← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
"Crypto Is Crashing!" - Wealth-Building Strategies to Capitalize on the Crypto Crash | Michael Saylor (Replay)
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C
What's up guys? I am so excited to bring you today's episode with the certified bitcoin whale, Michael Saylor. Michael is an entrepreneur and business executive that puts his money where his mouth is. Also called Gigachad, Michael has gone all in with bitcoin and shows no signs of slowing or backing down. In this second round with me on Impact Theory, we're looking at why this recession is the greatest financial crisis of our lifetime and how governments try to do everything top down, create dysfunctional societies and if there's still opportunity in buying crypto even after the latest crash. I hope you guys love this episode and get as much value out of it as I did in recording it. And if you do, please leave a review on our podcast. That's the best way to support us so we can get the show out there to more people around the globe looking to make an impact. I'm Tom Bilyeu and welcome to Impact Theory. Michael Saylor, welcome to the show.
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B
Yeah, thanks for having me, Tom.
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C
Dude, I am very excited to talk to you. Now, obviously things have changed dramatically in the financial landscape since we last spoke and I want to start us off actually with something that you said which is the world is going through an unprecedented financial crisis, the greatest of our lifetime. Now I want to know, one, why do you think crypto and everything else has crashed? And two, is there an opportunity in all of this disruption for somebody to take advantage of or not?
- [02:24]
B
Well, if we look at the past year, what you've got is a drawdown of all financial assets. So the NASDAQ is down about 22% over the past year. And so NASDAQ represents tech companies and all the risk assets. But on the other hand, if you were to go and look at like the bond market and the bond portfolios, bonds are down like the B O N D index, the long bond index, it's down almost 17% in the year. So for 30 or 40 years you had this 60, 40 bond portfolio.
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C
And the idea was bonds were considered a safe space.
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B
The idea was if stocks work, then bonds will be a low return and stocks will be a high return. But if stocks trade down, people will shift their money to bonds and the interest rates will go down, the bonds prices will go up and you'll actually get a yield on your bond portfolio. But of course, that broke around March of 2020. And the reason it broke in March of 2020 is because interest rates got pegged to zero. So after we had lowered interest rates from 5%, 5.5% to 5 to 4 and a half to 4 to 3 and a half to 3 to 2 and a half to 2 to 0 and left it at 0, then the debate was, can they take interest rates negative? If you can't take interest rates negative, then bonds don't act as a hedge to stocks anymore. I mean, you're kind of, you're at the end of the road for bonds. And, and what we saw with stocks is the Federal Reserve printed a bunch of money, pegged interest rates at zero, and then you saw all these risk assets explode. You know, you saw the NASDAQ explode up and the S and P explode up. You had a K shaped recovery. And in the K shaped recovery, it's almost like the entire economy was in a train wreck or in a car wreck and we got taken into the hospital and they pumped us full of morphine. And if you've ever been in a bad accident and then first you're in pain and then they pump you full of painkillers and then you actually feel pretty good. And you're sitting there and your arm is broken, but you're high on morphine or high on something, you feel pretty good about it and you're thinking, why don't I just go break my arm and do this all the time? And then at some point there's part of your brain that says, I'm going to come home from the hospital and I'm going to get off this painkiller and I'm going to be in great pain for the next three months or six months or whatever it is. So I think what happened here is the Fed just pumped tons and tons of liquidity and we stayed high for about a year, year and a half. And I remember when Jerome Powell said, tom, I'm not even thinking about, thinking about raising interest rates, and said strongly that It'll be till 2024 before interest rates start coming up again. But here we are in 2022, and now instead of raising them a quarter point, you know, each time, now they're raising them 75 basis points. So they're taking three steps at a time, multiple times. So we took the cost of money down faster than any time in history, and now we're jacking up the cost of money faster than any time in history. And the result is that all the traditional models are broken. Let me give you a two year postmortem since we started dealing with this issue. MicroStrategy had. We had, we had $500 million of cash and we saw interest rates at zero and we saw the stock market inflated in the summer of 2020. And we said, well, what are we going to invest in? And we looked around at everything. Should I buy gold? Should I buy land? Should I buy art? Should I buy some crypto asset? And what's going to happen next? So what we did is we decided to buy bitcoin and we bought $250 million of Bitcoin August 10, 2020. And then September, around September 10 or so of 2020, we bought another $175 million of Bitcoin or something like that. And then we started buying bitcoin more in December, and we kept buying bitcoin. We ended up buying nearly $4 billion, $3.97 billion of Bitcoin, Tom, over that time period. So in terms of our strategy, MicroStrategy has just bought as much bitcoin as we get our hands on since August 10th of 2020. And in that time period, stocks gyrated north, they gyrated south. Currencies have changed. So let me tell you what's happened. MicroStrategy stock, our stock is up 93, 94% since that day. Bitcoin is up 77% since that day. The S and P index is up about 18%. The NASDAQ index is up seven and a half percent. Gold is down 16%. The bond market, if you just bought bonds, they're down 18%. Bonds are down 80%. And silver, if you think silver was better than gold, it's down 32%. Now, if you go on and say, okay, well, fine, let's just buy big tech. If you had bought the. The greatest of the big tech companies is Google. Google is up 41%. Apple is up 39%. Microsoft's up 22%. You might have won. Those were all better investments in the S and P. Much better than Nasdaq, much better than gold, not as good as Bitcoin, not as good as MicroStrategy. But if you bought Amazon, you're down 18%. That was overvalued in the summer of 2020. Like a bunch of 20 somethings were just buying Amazon because they thought, well, we're all ordering Amazon stuff, so it must be good. Well, when you buy something that everybody else understands to be good, at the same time, they all agree with you. It's normally bad. Yeah. Facebook is down 41% since then. Netflix is down 54% since then. So half the big tech got shellacked, the other half did pretty good. And now last point. What if you bought enterprise software? We compete against companies 100 times as big as us. Oracle, SAP, Microsoft. Oracle is up 39%. IBM's up 6%. Salesforce is down nearly 20%. SAP is down 45%. So summary for us, MicroStrategy strategy was buy as much Bitcoin as you can and buy it with equity and debt. We borrowed money. We borrowed $2.2 billion at a blended interest rate of like 2% or 1.8%. So we borrowed cheap money while money was cheap and we bought Bitcoin. Now people are saying that's stupid because bitcoin was trading up and then it traded down. At the end of the day, if your time horizon is a decade or longer, if you can borrow the money for longer than five or six years and you can hold it through the volatility, then raising cheap money, grabbing billions of dollars at low interest, and then investing in a scarce, desirable asset that's got sort of a technology appeal and holding it for a long period of time, that's going to be a good strategy. That's why our stock is outperforming Bitcoin. That's why, that's why we're outperforming all the enterprise software companies, all the big tech companies. And the reason Bitcoin's outperforming all the other asset classes is because it's scarce, it's desirable, it's technical. No one's going to write a piece of software to make gold better. You're not going to put gold on a billion iPhones. Whereas Lightning is a protocol that's been rolling out lately. You know, square Cash App or blocked Cash app, put Lightning right into Cash App. It means that you can send a hundred dollars of bitcoin to anybody in the world on a Saturday afternoon for less than a penny, instantly, peer to peer.
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C
And so we'll get to that, though I want to. I want to make sure that we humanize this for people that aren't as familiar with a lot of this. So one part of the appeal of bitcoin is also its volatility, which I've heard you speak about. But I think we have to build a few bricks before we get to that. So I've been going on a journey myself of really understanding investing and understanding what this all means. And so I get to play. Not play. I really am the sort of ignorant guy, but smart enough to figure it out, that's been going through this in real time with people. So I want to go back. So the first thing we do is we start lowering interest rates. Now, I want to understand why they're doing that. I have a thesis. Let me know if this is actually accurate. The reason that they lower interest rates is they're trying to goose the economy by making money cheaper so that entrepreneurs and other people will go and take that money. Or people that want to build a house, whatever, they can get cheap money. They can do something that creates activity in the economy. So whether you're buying lumber to build the house or you're taking on debt to grow your business, but you're doing things, is that accurate? That's why they're lowering the interest rate, is to try to get activity.
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B
They're trying to use monetary policy to counteract the negative impact of fiscal and foreign policy and domestic policy.
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C
But what is the negative impact? Is it people just pulling back and not spending money? It's going to be important to get where I think we need to go. It's going to be important to understand why this stuff happens.
- [12:48]
B
When a government declares a war, they basically put public policy initiatives ahead of the interest of the free market. So if I declare a war, I could just draft every single adult in the country, put them in the military, send them off, and if I lose the war, they're all dead. What's it do to the economy? The economy crashes. What's it do to the prices? Well, price of everything go up. If you want to create inflation, you do it a couple of ways. Either you cut the supply or you cut the supply of the product you want to buy, or you increase the supply of the money that's available to buy it with. So if I make it illegal to manufacture food, the price of food's Going up. I don't even need to print more money. I can create inflation. Just in a war like in World War II, we have gas rationing, you have food coupons. Why? Because all the gasoline gets shipped off to Europe to put in tanks or to put in airplanes or put in ships. So when you have policies that are declaring war on something, you divert resources. So we had a war on Covid, we have a war on carbon and energy war. If I decide I don't want you to burn coal or oil, I drive up the price of energy. If I decide I don't want you to show up in your office, I drive up the price of production. If I decide that I want to fight this Covid war and I'm going to change the way the economy works, then I'm going to drive up the cost of everything else. So we've got lots and lots of wars. You've got a culture war, you've got a war on office work, you've got a war on carbon, you've got a war in the Ukraine. The war in the Ukraine has escalated. Right. It's not just a war in the Ukraine, it's really a kind of a quasi economic war on Russia. So when we actually imparted Russian sanctions, we cut the amount of gasoline or the amount of fuel available in energy, we drive up the price of energy. So every single time you actually put a bit a public policy in place, you create inflation policy. Is inflationary. The more policy you have, the more inflation you have.
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C
I think this is going to be one of the key elements that people need to understand. So centralized control, I think is a core part of the thesis as to why things are breaking. So you have governments coming in top down. This is going to be the way that it is. And I've heard you say, and I would agree with this very much, assume that they're coming in with good intentions, but despite their good intentions, they're creating all kinds of problems. There's actually a. Do you know Thomas Sowell?
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B
I don't.
