Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics

Lex Fridman (01:29.480)

And now, dear friends, here's Safety Amoose.

Saifedean Ammous (01:33.780)

Let's start with a big question.

Lex Fridman (01:35.720)

What is money?

Lex Fridman (01:37.600)

And what is the role of money

Lex Fridman (01:39.040)

in the history of human civilization?

Saifedean Ammous (01:40.680)

Money is a medium of exchange.

Lex Fridman (01:42.400)

The thing that defines money is that it is a good

Saifedean Ammous (01:44.660)

that you don't buy for its own sake

Lex Fridman (01:46.820)

because you wanna consume it itself

Saifedean Ammous (01:48.440)

or because you want to employ it

Lex Fridman (01:50.840)

in the production of other goods,

Saifedean Ammous (01:51.900)

which is what capital goods are.

Lex Fridman (01:53.440)

So we have consumption goods, we have capital goods.

Saifedean Ammous (01:55.840)

Money is distinct from those two

Lex Fridman (01:57.520)

because it is a good that is acquired

Saifedean Ammous (01:59.420)

purely to be exchanged later on for other goods.

Lex Fridman (02:01.920)

So it's not something that you acquire for its own sake,

Saifedean Ammous (02:05.160)

you acquire it so that you can then later on exchange it.

Lex Fridman (02:07.800)

And that's a market good.

Saifedean Ammous (02:09.720)

That's a market good like all other goods.

Lex Fridman (02:12.000)

You acquire food because you eat it,

Saifedean Ammous (02:14.080)

you acquire a car to move you around,

Lex Fridman (02:16.120)

you acquire money so that you can exchange it

Saifedean Ammous (02:17.880)

for other goods.

Lex Fridman (02:19.480)

And that's something that many people

Saifedean Ammous (02:21.640)

have a hard time grasping,

Lex Fridman (02:22.880)

of the concept of money as a market good.

Lex Fridman (02:25.040)

But it is a market good, just like all others.

Lex Fridman (02:27.880)

And the importance of it is that it allows us to trade.

Saifedean Ammous (02:31.440)

It allows us to develop the division of labor,

Lex Fridman (02:35.760)

which would not be possible

Saifedean Ammous (02:37.280)

at any kind of sophisticated level without money.

Lex Fridman (02:39.920)

So if we live in a small society of 10 people,

Saifedean Ammous (02:44.360)

then think about all the things that we can make,

Lex Fridman (02:46.540)

all the things that we can produce.

Saifedean Ammous (02:49.040)

If we're only 10 people isolated from the world,

Lex Fridman (02:51.780)

there's only very few things that we can make.

Lex Fridman (02:53.520)

And therefore we can exchange those things directly

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with one another.

Lex Fridman (02:57.900)

But as, you know, if we get in contact with other societies

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that have more people,

Saifedean Ammous (03:04.160)

then the opportunities for specialization increase.

Lex Fridman (03:06.660)

You know, if there's 10 people,

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the only thing that you can make is the very basics

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you need for your survival.

Lex Fridman (03:12.120)

But if you're part of an economy of 10 million people,

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there's much more room for specialization.

Saifedean Ammous (03:17.440)

You can make a car, you can make a house,

Lex Fridman (03:19.820)

that's very sophisticated.

Lex Fridman (03:22.000)

And that relies on the division of labor.

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That relies on you specializing

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in doing one tiny little thing,

Lex Fridman (03:28.960)

which is not what you consume.

Saifedean Ammous (03:30.760)

You know, and you trade that thing

Lex Fridman (03:33.280)

for all the things that you consume.

Lex Fridman (03:34.680)

So as the economy becomes more sophisticated

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and involves more people,

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and currently we're all part of an economy

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of almost 8 billion people,

Saifedean Ammous (03:43.680)

each one of us produces one tiny little thing.

Lex Fridman (03:46.600)

And they exchange that thing

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for all the things that they want.

Lex Fridman (03:50.720)

And so, because we specialize,

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we become more productive

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in doing the thing that we're good at.

Saifedean Ammous (03:55.480)

So, you know, there's people out there who are engineers,

Lex Fridman (03:57.940)

who are designing windshields in cars.

Saifedean Ammous (04:00.000)

It's a very specialized thing.

Lex Fridman (04:01.660)

They sell windshield design to Mercedes Benz.

Lex Fridman (04:05.200)

And then from that, you know,

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that windshield design is added on

Saifedean Ammous (04:09.600)

to millions of cars around the world.

Lex Fridman (04:11.480)

And from that, they're able to get enough money

Saifedean Ammous (04:14.240)

to meet all of their needs.

Lex Fridman (04:16.020)

So the division of labor is enhanced enormously with money,

Saifedean Ammous (04:19.440)

because without money,

Lex Fridman (04:20.840)

it's very difficult to be able to exchange

Saifedean Ammous (04:23.680)

a large number of goods.

Lex Fridman (04:24.800)

It's very difficult to have a sophisticated economy

Saifedean Ammous (04:27.300)

with a large degree of specialization,

Lex Fridman (04:29.160)

because it's very difficult to find people

Saifedean Ammous (04:33.560)

who want the thing that you have

Lex Fridman (04:36.020)

and have the thing that you want.

Saifedean Ammous (04:37.760)

We call this the coincidence of wants.

Lex Fridman (04:40.640)

And that's really the problem that money solves.

Lex Fridman (04:42.720)

So you make apples and I make oranges.

Lex Fridman (04:46.720)

I'd like to have some of your apples,

Lex Fridman (04:48.420)

but you don't want my oranges.

Lex Fridman (04:50.080)

And that's, we have a problem of coincidence of wants.

Lex Fridman (04:52.240)

So what do I do?

Lex Fridman (04:53.080)

You want bananas.

Saifedean Ammous (04:54.140)

I need to find somebody who has bananas,

Lex Fridman (04:56.280)

give them my oranges, take their bananas,

Saifedean Ammous (04:58.240)

give you their bananas, and then I take the apples.

Lex Fridman (05:00.900)

In that case, bananas are a medium of exchange.

Lex Fridman (05:03.440)

So it's natural that a medium of exchange will evolve

Lex Fridman (05:06.400)

and will emerge in an economy

Saifedean Ammous (05:07.840)

as an economy becomes more sophisticated.

Lex Fridman (05:09.680)

As we move beyond 10 people and 10 goods,

Saifedean Ammous (05:12.940)

it's inevitable that we're going to come to a situation

Lex Fridman (05:15.780)

where we have the problem of coincidence of wants.

Lex Fridman (05:18.480)

And the way to solve that is to use a medium of exchange.

Lex Fridman (05:21.720)

And it can be anything.

Saifedean Ammous (05:22.560)

It can be a banana, it can be food stuff,

Lex Fridman (05:25.960)

it can be any kind of good.

Saifedean Ammous (05:28.240)

As long as I acquire the good

Lex Fridman (05:29.920)

with the purpose of passing it on to you,

Saifedean Ammous (05:32.580)

not for the purpose of me consuming it or using it,

Lex Fridman (05:35.280)

then that's a medium of exchange.

Lex Fridman (05:36.920)

So when we look at the entirety of human society

Lex Fridman (05:40.000)

of millions of billions of people,

Saifedean Ammous (05:42.600)

you think of them, just a bunch of individuals running around.

Lex Fridman (05:46.480)

I love the term coincidence of wants.

Lex Fridman (05:49.520)

So each one of them, it's like a stochastic system.

Lex Fridman (05:52.660)

They have desires, it's like a random collection of desires,

Saifedean Ammous (05:56.800)

somehow rooted in our evolutionary history,

Lex Fridman (05:59.000)

but mostly random in terms of preference

Saifedean Ammous (06:01.600)

of banana or apple, that kind of thing.

Lex Fridman (06:04.240)

And then they also have the capacity for competence

Lex Fridman (06:08.600)

and excellence in particular kind of labor.

Lex Fridman (06:11.880)

So like specialization, they're able to be like incredible

Saifedean Ammous (06:16.560)

at a particular set of tasks.

Lex Fridman (06:18.140)

So there's a bunch of ants running around

Saifedean Ammous (06:20.760)

with consciousness and intelligence,

Lex Fridman (06:23.180)

and they have desires and they have capabilities.

Lex Fridman (06:26.560)

And then there's a coincidence of both the wants they have

Lex Fridman (06:32.840)

and the capabilities they have,

Lex Fridman (06:34.520)

and you wanted to create a system

Lex Fridman (06:36.320)

that kind of exchanges those things.

Lex Fridman (06:39.300)

So when you imagine like what is a good, what is markets?

Lex Fridman (06:45.160)

When you imagine a market is like a hierarchical system,

Lex Fridman (06:49.600)

what do you imagine?

Lex Fridman (06:50.880)

What is a market?

Saifedean Ammous (06:52.960)

A market is just the name

Lex Fridman (06:53.920)

for the naturally emergent phenomena

Saifedean Ammous (06:55.720)

of people voluntarily exchanging things.

Lex Fridman (06:58.300)

It's at any scale.

Saifedean Ammous (07:00.060)

At any scale, yeah.

Lex Fridman (07:01.280)

Individually, it could be a market of two people

Saifedean Ammous (07:03.160)

on an island on their own.

Lex Fridman (07:04.600)

It could be 8 billion people across the planet.

Saifedean Ammous (07:07.900)

Naturally emerging.

Lex Fridman (07:09.480)

Yes, this is the thing I think that is very hard

Saifedean Ammous (07:12.480)

for many people who don't have a good understanding

Lex Fridman (07:15.440)

of economics to grasp that capitalism and markets

Saifedean Ammous (07:18.880)

are not something that you need a central planner

Lex Fridman (07:23.480)

or a government officer to make happen.

Saifedean Ammous (07:26.840)

Capitalism is just what happens

Lex Fridman (07:28.300)

when people are left to their own devices.

Saifedean Ammous (07:30.080)

It's just our cognitive capacity allows us to develop tools

Lex Fridman (07:34.420)

that we can use for production.

Lex Fridman (07:36.240)

And that's what we do.

Lex Fridman (07:37.920)

That's what humans have been doing

Saifedean Ammous (07:39.040)

since they started making spears to hunt.

Lex Fridman (07:42.160)

That's the first capital good probably.

Lex Fridman (07:44.260)

So we're constantly accumulating capital.

Lex Fridman (07:46.240)

We're constantly trading with one another.

Saifedean Ammous (07:47.720)

We find an opportunity.

Lex Fridman (07:49.400)

You've got a lot of oranges.

Saifedean Ammous (07:50.560)

I've got a lot of apples.

Lex Fridman (07:52.520)

Then I'll take some of yours.

Saifedean Ammous (07:53.840)

You'll take some of mine.

Lex Fridman (07:54.680)

We're both better off.

Saifedean Ammous (07:56.040)

This is just a naturally emergent thing.

Lex Fridman (07:58.920)

And money is what makes it enormously powerful.

Saifedean Ammous (08:03.080)

Money is what allows it to scale really.

Lex Fridman (08:05.320)

Money is what allows it to go beyond small societies

Saifedean Ammous (08:09.240)

into just something that is global.

Lex Fridman (08:11.320)

Because with money, again, as I was saying earlier,

Saifedean Ammous (08:14.940)

all you need to do is specialize in doing one thing,

Lex Fridman (08:17.120)

the thing that you do best,

Lex Fridman (08:18.340)

and then you exchange that for money.

Lex Fridman (08:19.800)

And you don't have to worry

Saifedean Ammous (08:21.300)

about whether the other people involved in this

Lex Fridman (08:24.320)

want what you have and have what you want.

Saifedean Ammous (08:26.600)

You just sell it for money to whoever wants it.

Lex Fridman (08:30.000)

And you buy whatever you want from whoever has it.

Lex Fridman (08:32.840)

And that's an enormous reduction in the mental burden

Lex Fridman (08:37.240)

of how a market economy functions.

Lex Fridman (08:39.480)

So the first thing that I would say about money

Lex Fridman (08:40.920)

is that it allows for the division of labor

Lex Fridman (08:43.160)

and it allows for the market system to grow.

Lex Fridman (08:45.400)

And the second thing is that money is a mechanism

Saifedean Ammous (08:48.000)

for storing value into the future.

Lex Fridman (08:50.580)

So again, as humans, we develop the capacity

Saifedean Ammous (08:53.760)

to think for the future.

Lex Fridman (08:55.840)

We make a spear so that we can hunt,

Lex Fridman (08:58.640)

and then we see that it works.

Lex Fridman (09:00.360)

And then we take it out of the animal

Saifedean Ammous (09:01.640)

that we hunted it with,

Lex Fridman (09:02.960)

and we keep it for the next day's hunt.

Lex Fridman (09:05.600)

And then we start making a better spear,

Lex Fridman (09:07.120)

and we make a better fishing rod,

Lex Fridman (09:08.480)

and then we make a fishing net,

Lex Fridman (09:09.720)

and then we make a fishing boat.

Lex Fridman (09:11.360)

And that's our ability to think of the future.

Lex Fridman (09:15.200)

And as we start building durable goods,

Saifedean Ammous (09:18.000)

we start thinking more and more of the future.

Lex Fridman (09:19.840)

We start becoming more and more future oriented.

Lex Fridman (09:22.940)

And that's really the process of civilization,

Lex Fridman (09:26.580)

the process of denying our needs now

Saifedean Ammous (09:29.480)

in order to think for the future.

Lex Fridman (09:31.140)

So instead of spending all of our day on the beach,

Saifedean Ammous (09:33.760)

enjoying ourselves, we take time off from leisure

Lex Fridman (09:38.080)

on the beach and spend some time making a spear

Saifedean Ammous (09:42.480)

or making a fishing rod so that our productivity

Lex Fridman (09:45.320)

in hunting or fishing tomorrow is gonna be higher.

Lex Fridman (09:48.120)

And so that ability to think for the future

Lex Fridman (09:51.840)

is enhanced by our ability to provide for the future.

Lex Fridman (09:54.680)

And we do that with durable goods.

Lex Fridman (09:56.840)

But then money ends up being the best mechanism

Saifedean Ammous (10:00.760)

for providing for the future,

Lex Fridman (10:02.160)

because the future is uncertain.

Lex Fridman (10:04.440)

So you can save your apples and oranges.

Lex Fridman (10:07.960)

You can save the spears.

Saifedean Ammous (10:09.600)

You can save the animal that you hunted.

Lex Fridman (10:12.120)

But these things, first they rot.

Saifedean Ammous (10:15.240)

They're not very good at holding onto their value over time.

Lex Fridman (10:17.620)

But even if they were,

Saifedean Ammous (10:19.160)

even if you have objects that are durable,

Lex Fridman (10:22.440)

the problem with them is that you don't know

Saifedean Ammous (10:24.400)

if you need them tomorrow or next month or next year.

Lex Fridman (10:28.200)

You're not sure if you're going to be needing them.

Lex Fridman (10:30.320)

And you might end up not needing them.

Lex Fridman (10:31.920)

And you might end up not finding anybody who needs them

Saifedean Ammous (10:33.960)

or finding somebody who needs them,

Lex Fridman (10:35.200)

but doesn't value them much

Lex Fridman (10:36.440)

and won't give you much in exchange.

Lex Fridman (10:38.380)

Money allows you the optionality

Saifedean Ammous (10:40.040)

of saving the most liquid good, the most saleable good.

Lex Fridman (10:43.760)

So it's something that you can sell tomorrow

Saifedean Ammous (10:46.000)

with the least uncertainty.

Lex Fridman (10:47.720)

It has the most liquidity, the most ability

Saifedean Ammous (10:49.400)

to be sold without a loss in its value.

Lex Fridman (10:52.520)

So money is our most advanced technology

Lex Fridman (10:55.080)

and our best technology for moving value into the future.

Lex Fridman (10:58.480)

And so I think history really,

Saifedean Ammous (11:01.320)

I argue this in all my books,

Lex Fridman (11:03.680)

is that really history we see,

Saifedean Ammous (11:06.440)

we can think of it as a process of our money gets harder.

Lex Fridman (11:10.640)

And so our money gets better

Saifedean Ammous (11:12.860)

at holding onto its value for the future.

Lex Fridman (11:16.040)

And by harder, I mean harder to produce.

Saifedean Ammous (11:18.540)

We find things that are hard to produce

Lex Fridman (11:20.760)

that are better at holding onto their value.

Lex Fridman (11:23.080)

So they hold onto their value better for the future.

Lex Fridman (11:25.400)

And that allows us to plot and plan for the future.

Saifedean Ammous (11:28.300)

That makes the future less uncertain.

Lex Fridman (11:31.160)

And that makes us more future oriented.

Saifedean Ammous (11:33.940)

In other words, it lowers our time preference.

Lex Fridman (11:36.600)

And the harder the money is,

Saifedean Ammous (11:38.800)

the better it is at allowing us to think of the future.

Lex Fridman (11:41.480)

So people should know that you've written the book

Saifedean Ammous (11:44.960)

Bitcoin Standard from 2018, I believe.

Lex Fridman (11:48.760)

And then a new book called Fiat Standard.

Saifedean Ammous (11:52.080)

The Bitcoin Standard is considered kind of the Bible

Lex Fridman (11:55.400)

in the cryptocurrency space, in the Bitcoin space

Saifedean Ammous (11:57.760)

of just a very rigorous systematic explanation

Lex Fridman (12:01.720)

of why Bitcoin, what is it, why should it be,

Lex Fridman (12:06.360)

why is it good?

Lex Fridman (12:07.440)

So you're describing in that book and in the new book,

Saifedean Ammous (12:10.780)

different implementations of the technology of money.

Lex Fridman (12:14.240)

In the new book, you talk about fiat money,

Saifedean Ammous (12:17.520)

which is another way to do money.

Lex Fridman (12:19.480)

So obviously, there's a lot of different ways to do money.

Lex Fridman (12:22.600)

And maybe you haven't discovered the best way to do money,

Lex Fridman (12:25.080)

yet our conversation today is how to do money better.

Lex Fridman (12:29.440)

Maybe we'll go back to bananas eventually, right?

Lex Fridman (12:33.240)

Very good reasons why we won't.

Saifedean Ammous (12:35.000)

Well, we can disagree.

Lex Fridman (12:37.280)

We can agree to disagree on this.

Saifedean Ammous (12:39.400)

I'm open minded to the bananas.

Lex Fridman (12:42.360)

One of the biggest source of joy to me

Saifedean Ammous (12:44.140)

when I first came to this country is eating bananas.

Lex Fridman (12:48.040)

And so maybe money, happiness, perishable happiness

Saifedean Ammous (12:53.040)

will eventually become the best medium of exchange.

Lex Fridman (12:58.400)

I don't know, open minded.

Saifedean Ammous (13:00.040)

Anyway, so you mentioned hard money and soft money.

Lex Fridman (13:03.180)

So there's different ways to do money.

Lex Fridman (13:05.480)

What is hard money?

Lex Fridman (13:06.560)

What is soft money?

Saifedean Ammous (13:08.360)

In the Bitcoin standard, I present the argument

Lex Fridman (13:10.360)

that money is always whatever is the hardest thing to make.

Saifedean Ammous (13:14.820)

Historically, I think we see many examples of that.

Lex Fridman (13:17.460)

So for instance, in prison, people use cigarettes as money

Saifedean Ammous (13:20.080)

because nobody can make cigarettes in prison.

Lex Fridman (13:22.320)

In societies, we have the example of Yap Island,

Saifedean Ammous (13:25.240)

for instance, it's an island that doesn't have any limestone

Lex Fridman (13:28.080)

but there's a nearby island that has a lot of limestone.

Lex Fridman (13:31.360)

And it's very expensive obviously with primitive technology

Lex Fridman (13:34.640)

to move limestone from Palau to Yap.

Lex Fridman (13:38.160)

So on Yap, limestones were money.

Lex Fridman (13:41.600)

Seashells, rare seashells that are not easy to find

Saifedean Ammous (13:44.040)

end up serving as money in places where they're rare.

Lex Fridman (13:48.200)

Glass beads were money in West Africa

Saifedean Ammous (13:50.720)

where there was no glass making technology

Lex Fridman (13:52.720)

because they were imported from abroad

Lex Fridman (13:54.680)

and they were very hard to make.

Lex Fridman (13:57.280)

And I think there's a conscious effort

Saifedean Ammous (13:59.400)

of some people might recognize the hardness

Lex Fridman (14:02.280)

and the scarcity and choose this as money.

Lex Fridman (14:04.480)

But I think what's more important

Lex Fridman (14:05.920)

is just a natural evolutionary process

Saifedean Ammous (14:08.480)

whereby people choose all kinds of random things as money,

Lex Fridman (14:12.920)

bananas maybe even.

Lex Fridman (14:14.600)

But then the people who end up making these bad choices

Lex Fridman (14:17.360)

don't end up with any wealth left.

Saifedean Ammous (14:18.960)

Whereas the people who store their wealth

Lex Fridman (14:21.320)

in the things that are hard to make

Saifedean Ammous (14:24.040)

end up maintaining their wealth

Lex Fridman (14:26.880)

and maybe even increasing it over time.

Lex Fridman (14:29.120)

And of course this culminated in the 19th century,

Lex Fridman (14:32.000)

in the end of the 19th century

Saifedean Ammous (14:33.160)

by basically the entire planet being on a gold standard.

Lex Fridman (14:36.920)

And that's...

Lex Fridman (14:37.760)

What is a gold standard?

Lex Fridman (14:38.640)

The gold standard is basically when money is gold

Saifedean Ammous (14:41.800)

or at least government currencies backed by gold.

Lex Fridman (14:44.720)

But the reason gold became money

Lex Fridman (14:46.800)

and not copper, not nickel, not bananas

Lex Fridman (14:49.120)

is that gold is the hardest metal in the world.

Lex Fridman (14:52.160)

And it is the hardest metal to increase the supply of.

Lex Fridman (14:55.960)

And the reason for that is based in chemistry.

Lex Fridman (14:58.000)

So gold is indestructible.

Lex Fridman (15:01.080)

You can't destroy gold in any meaningful sense.

Saifedean Ammous (15:03.680)

It's been accumulating stockpiles for thousands of years.

Lex Fridman (15:08.680)

The gold that was worn by Nefertiti back in ancient Egypt

Saifedean Ammous (15:12.400)

is today probably in somebody's necklace

Lex Fridman (15:16.080)

or in somebody's gold coin.

Saifedean Ammous (15:17.120)

It's still there.

Lex Fridman (15:17.960)

So for thousands of years, humans have been digging for gold.

Saifedean Ammous (15:21.000)

They dig it out of the ground, they refine it

Lex Fridman (15:23.240)

and then they put it in a jewelry or a coin

Lex Fridman (15:25.880)

and then it just stays there.

Lex Fridman (15:27.440)

It gets melted down into new other forms.

Saifedean Ammous (15:29.880)

The jewelry gets turned into coins

Lex Fridman (15:31.520)

or coins get turned into bars.

Lex Fridman (15:34.240)

But it's just stockpiles that are accumulating.

Lex Fridman (15:38.560)

On the other hand, every year we get better

Saifedean Ammous (15:41.920)

at our technology of looking for gold.

Lex Fridman (15:43.880)

There's more people all over the world.

Saifedean Ammous (15:45.400)

The population increases, the technology improves.

Lex Fridman (15:47.880)

So we keep finding more and more gold

Lex Fridman (15:49.960)

and we keep making the stockpiles bigger.

Lex Fridman (15:52.080)

However, because we're constantly adding to a stockpile

Saifedean Ammous (15:55.240)

that is not being devalued,

Lex Fridman (15:57.720)

sorry, that is not being consumed

Saifedean Ammous (15:59.280)

because there's no way of consuming gold.

Lex Fridman (16:00.600)

You can't eat it, you can't burn it, it doesn't rust.

Saifedean Ammous (16:05.840)

Because of that, we're constantly adding

Lex Fridman (16:07.320)

to a constantly growing stockpile.

Lex Fridman (16:08.920)

So if you look at the numbers,

Lex Fridman (16:11.000)

you see over the last 100 years,

Saifedean Ammous (16:13.240)

we've got pretty reliable data on gold production worldwide.

Lex Fridman (16:16.360)

We see that pretty much gold stockpiles increase

Saifedean Ammous (16:19.120)

at around one and a half to 2% per year, every year.

Lex Fridman (16:22.480)

So yes, we're making more every year,

Lex Fridman (16:25.200)

but we're making more so we're adding to the stockpile.

Lex Fridman (16:28.080)

The stockpile grows more.

Lex Fridman (16:29.200)

So every year we're adding only around one and a half

Lex Fridman (16:31.560)

to 2%.

Saifedean Ammous (16:33.840)

Compare that to the second highest,

Lex Fridman (16:36.360)

the second hardest metal historically was silver.

Lex Fridman (16:39.160)

And that increased historically at around maybe 5%

Lex Fridman (16:42.400)

per year or so.

Saifedean Ammous (16:43.720)

Now it probably increases at something like closer to 30%

Lex Fridman (16:46.840)

because it's now getting used extensively

Saifedean Ammous (16:49.160)

in industrial uses.

Lex Fridman (16:50.840)

So when you use it in industry,

Saifedean Ammous (16:53.920)

when you put silver in a laptop or in a camera

Lex Fridman (16:56.440)

or in a machine, effectively,

Saifedean Ammous (16:59.520)

you are consuming the stockpile

Lex Fridman (17:01.040)

because it's not used as money.

Saifedean Ammous (17:02.600)

It's taken out of the monetary stockpile.

Lex Fridman (17:04.920)

So over the last 150 years, since 1870 in particular,

Lex Fridman (17:08.320)

and I discussed this in detail in the Bitcoin standard,

Lex Fridman (17:11.960)

what happened in 1870 was Germany won

Saifedean Ammous (17:14.600)

the Franco Prussian war and Germany was on a silver standard,

Lex Fridman (17:18.960)

but the value of silvers was declining.

Lex Fridman (17:21.160)

So Germany did something very smart,

Lex Fridman (17:22.640)

which is they took their indemnity from France

Saifedean Ammous (17:25.640)

in silver and gold and use that big chunk of gold

Lex Fridman (17:30.480)

to switch to going on a gold standard.

Lex Fridman (17:33.040)

And since then, silver has been collapsing in value

Lex Fridman (17:36.720)

next to gold.

Lex Fridman (17:37.560)

So back then the price of an ounce of gold

Lex Fridman (17:40.080)

was around 15 ounces of silver.

Saifedean Ammous (17:42.080)

Today it's closer to 100.

Lex Fridman (17:43.400)

It's just been declining for the last 150 years.

Lex Fridman (17:46.520)

And so because of that, because of the fact

Lex Fridman (17:48.480)

that it's lost its monetary role

Saifedean Ammous (17:50.720)

as people shifted toward gold,

Lex Fridman (17:52.840)

the value of silver went down

Lex Fridman (17:54.560)

and so it became economical to use it

Lex Fridman (17:56.120)

in more and more industrial applications.

Lex Fridman (17:58.240)

So the stockpile declines and then as a result

Lex Fridman (18:01.880)

that weakens its monetary properties

Saifedean Ammous (18:05.160)

more and more and more.

Lex Fridman (18:06.720)

So that's why by the end of the 19th century,

Saifedean Ammous (18:09.520)

I mean at the beginning of the 19th century,

Lex Fridman (18:10.840)

gold and silver were money.

Saifedean Ammous (18:12.120)

By the end, it was basically only gold.

Lex Fridman (18:14.400)

And the countries that were still on a silver standard,

Saifedean Ammous (18:16.800)

China and India in particular suffered enormously from it

Lex Fridman (18:19.680)

because their money was devaluing very quickly

Saifedean Ammous (18:22.920)

next to gold and so Europeans who would come to China

Lex Fridman (18:25.800)

or India were able to buy things

Saifedean Ammous (18:28.160)

at practically a big discount.

Lex Fridman (18:30.280)

So I hope it's okay if I ask very simple,

Saifedean Ammous (18:33.520)

very basic questions.

Lex Fridman (18:34.600)

There's few people in this world that are good,

Saifedean Ammous (18:37.680)

as good as you are at answering very basic,

Lex Fridman (18:41.160)

almost ridiculously basic questions

Saifedean Ammous (18:42.920)

because I think exploring questions like what is money

Lex Fridman (18:45.960)

is a really great way to think from first principles,

Saifedean Ammous (18:49.080)

to really think deeply about this world.

Lex Fridman (18:50.760)

So I really appreciate you doing that.

Lex Fridman (18:52.640)

When you say standard, what does it mean?

Lex Fridman (18:55.600)

When you say silver standard, gold standard,

Saifedean Ammous (18:57.560)

again with a basic question.

Lex Fridman (18:59.920)

The term really I think was based out of gold.

Saifedean Ammous (19:03.800)

The first time this came out was the gold standard

Lex Fridman (19:06.240)

because so I said gold was money

Saifedean Ammous (19:09.280)

at the end of the 19th century,

Lex Fridman (19:10.960)

but it wasn't just that everybody was using gold coins

Lex Fridman (19:13.520)

and trading with gold coins

Lex Fridman (19:15.080)

because that's got a problem of divisibility.

Lex Fridman (19:19.320)

So a lot of things are worth less than one gold coin.

Lex Fridman (19:23.400)

So how do you buy that thing?

Lex Fridman (19:25.160)

And the answer was that you created the monetary instruments

Lex Fridman (19:28.080)

that were backed by gold and so currencies,

Saifedean Ammous (19:31.560)

national currencies under the gold standard

Lex Fridman (19:34.360)

were specific units of gold

Lex Fridman (19:36.760)

and that's how a gold standard functioned.

Lex Fridman (19:38.960)

Money was gold, but you had pieces of paper

Saifedean Ammous (19:41.960)

that were redeemable in gold.

Lex Fridman (19:43.880)

So you could go to the central bank,

Saifedean Ammous (19:45.080)

you'd give them the piece of paper,

Lex Fridman (19:46.920)

the $100 bill or the $10 bill

Lex Fridman (19:49.120)

and they'll give you gold in exchange

Lex Fridman (19:50.960)

and they give you a specific quantity of gold in exchange.

Saifedean Ammous (19:53.760)

Effectively, the paper was just a receipt for gold.

Lex Fridman (19:56.200)

So the paper exactly represented the amount of gold.

Saifedean Ammous (19:59.440)

Exactly, that was the plan.

Lex Fridman (1:00:01.940)

is that you only get funded

Saifedean Ammous (1:00:03.060)

if you come up with this conclusion.

Lex Fridman (1:00:04.340)

If you come up with a conclusion

Saifedean Ammous (1:00:05.260)

that we need to shut down the central bank,

Lex Fridman (1:00:08.260)

you don't get funded by the central bank.

Saifedean Ammous (1:00:10.100)

You don't get published in the journals.

Lex Fridman (1:00:11.620)

You don't get a job at the prestigious universities.

Saifedean Ammous (1:00:14.540)

You don't get quoted by a fiat publications

Lex Fridman (1:00:16.980)

like the New York Times and CNN.

Saifedean Ammous (1:00:18.820)

They don't invite you on as an expert.

Lex Fridman (1:00:21.340)

Well, that's a fundamental flaw

Saifedean Ammous (1:00:22.540)

with a lot of institutions we have today

Lex Fridman (1:00:25.660)

and throughout human history.

Saifedean Ammous (1:00:26.980)

Let me zoom off for just a second to the big question.

Lex Fridman (1:00:29.500)

What is economics in general?

Lex Fridman (1:00:32.420)

What's the goal?

Lex Fridman (1:00:33.260)

You said there's a bunch of models.

Saifedean Ammous (1:00:34.940)

Is any economist basically trying to throw a bunch of models

Lex Fridman (1:00:38.180)

about human behavior on the table

Lex Fridman (1:00:40.060)

and try to generalize it to the global scale?

Lex Fridman (1:00:43.940)

So both dance between micro and macro somehow

Saifedean Ammous (1:00:47.060)

in order to determine public policy

Lex Fridman (1:00:49.180)

and explain the past, predict the future,

Saifedean Ammous (1:00:53.100)

prescribe policies that can control the future,

Lex Fridman (1:00:56.940)

those kinds of things.

Saifedean Ammous (1:00:57.900)

This is the big basic ridiculous question

Lex Fridman (1:01:00.140)

of what is economics?

Saifedean Ammous (1:01:02.060)

Economics is the study,

Lex Fridman (1:01:03.300)

the way the Austrians define it is the study

Saifedean Ammous (1:01:05.380)

of how humans make choices under the condition of scarcity.

Lex Fridman (1:01:09.100)

We begin with the starting point of economics

Saifedean Ammous (1:01:11.020)

as the fact that scarcity exists.

Lex Fridman (1:01:14.100)

And why does scarcity exist?

Saifedean Ammous (1:01:16.500)

Well, because it's easier to want things

Lex Fridman (1:01:18.380)

than it is to make them.

Saifedean Ammous (1:01:19.460)

It's much easier to want a Ferrari than it is to make one.

Lex Fridman (1:01:23.300)

And so because we have wants

Lex Fridman (1:01:27.620)

and we have limited means to meet those wants,

Lex Fridman (1:01:30.980)

we need to economize.

Saifedean Ammous (1:01:32.260)

It's a permanent marker of the human condition.

Lex Fridman (1:01:37.220)

We are always economizing at all times.

Lex Fridman (1:01:39.980)

And so how people make those decisions

Lex Fridman (1:01:43.060)

under the conditions of scarcity

Saifedean Ammous (1:01:45.340)

is what economists study.

Lex Fridman (1:01:47.500)

So to go back to your point on empiricism

Saifedean Ammous (1:01:49.900)

in Austrian school,

Lex Fridman (1:01:51.340)

so it isn't that the Austrians don't believe in data.

Saifedean Ammous (1:01:55.660)

On the contrary, it's that theory has to inform data.

Lex Fridman (1:02:00.500)

And in fact, if you think about it

Saifedean Ammous (1:02:02.460)

as the example of the stagflation of the 1970 shows,

Lex Fridman (1:02:08.180)

if you have stagflation,

Saifedean Ammous (1:02:10.620)

that just completely refutes the Keynesian model.

