← The "What is Money?" Show
The "What is Money?" Show
WiM002 - The Saylor Series | Episode 2 | The Rise of Man through the Dark and Steel Ages
01:43:39
Michael Saylor joins me to discuss anthropology, energy, and technology from first principles as we build an intellectual foundation for grasping the historic significance of Bitcoin.
Loading summary
Transcript73 lines
- [00:03]
Michael Saylor
Technologies that are dominating today. They're dominating because they're able to deliver force faster, harder, stronger, smarter. So if we ask the question, what is money? Money is the highest form of energy that human beings can chann. Bitcoin is channeling human ingenuity into making it better. And every commodity is channeling human energy into making it worse. The lowbrow or the historic colloquial term is hodl, right? Hold on for dear life or just hodl or save, whatever. And the highbrow term would be adopt as a treasury reserve asset.
- [01:07]
Robert Breedlove
Hey guys, this is Robert Breedlove and welcome to episode two of the Sailor series on the what is Money show. So in episode one, we covered the rise of man through the stone and the Iron Ages. So we went into ancient technologies. We talked about fire, we talked about missiles, and we talked about hydraulics facilitated by water. And now in this episode, we're going to go a little further in the historic arc of man and we're going to get into the Dark ages. We're going to learn how missing one key step along the path of civilization can actually cause us to slide backwards and to regress. And that civilization is not a guarantee, right. It is something that must be continually pushed forward and maintained across time. And we'll also get into how humanity reemerged from the Dark ages into the ultimately into the industrial age and the Steel age, which enabled a lot of very important technologies like cities and aviation and railroads, things of this sort. So we're going to touch on again the, the benefits that are offered by standardization and also the benefits of protocols similar to the ones we talked about in ancient Roman times earlier. And how the economic benefits of these standardizations to one language or one protocol actually accrete two civilizations. So these cost efficiencies accrete to us in the form of being able to satisfy wants faster, cheaper and better. And that's actually the force that drives civilization and increases both economic and network density for mankind. We're also going to talk about how violence and monopolization have shaped the course of history. How violence has been used to extract rents and taxes, how gatekeepers have influenced the course of history, and how monopolies have developed in both a natural and an unnatural way. And then we'll also talk about packaged foods and how much of an influence that had on civilization enabling us to store energy in a leak proof container. And also how mankind's ability to eradicate some infectious diseases was such a huge boon to humanity in terms of increasing life expectancy. And quality of life overall. And again, the general aim of this is to construct a solid intellectual foundation on which to understand the profound impact of that we believe bitcoin will have on the world. And you can think about bitcoin, as Saylor refers to it, as an engineering breakthrough. And that for the first time in history, we have a technology that is able to store the energetic life force that money represents. Again, we can think of money as a claim on all other sources of energy in the world, right? Whether it's capital, chemical energy, kinetic energy, food energy, all these types of energy, money acts as a kind of meta energy. And we've never had a monetary technology that was totally leak proof and that it did not lose value over time. So hopefully, by drawing analogies to these very important innovations across history, you'll start to have an emerging realization of the real importance and significance of Bitcoin. So with that, let's jump into episode two and at the end of this, I'll do a little outro to hopefully synthesize some of these ideas. All right, thanks.
- [05:18]
Michael Saylor
We have the rise of man through the Stone Age. And it took quite a long time, but we got here. That's impressive. We have the Roman rise and we saw a sophisticated society mastering energy networks, logistics networks, advanced tools, political processes in order to dominate their sphere of influence. And by the age of the Antonines, around Trajan, Hadrian, Marcus Aurelius, those are like a hundred years. It's a golden age of Rome. And that's like 90 A.D. to 180 A.D. the average life expectancy of a Roman is 72. And so you've got baths, you've got writing, you've got civilization, you've got sanitation, you've got aqueducts, you've got roads. They've got stuff pretty well organized, some sophisticated machines. And then of course, we take a hard left turn into the Dark Ages and stuff just starts to break down. And it's a reminder that if you. Nothing is certain. If you miss a key insight, you could waste a thousand years and stuff could have happened different way. It didn't. For example, let's take the printing press. The Chinese developed printing presses way back 2,000 years ago. They never really thought to commercialize them. And the Chinese Alphabet is a pictographic Alphabet. And so you wouldn't need 25,000 different type pieces in order to have like movable type and a printing press. And so they had the wrong language to develop printing presses. The Romans had the Roman Alphabet, which is an ideal language, because you could Actually print anything with just like 26 or 50 pieces of movable type. And they had all the knowledge, but for some reason, they just stare. Anybody could have figured it out, Robert. Like, all you got to do is walk in your boots through the mud and step on a nice floor and look down. And there's the idea for a printing press. Tracks in the mud. Right. They had paint, they had dyes, and, you know, they're just, oh, so close, and then they don't hit it. And we wait until whatever, 1453 or something for Gutenberg to work this out, and we're gonna suffer for a thousand years. It's amazing to me how certain things can be just right in front of a civilization and they just won't grab them. Like, if you go to St. Peter's Square, to the Vatican, and you look at that column that was. I think that used to be. It's now St. Peter's column, but it used to be Trajan's Column. And Trajan's Column was put up, you know, to celebrate the triumph of Trajan and his wars. And it's a bas relief, a marble relief of the Dacian wars. And it wraps spirals up. The column had a little staircase in the middle of it, a work of art and architecture. And at the top, eventually, the Roman Catholics put The statue of St. Peter, I guess. And in the ancient Roman times, that had Trajan's statue on it. And Trajan is standing there in his imperial robes and. And he's holding his hand up in the air. And do you know what he's holding in his hand?
- [09:20]
Unknown
I don't know.
- [09:22]
Michael Saylor
He's holding the world, and it's round. Robert. He's holding the globe in his hand. And this is 100 A.D. fast forward 1400 years, and people think the world is flat. It's like the Romans knew the world was not flat.
- [09:46]
Robert Breedlove
Right.
- [09:46]
Michael Saylor
And if they hadn't ripped his statue off the column a thousand years earlier, or whenever they ripped it off and buried it somewhere, they would have known the world was round. And it's just. It's so ironic that you could learn and then forget such a basic thing.
- [10:05]
Unknown
Right, right. So there is the possibility of significant civilizational regression if we ignore those learnings that we've accumulated over time.
- [10:19]
Michael Saylor
Yeah. You can go backwards and you think, well, we've got it, and if we do this, we're going to leap forward into a new progressive error. But if we kill it at a pivotal point, maybe people forget it ever existed. Like letting that fire go out yeah, I'll tell you another one that blows my mind. If you go to the Museum of the Native American Indian, or Native American in Washington, D.C. and you walk around, you see there's an entire civilization. I mean, they're pretty much hunter gatherers. And if you want to understand how hunter gatherers lived, I mean, the American and Native Americans, the way they were when the Europeans showed up in America is probably your best proxy for what the Paleolithic man was, I guess. But amongst all the artifacts they gather, if you walk around, you eventually find a pottery wheel. And the pottery wheel, it's a wheel in stone, and it's got a beautiful piece of pottery. And the sign says glowingly, yeah, Native Americans had very sophisticated pottery, and they knew how to mold clay, and they used this pottery wheel to do it. And I look at the wheel and I think for 5,000 years, nobody in the entire continent thought to take the wheel and turn it this way and roll it, right? Like, they knew a wheel. They knew a wheel was useful. I give you the wheel, Robert. But they never invented the wheelbarrow. They never invented the wagon. There's no rolling stock anywhere in America.
- [12:09]
Unknown
Incredible.
- [12:10]
Michael Saylor
And, you know, and so you're like, think about the consequences of that insight. Like, how is it possible that not a single person in the entire continent ever thought they might want to turn the wheel this way up? But it's such a profound idea, and yet you can go a thousand years and not get that idea.
