Podcast Summary: The "What is Money?" Show – Episode 9: The Saylor Series | Economics, Inflation, Interest Rates, and Natural Competition

Release Date: January 18, 2021
Host: Robert Breedlove
Guest: Michael Saylor

Introduction

In Episode 9 of "The What is Money?" Show, host Robert Breedlove engages in an in-depth conversation with Michael Saylor, a prominent figure in the Bitcoin and cryptocurrency space. The episode delves into various macroeconomic topics, including the nature of money, inflation, interest rates, and the inherent competition within markets. The discussion also weaves in philosophical perspectives, particularly Stoicism, to contextualize economic principles within broader life philosophies.

Bitcoin as an Elemental Innovation

Michael Saylor begins by positioning Bitcoin as a fundamental advancement in human civilization, likening its significance to the discovery of fire or the development of modern medicine.

"Bitcoin is channeling human ingenuity into making it better. And every commodity is channeling human energy into making it worse."
[00:02]

Saylor emphasizes Bitcoin's role in efficiently channeling human energy and intellect, contrasting it with traditional commodities that, in his view, degrade economic energy.

He further articulates Bitcoin's unique value proposition:

"Bitcoin's got a positive real yield because you don't, you're not getting hit with that 10% currency debasement."
[32:47]

This perspective underscores Bitcoin's potential to preserve value in an environment where traditional fiat currencies are subject to devaluation through inflation.

Critique of Fiat Currency and Inflation

Saylor presents a critical analysis of fiat money, describing it as "contaminated" and likening its use in economics to performing surgery with non-sterile instruments—a metaphor highlighting the destructive impact of inflation.

"If we're trying to build socioeconomic systems using a money that's contaminated with the uncertainty of inflation or confiscation or deauthorization, it tends to make me believe that the system we would build would be more vulnerable to death as well."
[05:30]

He challenges the conventional Consumer Price Index (CPI) as an inadequate measure of inflation, asserting that it excludes volatile and essential assets like food and energy, thereby misrepresenting the true inflationary pressures in the economy.

"I call it, it's a metaphysical metric that's been artificially defined in order to provide some comfort."
[24:36]

Saylor argues that the misdefinition of inflation serves as a tool for wealth redistribution, effectively acting as a mechanism for "monetary inflation" that reallocates resources in favor of those who can access newly printed money first.

Interest Rates and Real Yields

The discussion transitions to interest rates, where Saylor critiques the suppression of interest rates by central banks. He illustrates how artificially low rates lead to negative real yields, diminishing the purchasing power of savings.

"The problem starts with the fact that inflation is misdefined. The right way to think about it is every single product, service or asset has an inflation coefficient."
[19:05]

Using the example of government bonds, Saylor explains that when nominal yields fall below the inflation rate, investors face negative real yields, eroding the value of their investments over time.

"The risk free rate would be the yield on government bonds... if the asset inflation rate blended across all stock, all liquid assets, stocks and bonds and the like, it's probably 15% right now... Bitcoin's got a positive real yield."
[32:47]

This scenario underscores the incentive for investors to seek out assets like Bitcoin that can offer a hedge against the eroding effects of negative real yields.

Central Bank Manipulation

Saylor extends his critique to central banks, portraying their actions as attempts to manipulate the economy by controlling money supply and interest rates. He likens central banks to air conditioners, metaphorically suggesting they pump "heat" (economic entropy) onto society while trying to "cool" specific segments like their shareholders.

"It's like an air conditioner... It's trying to pump out the entropy, it's putting cold air into the room, is pulling hot air out of the room."
[62:50]

He contends that such manipulation leads to price distortions, misallocations of resources, and exacerbates boom-and-bust cycles within the economy. Saylor also touches on the historical role of central banks in funding warfare, implying that their ability to print money has been used as a tool for consolidating power and controlling economic outcomes.