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C
Oh my God. I think you would really resonate with him. He's an economist, so you might discount him a little bit for that. But he says the last 30 years have been marked by trading what worked with what sounds good. And I think that we're to your point about wars, let's take the one on energy. So we've got people doing a green war. Great intentions. They really believe in that they want to save the planet, but in trying to help the patient, they are putting forward measures that do feel very warlike, that are closing off a lot of doors, that are making energy more expensive, that are going to disproportionately impact the poor, not just here in the US but around the world. And so that top down control, I know better, I know what to do with this knob. Instead of letting it evolve or happen in the free market, we're going to prescribe behavior. And that now I would say, and I'd love to know if you agree is if not the biggest, certainly one of the biggest contributors to what's happening to the economy.
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B
Yeah. Good. The road to hell is paved in good intent, right? People, people get into positions of power and they want to do good. And so they do good by issuing edicts, executive orders, policies, regulations. And they think that the regulations will make things better. They believe that if you enter into government and politics, you believe the political process is a way to make the world better. So what you have is political organizations, centralized organizations, getting progressively more powerful. And as they get more powerful, people do things. And I think if you roll the clock back to Ronald Reagan, he would say government's the problem, government's not the solution. So let's take nuclear energy. The cleanest form of energy is nuclear energy. The cleanest, probably the safest. Nobody died at Three Mile Island. You know, we can't, we can't hardly trace a death from nuclear energy in the US and yet we haven't built a nuclear power plant since the creation of the nuclear regulatory commission 50 years ago. And in Germany, they shut all theirs down, right? And in Japan, they shut all human
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C
psychology at play like this feels another key piece to the puzzle here. As we look at what, why the collapse, how this happens, how we get back out, feels like is humans react in a very emotional way to what happens. So. Yeah, exactly. And euphoria. So you get these two competing things that set something up. Weird. So this is the first cycle that I've lived through where I was paying attention like somebody interested in the financial world. Till then I was just an entrepreneur and just totally focused on that. And so I watched the euphoria grow in crypto and it was like exciting and thrilling and it was so fun. But there were people, like I had heard you say a gazillion times, guys, you have to be thinking in at least four year increments. And any thinking less than that is you're, you're going to get tricked by the volatility. And despite the fact that you and many other people were saying similar things, the second the price starts dropping, people panic, the price starts dropping, more people get liquidated because they were in way over their heads. And now it's this sense of despair and it's never coming back and it's over forever. And so there's like this, this schizophrenic bipolar maybe is a better way to think of it attitude of like we're up and we could never lose and I don't need to plan for a down scenario. We're down and we'll never be up again. And how much of that do you think exacerbates the problem?
- [20:44]
B
If you're an entrepreneur or you're an investor, you have to have a 10 year time horizon and nothing great is accomplished without a decade. If you look at Microsoft companies founded in the mid-70s, a decade later in their mid-80s, if you're not willing to hold Microsoft stock for a decade, you probably didn't get to the point where they came public. So a decade's a short period of time for someone who's an industrialist or an investor. I mean Warren Buffett still owns Coca Cola stock and he must have bought it 50 years ago, right? So I think that anybody you know that's a billionaire, right? All of these names, the Sergey Brins, the Mark Zuckerbergs, the Jeff Bezos, the Elon Musk's of the world, they didn't get there without holding an asset that had technical potential for a decade or longer. There's no get rich quick scheme. So I think that people want an easy route. If you're trying to get a quick, a quick win with no volatility, with no risk doesn't make Sense. And if you're actually trying to be successful in a hurry with volatility, that probably still won't work either. I mean, ultimately success comes from taking a decade long view. Right. Andrew Mellon, John D. Rockefeller, Jeff Bezos. Right. We forget, like Tesla was founded 20 years ago. People think it's an overnight success, but it's not an overnight success. And with regard to the macro picture, we live in a time of unprecedented public intervention in the affairs of the economy. Right. Unprecedented. We never had a. Never in the history of the country did you have a government that told you you couldn't have Thanksgiving dinner with your family because they didn't want family members to sit too close to each other. Yeah, we arrested a dude on a surfboard in the middle of the Pacific Ocean for, for, for basically paddle boarding in the middle of Pacific because that was deemed as unsafe. Right. That kind of stuff. So we have an unprecedented amount of encroachment. We have, we have politicians overriding the free market. They tell you what kind of energy you can use. They tell you, you know, how, how you, how far you have to sit from someone. They tell you whether it's safe to be sitting in your office at a table next to someone. Lots and lots of encroachment. Each of these areas, right. War. War is the suppression of the free market to the, to the benefit of the public or the public organization. Right. The government is suppressing the free market. So if the government keeps suppressing the free market everywhere, what you do is you cripple production, right? Yeah. That's why we have tariffs on Chinese imports. Right. That drive up prices up or down. Drives them up. Right. You have a war on or a labor war. Right. If everybody unionizes and if everybody's afraid to go to work and if everybody thinks that their life is threatened to stand next to another human being. And, and if we're afraid to trade with each other and if we're afraid to talk with each other. If you have capital controls, wage controls, price controls, export controls, manufacturing controls, as those things happen, they have a chilling effect on the economy. So what we have right now is on one hand, you have a supply side problem. We're not producing as much. The degree of not producing, by the way, is misunderstood. The currency weakened by 20% in the year after Covid. If the economy measured in nominal terms is flat, that meant that the overall economic output decreased by 20%. The overall economic output decreased by 20% or more in the last two years. People wonder if we're in recession, we've been in recession since March of 2020. But what we have is a situation where all the metrics are distorted. Right. For example, how many people would measure the economy based upon GDP output measured in dollars? Most. Is that the correct measure? No. Right. Because the dollar's not worth what it was 24 months ago. Right. What if I told you, look at it. You have to measure it in real terms or measure it in the actual output of goods and services. For example, how many airlines miles got flown? Right. If Emirates Airlines grounded half their fleet and decommissioned it after Covid, now they're up and running the part they didn't decommission. How is it possible that the air sector could possibly recover to the point where it was in January of 2020 if you've actually mothballed or decommissioned half the airplanes? Right. I could double the price of a ticket. If I double the price of a ticket, I can tell you that the size of the airline industry is the same as it was in January 2020. Right. I could declare there's no recession. But the fact is everything costs twice as much. There's half as much of it. I changed the way that I measured it. GDP measured in nominal terms is a gross distortion. And then CPI is a gross distortion. If I have 100 things that you want and I pick 10 of them and I measure the increase in the price of 10 and I ignore the price in the other 90, I can show you CPI is 8%, right? 8.3% is the number this morning. But the actual inflation rate is higher. But it's, it's inflation on something like it's inflation on something you want. But I'm not going to choose to measure. For example, you know, the 30 year bond is, is traded up to 350 basis points and it was 180. Right. Mortgages have doubled. So mortgages have doubled. Housing prices are up 35%. And that means in theory, the cost for you to actually buy a home is going to be 50, 60% higher year over year. But I don't choose to measure it because we don't actually calculate CPI that way. I take a survey and I ask you whether or not you think you could raise your rent by something and if the owner equivalent rent is up 3%, and I say that the inflation is 3 or 5. So we have a set of metrics that are just manufactured metrics and then we focus on them and then we talk about them. But ultimately what you have is an economy that's distorted. There are some things we produce more of, and there is, and there are some things we produce less of and we have flexibility with what we choose to measure. The monetary intervention is the government, basically, if I put everybody under home arrest for a year, it's going to be a problem for the economy, right? I mean, if I shut down, they did it in New Zealand, they did it in Australia, they did it in Canada, they kind of did it in certain states in the US If I do that, that cripples the economy. So while I'm doing that, then if I go ahead and I pump a lot of money in the system, then maybe I create a wealth effect. And I can say, well, we're recovering, but ultimately you never recover from the fact that nobody went to school for a year and nobody, you know, went to work for a year, right? You can't, you've lost that forever. You're just not measuring it. You, you can, you can change your metrics, right? There's this, There's a saying. You write the, the winners write the history books. So the Romans, remember, the Carthaginians, have been as being like evil, right? If, if we win the war, then we write out all of the good that our adversary did and we write up all the good that we did and we suppress all the bad that we did because we won the war, we write the history books. And so I think right now what you're, what you see in the economy is lots of distortion of numbers, lots of distortion of metrics, right? The fact that we have a debate over whether we are in a recession or not is kind of laughable, right? Because we've been in a recession for 24 months. If you are measuring the production of goods and services, all you gotta do is look at the variety of things that were available to you in January of 2020 versus the variety of things available to you today. And the delays, if you've got 1/10 the selection and it takes three times as long to get it and it costs 20% more, how are you not in a recession?
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A
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C
Yeah, this is what really is I find unnerving as I go down the road of trying to figure all this out, trying to figure out where the opportunities are is I'm looking at what feels like. And again I wanted to give that it will be, it's being done with good intention. But you have a changing definition of what a recession is to match a thing that seems designed very explicitly to keep people calm. And it seems the same thing with the Fed, right? The reason that they said we're not even thinking about, thinking about taking up rates, they just want to keep everybody calm. So we're told things not necessarily because they will be the most effective long term or at least that the outcome is that they don't end up being effective, but they're looking at the short term impact of. I want to make sure that people stay calm. And I'll admit if they were like, oh my God, the world is burning and everything is bad, like then people are going to act like it's 10 times worse. And so that's why I feel like if I start putting the pieces together, there's really three pieces that I think give us the situation that we're in. As you have said, people just don't understand money. And so you said half of the problems that we face as a civilization have to do with the fact that we do not understand money. That was pretty interesting. And then you've got this top down control, so centralized decision making, which is destined to fail. Historically, just looking at it, it does not work. And then the third thing is human emotion. And so you put these things together in a cocktail and you get the moment that we're living through. So you've got people freaking out, you've got other people know that you're going to freak out. So trying to control everything, trying to say, hey, I can make better decisions than you. I'm going to tell you sort of white little lies to get you where I need you. I mean, I think back to the mask statement right in the beginning, it's like they don't work actually you need to wear them all the time. They didn't work when they wanted to save them for hospital employees. And suddenly they started working when there was enough for all of us to wear them. And so it's like, I get it, again, good intentions, but without a pathological fear of doing this. Top down control. You get this issue. And then compound the fact, even if people wanted to think through the process for themselves, they don't understand it. And so I feel like I'm just barely beginning to understand how money actually works. And I think now we should get into Bitcoin as a thing that exemplifies some very powerful principles that will begin to help people understand. So the first thing that I'm going to say, and I say this knowing that you will correct me if I'm incorrect, but here is my understanding of what makes Bitcoin so interesting. That money is basically your financial energy put into a form that can be carried across space and time. Some forms allow you to carry across space and time easily. Some, not so much. But getting people just to understand that I go do a thing that is my physical energy, my physical labor, my time, my actual turning oxygen and food into ATP. And I'm actually able to put that into a medium, right? It could be gold, it could be fiat currency, or it could be bitcoin. But just getting people to understand, holy shit, there's actually a way for me to do a thing, receive a thing, that allows me to carry that energy across time. And if, if you'll bear with me, it's like fat. So I can eat a bunch of food and I can store it on my body as fat, but if I'm really smart, I will eat a bunch stored on my body's fat, and I will give a bunch away because I'm too full. I can't keep eating. I will give a bunch away and essentially store fat on their bodies. So the next time, if I don't get food or they do get food. So the idea of being able to transfer useful things across time and space in unique ways is really important. So bitcoin comes along as certainly the newest entrant and maybe the best entrant of things that allow you to sock away your time and energy into that and carry it across time and space. Have I understood that correctly?