Lex Fridman (1:02:13.460)

The Austrian way of thinking,

Saifedean Ammous (1:02:15.500)

which is think from first principles,

Lex Fridman (1:02:17.860)

understand how the world actually works,

Saifedean Ammous (1:02:19.860)

think about how humans act and understand

Lex Fridman (1:02:21.980)

that economics is really all about human action.

Lex Fridman (1:02:23.940)

So it's not about aggregates of goods.

Lex Fridman (1:02:26.620)

This is really the key distinction

Saifedean Ammous (1:02:28.020)

in terms of methodology.

Lex Fridman (1:02:29.500)

For the Keynesians, it's physics envy.

Saifedean Ammous (1:02:32.820)

They look at the market economy,

Lex Fridman (1:02:34.340)

they look at individuals in the market economy,

Lex Fridman (1:02:36.700)

and they think that they can understand the market economy

Lex Fridman (1:02:39.220)

by looking at aggregates.

Saifedean Ammous (1:02:40.780)

This is really the key point of what I think

Lex Fridman (1:02:43.460)

makes a certain branch of economics pseudoscientific

Saifedean Ammous (1:02:48.060)

is the introduction of aggregates.

Lex Fridman (1:02:49.780)

When you introduce those aggregates,

Lex Fridman (1:02:52.500)

how much production takes place,

Lex Fridman (1:02:54.460)

how many people are unemployed,

Saifedean Ammous (1:02:56.580)

the percentage of the inflation rate,

Lex Fridman (1:02:59.580)

and then you think that you can establish

Saifedean Ammous (1:03:01.540)

scientific relationship between those aggregates,

Lex Fridman (1:03:04.860)

it's purely physics envy.

Saifedean Ammous (1:03:07.500)

In physics, for instance, or in chemistry,

Lex Fridman (1:03:09.980)

you put, let's say, a container that contains a gas,

Lex Fridman (1:03:13.900)

and you have the ideal gas law, PV equals to nRT,

Lex Fridman (1:03:18.380)

calculate the pressure, calculate the volume,

Lex Fridman (1:03:20.940)

and then the temperature.

Lex Fridman (1:03:24.380)

If you have the pressure and the volume,

Saifedean Ammous (1:03:25.620)

you can calculate the temperature

Lex Fridman (1:03:26.620)

because you have the nR constants.

Lex Fridman (1:03:30.060)

So there's a clear relationship

Lex Fridman (1:03:32.740)

that has been demonstrated in a laboratory

Lex Fridman (1:03:34.620)

and that we can do it right now.

Lex Fridman (1:03:36.620)

We can measure it and we can see it

Lex Fridman (1:03:38.260)

and it continues to hold.

Lex Fridman (1:03:40.020)

And all it takes is one scientist

Saifedean Ammous (1:03:42.740)

to show that this relationship does not hold,

Lex Fridman (1:03:44.820)

to do an experiment that shows that this does not hold,

Lex Fridman (1:03:48.020)

and it stops being a law of chemistry and it's broken.

Lex Fridman (1:03:52.780)

Whereas in economics, what they've done

Saifedean Ammous (1:03:56.380)

is they've copied the superficial shape of this

Lex Fridman (1:04:00.180)

without any of the scientific rigor

Saifedean Ammous (1:04:02.860)

that was used to build it.

Lex Fridman (1:04:04.820)

There's no experiments.

Saifedean Ammous (1:04:05.860)

You can't experiment on economies.

Lex Fridman (1:04:08.100)

We don't have the ability to establish laws,

Lex Fridman (1:04:11.780)

and all the laws that we establish

Lex Fridman (1:04:13.340)

are just models that get people published

Lex Fridman (1:04:15.420)

and get them on the media to say,

Lex Fridman (1:04:18.140)

my model says we need to print more money,

Lex Fridman (1:04:20.540)

but it's never subject to actual scientific scrutiny.

Lex Fridman (1:04:23.420)

If it were, they would all be rejected in 15 minutes

Saifedean Ammous (1:04:25.620)

because the world is full of examples that contradict them.

Lex Fridman (1:04:28.180)

Was it possible to do scientific scrutiny

Saifedean Ammous (1:04:30.220)

when it's human nature when you can't,

Lex Fridman (1:04:32.100)

when there's a nearly infinite number of variables

Lex Fridman (1:04:34.660)

and you can't control them?

Lex Fridman (1:04:36.020)

Is it possible, so what's the best thing

Lex Fridman (1:04:38.300)

you could possibly do?

Lex Fridman (1:04:40.180)

You do thought experiments.

Lex Fridman (1:04:43.100)

But the problem with thought experiments,

Lex Fridman (1:04:46.500)

Freud thinks everybody wants to have sex with their mother.

Saifedean Ammous (1:04:49.820)

Is he right? That's the problem with Freud.

Lex Fridman (1:04:51.780)

I don't know, maybe he's right.

Saifedean Ammous (1:04:53.780)

Well, obviously I'm joking on that front, but the...

Lex Fridman (1:04:57.020)

Freud is probably under the canes.

Saifedean Ammous (1:05:00.300)

Well, no, I think there's power to the thought experiment.

Lex Fridman (1:05:03.660)

Just like Einstein, a lot of general relativity,

Saifedean Ammous (1:05:06.420)

special relativity, that's a thought experiment.

Lex Fridman (1:05:09.300)

It originates in a thought experiment.

Lex Fridman (1:05:10.860)

Now, is it true?

Lex Fridman (1:05:13.460)

Nice thing about physics,

Saifedean Ammous (1:05:14.660)

you can't eventually have experimental validation.

Lex Fridman (1:05:17.420)

The downside of economics is you really can't have

Saifedean Ammous (1:05:20.860)

experimental, definitive experimental scientific rigor

Lex Fridman (1:05:25.660)

of validation of a theory.

Lex Fridman (1:05:27.060)

So a thought experiment is just a thought experiment.

Lex Fridman (1:05:29.140)

Using your intuition, it's the power of reasoning together

Saifedean Ammous (1:05:32.740)

about human nature.

Lex Fridman (1:05:33.700)

And that's why economics cannot make the claims

Saifedean Ammous (1:05:36.540)

that physics can make.

Lex Fridman (1:05:37.380)

So with physics, you can predict that if you get this gas

Saifedean Ammous (1:05:40.700)

at this pressure, at this volume,

Lex Fridman (1:05:42.320)

the temperature will be that much.

Lex Fridman (1:05:43.980)

And you can make that prediction and test it a million times

Lex Fridman (1:05:47.840)

and you'll always get the precisely correct answer.

Saifedean Ammous (1:05:50.340)

With economics, we can't make quantitative predictions.

Lex Fridman (1:05:53.060)

But still, on Twitter, and even today,

Saifedean Ammous (1:05:54.860)

you're very certain about the statements you're making.

Lex Fridman (1:05:57.820)

Do you...

Saifedean Ammous (1:05:58.660)

Yeah, but I don't make quantitatively certain statements.

Lex Fridman (1:06:00.480)

That's the thing.

Saifedean Ammous (1:06:01.320)

In economics, we don't make quantitative predictions.

Lex Fridman (1:06:03.380)

We cannot do that because we don't have experiments.

Lex Fridman (1:06:06.140)

But we can understand how the world actually works

Lex Fridman (1:06:09.620)

with humility.

Saifedean Ammous (1:06:10.460)

This is really the key difference

Lex Fridman (1:06:11.660)

that the Keynesians think they just wanna copy

Saifedean Ammous (1:06:13.940)

the methods of physics.

Lex Fridman (1:06:15.060)

And then that's just gonna give them the certainty

Saifedean Ammous (1:06:18.480)

of the results of physics, which is like me saying,

Lex Fridman (1:06:20.340)

I'm just gonna put a red blanket on my back

Lex Fridman (1:06:23.680)

and jump from the fourth floor because I'm Superman.

Lex Fridman (1:06:26.180)

Well, it's not the red blanket

Saifedean Ammous (1:06:27.500)

that's gonna make me Superman.

Lex Fridman (1:06:29.020)

There's a lot more to it.

Lex Fridman (1:06:30.180)

So humility manifests itself in economics

Lex Fridman (1:06:33.500)

as the belief in a free market.

Saifedean Ammous (1:06:35.580)

Meaning like, I can't centralize,

Lex Fridman (1:06:37.380)

I can't do centralized control on this thing.

Saifedean Ammous (1:06:41.180)

We're going to minimize the friction

Lex Fridman (1:06:44.480)

of the free exchange of goods.

Lex Fridman (1:06:47.440)

So Austrian economics puts priority in the market.

Lex Fridman (1:06:52.260)

Yes, and you could arrive at it through two paths.

Saifedean Ammous (1:06:55.660)

The more practical path, which most scientific minded

Lex Fridman (1:07:01.380)

people arrive at.

Saifedean Ammous (1:07:02.260)

I came from an engineering background.

Lex Fridman (1:07:03.500)

So I initially had this idea that what is lacking

Saifedean Ammous (1:07:07.060)

in economics is mathematicization.

Lex Fridman (1:07:09.180)

We need to have better math models.

Saifedean Ammous (1:07:11.260)

We need to get all of those tools from engineering,

Lex Fridman (1:07:13.120)

apply them to economics, and then we'll be able

Saifedean Ammous (1:07:15.380)

to plan the world economy and make it work better.

Lex Fridman (1:07:18.340)

And then you start actually trying to solve problems,

Saifedean Ammous (1:07:21.180)

trying to actually calculate them.

Lex Fridman (1:07:22.340)

And you realize nobody can have that ability

Saifedean Ammous (1:07:24.700)

because the difference ultimately comes down to the fact

Lex Fridman (1:07:28.460)

we can't have experiments.

Lex Fridman (1:07:29.780)

And the reason we can't have experiments is that

Lex Fridman (1:07:31.780)

you can experiment on particles of a gas.

Saifedean Ammous (1:07:33.900)

You can't experiment on human beings and entire economies.

Lex Fridman (1:07:37.440)

And because particles of a gas are just dumb matter.

Lex Fridman (1:07:42.180)

And so you kick matter in a certain way.

Lex Fridman (1:07:46.020)

You can calculate exactly how much is going to fly.

Saifedean Ammous (1:07:48.780)

Human beings are much more complex.

Lex Fridman (1:07:50.340)

They have a will inside them.

Lex Fridman (1:07:51.660)

And this is really, this is the humility to understand

Lex Fridman (1:07:55.420)

that you are a human being and other people

Saifedean Ammous (1:07:57.140)

are also human being just like you.

Lex Fridman (1:07:59.420)

And that every person wakes up every morning

Lex Fridman (1:08:03.580)

and they have a million things in their mind,

Lex Fridman (1:08:06.420)

a million things they care about,

Saifedean Ammous (1:08:07.700)

a million things they want to do.

Lex Fridman (1:08:09.500)

And you will never be able to make the decisions

Saifedean Ammous (1:08:13.220)

for somebody else, let alone for millions of other people.

Lex Fridman (1:08:16.660)

So this is one path by which you arrive at the conclusion

Saifedean Ammous (1:08:18.980)

that free markets are better because you realize

Lex Fridman (1:08:21.120)

that all of the people that think

Saifedean Ammous (1:08:22.080)

that they can centrally plan markets

Lex Fridman (1:08:24.660)

can't actually do that.

Lex Fridman (1:08:26.900)

And that there's really nothing scientific about them

Lex Fridman (1:08:30.540)

except essentially the rituals they ape

Saifedean Ammous (1:08:33.100)

of the scientific process.

Lex Fridman (1:08:35.300)

And the other path I think that makes you arrive

Saifedean Ammous (1:08:38.140)

at the Austrian perspective or the libertarian perspective

Lex Fridman (1:08:41.380)

I should say, is simply the notion of individuals

Saifedean Ammous (1:08:47.020)

as having their own inalienable right

Lex Fridman (1:08:49.700)

to decide what they want to do with themselves.

Saifedean Ammous (1:08:51.820)

If you, I mean, the only way that you can give yourself

Lex Fridman (1:08:55.700)

the idea that you get to be planner is ultimately

Saifedean Ammous (1:09:00.740)

you think you're better than other people.

Lex Fridman (1:09:02.520)

You think your choice, your judgment overrides mine.

Lex Fridman (1:09:05.820)

And I don't think that's a defensible position.

Lex Fridman (1:09:08.060)

I think I'm in no position to want to force anybody ever.

Saifedean Ammous (1:09:11.620)

I will never want to force anybody

Lex Fridman (1:09:13.500)

to do anything they don't want.

Saifedean Ammous (1:09:15.820)

The Keynesian perspective, the central planning perspective

Lex Fridman (1:09:18.880)

is unlike physics, which is let's force a bunch

Saifedean Ammous (1:09:22.660)

of particles to sit in the lab so that we can study them.

Lex Fridman (1:09:26.100)

In economics, you're forcing people to do things.

Saifedean Ammous (1:09:28.500)

Let's stop these people from doing this job

Lex Fridman (1:09:31.100)

because it's bad for the economy

Lex Fridman (1:09:32.380)

and let's get them to do that job.

Lex Fridman (1:09:34.040)

Let's force them to pay this price.

Saifedean Ammous (1:09:35.700)

Let's tax them this much.

Lex Fridman (1:09:37.500)

Let's prevent them from using gold as money

Lex Fridman (1:09:39.460)

and force them to use our credit as money.

Lex Fridman (1:09:42.260)

So it has to rely on coercion.

Saifedean Ammous (1:09:44.540)

There's no central planning without coercion.

Lex Fridman (1:09:46.620)

And coercion is a crime, in my opinion.

Saifedean Ammous (1:09:49.180)

There's no way that it is justifiable morally or ethically.

Lex Fridman (1:09:51.780)

So from a politics, from an ethical perspective,

Saifedean Ammous (1:09:55.340)

your view is the, I mean, perhaps the,

Lex Fridman (1:09:58.020)

broadly speaking, the libertarian view

Saifedean Ammous (1:09:59.940)

is coercion is unethical, freedom is essential.

Lex Fridman (1:10:07.420)

What is, what are the pros and cons

Lex Fridman (1:10:09.940)

of government intervention in the economy?

Lex Fridman (1:10:12.380)

So can you steal, can you provide pros?

Saifedean Ammous (1:10:14.860)

You just kind of provided arguments against.

Lex Fridman (1:10:19.100)

Is there any arguments to be made

Saifedean Ammous (1:10:20.900)

for government intervention,

Lex Fridman (1:10:22.580)

for the role of government in society?

Saifedean Ammous (1:10:25.260)

Speaking from a political or from an economics perspective,

Lex Fridman (1:10:28.660)

what is the positive role of government

Lex Fridman (1:10:31.460)

that you can imagine you can speak to?

Lex Fridman (1:10:33.460)

I can repeat many other cases,

Lex Fridman (1:10:34.920)

but I don't find any of them compelling

Lex Fridman (1:10:37.020)

for the reason that I mentioned,

Saifedean Ammous (1:10:38.100)

which is that ultimately they all rely on

Lex Fridman (1:10:41.340)

putting a gun to somebody's head

Lex Fridman (1:10:42.520)

and using the threat of force.

Lex Fridman (1:10:43.820)

So that's for me, it can never be justifiable.

Saifedean Ammous (1:10:46.100)

Whatever the ends are,

Lex Fridman (1:10:47.940)

if the means are violence and the threat of violence,

Saifedean Ammous (1:10:52.980)

then the ends aren't justified.

Lex Fridman (1:10:55.100)

Everything that's good,

Saifedean Ammous (1:10:56.420)

governments will use as an excuse to justify coercion.

Lex Fridman (1:10:59.900)

So, you know, what do you like?

Lex Fridman (1:11:01.500)

You like motherhood and apple pie?

Lex Fridman (1:11:03.060)

Well, government needs to ensure

Saifedean Ammous (1:11:04.300)

that motherhood works well,

Lex Fridman (1:11:06.040)

and we need the government central planning of birth.

Saifedean Ammous (1:11:09.520)

We need regulations on birth, for instance.

Lex Fridman (1:11:11.380)

We need regulations on how people give birth.

Saifedean Ammous (1:11:14.460)

We need to ban people from giving birth

Lex Fridman (1:11:16.140)

in traditional ways that have been tried

Saifedean Ammous (1:11:18.100)

for thousands of years.

Lex Fridman (1:11:18.940)

We need to force people to do things

Saifedean Ammous (1:11:20.980)

in the modern scientific way.

Lex Fridman (1:11:22.820)

Well, so what about things like that all of us use,

Lex Fridman (1:11:26.500)

so infrastructure, for example, or education,

Lex Fridman (1:11:31.020)

or, well, the economy too, right?

Lex Fridman (1:11:35.180)

Can you make a case for the role

Lex Fridman (1:11:38.460)

of some large scale centralized systems,

Saifedean Ammous (1:11:42.140)

whether it's government or not,

Lex Fridman (1:11:43.580)

that do this kind of management?

Saifedean Ammous (1:11:45.340)

I guess, perhaps you could say

Lex Fridman (1:11:46.700)

there's the economies of scale argument

Saifedean Ammous (1:11:48.840)

that some things must exist at a very large scale,

Lex Fridman (1:11:52.280)

and therefore you would want political accountability

Saifedean Ammous (1:11:56.860)

of the people who manage them.

Lex Fridman (1:11:58.100)

This is kind of the argument

Saifedean Ammous (1:11:59.060)

that's given for infrastructure monopolies.

Lex Fridman (1:12:01.460)

For instance, roads or electricity.

Saifedean Ammous (1:12:05.780)

Let's say we live in a country,

Lex Fridman (1:12:07.060)

we need one power plant.

Saifedean Ammous (1:12:08.180)

The bigger the power plant, the better off we will all be.

Lex Fridman (1:12:11.180)

And there's a natural monopoly in the power plant business.

Lex Fridman (1:12:15.020)

So we're gonna have to have one power plant.

Lex Fridman (1:12:17.160)

And since it's only one power plant,

Saifedean Ammous (1:12:19.380)

then we can't just let anybody own it

Lex Fridman (1:12:22.100)

because then they're gonna make it too expensive.

Lex Fridman (1:12:24.380)

So we need to have the government own it

Lex Fridman (1:12:26.240)

so it can make it too expensive.

Lex Fridman (1:12:28.180)

And you don't find that case compelling?

Lex Fridman (1:12:29.900)

Not at all.

Saifedean Ammous (1:12:30.740)

I used to believe in it.

Lex Fridman (1:12:31.580)

I was pretty much a Keynesian

Saifedean Ammous (1:12:33.620)

when I first started my graduate studies at Columbia.

Lex Fridman (1:12:38.620)

No, I don't find that compelling at all

Saifedean Ammous (1:12:40.180)

because I think all these examples that they mention

Lex Fridman (1:12:42.700)

of natural monopolies or economies of scale

Saifedean Ammous (1:12:45.540)

that can only fit at a scale of government,

Lex Fridman (1:12:51.220)

government bans people from opening power plants.

Lex Fridman (1:12:54.420)

And then there's only one power plant

Lex Fridman (1:12:56.140)

and they need to be in charge of it.

Lex Fridman (1:12:58.180)

But in reality, no.

Lex Fridman (1:13:01.580)

In reality, power plants can exist at all kinds of manners

Saifedean Ammous (1:13:04.580)

of scales of operation.

Lex Fridman (1:13:06.420)

And yes, of course, there are benefits to centralization

Saifedean Ammous (1:13:08.820)

in power plants in particular

Lex Fridman (1:13:10.260)

because there's efficiency in generation.

Saifedean Ammous (1:13:13.180)

One big power plant is more efficient

Lex Fridman (1:13:17.100)

than 10 equivalent smaller power plants.

Lex Fridman (1:13:20.020)

But there's also inefficiencies in centralization

Lex Fridman (1:13:22.260)

because the more centralized and the bigger the plant is,

Saifedean Ammous (1:13:25.540)

the further away a lot of the population is going to be.

Lex Fridman (1:13:29.920)

So you're gonna be losing a lot of the electricity

Lex Fridman (1:13:31.960)

and transmission.

Lex Fridman (1:13:33.540)

And you believe the free market is best in managing

Saifedean Ammous (1:13:36.020)

that dance, that balance of centralization.

Lex Fridman (1:13:39.220)

Exactly, and if we do end up in a situation

Saifedean Ammous (1:13:41.540)

where there's one power plant for an area,

Lex Fridman (1:13:44.380)

then if the markets ends up centralizing all of it

Saifedean Ammous (1:13:48.940)

into one power plant, I don't see that as a problem.

Lex Fridman (1:13:52.780)

There are places, there's a small town

Saifedean Ammous (1:13:54.860)

with only one barber shop.

Lex Fridman (1:13:56.060)

Is that a catastrophe?

Saifedean Ammous (1:13:57.460)

No, because they don't need two barber shops.

Lex Fridman (1:14:00.900)

Now, if that barber shop started to take advantage

Saifedean Ammous (1:14:03.060)

of people, started to charge higher price,

Lex Fridman (1:14:05.380)

well, then that's just an opportunity for others

Saifedean Ammous (1:14:07.460)

to step in and put them in their place.

Lex Fridman (1:14:10.020)

And that's the same thing with power plants.

Saifedean Ammous (1:14:11.460)

It's the same thing with everything.

Lex Fridman (1:14:13.580)

Ultimately, I think the key thing is this.

Saifedean Ammous (1:14:17.340)

From the central planning perspective,

Lex Fridman (1:14:20.140)

they'll present you the problem as it is,

Lex Fridman (1:14:22.700)

and they'll tell you, well, this is bad.

Lex Fridman (1:14:24.620)

So the fix, and what we can do is better.

Lex Fridman (1:14:28.140)

So let's stop what's bad and do what is better.

Lex Fridman (1:14:31.900)

Two problems here.

Saifedean Ammous (1:14:32.740)

Usually, the reason that the thing is bad

Lex Fridman (1:14:34.960)

in the first place is because it is a government monopoly.

Saifedean Ammous (1:14:37.100)

It's because of government intervention.

Lex Fridman (1:14:39.180)

But the second thing is that this notion

Saifedean Ammous (1:14:41.980)

that we could just pass a law and fix what's wrong

Lex Fridman (1:14:44.180)

and make it better, it ignores the fundamental

Saifedean Ammous (1:14:48.700)

underlying reality, which is that what you're doing

Lex Fridman (1:14:51.500)

is you're offering only one way for this problem

Saifedean Ammous (1:14:54.780)

to be solved and making all other solutions

Lex Fridman (1:14:57.340)

practically illegal.

Saifedean Ammous (1:14:58.340)

You're taking taxpayer money, you're putting guns

Lex Fridman (1:15:00.860)

to people's heads to take their money,

Saifedean Ammous (1:15:02.940)

to use it to build, say, this one solution

Lex Fridman (1:15:04.940)

for a power plant, but you're preventing

Saifedean Ammous (1:15:07.380)

the free market process from providing us

Lex Fridman (1:15:09.820)

with other alternatives.

Saifedean Ammous (1:15:11.300)

Well, so you phrased it sort of from that perspective,

Lex Fridman (1:15:13.700)

but in theory, there is a feedback accountability mechanism

Saifedean Ammous (1:15:18.500)

for the solution that you propose and enforce

Lex Fridman (1:15:22.340)

by, as you're saying, placing a gun to people's head.

Saifedean Ammous (1:15:25.840)

You're accountable for that choice,

Lex Fridman (1:15:29.140)

for the quality of that solution,

Saifedean Ammous (1:15:30.780)

by being voted out if the solution is actually bad.

Lex Fridman (1:15:34.740)

So it's just a different selection mechanism.

Lex Fridman (1:15:37.300)

And I think, I personally believe it is a selection mechanism

Lex Fridman (1:15:41.420)

that has worked in the past.

Saifedean Ammous (1:15:43.540)

It just often does not work nearly as well

Lex Fridman (1:15:46.980)

as a free market.

Lex Fridman (1:15:48.660)

And the question is, are there domains

Lex Fridman (1:15:52.020)

in which the free market gets itself into trouble?

Lex Fridman (1:15:54.780)

So this theoretical view is that that's the point

Lex Fridman (1:15:58.820)

of a free market, is it doesn't, if there's trouble,

Saifedean Ammous (1:16:02.840)

that's a signal, and it will respond to that signal,

Lex Fridman (1:16:05.780)

and it will respond appropriately

Saifedean Ammous (1:16:07.860)

to try to maximize happiness.

Lex Fridman (1:16:10.340)

The question is, is there a local optima

Saifedean Ammous (1:16:12.460)

that free markets get stuck in and need governments

Lex Fridman (1:16:15.620)

to represent the broader scale of the people

Lex Fridman (1:16:19.100)

to get outside of that?

Lex Fridman (1:16:20.500)

I think the fundamental problem here is the idea

Saifedean Ammous (1:16:24.180)

that there is a feedback mechanism

Lex Fridman (1:16:26.100)

when there is coercion in one party,

Saifedean Ammous (1:16:28.940)

when one party can employ coercion and the other one cannot.

Lex Fridman (1:16:31.780)

So in other words, I'm gonna put a gun to your head,

Saifedean Ammous (1:16:34.840)

I'm gonna take your money, and I'm gonna use it

Lex Fridman (1:16:36.900)

to buy more guns for me to put against your head,

Lex Fridman (1:16:39.960)

but somehow you're gonna put a paper in a box

Lex Fridman (1:16:42.980)

and that's going to deactivate my guns.

Saifedean Ammous (1:16:45.920)

Well, love requires a push and pull,

Lex Fridman (1:16:48.020)

a little bit of tension, a little spice in a relationship,

Saifedean Ammous (1:16:50.340)

I think, a little gun to the head.

Lex Fridman (1:16:53.660)

Good luck to anybody who's gonna be dating you

Saifedean Ammous (1:16:55.500)

if you think putting a gun to people's head

Lex Fridman (1:16:57.140)

is comparable to a relationship.

Saifedean Ammous (1:17:00.340)

All jokes, but yes, I mean, the people don't often think

Lex Fridman (1:17:04.340)

of it as government and the military as gun to the head,

Lex Fridman (1:17:09.340)

but that is sort of a libertarian perspective

Lex Fridman (1:17:11.700)

because ultimately when you, you know,

Saifedean Ammous (1:17:13.820)

turtles all the way down and at the bottom there's guns.

Lex Fridman (1:17:16.660)

Yeah, so.

Saifedean Ammous (1:17:17.500)

At the bottom if you don't want to pay,

Lex Fridman (1:17:18.860)

if you don't want to, you know,

Saifedean Ammous (1:17:19.740)

all right, I don't want to be part of your power plant,

Lex Fridman (1:17:21.260)

I want to get my own generator, I don't want to do it,

Lex Fridman (1:17:23.180)

and I don't want to pay for it, I'll go to jail.

Lex Fridman (1:17:25.260)

You can't not pay for it.

Saifedean Ammous (1:17:26.620)

That's really the asymmetry which the market doesn't have,

Lex Fridman (1:17:28.580)

which is why, in my opinion, it's not as if, you know,

Saifedean Ammous (1:17:31.940)

I'm being stubborn and stuck on the idea

Lex Fridman (1:17:34.220)

that I want a market and that the government can't work.

Saifedean Ammous (1:17:37.580)

It's presented as if, you know, we're choosing

Lex Fridman (1:17:39.620)

between two different machines.

Lex Fridman (1:17:40.940)

You know, should we use an Apple or a PC?

Lex Fridman (1:17:43.940)

And I'm just constantly choosing one of them

Lex Fridman (1:17:46.740)

and saying that the other one can't work.

Lex Fridman (1:17:48.660)

It's not equivalent, it's not two machines.

Saifedean Ammous (1:17:50.500)

We're comparing between a machine and a gun to the head.

Lex Fridman (1:17:54.700)

And we're comparing between a situation

Saifedean Ammous (1:17:56.020)

in which anybody anywhere is free to provide the service

Lex Fridman (1:17:59.980)

or the good, and anybody anywhere is free to buy it

Saifedean Ammous (1:18:02.740)

from them or reject to buy it from them.

Lex Fridman (1:18:05.020)

So anyone can build a power plant, anyone can succeed at it,

Saifedean Ammous (1:18:08.260)

anybody can fail at it, anybody can build it in a way

Lex Fridman (1:18:10.860)

that I can choose to take part in or not take part in.

Saifedean Ammous (1:18:14.100)

I can build my own.

Lex Fridman (1:18:15.380)

So we have a situation which 10 million people, let's say,

Saifedean Ammous (1:18:18.260)

they each can freely choose to provide the good

Lex Fridman (1:18:22.220)

or to buy the good.

Saifedean Ammous (1:18:23.620)

That cannot be considered an alternative on an equal footing

Lex Fridman (1:18:28.100)

to a situation where one person or one entity

Saifedean Ammous (1:18:31.060)

gets to decide for everybody and those people

Lex Fridman (1:18:33.740)

decide for everybody and those who disagree go to jail.

Lex Fridman (1:18:37.260)

So the problem is that the alternative to governments

Lex Fridman (1:18:41.900)

is other large successful entities that have humans in them

Lex Fridman (1:18:45.820)

and human nature is such that there's corruption,

Lex Fridman (1:18:48.180)

manipulation and so on.

Saifedean Ammous (1:18:50.180)

I think free market depends on the honest communication

Lex Fridman (1:18:57.020)

of information as widely as possible

Lex Fridman (1:18:59.980)

so that people can make great rational decisions

Lex Fridman (1:19:02.620)

but sort of my fear is, I'd like to propose

Saifedean Ammous (1:19:06.100)

is that in general there's manipulation

Lex Fridman (1:19:08.060)

whether it's government, whether it's companies.

Saifedean Ammous (1:19:10.180)

They're going to try to do propaganda.

Lex Fridman (1:19:13.060)

They're going to try to manipulate you, deceive you,

Saifedean Ammous (1:19:16.980)

shut down competition by playing games,

Lex Fridman (1:19:19.940)

human games of different kinds

Lex Fridman (1:19:22.620)

and sometimes even meaning well.

Lex Fridman (1:19:24.380)

It's not like everybody thinks they're doing good

Lex Fridman (1:19:26.140)

and they're actually doing evil.

Lex Fridman (1:19:27.620)

So how do we prevent the worst of human nature coming out

Lex Fridman (1:19:32.820)

in a free market as well?

Lex Fridman (1:19:35.020)

By not giving the worst of human nature

Saifedean Ammous (1:19:37.540)

a monopoly on violence in the institution of government.

Lex Fridman (1:19:40.740)

That little inkling of coercion,

Saifedean Ammous (1:19:42.940)

that little bit of asymmetry creates a gigantic

Lex Fridman (1:19:47.100)

like ripple effect of asymmetry in your view.

Saifedean Ammous (1:19:49.940)

Yes and it ends up just being the place

Lex Fridman (1:19:51.700)

where corporations, individuals, free markets,

Saifedean Ammous (1:19:55.180)

they can't coerce without the resort to government.

Lex Fridman (1:19:57.820)

So you think about all the examples

Saifedean Ammous (1:19:59.460)

of corrupt corporations doing bad things.

Lex Fridman (1:20:02.740)

It's always because they have certain privileges

Saifedean Ammous (1:20:06.420)

from governments because as it exists,

Lex Fridman (1:20:10.060)

Coca Cola, McDonald's, all of these giant corporations,

Saifedean Ammous (1:20:13.060)

they can't do anything to me without government.

Lex Fridman (1:20:15.860)

They can't take any of my money

Lex Fridman (1:20:17.140)

and they can't force me to buy their stuff

Lex Fridman (1:20:19.300)

and so it doesn't matter to me.

Lex Fridman (1:20:21.460)

So if Coca Cola is corrupted,

Lex Fridman (1:20:24.020)

that's a problem for Coca Cola customers,

Saifedean Ammous (1:20:25.820)

that's a problem for Coca Cola shareholders,

Lex Fridman (1:20:27.940)

that's a problem for anybody who deals with Coca Cola

Lex Fridman (1:20:30.940)

but as somebody who doesn't drink their stuff

Lex Fridman (1:20:32.460)

and isn't a shareholder,

Saifedean Ammous (1:20:34.380)

I have absolutely no interest in what happens.

Lex Fridman (1:20:36.540)

They could all go bust tomorrow and I don't care.

Saifedean Ammous (1:20:38.980)

I don't buy their product and I'm not a shareholder.

Lex Fridman (1:20:43.220)

So in this situation where you choose to voluntarily

Saifedean Ammous (1:20:47.340)

associate with people and you only give your money

Lex Fridman (1:20:50.140)

to people you want to voluntarily give the money to

Lex Fridman (1:20:52.460)

so you either buy their product

Lex Fridman (1:20:54.260)

or invest in their production,

Saifedean Ammous (1:20:55.900)

in that situation, the only way that a company

Lex Fridman (1:20:58.740)

can get my money is if they build a product that I value

Saifedean Ammous (1:21:03.100)

or if they convince me that they are going to use it

Lex Fridman (1:21:07.260)

in a way that's profitable and I may be wrong.

Saifedean Ammous (1:21:10.780)

I may invest in a company that fails

Lex Fridman (1:21:12.700)

or I may invest in a company that turns out to be fraudulent

Lex Fridman (1:21:17.300)

but that's my fault and it's my fault

Lex Fridman (1:21:23.620)

that I gave them my money

Lex Fridman (1:21:24.740)

and then it turned out to be scoundrels

Lex Fridman (1:21:26.860)

but it's a totally different problem

Saifedean Ammous (1:21:28.980)

when we make it mandatory.

Lex Fridman (1:21:32.260)

It's violence, it's a crime to put a gun to my head

Lex Fridman (1:21:36.100)

and force me to subsidize companies

Lex Fridman (1:21:38.540)

and force me to come at certain conclusions.

Lex Fridman (1:21:41.300)

Do you find an interesting distinction,

Lex Fridman (1:21:43.180)

Mr. Michael Malice, between anarchism and libertarianism?

Lex Fridman (1:21:46.740)

So this particular use of violence,

Lex Fridman (1:21:50.900)

this last resort, this policing force

Saifedean Ammous (1:21:53.680)

that libertarianism is okay with

Lex Fridman (1:21:56.220)

and anarchism is not okay with.

Lex Fridman (1:21:58.740)

So basically nation states that keep you safe

Lex Fridman (1:22:02.500)

from the worst of war.

