somebody else's local knowledge on Japan or something like that. But how is the Japanese person supposed to know about what's happening at Duke better than nyt? He would just go to NYT to figure out that information because he couldn't talk to you directly until social media.
- [23:49]
B
Yeah.
- [23:50]
A
And now we could route around. Right. Go ahead.
- [23:53]
B
Well, social media then changes things because you get influencers and you have influencers that you trust, and you trust them because people you trust are following them, are retweeting them, and when you yourself follow them, you find out that generally what they say turns out to be.
- [24:19]
A
True, or at least, at least it comports with one's worldview, even. Right? And then, then the tricky part, though, is, of course, social media itself is not a panacea because you have. You have lots of people who are posting fake stuff on social media just for clout or what have you, Right? And so eventually what I came to the conclusion on is that, you know, the thing about bitcoin and think about cryptocurrency. And one of the reasons, like I was interested in your work beforehand, but then I matched it up with my interest in. In cryptocurrency is have you heard that there's a. There's a great book on bitcoin. Just the title alone is actually pretty good. It's called the Truth Machine. Okay. And the reason is that not read It.
- [24:57]
B
No.
- [24:58]
A
Okay, Right. So you've heard about. So the thing is, whether you're Democrat or Republican, Indian or Pakistani, Chinese, Japanese, you know, British or French, everybody agrees on who holds what amount of bitcoin, which is this incredible thing to have consensus on. Not a trivial truth, a trillion dollar truth, a $2 trillion truth. Right. People will fight, you know, over a million dollars, A billion dollars, let alone trillions of dollars. And the same algorithms that allowed us to get consensus, because they made it very expensive, extremely expensive and challenging to fake the state of the bitcoin blockchain. The same algorithms can get you consensus not just over who holds what Bitcoin, but who holds what amount of stocks, what amount of bonds, what amount of any kind of property. And that actually then extends. And this is something you may not be aware of, it extends off chain. Because I've ever used a smart lock, you know, smart lock, like for a door.
- [25:51]
B
Yes, I have. Yeah.
- [25:52]
A
Like a lock that you can open with your phone, for example. Right. Or think about a key card at a hotel.
- [25:57]
B
Yes.
- [25:57]
A
So this. The same technology that's used to secure electronic, you know, like. Like digital stuff on chain can be used to digitally unlock and lock doors. Right. So that means that all capital equipment, all property, every. Every door to a room, every door to a train, a car, a tank, a plane, every. Everything that makes a drone fly or a robot animate, everything that every machine in a factory, every camera, all of that can actually also be gated by cryptography, the same crypto as bitcoin. It doesn't, to be clear, it doesn't cover the shirt on your back, it doesn't cover the food on your plate. Okay. It's. There's still, you know, personal property that it wouldn't cover. But what that means is we can get to consensus on who owns what piece of property for all capital equipment and all capital. And we can actually extend it further because these are like armored cars for information. So when people are trading on, for example, temperature data, Right. There's oracles that sort of take the temperature data to the blockchain, and then you have smart contracts on that basis. Like, you can do insurance contracts on that basis. So this, to me, struck me as something where it has implications for how we, like, fix a society that's been affected by public lives for a long time. We develop shadow statistics on inflation, on temperature, on this, on that. We make them tradable one at a time on chain. We have contracts on the basis. We allow them to be posted pseudonymously. There's various cryptographic techniques that allow you to do that. And then we eventually start getting a picture of what is actually true and false in society by kind of editing around the edges. Right. And we started with really the monetary system, which is maybe the most valuable piece. And then we can extend that to other kinds of facts. So I know that's maybe a little technical, but that is how I've been thinking about. You know, you pose a problem which is a recurrence of this public lies kind of thing that causes a dysfunction the centralized organ society. And here's a potential solution which is decentralized cryptographic truth. Let me pause here.
- [27:58]
B
You're talking about a method for extracting information, extracting true information in a context where people have incentives to lie, to falsify. Right. So I'm not really familiar with the methods that you have suggested. Perhaps I can talk about other methods.
- [28:27]
A
Like Bayesian truth ceremonies, similar methods that.
- [28:30]
B
Are used to predict, to measure private opinion in an environment where private opinion, the distribution of private preferences differs from public opinion, which is the distribution of public preferences.