- [12:35]
Unknown
Do you think there's any modern examples that jump to mind? That something that's maybe glaring at us in the modern age that we're ignoring or something that maybe we've forgotten or we're no longer respecting?
- [12:52]
Michael Saylor
Robert the blockchain and Bitcoin is a wheel. I can use this stuff if I turn it this way. You know, I take a couple of. They're not complicated ideas. You know, public, pretty good privacy. Public, private key encryption, hashing.
- [13:17]
Unknown
Right.
- [13:17]
Michael Saylor
You know, like, no one of them on its own. I mean, they've all been sitting there and someone says, well, what if I just do that with it? I start this fire and it's. I rub to rub two sticks together. Or maybe I just never think to rub two sticks together.
- [13:38]
Unknown
This calls to mind your example of the Roman hierarchy as well. That because everyone knew they were being watched. Right. It maximized their accountability and therefore their performance, competence. The Bitcoin network is sort of the same. You have all the nodes and miners looking at one another's activity to make sure everything's above board all the time. It's instantly auditing itself constantly in real time.
- [14:02]
Michael Saylor
And you could say the Romans were healthy as long as they kept tension and dynamism and this incredible competition, their ecosystem. And when they lost it, they lost their edge. And then, you know, when you look at the classic guns, germs and steel type narratives like the Europeans, they got hardened and tougher because they were always fighting with each other. And living with your animals made you tougher, and having people come through from Asia made you tougher. And, you know, and as soon as you try to insulate yourself from those stressors, then your civilization forgets how to do things. It never figures it out.
- [14:54]
Unknown
Right. Taleb calls the stressors are the information. Right. So you're actually cutting yourself off from the information flow that's driving your adaptation. Yeah.
- [15:08]
Michael Saylor
So one way or the other, we meander through that. But it strikes me that it didn't have to last as long as it did. Life expectancy plunges down to 30 years from 72 years. And in a world without technology, if you don't have aqueducts and sanitation and rules like don't bring your horse into the middle of the village because he's going to crap all over everything and going to get sick, in the absence of all those orderly rules, then you have just a degradation of the human condition. And we started to crawl out with the Renaissance. And what's interesting there, I think, is if you look at all the great cities in the world, all the great cities grew as nexus, as the central node of an empire. So Rome was the nexus of an empire. Carthage was the nexus of an empire. When they lose their empire, they collapse. The only way you generate enough money to make a great city is you have to scrape a tax off of all the energy, all the commercial value. In a large place, a fisherman cast a wide net to capture the fish. That's your empire. The Roman shtick was, you know, pay us 10% when it comes into Rome and 10% when it goes into the next port, and we'll take 20% of the value added or maybe 30% or whatever we're going to take. Right. If you go into Venice and you look around the Grand Canal, you see all these palazzos, they're all just warehouses. I bring a ship into Venice, I offload my cargo, and then it goes out the back and it gets barged up and down the canal and it gets transshipped to a new ship in that world. Each ship ran this route. Venice to Alexandria was one trade route. Venice to Rome is another trade route. Venice to Istanbul is another trade route. You're at the nexus. You're running these shipping networks. And of course you got to bribe the guy in Istanbul or maybe, you know, your son marries his daughter and that's how you get to come in and out of Istanbul without getting murdered or getting your stuff stolen. You know, and eventually all the families in Venice intermarry. Like, you know, I know you, you're my second cousin. That's how we don't cheat each other. And there's no way you can't solve the traveling salesman problem. There's no way I can take a ship from Istanbul to Alexandria to Venice to Rome to Ibiza, wherever I would go. Barcelona. Because I would basically get over taxed or extorted in each port unless I actually was friendly. Right?
- [18:29]
Unknown
Right.
- [18:30]
Michael Saylor
So the way that works is you have a hub and spoke system and there's always one central city and there's always one set of families or companies and they intermarry and they trust each other and they just agree. I'm going to buy wheat for a nickel or for a dime in Alexandria. I'm going to bring it to Venice and I'm going to sell it to you for 50 cents. You're going to take it to Barcelona and sell it for a dollar. And you're going to pay a nickel in tax to the guy on the other and you're going to get your 45 cents. I'm going to get my 45 cents. Those guys paid a dollar, these guys got paid a nickel. We can play with what's the markup? Right. It might be I buy it for a quarter, sell it for 50, and you sell it for 75 to the dude that sells it for a dollar. But invariably it's the people at the center of the network that are actually getting 10, 20, 30, 50% of all the commerce, which is all the energy. Now. And what's the definition of a smuggler or a pirate? The definition of a smuggler is someone that doesn't want to give me half their stuff.
- [19:45]
Unknown
Right.
- [19:46]
Michael Saylor
So how do I stop that? I have to have a navy that goes to kill them. So you have the Carthaginian navy stopping smuggling so they can tax half the stuff. And that's why Romans can't. Carthago delenda est? Right. Is it like Pliny the Elder or Cato, I forget which one said in every speech he gave in the Senate for 20 years, Carthago Delinda est. Carthage must be destroyed. Why? Because two People can't shake down the same guy of half his stuff. There's nothing left. If I take half your stuff as a tax, I can't. You know, it's like the tax wars.
- [20:31]
Unknown
Yeah, yeah.
- [20:32]
Michael Saylor
They're taxing the shippers and the Romans want the money. So therefore the Romans must defeat the Carthaginians. Now the Romans tax you, then they fall and the Venetians rise. Now the Venetian navy controls the Med. Then you've got, you know, you ever go to Venice, there's this great Renaissance painting, the Battle of Lepanto. And the Battle of Lepanto is when the King of Spain allies with the Pope from Rome, the head of the Roman Catholic Church, and with the Doge of Venice. And those three navies fight the Turks, the invading Muslims from Istanbul, and they beat them and it's the triumph of Christendom. But it gets you thinking about why were they all killing each other in the first place over the Med. And you realize it's because they're fighting over control of the mercantile network.
- [21:29]
Unknown
Right?
- [21:30]
Michael Saylor
And then the next interesting observation is you've heard the name, the word Roman Catholic Church, right? You ever heard the phrase Venetian Catholic?
- [21:43]
Unknown
I don't think so.
- [21:45]
Michael Saylor
There was a time when the Venetians terminated the Catholic Church in Venice. The Catholic Church in the entire Venetian Empire didn't terminate with the Pope in Rome. It terminated with the doge in Venice. And, and so that means all tithes, right? All dew goes to Venice and stops. You can't have an empire unless the person at the top of the empire is also in control of the religion. Because if you don't control the religion, then someone else takes half your money. You see, it's all about energy flow and the energy is flowing. By the way, the Pontifex Maximus originally refers to the Roman consul to the head of Rome. Augustus Caesar was the Pontifex Maximus. So the Romans had it eventually, the high priest.
- [22:51]
Unknown
Right.
- [22:52]
Michael Saylor
So the high priest, the Roman consuls were the high priest of Rome for 700 years. If you're elected general, you're also the priest. You run all the religious ceremonies. They didn't separate those two. And so the Church and the mercantile empire and the power to tax migrates from Rome to Venice. Okay. When did Venice start to decline? When they lost control of the church. At the end of the day, they start sinking because you can't afford to maintain those buildings. You can't afford to maintain hundred story buildings in Manhattan unless you're at the center of a financial empire. I have to basically buy your bonds for 68 cents on the dollar and sell them at. At 82 cents. Cut the difference. There are a lot of securities on Wall street where there's only two market makers. There's the one bank and the other bank, and they trade with each other. And if you're buying, you're buying at the bottom, or you're buying at the top of the spread, and you're selling at the bottom of the spread, and the spread is 2%. Robert. If I turn over a billion dollars worth of bonds, I'm paying $20 million in commissions, and there's a monopoly there. And the $20 million is just flowing into what? It's flowing into the building. And my buddy works for that bank, and I work for this bank, and we drink together and we just kind of joke about the 200 basis point spread.