Saifedean Ammous (1:22:05.320)

Yeah, I think to be more accurate,

Lex Fridman (1:22:06.540)

the distinction between anarchism and minarchism,

Saifedean Ammous (1:22:09.020)

I think libertarianism is kind of a vague term

Lex Fridman (1:22:11.660)

that can encompass both.

Saifedean Ammous (1:22:13.300)

Means a lot of things, okay.

Lex Fridman (1:22:14.420)

Yeah.

Saifedean Ammous (1:22:15.500)

On the Karl Marx to Michael Malice spectrum,

Lex Fridman (1:22:19.880)

where do you?

Saifedean Ammous (1:22:20.720)

No, no, I'm full anarchist.

Lex Fridman (1:22:22.140)

You're a full anarchist.

Saifedean Ammous (1:22:22.980)

Yeah, full anarchist.

Lex Fridman (1:22:23.800)

I mean, I don't find any justification

Saifedean Ammous (1:22:26.320)

for the use of force and I think recently perhaps,

Lex Fridman (1:22:31.460)

maybe I'm getting old, maybe I'm getting senile,

Lex Fridman (1:22:33.780)

maybe I'm getting wise, who knows?

Lex Fridman (1:22:36.060)

But I'm beginning to become more sympathetic to monarchy.

Lex Fridman (1:22:39.660)

So I'm an anarchist, monarchy.

Lex Fridman (1:22:43.180)

Which, what is that?

Saifedean Ammous (1:22:44.440)

Kings, royal. Oh, monarchy.

Lex Fridman (1:22:46.020)

Yeah.

Lex Fridman (1:22:46.860)

And I think.

Lex Fridman (1:22:49.020)

Wait, are you joking or not?

Saifedean Ammous (1:22:51.860)

No, I'm not joking.

Lex Fridman (1:22:53.140)

And I think, I mean, I think morally and intellectually,

Saifedean Ammous (1:22:58.420)

I'm an anarchist, but the reality is we find ourselves

Lex Fridman (1:23:02.380)

in a world in which a lot of people are not.

Lex Fridman (1:23:05.560)

And the question is, what is the thing

Lex Fridman (1:23:09.380)

that is going to provide you with more freedom?

Lex Fridman (1:23:12.760)

And I think, I'm recently coming around to the idea

Lex Fridman (1:23:16.740)

that monarchy might be the best way

Saifedean Ammous (1:23:19.420)

to provide people with the largest amount of freedom

Lex Fridman (1:23:22.080)

because to have a free society, you need a majority,

Saifedean Ammous (1:23:25.960)

perhaps, or a plurality of people

Lex Fridman (1:23:28.060)

to have a very strong understanding of libertarian ideas,

Saifedean Ammous (1:23:31.880)

to have a low time preference,

Lex Fridman (1:23:33.100)

to have a preference for the future.

Lex Fridman (1:23:35.720)

So you need a majority of the population

Lex Fridman (1:23:37.480)

to not decide to go and do something insane

Saifedean Ammous (1:23:41.300)

in order to continue to have a free society.

Lex Fridman (1:23:44.400)

You know, when a respiratory illness comes along,

Saifedean Ammous (1:23:48.580)

unfortunately, you know, the last couple of years

Lex Fridman (1:23:51.140)

showed that we, the vast majority of people

Saifedean Ammous (1:23:53.620)

are gonna freak out and lose their mind

Lex Fridman (1:23:57.340)

and support whatever their stupid TV tells them to support.

Saifedean Ammous (1:24:00.500)

And, you know, there's always a current thing

Lex Fridman (1:24:03.580)

and the media is always telling you

Saifedean Ammous (1:24:05.840)

that we need this current thing as an excuse

Lex Fridman (1:24:08.320)

for more and more government power

Lex Fridman (1:24:10.260)

and more and more government coercion.

Lex Fridman (1:24:11.660)

What's the role of kings and queens

Lex Fridman (1:24:13.100)

in that case of a monarchy?

Lex Fridman (1:24:15.980)

What's the role of a leader?

Saifedean Ammous (1:24:17.700)

I think there might be a case that,

Lex Fridman (1:24:21.700)

so as I was saying, you need a majority of the population

Saifedean Ammous (1:24:24.340)

to get together and decide, nope, whatever is the case,

Lex Fridman (1:24:28.300)

you know, the answer is voluntary.

Saifedean Ammous (1:24:31.660)

No matter how bad the disease is,

Lex Fridman (1:24:34.100)

it doesn't justify forcing people to stay home.

Saifedean Ammous (1:24:36.320)

You wanna stay home, stay home.

Lex Fridman (1:24:37.520)

You wanna wear a mask, take a vaccine,

Saifedean Ammous (1:24:39.640)

do whatever you want, but you can't force others to do that.

Lex Fridman (1:24:42.460)

So you need a majority of the people

Saifedean Ammous (1:24:43.940)

to strongly believe in this principle

Lex Fridman (1:24:46.420)

in order to get it in a democracy.

Saifedean Ammous (1:24:50.380)

Whereas in a monarchy,

Lex Fridman (1:24:52.480)

maybe you just need the king to get it.

Lex Fridman (1:24:54.460)

And I think the reason kings are more likely to get it

Lex Fridman (1:24:57.400)

is that kings have a low time preference

Saifedean Ammous (1:25:00.000)

where they think about things for many generations.

Lex Fridman (1:25:03.540)

Whereas in a democratic system,

Saifedean Ammous (1:25:05.420)

your president is likely only going to be there

Lex Fridman (1:25:08.220)

for four years or eight years or 10 years

Saifedean Ammous (1:25:10.620)

or five years or whatever it is.

Lex Fridman (1:25:12.620)

So the only way that, you know,

Saifedean Ammous (1:25:14.540)

all humans are self interested.

Lex Fridman (1:25:15.900)

So the only way that your president in a democracy

Saifedean Ammous (1:25:17.940)

can provide for themselves is to maximize

Lex Fridman (1:25:20.980)

the amount of exploitation that they can do

Saifedean Ammous (1:25:23.300)

of the population during their brief stint.

Lex Fridman (1:25:26.380)

And then when he's out, you get a new one,

Lex Fridman (1:25:28.660)

and then that one wants to start all over again.

Lex Fridman (1:25:30.540)

So every four years, you get a new robber.

Saifedean Ammous (1:25:33.060)

With monarchy, you sign up for a multi generation

Lex Fridman (1:25:37.260)

subscription to the same family.

Lex Fridman (1:25:41.380)

And when they have the security of knowing that,

Lex Fridman (1:25:44.140)

you know, his great grandson is going to be

Saifedean Ammous (1:25:47.940)

taking money from your great grandson,

Lex Fridman (1:25:50.860)

suddenly his interest in yours align

Saifedean Ammous (1:25:54.340)

because they both want your great grandson

Lex Fridman (1:25:56.420)

to be prosperous and have enough money

Saifedean Ammous (1:25:58.500)

for his great grandson to take.

Lex Fridman (1:26:00.260)

It's a monarchy with a tiny government.

Lex Fridman (1:26:02.320)

So anything required to really provide for a free market.

Lex Fridman (1:26:08.980)

So for maximizing individual freedom

Lex Fridman (1:26:11.020)

and the freedom of the economy.

Lex Fridman (1:26:12.460)

Yeah, and if I were a king, which is highly unlikely

Saifedean Ammous (1:26:15.460)

to ever happen, but I think, you know,

Lex Fridman (1:26:17.060)

if you look historically, the dynasties

Saifedean Ammous (1:26:20.140)

that have succeeded at lasting for a long time,

Lex Fridman (1:26:23.180)

the key thing that they managed to do

Saifedean Ammous (1:26:24.940)

is to basically be libertarian.

Lex Fridman (1:26:26.900)

The key to being a good king is to just leave people alone.

Saifedean Ammous (1:26:29.780)

Let them do whatever they want.

Lex Fridman (1:26:31.180)

Don't rob them too much or rob them as little as possible,

Saifedean Ammous (1:26:34.260)

or maybe even don't rob them.

Lex Fridman (1:26:36.140)

And, you know, as a king, use your power only

Saifedean Ammous (1:26:40.580)

to punish people who aggress against others.

Lex Fridman (1:26:43.220)

Don't use your power to enrich yourself

Lex Fridman (1:26:44.900)

and enrich your friends.

Lex Fridman (1:26:46.340)

And that's really, like, if you look at smart kings,

Saifedean Ammous (1:26:49.760)

this is what they do.

Lex Fridman (1:26:50.600)

This is what they teach their children.

Lex Fridman (1:26:51.740)

And the cycle of kingdoms is that, you know,

Lex Fridman (1:26:54.180)

the first king understands this,

Saifedean Ammous (1:26:56.020)

builds the empire and the first couple of generations,

Lex Fridman (1:26:59.780)

they get this and the society is free, the economy is free.

Lex Fridman (1:27:04.700)

And because of that, you know, there's peace and prosperity,

Lex Fridman (1:27:09.100)

but then over time, the next generation of kids

Saifedean Ammous (1:27:12.500)

become a lot more high time preference.

Lex Fridman (1:27:14.780)

They haven't worked hard.

Saifedean Ammous (1:27:17.300)

They don't understand the meaning of hard work.

Lex Fridman (1:27:20.020)

So they become more likely to engage

Saifedean Ammous (1:27:23.780)

in destructive behavior.

Lex Fridman (1:27:24.940)

So raise taxes, pass laws that require people to do things,

Saifedean Ammous (1:27:31.180)

even when they're not hurting anybody.

Lex Fridman (1:27:33.860)

And that ends up basically eventually destroying the kingdom.

Saifedean Ammous (1:27:37.940)

Of course, power corrupts.

Lex Fridman (1:27:40.300)

So you have to kind of create human institutions

Saifedean Ammous (1:27:42.780)

that prevent you as a king or any kind of leader

Lex Fridman (1:27:45.940)

from expand, so going back on the original promises

Lex Fridman (1:27:52.180)

and the purposes of your position.

Lex Fridman (1:27:54.620)

And then distracting, using tools of technology

Lex Fridman (1:27:58.020)

and communication to distract the populace

Lex Fridman (1:28:00.060)

while you expand the power.

Saifedean Ammous (1:28:01.300)

Exactly.

Lex Fridman (1:28:02.140)

All right, you wrote the fiat standard.

Saifedean Ammous (1:28:05.780)

I think we danced around it quite a bit,

Lex Fridman (1:28:08.580)

but I don't know if we actually defined it.

Lex Fridman (1:28:10.180)

So what is fiat money?

Lex Fridman (1:28:11.860)

What is the history of how it came to be?

Saifedean Ammous (1:28:14.700)

The fascinating history of the birth

Lex Fridman (1:28:16.140)

of the fiat monetary system is something

Saifedean Ammous (1:28:18.460)

that really only got uncovered in 2017.

Lex Fridman (1:28:21.740)

This is extremely, extremely interesting.

Saifedean Ammous (1:28:25.100)

In 1914, Britain joined World War I.

Lex Fridman (1:28:29.700)

And if you remember your history books,

Saifedean Ammous (1:28:31.740)

it's famous that this was called August Bank Holiday.

Lex Fridman (1:28:35.380)

It was just going to be a few weeks

Saifedean Ammous (1:28:36.820)

where the British troops were gonna go

Lex Fridman (1:28:38.340)

and kick European ass and come back triumphant.

Lex Fridman (1:28:41.780)

And most European countries believed that.

Lex Fridman (1:28:44.100)

But then the war kept on dragging on.

Lex Fridman (1:28:46.420)

And of course, to finance the war,

Lex Fridman (1:28:48.380)

the government, this is what they used to do

Saifedean Ammous (1:28:49.980)

under the gold standard,

Lex Fridman (1:28:50.820)

governments would issue bonds.

Lex Fridman (1:28:53.020)

So you'd issue the bonds, people would buy the bonds,

Lex Fridman (1:28:55.660)

the money would be used to finance the military,

Lex Fridman (1:28:57.980)

and then the government would pay off the bond

Lex Fridman (1:29:00.740)

over the next five or 10 or 20 years.

Lex Fridman (1:29:03.060)

So for World War I, the British government,

Lex Fridman (1:29:06.260)

the British treasury issued bonds for financing the war.

Lex Fridman (1:29:10.220)

And this only came to light in 2017.

Lex Fridman (1:29:13.460)

Only a third of the bonds were actually subscribed.

Lex Fridman (1:29:15.860)

So people, British people,

Lex Fridman (1:29:17.260)

and this is perhaps the greatest thing

Saifedean Ammous (1:29:19.180)

that they've ever done,

Lex Fridman (1:29:20.340)

they decided fighting a war in Europe

Saifedean Ammous (1:29:22.220)

is just not my ideal way of investing my capital.

Lex Fridman (1:29:25.300)

It's a stupid thing.

Lex Fridman (1:29:26.140)

Why should I go and fight?

Lex Fridman (1:29:27.300)

Because the Austrians and the Germans and the Serbians

Saifedean Ammous (1:29:30.180)

are at each other's throats.

Lex Fridman (1:29:34.220)

I'd rather invest in something else.

Lex Fridman (1:29:36.180)

So they only bought a third of the bond issue.

Lex Fridman (1:29:38.940)

And then the astonishing thing that happened,

Saifedean Ammous (1:29:42.140)

which really set the tone for the next century

Lex Fridman (1:29:44.180)

of war, murder, Keynesianism, and theft and inflation,

Saifedean Ammous (1:29:49.140)

was that the Bank of England went and got

Lex Fridman (1:29:52.740)

two of the high ranking officials in the Bank of England

Saifedean Ammous (1:29:56.700)

to buy the other remaining outstanding two thirds

Lex Fridman (1:29:59.460)

of the bonds under their own name

Saifedean Ammous (1:30:01.580)

with a line of credit from the Bank of England.

Lex Fridman (1:30:03.220)

So it wasn't their own money.

Lex Fridman (1:30:04.740)

But they took money essentially from the Bank of England,

Lex Fridman (1:30:06.700)

bought two thirds of the bonds that financed the war.

Lex Fridman (1:30:10.420)

And that was how England was able

Lex Fridman (1:30:12.700)

to keep going into the war.

Lex Fridman (1:30:14.900)

So that's essentially what they did

Lex Fridman (1:30:17.140)

is what we today know as quantitative easing.

Saifedean Ammous (1:30:20.180)

Back then, they just got, they printed money

Lex Fridman (1:30:23.740)

from the Bank of England, or credit, printed credit,

Saifedean Ammous (1:30:26.220)

gave it to those two employees.

Lex Fridman (1:30:29.020)

They bought the bonds.

Saifedean Ammous (1:30:30.020)

The government could fight the war.

Lex Fridman (1:30:32.420)

Sounds like it's a nice idea.

Lex Fridman (1:30:34.540)

And Keynes, of course, being a huckster himself,

Lex Fridman (1:30:38.180)

he himself said this was, he wrote a letter

Saifedean Ammous (1:30:42.100)

to the Bank of England that was uncovered recently.

Lex Fridman (1:30:44.020)

And he said, I congratulate you

Saifedean Ammous (1:30:45.900)

on this masterly manipulation.

Lex Fridman (1:30:48.020)

I quote it in the book.

Saifedean Ammous (1:30:49.420)

Masterly manipulation is what he called it.

Lex Fridman (1:30:51.700)

That they basically managed to buy the bonds

Saifedean Ammous (1:30:54.740)

using the money of the government.

Lex Fridman (1:30:56.420)

And of course, he never had an idea of how economics works

Saifedean Ammous (1:31:00.020)

because he never could ask the question of,

Lex Fridman (1:31:01.620)

okay, and then what?

Saifedean Ammous (1:31:02.780)

All right, so we just printed money

Lex Fridman (1:31:04.380)

to buy two thirds of these government bonds.

Lex Fridman (1:31:07.340)

What's gonna happen next?

Lex Fridman (1:31:09.060)

What could go wrong?

Saifedean Ammous (1:31:10.420)

Not a question Keynesians ask themselves

Lex Fridman (1:31:12.860)

because their jobs depend on not thinking

Saifedean Ammous (1:31:16.740)

about what's going to go wrong.

Lex Fridman (1:31:18.300)

So a quick question about war.

Lex Fridman (1:31:20.660)

And as somebody who's been nonstop reading

Lex Fridman (1:31:23.660)

and thinking about the wars of the 20th century

Lex Fridman (1:31:26.700)

and thinking that most of those wars

Lex Fridman (1:31:31.660)

were unjust, unethical, and destructive,

Lex Fridman (1:31:37.060)

how else do you find, how would you finance a war?

Lex Fridman (1:31:40.180)

So.

Saifedean Ammous (1:31:41.020)

Ideally you don't.

Lex Fridman (1:31:41.940)

No, but I mean, of course there are,

Saifedean Ammous (1:31:43.060)

sometimes you wanna fight for self defense.

Lex Fridman (1:31:45.140)

Yeah, you finance it, taxation, or bonds.

Saifedean Ammous (1:31:48.540)

See, the people really need to want a war

Lex Fridman (1:31:51.140)

not just with their voices, their thoughts,

Saifedean Ammous (1:31:54.020)

their tweets, or their actual financial investment.

Lex Fridman (1:31:56.740)

Put up the bullets and the cost of the bullets

Lex Fridman (1:31:59.260)

and the bodies.

Lex Fridman (1:32:00.420)

So their life and their financial well being.

Saifedean Ammous (1:32:05.500)

That's how it was under the gold standard mostly

Lex Fridman (1:32:07.420)

because under the gold standard,

Saifedean Ammous (1:32:09.220)

the government couldn't print gold.

Lex Fridman (1:32:10.660)

And so they had a budget and they had a certain amount

Saifedean Ammous (1:32:12.780)

of gold and that wasn't just, you know,

Lex Fridman (1:32:15.020)

that they couldn't infinitely increase it.

Lex Fridman (1:32:16.740)

So they couldn't tax their population at will.

Lex Fridman (1:32:20.180)

And it's very difficult to take money from people.

Saifedean Ammous (1:32:22.860)

You know, you go knock on doors and search everybody's home,

Lex Fridman (1:32:25.620)

see where they're hiding their gold.

Saifedean Ammous (1:32:27.260)

It's very complicated.

Lex Fridman (1:32:28.620)

On the other hand, when you gave them paper money,

Saifedean Ammous (1:32:30.220)

which is what the case was in 1914,

Lex Fridman (1:32:33.220)

you could take their wealth just by printing the money.

Lex Fridman (1:32:36.220)

And that's what changed everything when it comes to war.

Lex Fridman (1:32:38.780)

That's why the 20th century was the century of total war.

Saifedean Ammous (1:32:41.980)

Because under the gold standard,

Lex Fridman (1:32:43.220)

governments fought until they ran out of their own gold.

Saifedean Ammous (1:32:46.420)

Under the fiat standard, with paper money,

Lex Fridman (1:32:48.700)

with credit money, governments fought

Saifedean Ammous (1:32:50.900)

until they ran out of liquid wealth

Lex Fridman (1:32:53.480)

in the hands of all of their citizens.

Lex Fridman (1:32:55.840)

So let's find flaws in this thinking if there's any.

Lex Fridman (1:33:01.460)

Okay, there's a lot of pacifist type of thinking

Saifedean Ammous (1:33:06.460)

in World War II as Hitler was expanding and expanding.

Lex Fridman (1:33:10.020)

Hitler framed himself as a victim of the past, of history.

Saifedean Ammous (1:33:14.660)

He never attacked anybody.

Lex Fridman (1:33:16.940)

Everyone's always threatening to attack him.

Saifedean Ammous (1:33:18.940)

That's kind of the narrative.

Lex Fridman (1:33:20.140)

And he keeps expanding.

Saifedean Ammous (1:33:21.580)

He keeps sweet talking with his charisma,

Lex Fridman (1:33:23.660)

all the countries around him,

Saifedean Ammous (1:33:25.940)

into sort of embracing pacifism.

Lex Fridman (1:33:28.820)

Stay out of the war until the war is on your doorstep.

Lex Fridman (1:33:31.820)

So France, just very suboptimal military strategy

Lex Fridman (1:33:37.380)

from the perspective of many European nations

Saifedean Ammous (1:33:39.940)

in response to Hitler.

Lex Fridman (1:33:41.860)

They were basically hoodwinked by his words.

Lex Fridman (1:33:45.620)

So then there's Churchill, Winston Churchill,

Lex Fridman (1:33:50.640)

who stepped up and says, perhaps irrationally,

Saifedean Ammous (1:33:55.300)

from some kind of economics perspective,

Lex Fridman (1:33:57.860)

saying we're not going to back down.

Saifedean Ammous (1:33:59.900)

We're going to fight Germany.

Lex Fridman (1:34:01.580)

And perhaps that step alone is one of the biggest reasons

Saifedean Ammous (1:34:05.220)

that Hitler failed in his expansion.

Lex Fridman (1:34:11.380)

That decision to fight back,

Lex Fridman (1:34:15.840)

how, what's the right way to do that?

Lex Fridman (1:34:18.780)

If you're Winston Churchill,

Lex Fridman (1:34:21.260)

what's the right way to do that?

Lex Fridman (1:34:23.320)

If you're, to fight back evil when violence is required.

Saifedean Ammous (1:34:28.320)

Evil when violence is required.

Lex Fridman (1:34:30.440)

Now, you could argue that no war is just,

Lex Fridman (1:34:35.440)

but there is such a thing as a just war index.

Lex Fridman (1:34:38.840)

And a lot of people argue if there is a just war

Saifedean Ammous (1:34:41.920)

in the 20th century, it's World War II.

Lex Fridman (1:34:46.000)

So how would you fund, if you were Britain, the war?

Saifedean Ammous (1:34:49.800)

Would you require Winston Churchill

Lex Fridman (1:34:52.200)

to convince the populace?

Saifedean Ammous (1:34:54.800)

Don't fight until they're fully convinced

Lex Fridman (1:34:57.480)

that this is the right thing to do.

Saifedean Ammous (1:34:59.120)

You can't just make a decision for them.

Lex Fridman (1:35:01.240)

You have to convince them fully

Lex Fridman (1:35:02.960)

so that they give their life

Lex Fridman (1:35:04.400)

and they give their money to support the war.

Lex Fridman (1:35:07.760)

Is that the right way to do it?

Lex Fridman (1:35:08.720)

I think so.

Lex Fridman (1:35:09.560)

And I think when you have a true threat

Lex Fridman (1:35:13.280)

and a true evil and a true force

Saifedean Ammous (1:35:14.760)

that people really do think is genuine,

Lex Fridman (1:35:18.300)

you don't need to convince them.

Saifedean Ammous (1:35:19.360)

I mean, when it's real, people will want to fight

Lex Fridman (1:35:22.760)

and people will want to pay to fight.

Lex Fridman (1:35:24.440)

And I mean, I think, though, on this particular example,

Lex Fridman (1:35:28.880)

I think the best way to fight Hitler

Saifedean Ammous (1:35:30.680)

is to have not fought World War I

Lex Fridman (1:35:33.400)

and not take out the Kaiser of Germany.

Saifedean Ammous (1:35:36.080)

If Britain and the US had not gotten involved

Lex Fridman (1:35:40.120)

in World War I, which really is the senseless war

Lex Fridman (1:35:44.560)

about nothing, what was in it?

Lex Fridman (1:35:46.600)

And what was the goal from anybody fighting that war?

Saifedean Ammous (1:35:49.600)

If you look at it, after World War I,

Lex Fridman (1:35:52.360)

there were very minor adjustments

Saifedean Ammous (1:35:54.800)

in the borders of the countries that were participating.

Lex Fridman (1:35:57.640)

So Germany lost some land, Austria lost some land,

Lex Fridman (1:36:00.840)

but really it wasn't all that massive.

Lex Fridman (1:36:04.320)

And it wasn't like Britain wanted to take over Germany

Lex Fridman (1:36:09.320)

and move their people into Germany and kick the Germans out.

Lex Fridman (1:36:12.040)

So there was no real value from that war.

Lex Fridman (1:36:17.160)

And that's why the British people

Lex Fridman (1:36:18.100)

didn't want to take part in it.

Lex Fridman (1:36:19.960)

And that's why if they hadn't done

Lex Fridman (1:36:22.760)

this enormously criminal manipulation

Saifedean Ammous (1:36:25.560)

of printing money to buy the bonds,

Lex Fridman (1:36:28.520)

Britain wouldn't have gotten into the war.

Saifedean Ammous (1:36:30.720)

Germany would still be a kingdom and Hitler wouldn't rise.

Lex Fridman (1:36:34.520)

And yeah, there'd be small changes

Saifedean Ammous (1:36:37.240)

in the borders of various European countries.

Lex Fridman (1:36:41.440)

I struggled to see how it could have been worse.

Saifedean Ammous (1:36:44.800)

I mean, I struggled to see who benefited

Lex Fridman (1:36:47.900)

from four years of carnage in Europe.

Lex Fridman (1:36:50.800)

And then this came at the height of civilization.

Lex Fridman (1:36:53.620)

Before that, the people of Europe

Saifedean Ammous (1:36:55.640)

had the golden era under the gold standard.

Lex Fridman (1:37:00.160)

They were trading with one another, they traveled

Lex Fridman (1:37:02.000)

and technology was advancing.

Lex Fridman (1:37:04.400)

And they did not expect this war to last this long.

Lex Fridman (1:37:08.760)

And my favorite story from World War I

Lex Fridman (1:37:11.360)

is the Christmas truce football game,

Saifedean Ammous (1:37:14.840)

which I mentioned in my book.

Lex Fridman (1:37:16.480)

British and German soldiers at the height of the conflict,

Saifedean Ammous (1:37:19.640)

they stopped on Christmas day

Lex Fridman (1:37:20.760)

and they played a football game against each other.

Saifedean Ammous (1:37:23.120)

I mean, this is not a real war,

Lex Fridman (1:37:25.100)

where it's a war for survival.

Saifedean Ammous (1:37:27.680)

Britain didn't want to end Germany.

Lex Fridman (1:37:30.340)

Germany didn't want to end Britain.

Saifedean Ammous (1:37:31.840)

It was just kings who were emboldened

Lex Fridman (1:37:35.920)

by the fact that they had a printing press

Saifedean Ammous (1:37:38.440)

playing with the lives of the people.

Lex Fridman (1:37:42.720)

Take that away, take away the printing press,

Saifedean Ammous (1:37:44.640)

take away their ability to print money.

Lex Fridman (1:37:46.360)

I think we'd have had a much, much, much better

Saifedean Ammous (1:37:49.480)

20th century.

Lex Fridman (1:37:50.960)

Yeah, the counterfactual history.

Saifedean Ammous (1:37:52.520)

Neil Ferguson is a historian

Lex Fridman (1:37:54.080)

who gets in quite a bit of trouble.

Saifedean Ammous (1:37:56.960)

Basically, well, he's a Brit,

Lex Fridman (1:38:00.220)

suggesting that if Britain stayed out of World War I,

Saifedean Ammous (1:38:03.440)

there would be no Hitler, there would be no World War II.

Lex Fridman (1:38:05.980)

Yep, I agree entirely.

Lex Fridman (1:38:09.140)

But fiat money.

Lex Fridman (1:38:10.620)

Yeah, so how fiat money was born.

Saifedean Ammous (1:38:12.280)

Yeah, let's get back to that.

Lex Fridman (1:38:13.560)

So they financed the war with that money.

Lex Fridman (1:38:16.160)

So what could go wrong?

Lex Fridman (1:38:17.960)

That's where we left off.

Saifedean Ammous (1:38:19.220)

Well, what could go wrong when you've just printed

Lex Fridman (1:38:21.240)

an enormous amount of credit and used it to buy bonds?

Lex Fridman (1:38:26.760)

What goes wrong is that the value of the currency

Lex Fridman (1:38:28.560)

is going to go down.

Saifedean Ammous (1:38:29.600)

Or in other words, prices of things are gonna go up.

Lex Fridman (1:38:32.880)

So during the war, prices keep going up.

Lex Fridman (1:38:35.240)

And this is, of course,

Lex Fridman (1:38:38.040)

this is gonna sound very familiar

Saifedean Ammous (1:38:39.240)

to victims of the 20th century.

Lex Fridman (1:38:41.560)

A government tells you it's because of the war,

Saifedean Ammous (1:38:43.400)

it's not our fault, it's because of the Germans,

Lex Fridman (1:38:45.240)

it's because of the foreigners, it's because of Putin,

Saifedean Ammous (1:38:47.120)

it's because of this, it's because of that.

Lex Fridman (1:38:49.120)

This has always been the case.

Saifedean Ammous (1:38:50.280)

There's always, war is a very good cover for inflation,

Lex Fridman (1:38:55.080)

which is caused by monetary phenomena.

Lex Fridman (1:38:57.880)

So then the war ends.

Lex Fridman (1:38:59.720)

And inflation, prices have more than doubled

Saifedean Ammous (1:39:02.640)

over the past four years,

Lex Fridman (1:39:04.760)

over the four years of World War I,

Saifedean Ammous (1:39:07.640)

prices have more than doubled.

Lex Fridman (1:39:09.420)

And then the British economy is in bad trouble,

Saifedean Ammous (1:39:12.800)

obviously, lost a lot of the labor force for four years

Lex Fridman (1:39:16.360)

that was out there fighting.

Saifedean Ammous (1:39:18.280)

Now those workers come back, you've got prices are up.

Lex Fridman (1:39:23.200)

And so people are demanding

Saifedean Ammous (1:39:25.960)

that the government control prices

Lex Fridman (1:39:27.280)

and the government is trying to fix the problem

Saifedean Ammous (1:39:29.440)

of inflation by doing price controls,

Lex Fridman (1:39:31.000)

which is what they always do,

Saifedean Ammous (1:39:32.840)

which is catastrophic because it makes things worse.

Lex Fridman (1:39:36.040)

When you implement price controls,

Saifedean Ammous (1:39:38.560)

you are, when you make, you say, all right,

Lex Fridman (1:39:40.840)

well, bread can't be sold for more than X price.

Saifedean Ammous (1:39:45.400)

Well, that's just preventing bread producers

Lex Fridman (1:39:48.200)

from producing a lot of bread.

Lex Fridman (1:39:49.920)

And that's just making the problem worse.

Lex Fridman (1:39:51.560)

If you let the price rise, the extra price,

Saifedean Ammous (1:39:55.160)

first of all, it makes people economize,

Lex Fridman (1:39:56.840)

so people will only buy what they need.

Lex Fridman (1:39:58.760)

And it provides the money for the bread producers

Lex Fridman (1:40:00.800)

to acquire the capital and the resources

Saifedean Ammous (1:40:03.240)

they need to produce more bread,

Lex Fridman (1:40:04.840)

which then brings the price of bread down.

Lex Fridman (1:40:06.480)

But price controls destroy that.

Lex Fridman (1:40:08.520)

Then they also implement wage controls.

Lex Fridman (1:40:10.640)

So you wanna also make sure that people have high wages.

Lex Fridman (1:40:15.160)

So you raise people's wages artificially,

Saifedean Ammous (1:40:17.080)

you lower prices artificially,

Lex Fridman (1:40:18.600)

and you cause an economic problem.

Lex Fridman (1:40:21.240)

And this is basically, I use this historical example

Lex Fridman (1:40:24.960)

because it's the birth of fiat,

Saifedean Ammous (1:40:26.680)

because the Bank of England was the most important

Lex Fridman (1:40:28.560)

monetary system in the world at that time.

Lex Fridman (1:40:31.640)

And because it's the prototype

Lex Fridman (1:40:33.560)

that basically the entire planet copied

Saifedean Ammous (1:40:35.120)

over the last 100 years.

Lex Fridman (1:40:36.200)

We've had this same thing happen.

Saifedean Ammous (1:40:38.120)

The government prints money because of a stupid reason,

Lex Fridman (1:40:40.280)

because somebody in power decided

Saifedean Ammous (1:40:42.240)

this was worth destroying everybody's livelihood

Lex Fridman (1:40:44.800)

and savings for.

Lex Fridman (1:40:46.160)

And then the consequences come in

Lex Fridman (1:40:47.600)

and then they start covering up with price controls,

Saifedean Ammous (1:40:49.800)

wage controls, and then that makes things worse.

Lex Fridman (1:40:52.760)

And then they, and of course, throughout all of that,

Saifedean Ammous (1:40:57.480)

they're promising that we're going to go,

Lex Fridman (1:40:58.840)

oh, and also the other thing that they did,

Saifedean Ammous (1:41:01.240)

which I mentioned in the chapter is,

Lex Fridman (1:41:03.080)

they stopped people from using physical gold

Lex Fridman (1:41:05.320)

and they confiscated the, well, they didn't confiscate it,

Lex Fridman (1:41:07.480)

but they took the physical gold and they gave people paper.

Lex Fridman (1:41:10.040)

So I call it the fiat white paper.

Lex Fridman (1:41:12.240)

You know, in Bitcoin, we have the white paper.

Saifedean Ammous (1:41:14.960)

The fiat white paper was that the Bank of England

Lex Fridman (1:41:17.360)

announced to all of its banks and post offices.

Lex Fridman (1:41:20.040)

And from now on, you should not make payment in gold

Lex Fridman (1:41:23.200)

and you should take payment in gold

Lex Fridman (1:41:24.920)

and you should encourage all your customers

Lex Fridman (1:41:26.320)

to turn in all of their gold and give them paper instead.

Lex Fridman (1:41:28.640)

Is there an actual document?

Lex Fridman (1:41:30.040)

Oh, yeah, yeah, yeah.

Saifedean Ammous (1:41:30.880)

Nice.

Lex Fridman (1:41:31.720)

Yeah, it was, this is all new stuff.

Saifedean Ammous (1:41:33.400)

Obviously, nobody really likes to talk about this stuff

Lex Fridman (1:41:35.360)

because, you know, they're fiat economists,

Lex Fridman (1:41:36.880)

so they don't wanna talk about the original sin, but.

Lex Fridman (1:41:41.160)

Well, you should like republish it

Saifedean Ammous (1:41:42.880)

as the fiat white paper or something like that.

Lex Fridman (1:41:45.160)

There's a fascinating book by a guy called John Osborne.

Lex Fridman (1:41:49.680)

So in the 1920s, I think his name was Montagu.

