Podcast Summary: The Peter McCormack Show – "Bitcoin, A Fiduciary Duty with Nik Bhatia" (WBD350)
Introduction
In episode WBD350 of The Peter McCormack Show, host Peter McCormack interviews renowned Bitcoin author Nik Bhatia to delve into the evolving role of Bitcoin in modern financial systems. Released on May 19, 2021, this episode explores Bhatia's insights from his acclaimed book Layered Money, his recent article "Asset Managers Owning Bitcoin Is Now Your Fiduciary Duty," and broader discussions on Bitcoin's future, adoption, and its implications on fiduciary responsibilities.
1. Success of Layered Money and Bhatia’s Authorial Journey
Nik Bhatia opens the conversation by sharing the overwhelming success of his book, Layered Money, which has surpassed 18,000 copies worldwide and garnered international translations, including a version in Chinese partnered with the Social Sciences Academic Press (04:54). This success has enabled Bhatia to transition into a full-time author, with a second book already in the works, focusing exclusively on Bitcoin's future.
Notable Quote:
"It's over 18,000 copies worldwide now, which is really, really exciting." – [04:54] Nick Bhatia
2. Bitcoin as a Fiduciary Duty for Growth Managers
A significant portion of the discussion centers around Bhatia's article asserting that asset managers have a fiduciary duty to consider Bitcoin if they are committed to delivering growth for their clients. Bhatia argues that ignoring Bitcoin is akin to dismissing a fundamental shift in the monetary landscape, comparable to ignoring the advent of the internet decades ago.
Notable Quotes:
"If you're ignoring Bitcoin now as a growth manager, you are ignoring that an alternative monetary reality has come into existence on this planet." – [36:30] Nick Bhatia
"It’s a violation of your fiduciary duty. Can you imagine being a growth manager 20 years ago with no exposure to the Internet?" – [37:07] Peter McCormack
3. Global Bitcoin Adoption: El Salvador's Hyperbitcoinization
Bhatia narrates his transformative experience in El Salvador, particularly in the town of El Zonte, where Bitcoin has been embraced as a primary currency. He describes witnessing "micro, hyper bitcoinization," where local businesses and individuals prefer Bitcoin over traditional currencies, demonstrating its practical viability in everyday transactions.
Notable Quotes:
"Every single store pretty much accepts Bitcoin. Everybody locally wants Bitcoin. Everyone is using Bitcoin." – [21:07] Nick Bhatia
"This actually can happen. This actually can work. You can build an economy based purely on Bitcoin." – [24:27] Nick Bhatia
4. Inflation, Currency Debasement, and Bitcoin’s Appeal
The conversation shifts to the relationship between inflation, currency debasement, and Bitcoin. Bhatia emphasizes that while traditional measures of inflation in economies like the U.S. and the UK remain low, Bitcoin's appeal in regions experiencing economic instability and currency devaluation is profound. He underscores Bitcoin not just as an investment but as a safeguard against monetary policy missteps.
Notable Quotes:
"Inflation is still at 1% in Europe. Statistically speaking, that’s not enough statistical inflation to drive people into like, I have to own Bitcoin." – [30:05] Peter McCormack
"They've never had issues moving money around. I come to a place like El Salvador, they have issues getting money, moving money." – [24:26] Nick Bhatia
5. Differing Motivations for Bitcoin Adoption
Bhatia distinguishes between regions adopting Bitcoin out of necessity, such as in El Salvador and parts of Africa, versus Western markets driven by fear of missing out (FOMO) and potential high returns. He highlights that in areas where traditional currencies are unstable, Bitcoin offers a tangible alternative, whereas in more stable economies, its adoption is often speculative.