- [28:50]
A
So talk about that. I'm very interested. Go ahead.
- [28:53]
B
If there's a lot of preference of falsification, you know, these two are going to, going to differ dramatically. Now one way of that scholars have used is they've done ethnographic studies. Jim Scott, who died recently, the Yale political scientist, he was an expert at this. He wrote a book called Weapons of the Week. And to collect his data, he just lived among rural Malays to develop their trust, to have them reveal their secrets. And he discovered that all sorts of things that they told the state, that they told the tax collectors and so on were not true. And so that's one way. And many of the preferences that they projected publicly and to authorities, to people outside of their immediate circle were not true. So that's one thing you can do. You can also conduct surveys that offer anonymity in very repressive climates.
- [30:09]
A
Of course.
- [30:09]
B
Let me go back to ethnographic studies. Of course it's very expensive to do. It's very time incentive in time intensive surveys that offer anonymity. In repressive environments, it's difficult to be convincing.
- [30:31]
A
Yes. So I mean the thing about it is. Go ahead.
- [30:35]
B
Yeah. Repressive regimes know that there's a great deal of preference falsification and knowledge falsification because of their repression. But they have an interest in knowing where the true sentiment opposition are, what the, what the truth is. So they all, all offer anonymity to certain, certain groups to.
- [31:00]
A
Is that true? I didn't know that. So basically, I don't know. So they actually do their own private polling.
- [31:06]
B
Yes, they do their, their own private polling. This was, this was done in all Communist Europe. The Soviets did this in.
- [31:16]
A
I did not know that.
- [31:17]
B
Okay, they, they did this in East Eastern.
- [31:21]
A
How do they, how do they conduct that? Was it like, how many thought criminals are there in your district? Do you estimate, comrade? Do they do it like an indirectness thing so that the person who said, I think there's lots of saboteurs here could be off the hook? Or they literally ask it directly with an anonymous service?
- [31:37]
B
They, they did everything. The one I'm quite familiar with is the anonymous polling they conducted in Leipzig for over 40 years now. How they convinced, in the 1950s, how they convinced a group of students, college students at Leipzig, to believe that the check marks they put on pieces of paper that did not include their names. How that these would not be used somehow to punish them if they were giving the wrong answers, I don't know. But once the system got established and students at Leipzig learned that there were no reprisals, this information became valuable. Not that there was no preference falsification at all in these surveys, but over time changes were meaningful.
- [32:48]
A
So that's interesting. So the time series approach, where they could at least detect trends up and down, even if they weren't sure about the absolute level?
- [32:59]
B
Yes, they could detect these trends and they. Leading up to 1985-89, you see a dramatic increase in opposition to the Communist Party in the belief that communism was not an efficient system, that dramatic reforms were needed. So the communist leaders were aware that there was growing discontent in the, in the population. So that's one thing you can do. Of course, it's very difficult to establish such a system and develop the trust of a certain community. Google searches can be revealing. People often will if there might be no public enthusiasm for a particular candidate. But Google searches can, can reveal that there's actually a lot of enthusiasm, hidden enthusiasm for, for candidate. There's social circle polling. This, this involves asking people not about their own preferences, but the preferences of people in their, of their, the preferences of their acquaintances or. Yes, in their, in their communities.
- [34:35]
A
Yes, that's so. That's so. I'm filling with Bayesian truth serum, which is one variant on this. And this is also kind of relevant to prediction markets. But basically I think this is a patented technique or something like that. But there's, there's like maybe some unpatented version or it's coming off patent. But the idea was very similar to what you just said, which is you ask people, let's say, for example, let's say drug use, like marijuana or something. You ask people straight up, do they use marijuana? Then you also give them an incentive of guessing what percentage of people actually use marijuana in the population. And the closer they are, the, the more money they get. And it's like drops off symmetrically or whatever on either side.
- [35:17]
B
So if it's like part, you reward them partly for how well they can predict the actual distribution.