- [24:32]
Unknown
Interesting.
- [24:33]
Robert Breedlove
So it's these groups sort of competing.
- [24:35]
Unknown
To be the head gatekeeper in a way. Right. But to preserve that gatekeeping, it's intimately connected to the church control of religion, I guess you might say. So does this somehow connect the actual connections between money and religion? Like even today, we have in God We Trust on the US Dollar bill.
- [24:56]
Michael Saylor
It takes us to the Reformation, by the way. If you go to Amsterdam, Amsterdam is the city of canals. It's a big distribution. If you've ever seen a distribution center, the trucks come in one side, it goes through a very complicated set of conveyors, and it goes out the other side. These trucks come from the manufacturers. Those trucks go to the stores or the locales. And this distribution center is a maze of conveyors. Amsterdam's that, but it's that for barges. Before, we had machines. That's what Venice is. That's what every. That's what every great mercantile. That's what they did in every mercantile center. And when you get to, you know, Martin Luther's time, you realize one of the key drivers is there's no way that we can rise or elevate our civilization if we have to send all of our money to Rome. You see this struggle throughout medieval history, William the Conqueror had that struggle. You see the struggle of the northern European German nobles. And then, of course, it punctuates itself with Henry viii, who eventually forms the Anglican Church so he can be the Pontifex Maximus. And if the church terminates with the King of England, they don't have to ship any money, you know, down to Italy, nor do they have to ask permission to change their alliances and get married and do what they will. It's useful to have God on your side, it's always been useful. And so that drives a lot of stuff throughout the Renaissance. And it drives the, you know, you can say that Northern Europe broke off from the Roman Catholic Church for religious reasons, or you could say the northern European powers to be created the religion for political reasons and economic reasons to break off from the Roman Catholic Church. But either way, you know, it's kind of a triumph of history that everybody's forgotten that there used to be lots of why they call it Roman Catholic if there weren't other Catholics, how many different branches of the Catholic Church you think there were like a thousand? There could have been lot. They just kind of coalesced over time. But here's the general principle. Everywhere on Earth, where you see a big city, it was the center of an empire. Paris, London, Hong Kong, New York, Venice, Rome, everywhere. And by the way, everywhere where you see a city that's fallen upon hard times, that's been destroyed, its empire lapsed, Carthage, Troy, right. You could name them on and on and on, right? Venice had an empire, lost an empire. And that's because you can't physically create this kind of economic density. You go to Paris and you look at the Cathedral of Notre Dame, and you look at how much human effort went into creating Notre Dame. There are people that are selling postcards and bottled water in the shadow of Notre Dame Cathedral, making money off of tourists. Where the guys inherited the concession from his father's father's father's father's father's father's father's father's father's father's father. And if you go back 10 generations, the concession was 700 years old. Okay? They're living off of, off of the vestiges of an empire long past. And now the question is, what are the empires of the future? Where did they form? And that takes us really to the Steel Age, you know, the 19th century, the robber barons and the like. And you can see with shipping networks, those canals gave way to free ports and eventually gave way to container ships. And container ships totally remade everything. And they shifted power to Singapore and Hong Kong and companies like Maersk. And ultimately, it's a low energy, it's a componentized way to move things around. The most efficient way to move anything on earth is modern containers. By the way, the biggest rage in technology and servers today is containerized software via Kubernetes and Docker, which is the same principle as put all your stuff in a container ship and the container goes onto a ship. They've got standard loading facilities Into a port. They've got standard, standard train cars and standard trucks. Everything standardized. And the cost and the transparency of that was cut maybe by an order of magnitude with that innovation.
- [30:20]
Unknown
Right. Standardization once again. So I do have a question about these empires that we've discussed. Historically. Ostensibly the purpose of an empire like this is to basically preserve the walls of the city, protect the peace, honor private property rights within that dominion, enforce contract law, ensure that there's a non violent means for dispute resolution such that commerce can be conducted fluidly. And you mentioned the empires of the future. This is something I think about a lot, is that we've always needed this monopolist on violence to honor private property rights within their jurisdiction. But another really interesting aspect of Bitcoin is that it's the first private property right that is agnostic of government completely. You don't need government to enforce your right to your private keys. It's like holding physical gold or any other bearer instrument. So I wonder how much that plays into the relevance of an empire in the historical sense, kind of going into the future.
- [31:41]
Michael Saylor
Well, I guess, yeah. Traditional empires are producing security. The number one export of the United States is security. Like literally, I can live in Miami beach and I don't worry about someone shooting me across the intercostal waterway. And if I was in certain other parts of the world, I'd have to be surrounded by 100 bodyguards. So security. They have that saying about Genghis Khan. They said when the Mongols controlled all of Asia, a virgin could have ridden from one end of the empire to the other with a pot of gold on her head and not be molested. The Mongols weren't screwing around either. You intercept their mail. If anything gets stolen, anybody gets hurt, they show up with an army and they murder everybody for 100 miles in every direction trying to make the point. Don't f with the system. Now most of these empires, they generally provide this kind of security for their citizens. Not always for the non citizens or the aliens or the slaves or the whatever, whoever's the underclass. But they do manage to establish them. Bitcoin is a security. And bitcoin's number one, its number one value proposition is security. It's security of energy. If energy is translated to money and money is translated to bitcoin and it's stored in the bitcoin network, you're securitizing your assets in a cloud of behind a wall of encrypted energy. In that regard, it provides an important right and empowerment to the individual. It hasn't Quite addressed the physical security element, right? When we actually come up with something that will surround your person with a field of, I guess, repulsive energy, right, Then you will have accomplished the same thing in the physical domain that Bitcoin does in the virtual domain. But it's. But, but having. If I secure your life force, right? Energy. Money is energy is life, force is. Money is power. If I secure your power, that can be converted into. Into physical security, either by allowing you to travel away from the. We have the example Nazi Germany in the 30s, all the Jews had their money locked up in Germany. And so the way the system worked is they operated as bankers and they allowed people to launder their money out of Germany and they would take a haircut, 10, 20, 30% initially, then 50%, then 70%, then 90%, until pretty soon it was like a 90% haircut to get your value out. And so consequently people didn't want to leave. Right? And so if you don't have your monetary power or your assets secured virtually, then your physical security is always at risk because you can't leave, nor can you protect yourself. Right? You can't pay for anything to protect yourself and you can't get out or you can't pay to get out. You would think that probably one of the most useful, or common, or not common, one of the compelling use cases of Bitcoin would be if I'm a refugee trying to flee a war zone. Because it's either that or gold. And the problem with gold is there's a lot of people with guns, they're going to take it from you. At least with Bitcoin, you could pay the guy with the gun half the money when you started and the other half when you got there. And the worst he can do is blow your head off, but he's not getting your money. Whereas if you got gold, he just blows your head off, takes the gold. So, yeah, I think it's second order beneficial to physical security in a lot of different ways, and it makes the world better, but it's first order beneficial to economic security. If we think about the steel age, these rail networks are another network to deliver energy faster, stronger, smarter, harder. Of course, at the nexus of every transportation hub, there's an economic center. So railheads. If a great city isn't a port, it's at the center of a railroad juncture. And when you bring in, a lot of times, sometimes at the center of the rail juncture, you can tax all the trains. So if goods come from Spain into Paris and they're going to Germany, the French get to take tax right there in Paris. The railheads became a nexus. The other fascinating thing about the railroads is they became really instrumental to logistics, movement of armies, and they drove economic and political power. And one interesting example is Winston Churchill. When he was, like, 25, he wrote a book called the River War. Before he was famous for anything, in fact, he was quite the adventure. He went off to fight in the war in the Sudan under Kitchener. And the entire book is about the British working to win a war in the Sudan. And they had to take Khartoum. And it's like going 1000 miles up the Nile, maybe 1500 miles up the Nile across desert. And why would they want to do it? Very interesting question. But here's the bottom line. The entire outcome of the war comes down to the question, can the British build a railroad to Khartoum? And if the British succeed in building a railroad, they win. And if they can't build a railroad, they can't provision the army, and they can't move their heavy equipment, and they lose the war, the entire war. It's called the River War, but it ought to be called the Railroad War. It's just about building a railroad across a desert. And at the end of the day, as soon as the railroad arrived, a bunch of guys with explosives and Gatling guns showed up. They devastated everybody, and it was not a fair fight at all. Like Gatling guns versus guys with spears and musket loaders. And it's kind of very unpleasant. If you read it through the modern view, it doesn't necessarily leave you a good taste in your mouth, but it's a reminder that a lot of times, the difference between winning and losing and living and dying is, do you have railroads? I think there's a similar story in the American Civil War. If you look at the way railroads functioned and even the conquest of the continent. Right. The Union Pacific Railroad. And once the railroad crossed the continent, you know, Manifest Destiny states was going to dominate without that railroad. Was it a thousand times more expensive to move stuff over land?