- [35:07]
B
I think that's well said. I mean, fundamentally, money is an energy system to transfer energy over time and space. Right? That's the right way to think of it. Fat is an organic battery. It's your way to transfer organic energy. If you put 20 or 30 pounds of fat on your body, you can live for 90 days, and if you don't, you don't eat, you die. So fat was developed over the course of millions and you know, 70 million mammalian years. And it's a pretty wonderful invention when you think about it. It's, it's, it's the reason that we didn't go extinct or the reason you're not dead. The, the challenge with money is the fiat currencies that are used commonly as money. They're all broken, they all have a big hole in them.
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C
And, and the big hole is inflation. Period, end of story. Or is there something else?
- [36:06]
B
The hole is. We could call it inflation. But inflation, such a charged term because most people think inflation is cpi. The defect in fiat currencies is monetary inflation. It's the expansion in the money supply, not just the increase in consumer goods. Because the CPI is a distorted, it's a submetric. Right. If you look at the US dollar, the supply of dollars has been increasing 7% a year for 90 years. It's been increasing 15 to 20% a year for the past two years. Right. So the big idea, I think that's true.
- [36:44]
C
So it seems worth. Walk us through. Where do you get that number?
- [36:50]
B
Well, if you go back to 1930, my house in Miami beach cost $100,000. And if you roll the clock forward to 2012, it cost $14 million. And today it would cost you $40 million. So it's 400 times more expensive than it was 92 years ago. Now, if you back solve that, you'll find that that works out to about a 6% or 7% annualized inflation rate. Right. And if you go and you look at any kind of scarce, desirable asset, something that's, something that is you can't make any more of, you'll find typically they increase in cost about 7% a year. Normally. You can actually see if you look at the market basket of things people like want, like really good healthcare, really good education, Tom, you know, a beach house in the Hamptons, artwork, Picassos, right? That kind of stuff that doesn't go up in price 1 or 2% a year, that goes up in price normally about 7% a year. And if you look at the, at the price of a basket of stocks like the S and P, the S and P has gone up about 10% a year. Well, the reason it's gone up 10% a year is because the money supply expanded is 7% a year. And then the underlying buying companies probably grew 2 or 3%, you know, effectively. So you can figure this out for yourself if you just start to go and take samples of what stuff costs in 1971, what it cost in 1930, what it cost in the year 1950. And what you'll see is that for anything that's really desirable, like scarce energy that has energy content, it doesn't go up in price 2%. Now, the stuff that, that, that doesn't go up in price is expensive is stuff that's highly manufactured with low in low energy content, high information content. So, for example, a streaming video on YouTube or something that could be stamped out in quantity 100 million at a time, boxed food, right? Stuff, highly manufactured stuff that has machines generating it. Or even better, you know, something that's got cheaper, right? It costs a lot of money to listen to Beethoven's Fifth Symphony if the orchestra plays it in 1850, but it costs not that much to listen to Beethoven's Fifth Symphony if you're listening on your iPhone3 or AirPods. Right? So if I can strip the matter and the energy out of the product, I can provide that to you very cheaply. So the information content products got cheap, but stakes more expensive. Although there's a slight benefit. If you can manufacture 100,000 cows and I can use machines, right, Then that's a deflationary thing. One thing you can't easily manufacture more of is 3 acres of beachfront property in the Hamptons. That's very difficult, right? And if you look at the cost of a Palm beach house, they're $100 million right now. Okay, so $100 million for a house on two acres or three acres in Palm Beach. Now ask yourself the question, why isn't that getting cheaper? That thing's going up a lot. So the problem coming back to money is fiat currencies aren't anchored in energy. When we were on the gold standard, theoretically, during the gold age, 1870 to 1914, if a dollar was convertible at a twentieth ounce of gold, right, and you really pegged it hard to gold, then you're anchoring the currency into a hard asset. Now, gold isn't fixed in supply. The gold supply increases at 2% a year, 2 to 3% a year. So if you're on the gold standard, that means that the supply of money would be increasing at 2% a year or otherwise doubling every 35 years. So money under the gold standard, perfectly executed, bleeds energy every 35 years. It's got a half life of 35 years. But that creates stable prices, Tom, because the economy grows at 2 to 3% a year. So if the economy grows 3% a year, if the money loses 3% of its value a year, then everything kind of stays stable. Right? The demand increases, the supply increases. Right. That's a good situation. In that case, you can save your money and 30 years from now your money will be worth as much as it is today. Now, if it turns out that you're saving your money and the supply of money is increasing at 7% a year, then the money is cut in half every 10 years. Right. And so that means in 30 years, the amount of money you have will be cut in half once, twice, three times. So you would have 12.5% of your wealth in 30 years saving money under the fiat standard under a 7% regime. Now, 7% was about the rate that the US was inflating the dollar supply. But in the developing world in weaker countries, you would see them inflate the money supply about double that, 14%. So the half life of their money is five years. The half life of the dollar is 10 years. Most people don't even notice 10 years is half life. Except that anecdotally, if you asked anybody in the past 20 years, are you going to save your life savings in a checking account that earns 1 or 2% interest in dollars, they would tell you no. I know intuitively the cost of a college education is going to go up, the cost of a house is going to go up. I can't just save in dollars that generate zero percent interest. So under the fiat standard, the money supply is expanding from 7 to 14% a year, depending on where you are until we got to Covid. And in Covid, everything doubled. And so you started seeing a much more rapid collapse in the value of fiat currency. The US dollar expanded the money supply 15 to 20% a year. And so in the US we expanded the money supply maybe 40%. And so US single family homes went up in price 40%.
- [43:33]
C
Oh God.
- [43:34]
B
I think about the correlation. The price of a house is 40% higher than it was 24 months ago. The amount of money in dollars is 40% higher than 24 months ago. The number of houses are about the same, the number of people who want them about the same. Makes sense. Now if you go to other countries, if you look at currencies outside the US in the past 12 months, right, the Chinese currency has weakened 7%, Australian's down 8, the euro's down 15%, the yuan's down 15, the pound's down 17, South African rand's down 18, Polish a lotta is down 18 and Japanese yen's down 24% in dollar terms. What's happening? They're printing more money. It's even a bigger issue for them. The Japanese have pegged the 10 year interest rate at 25 basis points and the US 10 year interest rate is more than 10x that. The Japanese central bank is printing infinite yen in order to buy every bond and keep the price of bonds much, much higher than they would otherwise be. So they're holding up the price of bond by pumping yen in the economy. And the reason as they do that, the yen crashes against the dollar. But of course, it's even crashing faster against scarce desirable assets. If you price a barrel of oil in dollars, it just got 24% more expensive in Japan.
- [45:07]
C
Why do they do that?
- [45:08]
B
Because they want to hold up, prop up asset prices. They have institutions that are holding bond portfolios of yen and they have institutions holding stock portfolios. And if they stop printing yen to hold up the asset prices, those portfolios of assets will crash.
- [45:32]
C
And if they crash, then the inflationary impact.
- [45:35]
B
Well, if those portfolios of assets crash, then the banks or the investors that hold them will be technically insolvent and go bankrupt. If I'm a bank and I have $10 billion of assets and seven or $8 billion in loans outstanding, then I look solvent. But if those assets are in sovereign debt and the sovereign debt crashes by 2 or 3 billion, I'm technically insolvent. It creates a banking crisis or a financial crisis. So it gets worse than this, right, Tom? That's the good news. Those are strong countries.
- [46:10]
C
Great.
- [46:11]
B
The bad news is like Sri Lanka, Argentina, Turkey.
- [46:15]
C
Now are those the same thing? Just played out on a longer timeline.
- [46:20]
B
Those are examples where the government's printing even more money. So for example, the cost in Turkish lira up 120% over 12 months. So the Turkish lira is crashing more than 50% against the dollar. The Argentine peso is crashing in Sri Lanka. Sri Lanka crashed the entire economy. And the government, how'd they do it? Well, first they, they made it illegal to use fertilizer to grow crops, and they kind of crushed the farming business. Then they, they printed too much money under a modern monetary theory that they could just print money. So they crashed their currency. Then they couldn't afford to buy fuel, they couldn't buy energy or gasoline. So then they actually regulated the use of gasoline by saying the private citizens couldn't actually buy gasoline. Then the people rioted and they toppled the government. Because if you're going to starve me to death and freeze me to death and then lock me and deprive me of my car, Right? You pretty much like ripped me back to the Stone Age, right? You're going to freeze to death, walk everywhere, and there's no food to eat. Why? Because it got excessive government intervention. Right. These ESG policies that are totally irrational. So you can have irrational policies if you're rich.
- [47:48]
C
Let's go into ESG because this is actually super controversial but very interesting. So for somebody that doesn't know what an ESG policy is, what is esg?
- [47:58]
B
It's when I decide that, say nuclear power is bad, but solar power is good, but natural gas is bad, but wind power is good. When you start to decide and dictate how people will generate energy, or when I decide you can't use fertilizer in
- [48:23]
C
order to grow food, was that also a green decision?