- [35:26]
A
Yes, that's exactly. That's right. So, and under certain assumptions, of course, your people have to be smart enough to know that they can. By predicting the distribution, they're off the hook themselves. Right, because they're just, you know, trying to predict all these other people are misbehaving. Right. So this is similar to prediction markets where you are, you know, trying to estimate whether something is going to happen or not. And sometimes a prediction market's really like a verification market where you're trying to see whether sentiment will, you know, hit a particular range, you know, and you know, I think a lot of your concepts are good things for people in crypto to think about. Actually, there's another piece of it because your other set of books on Islamic finance, I often think about that with respect to bitcoin maximalism. Do you know what Bitcoin maximalism is?
- [36:22]
B
No.
- [36:23]
A
Basically, you know, Islamic finance wants no debt. Right. And you know, actually, you know, Christianity also.
- [36:32]
B
No interest based steps.
- [36:34]
A
Sorry, sorry, no interest based step. Correct. You're right, I'm precise. Christianity also had prohibitions on usury, on high debt rates, and you know, the, the Soviet Union had prohibitions on a different economic thing, which is profit. And what bitcoin maximalism is, it basically says Bitcoin is the only coin, there shall be no other coins. It essentially has a prohibition on, let's call it equity issuance. Right. Any, any, any new coin which is created is sort of taboo in the same way that interest was under Christianity or Islam and profit was under communism. And issuance of new assets is under Bitcoin maximalism. And there's a similar sense in which it has a somewhat distorting effect on the economy, which is to say that bitcoin maximalism is so anti finance that it's very hard to do decentralized finance on the bitcoin blockchain. So it's moved to other chains like Ethereum and Solana. Now one of the pros of this is that they basically think everything Outside of Bitcoin is a scam. And so okay, with everything that is not bitcoin being pushed off of the bitcoin chain. They want a very simple economy. They want gold and only that. They don't want any tricks. They want it to be simple. And this is actually, I would argue, in part also related to our previous point, which is it's a reaction against, let's say, an administration with all the lies of the Soviet Union or maybe the Biden administration or all the past kind of things. There's a tribal reaction to that, which is just mass distrust in the centralized power and just wants total simplicity, total verifiability, what I can touch and feel with my hands. But that also means less civilizational complexity, maybe a dark ages or less economic scale because there's no trust anymore. Everybody goes back to what they can touch and feel with their hands. Sort of a tribal kind of order. Right. So almost like phase one is publicized private truths and phase two is this extremely simple financial system like Bitcoin maximalism or post Soviet economics where there's such low trust that scale is inhibited. Let me know your thoughts.
- [38:44]
B
Scale is, is inhibited. And the, going back to the Islamic case, the reason the Middle east fell behind economically is that it could not scale up. It had economic institutions that were quite well suited to the Middle Ages were when the scale of production, the scale of commerce was quite small. Huge problem was when the west developed the institutions for mass production and mass communications, mass transportation, et cetera. And it developed the technologies that would make mass production and so on profitable. The Middle east found itself at that point. And the Middle east wasn't the only region in the world. There were other places as well that had been more advanced economically than Europe that found themselves unable to compete through small scale operations, small scale enterprises with the huge enterprises backed by a huge amount of capital that the, that the Europeans were presenting.
- [40:09]
A
So, you know, the thing is, you know, you know more of this history, you know more of this history than I do. But the Abbasids and the Umayyads did manage fairly large scale. Right? The state. The state did. Right. And certainly the modern.
- [40:23]
B
You didn't have private enterprises, large private enterprises.
- [40:27]
A
I see. That's interesting. So the, that, so, you know, it's, it's interesting some of the comparative stuff. You know, I've, I've been, I need to learn more about, you know, the basically Middle Eastern economics and so on and so forth. Have you, have you seen, have you read Fukuyama's Origins of Political Order.
- [40:48]
B
Yes. And I. I know several of Fukuyama's books. Yeah.