Notable Quotes:
"People in El Salvador want Bitcoin. They know they need Bitcoin, and they transfer some of it back to dollars because some places they need dollars, but they want Bitcoin." – [27:08] Peter McCormack
"In the West, the FOMO and the returns drive people, but in places like El Salvador, it's the most real thing they can get their hands on monetarily speaking." – [27:08] Nick Bhatia
6. The Lightning Network: Enhancing Bitcoin’s Usability
The discussion advances to the Lightning Network, a second-layer solution aimed at facilitating faster and cheaper Bitcoin transactions. Bhatia expresses strong optimism about its potential to revolutionize everyday transactions, making Bitcoin a more practical medium of exchange akin to services like Venmo.
Notable Quotes:
"Lightning Network is here to stay. It's growing. The technology is rapidly evolving." – [64:41] Peter McCormack
"Lightning Network is an acceleration of the velocity of Bitcoin by participants already in the network." – [63:36] Nick Bhatia
7. Geopolitical Implications and Bitcoin’s Future Role
Bhatia and McCormack explore Bitcoin's role in the broader geopolitical landscape. Bhatia posits that unless global stability is achieved, government-issued currencies will persist, functioning alongside Bitcoin. He anticipates the introduction of central bank digital currencies (CBDCs) but believes Bitcoin will continue to serve as a vital investment asset and a tool for financial empowerment.
Notable Quotes:
"As long as there's competition between countries, there's going to be government currencies because currency is a policy tool." – [56:33] Nick Bhatia
"Bitcoin is a pure voluntary social safety net." – [51:07] Nick Bhatia
8. Overcoming Bitcoin Naysayers and Misconceptions
Addressing skepticism, Bhatia criticizes naysayers who dismiss Bitcoin due to ideological biases or personal regrets over not investing earlier. He urges asset managers and investors to educate themselves, read foundational Bitcoin literature like Layered Money and Mastering Bitcoin by Andreas Antonopoulos, and recognize Bitcoin's integral role in the evolving financial system.
Notable Quotes:
"If you are not analyzing Bitcoin, then you are violating your fiduciary duty." – [38:34] Peter McCormack
"If you still haven't picked up a book about it or at least tried to understand the bull case for it, then you just got your head in the sand." – [39:42] Nick Bhatia
9. Bitcoin as the Pinnacle of Property Rights
Both discuss Bitcoin’s unique position as an uncompromisable form of property rights. Bhatia envisions Bitcoin as the ultimate advancement in property rights, providing individuals with immutable ownership that cannot be seized or devalued by external entities.
Notable Quotes:
"Bitcoin is the most magnificent advance in property rights in human history." – [31:08] Peter McCormack
"When you hold it and you own it, you realize you can send it to anyone without any middleman, there is that empowerment it gives you as an individual." – [43:57] Nick Bhatia
10. Concluding Thoughts and Future Outlook
As the episode wraps up, Bhatia shares his balanced view of Bitcoin's future, acknowledging both its potential to foster financial empowerment and his concerns about geopolitical and economic transitions. He remains optimistic about Bitcoin’s role as a foundational financial technology, likening its impact to that of the internet.
Notable Quotes:
"I believe that it's gonna all work out and that Bitcoin will serve this purpose, purpose that transitions us into a more equitable future." – [61:50] Nick Bhatia
"Bitcoin is a force for good for many people around the world." – [43:23] Nick Bhatia
Conclusion
In this insightful episode, Peter McCormack and Nik Bhatia explore the multifaceted role of Bitcoin in contemporary finance, emphasizing its significance as a fiduciary asset, a tool for financial empowerment, and a transformative force in global monetary systems. Bhatia’s perspectives underscore the imperative for asset managers and investors to acknowledge and integrate Bitcoin into their portfolios, recognizing its profound implications for the future of money.
For a deeper understanding of these topics, listeners are encouraged to read Nik Bhatia's Layered Money and explore his latest writings on fiduciary responsibilities in the age of Bitcoin.
Resources Mentioned:
- Layered Money by Nik Bhatia
- Andreas Antonopoulos's Mastering Bitcoin
- Nik Bhatia’s article: "Asset Managers Owning Bitcoin Is Now Your Fiduciary Duty"