- [39:45]
Unknown
Right, right, right.
- [39:48]
Michael Saylor
You know, Google is. They're very good at saying, we don't do anything else. It's going to be 10x or 100x better? I mean, so that's a Silicon Valley trope. You know, don't bother to do it unless you're gonna have a breakthrough that's 100x. Well, all these things were 100x better. But a railroad we take for granted could be, I give you five tons of stuff, carry it from New York to California, count the amount of energy it's gonna take you. Now put it on a railroad car, try again. You think that's not faster and stronger? Thousand times faster, Thousand times stronger. Something like that. Orders of magnitude. And that takes us to John D. Rockefeller. Right before Standard Oil comes along, people are actually hunting whales. They're getting in wooden ships, chasing around the Indian Ocean to kill a whale, boil down its blubber, make kerosene and burn a lamp. Not a very efficient way to gather energy. So then along comes oil. And oil is a thousand times more efficient way to get energy. And what Standard Oil was, was it was first an energy producer, but it was also an energy storage device as a battery. Right. Because the best way to store energy is put it in a tank. It was also an energy network. Standard Oil, they bought up all the. They didn't actually buy the fields, they bought the refineries, they refined the oil, they stored the oil, they bought up all the tanker cars, they bought up all the tanker ships, they locked down all of the networks and they basically had an energy network. They actually had guys driving around with carriages to deliver their energy to every single retail store. They had retail distribution. They would even give away the furnaces to sell the energy. They did a Jeff Bezos, you know, Amazon Prime. People think Jeff Bea invented. He didn't invent it. If you read the biography of John D. Rockefeller, Rockefeller invented it all. He did it all. He gave away the razors to sell the razor blades. He's the first guy to realize that, by the way, you have to form a cartel or you have to form some kind of understanding of scarcity. If there's no scarcity, there's so much volatility that the market is chaotically destructive. You had the world's first serious energy network there. And it's such a powerful network that 100 years after Rockefeller's dead, those companies still are worth a trillion dollars. They're still instrumental.
- [42:37]
Unknown
What does that mean that you said that Rockefeller realized he had to institute a cartel in order to, I guess, impose scarcity on the market, such to offset volatility. Can you elaborate on that?
- [42:52]
Michael Saylor
Booms and busts, like people would. You talk about scarcity, the problem of using a commodity as money is when the price goes up, people produce too much of it.
- [43:02]
Unknown
Supply goes up. Yeah.
- [43:05]
Michael Saylor
So he. It was a very inefficient industry with massive volatility. And so he consolidated it to drop the volatility so that they could standardize every component along the way. So that he could drive to a lower energy level, a more efficient energy system. And I mean, ultimately, right, if you want to look at the human condition, you know, you ever get on one of those rowing machines and you row as hard as you can for an hour, you know, and, you know, a kilowatt hour hard to come by. And then you start to, you start to think like, if I rode all day long and I was Olympic level rower, I think the sum total of my effort is like $0.29. If you calculate, you know, the value of all of your human effort and modern energy cost, a quarter, some people couldn't do a nickel worth of work, right? And you think about where we got to and we got through to that by channeling this energy. And it must be again, it's a thousand x, ten thousand x more energy. In fact, just a general theme. You see everywhere where there's an explosion of innovation and an explosion of vitality, somebody tapped into a thousand x more energy or figured out how to deliver the energy. Some oil. You know, oil was originally, it was all about kerosene and lighting and then heating. And then of course, the automobile shot it up by a factor of 10 and that was the killer app. But if you go on to some other industrial era Robert Baron type networks, here's an interesting one. Craft. Hershey's and Post cereal, they're technology companies people don't think of as that. Before they came along, there was no breakfast that people didn't eat breakfast. Kraft and Post figured out how to box cornflakes and put it. And what they did is they stabilized food energy and put it in a container that didn't bleed the energy, that didn't leak energy. If I give you a bottle full of tomato sauce and I just make it in my kitchen and you put it in your refrigerator, it will spoil over some period of time. How much? Well, there's bacteria in it. The origin of branding, the craft brand, the Hershey's brand or whatever brand. The origin of branding is I make it in a clean room, hermetically sealed. Everybody has to clean up, scrub down, sterilize, get the bacteria off. I have machines to load the can, to seal the can, to seal the bottle, I stamp it with my brand. The number one value proposition, Robert, wasn't it's good ketchup. The number one, or it's good tomatoes or good soup or good whatever. The number one value proposition is, it's not going to kill you. You ever actually make some leftovers and leave it in your refrigerator for Two months and eat it. By the way, here's a better one. Why don't you make something in your kitchen and then leave it in your closet for two months without a refrigerator? Because they didn't have refrigerators. Frozen food came along later, and Marjorie Meriwether Post became like one of the richest women of the century. A, because her father gave her Post cereal and they were able to stabilize starch in a box at room temperature. And then B, because she bought the first frozen food company and she realized the ability to actually freeze food was going to be a game changer. And before that, no one ever frozen food before. You think they're not technologists, Right. It's a food energy company.
- [47:45]
Unknown
Energy storage technologies. Right.
- [47:48]
Michael Saylor
I mean, you need energy in food form and nutritional form to not die. Yeah, right. If I could store it now. It's like, it's very interesting here, right? Like, can I take electricity from Detroit and deliver it to you in San Francisco today? No. Can I deliver electricity from Detroit to Grand Rapids, Michigan? Yes. When it gets to you, how long can you store it in your battery? It bleeds 2% a month. You'll probably lose it all in the year. Can I ship food from Detroit to Grand Rapids? Yeah. When it gets there, how long can you store it in your cellar? A day, A week? Well, if the answer is two weeks, there's no national business there. There's no national brand. The answer needs to be three months or six months. Now there's a national brand. Now it matters. So these guys that were launching these businesses, they were really launching clean room manufacturing plants that captured energy or something of value. They were store of value, Robert. Store of value that would not decay or bleed due to bacterial infestation or spoilage. And because of that, the brand became important, just like the standard brand was important. The kerosene is not going to explode. It's clean, right? Gasoline clean? Is the ketchup clean? You go to Hershey's, Pennsylvania, they got a factory. It's a work of art. It's more complicated than most computer programs. They wrote a computer program in steel. Like, don't F that up. Right. There's no version two coming. Write your program in an analog computer welded in steel that takes up a football field. That's what they did. And in one end goes, like, milk and eggs and, you know, and at the other end comes, like, boxes of chocolate bars. 50,000 an hour. And it's not just they come out perfectly uniform. It's. They come out without bacteria in them. And you can put them on shelf and they won't make a kid sick. And therein is the rise of all of those CPG companies.