- [40:52]
A
Okay. So there's one thing in that that stuck with me, and I'm going to just paraphrase and, you know, like. Like summarize a very big and complicated thing. And something that stuck with me was kind of the concept of. And maybe we can relate this to the Europe and Middle Eastern thing. In China, you have the state above the law. And in India, for many, you know, many centuries, you had the law above the state. And what that meant was in China, they took the pragmatic attitude that. Which is kind of actually, in a sense, pragmatic or. Or unlimited, a government, whatever you want to call it, that, like, your chair could just turn into a CCP agent or an agent of the emperor if. If the state so desired. Because what could really hold back the state law is just a piece of paper. But the state has, you know, the guns, it has the troops, it has the people. And so it really. It just has root access to everything. And so state above law. So strong state, weak law. In India, it was the opposite, where the kings were actually relatively weak because Dharma, they believed in Dharma and Karma. And so somebody could quote the Vedas or the scriptures against them, and they would be like, okay, I don't want to, you know, not be reincarnated. I'm going to step lightly. And dharmic law, you know, was. Was actually pretty strong. Right. But the state was relatively weak. And I think about that also in the modern context, in some ways, in terms of China versus crypto, where the modern China is strong state weak law, where Xi can just order lockdowns or seize funds, take Jack Ma's companies and so and so forth. But the Internet is sort of law above state. Where you have Bitcoin, you have cryptocurrency, and that can constrain states. And if they want to seize your funds, they can't. Right? You now move from people's belief in reincarnation, which is a human belief, something that's harder than that, which is like their inability to, you know, solve certain kinds of math problems, to take the money on chain. And. And then the kind of European and Middle Eastern world are yet different kinds of structures, right? Where Europe, you can argue the law equaled the state for a long time, you know, rather than state above law or law equal state, that, you know, that they were arguably, they were considered connected. And in the Middle east, maybe you can give some remarks on that. I think, like, my very rough impression is, see, there's been various stages, absence of Umayyads. Also before the modern era, you didn't have as much fundamentalist Islam and that like the whole Sayyid Khattab Wahhabiist thing is actually a late 20th century phenomenon because Mubarak and others, right, were very secular and they laughed at the idea that everybody was going to be veiled. They laughed at the idea of the Tarha was going to be a big thing. But then yet again you have now today, Riyadh and the UAE are actually very modern, despite having people in traditional dress and so on. So I don't pretend to fully understand the full Middle East. I'm actually pretty bullish on it in recent years because there's been a lot of pro tech, pro, you know, pro capitalist sentiment there. There's Kareem and other kinds of things. Maybe you can help give me a lens because, you know, I spend more time there, I spend more time in Dubai and I'm, you know, I'm, I'm bullish on the region, but I, but I don't know everything about it. So, you know, maybe you've got some thoughts.
- [44:01]
B
So I happen to be also optimistic with regard to the long run. The last book I wrote on the subjects called Freedoms Delayed, Not Freedoms Denied. I believe that the institutions necessary for the Middle east to achieve the right balance between the power of the state and power of society, that that potential is there. I don't think there's any quick fix. I don't think that in a region where you don't have a sing democracy at the moment, where religious freedoms are quite weak, I don't think that we're going to see a Jeffersonian democracy anytime soon. I think that the region is quite troubled at the moment. But I do agree with you that the region is not completely a basket case. It's not hopeless. It's not condemned for forever to very repressive, very repressive regimes and it will not remain forever economically underdeveloped. Let me point out, just taking off from some of the points you made. During the Umayyad and Abbasid times, roughly the 8th century to the 13th century, the Middle east had strong states in the sense that they had strong states in this sense that they could deny property rights if the sultan wanted to expropriate something was powerful enough to do that. Their ability to tax was far greater than, than the taxation capacity of European countries. In that sense they were strong. They were shallow states in the sense that they did not provide many social services. Social services were Provided through private non government organizations. And we can get into that if you want. What is the big problem in the Middle east, least with regard to modernization, was apart from the fact that it couldn't scale up in commerce and production, is that it's civil society didn't develop, you didn't get a value, you didn't get pressures from below that constrained the state. I. This is what Europe.
- [47:07]
A
No Magna Carta esque development.
- [47:09]
B
No Magna Carta esque developments over a long period. And it wasn't just the Magna Carta. It was over time. You had, merchants got organized, guilds got organized, various religions got, got organized and they started putting pressure on the state. They, they obtained seats at society's bargaining table and that's the rise of parliaments and the seats given to merchants and so on. That is a process that takes a thousand years and we don't see a counterpart of that in the Middle east until the 19th century. Yeah.
- [48:02]
A
So it's interesting because basically the, you know, you're of Turkish descent, right? And so like that, you know, that whole area, the sort of the Byzantine, the concept of Byzantine politics and so on comes from.
- [48:18]
B
Right.