- [48:27]
B
Yeah, because fertilizers have phosphates in them and they decide the phosphates are bad for the water and so they didn't want people to not use them. So as the government starts to implement policies about how you will or will not produce food, how you will or will not produce energy or heat, what happens is ultimately they drive up the price of food. Right. If you don't use fertilizer, then your crop yields get cut in half. If your crop yields get cut in half, food price doubles. If you're not allowed to use gasoline and you have to use a electric powered car, the cost of the car doubles, crop prices, your food price doubles again. Now it's 4x as much. If I double the money supply by printing a bunch of money to give to someone to pursue some aim that I agree with, now the price doubles again. So I've increased the price of everything by a factor of eight.
- [49:24]
C
How dangerous do you think this moment is for the us?
- [49:29]
B
It's pretty dangerous. We're the richest country in the world though. So the US has the world's reserve currency. So if you think about the way the economy works 24 months ago, the countries like China, sorry, countries like Russia and the like export a trillion dollars worth of raw materials like energy and metals and the like. And then countries like China export a trillion dollars worth of products and services and we pay for them by sending back $2 trillion worth of dollars. So what we do is we export 2 trillion worth of inflation and they export 2 trillion worth of products and services and energy because we run the banking system of the world, the banking network, plus the US dollars, the world reserve currency.
- [50:32]
C
I need to ask Because I don't understand. So when we send them the $2 trillion, we are creating that money in order to make those purchases.
- [50:40]
B
Yeah.
- [50:41]
C
So we're not just taking money that we've already saved.
- [50:45]
B
Let's say there's $50 trillion circulating around the world and we just print 2 trillion more. Now there's 52 trillion. We've inflated the currency supply by 4%. We've devalued everything by 4%, and we've traded $2 trillion worth of US dollars for $2 trillion worth of coal or oil or products or iPhones or labor or something. Right. And that's the way it works. Right. And the reason it works, though, what is the real export? The US Provides financial economic security. Like, for example, if you live in Mexico or you live in Argentina and you've got a million dollars, are you going to save it in the peso? You're going to save it in the dollar? Right. How are you going to save your money? If you export $100 billion of oil from the Middle east and we give you back $100 billion in dollars, what are you going to do with $100 billion? You buy t bills with it. So you buy sovereign debt. That yields 2% interest. And so now if you hold $100 billion worth of sovereign debt, now if I double the money supply, it's worth half that much. Right. So. So in essence, if I'm increasing the supply of dollars by 7% a year, and if you're holding $100 billion of my debt, then you're paying $7 billion a year to hold the debt. So I'm charging you $7 billion for the privilege of giving you a bank to put your $100 billion in. It's a negative interest rate. Right? Negative. Real yield. If you. If you do it ten years in a row, I take $70 billion from you. Whoa. But the question is, what else are you going to do? You're going to put in gold. If you have a billion dollars, what are you going to put it in? Well, the Russians put it in gold. We just seized the gold. You're going to buy yacht with it? We might take the yacht. You're going to buy land with it. Whose land? Land in another country. I already own all the land in my own country. Right. So the US Primary export is inflation. That's what we do. And it's a good situation. Right. We're running the banking system and we're printing more money. Our primary export is monetary, call it monetary technology in the form of The US dollar, it's the most desired instrument and what we trade for it is, is we get energy or we get products or services in return for exporting the dollar. Right, right now we're on this cusp because we're exporting too many dollars. And, and that causes the collapse of other countries currencies. And when their currencies collapse, their governments collapse. So the us the US won't collapse. The first countries to collapse will be Zimbabwe, Lebanon, Syria. Right. Iraq. Iran.
- [54:02]
C
Right.
- [54:03]
B
Not any country, not Iran, but Afghanistan, Iraq, South America, all throughout. They're all being destabilized. Sri Lanka. So what you have is you have this rippling wave of destabilizations in the developing world. You have a weakening in the developed world. As their currencies weaken, they're going to suffer from inflation. If we have inflation, that's 8% in the US dollar. And if the Japanese yen weakens 24% against the US dollar in one year, and if the Japanese have to buy oil priced in dollars, what's their inflation rate going to be? Now, right now the government, the official figures will tell you it's low. And you can do that as long as you define the metric. But there's only so long. You can do it at the point where nobody can actually afford to buy gasoline or buy energy and their cars don't run and they can't heat their home. Right. Then you can no longer persuade the public that there is no inflation problem. Then you have a problem. And now the question is how are you going to deal with it? And of course there's how does the government deal with it? First they'll persuade you that they won't count this. They won't include. Have you ever heard the phrase a core inflation doesn't include the highly volatile food and energy?
- [55:40]
C
I haven't, no.
- [55:41]
B
But that's, there's, there's actually an inflation measure, core inflation, that does not include food and energy. So first I'll try to persuade you not to actually pay attention to the cost of food and energy. But at some point I'll accept it. But I will, I will pick a different measure of food and energy. I'm not going to measure the cost of a steak. I'm going to measure the cost of a soybean burger. Right. I'm, I'm going to measure the cost of, of manufactured, you know, agricultural grain products that are cheaper. I'm not going to measure the cost of, of some organic vegetable that's more expensive. So you'll see a distortion of that and then at some point you see a normalization of behavior. Like there's the old world Economic forum meme. You know, you'll own nothing and you'll be happy.
- [56:34]
C
Mm.
- [56:34]
B
It's like, well, I've decided that eating meat is bad for me. Like so first you can't afford it, now you, now it's bad for you to eat it. So I'm not really upset that I can't afford it because it was bad anyway. Or, you know, if you're a patriot, you're not going to actually cool your home below 80 degrees in the summer and you're not going to heat your house. You remember during the energy crisis, you don't remember this in the 70s, right? It was your patriotic duty to turn the thermostat down in the winter and turn the thermostat up in the summer. So this happens in wars too, right? In a war it becomes your patriotic duty to do without, to ration.
- [57:15]
C
In a war. I get it, obviously, assuming that it's a justified war. But I would like to go back to this idea of the government basically not getting you to look at the. Well, one I want to tie this back to. We started this because we were talking about the, the green mandates having a knock on effect that people aren't paying attention to. So you put these draconian rules in for energy production. The one that's always confused me again is like a total outsider. But not doing nuclear energy just seems crazy so that we can get energy self sufficient. That seems to tie into this idea of a globalized economy which I think we're seeing the risks of that play out now certainly with Russia and the Ukraine. I think that it could potentially play out just as disruptively with China. But so you've got this belief in globalization. So now I believe I can get my energy from Russia or from wherever. And so we're going to be fine. We don't need to do these ultra high risk nuclear things. But you start, so you start putting in these. Is esg. What, what is the initials?
- [58:29]
B
Environmental, Social and Governance.
- [58:33]
C
Okay, so you've got the ESG rules forcing people to do things a certain way which don't necessarily have all the economic consequences that we would like. Very negative. Okay. Now as inflation starts to happen, we've got the government saying, well, don't look at food and electricity, which seem like the two things you're going to interface with constantly. How do we, like, what is the path out of that? Like that seems really high risk in terms of negative Impact on the individual person really beginning to struggle. They're going to start asking, why am I being asked to give up all this? And then if you don't have a really good justification, then they're going to rebel, which gives the government an incentive to come up with a really good justification, which makes me nervous.
- [59:25]
B
Well, the problem is too much government. And, and, and the most dysfunctional societies are the ones that have, have the strongest, most pervasive governments because they're the ones that can actually take the economic decisions to cripple the economy completely and utterly. No checks and balances. So, I mean, the impact and the damage of the lockdowns was much worse in Canada and Australia and New Zealand because they had strong centralized governments. And it was weaker in the US because we had state governments. If it wasn't for Florida and Texas, we might not have ever reopened our economy. Right. But the fact that Florida and Texas reopened and people functioned became the incentive and, or the air cover for New York and California to reopen. So if you're an individual, the solution is you run to the place with the least government, figure out where that is, and you run away from the place with the most government, because the most authoritarian government is probably going to choke you to death if you're, if you're politically engaged. The answer is vote for and lobby your politicians for less government. Right. As long as politicians think government is the solution, you'll get more of it. When they start thinking that government is the problem, you'll get less of it. The problem we have here is we don't have one war, we have 12 wars. We have the war on terror, we have the war on misinformation, we have the war on carbon, we have the war on culture, we have the war in Ukraine, we have the war fill in the blank on radical Islam, we have the war for democracy. There are so many different wars and, you know, a single terrorist event. Look at what happened in 9 11. Two things. One, we decided we're going to go to Iraq and we fought a war in Iraq. A country had nothing to do with 9 11, and it cost us, what, a trillion dollars and how many lives? And then we also implemented TSA restrictions and security restrictions. And so even to this day, we are now 22 years later. You can't get on an airplane without going through a horrific amount of security issues. And ostensibly, all that security is to keep you safe in the airplane. But if I wanted to blow up a bomb, I could just walk into the security line of the airport and Blow up the bomb without going through that. And if I really was a terrorist, I could just walk into a church or walk into any restaurant or any other public gathering space where there are just as many people. And so we didn't really get more security. What we got is more authority, more of a police state. And so you, each of these incidences, a terrifying thing. Right. Becomes an excuse for the government to encroach more on freedom. I don't know that it's easy to actually fix that problem in any given country. Right. Not so easy. But on a minor level, you can campaign for freedom in your municipality or your county or your state. Maybe you can, you can, it does have an impact. You can relocate yourself to a place that's more free from a place that's less free. Right. I personally wouldn't live in a place where an official could by edict confine me to my home as long as they want, for any reason they want, without my approval, without a court order, you know, without a law. Right. You know, if you look at American history, most of the of the constitutional fights where presidents wanted to declare war without an act of Congress and Congress is supposed to actually vote on it. So if you live in a society where people can declare war on anything and everything without even a debate in the legislature, legislative branch, what good is it to elect people that are actually against that given policy if they don't even get a say in it?
- [63:46]
C
Why do you think top down control doesn't work?
- [63:50]
B
Why does top down control not work? Because it's the decision of one individual versus the wisdom of the marketplace. You know, the marketplace is trying to find. It's like the market New York City as, as a set of 10 million people figures out how to run itself every day. And if one person got up in the morning and decided they were going to issue orders to all 10 million people until every one of them went to go to the bathroom, it probably wouldn't work so well. It's impossible for a centralized entity to actually make decisions that are as rational as a decentralized marketplace.
- [64:38]
C
Humans though, seem to, from a historical perspective, continually gravitate back towards the centralized top down control. Do you think that there's something just inherent to the psyche? Where is it arrogance that we believe we can do it? Is it that we really want to help and we feel like we know the answer? And so we go into politics and we start, we only have that one lever. And so let me just keep adding things on the books, like what on earth is it that Allows us to look at, say, the 20th century and go, that was just done poorly. Let me show you how it's really done.