- [50:26]
Unknown
It's interesting, I love the perspective you have on all investment being an investment in technology because that is what we are doing, right. We are making tools, protocols, technologies that basically improve our productivity. And that's how we advance is sort of layers of these innovations on top of one another such that basically every business is a technology business. I think that's a very unique insight I had never heard before. And then I think the other thing is the interesting connection between this hyper sanitation to really make sure there's no bacteria or any anything that could cause harm to the user of energy, which would be the eater of the food. How the hypersanitation is connected to the preservation of the food or the energy store. And that seems to somehow kind of mirror Bitcoin in a way that it's.
- [51:22]
Robert Breedlove
Got a hypersanitary ledger.
- [51:24]
Unknown
There's never any errors in the blockchain whatsoever such that it preserves its sanctity maximally across time. Like it's the most, the best preservation technology of value because there's no detritus in it.
- [51:38]
Michael Saylor
I guess you could say the best branded asset in the history of the world.
- [51:45]
Unknown
Right, Exactly.
- [51:46]
Michael Saylor
Maybe it's the first time someone came up with a way to cryptographically brand a security.
- [51:55]
Unknown
Yeah.
- [51:56]
Michael Saylor
Which is an interesting idea. Now with regard to businesses, I would say that all of the great businesses, the growth companies were all technology companies in their time. And eventually almost by definition they stop growing when they are no longer cutting edge technology companies. There are other businesses that are more like rent seeking businesses or their concessions. The guy that sells bottled water in the shadow of the Notre Dame Cathedral, that's a business. It relies upon political largesse. Maybe there's a real estate business, I own that real estate. And then I sell you water or lemonade on that real estate. There are those kind of businesses. But the growth companies, Standard Oil was a growth company. US Steel, Boeing, IBM. In that period when they're growing, they're a technology company. That means that all growth stocks are technology companies. By definition. You can buy another stock that's not a growth, that's not a growth company or a non tech company, but it's probably not a growth stock. In order to grow a non technology company, you could then make the assertion that you're going to need to do financial engineering like roll ups, like I'm going to buy up every McDonald's or every restaurant across the country with debt. Maybe that's a way to grow it. Or you need a concession from a regulator, it's now illegal for you. I'm the only person that can operate airports in the United States. I can grow that way. I need a concession, a political concession. I suppose there's a place for innovative marketing, but if there's not a compelling technology breakthrough, I'm just not a big fan, right, of the marketing thing, except for if the marketing breakthrough comes about due to technology. For example, I created a company that got famous because I'm famous on Twitter and YouTube. And that's not a bad idea. I'm the best marketer on a new medium. Maybe that can work. But then the day those aren't going to be trillion dollar in their day. I mean, if the dollar is inflated or it's debased by a factor of 100, at least. Well, I mean, John D. Rockefeller was worth 300, $400 million in his money, multiplied by 100, multiplied by 200. He got to being worth a billion, I think. So he probably is worth 200 billion to $250 billion in his money. And that was in a day where you didn't have access to all the deflationary tech services that are effectively free. So relatively speaking, they had extraordinary power, but they were all technology capitalist. It's important at this point for us to just look at the impact of steel and aluminum. Through this entire era, Carnegie created an empire based on steel, and Andrew Mellon's empire was substantially based on aluminum and aluminum Alcoa. And steel is an elemental force for the civil engineering industry. And aluminum became that elemental force for aviation. Without steel, there really there is no modern city. You know, you build a building in wood, it's two stories. Build a building in bricks or masonry, it's five stories is max. In order to create New York or London or any great city, you need steel and you need of course, an elevator. Straightforward things, but of the two of them, steel is the harder development. The elevator you could probably figure out it's a counterweight on a pulley. Whereas steel is iron laced with carbon. And it's really hard. How hard? Think about how complicated it is in order to refine steel and shape steel when it's molten and it melts through just about anything you might put it in or on. If you read any books on steel, like American Steel, I think by Richard Preston about Nucor, they talk about steel refinery blowouts. If you actually have an accident in a steel refinery and if the molten steel falls on the concrete, there's water vapor in the concrete. So molten steel superheats the water vapor. And what happens when water vapor gets hot or water gets hot, expands, explodes molten steel on concrete turns the entire refinery into a bomb and it blows up and it kills everybody for 100 meters in every direction. So technology or not technology, harder technology. Everybody thinks they're in the technology business today. Nobody deals with technology that's as dangerous and tricky as what Carnegie and those early steel refineries are dealing with or the DuPonts handling nitroglycerin. What do you think happens when you mishandle nitroglycerin? When you mishandle crypto, you lose some money. When you mishandle nitroglycerin, everything gets blown up again for half a mile in every direction. And aluminum, again, not so easy either. So these are really difficult technologies, but really elemental because the difference between steel and no steel is do you build a hundred story skyscraper? I guess you could say you might do something with iron, but iron's just got problems. Steel's the perfect material for civil engineering. It's cheap, it's got extraordinary tensile strength. If you paint it or maintain protect it from corrosion, it will last forever, literally forever. ROBERT if you build a steel ship and you punch a hole in it, you can weld the hole with another piece of steel and the weld will be stronger than the original cold rolled steel. It's that strong. So in the world of strong, this is the strongest of strong materials. It's strong, it's cheap. Carnegie figured it out, they built every bridge with it. No steel, no bridges. No bridges, no Manhattan. Figure out what happens if you blow the bridges in Manhattan. Everybody starved to death. You can't even get the food in fast enough. And of course you can't hold the skyscrapers. So all modern civil engineering is based on steel. So then along comes aviation and they try to build a plane with steel. What happens? You ever see a steel airplane?
- [60:15]
Robert Breedlove
No.
- [60:16]
Michael Saylor
It's the perfect material. It's cheap, it's indestructible. Why not build an airplane with steel?
- [60:22]
Unknown
Too damn heavy.
- [60:24]
Michael Saylor
Two, just one little nuance, just one problem, but that, you know, the fact that it's better than aluminum in every way shape, and aluminum is 20 times more expensive than steel, you know, and it flexes and there's also, and it's difficult to work. It doesn't matter. Steel doesn't fly, iron doesn't fly, Wood flies. You know, canvas flies, fabric flies. But you try to find a metal which is stable that's going to be a structurally sound metal for aviation. And aluminum's the one. No aluminum, no aviation, nothing.
- [61:13]
Unknown
Right?
- [61:14]
Michael Saylor
Nothing like you're talking about balloons, right? Maybe you got the right flyer, but it's an elemental force. And on that element you make that breakthrough, then you have hundreds, you have a trillion dollar industry based on that breakthrough. How do you work it, how do you create it, how do you use it?
- [61:43]
Unknown
It's so interesting that these raw material breakthroughs then have so many follow on consequences, like first and second order consequences to the point where you're saying no steel, no city, no aluminum, no aircraft. And then we have to think about how much commerce is actually conducted through the city and through the aircraft. I mean, it's foundational to global civilization as we know it.