Lex Fridman (1:41:53.120)

He was the chief of the Bank of England.

Saifedean Ammous (1:41:54.800)

He commissioned one of his secretaries, John Osborne,

Lex Fridman (1:41:58.600)

to study what the bank did during World War I.

Lex Fridman (1:42:02.520)

And it was a study that was kept under wraps,

Lex Fridman (1:42:05.200)

a confidential, in the Bank of England,

Saifedean Ammous (1:42:07.720)

only released in 2017, almost a century later.

Lex Fridman (1:42:12.160)

And.

Lex Fridman (1:42:13.000)

What was special about 2017, by the way, it's a year.

Lex Fridman (1:42:15.800)

It's just it was a year in which

Saifedean Ammous (1:42:17.920)

some of this information was released.

Lex Fridman (1:42:19.840)

Yeah, a bunch of people got into parts of the basements

Saifedean Ammous (1:42:22.320)

of the Bank of England and found this and published it

Lex Fridman (1:42:24.400)

and now you can download it as a PDF

Lex Fridman (1:42:26.160)

and find all of the amazing details.

Lex Fridman (1:42:29.520)

So they confiscated the gold

Lex Fridman (1:42:31.480)

and they forced people to use the paper

Lex Fridman (1:42:32.960)

and they promised people that as soon as the war

Saifedean Ammous (1:42:34.560)

was gonna be over, this is temporary,

Lex Fridman (1:42:36.360)

we're gonna be back to using gold.

Lex Fridman (1:42:38.240)

And of course, you know, if you told people in Britain,

Lex Fridman (1:42:42.000)

this is the real scam about fiat.

Saifedean Ammous (1:42:43.920)

If you told people in Britain in 1914,

Lex Fridman (1:42:47.040)

hey, we're gonna go off the gold standard

Saifedean Ammous (1:42:49.040)

because it's better.

Lex Fridman (1:42:50.320)

I mean, there might've been lynchings

Saifedean Ammous (1:42:53.360)

of government officials because the British pound

Lex Fridman (1:42:56.720)

at that point, it had been the global currency

Saifedean Ammous (1:43:00.560)

of the whole world.

Lex Fridman (1:43:01.600)

And the fact that they'd managed,

Saifedean Ammous (1:43:04.800)

the Bank of England had kept the British pound

Lex Fridman (1:43:07.120)

at a fixed rate next to gold for,

Saifedean Ammous (1:43:09.920)

since Newton, you know, the exchange rate,

Lex Fridman (1:43:12.120)

the value of the British pound was set

Saifedean Ammous (1:43:14.560)

by Isaac Newton himself.

Lex Fridman (1:43:16.440)

He was the warden of the mint

Lex Fridman (1:43:18.600)

and he made the pound a specific amount of gold.

Lex Fridman (1:43:22.160)

And since then, up until World War I,

Saifedean Ammous (1:43:24.760)

it was 4.25 pounds per ounce of gold.

Lex Fridman (1:43:28.600)

I think I might be wrong, but I have it in the book.

Lex Fridman (1:43:31.480)

So he'd set that price.

Lex Fridman (1:43:32.760)

And it was a matter of national pride

Saifedean Ammous (1:43:34.240)

for people in England, you know.

Lex Fridman (1:43:35.960)

The sterling is as good as gold

Saifedean Ammous (1:43:37.600)

because for two centuries it has been stuck to gold.

Lex Fridman (1:43:40.360)

There was the exception of the Napoleonic Wars,

Lex Fridman (1:43:42.440)

but for two centuries, mostly it was stuck to that.

Lex Fridman (1:43:45.240)

And so they went off that and then they couldn't go back

Saifedean Ammous (1:43:49.200)

because if they wanted to go back,

Lex Fridman (1:43:50.320)

they didn't have enough gold.

Saifedean Ammous (1:43:51.320)

They shipped their gold to the US to finance the war.

Lex Fridman (1:43:54.720)

And they had printed a whole bunch of money

Saifedean Ammous (1:43:56.840)

that was out there.

Lex Fridman (1:43:58.080)

So this begins the problem for England.

Lex Fridman (1:44:01.280)

And that begins the end of England

Lex Fridman (1:44:03.120)

as the world's superpower.

Lex Fridman (1:44:05.120)

And the way they tried to fight that

Lex Fridman (1:44:06.560)

was to get more and more countries around the world

Saifedean Ammous (1:44:08.560)

to establish central banks and have,

Lex Fridman (1:44:10.640)

and hold British pounds.

Lex Fridman (1:44:12.200)

So they'd hold, you know, basically dumping their bags

Lex Fridman (1:44:15.640)

like just any other shit coin.

Saifedean Ammous (1:44:17.840)

You just, if you get people to buy your shit coin,

Lex Fridman (1:44:20.040)

you know, that raises the value of your shit coin.

Saifedean Ammous (1:44:21.840)

So.

Lex Fridman (1:44:22.680)

Can you define shit coin?

Saifedean Ammous (1:44:23.920)

Shit coin is, in my definition of a shit coin

Lex Fridman (1:44:27.000)

is that it's any form of money

Saifedean Ammous (1:44:28.720)

where somebody can produce it.

Lex Fridman (1:44:31.360)

So soft money.

Saifedean Ammous (1:44:33.320)

Not necessarily, I guess.

Lex Fridman (1:44:35.080)

I think the difference, so there's easy money,

Lex Fridman (1:44:38.160)

but the shit coin is something that someone can produce

Lex Fridman (1:44:42.120)

at a rate that is, at a cost that is different

Saifedean Ammous (1:44:45.200)

from the market cost.

Lex Fridman (1:44:46.520)

So gold, nobody can make gold except if they dig for it.

Lex Fridman (1:44:49.520)

And the cost of mining gold is generally in the range

Lex Fridman (1:44:52.520)

of the price of gold.

Saifedean Ammous (1:44:54.640)

Seems true for Bitcoin.

Lex Fridman (1:44:56.400)

So gold is not a shit coin.

Saifedean Ammous (1:44:57.800)

Gold is not a shit coin.

Lex Fridman (1:44:59.360)

The copper is.

Saifedean Ammous (1:45:00.640)

Copper, I'm not so sure.

Lex Fridman (1:45:03.000)

I wouldn't call copper a shit coin

Saifedean Ammous (1:45:04.320)

as much as it is easy money.

Lex Fridman (1:45:05.800)

But I think government currencies and other alt coins,

Saifedean Ammous (1:45:09.800)

I think are shit coins because somebody could click a button

Lex Fridman (1:45:13.080)

and make 10 times the supply.

Saifedean Ammous (1:45:14.960)

Would it be fair to say that this began

Lex Fridman (1:45:19.040)

with the will for war in World War I?

Lex Fridman (1:45:23.120)

So the march towards fiat began

Lex Fridman (1:45:30.160)

with a global desire for war in the 20th century.

Lex Fridman (1:45:35.840)

Did war start this or was war a result?

Lex Fridman (1:45:39.680)

It's difficult to say really.

Saifedean Ammous (1:45:40.840)

I think it goes both ways.

Lex Fridman (1:45:42.200)

I think you can't have permanent war without fiat.

Lex Fridman (1:45:48.320)

And I also think there's a case to be made

Lex Fridman (1:45:51.720)

that you can't really have fiat without war.

Lex Fridman (1:45:54.720)

So it's some kind of weird dynamical system

Lex Fridman (1:45:57.480)

with a chicken and egg situation

Lex Fridman (1:45:59.360)

and they build on top of each other

Lex Fridman (1:46:00.800)

and there's a few individuals that figured out

Saifedean Ammous (1:46:03.000)

there's a way to manipulate this to play this kind of game

Lex Fridman (1:46:05.840)

and it escalates and nothing gives you the ability

Saifedean Ammous (1:46:08.840)

to manipulate money quite like war.

Lex Fridman (1:46:12.200)

When you have a war, you can declare an emergency.

Saifedean Ammous (1:46:15.520)

You can call all the people who oppose you traitors.

Lex Fridman (1:46:19.360)

You can get people to support you

Saifedean Ammous (1:46:23.640)

not because what you're doing is good

Lex Fridman (1:46:25.400)

but because you play on their sense of tribalism.

Saifedean Ammous (1:46:28.240)

In your book, you do cost benefit analysis.

Lex Fridman (1:46:31.000)

So you do acknowledge or think about

Saifedean Ammous (1:46:33.240)

the pros of fiat currency.

Lex Fridman (1:46:35.440)

Can you do just that, look at the benefit

Lex Fridman (1:46:41.000)

and look at the cost just broadly at the highest level?

Lex Fridman (1:46:43.880)

So the way that I write the fiat standard

Saifedean Ammous (1:46:45.640)

is that I try and analyze it as an engineering system

Lex Fridman (1:46:49.440)

in the same way that I wrote the Bitcoin standard.

Lex Fridman (1:46:51.480)

So with the Bitcoin standard,

Lex Fridman (1:46:52.320)

I looked at Bitcoin from first principles

Lex Fridman (1:46:54.040)

and tried to explain how it works

Lex Fridman (1:46:56.080)

for a reader that doesn't really have much of a background

Saifedean Ammous (1:46:59.320)

in computer science, networks or economics.

Lex Fridman (1:47:03.760)

And I thought I'll do the same with the fiat.

Saifedean Ammous (1:47:05.520)

Let's just ignore the official stories

Lex Fridman (1:47:07.480)

and look at how this thing actually works.

Lex Fridman (1:47:10.280)

And I think it does have value

Lex Fridman (1:47:14.000)

in the fact that the reason that they were able

Saifedean Ammous (1:47:18.080)

to pull it off is because it was not possible

Lex Fridman (1:47:21.440)

for people who don't want to be part of it

Saifedean Ammous (1:47:25.520)

to use gold independently of governments.

Lex Fridman (1:47:28.000)

This is really the key thing.

Saifedean Ammous (1:47:29.480)

Gold is just very expensive to move around.

Lex Fridman (1:47:31.840)

And the fact that it is expensive to move around

Saifedean Ammous (1:47:36.040)

means that there's inevitably going to emerge institutions

Lex Fridman (1:47:41.040)

where it is centralized in physical location.

Lex Fridman (1:47:44.280)

And then these institutions trade liabilities for the gold.

Lex Fridman (1:47:47.840)

So really the gold standard intrinsically must involve credit

Saifedean Ammous (1:47:55.520)

as becoming part of the monetary system.

Lex Fridman (1:47:58.120)

It has to be the credit and because it gets centralized

Saifedean Ammous (1:48:00.840)

it can easily be captured by the government.

Lex Fridman (1:48:03.080)

So to be fair, the benefits of the fiat system

Saifedean Ammous (1:48:06.920)

is that it saves us on the cost of moving gold around,

Lex Fridman (1:48:09.520)

which is pretty significant.

Saifedean Ammous (1:48:11.240)

Like generally, moving a bar of gold across the Atlantic

Lex Fridman (1:48:15.000)

is gonna cost somewhere between 0.1 to 1%

Saifedean Ammous (1:48:18.160)

of the cost of the gold bar.

Lex Fridman (1:48:19.920)

So you move it 100 times back and forth

Saifedean Ammous (1:48:22.640)

between the Atlantic, you need to pay the whole gold bar,

Lex Fridman (1:48:25.320)

the cost of the whole gold bar to move it 100 times across.

Saifedean Ammous (1:48:28.400)

Well, with fiat money, it's essentially government credit.

Lex Fridman (1:48:31.280)

And so it's just sending a message

Saifedean Ammous (1:48:33.600)

from one central bank to another

Lex Fridman (1:48:36.120)

and you can move it halfway around the world.

Lex Fridman (1:48:38.160)

Is there also something to be said about the cost in time?

Lex Fridman (1:48:41.240)

So you're saving the sort of,

Saifedean Ammous (1:48:42.640)

you're reducing the friction of the communication as well.

Lex Fridman (1:48:45.920)

Exactly.

Saifedean Ammous (1:48:46.760)

Of the transactions as well.

Lex Fridman (1:48:47.880)

Exactly, it's faster.

Lex Fridman (1:48:50.480)

How big is that benefit?

Lex Fridman (1:48:52.000)

Because wouldn't you argue that that potential

Saifedean Ammous (1:48:54.280)

is the thing that enables modern economy,

Lex Fridman (1:48:56.680)

both the speed and the low cost,

Lex Fridman (1:48:58.400)

so increasing the scale and the frequency,

Lex Fridman (1:49:01.240)

the speed of the transactions?

Saifedean Ammous (1:49:03.160)

Yeah, arguably it does help in that regard.

Lex Fridman (1:49:06.680)

However, it isn't as if you couldn't have

Saifedean Ammous (1:49:10.160)

fast transactions built on top of gold.

Lex Fridman (1:49:12.400)

So you could have gold being used for final settlement

Lex Fridman (1:49:15.360)

and you could have banks settling with one another

Lex Fridman (1:49:19.600)

essentially using credit settlement.

Lex Fridman (1:49:21.040)

Can you define settlement just for people

Lex Fridman (1:49:24.120)

who are outside of this world?

Saifedean Ammous (1:49:25.360)

Because we'll mention that word quite a bit probably.

Lex Fridman (1:49:27.360)

Good question.

Lex Fridman (1:49:28.200)

So the way that it works is, let's say right now

Lex Fridman (1:49:29.920)

I'm gonna pay you $10 over PayPal or credit card.

Lex Fridman (1:49:35.080)

So it shows up in your PayPal or credit card

Lex Fridman (1:49:37.040)

within a few seconds that I've sent you the money

Lex Fridman (1:49:39.960)

and then that's yours.

Lex Fridman (1:49:41.200)

But it didn't also happen in those 10 seconds

Saifedean Ammous (1:49:46.600)

that my bank, which could be in another country,

Lex Fridman (1:49:49.840)

sent the money to your bank into your account.

Saifedean Ammous (1:49:54.760)

There's a lot of infrastructure underneath that.

Lex Fridman (1:49:57.160)

So what actually happened is that I have an account

Saifedean Ammous (1:49:59.160)

with my bank and you have an account with your bank.

Lex Fridman (1:50:01.600)

And when the message is communicated from my app to yours,

Saifedean Ammous (1:50:05.560)

my bank crosses out the money

Lex Fridman (1:50:07.560)

and your bank credits you with the money.

Lex Fridman (1:50:10.080)

And then at the end of the day, week or month,

Lex Fridman (1:50:14.400)

banks in the same city will settle with one another,

Saifedean Ammous (1:50:16.560)

banks in the same country will settle with one another

Lex Fridman (1:50:19.520)

and banks from different countries

Saifedean Ammous (1:50:21.720)

will settle with one another.

Lex Fridman (1:50:22.880)

So they won't move the $10 from my account to yours.

Saifedean Ammous (1:50:27.040)

At the end of the day or week or month,

Lex Fridman (1:50:29.600)

they'll tally all of the money that was sent

Saifedean Ammous (1:50:32.200)

from one bank to the other

Lex Fridman (1:50:33.880)

and then just settle the difference.

Lex Fridman (1:50:35.320)

So it turns out at the end of the month,

Lex Fridman (1:50:37.080)

my bank had sent $15 million to your bank

Lex Fridman (1:50:40.440)

and your bank had sent $14 million to my bank.

Lex Fridman (1:50:43.480)

So they give them $1 million and that settles it,

Saifedean Ammous (1:50:46.840)

that finalizes the transaction.

Lex Fridman (1:50:48.920)

So final settlement 3D is like the,

Saifedean Ammous (1:50:51.680)

you can think about it as the infrastructure of the system.

Lex Fridman (1:50:54.640)

And then you can think of these things

Saifedean Ammous (1:50:56.840)

as being the higher layer levels.

Lex Fridman (1:50:59.360)

And you had a wonderful discussion about that

Saifedean Ammous (1:51:01.080)

with Michael Saylor.

Lex Fridman (1:51:02.720)

So the final settlement is like the moment

Saifedean Ammous (1:51:05.960)

when you paper and ideas connect to physical reality.

Lex Fridman (1:51:11.880)

Or to some representation of physical reality.

Saifedean Ammous (1:51:13.760)

Yeah, and under gold,

Lex Fridman (1:51:15.560)

everything was tethered to physical reality

Saifedean Ammous (1:51:17.720)

because there was a market commodity

Lex Fridman (1:51:19.080)

at the bottom of all of this

Lex Fridman (1:51:20.520)

and nobody could print that market commodity.

Lex Fridman (1:51:22.440)

And so at the end of the month,

Saifedean Ammous (1:51:23.960)

if your bank made too many payments,

Lex Fridman (1:51:26.240)

if you made too many payments, there was a reckoning.

Saifedean Ammous (1:51:29.040)

If you were reckless, if you were insolvent,

Lex Fridman (1:51:33.040)

you went out of business.

Lex Fridman (1:51:34.440)

So there was no way to fool that.

Lex Fridman (1:51:37.640)

But then we moved to the fiat century

Lex Fridman (1:51:39.840)

and everything is credit.

Lex Fridman (1:51:41.840)

At the end of the day,

Saifedean Ammous (1:51:42.680)

the final layer is government credit.

Lex Fridman (1:51:45.680)

And so as long as you're friends with the government,

Saifedean Ammous (1:51:48.600)

basically you never go bankrupt.

Lex Fridman (1:51:50.280)

So all kinds of hucksters managed to find their way

Saifedean Ammous (1:51:54.200)

into getting into position where they don't get bankrupt.

Lex Fridman (1:51:58.840)

So in part two of the fiat standard called Fiat Life,

Saifedean Ammous (1:52:03.000)

you describe the effects of fiat money

Lex Fridman (1:52:04.640)

on a bunch of things like life, food, science, education.

Lex Fridman (1:52:10.640)

What is the most pernicious effect of fiat money

Lex Fridman (1:52:14.040)

on our world, on our life?

Lex Fridman (1:52:15.440)

So taking a step outside of the monetary system,

Lex Fridman (1:52:18.160)

actually like how that affects our life from this book?

Saifedean Ammous (1:52:21.800)

I mean, there's a whole bunch of things

Lex Fridman (1:52:23.480)

and I won't be able to go over them

Lex Fridman (1:52:25.440)

and I highly recommend reading the book.

Lex Fridman (1:52:26.840)

But if I were to pick one,

Saifedean Ammous (1:52:28.520)

I would say it's the impact that it has

Lex Fridman (1:52:29.880)

on our time preference, on our valuation of the future.

Lex Fridman (1:52:33.640)

So remember when we started the discussion,

Lex Fridman (1:52:35.680)

I said that the key function of money

Saifedean Ammous (1:52:38.840)

is that it serves as a store of value.

Lex Fridman (1:52:41.400)

And the harder the money is,

Saifedean Ammous (1:52:42.920)

the better it is at providing us

Lex Fridman (1:52:45.240)

with a way for providing for our future.

Lex Fridman (1:52:48.160)

And so the harder the money is,

Lex Fridman (1:52:49.800)

the less we discount the future.

Saifedean Ammous (1:52:51.320)

We always discount the future compared to the present.

Lex Fridman (1:52:53.200)

So if I told you, I'm gonna give you something today

Saifedean Ammous (1:52:56.200)

versus giving it to you 10 years from now,

Lex Fridman (1:52:58.640)

the same thing, you would prefer to take it now

Saifedean Ammous (1:53:00.840)

because then you'd get to enjoy it over the next 10 years.

Lex Fridman (1:53:03.240)

So we always prefer the present to the future.

Saifedean Ammous (1:53:06.520)

There's always a discount on the future.

Lex Fridman (1:53:09.080)

And that discount is called time preference.

Saifedean Ammous (1:53:10.920)

The degree to which we prefer the present to the future

Lex Fridman (1:53:13.600)

is called our time preference.

Lex Fridman (1:53:15.400)

So the higher our time preference,

Lex Fridman (1:53:18.960)

the less we care about the future.

Lex Fridman (1:53:20.840)

And the process of civilization

Lex Fridman (1:53:22.200)

is the process of lowering our time preference,

Saifedean Ammous (1:53:24.680)

where we start caring more for the future,

Lex Fridman (1:53:26.600)

we start prioritizing the present less and less.

Lex Fridman (1:53:29.680)

So we start being able to not consume everything

Lex Fridman (1:53:32.880)

that we have and store it.

Lex Fridman (1:53:34.800)

And so money is essential for that.

Lex Fridman (1:53:36.640)

And under the gold standard,

Saifedean Ammous (1:53:38.640)

everyone in the world had the ability

Lex Fridman (1:53:40.680)

to provide for their future

Saifedean Ammous (1:53:42.360)

by simply using the same money that they use.

Lex Fridman (1:53:44.400)

You would work a day and you would get paid in a gold coin

Lex Fridman (1:53:47.560)

and you could take that gold coin

Lex Fridman (1:53:49.080)

and keep it safe for 10 years

Lex Fridman (1:53:51.720)

and know that at the end of those 10 years,

Lex Fridman (1:53:54.000)

that gold coin would buy you slightly more

Saifedean Ammous (1:53:56.720)

than what it bought you the day that you earned it.

Lex Fridman (1:53:59.400)

So anybody could provide for their future

Lex Fridman (1:54:01.480)

and anybody could have very high degree of certainty

Lex Fridman (1:54:04.640)

that whatever they're saving is going to be there

Saifedean Ammous (1:54:08.160)

when they want it in the future.

Lex Fridman (1:54:10.320)

Because the money supply was only increasing

Saifedean Ammous (1:54:12.000)

at one and a half percent,

Lex Fridman (1:54:13.480)

whereas the production of goods and services

Saifedean Ammous (1:54:16.880)

was increasing for most cases, for most periods

Lex Fridman (1:54:21.040)

at a higher rate than that.

Lex Fridman (1:54:22.160)

So you could buy more apples and oranges

Lex Fridman (1:54:24.480)

and houses and cars at the end of the 10 years

Saifedean Ammous (1:54:27.720)

than you could at the beginning of the 10 years.

Lex Fridman (1:54:29.240)

So everybody had a way of providing for the future.

Lex Fridman (1:54:31.200)

And with that, people lower their time preference.

Lex Fridman (1:54:34.280)

And that is reflected across all aspects of life.

Saifedean Ammous (1:54:38.280)

I think it's not just the economic thing.

Lex Fridman (1:54:40.080)

You see it in the savings rate,

Saifedean Ammous (1:54:41.480)

the ability to deny yourself gratification today.

Lex Fridman (1:54:44.920)

I could take the money that I have

Lex Fridman (1:54:46.400)

and throw a giant party, buy a sports car, buy a yacht.

Lex Fridman (1:54:50.560)

And yet you decided, I'm not going to do that.

Saifedean Ammous (1:54:52.960)

I'm going to keep it so that tomorrow

Lex Fridman (1:54:54.360)

I can throw a bigger party or buy a better yacht

Saifedean Ammous (1:54:57.240)

or have a better life or give my children a better life.

Lex Fridman (1:55:01.280)

So all of human civilization really

Saifedean Ammous (1:55:03.880)

is the process of us lowering our time preference

Lex Fridman (1:55:06.680)

and finding harder monies that allow us

Saifedean Ammous (1:55:09.120)

to provide better for the future

Lex Fridman (1:55:10.960)

is how we really technologically we do that.

Saifedean Ammous (1:55:15.200)

I think of the hardness of money

Lex Fridman (1:55:17.720)

as being the control knob for our time preference.

Lex Fridman (1:55:20.760)

And you can see this reflected in the 20th century

Lex Fridman (1:55:23.520)

where we go from the money supply increases

Saifedean Ammous (1:55:26.120)

at around one and a half percent under gold

Lex Fridman (1:55:28.840)

to this current situation where over the last 60 years

Saifedean Ammous (1:55:31.440)

I ran the numbers on money supply and fiat,

Lex Fridman (1:55:34.440)

the global fiat supply has increased

Saifedean Ammous (1:55:36.360)

at around 14% per year.

Lex Fridman (1:55:38.000)

So we've done a 10X in the increase

Saifedean Ammous (1:55:40.280)

in the supply of money annually.

Lex Fridman (1:55:43.000)

And 14% is a weighted average.

Lex Fridman (1:55:45.280)

So if you take a basic numerical average

Lex Fridman (1:55:48.400)

for all fiat currencies, you get something like 30%.

Saifedean Ammous (1:55:52.000)

The average fiat currency increases by 30%.

Lex Fridman (1:55:55.000)

But if you value it by the volume of each currency

Lex Fridman (1:55:57.720)

so that you're not giving equal weight

Lex Fridman (1:56:00.160)

to the Venezuelan Bolivar increasing at 500% a year

Lex Fridman (1:56:04.880)

and the dollar increasing at 8% a year,

Lex Fridman (1:56:07.920)

if you do it by value of the currencies

Lex Fridman (1:56:10.480)

so that you get the total supply of fiat,

Lex Fridman (1:56:12.120)

it's something like 14%.

Lex Fridman (1:56:13.720)

And weighted is 30% you said?

Lex Fridman (1:56:15.440)

Yeah, 30%.

Saifedean Ammous (1:56:16.880)

It's insane.

Lex Fridman (1:56:17.720)

I'd like to see the worst ones,

Saifedean Ammous (1:56:19.040)

the people that are tracking that average up.

Lex Fridman (1:56:22.320)

Yeah.

Lex Fridman (1:56:23.160)

But 14% is still an incredibly high, high number.

Lex Fridman (1:56:25.560)

And so you're saying that,

Saifedean Ammous (1:56:27.440)

sorry, that's the average over the century

Lex Fridman (1:56:29.240)

or the past 100 years?

Saifedean Ammous (1:56:30.080)

Over the past 60 years, 1960 to 2020,

Lex Fridman (1:56:32.200)

we get World Bank data on that,

Saifedean Ammous (1:56:34.040)

pretty reliable data on World Bank

Lex Fridman (1:56:35.640)

and European Union OECD data.

Saifedean Ammous (1:56:38.640)

I ran the numbers on that weighted average,

Lex Fridman (1:56:40.680)

something like 14%.

Lex Fridman (1:56:42.120)

And what effect that has on time preference?

Lex Fridman (1:56:45.240)

The effect is now it's much, much, much harder

Saifedean Ammous (1:56:47.880)

for everybody to provide for their future.

Lex Fridman (1:56:50.080)

Everywhere in the world, it's much harder.

Lex Fridman (1:56:52.240)

So how do I get the equivalent of the old gold coin

Lex Fridman (1:56:56.640)

that I could just put under my mattress

Lex Fridman (1:56:58.080)

and expect it to be there 10 years from now?

Lex Fridman (1:56:59.720)

Well, gold itself isn't cutting it.

Saifedean Ammous (1:57:01.440)

Gold can't keep up with inflation.

Lex Fridman (1:57:03.400)

And the reason for that is that gold is not being used

Saifedean Ammous (1:57:06.120)

as a money anymore in that you can't send it internationally.

Lex Fridman (1:57:11.120)

Internationally, you can't use it

Saifedean Ammous (1:57:13.120)

to settle trade internationally,

Lex Fridman (1:57:14.760)

which therefore means demand for it monetarily is limited.

Lex Fridman (1:57:18.720)

And so it's becoming more and more an industrial metal.

Lex Fridman (1:57:23.400)

And as a result of the fact that its value

Saifedean Ammous (1:57:26.840)

doesn't keep up with inflation,

Lex Fridman (1:57:28.040)

it becomes economical to use it in industry.

Lex Fridman (1:57:30.120)

So we're seeing gold become like silver

Lex Fridman (1:57:32.760)

in that it gets used in industry.

Lex Fridman (1:57:34.400)

So the stockpile declines.

Lex Fridman (1:57:36.280)

And so the stock to flow ratio declines as well,

Lex Fridman (1:57:38.720)

and it becomes more and more of an industrial metal.

Lex Fridman (1:57:41.000)

And it can't protect your wealth over time very well.

Lex Fridman (1:57:44.960)

So what do you do?

Lex Fridman (1:57:45.960)

Well, you could invest.

Lex Fridman (1:57:47.400)

And this is kind of the obvious answer

Lex Fridman (1:57:49.040)

that Keynesian will give you is,

Saifedean Ammous (1:57:50.560)

well, you just put your money in an investment.

Lex Fridman (1:57:52.960)

But investment is different from saving.

Saifedean Ammous (1:57:55.120)

Saving, the whole point of saving

Lex Fridman (1:57:56.560)

is that the thing is liquid

Lex Fridman (1:57:57.840)

and that the thing carries little uncertainty.

Lex Fridman (1:58:00.240)

You just held the gold coin and it just sat there.

Saifedean Ammous (1:58:03.800)

It did nothing.

Lex Fridman (1:58:04.640)

It didn't take risk.

Saifedean Ammous (1:58:05.840)

You knew that it was gonna be there in 10 years.

Lex Fridman (1:58:07.680)

Investment means you give the gold coin to somebody

Saifedean Ammous (1:58:10.840)

to go and do something with it.

Lex Fridman (1:58:13.040)

And it could work, it could not work.

Saifedean Ammous (1:58:14.480)

If it works, you get a positive return.

Lex Fridman (1:58:16.600)

You get more gold back.

Saifedean Ammous (1:58:18.160)

If it fails, you might not get any of your gold back.

Lex Fridman (1:58:21.200)

So taking on risk is something very different from saving.

Saifedean Ammous (1:58:24.480)

Saving is just a way of buying the future.

Lex Fridman (1:58:27.000)

Investing is taking on a risk

Lex Fridman (1:58:29.480)

and you could lose everything with it.

Lex Fridman (1:58:31.280)

So what ends up happening,

Lex Fridman (1:58:33.280)

and this is the Keynesian objection I think

Lex Fridman (1:58:35.520)

is very wrong and bad

Saifedean Ammous (1:58:39.760)

because investment is a job in itself.

Lex Fridman (1:58:44.080)

To figure out what to do with your money

Saifedean Ammous (1:58:46.000)

in order to beat inflation is something

Lex Fridman (1:58:49.160)

that there are professionals out there on Wall Street

Saifedean Ammous (1:58:52.160)

that have PhDs in finance, that have enormous computers,

Lex Fridman (1:58:55.680)

and they have enormous staffs of PhDs and master's degrees

Lex Fridman (1:58:59.600)

and math nerds that are crunching numbers

Lex Fridman (1:59:01.560)

and figuring out how to allocate your portfolio

Lex Fridman (1:59:04.200)

so that you can beat inflation.

Lex Fridman (1:59:05.600)

And guess what?

Saifedean Ammous (1:59:06.440)

The majority of them don't beat inflation.

Lex Fridman (1:59:08.560)

The majority of them can't beat inflation.

Saifedean Ammous (1:59:10.440)

Not as measured by CPI, which is completely fraudulent,

Lex Fridman (1:59:13.480)

but if you remember.

Saifedean Ammous (1:59:14.880)

14%.

Lex Fridman (1:59:15.720)

Yeah, that 14% or even the 7%,

Saifedean Ammous (1:59:18.920)

like if you look at just the increase in the money supply,

Lex Fridman (1:59:21.120)

which I think is a much better metric.

Lex Fridman (1:59:23.160)

And this is what's reflected on the desirable goods.

Lex Fridman (1:59:25.440)

Like if you look at the price of real estate

Saifedean Ammous (1:59:27.120)

in Miami Beach, as Michael Saylor mentioned in your example,

Lex Fridman (1:59:30.200)

it goes up at around 6, 7% per year on average

Saifedean Ammous (1:59:32.840)

over the last century.

Lex Fridman (1:59:34.640)

So that's, if you wanna live in a nice area,

Saifedean Ammous (1:59:38.160)

that's what happening to real estate.

Lex Fridman (1:59:39.480)

If you wanna go to the good universities,

Saifedean Ammous (1:59:41.000)

that's what's going up.

Lex Fridman (1:59:41.840)

It's going up at a rate that's similar

Saifedean Ammous (1:59:43.120)

to the increase in the money supply.

Lex Fridman (1:59:44.960)

And you can beat CPI,

Lex Fridman (1:59:47.320)

but CPI is designed so you can beat it,

Lex Fridman (1:59:50.360)

but you can't really beat the appreciation

Saifedean Ammous (1:59:52.760)

in the things that you actually want to buy,

Lex Fridman (1:59:54.480)

in the price of good food, the price of good real estate.

Saifedean Ammous (1:59:57.120)

So, and most investment professionals fail at doing that.

Lex Fridman (20:01.080)

That was what it's supposed to do,

Lex Fridman (20:03.160)

but arguably we never had a pure gold standard

Lex Fridman (20:07.240)

because the nature of gold means

Saifedean Ammous (20:09.200)

that the people who are in charge of the gold,

Lex Fridman (20:12.000)

they have an enormous amount of power

Saifedean Ammous (20:13.480)

because the gold is concentrated with them

Lex Fridman (20:15.120)

and as long as not everybody shows up at the same time

Saifedean Ammous (20:17.800)

asking for their gold,

Lex Fridman (20:18.840)

then you can make more receipts than you have gold.

Lex Fridman (20:21.720)

So there's always shady stuff going on,

Lex Fridman (20:24.160)

but at least that's the state of gold

Saifedean Ammous (20:26.120)

is the receipts should exactly represent

Lex Fridman (20:28.320)

the amount of gold there.

Lex Fridman (20:29.840)

And also when you say standard,

Lex Fridman (20:31.720)

it means that governments sort of publicly stated

Saifedean Ammous (20:38.160)

that this is the approved,

Lex Fridman (20:40.480)

the main way of making transactions that are monetary.

Lex Fridman (20:44.040)

So this is the money, this is the official money

Lex Fridman (20:46.760)

that you should be using if you live in this country.

Saifedean Ammous (20:48.760)

Yes, although I would say it's more like

Lex Fridman (20:51.320)

the other way around.

Saifedean Ammous (20:52.160)

It's not that the governments established gold as money.

Lex Fridman (20:55.440)

It's more like gold gave the governments

Saifedean Ammous (21:00.040)

the credibility for their currencies.

Lex Fridman (21:01.920)

So governments were not the ones that made gold money.

Saifedean Ammous (21:06.320)

Gold has been money before states were invented.