- [65:12]
B
You know, the tendency has been here since time immemorial, goes back thousands and thousands of years, right. The battle in ancient Greece, you know, over, is a monarchy better than a democracy, better than an aristocracy? Right. It's a question that's been dealt with by ancient philosophers. You know, the Romans had a republic they thought was better than Philip of Macedon's kingdom. And you know, they had debates 2,500 years ago. And so I don't think it's new. I think there's been a continual fight, yin and yang, between this. The only thing that's different today is that technology allows for the centralization of more authority. If a billion people are all getting their information on one website, then whoever controls that website can control what information flows to those billion people with a flip, flip of a switch. And when a billion people had to talk to each other, no one person could decide what was said with a flip of a switch. So I think technology is inherently centralizing to a certain degree and that is exacerbated the issue.
- [66:27]
C
Have you read Matt Ridley's book, the Evolution of Everything?
- [66:30]
B
No, I haven't.
- [66:32]
C
It's really interesting. I don't know if you're familiar with him as an author, but he wrote a book called the Rational Optimist, another really great book. He's written a few. I think he also was the one that wrote the Red Queen, which is basically evolution is about running as fast as you can to effectively stay in place. And in the book, he, he goes into why the basically you have two ways to look at the world. You have a, a creationist point of view where it's like a top down, God created the universe, let there be light, and everything went into motion. And so, hey, top down, that works. And then you've got an evolutionary lens where everything is bottom up. And he goes and makes a very credible case why a lot of the things that we think of as being top down were really bottom up. And I've heard you talk a lot about, in drawing parallels to Bitcoin, you've talked a lot about like, hey, if you look at any city that's, you know, a couple hundred years old, the buildings are all six stories tall. And they're six stories tall because that's what masonry and a wood frame is going to get you. And people without electricity are not going to be able to go up more than six flights of stairs. And so you hypothesize that, hey, if you went and looked at Rome, my guess is that in Rome they're probably going to be six feet tall. There's just a materials problem. And so you end up getting skyscrapers the way that we think of them now as the steel comes along. And now steel can build bigger buildings. You've got electricity so you can do an elevator. And so steel wasn't. This moment of. Or skyscraper is not a moment of pure genius by an architect. It's the ground up of like, oh look, steel becomes a thing, electricity becomes a thing. Architects are learning something. And so this one thing is probably more a reflection of its time than it is this staggering genius where somebody lurches us forward. And so he looks at all these classic cases where we thought it was one person that really did this thing. Like there's something like seven people in different countries that came up with a light bulb at almost exactly the same time. And so in the west, we of course hear about Thomas Edison, but in reality he's saying, no, no, no, this was just an idea whose time had come. And it really gave me a very visceral understanding of the difference between somebody that just the subroutine running in the back of their mind is creationist in origin, that I view everything through the lens of a particular genius, sparks and then something moves forward versus all the things you mistake for that, including the universe itself is actually a bottom up phenomenon. And once you flip your thinking over to everything evolves, everything comes from the bottom up, you begin to come up with solutions that are more effective. Right? And so going back to the old adage, I forget who it was that came Yeltsin, maybe that came from Russia and was doing a tour of a grocery store and he just could not believe, like the shelves are all full. And he's like, but who decides the price of bread? And they're like, what do you mean? Like it's just set locally at the local store. And that is top down thinking, where it's so embedded into your psyche you can't even conceive of another way to do it versus us, where, you know, we wouldn't think to have somebody tell us, it's like, well, you just set the price based on what somebody can control there. But I feel as somebody who's just old enough to, you know, I was a kid when Reagan was president and now I can feel everything shifting in the opposite direction. Which brings me to the question I really want to ask you point blank, what do you Think it. So I'll lead you down a garden path. I think the problem is that the reality of the market is it leaves some people behind. Some businesses collapse, and that's painful. Some people will lose their generations worth of wealth in a bad decision. And if you're not willing to let some people get eaten by the lion, you got to go top down. The problem is you then crush them.
- [70:36]
B
You.
- [70:36]
C
You cuddle them to death. What's your thought on that?
- [70:42]
B
I. I think that if you're an individual looking for the rational path forward, what you want to do is embrace technologies or ideologies that, that reinforce individual sovereignty and freedom and they're rational. So hence Bitcoin. If you have a bunch of money and you have a choice, are you going to buy a million dollars of gold and put it in a bank of a centralized institution that will seize it? Are you going to buy a million dollars of land in the middle of Beijing where the government of China could just take it from you? Are you going to buy a million dollars worth of a stock in a Chinese company? How about American company? How about an Argentinian company? Or are you going to buy a million dollars worth of a crypto asset that's in cyberspace beyond the reach of a government or a corporation? And so clearly the answer is if you take all of your money and all of your power and you put it in the middle of Beijing, right, they own you. And what if you're, if your life is not consistent with the policies of that government, then you lose everything when you put, if you took all your money and you, you invested it in New York City, the mayor of New York could just take it. And if, if New York, you know, if you took all your money and you put it in New Zealand and New Zealand locked down the economy for a year, right? Then they own you. So if you're looking for sovereignty and freedom or a rational path forward where you get a choice, then you need to actually put your property beyond the reach of a government that might be irrational or that might be capricious. And you need to put it beyond the reach of a corporation that might be influenced by said government.
- [72:47]
C
Do you think, though, even with bitcoin. So as I run this experiment in my own mind, I always come down to, but the government could still say, if you own bitcoin, you're going to pay this tax and at that point I just have to leave the fucking country. I mean, that seems like the only solution this ultimately does come down to. Any government could act, however they want. They can put whatever mandate on you they want. And I think part of where people's. The average person's willingness to adopt Bitcoin comes down to that thought of, like, Jesus, man, if the government is coming after me and they could,
- [73:27]
B
do I
- [73:27]
C
really want to flee? Like, so I think, well, like, let's
- [73:31]
B
come back to that. So let's say that. Let's make this easier. What if you were in Zimbabwe right now and you had a million dollars?
- [73:38]
C
Well, it's easy for me as an American to be like, yeah, of course I'd flee Zimbabwe.
- [73:41]
B
Well, let me turn around. Why don't, why don't you just go? It doesn't matter. You're not going to want to flee. Why don't you just go ahead and invest it in the town square in the middle of a village in Zimbabwe?
- [73:50]
C
I mean, the point, that definitely does feel riskier. I'm. Now I'm, you know, gluing something down. So I'll give you. Even in my own life, in fact,
- [74:00]
B
why don't we just. Why don't we sink you up to your knees in concrete in the town square in Zimbabwe? I mean, while we're on that subject, the point really is, is you have a physical presence in this world. And so ultimately, maybe they won't let you out through the airport, right? What if I just tell you I'm going to murder you next Monday, Will you leave? Will you stay? Right. Maybe you can't leave, right? But the point is, is there are a whole set of decisions you can make in life where you don't have the choice. If you make the decision to invest your family's life savings in a building in a country in Africa run by a dictator, you have given up the option to live in Europe. You've given up the option to leave. You've given up the option to do anything. So the question really is, do you want the option or do you want to give up the option? Because one is the choice of death, the other is a choice of life. There is no guarantee. If you leave Africa and come to the U.S. it seems like it's pretty obvious to me. The truth is everybody in the world would leave a weak country and come to a strong country. Everybody. That's why we have a border issue, right? Everybody wants to be in America. So that's not a hard sell. If you come back to the issue of, well, I'm an entitled American, will I ever want to leave America? Maybe you won't. But the point there is, if you had A choice between being rich and living in Texas or being destitute and living in California. Would you cling to California and be destitute or would you be rich and live in Texas? Because that doesn't seem so controversial either. It seems pretty obvious that if you can go to one state where you can live happily, what if I told you you're going to be locked in your bedroom for the next decade? If you live in one state and you're going to starve to death, or you can move to another state and you can live a normal life, you're like, well, isn't it obvious that you would like the option to live in the place that will allow you to breathe the air freely and conduct your business, right? When one place says you can't sit at dinner with your family and the other place says you can have dinner with your family, you're going to want to leave from point A to point B. So you won't be able to do it if your property is fixed, right? I mean, a lot of Jews died in Nazi Germany in the 30s because their property was fixed in Germany. They didn't want to leave and they got trapped there. If their property had been in a crypto asset like Bitcoin, and they could have left, they'd be alive. And it's not that hard to make that point. And you can, you can, you can illustrate that with every expatriate and every immigrant fleeing, you know, every war zone. Just go to ask the Cubans, right, that fled Cuba and came to Florida, you know, after Castro came to power, about what they lost and how they feel about it. So my point really is you can't fix the political problem in a country like Zimbabwe has been getting squeezed progressively for the past 50 years, and Cuba is the same way. You might not be able to change an entire regime, but you do have a choice as to whether or not you will commit yourself or allow yourself to be owned by the regime. And when you actually choose to put money, for example, when you choose to save your money in the peso, you accept the inflation of the peso. Would you take all your money right now, sell the dollars and go buy Zimbabwe currency? Would you do that? Probably not, right? It seemed pretty foolish. Would you take everything you own? Would you take your family and would you ship them to a hostile nation? Would you move everybody to North Korea? No, probably not. But, I mean, it's such a silly observation. It kind of illustrates the point, right? No doubt you have a choice as to where you put yourself Physically, and maybe you've decided physically the safest place is the U.S. now you got to choose the state. Now you got to choose the city. Now you got to choose the house. You also have a choice as to where you put yourself economically. Your wealth, your balance sheet. If you choose the dollar, you're losing 7 to 20% a year. If you lose the peso, you're losing 50% a year. If you choose the bolivar, you're losing 95% of it a year. You have that choice. And third, you have a choice as to where you put your livelihood. You can choose to work as a YouTube streamer. You know what? You depend upon YouTube. If you say something that causes YouTube to rip your channel off, your livelihood goes to zero. So if you choose to make your livelihood on YouTube, you should pay attention to their policies and act accordingly. If your livelihood is a hot dog stand in Beijing, if your livelihood is in Moscow, downtown, downtown, think about the Russian policy. You act accordingly. Everybody has a choice as to where they will place their livelihood, what corporation