- [62:12]
Michael Saylor
And they all kind of come down to networks that move energy around. Standard Oil is an energy network. The railroads are energy networks. Right. No railroad, no tanker car with energy on it. Right. The railroad is the energy network moving the oil around, the airplanes, another energy network moving high frequency car cargo around and information around, and each one of them build another one and then the food networks. And the result of all of them is there are large corporations and huge opportunities for wealth creation if you get to the node of the network. One last point on the Steel Age before we move on, it's worth noting is average life expectancy at 1900 is 50. In America it was 70. Under the Romans, it was 30. In the Dark Ages it might have been 32, 33 in the Revolutionary War. In the US we crawl back up to 50 and then by 1950 it's 70. And so probably the most rapid expansion in the quality of life in thousands of years is in that 50 years from 1900 to 1950, because of the conquest of infectious diseases. And that's all really a function of discovering, you know, discovering the science of microbes and sterilization, understanding that you need to be sterile. And then the second is antibiotics. And those two things together were extraordinary. Antibiotics alone. And penicillin is responsible for the defeat of tuberculosis. And tuberculosis killed a billion people. The white plague. You caught tuberculosis, it was a death sentence. Think it killed Chopin, Killed all sorts of people. A billion people, more than any war. And of course, in this particular case, if you look at history books on the 20th century, they give it like two paragraphs. If you were weighting the text based upon the significance of what happened, probably something like half of all the history of the 20th century ought to be just about, you know, penicillin, antibiotics, and sterilization half and everything else could be the other half. But in fact, it's not even 0.01%. The only measurable mortality rate in the 20th century is the flu epidemic around 1920. Where you could see a blip. You can't see an impact on the average life expectancy of any other event, including all the wars. World War I doesn't register. World War II doesn't register nothing. It's kind of like just the impact of technology, of modern medicine and antibiotics and networks and cheap energy and sterilization and sanitation and running water. The impact of that so dwarfs every political thing that took place in the century that what you've really got. I think it's just a chart. That's just a small blip in 1920. And that was like, you know, different estimates. 100 million people died. 20 people say as much as 20%. 10 to 20% of the population died in that one or two year time frame. And they're still debating what that is, but it's the only event you can see on the chart. And all of the activities of all the politicians and all the ideologies and everything we fought over turned out to be not as relevant as defeating tuberculosis, penicillin.
- [66:33]
Unknown
And it was derived from a mycelium, is that correct? That was left in a sink overnight accidentally. Something to that effect.
- [66:41]
Michael Saylor
Yeah. And it's an accident. The guy we get it from, from a fungus, and it's accidental, incredible and, and, and powerful. But I don't know. I guess your takeaway from that is let people do their stuff and don't, don't.
- [67:06]
Unknown
Right.
- [67:07]
Michael Saylor
Don't try to channel people in any particular direction too much because nature is a bit more complicated.
- [67:16]
Unknown
I think Taleb makes the point that all of our innovation is. Or won't say, all, say the vast majority of innovation occurs through trial and error. Right. This tinkering impulse that people naturally have versus this image of the inventor alone in a room laboring for 20 years straight, and all of a sudden he has a breakthrough. It's more like people working and tinkering all over the world and communicating that lead to these breakthroughs.
- [67:42]
Michael Saylor
Yeah. Half of science is accidental and half the stuff gets discovered. But the issue is no one decides to commercialize it or they don't engineer it into the solution. So there's that phrase, I think William Gibson's phrase, the future's already with us. It's just not evenly distributed.
- [68:03]
Unknown
Right, Right. Yeah. Yeah, exactly.
- [68:06]
Robert Breedlove
All right, guys. Episode two. So good we're making Progress. We've now seen man rise through Stone Age, Iron Age, regress into the Dark Ages, and then finally progress into the Steel Age. And this leads us into the Industrial Revolution and where we are today, which is the Information Age. So I really appreciated Saylor's perspectives on this. I thought it was interesting that we take so much for granted today. We really think that all of these modern miracles generated by markets are a given. But if we look at the Dark Ages and realize that one key misstep can send us sliding back thousands of years, I think it's a great lesson to deeply absorb and realize that none of this is promised. And, you know, he made the point clear with, you know, the boot print, right? The idea of the printing press was evident to anyone who had ever seen a footprint or a boot print. Yet for some reason, it took us really long time to commercialize it and realize its revolutionary potential. And also when he pointed to Trajan, right, The guy from 100 A.D. the statue of Trajan holding the globe, right, the spherical world in his hand in 100 AD yet fast forward to 1400 BC and there's people in Europe, pre Columbus, that still think the world, world is flat. So, so interesting to me that these ideas, powerful as they are, they can be missed, right? We can, we. We can hurt ourselves by not paying attention and not just at an individual level, but really at a civilizational level. And I think, you know, as Saylor might call that the fire of truth, right? When we let the fire of truth be extinguished, society can regress into falsehood. The other interesting point was the Native Americans with a pottery wheel, right? They had this device for who knows how many hundreds of years, but no one had figured out to turn it on its side and realize all of the mechanical potential of the wheel, right? The wheelbarrow, the wagon, even things like the train and whatnot, they all use the wheel to overcome frictions for terrestrial motion. And I thought that was an interesting example of how some of our most important innovations can just be hidden in plain sight, frankly. And this points towards Bitcoin for me, in that so many people know there's something wrong in the world. They sense there's something really deeply wrong in the world today. But very few people understand how broken the money is and how much that contributes to the socioeconomic problems we're seeing the world over. So in that way, I kind of think the problem and the solution are hidden in plain sight, so to speak, and that we need to fix the money to fix many problems in the world. And we got into the discussion about smugglers, right? The definition of a smuggler, which sounds like a criminal actor, is really just someone trying to protect their self interest. There's someone that wants to conduct commerce through a port and not give away half of their stuff, as Salo said. I thought that was very interesting. And that's actually where we get the term freeport. I don't remember if we touched on that in the episode or not, but the term freeport means that you can dock there without having half your stuff or a percentage of your stuff confiscated. That leads us to the really important role that gatekeepers have played throughout history. Whatever local monopoly on violence existed, they always wielded that monopoly to extract value or rents or tax from those conducting business and creating economic surplus in their guarded territory, right? That's been kind of the name of the game throughout human history. And that's why we have the two adages, right? Death and taxes. Anywhere you go to conduct business, you're going to get taxed. And you know, we're all immortal, we all die. So governments have always used the weapon of the law as an instrument of plunder, right? It is how they generate revenue is maximally extracting wealth from those that do business in their territory. But it's a parasitic relationship. And if we look in the domain of biology, parasites actually don't tax their host to death. That would be actually counter to their own self interest. They want to extract maximum value, but in a way that maintains the host longevity. So it's kind of like establishing monopoly profits in an economic sense. There's a very particular point on the price curve where the monopolist sets their price to optimize their own profits, which isn't enough profit to say, kill the consumer and force them not to be able to pay for it. And it's not a low price like we'd seen free market competition, but it's like right at this peak point. So I thought it was pretty interesting that we were able to see governments in that light. And that's why history has this distinct pattern of might is right, yeah. You know, like people have been competing to be the head gatekeeper, right. And this is, this could be governmental, this could be religious because it gives them a very, the path of least resistance, if you will, for extracting value and becoming wealthy. And indeed those were the first wealthy people in the world or people that were able to specialize in violence or to specialize in religion to establish monopolies on local people, commerce or local belief systems. And if You. And that points to the intimate relationship of government and religion. And the defining feature of Western civilization today is the separation of church and state. That was how we have secular society. It was a decoupling of those two institutions. And we look at say a modern city like New York. I thought the point was great that those skyscrapers are constructed from the value that is extracted by financial intermediaries, right? Say they gave the example of two bond traders in adjacent buildings driving most of the volume in a market and they both get to scrape their vig, their 1 or 2%. And it reminds me of the hotels in Vegas. The old joke is like the buildings aren't built by winning gamblers. The nature of being an intermediary is that you get to extract perpetual profits basically from anyone doing business within your network. And that's what money is, right? It's just this, it's a network of trust. And that's why the state has always fought to control and monopolize it, because it gives them essentially unlimited power and wealth to be able to confiscate that from the entirety of their citizens. And that's what tax is. That's what a rent is. Not a rent like you pay monthly for your apartment. But rent is, in the economic sense is. It is the intermediary or group preserving peace in that area. They get to siphon value off of it for the privilege of protection. And it's not necessarily a bad thing. The problem with it is when it's priced at a non consensual rate, right? When you have to pay 40% taxes to the government and you don't have any bargaining power in that relationship, that's the problem, right? That's when we move away from free market competition and towards monopolization. And that's what creates so many problems in the world. And then when we shifted the discussion and started looking at standardized containers, I talked about that standardized container that you might see on the back of a semi truck or that now goes in. They also ship across the ocean. When we started talking about the value again there of standardization, which we touched on a lot of this in episode one when we looked at ancient Romans. When we are able to compress, I guess you could say that protocols and standardization compress confusion, right? Because there's less optionality. So everyone knows the language, everyone knows exactly what to expect. So you're able to execute actions very quickly and efficiently. And this creates a lot of economic surplus, right? This frees up a lot of time and resources which are harnessed as well. That can be reallocated to other things. So it's. That is how we collapse fixed costs. Right. Is by standardization. And I think, and we'll talk about this more in a bit. But the pattern I see emerging is that at the beginning of an industry, it's almost as if there's not a natural monopoly. There's typically attempted to be imposed a legal monopoly. And this can have some short run benefit because, because it establishes standards, but it's at the long run detriment of the market because again, the monopolist is essentially extracting wealth from other market participants. But we'll talk about that more shortly. So when we looked at empires, I love how Saylor painted them in that the number one export of an empire is security. That's what the US is today, where the imperialist that runs the world, we export security. If you look at a map of how many US military bases there are worldwide, we're basically everywhere except Russia and China. And it's interesting to me how bitcoin fits into that picture because bitcoin's number one value proposition is security. It's security of your time and energy in a medium that counts be compromised. And as Saylor described that, he said it's like a technology, Bitcoin for securitizing your time and energy behind an impenetrable wall of encrypted energy. Right. So it's this, it's a very unique tool and that for the first time in history we have a place to put our life force. Right. Or our wealth that is independent of any political happenings in the world.