Lex Fridman (21:10.440)

States, if you have a government

Lex Fridman (21:12.240)

and you'd like to have some legitimacy

Lex Fridman (21:14.200)

and you'd like to be able to deal with other governments

Saifedean Ammous (21:16.600)

on an equal footing, you had to go by the gold standard.

Lex Fridman (21:19.800)

You had to have a currency that was redeemable in gold

Lex Fridman (21:22.480)

so that you could trade with the rest of the world

Lex Fridman (21:24.120)

so that people could in your country use that currency.

Lex Fridman (21:28.160)

So it's not that governments were choosing gold.

Lex Fridman (21:32.120)

It's more like they were having to adapt

Saifedean Ammous (21:35.440)

their own currencies to gold

Lex Fridman (21:37.760)

in order to give their currencies credibility.

Lex Fridman (21:39.360)

So there's a dance there though,

Lex Fridman (21:40.960)

because if they had to,

Lex Fridman (21:43.560)

then why did they switch away from it after?

Lex Fridman (21:46.520)

So there is a dance where the governments,

Saifedean Ammous (21:49.640)

the people pressure.

Lex Fridman (21:52.120)

So first of all, the basic characteristics

Saifedean Ammous (21:56.040)

of the hard money pressures the governments

Lex Fridman (21:59.720)

and the people in terms of what should be used.

Saifedean Ammous (22:02.720)

Then the people, based on their community,

Lex Fridman (22:05.200)

the network effects, the narratives they tell each other,

Saifedean Ammous (22:09.200)

all that kind of stuff, they pressure the governments

Lex Fridman (22:12.400)

to take on a particular money.

Saifedean Ammous (22:14.080)

Then the governments, they like power,

Lex Fridman (22:17.960)

they like control, all those kinds of things.

Saifedean Ammous (22:19.720)

They pressure the people

Lex Fridman (22:21.080)

and tell different kinds of narratives.

Lex Fridman (22:22.280)

So there's a dance going on in this evolution

Lex Fridman (22:24.880)

of what technology to use for a monetary system.

Lex Fridman (22:27.400)

So the reason I don't know if governments had to,

Lex Fridman (22:32.400)

because they clearly didn't have to,

Saifedean Ammous (22:34.240)

because they eventually moved away from it.

Lex Fridman (22:37.440)

But there was pressure probably.

Saifedean Ammous (22:39.040)

Yeah, but even after they moved away from it,

Lex Fridman (22:41.320)

central banks, until today,

Saifedean Ammous (22:42.520)

they still hold a lot of gold reserves.

Lex Fridman (22:45.000)

In fact, if you look at 1914,

Saifedean Ammous (22:47.480)

when the world really went off the gold standard,

Lex Fridman (22:51.200)

the amount of gold reserves held by central banks

Saifedean Ammous (22:53.720)

was a tiny fraction of what it was.

Lex Fridman (22:55.720)

As time went on,

Saifedean Ammous (22:57.440)

central banks accumulated more and more gold.

Lex Fridman (22:59.840)

What ended up happening is they prevented their citizens

Saifedean Ammous (23:02.160)

from using the gold, but they continued to use it.

Lex Fridman (23:04.240)

So gold continued to be money up until 1971

Saifedean Ammous (23:07.560)

because effectively the world was on a dollar standard

Lex Fridman (23:10.800)

and the dollars were backed by gold.

Lex Fridman (23:12.960)

But then after 1971, even then,

Lex Fridman (23:15.600)

central banks continued to accumulate gold

Saifedean Ammous (23:17.280)

because why would you as a central bank

Lex Fridman (23:20.000)

want to accumulate pieces of paper effectively

Saifedean Ammous (23:22.520)

or credit liabilities of another central bank

Lex Fridman (23:25.240)

that can produce them infinitely?

Lex Fridman (23:27.960)

And it's a lesson that's becoming more and more obvious

Lex Fridman (23:31.800)

to governments today,

Saifedean Ammous (23:33.680)

as we see US sanctions taking, say, Russian reserves

Lex Fridman (23:36.640)

or Afghanistan reserves.

Lex Fridman (23:39.040)

And this is why we see China and Russia

Lex Fridman (23:40.840)

have accumulated a lot of gold over the last 10, 20 years.

Lex Fridman (23:44.080)

So just to return to the question of definitions,

Lex Fridman (23:48.440)

so what is hard money versus soft money?

Saifedean Ammous (23:51.000)

Yes, so hard, I mean, it's a relative thing,

Lex Fridman (23:54.120)

but the hardness refers to the difficulty

Saifedean Ammous (23:56.560)

of producing more units of the money supply.

Lex Fridman (23:59.520)

So an easy money would be a money

Saifedean Ammous (24:01.640)

that is relatively easy to make.

Lex Fridman (24:04.480)

So you can increase the supply by 10, 20, 30, 40, 50%

Saifedean Ammous (24:08.840)

or something like that.

Lex Fridman (24:09.680)

So pretty much all commodities, all market commodities,

Saifedean Ammous (24:12.640)

other than gold and silver, they're easy money

Lex Fridman (24:15.560)

and they're not suitable as a monetary medium

Saifedean Ammous (24:18.920)

because they're being consumed.

Lex Fridman (24:20.160)

So if you look at, and in the Bitcoin standard,

Saifedean Ammous (24:22.320)

I mentioned this metric called the stock to flow ratio,

Lex Fridman (24:25.080)

which is the ratio of the annual production, the flow,

Saifedean Ammous (24:28.840)

to the stockpile, the existing stockpile.

Lex Fridman (24:31.480)

If you look at all the other metals,

Saifedean Ammous (24:33.120)

they're easy money because they're being consumed.

Lex Fridman (24:36.160)

So think about how much stockpiles of copper

Saifedean Ammous (24:38.360)

there are in the world today.

Lex Fridman (24:40.120)

So copper companies obviously have

Saifedean Ammous (24:41.960)

some stockpiles of copper.

Lex Fridman (24:44.000)

Major copper consumers will have stockpiles of copper,

Lex Fridman (24:47.080)

but the vast majority of copper

Lex Fridman (24:48.600)

is essentially on a conveyor belt of production

Saifedean Ammous (24:53.120)

from the mine straight to the consumer good

Lex Fridman (24:56.840)

that it's being used for.

Lex Fridman (24:58.480)

So the existing stockpiles are roughly

Lex Fridman (25:01.800)

in the range of one year's production.

Saifedean Ammous (25:04.920)

If you take all of the companies,

Lex Fridman (25:06.800)

I don't have exact statistics,

Saifedean Ammous (25:09.040)

hence it's very difficult to get these,

Lex Fridman (25:10.440)

but it's roughly in the same range.

Saifedean Ammous (25:12.760)

Like if copper production were to stop completely today,

Lex Fridman (25:17.280)

we'll have about a year's production

Saifedean Ammous (25:19.520)

stored in various places.

Lex Fridman (25:22.000)

So that makes copper terrible money

Saifedean Ammous (25:24.720)

because if you started using copper as money,

Lex Fridman (25:27.480)

and this is why a lot of people say,

Saifedean Ammous (25:28.880)

well, money is a collective illusion.

Lex Fridman (25:30.680)

Money is a social construct.

Saifedean Ammous (25:34.240)

If we all agree that something is money,

Lex Fridman (25:35.960)

then something is money.

Saifedean Ammous (25:36.800)

I think this is completely clueless,

Lex Fridman (25:37.880)

and it's usually Marxists who believe this,

Saifedean Ammous (25:40.000)

obviously no understanding of economics.

Lex Fridman (25:42.280)

It's completely clueless

Saifedean Ammous (25:43.360)

because even if everybody in society

Lex Fridman (25:45.640)

decided we wanted to make copper as money,

Saifedean Ammous (25:47.880)

even if we all decided to collectively

Lex Fridman (25:50.400)

take part in this hallucination or illusion,

Saifedean Ammous (25:53.320)

it would not make copper money.

Lex Fridman (25:54.960)

It would just make everybody who decides

Saifedean Ammous (25:56.720)

to take part in this hallucination poor, that's it.

Lex Fridman (25:59.480)

It would make copper miners rich.

Saifedean Ammous (26:01.040)

It would make all of the people

Lex Fridman (26:02.240)

who chose copper as money poor,

Lex Fridman (26:04.160)

and copper would not be money.

Lex Fridman (26:05.640)

It can't work because what happens is,

Saifedean Ammous (26:07.720)

because of the fact that the stockpiles are so small,

Lex Fridman (26:10.280)

if you buy, you know,

Saifedean Ammous (26:11.320)

even if you get the 1,000 richest people in the world,

Lex Fridman (26:14.120)

all of the world's billionaires,

Saifedean Ammous (26:16.240)

they get together,

Lex Fridman (26:17.080)

and they all dump all of the money that they have,

Saifedean Ammous (26:19.680)

all the stocks, all the bonds, all the gold,

Lex Fridman (26:22.520)

all of the Bitcoin, everything that they own,

Saifedean Ammous (26:24.440)

they dump it, and they buy copper with it.

Lex Fridman (26:27.520)

What's gonna happen?

Saifedean Ammous (26:28.360)

Price of copper is gonna go up a lot,

Lex Fridman (26:30.840)

but what's gonna stop copper miners

Saifedean Ammous (26:33.040)

from flooding the market with even more copper

Lex Fridman (26:36.000)

than what the billionaires bought?

Saifedean Ammous (26:37.800)

Nothing.

Lex Fridman (26:38.640)

They're gonna dump all of that extra copper production.

Saifedean Ammous (26:41.880)

If the price of copper is gonna go up

Lex Fridman (26:43.040)

so there will be a lot more copper mining

Saifedean Ammous (26:45.640)

than all the other metals,

Lex Fridman (26:47.080)

a lot of nickel companies and gold miners

Saifedean Ammous (26:51.080)

are gonna switch to focusing on copper,

Lex Fridman (26:53.480)

and then we're gonna dump an enormous amount of copper

Saifedean Ammous (26:56.200)

on the market.

Lex Fridman (26:57.040)

The value of copper is gonna crash,

Lex Fridman (26:59.000)

and the people who chose copper as money

Lex Fridman (27:01.560)

are just gonna end up with large warehouses

Saifedean Ammous (27:03.760)

of very cheap rusting metal.

Lex Fridman (27:06.480)

So that's a brilliant description,

Lex Fridman (27:07.920)

and that kind of pushes towards gold

Lex Fridman (27:09.880)

where the stock to flow ratio,

Saifedean Ammous (27:13.240)

I guess you would say is 1.5 to 2%,

Lex Fridman (27:15.560)

like you mentioned earlier.

Saifedean Ammous (27:16.840)

That would be like the inverse of the stock to flow.

Lex Fridman (27:18.680)

That's the supply growth rate,

Lex Fridman (27:19.960)

so the stock to flow is the inverse.

Lex Fridman (27:21.240)

It's around 60.

Saifedean Ammous (27:22.560)

60, got it.

Lex Fridman (27:23.680)

But let me push back on,

Saifedean Ammous (27:26.000)

as somebody who likes human psychology,

Lex Fridman (27:27.800)

let me push back on the collective hallucination

Lex Fridman (27:30.920)

and the illusion.

Lex Fridman (27:32.120)

So that's for copper, but what about paper money?

Saifedean Ammous (27:35.860)

That's not, you can't smoke it,

Lex Fridman (27:40.980)

you can't eat it.

Saifedean Ammous (27:42.420)

It's just, it's supposed to represent,

Lex Fridman (27:44.820)

it's supposed to just be the medium of exchange,

Lex Fridman (27:47.020)

and in that sense, what role does collective hallucination

Lex Fridman (27:53.980)

play in the effectiveness of money?

Saifedean Ammous (27:56.060)

Exactly zero, because all of the paper money,

Lex Fridman (27:59.060)

first of all, there's never been an instance,

Lex Fridman (28:00.900)

and again, this flies in the face

Lex Fridman (28:04.780)

of a lot of what a lot of people like to think about money.

Saifedean Ammous (28:08.180)

There's never been an instance

Lex Fridman (28:09.420)

where a government came out and said,

Saifedean Ammous (28:11.980)

all right, we're printing out these pieces of paper,

Lex Fridman (28:13.700)

use them as money.

Saifedean Ammous (28:14.540)

This one is worth 10 apples or use it for buying things,

Lex Fridman (28:19.020)

and here's the piece of paper.

Saifedean Ammous (28:19.900)

This has never happened.

Lex Fridman (28:21.340)

They've always taken fiat money, paper money,

Saifedean Ammous (28:26.620)

all of these things were always born out of fraud.

Lex Fridman (28:30.660)

Initially, it was a receipt for gold,

Lex Fridman (28:32.740)

and then they told you, well, you know,

Lex Fridman (28:34.860)

you don't need the gold anyway, and you have to use this,

Lex Fridman (28:36.940)

and then if you don't use it, we throw you in jail.

Lex Fridman (28:39.460)

And then, so first of all, it doesn't,

Saifedean Ammous (28:42.900)

you can't enforce this thing,

Lex Fridman (28:44.340)

so it's never really just happened,

Lex Fridman (28:45.700)

and it's never been hallucinated into existence.

Lex Fridman (28:48.340)

People can hallucinate this kind of nonsense

Saifedean Ammous (28:50.100)

in writing textbooks and books and in academia,

Lex Fridman (28:54.340)

but in the real world, people don't hallucinate money.

Saifedean Ammous (28:57.580)

People are very careful about what they put their money in.

Lex Fridman (29:00.140)

For people listening,

Saifedean Ammous (29:01.540)

we're gonna have fun in this conversation,

Lex Fridman (29:03.100)

because you already said Marxist, fraud, hallucination,

Saifedean Ammous (29:08.340)

just because we use these words doesn't mean they're true,

Lex Fridman (29:11.500)

but they're fun to talk about.

Lex Fridman (29:12.900)

So you have a strong certainty about the way you talk,

Lex Fridman (29:17.220)

which I think is fun,

Lex Fridman (29:20.100)

but allow me in my dumb self to push back,

Lex Fridman (29:22.400)

to play devil's advocate,

Lex Fridman (29:23.740)

and I'll actually ask you sometimes

Lex Fridman (29:25.180)

to play devil's advocate if possible,

Saifedean Ammous (29:27.180)

because you're smarter than me on all this stuff,

Lex Fridman (29:28.880)

so we want the smartest devil's advocate possible,

Lex Fridman (29:33.500)

and I'm certainly not that, but anyway,

Lex Fridman (29:35.820)

but nevertheless, we are currently on a fiat standard,

Lex Fridman (29:41.460)

so money does have value, paper money,

Lex Fridman (29:50.420)

and the reason it has value

Saifedean Ammous (29:51.900)

is because we believe it has value.

Lex Fridman (29:53.780)

To what degree, if we put the hallucination word aside,

Saifedean Ammous (29:57.760)

the belief that something is worth value

Lex Fridman (2:00:01.720)

So what hope does a doctor or an engineer or a scientist

Lex Fridman (2:00:06.520)

or an athlete have in doing those things?

Lex Fridman (2:00:08.800)

And investment is hard and saving should be easy.

Saifedean Ammous (2:00:11.760)

Exactly.

Lex Fridman (2:00:12.600)

Saving is essential for us as a civilization.

Lex Fridman (2:00:15.800)

And what fiat did is it took that away from us.

Lex Fridman (2:00:18.920)

And then it forced everybody to become an investor

Saifedean Ammous (2:00:22.240)

or more accurately a gambler, because you're not just even,

Lex Fridman (2:00:25.720)

because the money itself is broken,

Saifedean Ammous (2:00:27.560)

because the money itself is constantly changing in value,

Lex Fridman (2:00:30.320)

investing is becoming more of a crapshoot.

Saifedean Ammous (2:00:33.000)

I mean, value investing is completely underperforming,

Lex Fridman (2:00:36.400)

compared to market analysis.

Saifedean Ammous (2:00:38.400)

You know, you listen to the Fed,

Lex Fridman (2:00:40.480)

and what matters to the price of individual companies

Saifedean Ammous (2:00:47.040)

is monetary policy much more

Lex Fridman (2:00:48.480)

than it is their own performance.

Lex Fridman (2:00:50.120)

So basically you need to be a junkie watching the Fed

Lex Fridman (2:00:52.440)

and following all of the world's central banks.

Lex Fridman (2:00:54.040)

And yeah, I need to learn macro economics

Lex Fridman (2:00:55.760)

and you need to learn what all the central banks are doing.

Lex Fridman (2:00:58.880)

And you need to understand how commodity markets work.

Lex Fridman (2:01:00.880)

And you need to understand how equity markets work

Lex Fridman (2:01:02.760)

and bond markets and real estate markets.

Lex Fridman (2:01:05.360)

You need to do all of those things

Saifedean Ammous (2:01:07.080)

just in order to be able to save and earn

Lex Fridman (2:01:10.400)

and keep the money that you've already earned.

Saifedean Ammous (2:01:13.280)

That's the criminal thing about it.

Lex Fridman (2:01:14.800)

Like I've already earned that money being a doctor,

Saifedean Ammous (2:01:17.640)

being a dentist, being an athlete, being an engineer.

Lex Fridman (2:01:19.640)

I built a house for somebody and I got that money.

Lex Fridman (2:01:22.600)

And all I wanna do is just make sure

Lex Fridman (2:01:24.240)

that I can have it 10 years from now.

Saifedean Ammous (2:01:26.800)

The only way to do so is to become a crappy engineer

Lex Fridman (2:01:29.280)

because you have to spend half your time

Saifedean Ammous (2:01:30.760)

not doing engineering and instead spend half of that time

Lex Fridman (2:01:34.640)

learning about Japanese central bank monetary policy

Lex Fridman (2:01:37.320)

and commodity markets and what's gonna happen to copper

Lex Fridman (2:01:40.160)

and what's gonna happen to oil

Lex Fridman (2:01:41.720)

and what's happening in the wars

Lex Fridman (2:01:44.600)

and what's happening with foreign policy

Lex Fridman (2:01:46.360)

and Russia and the US and all of those things.

Lex Fridman (2:01:51.360)

Under the gold standard,

Saifedean Ammous (2:01:52.920)

you didn't care about any of that stuff.

Lex Fridman (2:01:54.440)

Your gold coin worked regardless of all of those things.

Lex Fridman (2:01:56.840)

So what this means is the future,

Lex Fridman (2:01:59.120)

so first of all, we have all of the problems I mentioned,

Lex Fridman (2:02:01.400)

but also it means that the future becomes

Lex Fridman (2:02:04.760)

much more uncertain.

Lex Fridman (2:02:05.720)

So you're far less likely to provide for yourself

Lex Fridman (2:02:08.840)

10 years from now,

Saifedean Ammous (2:02:09.680)

far less likely to find an easy way

Lex Fridman (2:02:11.240)

to give yourself value 10 years from now.

Lex Fridman (2:02:14.880)

And so you become more short termist.

Lex Fridman (2:02:17.120)

And that is reflected economically

Saifedean Ammous (2:02:18.560)

in a lower savings rate and we see savings rates decline,

Lex Fridman (2:02:22.120)

but it is also reflected in all manners of decision making.

Lex Fridman (2:02:25.200)

And I think if you really wanna see what it is,

Lex Fridman (2:02:27.600)

take a look at a society that goes through hyperinflation

Lex Fridman (2:02:30.840)

and look at what happens there.

Lex Fridman (2:02:32.560)

How do people change under hyperinflation

Lex Fridman (2:02:36.680)

and compare that to essentially what we see

Lex Fridman (2:02:39.800)

in the 20th century all over under not hyperinflation,

Lex Fridman (2:02:43.440)

but under low inflation,

Lex Fridman (2:02:45.080)

10, 15% that you see across the board most of the time

Saifedean Ammous (2:02:49.600)

is just slow motion hyperinflation.

Lex Fridman (2:02:51.840)

So what happens in hyperinflation?

Saifedean Ammous (2:02:53.400)

Everybody gets their paychecks,

Lex Fridman (2:02:54.960)

they run straight to the supermarket,

Saifedean Ammous (2:02:56.880)

they spend all of their money.

Lex Fridman (2:02:58.520)

Nobody thinks about savings.

Saifedean Ammous (2:03:00.240)

Nobody thinks about the future.

Lex Fridman (2:03:01.840)

Survival until the end of this month is highly uncertain.

Lex Fridman (2:03:05.960)

How likely are you to be planning

Lex Fridman (2:03:07.560)

for what you're going to be doing five years from now?

Saifedean Ammous (2:03:11.120)

Very unlikely.

Lex Fridman (2:03:12.240)

But also it's reflected not just economically,

Saifedean Ammous (2:03:15.320)

it's also reflected in all aspects of morality

Lex Fridman (2:03:17.600)

and all the way in which we deal

Saifedean Ammous (2:03:19.160)

with each other as human beings.

Lex Fridman (2:03:20.960)

When your survival is precarious,

Lex Fridman (2:03:23.560)

how much are you invested in the notion

Lex Fridman (2:03:26.280)

of being a good citizen, on caring about your reputation,

Lex Fridman (2:03:29.760)

on caring about not getting caught in a crime?

Lex Fridman (2:03:32.800)

All of these things become harder to value.

Lex Fridman (2:03:35.760)

So people start committing crime,

Lex Fridman (2:03:37.160)

people start caring less and less about the future.

Lex Fridman (2:03:39.840)

And we see it reflected in everything.

Lex Fridman (2:03:41.280)

And I argue, you see it reflected in architecture.

Saifedean Ammous (2:03:43.920)

We used to build houses in the 19th century

Lex Fridman (2:03:45.760)

that last until today.

Lex Fridman (2:03:47.600)

And then in the 20th century,

Lex Fridman (2:03:48.720)

we build essentially disposable cardboard boxes

Saifedean Ammous (2:03:51.680)

that get scrapped in 20 years.

Lex Fridman (2:03:54.400)

So what can you say about potential positive effects

Lex Fridman (2:03:57.720)

of lower time preferences?

Lex Fridman (2:03:59.080)

So I mean, it's a balance.

Saifedean Ammous (2:04:00.520)

Like basically, you're talking about

Lex Fridman (2:04:04.400)

an average kind of time preference,

Lex Fridman (2:04:05.800)

but there's some things in life

Lex Fridman (2:04:07.360)

where low time preference could be a negative thing.

Lex Fridman (2:04:10.600)

So like if I want to take on risk,

Lex Fridman (2:04:13.720)

not for investment, for a kind of investment,

Lex Fridman (2:04:15.920)

but say I want to start a business,

Lex Fridman (2:04:18.160)

I want to take something crazy,

Saifedean Ammous (2:04:20.720)

take a leap into the unknown, be an entrepreneur.

Lex Fridman (2:04:24.000)

What can you say about that kind of leap?

Saifedean Ammous (2:04:26.840)

Taking on debt.

Lex Fridman (2:04:28.880)

What's the value of that within the current system?

Saifedean Ammous (2:04:31.840)

What's the right approach to that

Lex Fridman (2:04:32.960)

within the current system?

Saifedean Ammous (2:04:33.840)

What's the right approach overall

Lex Fridman (2:04:35.360)

from an economics perspective?

Lex Fridman (2:04:37.080)

So it's not saving for the future.

Lex Fridman (2:04:40.240)

It's doing something wild,

Saifedean Ammous (2:04:43.560)

taking the money from your mattress, taking on debt,

Lex Fridman (2:04:46.800)

and having a dream in your heart

Saifedean Ammous (2:04:48.680)

that you somehow just want to do.

Lex Fridman (2:04:50.800)

Maybe it's not the wisest investment decision,

Lex Fridman (2:04:52.960)

but it's something, you know, it's being human.

Lex Fridman (2:04:55.720)

It's taking a leap into the unknown

Saifedean Ammous (2:04:58.600)

because something in your heart says to do it.

Lex Fridman (2:05:00.680)

I think you're more likely to be taking the leap

Saifedean Ammous (2:05:02.280)

in the unknown when you have a little bit of gold

Lex Fridman (2:05:04.400)

in the mattress than when you don't.

Saifedean Ammous (2:05:06.320)

I think this is the thing.

Lex Fridman (2:05:07.360)

Like if you look at the late 19th century,

Lex Fridman (2:05:10.040)

and I discussed this in the Bitcoin standard,

Lex Fridman (2:05:11.920)

that was arguably the most innovative period

Saifedean Ammous (2:05:14.960)

in human history.

Lex Fridman (2:05:16.280)

You know, there's qualitative evidence.

Saifedean Ammous (2:05:17.960)

You know, look at the world around you today.

Lex Fridman (2:05:20.240)

Pretty much everything that we use

Saifedean Ammous (2:05:21.600)

was invented in that period.

Lex Fridman (2:05:23.200)

The car, the airplane, the telegraph, the telephone,

Saifedean Ammous (2:05:30.800)

the camera, pretty much modern life as late 19th century.

Lex Fridman (2:05:35.840)

You know, the period between 1870 and 1914,

Saifedean Ammous (2:05:38.840)

because the whole world was practically on a gold standard,

Lex Fridman (2:05:41.560)

the whole world was using the same money,

Lex Fridman (2:05:43.720)

and the whole world could save in the same currency.

Lex Fridman (2:05:46.440)

That meant that a bicycle shop owner,

Saifedean Ammous (2:05:49.000)

two bicycle shop owning brothers in North Carolina

Lex Fridman (2:05:52.160)

could go and try and fly,

Saifedean Ammous (2:05:53.880)

even as all the scientific experts in 1903

Lex Fridman (2:05:57.320)

were confirming that the possibility of flight

Saifedean Ammous (2:06:01.360)

has been debunked as unscientific.

Lex Fridman (2:06:03.760)

You know, Lord Kelvin said,

Saifedean Ammous (2:06:05.280)

not in a million years we're going to be flying.

Lex Fridman (2:06:07.640)

Thomas Edison said it's never gonna happen.

Saifedean Ammous (2:06:09.520)

No, I think it was Edison who said a million years,

Lex Fridman (2:06:11.160)

but Kelvin also said it's never gonna happen.

Saifedean Ammous (2:06:14.040)

The New York Times said it's never gonna happen

Lex Fridman (2:06:16.440)

the same month in which the Wright brothers did it.

Lex Fridman (2:06:20.000)

And they continued to deny that it was gonna happen

Lex Fridman (2:06:22.400)

even two years after they did it.

Lex Fridman (2:06:25.240)

But that's, why could they do that?

Lex Fridman (2:06:27.880)

Because they had savings in gold.

Saifedean Ammous (2:06:29.480)

They had the security with something that you know

Lex Fridman (2:06:33.400)

is gonna be there.

Lex Fridman (2:06:34.640)

And then you can take a risk with the stuff that is extra.

Lex Fridman (2:06:37.080)

You know, I have say three years expenditures in gold

Saifedean Ammous (2:06:40.760)

under my mattress.

Lex Fridman (2:06:42.240)

And I know that I could take a risk with everything else

Saifedean Ammous (2:06:45.000)

because whatever bad things happen with all of my dreams,

Lex Fridman (2:06:48.320)

like even, you know, flying, think about how insane that is.

Saifedean Ammous (2:06:51.640)

I still can go back to the three years of gold

Lex Fridman (2:06:54.280)

that I have saved.

Saifedean Ammous (2:06:55.120)

It's still okay to take on debt

Lex Fridman (2:06:57.000)

given the stuff, the gold under the mattress.

Saifedean Ammous (2:06:58.760)

Well, this is the thing, under the gold standard,

Lex Fridman (2:07:00.920)

the way that people finance things

Saifedean Ammous (2:07:02.560)

was predominantly with capital, with equity.

Lex Fridman (2:07:04.880)

So you would, because you had gold savings,

Saifedean Ammous (2:07:07.360)

I had gold savings, everybody had gold savings.

Lex Fridman (2:07:09.720)

When you wanted to start the business,

Saifedean Ammous (2:07:11.840)

you could use your own savings or somebody else's savings.

Lex Fridman (2:07:14.440)

So you didn't need to get into debt.

Saifedean Ammous (2:07:18.040)

Well, you could get equity from others

Lex Fridman (2:07:19.960)

and you could also get debt from others.

Lex Fridman (2:07:21.680)

So there was.

Lex Fridman (2:07:22.520)

But it's directly mapped to physical reality.

Saifedean Ammous (2:07:25.440)

Yeah, it's directly mapped to economic reality

Lex Fridman (2:07:27.520)

and that there's a hard money out there

Saifedean Ammous (2:07:28.960)

that, you know, what you're spending money,

Lex Fridman (2:07:31.160)

you know, you wanna build your airplane factory,

Saifedean Ammous (2:07:34.000)

you need to get actual resources.

Lex Fridman (2:07:35.640)

So you get actual gold, either yours or somebody else's,

Saifedean Ammous (2:07:38.360)

you borrow it or you give them equity,

Lex Fridman (2:07:40.400)

but there's real resources.

Lex Fridman (2:07:42.200)

Now, what happened with the fiat system?

Lex Fridman (2:07:43.680)

And this is, you know, the first part of the book

Saifedean Ammous (2:07:45.760)

where I look at it from an engineering kind of perspective

Lex Fridman (2:07:48.400)

is essentially, and I think this is like the breakthrough

Saifedean Ammous (2:07:50.840)

inside of the book, what fiat does

Lex Fridman (2:07:53.720)

is that it replaces gold mining with credit creation.

Saifedean Ammous (2:07:59.480)

The way that we make fiat money,

Lex Fridman (2:08:01.560)

the way that fiat is mined into existence

Saifedean Ammous (2:08:04.080)

is through credit creation.

Lex Fridman (2:08:05.200)

Most people think of fiat money

Saifedean Ammous (2:08:06.400)

as being something that happens

Lex Fridman (2:08:07.320)

when government prints money.

Lex Fridman (2:08:08.800)

And we still use the term government's printing money,

Lex Fridman (2:08:11.440)

but the vast majority of fiat is not physical.

Lex Fridman (2:08:14.480)

And in fact, fiat is not created

Lex Fridman (2:08:16.200)

when it is printed physically,

Saifedean Ammous (2:08:18.080)

it's created when it is lent.

Lex Fridman (2:08:19.960)

So when you go to a bank to get a $1 million loan

Saifedean Ammous (2:08:22.840)

to buy a house, that bank is not gonna give you

Lex Fridman (2:08:25.800)

a million dollars from their own money

Saifedean Ammous (2:08:27.520)

or from their depositor's money.

Lex Fridman (2:08:29.480)

They're gonna make a fresh new million dollars.

Saifedean Ammous (2:08:32.080)

When you walk out of that bank,

Lex Fridman (2:08:34.320)

the money supply has increased by $1 million

Saifedean Ammous (2:08:36.760)

to finance your home.

Lex Fridman (2:08:38.680)

So what fiat does is, I mean,

Saifedean Ammous (2:08:41.680)

it was basically born out of government credit

Lex Fridman (2:08:44.520)

and the credit of banks that are backed

Saifedean Ammous (2:08:46.840)

by the central bank and the government.

Lex Fridman (2:08:48.960)

So if you're part of the institutions

Saifedean Ammous (2:08:51.240)

that are allowed fiat privilege,

Lex Fridman (2:08:53.320)

where you can just issue loans backed by the central bank,

Saifedean Ammous (2:08:56.520)

backed by the currency,

Lex Fridman (2:08:57.960)

you are effectively creating new currency,

Saifedean Ammous (2:09:00.120)

new money every time you issue the loan.

Lex Fridman (2:09:02.360)

That's fiat mining is credit creation, I love it.

Lex Fridman (2:09:05.360)

So can you say something, I mean,

Lex Fridman (2:09:07.520)

you can't really have credit without a demand for credit.

Saifedean Ammous (2:09:10.720)

You can't really have an increase in supply

Lex Fridman (2:09:12.440)

without a demand for it.

Lex Fridman (2:09:14.120)

Is there any value you place in the humans wanting it?

Lex Fridman (2:09:18.920)

Basically, people wanting to do something with that credit,

Saifedean Ammous (2:09:22.720)

wanting to take big leaps, big risks,

Lex Fridman (2:09:25.280)

big entrepreneurial decisions.

Lex Fridman (2:09:27.840)

So is all credit bad?

Lex Fridman (2:09:31.240)

No, I think what's bad is anything, in my opinion,

Saifedean Ammous (2:09:36.400)

anything that is consensual,

Lex Fridman (2:09:38.400)

I wanna borrow money from you and we agree the terms,

Saifedean Ammous (2:09:40.600)

I can't object to that.

Lex Fridman (2:09:42.880)

As long as you and I both agree, I can't object to that.

Lex Fridman (2:09:46.080)

But in the case of the fiat system,

Lex Fridman (2:09:48.800)

it's not just you and the bank who come to an agreement.

Saifedean Ammous (2:09:51.960)

Everybody who uses the currency

Lex Fridman (2:09:53.600)

is forced to be part of that agreement.

Saifedean Ammous (2:09:55.800)

Because if you default,

Lex Fridman (2:09:57.640)

effectively what's protecting the bank from you

Saifedean Ammous (2:10:00.400)

is the fact that the government

Lex Fridman (2:10:01.760)

can just print a bunch of money and make the bank whole.

Lex Fridman (2:10:04.720)

So effectively.

Lex Fridman (2:10:06.480)

Interesting.

Lex Fridman (2:10:07.320)

So that little agreement between the bank and you

Lex Fridman (2:10:11.520)

is actually an agreement between the bank, you,

Lex Fridman (2:10:14.200)

and the entire populace that's using the currency.

Lex Fridman (2:10:16.440)

Exactly.

Saifedean Ammous (2:10:17.280)

They're forced to provide the safety net for you and me

Lex Fridman (2:10:19.720)

to go and make that loan.

Lex Fridman (2:10:21.360)

And that safety net is the devaluation of the currency.

Lex Fridman (2:10:24.040)

That's how the whole thing actually works.

Lex Fridman (2:10:28.200)

So this is why I wrote the Bitcoin standard,

Lex Fridman (2:10:30.960)

explaining Bitcoin,

Lex Fridman (2:10:31.800)

and basically the takeaway message of the Bitcoin standard

Lex Fridman (2:10:34.160)

is you need to stack as much Bitcoin as you can,

Saifedean Ammous (2:10:36.600)

because this is the best money that has ever been invented.

Lex Fridman (2:10:38.720)

And we'll talk about that,

Lex Fridman (2:10:39.960)

why Bitcoin is the hardest money.