they'll be dependent upon, what regulator they will be dependent upon, what government they will be dependent upon. Right? You have a lot of choices today. Just be rational. I can't fix all of these problems in the world. All I can do is say some places are more permissive than others. On the margin, I would guess that your odds of being able to operate your business in the face of a potential pandemic are higher in Texas than they are in certain left leaning states. On the margin, Florida, probably higher. If the governor says, I'm never going to shut down a business, you have a right to work, probably you have a higher right there. So you get to choose. But that changes every month and every year, right? So public policy is changing, economic policy is changing. One thing is clear though. If you put your money in gold, it'll probably be seized by the, by the counterparty. And if it isn't seized, you're going to lose half of it every third, 30 years. If you put your money in a currency, you're going to lose half of it every five to 10 years. If you put your money into a weak currency, you lose half of it every five to 10 months. If you put your money into an equity, you're going to have to trust the management team. But the management team is going to dilute you in their pursuit of their plans and strategies. And if the equity is valued on cash flows, what if I gave you the most profitable company in Zimbabwe right now? Like, how much is the equity worth? Over the next decade, what are the cash flows worth for a company that generates Zimbabwe dollars for the next decade if the dollar crashes in Zimbabwe? So you have to be aware that you are trusting your balance sheet to some macroeconomic force, and you're putting yourself in that frame of reference. You're trusting your P and L to a different set of macronomic forces. You're a Chinese company and you do work in China, and you sell food in China, but you save in the US Dollar. You see, you have dollar exposure and then you have Chinese commercial exposure. When you're a Saudi Arabian oil company, you're selling oil, and so you have that business energy exposure, but then you're saving in dollars, you have that exposure, and you can't easily move the oil fields out of the country you're in. So you have that political exposure. So ultimately, I think the lesson, I mean, the big idea of the last two years is every individual needs to become macroeconomically sophisticated and politically sophisticated. If you ran a yoga studio in New York and you didn't care about politics and you didn't care about macroeconomics, and you thought you could ignore that and just study yoga, well, you had a rude awakening, right? When the mayor decides that it's illegal to sell yoga services in your studio, then you realize that it probably matters what the politicians think. So I would say today, everybody needs to understand money because they need to understand how to protect their balance sheet. They need to understand property rights. You may not have property, you don't have property rights in North Korea and Cuba. You can't own property. But if you happen to own a piece of, you know, do you have property rights if you own a coal field, Maybe not. Maybe it's illegal to actually mine for coal. Do you own natural gas rights? Maybe it's illegal to run a pipeline to your natural gas field. Maybe you don't. Maybe you do, right? So you need to understand, do you have property and what is the exposure of the property politically to the jurisdiction where you have nexus? And I want to start, once you understand that, you make a rational decision with your life and your family's future, decide where you'll locate your family, where you will locate your business, where you will locate your balance sheet, and then you probably want to pick up the paper and read the news because you can have regime change, right? If the governor of a certain state says, I disagree 180 degrees with the former governor, and I'm going to pursue the opposite strategy, how long is that governor going to be in power and how much power do they have? And at some point, the federal government may override the state government. Right. I mean, the federal government will act in certain jurisdictions. It doesn't matter what the governor thinks about maybe drilling for. For gas on. On land. Maybe it matters like the governor can't mandate a nuclear power plant if the federal government says you can't have one. So you need to be aware of how all these things interact as you make a decision about your life.
- [84:25]
C
All right, I want to sum up what you've been saying in slightly different words and tell me if I'm understanding all of this, because every time I research you, every time I talk to you, I realize that I feel like I understand everything you're saying, and then I'll spend eight more hours with you.
- [84:39]
B
And I learned that much, and then
- [84:41]
C
I learned this much more. And it really does impact how I
- [84:44]
B
view
- [84:47]
C
Bitcoin, for sure. Money, definitely. And then the idea that I think you're trying to get across between the words, which is sovereignty and mobility. So for the first time in my life, I feel like we're entering a period of political volatility that finally has me going. I don't like the idea of being grounded in any one area by the things that I own. So I'm in the process now of selling my homes, and I never thought that I would get there, but I happen to be in California where they take a very aggressive posture. And so that clicked over for me now, hearing you talk just now, the ability to get my. Because right now, a significant portion of my net worth is tied up in real estate. And that was me growing up. That's where you wanted your money. So that was just like a sort of default response. So tied up in real estate. But to your point, I can't move those, the blocks of Los Angeles to somewhere with more favorable, let's say, entrepreneurial leanings. So I have a real grounding here, certainly with that money, but I could put that money in a form. So one, I want to remind everybody what we said at the beginning. So money is you transferring your time, your energy, but also your efficiency, your intelligence into a thing. That thing could be money. Or in this case, I have a lot of, for me, a lot of that tied up into physical property.
- [86:25]
B
And so, okay, we monetized real estate. We monetize real estate when we devalue the currency. And so your property becomes your store of value. Money.
- [86:36]
C
Right. Which getting everybody to understand that the more knowledgeable somebody is about money, the more they are constantly looking for where can I put this money that it will stay, it will retain the purchasing power that it has, or that its purchasing power will go up. Now I live 40 years of my life without ever asking that question because all I ever thought about was generate money, Whether that was generate a paycheck or whether that was build equity in the company that I would ultimately sell. But once I sold a company and all of a sudden had a very substantial amount of money, all of a sudden I had to understand investing and it was a real shock to my system. So just understanding that you're putting your money into something that you hope will retain its value or grow its value over time. But there are massive complexities. So if you're living in a house and you're thinking that it's doing that, you're actually paying a lot more money for that privilege than you think. So that's certainly something to contemplate. But anyway, by looking at where else I could put it, you start asking a series of very interesting questions. Now, one of the more interesting collisions with you that I think is between you and Peter Schiff, but not as Peter Schiff relates to gold, because as you very aptly pointed out, he owns like 5% of his portfolios in gold. He obviously doesn't have a real big belief in that. And the parts that he does have in gold, he has in gold miners who are actively shorting gold. Cool. But what I think he represents and Jesus, I'm speaking for somebody I've never met or spoken to, but what I think he represents is, we'll call it something more like Ray Dalio's idea of diversification based on like what's happening and he's got the idea of an all weather portfolio. So it seems like the, what you represent to me is somebody who has tremendous conviction, possibly a lot of risk tolerance, which is something that I want to better understand about you and everybody else, myself included, is more like, ah, I'm not sure, I don't know. So I have what many would consider an irresponsible amount of my net worth in Bitcoin. But I put in as much as I was willing to lose. And so, but I put in over about a year I dollar cost averaged in over a year and then said co that I'm going to do. So even though the price has gone down, I'm not buying more as of right now.
- [88:52]
B
I just want to make the point like I think the real issue here is do you have an engineering mentality and reason from first Principles or are you simply complying with the norms of society and conventional wisdom that you grew up with? People say things and they repeat these bromides and, and they give you a simple rule of thumb. Like, oh, the rule of thumb is 60, 40 stock, bond, portfolio. Or the rule of thumb is stay diversified, you know, or the rule of thumb is, you know, you know, take, buy the biggest house you can and get the biggest mortgage and you'll be fine. Okay, well, those are all fine. Assuming that you have equilibrium and you, and you don't have a radical state change, for example, that, that all those rules of thumb don't. They don't work if you're a Jew in Nazi Germany in the 30s, right? Buying a house to store. Valid. Doesn't work, right? Trusting the government. How about trust the government? Keep your nose clean. That doesn't work, right? Buying stocks. Stocks, that's an interesting thing. In the US when the money supply expands at 7% a year, do you think stocks work? If you bought stocks in Zimbabwe or stocks in Cuba or stocks in North Korea or stocks in Argentina or stocks fill in the blank, they don't work. What happens when the government crashes? You think stocks work in Sri Lanka, right? No. How do stocks work in Russia in the 90s? Well, the entire currency collapsed. The government collapsed. Everybody lost everything. Everything. So, you know, diversification. Diversification doesn't work when every single thing you own in your portfolio is correlated. For example, you can buy any company, you can buy any company you want in, in Germany in 1944. How's your diversification going to work? Right? How about just, how about buy anything you want in the city I'm about to drop a nuclear bomb on, how's that going to work? Right? So diversification is a bromide. Stocks, bonds are a bromide. Real estate as monetizable property, it's a bromide. It only works if you can trust them. How's it going to work when I actually get elected mayor and I just seize your entire property to make into a pet hospital for the good of the people? Or how about this one? At what property tax rate? If property tax are 20 basis points a year, maybe property is money. What happens when they're 200 basis points a year? Property tax rate In Florida is 2% a year. Okay? If, if you're not a, if you don't have the homestead exemption and you're not a citizen, then that means you buy $10 million worth of property, you pay $200,000 of tax, then they actually assess it up 15% a year. So that means that in 10 years the property is valued at 30 million, you owe $600,000 in tax. In the next five years, you've lost all your money. Okay, but I thought Florida was low tax state, huh? I thought property was a good investment. Well, let's make it simpler. What if I make the tax rate 5% a year? What if I make it 50% a year? Like what if. So the point really is all of these are simple rules of thumb that allow people to not think for themselves. You know, you're on a ship, the ship is sinking. There's 10 boats in front of you. One of the boats doesn't have a hole in it. The other three, nine boats have holes in them. You're going to put, you got 10 members in your family. Are you going to put one kid in each of the nine boats or, or the like? Or are you going to put everybody in the boat that doesn't have the hole in it?
- [93:04]
C
Okay, so you come to that level of conviction, which is intoxicating, by the way.
- [93:07]
B
It's not conviction. It's like, it's not conviction. It's just rational thinking for yourself. Are you moving your entire family to Zimbabwe right now because you know you have conviction? Or let me reverse it. Why is it that you don't move your entire family to Zimbabwe, sell all your stuff and buy the Zimbabwe dollar? Why is it that you don't do that? Because of conviction or just because it seems quite obvious to you that's not a good idea?
- [93:37]
C
I won't say that conviction is the when you don't do something, but when you go all in on something, I would say that does take conviction. Now your conviction might be how many
- [93:46]
B
chairs are you sitting on right now? 1. Are you all in on the chair?
- [93:51]
C
I am all in on the chair.