- [48:19]
A
But that always struck me as something where you did have lots of groups maneuvering against each other, but you would not call that civil society. You would consider that something different. Or am I, you know, mistaken for different things?
- [48:32]
B
You had, you had conflicts among elites.
- [48:41]
A
As distinct from civil society.
- [48:42]
B
Yeah, distinct from civil society. There was constant angling among the elites, people in the sultan's circle for, for better position people. You know, there was a lot of backstab going on. There was, there was constant renegotiation among, among elites. But you didn't have, you didn't have groups from below gain, gain a place at the bargaining table. They were never part of the negotiations.
- [49:18]
A
I see. That's interesting.
- [49:20]
B
Even the reforms that started in Egypt and Turkey in the, in the 19th century, that came from above.
- [49:29]
A
It's interesting because I have to, I have to kind of sit and think about that for a bit because, you know, there's like one school of thought that says, you know, change comes from the masses and our school of thought that says it's actually always just elite versus counter elite. There's a third school of thought that says if you become a leader of the masses, then you are almost by definition a counter elite and you know, so on and so forth. Right. And so I'm not, I'm not disagreeing with you. I'm just, I'm just, you know, I have to I have to think about that for a little bit. The. I think another thing is in your definition of civil society there, that there's sort of a positive reason for, let's say, merchants to group together that didn't necessarily have a. Necessarily political reason, like farmers or what have you. They could, they could be building together, you know, they could be trading together and so on and so forth, and they'd get to know each other socially.
- [50:23]
B
Pooling their capital and labor.
- [50:25]
A
Yeah, exactly. So they had, they had some organic reason to be together that wasn't just fighting the government or whatever. Right. And so because of that, there was like, you know, they actually were not simply always part of a power struggle. They were also part of. They were like an organic structure that emerged just by its own. Maybe that's, maybe that's a useful distinction. You know, one thing, actually, maybe you can say something. I know this is a digression as well, but modern Turkey, I don't fully understand it because on the one hand it has these crazy rates of inflation. On the other hand, like, you know, whenever I fly through Ankara or something like that seems pretty nice. And you know, like, when I'm going around Turkey, it, like at least the Istanbul area, it seems pretty nice. And they've got the bare actor drones and so on and so forth. And so I can't really, I'm just rationally ignorant about Turkey because I don't understand it. But maybe you have some thoughts on it.
- [51:30]
B
This, this connects with a point I made earlier, that there is a huge potential in the Middle East. Turkey is right now, Turkey right now has an authoritarian system, but as a very dynamic economy. And it has large groups of people who are quite alienated from the system. And when I say the system, it's not just the political system and the party in power, Erdogan's party, but also the dominant religion, which is Islam. Islam has not had a liberal schism. All of the schisms that have taken place in Islam over the past 200 years have been radical schisms groups. ISIS is an example. Al Qaeda is another example. The Muslim Brotherhood is another example. They are groups that oppose the mainstream variant of Islam in a particular geographic area for being too relaxed. And they promote a more puritanical, stricter form of Islam.
- [53:05]
A
Can I argue with you a little bit?
- [53:09]
B
Yes.
- [53:09]
A
So there, you know, you can. One thought is that the, there's, there's Sunni Islam, Shiite Islam and then socialist Islam. Right. In the sense of wokeness. The woke version of Islam is in a sense A liberalizing. You could in some sense radicalize, in some sense liberalizing, but it's to the left on some dimensions of Sunni Islam, number one. Arguably, it's with them on other kinds of things. So it's almost like a third school, Right. That hasn't been kind of thought of.
- [53:46]
B
As such, except that it's not organized. You don't have. You don't have Protestantism, but Protestantism has, you know, is organized. There are hundreds of Protestant churches. They all have. Have their. They own. They all own proper. They have legal standing and so on. You don't have a recognized liberal Islam or. Okay, use your terminology, woke Islam. Yes.