- [79:47]
Unknown
Right.
- [79:47]
Robert Breedlove
It's an apolitical money which is very central to its value proposition. And although bitcoin hasn't. So it clearly has a huge relationship with security, although it hasn't clearly hasn't solved physical security. Right. Bitcoin's not a force field or anything like that. It does have some interesting potential implications in that because it's programmatic, you could say, program a payment to be issued to a gatekeeper, like half before you pass the gate, whatever the gate may be, whether this is a border or anything that a gatekeeper does, and then program such that they receive half a payment after. So it can actually reduce the incentives to violence. Right. And increase the incentives to cooperation. So it'll be interesting to see how bitcoin fits into the empires of the future. And then we went into the steel age, which, you know, steel is just such a fascinating thing. It's this raw material for building these networks in a really Permanent fashion, right? And again, if we look at what people are, people are, as I say in some of my writing, we are the networked species, right? We dominate the planet with our wits because of our ability to abstract, to tell stories like money, like nation states, like human rights. And this is all that entire thesis is encapsulated really well in the book Sapiens, if you haven't read that. And our ability to abstract these stories, orient ourselves around them, and then communicate about them very precisely and very quickly, that's what lets us function as almost like a single harmonious organism, which we could say that's what the world economy is, right? Where we're communicating with each other, with words and prices, and shifting the allocation of resources to the highest and best use, at least in a purely free market. Central banking clearly distorts a lot of that. And in that context, steel was critical to building out kinetic networks, right? The railroad, the ability to move people and military assets 1000x or 10000x more cheaply across land. Right. Saylor was making the point that wars were won and lost based on the successful construction of railroads. And this drove an interconnectivity of people and cities across land. So it's one of these primordial networks for civilization was the railroad. And behind that were the roads, right, Built by the Romans again. And that took us to John D. Rockefeller and Standard Oil. I think the point was great about light again, before we figured out how to harness oil, oil being this compressed energy source from ancient sunlight. It's sunlight that's fallen on the Earth for tens of, of thousands of millions of years and has been compressed into its subterranean layers that we're then able to harness to radically increase our productivity, as we've seen in the industrial age. Before that, before we figured out oil, we're literally going to see hunting whales, harpooning whales to harvest, to harvest their blubber for candlelight. So the productivity, and I've seen the math on this before, I can't quote it exactly, but the amount of energy necessary to produce a single lumen, which would be a unit of light radiance, going from needing to hunt whales to produce candles to harnessing oil, like, again, it was orders of magnitude more cheap to actually create light, right? So I thought that was really energy, really interesting. And oil basically was this, like fire almost, this primary energy network, right, that we were able to tap and just radically accelerate how quickly the economy was producing wealth and new things and new innovations. So, again, if we consider that we're channeling energy across our intellect to create new and useful things. It's as if our intellect hit this new really potent source of energy when we figured out oil and Rockefeller, you know, he captured the entire value stream. He built out the logistics network, he had the train cars, the container ships, the trucks. Sailor made the point, he was giving away the furnaces for free. So he had the freemium model, he's giving away the furnace to sell the oil, so to speak. And he originated this cartel model of owning the whole supply chain so he could standardize the industry, which I thought was super interesting because again, we're back to standardization, monetization, where a monopolist can come in and lay out this singular unitary plan to kind of mute the volatility, right? To mute the competition, which is long term bad, but short term sort of a benefit in that that monopolist now gets to set standards, right? He can create standards that everyone else will be forced to operate on if done correctly for forever. He almost gets to be the incipient of the path dependence of the network that he's creating. And so the thing that comes to mind is monopolies serving this function perhaps of muting volatility in the early stages of an industrial or particular industry's development, and to establish standards which then commoditizes the space. And assuming you can remove that monopoly after it's served its function of setting the standards, then you let free market competition take hold on those standards and it's more beneficial versus if you just set out in the beginning with pure free market competition, then it's hard to get the industry to interoperate well because of the lack of standards. So it's a bit of a mind twist for me, but the old saying comes to mind, if you want to go fast, go alone, if you want to go far, go together. It's as if a monopolistic single unitary plan enables you to go fast, right? Really build out an industry really quickly, even in the information age today, right? I think we're very early and we're seeing the monopolist take a big leap, right? Facebook, Amazon, Netflix, Google. But over time, I would suspect that the standards that they have been setting will start to be opened up to more free market competition and we'll see the demonopolisation of this space and with that the decline in cost, which then again frees up all this economic abundance that man can reallocate towards the next major wave of innovation. So it's a lot to think about there, but it seems like there's something Natural, some natural interplay between monopolistic and free market competition. And that led to Rockefeller figuring out standardizing oil, led to Henry Ford's production of the automobile. And the automobile, as Saylor said, was the killer app for oil. And when we think about the automobile, it's like what was invented, right? We think it's just this vehicle for getting us from A to B. But it enabled all of a sudden the density of the city, the economic network, density of the city to be a reality because then people could commute into the city and commute out. It created a lot of the pollution we see in the world today. It changed people's self identity, right? Like the car is an avatar of who we are. People often use automobiles today as kind of a status symbol. So it's just a total game changer, right? The invention of the automobile, which again is one of those innovations that sort of sprung up from the mastering of the oil energy network. And I thought it was interesting too, how Rockefeller was basically the most wealthy guy in history. I think Saylor made the point. He was worth over $200 billion in today's dollars. But Rockefeller died in say, 1937. The refrigerator wasn't even commercialized until like early 1920s. So this is a guy, the richest guy in the world, right, didn't even have a refrigerator. So if you today have a refrigerator, you in some ways are more wealthy than John D. Rockefeller was just a little less than 100 years ago. And that I think is just a testament to the abundance created by free markets. It's like every living generation, assuming we're optimizing for productivity improvement, is head and shoulders above the prior generation, even the richest of the prior generation. And then we got into discussion about Kraft, Hershey's and Post Foods. I never thought about this before, that the business they were in was actually selling stabilized energy, right? Like food is inherently unstable. It doesn't keep well, especially before the invention of the refrigerator. And these innovators figured out basically how to stabilize food energy at room temperature. And the value proposition they were selling is that their food doesn't kill you, which I thought was just great. This again, they were, they're technologists, right? We think of it as food and we think today it's no big deal. We go to the grocery store and we buy boxes or cans or bottles of whatever we want. But this is a major breakthrough for supporting larger populations like we have in the world today. And it kind of reminds me of the certification function on Coin Engine Beals too, because you Know, Saylor made the point. I never thought of a brand like this, that the brand was like, you know, this food won't kill you. Just like a gold coin stamped by a government or a private certification. Business was saying, this is one ounce of gold, gold, or this is 10 ounces of silver, whatever it was. So it's a trust thing, right? You learn to trust the brand to represent what it says it is. And then also in food, frozen food was a total game changer. The fact that we could suck all the entropy out of food and keep it for extremely long periods of time just allowed us to accumulate the savings of food, right? You know, we all take it for granted today. But again, a freezer and a refrigerator, like, we should just stop in awe of our freezer and refrigerator every