Market Competition and the Law of Decimation

A significant portion of the episode examines the concept of natural competition within markets, drawing parallels to biological ecosystems. Saylor introduces the "Law of Decimation," an ancient Roman military practice where one in ten soldiers were randomly killed to enforce discipline and prevent complacency.

"The law of decimation is 1 out of every 10 of the moving parts in anything will break in any given year."
[44:11]

He applies this principle to modern business practices, suggesting that in any complex system—be it a company or an economy—approximately 10% of components will fail annually. This constant pressure ensures that only the most efficient and resilient entities survive.

"In a real Darwinian capitalist economy, it's like being flat means defeating 99% of the rest of the market being flat."
[38:16]

Saylor emphasizes the increasing competitiveness in the digital age, where geographic boundaries are erased, and excellence must rise to the top on a global scale. This environment necessitates continual innovation and humility to avoid being outcompeted by more agile and resourceful entities.

Stoicism and Philosophy

Integrating philosophical discourse, the episode delves into Stoicism, particularly through the lens of Marcus Aurelius. Saylor reflects on Aurelius's paradoxical legacy—celebrated for his stoic writings yet criticized for poor decision-making in succession planning, leading to the decline of the Roman Empire.

"The single most important decision Marcus Aurelius made... was the decision on an heir... which plunged the Roman Empire into chaos."
[52:22]

This narrative serves as a cautionary tale about the fragility of even the most virtuous systems and the importance of maintaining principles over personal biases or attachments. Saylor connects this to the broader theme of entropy and the necessity of disciplined, principle-driven decision-making to uphold systemic integrity.

Antifragility and Vitality

The conversation concludes with an exploration of antifragility—a concept popularized by Nassim Nicholas Taleb—that describes systems that gain strength from volatility and stress. Saylor illustrates this through examples from nature, where predators and prey engage in constant dynamics that promote resilience and adaptability.

"Animals in the wild are all beautiful because they're constantly being conditioned against the chaos of nature."
[73:28]

He advocates for embracing entropy and uncertainty as catalysts for growth and evolution, both in economic systems and personal development. This ties back to the earlier discussion on Stoicism, reinforcing the idea that resilience and adaptability are paramount in navigating an unpredictable world.

Conclusion

Episode 9 of "The What is Money?" Show presents a comprehensive critique of traditional economic systems, particularly fiat currencies and central banking practices, through the insightful perspectives of Michael Saylor. By intertwining economic theory with philosophical principles, the episode offers a nuanced understanding of how Bitcoin emerges as a solution to the inherent flaws within current monetary frameworks. The discussions on competition, entropy, and resilience provide listeners with a deeper appreciation of the complex interplay between economics and human behavior, advocating for a more disciplined and principled approach to financial systems and personal decision-making.

Notable Quotes

• Michael Saylor - "Money is the highest form of energy that human beings can channel."
  [00:02]

• Michael Saylor - "Inflation is bleeding like operating with non-sterile instruments. The patient keeps dying and we don't know why."
  [05:30]

• Michael Saylor - "There's no such thing as a free lunch, but the inflation that's being reported is an irrelevant metric."
  [24:36]

• Michael Saylor - "Central banks are trying to freeze out market participants or sucking the air out of the room."
  [26:41]

• Michael Saylor - "It's almost like I put it in a battery that drains 2% a month or 1% a month. I can't store energy."
  [26:41]

• Michael Saylor - "In a real Darwinian capitalist economy... there's always someone ready to outcompete you."
  [38:16]

• Michael Saylor - "Stoicism is critical... you can always snatch defeat from the jaws of victory."
  [53:52]

• Michael Saylor - "Antifragility could be a synonym for antifragility, could be genetic vitality, right? Darwinian vitality."
  [54:36]

This episode provides a thought-provoking exploration of money's role in society, emphasizing Bitcoin's potential to revolutionize economic systems by offering a more resilient and energy-efficient alternative to traditional fiat currencies. Through a blend of economic analysis and philosophical insight, listeners are encouraged to reevaluate their understanding of inflation, interest rates, and the underlying forces shaping our financial landscapes.