- [54:18]
A
Yeah. So let me give a fourth. So let's say Sunni Islam, Shiite Islam, socialist Islam, or woke Islam, and then the fourth, which is secular Islam, which I know sounds oxymoronic, but when I'm in the Middle East, I see a lot of people there, especially in Dubai and increasingly Riyadh, who are. Maybe they're in, you know, traditional attire, but they're very sophisticated tech, finance, capitalist people, men and women. And they have great conferences and they are like. I don't get any sense of like, they're. They're exactly like the, you know, Arab and Muslim people that I've worked with in tech outside the Middle East. Right. And so, like, that's. That's very different than I think Saudi was pre mbs. And, you know, I don't know. I don't have enough track record or not track record. I don't have enough game film on what Dubai was like 20 years ago, but it basically feels like, like San Francisco, honestly, in terms of. Or like what San Francisco used to be in terms of being plural and pro tech. And, you know, they still have the call to prayer and so on and so forth, and they still wear traditional dress. Go ahead.
- [55:27]
B
Yeah, yeah, yeah. Very talented. No, one of the things that has happened in the Middle east and this is happening below the radar screen of most people, is that religiosity is declining dramatically.
- [55:40]
A
That's exactly what I'm saying. So I don't know.
- [55:42]
B
Yes. Reforms didn't occur out of the blue. They're not happening just because, you know, he's trying to push society. He sees the trends. He sees that youth are less religious. He sees that people are fed up with the Wahhabis. They are wealthy, wealthy enough to have access to information coming from outside of Saudi Arabia. They're all on social media and so on. He is extremely clever. He's trying to get ahead, get ahead of the curve and be the leader of the modernizers in Turkey, religiosity.
- [56:20]
A
Was that a backlash to ISIS and the craziness or was it like exposure to the global.
- [56:25]
B
It's backlash to Wahhabism and it's, and it's a consequence of higher education, which has happened in Saudi Arabia. The literacy rate a century ago was less than 1% and now there's universal literacy. Women go to school. In fact, more women. I believe this is true for Saudi Arabia as well, or are in college than, than men. And they are, this is making and making a difference. And you have, you have a growing number of atheists and deists in places like Saudi Arabia. The numbers are huge. In Turkey, we're talking about 20, 30, 40% who are nominally Muslims still, but they don't actually consider themselves Muslims. They don't believe in organized Islam. Iran is another case. Some point religiosity is falling dramatically. And this is, I think the, this is what creates a huge potential for change, including change in interpreting the religion. Now, this is not to say that. Yeah, please.
- [57:47]
A
Yeah, there's going to say. Well, the reason I ask is there's a, there's an interesting quote from a, a senior person in Dubai. Right on. Like, let me see if I can play it for you. Yeah. So this Sheikh Abdullah bin Syed, right. Do you know this quote from like a few years ago?
- [58:13]
B
There's so many quotes. You'll have to show it to me.
- [58:15]
A
Yeah, yeah, it's, it's a very good quote where he basically said that Europe is going to produce way more fundamentalists than the Middle east because they, they get it. Right. Like I say, the Middle east actually understands it and so on and so forth. Right.
- [58:32]
B
You, you mean that, you mean Muslim fundamentalists in Europe? Is that what he's.
- [58:37]
A
Yes, that's what, that's what he was saying. So here, let me, let me show you this. You paste this on. Let me see if I can. I'm not sure if this will. If you just play that video.
- [58:52]
C
And let me say this in English so you can understand what I'm saying. No, I know you have translation, but I just want to make sure you get it right. There will come a day that we will see far more radical extremist terrorists coming out of Europe because of lack of decision making, trying to be politically correct or assuming that they know the Middle east and they know Islam and they know the others far better than we do. And I'm sorry, but that's pure ignorance.
- [59:35]
B
So. Can you hear me?
- [59:36]
A
Yes. Did you see that?
- [59:38]
B
Yes, yes, no, I did see. Won't surprise me if a lot of fundamentalists emerge in Europe at the same time. There are a lot of Muslims in Europe who are quite tolerant, who are not Islamists you just don't hear about.
- [60:05]
A
So of course, of course, if you.
- [60:07]
B
Look at the United Kingdom or the Netherlands or France, the ones you hear about are the violent ones or the ones.
- [60:16]
A
Totally, totally. No, no, I'm totally with you on that Cathedral.
- [60:20]
B
So there is so one possible, one possibility is for liberal Islam to emerge in Western Europe or in North America and, and then spread to the Middle east another.
- [60:39]
A
So that's a part, that's the part where at least what I am observing is that you have more like, for lack of a term, tech, libertarian, secular, you know, people in Dubai and Riyadh.