Lex Fridman (2:10:42.760)

Yeah.

Lex Fridman (2:10:43.600)

But with fiat, the conclusion of the fiat standard,

Lex Fridman (2:10:45.600)

and again, this is not financial advice,

Saifedean Ammous (2:10:47.560)

I'm a lowly academic,

Lex Fridman (2:10:49.760)

you shouldn't listen to me on issues of money,

Lex Fridman (2:10:51.680)

but I think theoretically and intellectually,

Lex Fridman (2:10:54.320)

the conclusion of the fiat system

Saifedean Ammous (2:10:55.640)

is you need to be short fiat as much as you can.

Lex Fridman (2:10:58.840)

That's the smart winning move.

Lex Fridman (2:11:00.160)

So human wisdom over thousands of years is to save,

Lex Fridman (2:11:04.480)

try and not borrow as much as you can,

Saifedean Ammous (2:11:06.160)

try and accumulate as much savings as you can.

Lex Fridman (2:11:08.440)

That's reversed under fiat.

Saifedean Ammous (2:11:09.800)

If you're saving money,

Lex Fridman (2:11:11.680)

you're just subsidizing everybody else taking on loans.

Saifedean Ammous (2:11:14.720)

If you're taking on loans,

Lex Fridman (2:11:16.200)

you're benefiting from all the people that are borrowing.

Lex Fridman (2:11:18.880)

So the winning move under the fiat system,

Lex Fridman (2:11:21.000)

and this is what rich people do, is you borrow.

Saifedean Ammous (2:11:23.720)

Rich people under the fiat monetary system,

Lex Fridman (2:11:25.560)

they don't hold assets.

Saifedean Ammous (2:11:28.960)

If you're worth a billion dollars today,

Lex Fridman (2:11:30.680)

you don't have a billion dollars in a checking account.

Saifedean Ammous (2:11:33.440)

You've got maybe a hundred thousand, a million,

Lex Fridman (2:11:36.240)

five million or something like that.

Saifedean Ammous (2:11:39.280)

A tiny fraction of your money is held in cash.

Lex Fridman (2:11:41.720)

The majority is going to be held

Saifedean Ammous (2:11:43.640)

in all kinds of other hard assets.

Lex Fridman (2:11:46.160)

And you're gonna be borrowing.

Saifedean Ammous (2:11:48.120)

The richest people in the world

Lex Fridman (2:11:49.640)

are the biggest borrowers in the world.

Saifedean Ammous (2:11:50.920)

The most powerful entities in the world,

Lex Fridman (2:11:52.440)

the governments are the biggest borrowers in the world.

Lex Fridman (2:11:54.960)

And that's how they are the richest and the most powerful,

Lex Fridman (2:11:57.920)

because every time you're borrowing,

Saifedean Ammous (2:12:00.120)

you're giving the bank an excuse to print new money.

Lex Fridman (2:12:03.640)

So you're devaluing everybody else's money

Lex Fridman (2:12:05.480)

and you're getting a bit of the cut.

Lex Fridman (2:12:06.880)

If you were going to buy a house with your savings,

Saifedean Ammous (2:12:10.080)

you're accumulating the savings and they're losing value.

Lex Fridman (2:12:13.040)

And if I were to go buy the same house with credit,

Saifedean Ammous (2:12:17.920)

I'm getting the bank to print money for me.

Lex Fridman (2:12:21.400)

So obviously they can cut me in on that deal.

Lex Fridman (2:12:23.680)

And that's why it's much cheaper

Lex Fridman (2:12:24.960)

for everybody to buy with credit.

Saifedean Ammous (2:12:26.400)

That's why everybody buys everything on credit.

Lex Fridman (2:12:29.120)

So when we look at the global monetary system,

Saifedean Ammous (2:12:31.400)

the thing you wanna do as a government

Lex Fridman (2:12:34.280)

is be the sexiest currency out there.

Lex Fridman (2:12:37.480)

So the main currency, like the dollar currently is,

Lex Fridman (2:12:42.720)

is the one that has the most power in that kind of context.

Lex Fridman (2:12:46.000)

So you have, if you were to try to summarize

Lex Fridman (2:12:49.000)

what is the global monetary system as it is today,

Saifedean Ammous (2:12:53.040)

is a bunch of fiat currencies battling for position,

Lex Fridman (2:12:57.800)

for use outside their nation,

Lex Fridman (2:13:03.160)

and in so doing trying to gain power

Lex Fridman (2:13:05.400)

in the geopolitical sense.

Saifedean Ammous (2:13:06.600)

Is that, if we just zoom out,

Lex Fridman (2:13:09.400)

what is the global monetary system?

Lex Fridman (2:13:11.120)

Like how, what is it currently?

Lex Fridman (2:13:14.000)

So outside of the United States, the whole thing.

Saifedean Ammous (2:13:15.960)

Yeah, you could say that, but I think it's more realistic

Lex Fridman (2:13:18.520)

looking at how it has actually evolved

Saifedean Ammous (2:13:19.960)

over the past few decades.

Lex Fridman (2:13:21.600)

It's really a dollar system.

Saifedean Ammous (2:13:23.200)

It's not a system of currencies buying with one another.

Lex Fridman (2:13:26.440)

It's a dollar system, and all other currencies

Saifedean Ammous (2:13:28.400)

are just basically, I like to call them dollar

Lex Fridman (2:13:30.480)

plus country risk.

Lex Fridman (2:13:32.040)

So each.

Lex Fridman (2:13:34.240)

It always returns home to the dollar.

Saifedean Ammous (2:13:36.400)

Yeah, there is no competition.

Lex Fridman (2:13:37.960)

There is no second best, as Michael Saylor would say.

Lex Fridman (2:13:41.360)

And money is like that.

Lex Fridman (2:13:42.640)

Gold was a winner take all by the end of the 19th century.

Saifedean Ammous (2:13:46.520)

The global monetary market is effectively

Lex Fridman (2:13:49.160)

a winner take all for the dollar.

Lex Fridman (2:13:51.560)

And if we get it to Bitcoin, you'll know,

Lex Fridman (2:13:54.400)

I also think digital currencies are also going to be

Saifedean Ammous (2:13:57.320)

a winner take all situation.

Lex Fridman (2:13:59.280)

So money wants to be one.

Saifedean Ammous (2:14:01.840)

In fact, there is no such thing as multiple currencies.

Lex Fridman (2:14:04.120)

Multiple currencies is just a step back to barter.

Saifedean Ammous (2:14:07.280)

Money is one.

Lex Fridman (2:14:08.800)

If you go back to a system of several currencies,

Saifedean Ammous (2:14:11.080)

you're just reinventing barter.

Lex Fridman (2:14:13.160)

So in the case of the dollar system,

Saifedean Ammous (2:14:16.160)

the global dollar system is built around the dollar

Lex Fridman (2:14:20.720)

because all central banks have dollar reserves

Lex Fridman (2:14:23.280)

and because all central banks use

Lex Fridman (2:14:24.880)

the dollar's clearing mechanisms.

Lex Fridman (2:14:26.680)

So that's why you're basically playing in the dollar system.

Lex Fridman (2:14:30.440)

This seems to have changed over the last couple of months

Saifedean Ammous (2:14:33.640)

with the sanctions on Russia

Lex Fridman (2:14:35.560)

and the confiscation of Russian reserves.

Saifedean Ammous (2:14:37.760)

It remains to be seen what that's going to do

Lex Fridman (2:14:40.840)

and how that's going to change.

Lex Fridman (2:14:42.520)

But it is looking like this dollar system

Lex Fridman (2:14:47.280)

is clearly unsustainable.

Saifedean Ammous (2:14:48.720)

It's not sustainable for the US.

Lex Fridman (2:14:49.920)

It's not sustainable for anybody.

Saifedean Ammous (2:14:51.840)

Speaking of which, so you do an amazing podcast

Lex Fridman (2:14:56.440)

called the Bitcoin Standard Podcast.

Lex Fridman (2:14:58.680)

So episode 108 of that podcast

Lex Fridman (2:15:01.640)

is about the very thing you just mentioned.

Lex Fridman (2:15:03.920)

And allow me please to read the description of that

Lex Fridman (2:15:06.480)

and then ask you a couple questions

Saifedean Ammous (2:15:07.960)

about your thoughts in general.

Lex Fridman (2:15:09.680)

The description reads,

Saifedean Ammous (2:15:11.120)

after the Russian invasion of Ukraine,

Lex Fridman (2:15:13.600)

the US confiscated the Russian central bank's

Saifedean Ammous (2:15:15.840)

significant monetary reserves

Lex Fridman (2:15:17.640)

and banned some Russian banks from the SWIFT network.

Saifedean Ammous (2:15:20.600)

Serious questions are being asked

Lex Fridman (2:15:22.400)

about the survival of the postwar dollar

Saifedean Ammous (2:15:25.160)

based world monetary order.

Lex Fridman (2:15:28.080)

Will Russia, China and other countries

Saifedean Ammous (2:15:30.080)

actually build an alternative international settlement system

Lex Fridman (2:15:33.320)

after years of threatening to do so?

Saifedean Ammous (2:15:35.240)

Question mark.

Lex Fridman (2:15:36.360)

Will global central banks stop accumulating

Saifedean Ammous (2:15:38.760)

US treasury bonds and replace them

Lex Fridman (2:15:40.800)

with gold and commodities?

Saifedean Ammous (2:15:42.960)

Will we witness the birth of a new commodity

Lex Fridman (2:15:45.240)

gold based monetary order?

Saifedean Ammous (2:15:47.360)

In this seminar, we use the insights

Lex Fridman (2:15:49.600)

from the Bitcoin Standard and the Fiat Standard

Saifedean Ammous (2:15:52.200)

on temporal and spatial salability

Lex Fridman (2:15:54.840)

to explain why reports of the death of the dollar

Lex Fridman (2:15:57.640)

and the emergence of a new gold standard may be exaggerated.

Lex Fridman (2:16:00.840)

So I would love to get your analysis on this situation.

Lex Fridman (2:16:04.720)

What are the fundamentals of it?

Lex Fridman (2:16:06.160)

What is SWIFT?

Lex Fridman (2:16:07.280)

What are the possible future evolutions

Lex Fridman (2:16:09.080)

of the global monetary system?

Saifedean Ammous (2:16:11.280)

Yeah, so SWIFT is the network

Lex Fridman (2:16:12.480)

that the US Federal Reserve uses

Saifedean Ammous (2:16:14.680)

for moving money around the world.

Lex Fridman (2:16:17.880)

So basically the US government can sanction you

Saifedean Ammous (2:16:20.080)

off of SWIFT as they've done with Russian banks,

Lex Fridman (2:16:22.720)

as they've done with Iran,

Lex Fridman (2:16:24.600)

and as they've done with Afghanistan.

Lex Fridman (2:16:27.200)

So effectively, I mean, this is really the catastrophe

Saifedean Ammous (2:16:30.960)

of the current monetary system

Lex Fridman (2:16:32.080)

is that in order to be able to trade

Saifedean Ammous (2:16:34.280)

as a member, as a citizen of your country,

Lex Fridman (2:16:37.320)

you need your monopoly local central bank

Saifedean Ammous (2:16:40.360)

to be on good terms with the US government

Lex Fridman (2:16:42.560)

so that they would let them operate.

Lex Fridman (2:16:44.080)

And this is really like on top of the aspect

Lex Fridman (2:16:48.320)

of the hardness of money,

Saifedean Ammous (2:16:49.480)

this is the other really powerful thing about Bitcoin,

Lex Fridman (2:16:52.880)

which is that it's just purely a technological thing.

Saifedean Ammous (2:16:54.920)

It doesn't matter if you're Russian, if you're Iranian,

Lex Fridman (2:16:57.560)

if you're American, if you're Chinese, it's a technology.

Lex Fridman (2:17:00.200)

And so it's like a spoon or a knife or a car,

Lex Fridman (2:17:03.560)

you operate it properly and it works.

Lex Fridman (2:17:06.120)

And so with Bitcoin, it's the same thing.

Lex Fridman (2:17:07.520)

It doesn't care about your passport.

Saifedean Ammous (2:17:09.320)

If you have the private key, you click send

Lex Fridman (2:17:11.760)

and the money goes, well, it doesn't really go,

Lex Fridman (2:17:14.680)

but effectively it does go anywhere at once

Lex Fridman (2:17:18.040)

and the money can move

Saifedean Ammous (2:17:19.400)

without having to abide by political situations.

Lex Fridman (2:17:22.440)

And the point here is not to bash US foreign policy

Saifedean Ammous (2:17:26.040)

much as that might be deserved.

Lex Fridman (2:17:27.640)

I'm just going to discuss it

Saifedean Ammous (2:17:28.560)

from a kind of technical perspective.

Lex Fridman (2:17:31.080)

It has to be a political system with fiat

Saifedean Ammous (2:17:33.120)

because ultimately it relies on credit.

Lex Fridman (2:17:35.240)

And then the government is the one that has the guns

Lex Fridman (2:17:37.480)

and the government is going to decide

Lex Fridman (2:17:38.760)

who gets to pay their loans anyway.

Lex Fridman (2:17:40.480)

And the government's going to have to make its own rules

Lex Fridman (2:17:46.000)

about who gets to play and who doesn't.

Lex Fridman (2:17:47.880)

And so it has to be political as this kind of fiat system.

Lex Fridman (2:17:52.200)

And when I wrote the Bitcoin standard,

Saifedean Ammous (2:17:56.240)

initially I used to be much more of a gold bug.

Lex Fridman (2:17:58.640)

And in my mind, gold bugs have spent the last 50 years

Saifedean Ammous (2:18:02.600)

saying the global monetary system

Lex Fridman (2:18:04.440)

is going to collapse next week

Lex Fridman (2:18:05.600)

and we're going to go back to a gold standard.

Lex Fridman (2:18:07.720)

And writing the fiat standard gave me

Saifedean Ammous (2:18:10.560)

a very good appreciation for why this hasn't happened

Lex Fridman (2:18:13.560)

and why it's not very likely to happen.

Saifedean Ammous (2:18:15.680)

I think the reason is, as I said earlier,

Lex Fridman (2:18:18.840)

just gold is very expensive to move around

Lex Fridman (2:18:20.760)

and perhaps more importantly,

Lex Fridman (2:18:22.440)

it's very expensive to verify.

Saifedean Ammous (2:18:24.160)

That's really the problem with it.

Lex Fridman (2:18:25.440)

It's very expensive to verify

Saifedean Ammous (2:18:27.120)

that the gold that you're receiving is original gold.

Lex Fridman (2:18:29.480)

So the only way to do this properly

Saifedean Ammous (2:18:32.480)

is to melt the gold bars down and recast them,

Lex Fridman (2:18:35.880)

which is pretty expensive.

Lex Fridman (2:18:37.480)

So we have this situation now where Russia,

Lex Fridman (2:18:40.360)

which is one of the biggest economies in the world

Saifedean Ammous (2:18:42.680)

has been kicked off to varying degrees

Lex Fridman (2:18:45.640)

off the global monetary system

Lex Fridman (2:18:47.320)

and the US has confiscated their reserves.

Lex Fridman (2:18:49.240)

And I don't have political opinions about the war.

Saifedean Ammous (2:18:52.560)

It's not something I'm very familiar with.

Lex Fridman (2:18:54.360)

It's outside of my area of expertise.

Saifedean Ammous (2:18:56.400)

I'm just analyzing the monetary aspects of it.

Lex Fridman (2:18:58.800)

It is, on the one hand,

Saifedean Ammous (2:19:00.720)

whether you think the war is justified

Lex Fridman (2:19:02.960)

or the sanctions are justified

Saifedean Ammous (2:19:04.040)

is not something I can opine on.

Lex Fridman (2:19:08.040)

But the implication of this is that effectively

Saifedean Ammous (2:19:11.040)

the US might be shooting itself in the foot

Lex Fridman (2:19:13.000)

because it's telling everybody in the world,

Saifedean Ammous (2:19:15.480)

your money in our system is not really your money.

Lex Fridman (2:19:18.040)

It's just a token to play in our arcade.

Lex Fridman (2:19:22.120)

And any point in time, if you misbehave,

Lex Fridman (2:19:23.800)

we kick you out of the arcade and we take your tokens.

Lex Fridman (2:19:27.680)

And so, I mean, this is something that China, Russia, Iran

Lex Fridman (2:19:32.120)

and many countries have made a lot of noise about

Saifedean Ammous (2:19:33.720)

over the past decades.

Lex Fridman (2:19:35.080)

It got real this year,

Lex Fridman (2:19:38.280)

but it's been decades of China, Iran and Russia

Lex Fridman (2:19:43.480)

to some extent saying that, you know,

Saifedean Ammous (2:19:44.800)

we wanna build an alternative to the US dollar based system.

Lex Fridman (2:19:48.680)

And yet they haven't.

Lex Fridman (2:19:50.080)

And I think there's very good reasons they haven't.

Lex Fridman (2:19:51.600)

And the reason is, what do you do based on?

Lex Fridman (2:19:54.040)

How do you build it?

Lex Fridman (2:19:55.200)

So you can do a credit based system based on,

Lex Fridman (2:19:57.800)

but then who's gonna be the big boss?

Lex Fridman (2:20:00.480)

Is it gonna be China?

Lex Fridman (2:20:01.400)

Is it gonna be Russia?

Lex Fridman (2:20:02.240)

Is it gonna be Iran?

Lex Fridman (2:20:03.080)

Is it gonna be India?

Lex Fridman (2:20:04.200)

None of these countries wants to be, you know,

Saifedean Ammous (2:20:06.840)

they don't wanna jump out of the US based system

Lex Fridman (2:20:10.400)

to get into somebody else's based system.

Lex Fridman (2:20:12.560)

So China doesn't wanna use a Russian system.

Lex Fridman (2:20:14.440)

Russia doesn't wanna use a Chinese system.

Lex Fridman (2:20:16.520)

And so therefore you can't use

Lex Fridman (2:20:17.840)

their own central bank's currencies.

Saifedean Ammous (2:20:19.520)

Don't you think they have enough leverage,

Lex Fridman (2:20:23.240)

India, China, Russia combined with several other nations

Saifedean Ammous (2:20:27.800)

have enough leverage and incentive

Lex Fridman (2:20:29.920)

to create their own system?

Lex Fridman (2:20:32.040)

So any one player, yes, but if they collaborate.

Lex Fridman (2:20:35.600)

Yeah, but then, okay, so what are you based on?

Lex Fridman (2:20:37.280)

Like who's going to be the boss?

Lex Fridman (2:20:39.620)

Who's going to be the one who can?

Lex Fridman (2:20:40.880)

In this case, China, right?

Lex Fridman (2:20:44.040)

Because China's becoming increasingly

Saifedean Ammous (2:20:45.880)

an economic power in the world.

Lex Fridman (2:20:47.640)

Yeah.

Saifedean Ammous (2:20:48.480)

That's hard to deny.

Lex Fridman (2:20:49.520)

Yes, it's true.

Lex Fridman (2:20:50.360)

And it's the most likely scenario perhaps

Lex Fridman (2:20:52.680)

if we were to witness something like this

Saifedean Ammous (2:20:54.600)

is going to be a Chinese based system.

Lex Fridman (2:20:57.200)

So is it possible to have like a split

Lex Fridman (2:21:00.520)

in what is the driving currency of the world?

Lex Fridman (2:21:04.680)

It's possible, but I don't think it's sustainable.

Saifedean Ammous (2:21:06.840)

Again, money wants to be won.

Lex Fridman (2:21:08.160)

And that's the kind of thing that I argue in that seminar.

Lex Fridman (2:21:10.560)

So we could see this emerge based around the Yuan

Lex Fridman (2:21:13.480)

and likely, I mean, Russia is obviously going to hurt

Saifedean Ammous (2:21:18.200)

economically from what happened

Lex Fridman (2:21:19.600)

from the confiscation of the reserves and from the sanctions.

Lex Fridman (2:21:22.160)

So it's not going to be in a position.

Lex Fridman (2:21:24.600)

And of course, because it's outside of the US based system,

Saifedean Ammous (2:21:27.680)

it's not in the strongest negotiating position

Lex Fridman (2:21:29.760)

with the Chinese.

Lex Fridman (2:21:30.600)

So the Chinese might be able to get them

Lex Fridman (2:21:32.720)

to join their Yuan based system.

Lex Fridman (2:21:34.960)

But I don't think that's sustainable in the long run

Lex Fridman (2:21:36.920)

because these governments can issue their laws

Lex Fridman (2:21:41.120)

and make their designs and then make their monetary systems.

Lex Fridman (2:21:45.080)

But ultimately, there are billions of Chinese people

Lex Fridman (2:21:50.280)

and billions of dollar based people

Lex Fridman (2:21:52.040)

and they're going to want to trade with one another.

Lex Fridman (2:21:53.680)

And the power to want to trade with one another

Lex Fridman (2:21:55.560)

is too strong.

Saifedean Ammous (2:21:56.400)

We can't just split the world economy

Lex Fridman (2:21:58.200)

into two monetary systems that don't trade with one another.

Lex Fridman (2:22:00.720)

So then they're going to want to trade with one another.

Lex Fridman (2:22:02.920)

Or the dark possibility is the inability to trade

Saifedean Ammous (2:22:10.840)

as opposed to being a forcing function for trade.

Lex Fridman (2:22:14.400)

It will become a forcing function for conflict

Saifedean Ammous (2:22:17.720)

in cyberspace and potentially hot war.

Lex Fridman (2:22:20.280)

Yes, this is the scary part of it.

Lex Fridman (2:22:22.560)

And this is basically how World War II happened

Lex Fridman (2:22:24.800)

because there's an old historian who used to say

Saifedean Ammous (2:22:28.280)

when I think his name is Otto Mallory

Lex Fridman (2:22:30.400)

and I quote him in the Bitcoin standard,

Saifedean Ammous (2:22:31.960)

if goods don't cross borders, then bombs will.

Lex Fridman (2:22:35.600)

If people trade with one another,

Saifedean Ammous (2:22:36.760)

they have an incentive for each other's wellbeing

Lex Fridman (2:22:39.280)

and then they have less of an incentive to fight.

Lex Fridman (2:22:42.520)

And it was the death of global trade in the 1930s

Lex Fridman (2:22:45.520)

because of the failure of the fiat system

Saifedean Ammous (2:22:48.680)

that brought about the rise of the populism

Lex Fridman (2:22:52.040)

and the rise of all those leaders that hated each other

Lex Fridman (2:22:54.120)

and helped finance the war and bring it about.

Lex Fridman (2:22:56.240)

So that is the scary possibility.

Lex Fridman (2:22:59.000)

And of course, you can't discount that

Lex Fridman (2:23:00.920)

with all of the escalation that you see,

Saifedean Ammous (2:23:02.560)

that is a possibility that it could turn into a real war.

Lex Fridman (2:23:05.520)

But then even so, I think ultimately,

Saifedean Ammous (2:23:09.120)

you can't fight wars forever.

Lex Fridman (2:23:12.240)

It's going to end at some point.

Lex Fridman (2:23:13.880)

And we're going to be back at square one

Lex Fridman (2:23:15.640)

or well, not square one.

Saifedean Ammous (2:23:16.920)

We're going to be back at the same dilemma

Lex Fridman (2:23:18.240)

of who's going to have the global monetary system.

Lex Fridman (2:23:21.800)

And so one alternative is that what the Chinese

Lex Fridman (2:23:24.560)

and the Russians could do is they could base it

Saifedean Ammous (2:23:27.040)

on a commodity.

Lex Fridman (2:23:28.240)

So a lot of people are now saying,

Saifedean Ammous (2:23:29.320)

well, they're going to base it on copper and corn

Lex Fridman (2:23:32.640)

and agricultural commodities.

Lex Fridman (2:23:35.480)

And that's the analysis of saleability

Lex Fridman (2:23:38.160)

that we discuss in the Bitcoin standard

Lex Fridman (2:23:39.680)

and the fiat standard.

Lex Fridman (2:23:40.880)

I don't think that's workable.

Saifedean Ammous (2:23:42.200)

If you end up basing the monetary system on copper,

Lex Fridman (2:23:44.760)

as we said earlier, it doesn't matter how many governments

Saifedean Ammous (2:23:47.240)

say that we're going to make a new monetary system

Lex Fridman (2:23:50.120)

based on copper grains and nickel and iron and so on.

Saifedean Ammous (2:23:56.440)

It doesn't matter.

Lex Fridman (2:23:57.280)

You're going to have to stockpile those things

Saifedean Ammous (2:24:00.000)

in order to make a market in them.

Lex Fridman (2:24:02.400)

And then if you stockpile those things,

Saifedean Ammous (2:24:03.720)

you're just raising their value,

Lex Fridman (2:24:05.440)

inviting the producers to make more, flood the market.

Saifedean Ammous (2:24:08.800)

I hope they don't try this because it's going to be

Lex Fridman (2:24:10.600)

a devastating, devastating impact on the world economy.

Saifedean Ammous (2:24:15.240)

You're going to have central banks bidding up the price

Lex Fridman (2:24:17.960)

of essential commodities that people need for real uses

Saifedean Ammous (2:24:20.800)

in order to back their currencies with them,

Lex Fridman (2:24:23.000)

and then just incentivizing the producers

Saifedean Ammous (2:24:24.800)

to make more and more and more of it,

Lex Fridman (2:24:26.600)

and then bringing the price back down.

Lex Fridman (2:24:28.040)

So it's going to be a very expensive mistake

Lex Fridman (2:24:29.840)

where we raise the price of copper,

Saifedean Ammous (2:24:31.640)

destroy a lot of industries dependent on copper,

Lex Fridman (2:24:33.840)

and it's not just copper, but also food,

Lex Fridman (2:24:35.600)

and then increase the supply beyond what we need.

Lex Fridman (2:24:38.240)

And the end result is copper miners make out well,

Saifedean Ammous (2:24:41.680)

governments go broke,

Lex Fridman (2:24:43.720)

and we end up with a lot of rust in copper

Saifedean Ammous (2:24:46.240)

in government warehouses.

Lex Fridman (2:24:49.520)

That's why I don't think it works to use commodities

Saifedean Ammous (2:24:54.120)

that are not monetary commodities.

Lex Fridman (2:24:56.360)

Then the question is maybe gold.

Lex Fridman (2:24:58.520)

Can we go back on another gold standard?

Lex Fridman (2:25:00.800)

And I mean, Russia seems to have done that.

Saifedean Ammous (2:25:04.520)

I'm not so sure.

Lex Fridman (2:25:05.600)

It's very difficult to get reliable information.

Saifedean Ammous (2:25:07.640)

I'm trying to look into this more,

Lex Fridman (2:25:10.280)

but they seem to have said that they're fixing

Saifedean Ammous (2:25:13.160)

the price of gold in rubles.

Lex Fridman (2:25:15.200)

So they will buy and sell gold at a fixed ruble rate,

Saifedean Ammous (2:25:18.640)

which effectively means you're on a gold standard.

Lex Fridman (2:25:20.920)

Now, I'm not sure how much, how serious this is,

Lex Fridman (2:25:24.640)

how they've managed to stick to it,

Lex Fridman (2:25:26.440)

but it seems to have stabilized the ruble

Lex Fridman (2:25:28.840)

and in fact brought it back to its pre war level,

Lex Fridman (2:25:31.000)

which I found absolutely astonishing,

Saifedean Ammous (2:25:33.320)

considering all the sanctions going on.

Lex Fridman (2:25:35.920)

But in the short run, it's obviously much better

Saifedean Ammous (2:25:39.720)

than having your currency pegged to nothing.

Lex Fridman (2:25:41.720)

But in the long run,

Saifedean Ammous (2:25:43.200)

I also don't think gold is gonna cut it

Lex Fridman (2:25:45.520)

in the 21st century.

Lex Fridman (2:25:46.720)

Do you think there's any chance they go full gangster move

Lex Fridman (2:25:50.600)

and go into the digital space on the blockchain

Lex Fridman (2:25:54.720)

and go with Bitcoin?

Lex Fridman (2:25:56.880)

I think the point of this discussion is that,

Saifedean Ammous (2:25:59.640)

we run through all these other options,

Lex Fridman (2:26:01.760)

a Chinese based system, why it probably won't work,

Saifedean Ammous (2:26:04.600)

a commodity based system, why it won't work,

Lex Fridman (2:26:06.400)

and a gold based system, why it won't work.

Saifedean Ammous (2:26:08.720)

I think they might have to learn this the wrong way.

Lex Fridman (2:26:12.040)

I mean, the hard way.

Lex Fridman (2:26:13.560)

But eventually, I don't see them doing it now,

Lex Fridman (2:26:16.000)

but eventually I think the winning move

Saifedean Ammous (2:26:18.720)

is going to be to go on a Bitcoin based monetary system.

Lex Fridman (2:26:21.480)

Well, I don't know if everything always has to be

Saifedean Ammous (2:26:23.880)

the hard way.

Lex Fridman (2:26:25.720)

I'd love it not to be, but I mean,

Saifedean Ammous (2:26:28.640)

it doesn't look like there is any kind of desire

Lex Fridman (2:26:31.960)

in China or in Russia to switch to a Bitcoin based system.

Saifedean Ammous (2:26:34.720)

To take a leap to Bitcoin.

Lex Fridman (2:26:36.120)

So unfortunately, I think we're gonna go through

Saifedean Ammous (2:26:39.680)

a few years, maybe many years of learning the lesson

Lex Fridman (2:26:44.200)

the hard way, of trying to accumulate these commodities

Lex Fridman (2:26:46.800)

and seeing the limitations that make them unsuitable

Lex Fridman (2:26:49.200)

as money today.

Saifedean Ammous (2:26:50.440)

One of the things I'm really concerned about

Lex Fridman (2:26:52.280)

is the tension, the amount,

Saifedean Ammous (2:26:55.960)

the increasing amount of hate in the world.

Lex Fridman (2:26:58.000)

Yes.

Lex Fridman (2:26:58.880)

And the increasing amount of power centers in the world

Lex Fridman (2:27:03.480)

between which hate is making a regular appearance.

Lex Fridman (2:27:12.040)

And because the weapons of war are becoming

Lex Fridman (2:27:14.440)

more and more powerful as they have been

Saifedean Ammous (2:27:16.000)

in the past many decades,

Lex Fridman (2:27:19.640)

I'm really concerned about nuclear war.

Lex Fridman (2:27:22.280)

So let us see if Bitcoin can fix this.

Lex Fridman (2:27:25.160)

Yes, Bitcoin fixes all of this.

Saifedean Ammous (2:27:27.280)

The first rule of Bitcoin is if it's a problem,

Lex Fridman (2:27:31.040)

Bitcoin fixes it.

Saifedean Ammous (2:27:32.040)

All right, well I have some personal questions

Lex Fridman (2:27:35.080)

for Bitcoin then, because I have some,

Saifedean Ammous (2:27:37.120)

my life is pretty fucked up, so I'll have to try to see.

Lex Fridman (2:27:40.040)

A quick pause for bathroom breaking, any?

Saifedean Ammous (2:27:41.680)

Sure.

Lex Fridman (2:27:43.120)

Let's return to the basics.

Lex Fridman (2:27:44.800)

What is Bitcoin?

Lex Fridman (2:27:46.400)

We started with what is money, what is Bitcoin?

Saifedean Ammous (2:27:49.320)

We talked about hard money, inflation,

Lex Fridman (2:27:52.400)

fiat, the history of money, the history of war

Saifedean Ammous (2:27:56.800)

in the 20th century, and that takes us

Lex Fridman (2:27:58.640)

into the 21st century.

Lex Fridman (2:28:00.320)

What is Bitcoin?

Lex Fridman (2:28:02.120)

Bitcoin is a software, and it's a distributed software

Saifedean Ammous (2:28:05.800)

to operate peer to peer network between members

Lex Fridman (2:28:09.080)

who are all equal on the network, they're all peers.

Lex Fridman (2:28:11.800)

And what this software does is that it allows you

Lex Fridman (2:28:14.520)

to operate a payment network between those peers,

Lex Fridman (2:28:19.400)

and that payment network has its own currency.

Lex Fridman (2:28:22.360)

And that seems like just a simple software game,

Lex Fridman (2:28:26.320)

but the reason this is such a big deal is,

Lex Fridman (2:28:28.680)

I believe Bitcoin is the most advanced form

Saifedean Ammous (2:28:30.760)

of money ever invented.

Lex Fridman (2:28:32.440)

And the reason for that comes from two properties

Saifedean Ammous (2:28:34.880)

that this network has.

Lex Fridman (2:28:36.840)

The first one is that the currency

Saifedean Ammous (2:28:39.320)

is the hardest money ever invented.

Lex Fridman (2:28:41.720)

It's the money whose supply is the most resistant

Saifedean Ammous (2:28:44.800)

to inflation.

Lex Fridman (2:28:45.960)

It's the first monetary asset that we've ever invented

Saifedean Ammous (2:28:49.040)

that is guaranteed to be fixed in its supply,

Lex Fridman (2:28:52.120)

that cannot be increased beyond a certain number.

Lex Fridman (2:28:54.600)

So there's only ever going to be 21 million Bitcoins.

Lex Fridman (2:28:56.960)

And that's a qualitative leap forward

Saifedean Ammous (2:29:00.600)

in our technologies of money.

Lex Fridman (2:29:02.640)

All of our monies leak, essentially,

Saifedean Ammous (2:29:05.560)

because people can always make more and more and more of them.

Lex Fridman (2:29:08.400)

You know, the best money is the one that leaks the least,

Saifedean Ammous (2:29:11.040)

which is gold, because it only leaks one and a half percent.

Lex Fridman (2:29:13.800)

In other words, your share of the gold stock

Saifedean Ammous (2:29:17.840)

is diluted by one and a half percent every year.

Lex Fridman (2:29:21.200)

Ideally, you'd like it to be zero.

Saifedean Ammous (2:29:23.240)

Bitcoin is currently at around 1.8% headed towards zero.

Lex Fridman (2:29:27.480)

So it's the first money that we've ever had

Saifedean Ammous (2:29:29.200)

that goes to zero in terms of terminal supply.