day and just think about how amazing it is that we figured out a way to suck the entropy out of food and store food energy over extremely long periods of time. And in that context, in a monetary sense, we could say that fiat currency is a high entropy storage device. It leaks a lot, it suffers from spoilage over time. Whereas bitcoin could be considered like the deep freeze, the absolute zero of storing monetary energy. It sucks all the entropy out of it. And you know that you'll own a guaranteed fraction of the total money supp for all time. So that analogy was interesting to me as well. I liked how he talked about food factories being, again, they're technologists. They were computer programs written in steel. So one end of this program, you input eggs and flour and milk or whatever it is. And at the other end of this steel computer program, it outputs cookies that you can then box wrap in plastic, put on the shelf, and they last for a year or whatever the number is. This is a totally new and unique way to look at food and consumer packaged goods in general. And in that way, they were stores of value, right? Food, this consumer packaged good industry, was in the business of storing value, right? They're storing food energy as value and selling it. And they were able to accomplish that through hypersanitization, I'm sorry, hypersanitation. So they're removing all of the detritus and any uncleanliness from the food packaging process. And in doing so, they're able to output a product that was guaranteed to last for a fixed amount of time. And again, the analogy there to Bitcoin being this hypersanitized ledger, right? There's all of the nodes are all checking and the miners are all checking one another's work to make sure it's being done consistent with the rules of the protocol, which are 100% open and transparent to everyone. And that's what makes it this ultimate preservation device of monetary energy. So, you know, just mind blowing comparisons between consumer, consumer food products and bitcoin. And in that way, you know, Saylor hit this on the head. I saw the brand, the concept of a brand in a new way. Like I used to think a brand was just a company's logo and reputation. But to his point, the brand was the certification saying this product is what it says it is. You can trust the reputation of this group and you know, particularly this food won't kill you, right? Something that's pretty important, something you're going to eat and put in your body, you can reliably trust this brand, that it won't kill you, right? They're trading the producers, trading on their own reputation, if you will. And I thought he just hit the button right on the head when he said, in that sense, bitcoin is the best branded asset in history. Because bitcoin does do exactly what it says it will do. Nothing less, nothing more. And there's no element of human corruption that can change that, right? Like you could install a new CEO at Kraft Foods and he could say, to hell with a customer, I'm gonna start putting rat poison in my cheese crackers or whatever, right? Can do some outlandish stuff to ruin the reputation of the business. But bitcoin is this leaderless institution, right, that just runs the rules of the protocol and it doesn't change, it doesn't bend. So that was just mind blowing for me. It's something I'm going to be thinking about for a really long time. And then we got into steel, you know, with, with Andrew Carnegie. Mastering this ultimate raw material for civil engineering.
- [96:03]
Unknown
Right.
- [96:04]
Robert Breedlove
Saylor made the point. Steel is cheap, high, high tensile strength. If you paint basically lasts forever. So it's non corrosive as long as you seal it off from air and water. And then if you damage it and decide to repair it with a weld. Wielding the welding. Welding is how you say that welding is actually stronger than the original steel itself. So it's just again, another one of these fundamental breakthroughs in raw materials that supported higher civilizational advance. And then we talked about aviation. Clearly steel is good for a lot of things, but no good for aviation because it's too heavy. So we had to figure out aluminum. And so much, I don't know, my epiphany here is that so much was riding on these raw Material breakthroughs. We're discovering new foundational elements to society. And there's a lot of upstream consequences that we can't even imagine, right? Like when someone figured out steel or figured out steel, who knew we were going to figure out the city and then figure out aluminum, to figure out aviation and then figure out, say, fiber optics encircling the planet, figuring out the Internet, figuring out YouTube, right? It's just these layers of innovation. And from the point of innovation, it's very difficult, it's impossible, frankly, to see where it's going to go. So it just unlocks all this potential human ingenuity to discover all these other things and kind of a cascading effect. So, you know, as you said, no steel, no city, no aluminum, no aviation. And just think about just those two. We just stopped there. If we had no city and we had no aviation, how much of the world would we not have today? I mean, how many of you have flown, right? How many of you have lived in a city? It's really hard to fathom how much just these two raw material breakthroughs have changed our lives. And again, in my mind, it all comes down to increasing the energetic or network density, right? So we're increasing the possibility of exchange, right? We increase, say, the economic and population density of a city, increases exchange within that city. So it's pumping out more ideas and innovations. There's great books on this. I think it's called the Serendipity of the City, maybe where it talks about this relationship with population density and innovation, right? The more population density there is, the more innovation tends to come out of it. And then in aviation sense, it's about overcoming the frictions to free exchange, right? Most people born 200 years ago would really never leave, say a 30 mile radius of where they're born, give or take. Maybe those numbers are wrong, but you get the point. Point. The world has opened up to us with aviation. I mean, you can go anywhere in the world now within a day, right? Anywhere in the world it used to take. It took settlers in the U.S. what, three or four months to cross the continent if you didn't die from disease or whatever. So again, it just points towards the importance of free exchange and how these raw material breakthroughs support more network density, which increases free, accelerates free exchange even more and leads to more and more breakthroughs in a cascading fashion. And the analogy I like there is that Bitcoin, it kind of is like financial steel, right? It's just the best tool for the job. And it doesn't it just works, right? It doesn't bend, it doesn't break. It just is an absolutely perfected monetary technology. And it's also, it's steel, but it also has wings, right, because you can just send it anywhere. You can store it in your mind or in a computer anywhere. So it has all this flexibility too and could be program to do different things and you can build different features and modules on top of the protocol and you build higher layer protocols. It's just one of those type of breakthroughs where it's like a raw material network breakthrough. So it's a lot to think about there. And then finally we talked a bit about the conquest of infectious diseases, which clearly we haven't conquered all of them, but we've done a lot. And Saylor made the point that these breakthroughs are the best amplifiers of life expectancy ever. Curing tuberculosis, which killed a billion people, that had an immediate impact on the life expectancy curve, which The World War I and World War II were just a blip, right? So makes the point that technology is increasingly more of a variable on our progress as it's almost like technology is becoming exponentially more important to us as we innovate further, which gets us into the information age and the wars, which are more of like political actions, these matter much less in the long scheme of human history. But there's a distortion in the history books, right? If you go to read history, you're going to read 99 pages about World War and World War I and 2, maybe 9900 for every one page you'll read about tuberculosis. So there's this asymmetry in terms of how important the breakthrough is versus how much is written about it, which I thought was fascinating. And penicillin, you know that breakthrough that increased our life expectancy so much, it was accidental, right? It again, as Taleb would say, tinkering is an anti fragile process. So it's the more entropy or uncertainty or randomness we can introduce to the process, the more breakthroughs we have that can be accidental at times, right? Penicillin was, I think it was a mycelium or a fungus left in a sink overnight. And then something grew on it. Someone tested it, someone figured out, holy crap, holy cow, this thing cures disease and infection. And it just radically changed the world. One of the most important discoveries in the history of man from an accident. I think it just points to what we need to optimize society for, which is free exchange and experimentation. That's how we create the most wealth in the world. That's how we solve problems. That's how we increase life expectancy. That was killer episode. I hope you guys enjoyed it as much as I did. And we'll see you back soon for episode three.