- [93:55]
B
The point really is you put on one pair of glasses, you've got one pair of AirPods. Right now you're looking at me through one screen. You're using one microphone. That's a one microphone. You trust. It is that conviction seems kind of scary. Why don't you diversify? Why don't you use 10 microphones? The point really is things in your life. Did you drive in 10 cars at the same time or one car at one time? Do you drive down one street? Aren't you afraid that you're driving down one street? Do you take a different way? You know, so my point really is if you're an engine, you get on one airplane, Are you convicted? You put Your entire family in the one airplane, Aren't you afraid? Ultimately, if you're a rational individual, do you use, when you use knives, do you have copper knives, wooden knives, steel knives, aluminum knives, rubber band knives, diamond knives, because you're afraid to commit to the right knife? It's a tool. So ultimately, what I'm saying here is an engineer would look at this and say, I use glass for my windows. I don't use aluminum for my windows because I can't see through the aluminum, right? I use steel beams. People used to use wooden beams. Steel beams work better, right? I use copper for wires because electricity goes through copper better. I don't use aluminum for wires, right? Am I a radical, convicted fanatic investor? Am I just like a rational person that uses copper for wires because copper works better? Right. And my point here is you live in a society and things are going awry. If you did live in a country and the food supply was cut off, the electricity got turned off, the currency collapsed and there are riots in the streets, would you still just kind of hang out and use the same rules of thumb you've been using, or would you say, I think I'm going to exit via the airport where there are no riots if I can get on that plane and I'm going to go somewhere else because. Not because I'm convicted, not because I'm radical, not because I'm a risk taker, no, I'm just going to do it because I'm an intelligent human being. And I notice that it's getting uncomfortable where I am right now. And so that's the way I see this. It's just thinking for yourself, using reason. Your choice is you want to hold a billion dollars of property in Zimbabwe or North Korea. You want to hold a billion dollars of property in la. You want to hold a billion dollars of gold in a vault. You want to hold a billion dollars worth of a stock in a Chinese company, Alibaba, trading on the Shanghai Stock Exchange, subject to the Chinese government. Do you want to hold a billion dollars worth of Bitcoin? What do you want to hold? Right? Why do you, why do you feel that way? Once you understand money, you understand Bitcoin is engineered money, and it's engineered without defects. Once you look at your life, you realize you got a balance sheet. You got to actually allocate your wealth to portions of the balance sheet. And assumptions you used to be able to make about bonds, they don't work anymore. Assumptions you used to make about stocks, they don't work anymore. Assumptions you made about property. You own a yoga studio. I get elected mayor, and I tell you point blank, I think yoga is dangerous. People should not be able to do yoga. It's abomination in the eyes of God. For the next decade, you still have the same view of your value of your yoga studio. Are you going to say, maybe I can repurpose it to something that's politically correct? Or you say, maybe I'm just gonna, like, sell it and go someplace where I'm less likely to get canceled. Right. As a business. This is. This is not radical conviction, right? The people that, you know, we. We like to think the people that came to the United States were crazy, but. But they're not crazy. The reason they came to the US Is because they were the wrong religion or the wrong ethnic group in country that had an encroaching authoritarian government. And at some point, the Catholics decided, the Protestants aren't allowed to own property or live. And at some point, the Protestants decided, Catholics, they can't own property. And if it turns out that you happen to be a Catholic, you're going to be drawn and quartered, right? And the skin will be flayed off your skin. You know, my family came from Lucerne, Switzerland, in 1730, and they were Palatines, they were Swiss people, Protestants, okay? Why would you get on a wooden ship, travel for 12 weeks, risk 5% chance of death to get out of your hometown? And the answer is, because it was a certain death, a certain slow death if I stuck around. And that is. That is the story of America for hundreds of years. Quakers, Protestants, Catholics, you know, Mennonites, name it. Every sect was leaving, emigrating because the life was hopeless where they stayed. And I don't know, I call that radical conviction as much as I would just say at some point, they realized that it was riskier to stand where they are than it is to move somewhere else. And if I. If I look at Bitcoin, I'm not going to say. Let me say it this way. If you're in a city in the middle of Africa taken over by a dictator who's going to murder everybody next Tuesday, I would say convert all your wealth to Bitcoin and leave. Okay? If you happen to live in Florida or Texas and you've got a comfortable life and family and you expect to be there for next 30 years, and you want to own some land, a building, a restaurant and some Bitcoin, I say, okay, diversified portfolio, I guess that's fine for you. And if you're somewhere else, where. If you're sitting in a country where the bank is about to freeze your assets and devalue them 10 to 1 and trickle them back to you over the next 20 years. I would say on the margin, yeah, you probably should convert them all to Bitcoin and get them out of a custodian. Because the volatility of Bitcoin and the risk of Bitcoin is a lot less than the risk of trusting the bank and trusting the government and trusting the local currency. So ultimately, everyone's got to decide just how risky is their macroeconomic situation. And if you happen to be wealthy, living in Manhattan and you're living off a trust fund, you might not have a problem. You might think it's okay, but you know, ask people to fled Cuba or North Korea, how okay it was, right? Everybody's got to make their decision. The lucky thing is you have an option. Today you have an option. 30 years ago, 40 years ago, you didn't have an option to move all of your wealth onto a crypto asset network. And what Bitcoin represents is hope. It's hope for a refugee that's going to flee a hostile regime, a hostile banking system, a hostile environment. And if you're one of the three or four billion people that has no hope otherwise, then for you it's really a egalitarian, utilitarian entitlement. For people that are rich in the Western world, it's just an investment option for them until they get sensitized to this issue. And the more you get sensitized, then you start to realize that it's a moral imperative. Even if not for you, maybe you're rich and safe, it's a moral imperative for you to support it for them, for the, for people that are in Africa or South America or fleeing from a war zone or fleeing from a hostile regime that's going to confiscate 20, 30, 40% of their property every year forever. So even if you don't think you need it in order to protect your family for the next 30 years, seems to me like you might want to support it just because it's the right thing for humanity. And that's where I come down on this situation.
- [102:36]
C
Yeah, no, I think that that is, it's an incredible breakdown. And thinking of you as an educator, knowing that you have transitioned out of the full time CEO role at MicroStrategy to really, and I don't know if you'd categorize it this way, but it certainly feels way from the outside to evangelize for Bitcoin. For the reasons that you just laid out. It's amazing, man. Saylor Academy, all the free education that you're doing, what is money and what you did with Breedlove, it's really extraordinary. There's another idea that you've introduced me to around Bitcoin. I will choose to interpret it to carry beyond Bitcoin though. I know your thoughts and feelings, at least vaguely about Ethereum. But. But this idea of the value of an irreversible transaction and what that's going to mean for cyberspace, if you know exactly what I'm talking about, we can just go right into it. Or I can give you a paraphrase of when I heard you discuss this. Would that help?
- [103:38]
B
You can go and paraphrase me, but I think I know what you're talking about.
- [103:41]
C
Okay, so yeah, I think this is really, really interesting. So you said this part is a quote, everything we've built in cyberspace, there's shadows of reality. As much as we tell ourselves we built something functional, it's a gross monstrosity of something functional. And now this is my commentary on that was on the above quote. He was explaining why you need irreversible transactions to replicate matter, giving bits the same properties that physical things have, including their adherence to the laws of physics. So that things inside of cyberspace matter. And I, that really blew me away because it put words to an idea that I've been trying to explain to people. Why, because I got into cryptocurrency, not because I. I didn't understand money investing. I wasn't even thinking about that. I was just thinking about entertainment, building an entertainment company, this new technology that was going to let me do all this cool stuff. But then that leads you to learning and exploring and all that. But the thing that I kept trying to get people to understand was now it's like six or seven years ago, somebody introduced me to NFTs. They weren't called that back then. And I was like, oh man, this is digital scarcity. This is going to change my business forever. And then I promptly forgot about it because it wasn't ready. And flash forward to 2020 and I get reintroduced to it. I'm like, oh, this is that digital scarcity thing. But I've always used the words digital scarcity. And it never, like I can see in the person's eyes it doesn't land the way that I want it to land. But when you started talking about why people need irreversible transactions, that if you throw a rock off of a Bridge, it is going to fall down. And there is no way to take that back. That's just what gravity does. I was like, okay, that's, you know, the fact that water flows to gravity allows you to build hydroelectric dams. The fact that an internal combustion engine works is because it adheres to laws of physics that are entirely predictable. And so by creating, effectively entropy in the system, because people's pushback is, why would you create an irreversible transaction that's just going to facilitate fraud? If you could undo it, if somebody were money laundering or whatever, you could undo that. And you said, when God said let there be light, he introduced entropy. But that things adhering to entropy and the laws of physics is what allows you to build all these things on top of it. And that changed my perception of why this is. When I think about building cyberspace for real, that that very thing is critically important.