Lex Fridman (2:29:31.960)

So there'll never be more than 21 million Bitcoin.

Saifedean Ammous (2:29:34.640)

I think that's a huge deal because, you know,

Lex Fridman (2:29:36.880)

as I said earlier, money is always whatever

Saifedean Ammous (2:29:39.560)

is the hardest to make,

Lex Fridman (2:29:40.480)

and now Bitcoin is the hardest thing to make.

Lex Fridman (2:29:43.240)

And then the second property,

Lex Fridman (2:29:44.520)

which is extremely important as well,

Saifedean Ammous (2:29:46.800)

is the fact that it operates without the need

Lex Fridman (2:29:50.200)

to trust in anybody.

Saifedean Ammous (2:29:51.560)

It doesn't have a party that is in charge of it.

Lex Fridman (2:29:54.040)

It doesn't have a central authority that can,

Saifedean Ammous (2:29:57.080)

you know, as I said, it's peer to peer.

Lex Fridman (2:29:58.720)

So it only has users.

Saifedean Ammous (2:30:00.560)

It doesn't have any admins.

Lex Fridman (2:30:02.440)

There's no authority in charge of Bitcoin

Saifedean Ammous (2:30:04.720)

that can take your Bitcoin,

Lex Fridman (2:30:05.840)

that can stop you from using Bitcoin,

Saifedean Ammous (2:30:08.200)

that can change the rules of Bitcoin.

Lex Fridman (2:30:09.600)

They can't make more of it.

Lex Fridman (2:30:11.080)

So it's fixed.

Lex Fridman (2:30:12.800)

It's available for anybody in the world.

Saifedean Ammous (2:30:15.160)

It's the hardest money ever invented.

Lex Fridman (2:30:17.200)

And it is absolutely, I think, an enormously,

Saifedean Ammous (2:30:21.920)

enormously significant invention

Lex Fridman (2:30:23.520)

because if you read the fiat standard

Lex Fridman (2:30:26.440)

and the Bitcoin standard as well,

Lex Fridman (2:30:28.600)

you'll see my perspective for why I think

Saifedean Ammous (2:30:31.200)

a very large number of problems in the world

Lex Fridman (2:30:34.520)

are caused by easy money, are caused by inflation,

Lex Fridman (2:30:38.320)

and caused by government having access to essentially

Lex Fridman (2:30:41.840)

an infinite recourse to people's wealth.

Lex Fridman (2:30:45.880)

And I think Bitcoin fixes this

Lex Fridman (2:30:47.840)

because it allows us to have money

Saifedean Ammous (2:30:51.440)

that has the salability of gold across time,

Lex Fridman (2:30:54.440)

meaning it holds its value across time like gold,

Lex Fridman (2:30:57.280)

but much better than gold.

Lex Fridman (2:30:58.720)

But also it is similar to fiat

Saifedean Ammous (2:31:01.800)

in that fiat can travel quickly,

Lex Fridman (2:31:03.840)

but Bitcoin can travel even faster than fiat.

Lex Fridman (2:31:06.080)

So it combines gold's salability across time

Lex Fridman (2:31:11.400)

with fiat's salability across space

Saifedean Ammous (2:31:14.000)

in one immutable package that nobody can change

Lex Fridman (2:31:17.200)

and nobody can control.

Lex Fridman (2:31:18.280)

Can you define the word salability?

Lex Fridman (2:31:20.120)

Salability is the essential property of money.

Saifedean Ammous (2:31:22.960)

It's the ability of a good to be sold easily on the market,

Lex Fridman (2:31:28.520)

specifically to be sold without much loss in its value.

Lex Fridman (2:31:31.200)

So houses are great for living in,

Lex Fridman (2:31:33.560)

but they're not very salable.

Saifedean Ammous (2:31:35.040)

If you wanna sell a house,

Lex Fridman (2:31:36.680)

you can just click a button and sell a house

Lex Fridman (2:31:38.600)

and have a giant market of people buying houses from you.

Lex Fridman (2:31:41.880)

You need to find somebody

Saifedean Ammous (2:31:45.000)

who wants the exact house that you have

Lex Fridman (2:31:46.720)

with the exact specifications that you have.

Lex Fridman (2:31:48.800)

And because houses are not identical,

Lex Fridman (2:31:50.480)

there's no liquid giant market

Saifedean Ammous (2:31:52.160)

for people to just buy and sell identical houses from.

Lex Fridman (2:31:56.400)

So gold, for instance, has good salability as money

Saifedean Ammous (2:32:01.640)

because it's a liquid good, it's uniform,

Lex Fridman (2:32:03.880)

and people are always buying it.

Saifedean Ammous (2:32:06.040)

Fiat dollars have great salability

Lex Fridman (2:32:08.200)

because everybody's always buying

Lex Fridman (2:32:09.880)

and exchanging dollars for other goods.

Lex Fridman (2:32:11.960)

So if you have $100 bill, you can easily get rid of it

Lex Fridman (2:32:15.320)

and you'll get $100 worth of stuff for it.

Lex Fridman (2:32:18.000)

If you have $100 worth of stuff,

Saifedean Ammous (2:32:20.880)

it's harder to get rid of it.

Lex Fridman (2:32:22.000)

If you have $100 worth of phone,

Saifedean Ammous (2:32:24.600)

it's not as easy to spend it as a $100 bill.

Lex Fridman (2:32:26.960)

That's salability.

Lex Fridman (2:32:28.400)

What do you mean that Bitcoin,

Lex Fridman (2:32:31.000)

I understand that Bitcoin has the salability

Saifedean Ammous (2:32:33.280)

of gold across time.

Lex Fridman (2:32:35.280)

Better even, yeah.

Saifedean Ammous (2:32:36.360)

Better, yes, like on the order or whatever.

Lex Fridman (2:32:39.360)

And then it has the salability of fiat across space.

Lex Fridman (2:32:42.880)

What does that mean?

Lex Fridman (2:32:43.800)

So if you remember when you asked me

Lex Fridman (2:32:44.760)

what is the advantage of fiat,

Lex Fridman (2:32:46.200)

what is the advantage it offers us,

Saifedean Ammous (2:32:48.160)

it's cheaper to move fiat across space

Lex Fridman (2:32:50.880)

than it is to move gold.

Saifedean Ammous (2:32:52.400)

With the current fiat monetary system,

Lex Fridman (2:32:54.800)

for all of its flaws, you can send money,

Saifedean Ammous (2:32:58.360)

I could send money from my bank account in the US

Lex Fridman (2:33:01.240)

to a bank account in China in a couple of days,

Saifedean Ammous (2:33:05.280)

or in Britain, in France, in a day or two,

Lex Fridman (2:33:08.920)

which is much faster than you could do with gold

Lex Fridman (2:33:10.960)

and much cheaper than you could do with gold.

Lex Fridman (2:33:13.440)

But in reality, with fiat,

Saifedean Ammous (2:33:16.400)

the reason Bitcoin improves on that

Lex Fridman (2:33:17.800)

is that with Bitcoin, you're actually selling,

Saifedean Ammous (2:33:19.560)

you're sending final settlement in a couple of hours.

Lex Fridman (2:33:23.000)

So you send the Bitcoin transaction,

Saifedean Ammous (2:33:24.360)

you get six confirmations in an hour,

Lex Fridman (2:33:26.480)

you get about 12 confirmations in two hours on average.

Saifedean Ammous (2:33:29.800)

With 12 confirmations, you're pretty definitely

Lex Fridman (2:33:34.320)

clearly safe on this.

Lex Fridman (2:33:36.560)

So within a couple of hours,

Lex Fridman (2:33:38.360)

you could send a billion dollars across the ocean

Lex Fridman (2:33:41.080)

and have final settlement on them.

Lex Fridman (2:33:44.040)

It's not just that you've sent a credit obligation

Saifedean Ammous (2:33:46.600)

that's gonna need weeks and months to settle,

Lex Fridman (2:33:49.080)

which is the case with fiat.

Lex Fridman (2:33:51.040)

So it is faster than fiat, effectively.

Lex Fridman (2:33:54.040)

So it's harder than gold and faster than fiat.

Saifedean Ammous (2:33:56.960)

That's a good way of putting it.

Lex Fridman (2:34:00.240)

One other aspect of Bitcoin I have to ask,

Saifedean Ammous (2:34:04.040)

to me on a human level, it's fascinating,

Lex Fridman (2:34:06.680)

is it was founded by Satoshi Nakamoto,

Saifedean Ammous (2:34:09.760)

an anonymous founder, there's no leader.

Lex Fridman (2:34:12.000)

So that's another aspect of the decentralization

Saifedean Ammous (2:34:14.960)

is leaderless.

Lex Fridman (2:34:16.280)

Yeah.

Lex Fridman (2:34:17.160)

So unfortunately, it's not a monarchy.

Lex Fridman (2:34:19.560)

Fortunately.

Saifedean Ammous (2:34:20.400)

Or fortunately, yes.

Lex Fridman (2:34:22.160)

Who is Satoshi Nakamoto, do you think?

Lex Fridman (2:34:24.560)

And first of all, is it you?

Lex Fridman (2:34:26.680)

It definitely is not me.

Saifedean Ammous (2:34:29.400)

I don't know who it is.

Lex Fridman (2:34:30.440)

If it was, would you tell me?

Saifedean Ammous (2:34:32.040)

That's a trick question.

Lex Fridman (2:34:34.360)

Yeah, I know, trick question.

Lex Fridman (2:34:35.560)

But I mean, everybody who knows me knows

Lex Fridman (2:34:37.040)

I can't read the code.

Lex Fridman (2:34:38.040)

So you would say that even if you could.

Lex Fridman (2:34:42.440)

But that's true.

Lex Fridman (2:34:43.320)

Do you think it's one person?

Lex Fridman (2:34:44.440)

Do you think it's multiple people?

Lex Fridman (2:34:45.640)

Is it interesting to you?

Lex Fridman (2:34:47.000)

Do you think it's fundamental to the coin itself

Saifedean Ammous (2:34:49.520)

to not to coin the entirety of the concept

Lex Fridman (2:34:54.120)

that it's founders and animus?

Lex Fridman (2:34:56.240)

And how much guts do you think it takes

Lex Fridman (2:34:58.640)

if it's one person to just walk away from so much money?

Saifedean Ammous (2:35:02.320)

I've considered all these questions many times.

Lex Fridman (2:35:04.720)

It's very hard to formulate a definitive answer

Saifedean Ammous (2:35:07.720)

to all of them.

Lex Fridman (2:35:09.160)

I don't know who it is.

Lex Fridman (2:35:10.120)

And I don't know why he or them or she

Lex Fridman (2:35:15.640)

are not spending the coins that they most likely have.

Saifedean Ammous (2:35:19.960)

I think what really matters in Bitcoin about Satoshi

Lex Fridman (2:35:23.040)

is the fact that he's not there.

Lex Fridman (2:35:24.920)

And this is what's truly astonishing about it.

Lex Fridman (2:35:28.040)

The most important fact in Bitcoin

Saifedean Ammous (2:35:29.720)

is the fact that the creators disappeared

Lex Fridman (2:35:31.800)

and the thing has continued to operate now

Saifedean Ammous (2:35:33.440)

for almost 12 years without him being there

Lex Fridman (2:35:35.560)

or 11 years I think it's been since he's left.

Lex Fridman (2:35:38.880)

And this is really the most important thing.

Lex Fridman (2:35:41.120)

And maybe he died or she died

Saifedean Ammous (2:35:44.520)

or they got into an accident on a road trip or whatever

Lex Fridman (2:35:49.440)

and that's why they haven't accessed their coins.

Saifedean Ammous (2:35:51.240)

Maybe they're incapacitated for some reason.

Lex Fridman (2:35:54.040)

But whatever reason it is,

Saifedean Ammous (2:35:55.960)

I really think it's fate or serendipity

Lex Fridman (2:36:00.560)

that has given us this very vital,

Saifedean Ammous (2:36:04.520)

very, very, very vital building ingredient in Bitcoin

Lex Fridman (2:36:07.960)

which no other digital currency would ever recreate,

Saifedean Ammous (2:36:11.120)

which is that because it was the first,

Lex Fridman (2:36:14.760)

it was the one that was able to establish

Saifedean Ammous (2:36:17.360)

the first mover advantage and get all of the people

Lex Fridman (2:36:19.520)

who are interested in the technology to get into it.

Lex Fridman (2:36:22.160)

And so that's an enormous advantage,

Lex Fridman (2:36:23.760)

but the cherry on top or what made the whole thing

Saifedean Ammous (2:36:28.760)

really function well is the fact

Lex Fridman (2:36:31.800)

that the guy who made it disappeared

Lex Fridman (2:36:33.760)

and that it continued to operate,

Lex Fridman (2:36:35.280)

which is just a clear illustration

Saifedean Ammous (2:36:37.440)

that this is a network with no admins.

Lex Fridman (2:36:39.760)

And I'm tempted to think that they're incapacitated

Saifedean Ammous (2:36:42.400)

in some way, probably dead or gone

Lex Fridman (2:36:44.160)

because I can't believe the,

Saifedean Ammous (2:36:48.200)

I don't believe any human being

Lex Fridman (2:36:50.040)

would have this level of self control

Saifedean Ammous (2:36:52.240)

to not get into, not want to meddle

Lex Fridman (2:36:55.520)

with their invention so much, even if they,

Saifedean Ammous (2:37:00.760)

they might have had the self control

Lex Fridman (2:37:01.920)

to like mine the first million coins

Saifedean Ammous (2:37:03.480)

to get the network going and then throw away the coins

Lex Fridman (2:37:05.880)

or send them to an address

Saifedean Ammous (2:37:07.040)

that they don't have the key to

Lex Fridman (2:37:10.160)

because they really just wanted the network to take off.

Saifedean Ammous (2:37:12.160)

They may have no access to the coins

Lex Fridman (2:37:14.200)

and that's why they can't move them.

Saifedean Ammous (2:37:15.480)

I could see that happening,

Lex Fridman (2:37:17.000)

but I find it harder to believe

Saifedean Ammous (2:37:18.240)

that they would resist the temptation

Lex Fridman (2:37:20.320)

to mess with the network.

Saifedean Ammous (2:37:21.880)

You know, it's funny, I find that the founders of ideas

Lex Fridman (2:37:25.320)

are often principled and have the integrity

Saifedean Ammous (2:37:29.600)

that the eventual users of those ideas don't fully have.

Lex Fridman (2:37:35.600)

I tend to, you know, we have the kind of cynical view,

Saifedean Ammous (2:37:38.480)

power corrupts, absolute power corrupts absolutely.

Lex Fridman (2:37:41.320)

And we tend to, in our mind,

Saifedean Ammous (2:37:42.720)

generalize that all humans are corruptible.

Lex Fridman (2:37:45.640)

And perhaps that's true to some degree,

Lex Fridman (2:37:47.680)

but I think some people are more corruptible than others.

Lex Fridman (2:37:51.240)

And I find that there is, I mean,

Saifedean Ammous (2:37:53.480)

I like to think that Satoshi Nakamoto's out there

Lex Fridman (2:37:58.000)

and, you know, just like George Washington

Saifedean Ammous (2:38:00.720)

chose to walk away and it's a principle.

Lex Fridman (2:38:03.320)

And the principle is more powerful

Saifedean Ammous (2:38:05.160)

than the financial reward or any of those kinds of things.

Lex Fridman (2:38:10.160)

It's a principle that stands for freedom.

Lex Fridman (2:38:12.360)

And there's a lot of people throughout history,

Lex Fridman (2:38:14.000)

even recent history,

Saifedean Ammous (2:38:14.920)

that are willing to die for these principles

Lex Fridman (2:38:18.120)

or live a life full of suffering and sacrifice

Saifedean Ammous (2:38:23.120)

because they're still living a life of principle

Lex Fridman (2:38:27.000)

and choosing that day after day after day.

Saifedean Ammous (2:38:29.160)

So, I mean, there's power to that.

Lex Fridman (2:38:31.400)

Money, what's the worth of money in the end?

Saifedean Ammous (2:38:35.080)

In terms of just personal financial gain

Lex Fridman (2:38:37.940)

versus knowing how much positive impact there is.

Lex Fridman (2:38:43.360)

So the person that chooses to walk away like that,

Lex Fridman (2:38:46.240)

I think is the same kind of person

Saifedean Ammous (2:38:47.560)

that chooses to live by that principle.

Lex Fridman (2:38:52.560)

You have people like that, you know,

Saifedean Ammous (2:38:53.960)

in Grigori Grisha Perlman in mathematics

Lex Fridman (2:38:58.280)

who turned down the Fields Medal because he was.

Saifedean Ammous (2:39:01.760)

Yeah, that's a medal, not $50 billion of Bitcoin.

Lex Fridman (2:39:05.640)

Well, that's, I.

Saifedean Ammous (2:39:06.820)

No, I know, I know, I'm joking.

Lex Fridman (2:39:08.240)

Well, that's actually an interesting, just a brief comment.

Saifedean Ammous (2:39:10.920)

You know, when people talk about Bitcoin

Lex Fridman (2:39:12.640)

in the cryptocurrency space,

Saifedean Ammous (2:39:14.440)

that it's often mixed up financial interest and ideas.

Lex Fridman (2:39:19.440)

And I think those are often correlated,

Lex Fridman (2:39:24.360)

but that good feeling you get when you win

Lex Fridman (2:39:27.600)

or number go up or you just,

Saifedean Ammous (2:39:31.680)

just somebody, you know,

Lex Fridman (2:39:32.860)

I found 20 bucks on the street the other day.

Lex Fridman (2:39:35.760)

And just that feeling of just like,

Lex Fridman (2:39:38.120)

ooh, like more money, that positive feeling,

Saifedean Ammous (2:39:41.380)

that's correlated, but it is distinct

Lex Fridman (2:39:44.360)

from the power of the idea to change a world,

Saifedean Ammous (2:39:47.480)

to change the world for the better.

Lex Fridman (2:39:49.120)

For the, to alleviate, it's like Alex Gladstein,

Saifedean Ammous (2:39:51.560)

in the case of Bitcoin,

Lex Fridman (2:39:53.000)

that decreased the amount of suffering in the world

Saifedean Ammous (2:39:55.200)

because of the authoritarian regimes.

Lex Fridman (2:39:56.760)

And just because your number goes up

Saifedean Ammous (2:40:00.320)

like that gambling feeling of like, yes, yes, this is good.

Lex Fridman (2:40:04.200)

And I mean, short term number go up.

Saifedean Ammous (2:40:07.160)

There's a long term number go up

Lex Fridman (2:40:08.520)

that's more like investment and so on.

Lex Fridman (2:40:10.800)

And there's a short term number go up

Lex Fridman (2:40:12.120)

that's just a good feeling that you can't,

Saifedean Ammous (2:40:14.520)

you have to, in your mind, keep those distinct

Lex Fridman (2:40:16.720)

from the power of the idea to transform the world.

Lex Fridman (2:40:21.320)

And if you focus on the power of the idea,

Lex Fridman (2:40:24.200)

maybe a billion or billions of dollars don't matter as much.

Saifedean Ammous (2:40:28.840)

At least that's what I would like to believe.

Lex Fridman (2:40:30.400)

Perhaps, but what matters ultimately

Saifedean Ammous (2:40:32.640)

is that the thing works without him.

Lex Fridman (2:40:34.280)

The thing's worked for 11 years without him.

Lex Fridman (2:40:35.880)

And I think this is the really important thing.

Lex Fridman (2:40:38.720)

If they had stuck around for whatever reason

Lex Fridman (2:40:41.680)

and they had continued to meddle with it,

Lex Fridman (2:40:43.800)

it's not clear to me how decentralized

Saifedean Ammous (2:40:46.360)

it could have been.

Lex Fridman (2:40:47.760)

This is the problem with the other currencies.

Saifedean Ammous (2:40:49.320)

It's like, how do you lose control

Lex Fridman (2:40:52.560)

of the Frankenstein that you've created?

Saifedean Ammous (2:40:54.680)

The only way that this Frankenstein continues to survive

Lex Fridman (2:40:57.160)

is if the person in charge of it continues to feed it.

Lex Fridman (2:41:00.240)

And so it continues to be yours.

Lex Fridman (2:41:02.640)

And that's the problem

Saifedean Ammous (2:41:03.560)

with all the other digital currencies.

Lex Fridman (2:41:05.200)

If you've heard about any of the other 16,000

Saifedean Ammous (2:41:07.320)

digital currencies out there,

Lex Fridman (2:41:09.120)

you've only heard about it

Saifedean Ammous (2:41:10.040)

because there's a small group of people behind it

Lex Fridman (2:41:11.920)

that are working on it, that are promoting it.

Lex Fridman (2:41:14.440)

And that's why, and I think Michael Saylor's discussion

Lex Fridman (2:41:17.080)

with you was a magnificent illustration

Saifedean Ammous (2:41:19.560)

of the difference between Bitcoin and altcoins

Lex Fridman (2:41:23.000)

in that they are securities.

Lex Fridman (2:41:24.800)

And I think he makes a very compelling, brilliant case

Lex Fridman (2:41:27.240)

for why this makes them categorically different

Saifedean Ammous (2:41:31.920)

from Bitcoin.

Lex Fridman (2:41:32.760)

Bitcoin, you're buying property.

Saifedean Ammous (2:41:34.680)

I think he mentioned he's a huge fan of Dogecoin,

Lex Fridman (2:41:36.840)

but I might be misremembering.

Saifedean Ammous (2:41:38.120)

You are misremembering.

Lex Fridman (2:41:39.200)

Okay, me too.

Saifedean Ammous (2:41:40.520)

Maybe I'm quoting him out of context.

Lex Fridman (2:41:42.840)

Okay, let me just ask you about some possible criticisms

Saifedean Ammous (2:41:47.800)

of Bitcoin.

Lex Fridman (2:41:49.080)

So on centralization, so there's a criticism

Saifedean Ammous (2:41:52.480)

on the mining and on the node side,

Lex Fridman (2:41:55.960)

or the node is not really the criticism,

Lex Fridman (2:41:58.000)

but Bitcoin mining is not fully decentralized

Lex Fridman (2:42:00.920)

because a small number of miners control a majority

Saifedean Ammous (2:42:04.600)

of the hashing power.

Lex Fridman (2:42:06.160)

I looked it up, there's 10,000, 15,000,

Saifedean Ammous (2:42:08.360)

whatever the number is of computers that are full nodes,

Lex Fridman (2:42:11.880)

that have the full, that are actively connected

Saifedean Ammous (2:42:15.640)

to the network.

Lex Fridman (2:42:16.640)

So you could argue that's decentralized

Saifedean Ammous (2:42:18.320)

because it's global, it's all across the world,

Lex Fridman (2:42:20.440)

but the miners, they're still, it's more centralized.

Lex Fridman (2:42:25.560)

So if you're thinking of making a case

Lex Fridman (2:42:27.360)

for Bitcoin being decentralized,

Lex Fridman (2:42:30.200)

do you worry about the miners being somewhat centralized?

Lex Fridman (2:42:34.400)

Is the nodes the important thing to think about?

Saifedean Ammous (2:42:37.400)

Yeah.

Lex Fridman (2:42:38.240)

And what number of nodes counts as centralized

Lex Fridman (2:42:40.800)

and not?

Lex Fridman (2:42:42.280)

The nodes are what matters because the nodes

Saifedean Ammous (2:42:43.960)

are what determines Bitcoin's consensus parameters.

Lex Fridman (2:42:46.720)

I think the best way to think about it is that miners

Saifedean Ammous (2:42:51.760)

simply sell a commodity to the nodes

Lex Fridman (2:42:54.720)

and that commodity is Bitcoin blocks.

Lex Fridman (2:42:56.920)

So what a miner does is they solve the proof of work problem

Lex Fridman (2:43:00.360)

so they keep operating their computers

Saifedean Ammous (2:43:02.280)

until they can get a solution to the problem.

Lex Fridman (2:43:04.880)

And then they attach that to a bunch of transactions

Lex Fridman (2:43:07.000)

and present it to the nodes for the nodes to ratify

Lex Fridman (2:43:10.160)

and approve it.

Lex Fridman (2:43:11.480)

So therefore, this is, and this is,

Lex Fridman (2:43:14.280)

I strongly recommend people learn about the 2017 block size

Saifedean Ammous (2:43:18.520)

war to understand why miners don't control Bitcoin.

Lex Fridman (2:43:21.680)

I discussed this briefly in my Bitcoin standard,

Lex Fridman (2:43:25.080)

but there's a recent book that discusses this in detail

Lex Fridman (2:43:27.760)

called The Block Size War by Jonathan Beer.

Saifedean Ammous (2:43:30.640)

It's a great description of, in 2017,

Lex Fridman (2:43:33.800)

essentially the miners thought that they can control Bitcoin.

Saifedean Ammous (2:43:36.200)

You know, they had, there was one mining company

Lex Fridman (2:43:39.640)

that produced the majority of the machines

Saifedean Ammous (2:43:42.360)

that were on the network and they,

Lex Fridman (2:43:44.720)

and their allies had control of the machines

Saifedean Ammous (2:43:48.320)

that were out there and they controlled the majority

Lex Fridman (2:43:51.280)

of the hash rate and they thought that they could change

Saifedean Ammous (2:43:53.000)

Bitcoin's supply, not supply, sorry,

Lex Fridman (2:43:55.880)

they could change Bitcoin's block size,

Saifedean Ammous (2:43:57.760)

which is a tiny little detail, technical parameters,

Lex Fridman (2:44:01.960)

not even all that big of a deal for the economics of it.

Lex Fridman (2:44:05.400)

But they thought that they could pass this change,

Lex Fridman (2:44:08.280)

they could force this change on the network.

Lex Fridman (2:44:10.560)

And the members of the network rejected it

Lex Fridman (2:44:13.760)

and they weren't able to do it.

Lex Fridman (2:44:15.160)

So the nodes are what is sovereign.

Lex Fridman (2:44:17.560)

The nodes are what determine the rules of the game.

Saifedean Ammous (2:44:20.360)

The miners are a service provider.

Lex Fridman (2:44:23.520)

The miners invest capital upfront.

Saifedean Ammous (2:44:25.920)

You know, they buy the machines, they buy the electricity,

Lex Fridman (2:44:28.960)

they buy the storage, they buy the locations,

Saifedean Ammous (2:44:31.560)

they pay the rent, and they invest all of that money

Lex Fridman (2:44:34.720)

based on the idea that if they behave according

Saifedean Ammous (2:44:38.360)

to what the nodes want,

Lex Fridman (2:44:39.840)

the nodes will reward them with Bitcoin.

Lex Fridman (2:44:42.160)

So the miners are in no position

Lex Fridman (2:44:43.600)

to dictate terms for anyone.

Saifedean Ammous (2:44:45.040)

You know, they've put up their capital upfront

Lex Fridman (2:44:47.800)

and they will only recoup it if they do what the nodes want.

Lex Fridman (2:44:51.640)

So therefore what really matters

Lex Fridman (2:44:53.320)

is the decentralization of the nodes.

Lex Fridman (2:44:54.880)

So we wanna, you wanna have as many nodes as possible.

Lex Fridman (2:44:57.920)

You should, you wanna have a system

Saifedean Ammous (2:44:59.840)

where there's a large number of nodes.

Lex Fridman (2:45:01.920)

And this is of course the biggest problem

Saifedean Ammous (2:45:04.360)

with other digital currencies is that, you know,

Lex Fridman (2:45:08.720)

because basically Bitcoin has cornered the market

Saifedean Ammous (2:45:11.200)

on a digital currency,

Lex Fridman (2:45:13.040)

the only way that you can really get traction

Saifedean Ammous (2:45:16.240)

is to generate a whole bunch of buzzwords

Lex Fridman (2:45:18.120)

about, you know, we're doing this and we're doing that.

Lex Fridman (2:45:20.480)

And so other digital currencies are optimized

Lex Fridman (2:45:23.760)

for bells and whistles and buzzwords.

Lex Fridman (2:45:27.920)

And that means adding computational load,

Lex Fridman (2:45:30.760)

which makes the nodes bigger, harder to operate,

Lex Fridman (2:45:33.640)

and therefore you have a very small number of nodes.

Lex Fridman (2:45:35.680)

In fact, very few digital currencies are keen

Saifedean Ammous (2:45:39.840)

to publicize how many nodes there are,

Lex Fridman (2:45:42.040)

and they don't have full nodes in the true sense.

Lex Fridman (2:45:44.360)

And it doesn't even matter how many nodes they have

Lex Fridman (2:45:46.560)

because de facto, you know, you can spin up a million nodes

Saifedean Ammous (2:45:53.120)

tomorrow on AWS, doesn't really matter.

Lex Fridman (2:45:57.120)

What matters is de facto do the nodes dictate

Saifedean Ammous (2:46:00.280)

the rules of consensus.

Lex Fridman (2:46:02.240)

And the fact that with most digital currencies

Saifedean Ammous (2:46:03.960)

you can have hard forks very frequently

Lex Fridman (2:46:06.160)

and they can change the supply all the time

Saifedean Ammous (2:46:08.200)

means that there's a small group of people

Lex Fridman (2:46:09.600)

who agree amongst themselves how to move forward.

Saifedean Ammous (2:46:11.880)

Yeah, so you threw in a few criticisms of all coins there.

Lex Fridman (2:46:15.320)

So one is the small group.

Saifedean Ammous (2:46:17.200)

That one we could talk about.

Lex Fridman (2:46:18.760)

It's a tricky one, and we talked about that

Saifedean Ammous (2:46:21.320)

with Satoshi Nakamoto.

Lex Fridman (2:46:22.680)

But the other one is small number of nodes

Saifedean Ammous (2:46:25.720)

sort of to push back on that.

Lex Fridman (2:46:27.320)

As computational power increases,

Saifedean Ammous (2:46:29.000)

you can argue that that enables more and more

Lex Fridman (2:46:32.600)

cheap computers to serve as nodes.

Lex Fridman (2:46:35.720)

So at least it paints a future

Lex Fridman (2:46:38.000)

where nodes are always increasing

Saifedean Ammous (2:46:40.120)

because computational power is always increasing

Lex Fridman (2:46:42.400)

and getting cheaper and cheaper and cheaper.

Lex Fridman (2:46:44.560)

So at least there's a hope for the future

Lex Fridman (2:46:46.160)

for greater and greater decentralization

Saifedean Ammous (2:46:49.120)

on the node front.

Lex Fridman (2:46:50.440)

Yeah, but I mean, ultimately, again,

Saifedean Ammous (2:46:52.840)

it doesn't really matter how many nodes you have

Lex Fridman (2:46:55.440)

if the way that the currency is run

Saifedean Ammous (2:46:59.520)

is that you're gonna have a hard fork every few months,

Lex Fridman (2:47:01.720)

which is the case with most other currencies.

Saifedean Ammous (2:47:03.520)

Bitcoin's the only one that's not have a hard fork.

Lex Fridman (2:47:07.120)

Basically, the unique thing about Bitcoin

Saifedean Ammous (2:47:10.160)

in a technical sense is that you could get

Lex Fridman (2:47:12.200)

the original software that Satoshi himself ran in 2009

Saifedean Ammous (2:47:16.840)

to start the network.

Lex Fridman (2:47:18.520)

And you could run it today

Lex Fridman (2:47:21.680)

and it would sync with the blockchain.

Lex Fridman (2:47:23.160)

There's one bug you need to fix,

Saifedean Ammous (2:47:25.400)

one mistake that would have only appeared

Lex Fridman (2:47:28.440)

I think in around 2013 or 14 or something like that,

Lex Fridman (2:47:31.560)

so that he wasn't aware of back then.

Lex Fridman (2:47:33.000)

So you just need to fix this one tiny little bug.

Lex Fridman (2:47:35.480)

And then the consensus parameters are still the same.

Lex Fridman (2:47:37.640)

So you're able to sync to it.

Saifedean Ammous (2:47:39.360)

This is not true for most other digital currencies.

Lex Fridman (2:47:41.480)

I'd say probably all of them

Saifedean Ammous (2:47:42.880)

because they've all had many hard forks,

Lex Fridman (2:47:44.840)

which they think of as upgrades.

Lex Fridman (2:47:46.320)

And they market this thing as,

Lex Fridman (2:47:49.360)

well, Bitcoin can't upgrade, but we upgrade all the time.

Lex Fridman (2:47:52.440)

Well, yeah, you know what else upgrades all the time?

Lex Fridman (2:47:55.240)

Facebook, Apple, Amazon,

Saifedean Ammous (2:47:57.160)

anything that centralizes is very easy to upgrade.

Lex Fridman (2:47:59.360)

And that's precisely why, as Michael Saylor says,

Saifedean Ammous (2:48:01.400)

these things are somebody's liability.

Lex Fridman (2:48:03.640)

They are security.

Saifedean Ammous (2:48:04.600)

You're carrying on somebody's technical

Lex Fridman (2:48:07.120)

and economic liability.

Saifedean Ammous (2:48:08.720)

They can hard fork, they can 10x the supply tomorrow.

Lex Fridman (2:48:12.680)

Yeah, they can fall victim to the same corrupting forces

Saifedean Ammous (2:48:19.680)

that governments fall victim to.

Lex Fridman (2:48:21.800)

Sure, and for people who don't know,

Saifedean Ammous (2:48:22.960)

yeah, hard fork is a reverse incompatible change

Lex Fridman (2:48:29.920)

to the underlying function of a cryptocurrency.

Saifedean Ammous (2:48:35.120)

Of course, there is hard forks of Bitcoin as well.

Lex Fridman (2:48:40.080)

I'm sure all of which you love dearly.

Saifedean Ammous (2:48:43.240)

Anyway, but that doesn't matter.

Lex Fridman (2:48:44.800)

The original Bitcoin, for the most part,

Saifedean Ammous (2:48:47.160)

has not undergone any changes.

Lex Fridman (2:48:49.920)

And that's one of the...

Saifedean Ammous (2:48:50.760)

I mean, it has undergone changes,

Lex Fridman (2:48:51.960)

but none in the important parameters of the network.

Lex Fridman (2:48:57.200)

So another criticism is about energy.

Lex Fridman (2:49:00.880)

So the proof of work,

Saifedean Ammous (2:49:02.640)

consensus mechanism uses a lot of energy.