- [60:56]
B
Absolutely.
- [60:57]
A
And, and that seems that's like hugely on the upswing. Anyway, I, I, I throw that out there because I feel that that's something which is not part of the public perception about the Middle east, that they're doing startups and they're doing tech and it's not, it's not all war and, and somehow actually maybe you have a thought on this actually. What was your. Do you think Turkey has, you know, is it doing poorly economically? Is it doing well? It's very hard for me saying, by the way, it wasn't Ankara that I stopped there. I think it was Istanbul. Yeah, it makes more sense. Sorry, I got that wrong. Do you have a view on whether.
- [61:35]
B
Istanbul is a big global hub?
- [61:36]
A
So yeah, yeah, that's right, that's more sense.
- [61:42]
B
So the Turkey is ahead of the curve respect to many, many Arab countries because it started reforming its institutions. It start of the process in the early, even early auditor came several generations after the process started. The process involved, involved abandoning Islamic institutions which were the basis of the economy and replacing that and borrowing European institutions. This started in the 19th century in Turkey, in Saudi Arabia, the process started in the 1930s. And secularism. Saudi Arabia has not had a period of official secularism, whereas the Middle east was secularizing in the late Ottoman Empire. And then it had a period of assertive and very aggressive and to an extent repressive secularism between 1923, 1850. So. There's a lot of experience with secularism and secularism has secularism. The secular period is remembered for many achievements, which helps. Now the reason I'm bullish on the economies of the region is that they have all complete, they've all moved away from Islamic institutions and adopted all of the institutions that enable capital accumulation on large scale. The forming of large profit making companies, the formation of large NGOs that have flexibility. And if the region starts liberalizing in one area, the starting point might be religion, it might be intellectual life, it might be politics, liberalism will spread. And all of the institutions necessary for a liberal order have already been adopted. And religious opposition to them is minimal, if not non existent. Under classical Islamic law you could not establish a corporation. There's no such thing as a fictitious individual that would be recognized in courts. Islamic law, classical Islamic law is extremely individualistic. Only natural individuals are recognized. That's no longer the case. Everywhere commerce is conducted under rules that allow enterprises. Large corporations, Large corporations. Every place you find stock markets where shares are, shares trade. And these are things that were in that are incompatible with classical Islamic law.
- [65:40]
A
Well, you know, it's interesting because one, one thing that I can't shake is the feeling that maybe it was different 25, 30 years ago, but I have a feeling that, that the west has become in some ways more fundamentalist than at least the parts of the Middle east that I see. And here's why I say that I think for example, what is the modern thing on corporate law? Right. It would be AI agents and AI personhood and so on and so forth, right? That would be like the modern updating. Just like there was that sort of, you know, kind of use your imagination fiction of a corporate person. It's less fictional. An AI that can trade on your behalf maybe have even have some liability. It has a crypto wallet, so it has some bank account, it can be fined even you know, what have you. I have a feeling that there's going to be strong forces that resist AI personhood in the West. I can, I can feel a developing anti tech backlash that'll probably happen next few years. But I, I think there'll be less of that overseas. Maybe not specifically in the Middle east, but it somehow I think, and maybe it's. The west is unfortunately declining with the rise of the Internet, but Asia and the east is rising with the Internet. And so because of that the west will correlate the phone and AI and all this kind of stuff to their decline. And the east will not, they will correlate it have the opposite conclusion. They'll be more friendly to these new constructs. Did the, did the ban on corporate personhood, was that related to like the ban on iconography or basically the iconoclasm?