- [106:22]
B
I think you've now moved us into the domain of technology. Right? When I talk about Bitcoin, I say it's an economic imperative because it's, it's perfected money. It's a moral imperative because it's the ability to give property rights to 8 billion people. But it's also a technology imperative. It's a technical imperative because it represents technology to introduce conservation of energy into cyberspace or to create matter and energy in cyberspace, digital energy. And, and if you can actually introduce physics, conservation of energy, thermodynamics into cyberspace, then you can not only clean up cyberspace, but you can empower cyber actors, you can empower individuals. You can, if you combine that with the power of cryptography and, you know, the crypto ethos, you know, that you're referring to is, is how do we actually give individuals the ability to own something without asking permission of another organization? How do you own it? If it's, if it's an nft, how do you own that? Right? And how do you, you know, the smart contract idea is how do you have the right to enter a smart contract contract without a trusted intermediary, right? Without asking, without asking permission of, or relying on a bank or a legal team or a court system to enforce your right, Right? This idea of cyber rights, cyber process, cyber property, cyber energy, it's a big idea. And I think the reason I think that Bitcoin is so powerful is because if I can create a billion dollars of energy, a billion dollars of money that is transferred between two actors in cyberspace simply by transferring private keys or through any number of other processes, right? And I can do that in a millisecond, then I can do that a million times a second. I could do it a billion times an hour. I could do it a billion times an hour, programmatically. Now, I've created high velocity, intelligent money, high velocity, intelligent property, right? And the applications are manifold. You can change the way sales systems work. You can change the way marketing works. You can change cybersecurity to your point. In the real world, I can build structures. In the real world, I can build a wall in the real world, and you run into it. I don't have to sue you to stop you from running through the wall. If I had to sue you, you would go through the wall, murder me and my family, and 18 years later, or eight years later, my appeal would get to the 37th Circuit Court and they would find out that you had broken the law. I would be dead. You know, all the carnage that follows for the next eight years would have already taken place, and I would have the court system. So courts don't work to create physical security any more than, you know, you can build a bridge with matter, and I can walk across a crevasse, and if I require a legal bridge, I'd walk across the crevasse, plunged to my death, and 18 months later, they would determine that I should be able to stand, but I can't. So you can't engineer anything in the world of it. You're based on politics. And right now, the cyberspace is a political construct, and it is not a physical construct. Money in cyberspace is political money. If. If you ask me for $100 and I send it to you via credit card, I can decay the deal. I can go to my credit card company, my bank, and say I didn't really do that transaction. They'll reverse the transaction tomorrow and you'll lose the money consequences. Well, what if you ask me for $1 billion and I ask you for $1 billion of stuff, okay, so I want you to give me 10 ships, I'll give you $1 billion, and the next day I just reverse the credit card transaction and keep your ships. This is a problem, right? Trade breaks down because there is no way to settle in a. In a final fashion. Now, what if. What if you wanted to come and you wanted to interfere with a million people online and do $10 of damage to each one? Well, you're going to do $100 million of damage using a bot. How do I charge you $100 million for doing that damage if I try to charge you with a credit card it doesn't work. So you get to do $100 million of damage with, with no risk because there is no consequence. If we actually have digital money, true digital money, which represents digital energy, then I can actually say to you, every time you cross this threshold, you have to post $10. And if you cross the threshold with a million bots, you have to post $10amillion times. You have to post $10 million. And if I say after you cross the threshold, if you then attempt to murder me, or after you cross the threshold, if you slime me, if you know, post a phishing site that's going to defraud me. If you do that a million times, it's going to cost you the forfeiture of your deposit. So you lose $10 million. Do it 10 million times, could cost you $100 million. If you want to wage in a high speed phishing attack on me, you can do it. It'll cost you $100 million. That is the equivalent of driving $100 million truck into a $100 million plane into a wall, right? Something or $100 million ship into a wall. There are real consequences. So when I say bitcoin represents digital energy, what I'm really saying is when Satoshi invented a way to transfer a million dollars of value from me to you without a trusted intermediary or a third party, not only did they solve the problem of how to move a million dollars of energy, they also solved the problem with of how to manifest a million dollars of energy in the digital realm. If I can move it, I can create it and I can store it. So now I can hold a million dollars of energy. Now I can hold a million dollars of energy I have created. God said, let there be light, right? Satoshi said let there be light. In essence, Satoshi created. Satoshi made it shine in cyberspace. I say some has created a fire in cyberspace, brought light. Light is energy and ultimately energy is matter. Matter is energy. We introduced matter and energy into cyberspace with this idea of a decentralized network, right? And once we've done it, you know you can, once you've seen it, you can't unsee it. For the most part, we haven't seen the breakthrough applications in cyberspace that will use it. But the, but the applications are pretty obvious. For example, you know, if I made people post $10 worth of digital money in order to view a YouTube video, it'll be a $10 deposit. Once in your life. It's no impact on any person because it's A ten dollar deposit and you get it back, right? And actually it probably accretes in value. But on the other hand, when I go on YouTube and I see Michael Saylor, you know, scam videos with 20,000 fake viewers, you know, sometimes 50,000 people spin up fake YouTube videos with 50,000 fake listeners. If they had to post $10 each, it'd be $500,000. Fake phishing attempt, it's not worth $500,000. And so the scammers and the fishers, they would not engage in that behavior if they were penalized via security deposits. So you would clean up all manner of. You know, when I post on Twitter, the first 18 comments are bots. It's actually a CZ bot saying, why is nobody talking? You can actually see them. They're right in front of you. 37 comments in the first second. The reason they do it is there is no cost to maliciousness because cyberspace doesn't have conservation of energy and creating a world, a beautiful world without matter and energy, right? It's like you want to create a city. There's no friction and there's no materials and there's no energy. You can't do it. What you're creating is this, you know, this virtual world that's full of monstrosities. Because one what if I could just snap my fingers and create a hundred billion demons to invade every everybody's stream and everybody's room and everybody's head and just bark at you non stop. And I could do that for a penny. All it takes is one person in the human race to infect everybody with demons. And that's happening right now on Twitter. It's happening inside. In social Media, you have 0.1% bad actors that are responsible for half a million to a million fake accounts a day on Twitter. Whoa. Like you can't. That's 300 million fake accounts a year. You can't stop them because it doesn't cost anything to launch them. And so in essence, the toxicity that's being pumped into the economy is extreme. Well, there's a lot of other applications of digital energy, but ultimately the reason this matters is the velocity of money, of political money through cyberspace. Using a credit card is about six per year. Like I, I can send you $500 on a credit card. It takes 90 days to settle, so I can move the money six, seven, eight times a year. The velocity of digital. What's the, what's the, the kilohertz frequency of a nice song. Yo, yo, yo. If I sing to you Think about the vibration and the velocity and the frequency of that to create music. What's the frequency of a laser beam? What's the frequency of gravitational beams? If you look at the way physics works, you're going to have to move stuff a million times a second, not six times a year. The velocity of digital energy is billions and billions, not six. Might be six billion, six billion times as fast, right? Like that's. How do tides work? That's the moon talking to the Earth, right? Weather patterns, you walk across the, you know, the floor. Friction, heat exchange, vibration, right? All of these things, they're all critical to the way the universe works, but they're also critical to the way the civilization works. And right now, what we have is cyberspace. It just doesn't work. It's defective. And everything in it that could be beautiful is ugly. If we want to clean up cyberspace, we need digital energy. But, but you know, it's, it's the same as you look at New York and you've got skyscrapers built of steel, up 100 stories, and if I shred it and I tell you you got to rebuild it with balsa wood, what do you get? And that's, that's cyberspace without digital energy. It's like, what do you have, you have these amorphous structures that collapse under their own weight over time and, or inflict massive pain and inefficiency in the economy. So just as I would say the money being defective, the cost of defective money in the economy is 10, 20, $30 trillion a year. It's some obscene amount of economic inefficiency because nothing works. All of your working capital bleeds energy at a ferocious rate. Well, the cost of, of having an ineffective materials in cyberspace is the same, right? It's like you stop using a social media thing because the newsfeed is toxic, because it's so unpleasant or it's dangerous, right? So Bitcoin represents like the first and the greatest instantiation of digital energy. And the obvious application is just store of value in cyberspace. And that was the first application. The other applications are coming. People have yet to work them all out in their head, and that many of them are going to be based upon proprietary protocols and lightning protocols and the like. But I think if you're a technologist, you can't ignore it, because if you want to build structures that are functional for a billion people, that are stable, that'll last a hundred years, you have to do it with cryptosteel. You have to do it with the Equivalent of the reared and metal right of cyberspace. Something which is 100x better. And in fact, this is not 100x better than a credit card company. These credit card companies move money six times a year, and then after the sixth time, they've taken 15% of the money. Whoa, right? Think about two and a half percent transaction fee six times. So you can move a billion dollar block of money six times a year for $150 million. That's what happens right now. And it only works for a small portion of the civilization. What if I told you you could move money six times a second or six times a millisecond for nothing? The money, not only is it bleeding 15% of its value a year due to transaction fees, it's bleeding another 15% of its value a year due to the devaluation of the base unit currency. So you're losing 30% of your value of your money. Or your, your money is cut in half every two and a half years. Like, that's, that's like building a ship, you know, with balsa wood. Wooden ships might last 20, 30, 40 years. A steel ship will last hundreds of years if you patch it correctly. You know, why don't you just build a ship out of bubble gum, you know, or taco shells, right? It's like, it's. The materials are so defective that you laugh because you wouldn't even bother, right? I mean, you wouldn't even bother to try to cross the Atlantic. A ship full of taco shells, you know, with cotton candy or rubber bands holding it together. It's just a joke. But that's kind of what we have in many cases in the digital realm right now. We have imperfect materials. And the struggle, the real fight in the crypto world is how do I define a crypt? How do I create a crypto system that has a reasonable chance of holding its integrity and security 100 years from now, Right? That's why there's this obsession over, well, you know, node size. I can't, I can't centralize the nodes. I want everybody to run their own node. I don't want nodes to run on AWS or Google. I want everybody to run this. I, I want it to run on hardware, you know, on a Raspberry PI. In my house. I want everything open. I want anybody, I want it to be outside the control of a company. I don't want a foundation. I don't want a nation state. I don't want anybody to get too influential. I don't want to be organized. I Don't want a centralized group of developers. I don't want developers to be able to do anything to it. The doing of things is what's causing all the problems in the world. It's well meaning centralized actors that want to help you and they keep introducing this policy that they apply to everyone that introduces fragility into the civilization and inadvertently is crippling to all of us. I think that's the opportunity we have. If we properly understand this technology. We have the opportunity to create things of beauty and substance that exist in the digital realm beyond the reach of a political institution or a commercial institution or any small group of actors. And if you do that then, then you have created a cyber commodity, a digital commodity, you know. And we, we call it digital gold. But it's a lot more than digital gold. It's really digital matter and digital energy. That, that, that's obvious. Use cases, digital money is a store of value and as a medium of exchange and as a unit of account. But that's, you know, that's just the pedestrian economic use case. The ultimate use case of energy is to create the civilization and carry it forward and promulgate life as we know it. And if you want life in the digital realm, life in cyberspace, and we want life to continue to move forward and technology to continue to move forward, then this is a necessary thing for us to us to master and grasp and promote.
- [125:47]
C
You've been an extraordinary advocate of Bitcoin as digital gold and really getting people to understand that where can people follow you? Where can they learn more?
- [125:56]
B
I post all my comments on Twitter at Saylor is my handle S A Y L O R. So just look for me it's on Twitter at Saylor. Otherwise Bitcoin is hope. So go to hope.com and we post a lot of Bitcoin educational materials, resources, websites and books and the like@hope.com. my personal website is michael.com you go find me at Michael and and I. Those are probably all good places to start. Oh, oh, and free education. The Saylor Academy offers hundreds of free college courses there at Saylor. S a Y-O-L-O-R.org and so that's all free to anybody in the world. So you'll probably find all these things on the Twitter if you start there. And thank you for your time and attention today, brother.
- [126:49]
C
I really can't thank you enough for the time that you've taken. I really look forward to the next time. And everybody, if you haven't already, be sure to subscribe and until next time, my friends, be legendary. Take care. Peace.