- [67:20]
B
No, this was. The concept of a corporation was developed in the Roman Empire in what is now Istanbul. Justinian's code of the 6th century. It contained the concept of the corporation. The west borrowed that concept at a time when states were in Europe were quite weak. In the aftermath of the fall of the Western Roman Empire. Islam arose about a century later and developed very strong states. The state did not want competition from corporations. What were the communities likely to benefit from the corporation and gain strength by incorporating? They were the old tribes. Islam was not just religion, but it was also a political project. It tried to replace universal Muslim brotherhood with tribalism. And so even though many concepts were borrowed from Roman law and from Persian law, the concept of a corporation was deliberately ruled out through by making Islamic law extremely individualistic. That was the reason why there's no concept of corporation. And so the. And the reason why the concept of the corporation was not. Even though it was always known why it was not brought into Islamic law. In later centuries. After Europeans started using the corporation for various reasons, not just to organize universities and to make guilds more efficient, but also to make commerce more efficient and finance more efficient. Banks were established as corporations. Starting in the 16th 17th century, trading companies started getting organized as corporations. Why didn't Islamic law, Islamic law, seeing the advantages of the corporation in the west, why didn't it undergo reforms at that point? Well, one of the reasons was that there wasn't much pressure from below for establishing corporations. Commerce was was in the hands of atomistic enterprises. And small enterprises don't see not only small but short lived enterprises. They don't see a reason to incorporate. There wasn't a constituency that demanded the corporation. The corporate laws in the Middle east arose in the or were put in place at the beginning of the 20th century again from above by people who understood that unless you gave society the tools to establish corporations, the Middle east would continue to be colonized and it would be ruled by Europeans.
- [71:13]
A
Because they're cooperation tools. That's really interesting.
- [71:17]
B
They're tools of cooperation on a large scale.
- [71:19]
A
Yes, that's right.
- [71:22]
B
With a small partnership of two, three individuals. You can have the individuals, you can have all the individuals come to court. You can't do that with a large scale organization. You can't have every shareholder holder of Microsoft say if there's a court case involved with Microsoft, you can't have all of them come to come to court.
- [71:43]
A
Right, right, right. Yeah. No, I understand. Being able to act on someone else's behalf. And actually a meta organism like a company. Every single person who was part of Coca Cola in 1950 has basically been swapped out and replaced with, in a sense, they're like an immortal person because every cell can be swapped out. The CEO can be swapped out, but so can every person.
- [72:05]
B
Yes.
- [72:06]
A
And in theory you could have a corporation where every single person was swapped out and then they were swapped back in. If that's ever happened. Maybe, you know, so like, I don't know, like a change of control or something.
- [72:17]
B
But the corporation itself lives on. And I find very interesting this, this notion that you could have, that AI can have legal personality. Legal.
- [72:27]
A
So yeah. So this is something that I think a lot about because you know, somebody like I've talked about this others, some people have tweeted this. But the next step after corporate personhood and double entry accounting.
- [72:40]
B
Yes.
- [72:41]
A
Is AI agency and triple entry accounting, which is what the blockchain is because it's not just the debit and the credit. There's also a universal ledger that accounts for it. And AI and crypto go together because like crypto and the blockchain, that's the kind of money that's kind of property that AIs can natively interact with with now how you want to have what they do be bounded. But could an AI be a corporate secretary? It probably could. Could it do your books for you? It probably could. Anything that's relatively routine and straightforward and not exceptionally time or rule varying. It can't do markets, it can't do politics yet because those are very time varying demands. But the relatively routine kinds of things, it could do that.
- [73:23]
B
But can it happen?
- [73:24]
A
Go ahead.
- [73:25]
B
What kind of liability will it have? I'm sure this is the, the, the limit.
- [73:31]
A
The liability will be limited by how much crypto it's on its person. It's AI person, which is funny. So, okay, I want to, I want to just quickly wrap up. This is actually pretty, pretty awesome. I think we connected your, your books to actually cutting edge technology. We're publicized product truths. So in terms of preference falsification and you know, relating that to not just contemporary events, but also decentralized cryptographic truth and then the concept of personhood and corporate personhood and how that was held back in some ways kind of leads to AI plus crypto and then also other aspects of determining whether or not people are telling the truth related to prediction markets. So I recommend your work for people who are interested in how older social systems function and dysfunction and how if you're interested in the societal implications of new technologies, that there's a lot to learn and digest from your work. And that's why I've been a big fan for a long time. So thank you very much, Timur, for coming on the pod.
- [74:39]
B
Well, thank you very much for the opportunity. And I greatly enjoyed the conversation and learned a lot in the process that you, you mentioned a number of concepts that I was unfamiliar with, and I will go and try to educate myself about them.
- [74:57]
A
Great. Awesome. Looking forward to it. And let's talk more.
- [75:00]
B
Okay. Bye.
- [75:01]
A
Bye.
- [75:02]
B
Take care.