Lex Fridman (2:49:06.160)

What's the response to that criticism of Bitcoin?

Saifedean Ammous (2:49:08.680)

Yes, because it's worth it.

Lex Fridman (2:49:12.200)

Okay, the airplane uses a lot more energy than a kayak.

Saifedean Ammous (2:49:14.760)

You know, when you're gonna cross the Atlantic next time,

Lex Fridman (2:49:16.840)

what are you gonna take?

Saifedean Ammous (2:49:17.680)

A kayak that is environmentally friendly,

Lex Fridman (2:49:19.640)

according to this insane definition,

Saifedean Ammous (2:49:21.640)

or are you gonna take an airplane

Lex Fridman (2:49:22.840)

that consumes a lot of energy?

Lex Fridman (2:49:24.040)

So the cost benefit analysis here,

Lex Fridman (2:49:28.040)

essentially, you have to consider

Saifedean Ammous (2:49:29.520)

both the cost and the benefit.

Lex Fridman (2:49:31.360)

Exactly, and I think it's an astonishing testament

Saifedean Ammous (2:49:34.880)

to just how far backward people's scientific

Lex Fridman (2:49:38.520)

and technological thinking has devolved

Saifedean Ammous (2:49:41.400)

to the point where we think of energy consumption

Lex Fridman (2:49:43.360)

as a bad thing.

Saifedean Ammous (2:49:44.200)

I think it's just...

Lex Fridman (2:49:45.040)

And in the Fiat standard,

Saifedean Ammous (2:49:46.280)

I discussed the whole hysteria around energy,

Lex Fridman (2:49:48.920)

and I think it's a product of Fiat inflation

Saifedean Ammous (2:49:52.760)

because it's a way of trying to covering up

Lex Fridman (2:49:55.160)

the fact that energy fuels that are reliable

Lex Fridman (2:49:58.400)

and necessary for the current world

Lex Fridman (2:50:00.560)

are becoming more and more expensive because of inflation.

Lex Fridman (2:50:03.640)

And so governments are always looking for excuses

Lex Fridman (2:50:05.800)

for why you should not be using those things.

Lex Fridman (2:50:07.880)

And so they promote all kinds of stupid pseudosciences

Lex Fridman (2:50:10.160)

that tell you about why these things are bad.

Lex Fridman (2:50:13.320)

But really, you know, all technology is...

Lex Fridman (2:50:16.960)

Well, not all, but the vast majority

Saifedean Ammous (2:50:19.760)

of technological innovations involve

Lex Fridman (2:50:22.160)

economizing on human time and judgment

Lex Fridman (2:50:24.520)

and replacing it with machines,

Lex Fridman (2:50:26.000)

with reliable machines that spend a lot of energy.

Lex Fridman (2:50:28.440)

So that's what a telephone does.

Lex Fridman (2:50:31.040)

Instead of having to send somebody across the world

Saifedean Ammous (2:50:33.200)

to tell somebody something else or send a letter,

Lex Fridman (2:50:36.120)

a telephone allows you to do it.

Saifedean Ammous (2:50:38.760)

The car is like that.

Lex Fridman (2:50:39.840)

You could walk, but a car consumes a lot more energy,

Lex Fridman (2:50:43.040)

but it allows you to travel much faster and safer

Lex Fridman (2:50:45.280)

and more reliably.

Saifedean Ammous (2:50:47.200)

An airplane is like that.

Lex Fridman (2:50:48.720)

Modern telecommunication, human prosperity

Saifedean Ammous (2:50:52.440)

is an increase in the consumption of energy.

Lex Fridman (2:50:54.680)

And I think it is an absolutely criminal thing.

Saifedean Ammous (2:50:58.800)

I mean, genuinely mean the word criminal

Lex Fridman (2:51:01.640)

to portray energy consumption as a bad thing,

Saifedean Ammous (2:51:04.840)

because it is truly depriving people of the chance

Lex Fridman (2:51:07.280)

to live a life that makes life better, you know?

Saifedean Ammous (2:51:10.320)

It's truly criminal to tell poor countries

Lex Fridman (2:51:12.480)

that they should not consume the same energy sources

Saifedean Ammous (2:51:15.440)

that are being used in rich countries

Lex Fridman (2:51:17.720)

on which our modern infrastructure and modern life relies.

Saifedean Ammous (2:51:21.880)

That's what life is.

Lex Fridman (2:51:22.800)

You know, if you reduce the consumption of energy in the US

Saifedean Ammous (2:51:25.760)

to the levels that you have in poor countries today,

Lex Fridman (2:51:28.520)

the US would become desperately poor.

Saifedean Ammous (2:51:30.320)

A lot of people would die.

Lex Fridman (2:51:31.440)

Cities would collapse.

Saifedean Ammous (2:51:32.520)

The quality of life would decrease significantly.

Lex Fridman (2:51:34.560)

A high quality of life often requires,

Saifedean Ammous (2:51:37.120)

given the current technology, a high expenditure of energy.

Lex Fridman (2:51:39.600)

Yeah, and I should be clear, you know,

Saifedean Ammous (2:51:41.080)

it's not a quality of life in the sense of,

Lex Fridman (2:51:42.760)

many people think of this as,

Saifedean Ammous (2:51:43.920)

oh yeah, well, you know,

Lex Fridman (2:51:46.560)

taking needless flights for vacations.

Saifedean Ammous (2:51:50.240)

No, no, these are the cherries on top of the cake,

Lex Fridman (2:51:53.440)

but the substance of the cake

Lex Fridman (2:51:54.960)

and the real benefits of energy

Lex Fridman (2:51:56.920)

is the fact that children, premature babies,

Saifedean Ammous (2:52:00.800)

survive in countries that have reliable

Lex Fridman (2:52:03.520)

24 hour cheap electricity.

Saifedean Ammous (2:52:05.560)

If your child is born premature,

Lex Fridman (2:52:07.200)

that you put in an incubator,

Saifedean Ammous (2:52:08.640)

put him in an incubator or her,

Lex Fridman (2:52:10.440)

they're highly likely to survive.

Saifedean Ammous (2:52:11.840)

If you don't have 24 hour electricity,

Lex Fridman (2:52:14.200)

that child is not gonna make it.

Lex Fridman (2:52:16.040)

And you see it, you know,

Lex Fridman (2:52:18.920)

the level of energy consumption per capita

Saifedean Ammous (2:52:20.760)

is highly correlated, not just to income,

Lex Fridman (2:52:23.400)

but also to health outcomes, to infant mortality,

Saifedean Ammous (2:52:26.280)

to all of the things that you care about.

Lex Fridman (2:52:28.440)

And Bitcoin is just another technology.

Saifedean Ammous (2:52:31.840)

It does consume a lot more energy than central banks.

Lex Fridman (2:52:34.640)

A lot of Bitcoiners like to take a cop out of this

Saifedean Ammous (2:52:37.840)

by saying, well, you know, central banks consume money

Lex Fridman (2:52:40.120)

and ATMs consume a lot of energy.

Lex Fridman (2:52:42.720)

And I think if you calculate

Lex Fridman (2:52:44.200)

how much central banks and banks consume,

Saifedean Ammous (2:52:45.880)

I think it's a rounding error

Lex Fridman (2:52:47.040)

next to what Bitcoin consumes.

Saifedean Ammous (2:52:49.680)

I think Bitcoin is just, maybe not a rounding error,

Lex Fridman (2:52:52.160)

but it's still, Bitcoin I think is going to consume

Saifedean Ammous (2:52:54.520)

a lot more, and that's a good thing.

Lex Fridman (2:52:56.240)

You know what's humbling is to look,

Saifedean Ammous (2:52:58.160)

because even just looking into this

Lex Fridman (2:53:00.080)

forces me to look at the energy expenditures

Saifedean Ammous (2:53:02.440)

for many of the things we take for granted.

Lex Fridman (2:53:04.640)

Obviously computers and other digital,

Saifedean Ammous (2:53:07.280)

our digital lives are just, Bitcoin becomes a rounding error

Lex Fridman (2:53:12.880)

relative to how much energy is spent

Saifedean Ammous (2:53:15.040)

on all the computers in our world.

Lex Fridman (2:53:16.800)

But also things like home appliances,

Saifedean Ammous (2:53:19.800)

microwaves, and hair dryers and stuff.

Lex Fridman (2:53:22.640)

Yeah.

Saifedean Ammous (2:53:23.480)

It's that.

Lex Fridman (2:53:24.360)

Yeah, I mean, this is, that's being hilarious.

Saifedean Ammous (2:53:26.680)

It's like, oh, these things

Lex Fridman (2:53:28.280)

that are just part of our modern life,

Saifedean Ammous (2:53:31.360)

they're either the same order,

Lex Fridman (2:53:33.240)

at least the same order of magnitude as Bitcoin,

Lex Fridman (2:53:35.880)

and they seem like trivial parts of life.

Lex Fridman (2:53:39.280)

Yeah, and this is the thing,

Saifedean Ammous (2:53:40.600)

all of the people that complain

Lex Fridman (2:53:41.720)

about Bitcoin's energy consumption,

Saifedean Ammous (2:53:43.200)

I presume they use washing machines.

Lex Fridman (2:53:45.080)

Now, why should their desire for clean and dry clothes

Lex Fridman (2:53:51.000)

get to consume energy?

Lex Fridman (2:53:52.160)

And I mean, I used to live in Lebanon.

Saifedean Ammous (2:53:54.960)

Lebanon had hyperinflation.

Lex Fridman (2:53:56.320)

I escaped from hyperinflation.

Saifedean Ammous (2:53:58.920)

I escaped, it prevented,

Lex Fridman (2:54:01.720)

my life could have been ruined by hyperinflation.

Lex Fridman (2:54:03.600)

And the reason that it wasn't ruined

Lex Fridman (2:54:04.680)

is because I have Bitcoin.

Lex Fridman (2:54:06.160)

So, I don't know, am I allowed to swear on your podcast?

Lex Fridman (2:54:10.120)

Yes, please.

Saifedean Ammous (2:54:10.960)

So, fuck your washing machine.

Lex Fridman (2:54:12.120)

given a choice between my washing machine

Lex Fridman (2:54:16.600)

and my Bitcoin, I'll choose Bitcoin.

Lex Fridman (2:54:18.760)

It's a technology that has been,

Saifedean Ammous (2:54:20.440)

that has already saved my life,

Lex Fridman (2:54:21.640)

and I think it's gonna save the lives

Saifedean Ammous (2:54:22.760)

of many, many, many, many more people.

Lex Fridman (2:54:24.400)

So, but of course, I don't have to choose

Saifedean Ammous (2:54:27.440)

between my Bitcoin and my washing machine

Lex Fridman (2:54:31.120)

because this is, you know,

Saifedean Ammous (2:54:33.280)

we're just constantly consuming more energy

Lex Fridman (2:54:35.160)

and we're gonna continue to consume more energy

Saifedean Ammous (2:54:36.680)

in this world, and that's just what progress is.

Lex Fridman (2:54:39.880)

And a small remark.

Saifedean Ammous (2:54:41.480)

So, in principle, I don't think this is a problem,

Lex Fridman (2:54:43.840)

but the other thing about Bitcoin,

Saifedean Ammous (2:54:45.000)

where it is different from washing machines,

Lex Fridman (2:54:47.360)

Bitcoin is truly unique in this.

Saifedean Ammous (2:54:48.880)

It's the only thing whose energy consumption

Lex Fridman (2:54:52.840)

can be produced absolutely anywhere.

Saifedean Ammous (2:54:55.200)

Your washing machine needs to be in your house

Lex Fridman (2:54:57.280)

where you live, and you live in a city

Saifedean Ammous (2:54:58.920)

surrounded by 10 million people,

Lex Fridman (2:55:00.720)

and they all have their washing machines,

Lex Fridman (2:55:02.920)

and they're all connected to the grid,

Lex Fridman (2:55:04.520)

and they generally tend to do their laundry

Saifedean Ammous (2:55:06.520)

around the same time.

Lex Fridman (2:55:07.960)

And so you have to put the load of the washing machine

Saifedean Ammous (2:55:11.360)

on the grid at the same time.

Lex Fridman (2:55:14.360)

There needs to be one power plant

Lex Fridman (2:55:16.320)

and all of the infrastructure needs to work

Lex Fridman (2:55:17.920)

at the same time, and the electricity

Saifedean Ammous (2:55:19.200)

is pretty expensive because it's being done

Lex Fridman (2:55:21.720)

in a place with high demand.

Saifedean Ammous (2:55:23.360)

Bitcoin does not need to buy electricity

Lex Fridman (2:55:26.240)

from places where it has high demand

Saifedean Ammous (2:55:28.360)

because it can buy electricity from anywhere.

Lex Fridman (2:55:30.320)

This is what's truly mind blowing about it.

Saifedean Ammous (2:55:32.320)

You can buy, you know, what you need,

Lex Fridman (2:55:35.600)

the electricity that you need for mining

Saifedean Ammous (2:55:37.200)

can be done anywhere.

Lex Fridman (2:55:38.280)

So you can mine, you know, you can have a waterfall

Saifedean Ammous (2:55:42.120)

in the north of Canada, 300 miles away

Lex Fridman (2:55:44.560)

from any population center.

Saifedean Ammous (2:55:46.480)

There's water falling, there's energy.

Lex Fridman (2:55:48.520)

You can put a hydroelectric dam there,

Lex Fridman (2:55:51.120)

and then you can use that energy to operate the miners,

Lex Fridman (2:55:53.480)

and then the miners just need

Saifedean Ammous (2:55:54.800)

a satellite internet connection,

Lex Fridman (2:55:56.680)

and effectively you're selling that energy

Saifedean Ammous (2:55:58.760)

that is isolated to the grid.

Lex Fridman (2:56:01.160)

And because of the way that Bitcoin functions,

Saifedean Ammous (2:56:02.920)

because of the difficulty adjustment,

Lex Fridman (2:56:04.840)

the only profitable miners are the ones

Saifedean Ammous (2:56:07.240)

who can get cheap electricity.

Lex Fridman (2:56:09.240)

Basically if you're mining at grid cost,

Saifedean Ammous (2:56:11.680)

if you're mining at around, the average electricity price

Lex Fridman (2:56:14.560)

in the world is around 14 cents.

Saifedean Ammous (2:56:16.760)

If you're mining at 14 cents in Bitcoin,

Lex Fridman (2:56:19.160)

you're most likely not gonna make it.

Saifedean Ammous (2:56:21.360)

If you're running your miners at 14 cents,

Lex Fridman (2:56:23.920)

because everybody could mine at 14 cents,

Lex Fridman (2:56:26.040)

and so what happens is if everybody's mining

Lex Fridman (2:56:28.720)

at 14 cents, 14 cents stops being profitable,

Lex Fridman (2:56:32.720)

and then only the people mining

Lex Fridman (2:56:33.960)

at a lower price are profitable.

Lex Fridman (2:56:35.480)

So that's why Bitcoin mining is not competing

Lex Fridman (2:56:38.360)

with your washing machine.

Saifedean Ammous (2:56:39.360)

This is the absurd thing

Lex Fridman (2:56:41.040)

about this kind of energy scarcity viewpoint

Saifedean Ammous (2:56:45.480)

where, oh no, it's a catastrophe,

Lex Fridman (2:56:47.000)

Bitcoin is taking all the electricity,

Saifedean Ammous (2:56:48.480)

as if the electricity is just one fixed pie

Lex Fridman (2:56:51.000)

that we all have to share and fight over.

Lex Fridman (2:56:53.160)

And this is how I keep making fun

Lex Fridman (2:56:54.960)

of these stupid headlines they put out

Saifedean Ammous (2:56:56.400)

where Bitcoin's consuming more electricity

Lex Fridman (2:56:58.600)

than Portugal.

Saifedean Ammous (2:56:59.720)

All right, well, maybe we should shut down Portugal then.

Lex Fridman (2:57:03.080)

What the hell is Portugal giving us?

Saifedean Ammous (2:57:04.880)

Like, obviously it's not, it's not competing.

Lex Fridman (2:57:07.240)

He doesn't mean that, I've gotten so much criticism

Saifedean Ammous (2:57:09.320)

for saying Cristiano Ronaldo's not in the top five.

Lex Fridman (2:57:13.280)

I apologize, I love Portugal.

Saifedean Ammous (2:57:16.160)

That's another discussion we should get into at some point.

Lex Fridman (2:57:18.640)

Because you posted a few soccer things.

Saifedean Ammous (2:57:20.440)

I'm not, I realize how passionate people are about this.

Lex Fridman (2:57:23.440)

Listen, it was a joke, all right?

Saifedean Ammous (2:57:25.040)

He deserves to be potentially in the top five.

Lex Fridman (2:57:27.520)

Yeah, I love Portugal.

Lex Fridman (2:57:28.920)

And even though I'm a Liverpool fan,

Lex Fridman (2:57:30.400)

I still respect Cristiano Ronaldo a lot.

Saifedean Ammous (2:57:32.440)

In fact, I hold a very unpopular opinion

Lex Fridman (2:57:35.520)

where I think Cristiano Ronaldo's

Saifedean Ammous (2:57:37.680)

the greatest football player ever.

Lex Fridman (2:57:39.040)

Number one, over Pelé and Maradona, Messi,

Saifedean Ammous (2:57:41.640)

better than Messi.

Lex Fridman (2:57:42.480)

Yes, he's been doing it for 20 years at the top.

Saifedean Ammous (2:57:44.120)

Nobody's ever done that.

Lex Fridman (2:57:45.000)

He's won everything everywhere,

Saifedean Ammous (2:57:46.520)

everywhere he goes at the top, at the Champions League.

Lex Fridman (2:57:50.320)

Really strong argument to be made for him.

Saifedean Ammous (2:57:53.080)

Messi's never done anything outside of Barcelona,

Lex Fridman (2:57:55.120)

that's the thing.

Lex Fridman (2:57:55.960)

So you appreciate performance, long term,

Lex Fridman (2:57:59.400)

versus the genius of the actual play on the field.

Saifedean Ammous (2:58:04.600)

I mean, the genius is,

Lex Fridman (2:58:05.760)

Ronaldo's the top scorer of all time.

Saifedean Ammous (2:58:07.640)

He scores more goals.

Lex Fridman (2:58:08.480)

So the genius is in the scoring,

Saifedean Ammous (2:58:09.320)

not the actual dance of the play, the creativity.

Lex Fridman (2:58:13.480)

Well, I mean, I don't know,

Saifedean Ammous (2:58:14.680)

Messi's been absolutely mediocre since he's left Barcelona.

Lex Fridman (2:58:18.240)

These are strong words.

Lex Fridman (2:58:20.080)

He scored, what, two goals in PSG season this year?

Lex Fridman (2:58:23.240)

They're out of the Champions League.

Lex Fridman (2:58:25.000)

What about Mohamed Salah?

Lex Fridman (2:58:26.600)

You posted about him.

Lex Fridman (2:58:28.040)

Is he climbing up to be someone?

Lex Fridman (2:58:31.520)

I think he should win the Ballon dOr this year.

Saifedean Ammous (2:58:33.080)

He probably should have won it last year as well.

Lex Fridman (2:58:34.780)

He's been absolutely outstanding,

Lex Fridman (2:58:36.240)

but I mean, just people are so crazy about Messi.

Lex Fridman (2:58:39.740)

They keep giving him accolades.

Saifedean Ammous (2:58:40.800)

He hasn't deserved, I think,

Lex Fridman (2:58:41.840)

Messi the last couple of Ballon dOrs that he got.

Saifedean Ammous (2:58:45.040)

I mean, he's a great player and everything,

Lex Fridman (2:58:46.400)

but no, he did not deserve it last year.

Saifedean Ammous (2:58:51.800)

We can agree to disagree.

Lex Fridman (2:58:53.940)

There's something.

Lex Fridman (2:58:54.780)

Do you think you're a Barca fan or a Messi fan?

Lex Fridman (2:58:56.800)

I would say, no, I wouldn't say I'm a Barca fan,

Lex Fridman (2:58:59.600)

but a Barca fan because of Messi,

Lex Fridman (2:59:01.280)

and I just, I think it's like, there's certain things.

Lex Fridman (2:59:06.760)

So when I was growing up in the Soviet Union, Russia,

Lex Fridman (2:59:09.840)

I remember Maradona, he was the first person I saw

Saifedean Ammous (2:59:15.180)

that I was like, oh, wow, this could be,

Lex Fridman (2:59:19.480)

this is greatness in sport, not just football and sport,

Saifedean Ammous (2:59:22.280)

right, and for some reason.

Lex Fridman (2:59:23.680)

I mean, it's something about Diego Armando Maradona,

Saifedean Ammous (2:59:26.760)

the way they were commentating the genius of his play,

Lex Fridman (2:59:30.160)

the mix of ego, and again, the performance,

Lex Fridman (2:59:32.960)

but being able to carry a team on his shoulders,

Lex Fridman (2:59:35.400)

that, I just fell in love with whatever he represented,

Lex Fridman (2:59:38.680)

and then by that, Argentina, and then Messi,

Lex Fridman (2:59:41.560)

I saw when he was 16, 17, when he was just in the early days,

Lex Fridman (2:59:46.120)

and when you first see a person and you see the genius

Lex Fridman (2:59:49.560)

and you notice that, and then it turns out

Saifedean Ammous (2:59:51.660)

to be actually a great player, for some reason,

Lex Fridman (2:59:54.080)

you're invested, you're emotionally invested,

Saifedean Ammous (2:59:57.440)

you're, I don't know, so you kind of just fall in love

Lex Fridman (30:01.220)

is actually value, and is the thing that helps money work,

Saifedean Ammous (30:06.060)

because you're saying it's fraud,

Lex Fridman (30:09.220)

and the belief is almost valueless,

Lex Fridman (30:13.780)

but how much value?

Lex Fridman (30:14.860)

Can we quantify the value of the belief,

Lex Fridman (30:17.380)

the collective belief?

Lex Fridman (30:18.460)

I should say, all economics is subjective.

Saifedean Ammous (30:21.660)

I consider myself an Austrian school economist,

Lex Fridman (30:24.180)

and the starting point of all Austrian economics

Saifedean Ammous (30:26.740)

is that all value is subjective,

Lex Fridman (30:28.900)

so obviously, value only exists

Saifedean Ammous (30:33.300)

because humans choose to make the valuation.

Lex Fridman (30:35.900)

However, the economic reality of the way that money works

Saifedean Ammous (30:40.020)

means that it's just a technology like all others,

Lex Fridman (30:42.640)

and so for me, when people say,

Saifedean Ammous (30:45.060)

well, if we hallucinate that this thing can be money,

Lex Fridman (30:47.220)

then it'll be money.

Saifedean Ammous (30:48.220)

If we can hallucinate bananas to be money,

Lex Fridman (30:49.900)

then it'll be money.

Saifedean Ammous (30:50.860)

For me, it's like saying, well, if we hallucinate

Lex Fridman (30:52.380)

that bananas can be spaceships, they'll be spaceships.

Saifedean Ammous (30:54.960)

I mean, you can call them spaceships if you want,

Lex Fridman (30:56.940)

but a banana's not gonna get you to the moon.

Saifedean Ammous (30:59.700)

Well, then nevertheless, that's true.

Lex Fridman (31:03.080)

So you're drawing a big distinction

Saifedean Ammous (31:05.060)

between physical reality and the space of belief,

Lex Fridman (31:09.340)

but it seems like so much power of human civilization,

Lex Fridman (31:14.580)

so much destruction, so much creativity, creation,

Lex Fridman (31:18.940)

happens in our minds.

Saifedean Ammous (31:21.180)

Absolutely, everything does happen in the mind.

Lex Fridman (31:23.540)

You're not gonna get to the moon,

Lex Fridman (31:24.980)

but you might still have a significant impact

Lex Fridman (31:27.580)

on human civilization if a lot of people believe a thing.

Saifedean Ammous (31:31.540)

True, but economic reality exists in a way

Lex Fridman (31:35.420)

in which your beliefs are rewarded

Saifedean Ammous (31:37.940)

when they match up with economic reality,

Lex Fridman (31:40.620)

and they're punished when they don't.

Lex Fridman (31:41.900)

So if you ride a banana and jump off a cliff

Lex Fridman (31:44.740)

thinking you're gonna get to the moon,

Saifedean Ammous (31:46.940)

that solves the problem of people thinking

Lex Fridman (31:48.620)

that bananas are spaceships by killing people

Saifedean Ammous (31:50.620)

who think that bananas are spaceships.

Lex Fridman (31:53.020)

And I think, to go back to your question

Saifedean Ammous (31:55.020)

in terms of paper monies, so yes,

Lex Fridman (31:56.820)

even though ignoring the original sin

Saifedean Ammous (32:01.380)

of the creation of fiat money,

Lex Fridman (32:02.980)

and ignoring everything that happened before 1971,

Saifedean Ammous (32:05.460)

all right, well, here we are, people are using,

Lex Fridman (32:07.860)

well, it's not really paper money.

Saifedean Ammous (32:09.340)

We should say fiat money is predominantly credit.

Lex Fridman (32:12.780)

So it's also a digital currency.

Lex Fridman (32:15.020)

So more than 90% of dollars are digital.

Lex Fridman (32:18.780)

Less than 10% of dollars are physical.

Lex Fridman (32:21.380)

So it is a digital currency,

Lex Fridman (32:22.740)

and all over the world, all these governments

Saifedean Ammous (32:24.700)

are using digital currencies effectively

Lex Fridman (32:26.420)

with some physical manifestations in paper.

Lex Fridman (32:29.500)

But yet, even within these currencies,

Lex Fridman (32:32.380)

it's still the same analysis,

Lex Fridman (32:33.740)

and I discussed this in chapter four,

Lex Fridman (32:35.140)

the Bitcoin standard.

Saifedean Ammous (32:36.300)

You look at government monies,

Lex Fridman (32:37.700)

you see that the currencies that have held onto their value,

Saifedean Ammous (32:40.140)

the ones that have the biggest value,

Lex Fridman (32:42.180)

the ones that play the biggest role in global trade,

Saifedean Ammous (32:44.660)

the ones that are used as currency reserves

Lex Fridman (32:46.900)

all over the world,

Saifedean Ammous (32:48.100)

are the ones that have the lowest supply growth rate.

Lex Fridman (32:50.860)

The ones that grow, whose central banks

Saifedean Ammous (32:53.420)

are the least inflationary.

Lex Fridman (32:55.380)

And on the other hand,

Saifedean Ammous (32:56.420)

the ones who supplies more inflationary,

Lex Fridman (32:58.900)

similar to copper, end up failing.

Saifedean Ammous (33:00.900)

You look at Lebanon, Venezuela, Zimbabwe,

Lex Fridman (33:03.460)

these are currencies whose supply increases very quickly,

Lex Fridman (33:06.500)

and therefore, their value collapses.

Lex Fridman (33:09.060)

Whereas the dollar, the Swiss franc, the Euro,

Saifedean Ammous (33:12.540)

the British pound, the Japanese yen,

Lex Fridman (33:14.940)

they increase at a much lower rate in general

Saifedean Ammous (33:17.140)

than these terrible currencies.

Lex Fridman (33:20.220)

And that's why all over the world,

Saifedean Ammous (33:21.940)

you see people are looking to get more dollars

Lex Fridman (33:24.180)

and more of these harder currencies than the easier ones.

Lex Fridman (33:28.180)

So I think this analysis of the hardness of the money

Lex Fridman (33:32.380)

and the ease of money is pretty well supported empirically.

Lex Fridman (33:37.580)

So like you said, you're at least in part,

Lex Fridman (33:40.780)

or in whole, consider yourself an Austrian economist.

Lex Fridman (33:44.740)

So you're perhaps a great person to ask about the basics.

Lex Fridman (33:48.980)

What is Austrian economics?

Lex Fridman (33:50.500)

What is Keynesian economics?

Lex Fridman (33:52.220)

How do you compare the two?

Lex Fridman (33:54.660)

What should people know?

Lex Fridman (33:56.340)

What are the interesting defining characteristics

Lex Fridman (33:59.580)

to you about these schools of thought?

Lex Fridman (34:01.700)

So Austrian economics, the way that I say it,

Saifedean Ammous (34:03.340)

Austrian economics is economics.

Lex Fridman (34:04.900)

It's, we call it Austrian economics

Saifedean Ammous (34:07.660)

because economics has been hijacked

Lex Fridman (34:09.420)

by a bunch of frauds, really.

Saifedean Ammous (34:11.420)

Or people who are wrong, okay.

Lex Fridman (34:12.860)

Well, it's much worse than wrong,

Saifedean Ammous (34:14.540)

by people who are just essentially propagandists

Lex Fridman (34:16.620)

for inflation.

Saifedean Ammous (34:17.460)

Right.

Lex Fridman (34:18.500)

So.

Saifedean Ammous (34:19.340)

It's like your opinion, man.

Lex Fridman (34:20.180)

Right.

Saifedean Ammous (34:21.020)

Yeah, well, that's also like your opinion, man.

Lex Fridman (34:23.820)

Yeah.

Lex Fridman (34:24.660)

But you asked.

Lex Fridman (34:25.500)

That's true.

Saifedean Ammous (34:26.340)

Well, I also talked to Paul Krugman on this podcast.

Lex Fridman (34:28.620)

So he's, the O speaks enough,

Lex Fridman (34:32.740)

but he's one of the people

Lex Fridman (34:35.500)

that is perhaps most harshly criticized

Saifedean Ammous (34:38.700)

by folks in Austrian economics perspective

Lex Fridman (34:42.660)

and vice versa, which is a fascinating tension.

Saifedean Ammous (34:45.740)

Yeah, he's done a great job as an actor

Lex Fridman (34:48.940)

who plays an economist on TV and the internet.

Lex Fridman (34:52.420)

So anyway, now tell me what you really think.

Lex Fridman (34:55.420)

No, but, so the basics of what is Austrian economics?

Lex Fridman (34:58.580)

What is the, what perspective does it take on the world?

Lex Fridman (35:00.580)

Yeah, so I mean, Austrian economics really is

Saifedean Ammous (35:03.900)

the continuation of a tradition

Lex Fridman (35:06.060)

that it goes back to the ancient Greeks

Saifedean Ammous (35:08.380)

of studying economics.

Lex Fridman (35:09.660)

Historically, it's really just economics

Lex Fridman (35:13.260)

and that has evolved over time.

Lex Fridman (35:14.620)

And the establishment of the Austrian school per se

Saifedean Ammous (35:20.300)

came in 1871, 150 years ago,

Lex Fridman (35:23.500)

when Karl Menger, the father of the school,

Saifedean Ammous (35:25.500)

wrote a book called Principles of Economics

Lex Fridman (35:28.100)

and essentially invented marginal analysis,

Saifedean Ammous (35:30.820)

which is a big deal in economics.

Lex Fridman (35:32.780)

Marginal analysis is the idea that in economics,

Saifedean Ammous (35:35.300)

individuals carry out decisions at the margin,

Lex Fridman (35:37.780)

that it's, when you make choice, you're not making it.

Saifedean Ammous (35:42.660)

For instance, if you're making a choice

Lex Fridman (35:43.980)

between what should I spend my money on,

Saifedean Ammous (35:46.740)

you're not making a choice whether it is,

Lex Fridman (35:49.700)

this thing is object A or B,

Saifedean Ammous (35:51.820)

which one is more valuable for me in general,

Lex Fridman (35:53.820)

which one is more valuable for me for the rest of my life.

Saifedean Ammous (35:56.740)

You're choosing about the next unit right now

Lex Fridman (35:59.380)

at this point, at this stage.

Lex Fridman (36:00.900)

And if you analyze economic decision making at the margin,

Lex Fridman (36:04.060)

it makes a lot more sense and you can understand

Lex Fridman (36:05.980)

why people decide and make the decisions that they do.

Lex Fridman (36:09.660)

Whereas if you don't apply marginal analysis,

Saifedean Ammous (36:12.540)

things don't make sense.

Lex Fridman (36:14.300)

The key thing that marginal analysis helps us solve

Saifedean Ammous (36:17.220)

is what is called the water diamond paradox.

Lex Fridman (36:19.780)

So you will die without water.

Saifedean Ammous (36:22.220)

We all need water and yet water is dirt cheap.

Lex Fridman (36:25.820)

Whereas diamonds are extremely superfluous,

Saifedean Ammous (36:29.260)

nobody needs them.

Lex Fridman (36:30.940)

Nobody is gonna live or die because they have a diamond

Lex Fridman (36:33.660)

and yet they're extremely expensive.

Lex Fridman (36:35.460)

So why is it that as human beings,

Saifedean Ammous (36:37.020)

we pay maybe say a dollar a liter for water,

Lex Fridman (36:41.660)

whereas we pay thousands of dollars

Saifedean Ammous (36:43.140)

for a few grams of diamonds.

Lex Fridman (36:44.940)

Why is this the case?

Lex Fridman (36:46.140)

Do we value water less than diamond?

Lex Fridman (36:49.260)

The answer is no, but at the margin where we are right now,

Saifedean Ammous (36:53.940)

you live in a place where water is very abundant

Lex Fridman (36:55.860)

because cities are only built in places

Saifedean Ammous (36:57.900)

where water is abundant.

Lex Fridman (36:59.620)

And you're only making a choice

Saifedean Ammous (37:03.500)

about the next unit of water.

Lex Fridman (37:05.300)

And so water is extremely abundant

Lex Fridman (37:07.260)

and you're choosing about whether to spend

Lex Fridman (37:10.380)

the next unit of money on water.

Saifedean Ammous (37:14.580)

The valuation that you give to water,

Lex Fridman (37:16.420)

given that you have a lot of water at home

Lex Fridman (37:18.900)

and that you live in a place that has abundant water

Lex Fridman (37:21.420)

is pretty low to the marginal unit,

Lex Fridman (37:24.660)

but it's very high for water overall.

Lex Fridman (37:26.940)

So if I asked you,

Lex Fridman (37:28.420)

how much would you spend for water in general?

Lex Fridman (37:31.980)

How much would you pay for water for all of your life?

Saifedean Ammous (37:34.940)

It would be a lot higher than diamonds.

Lex Fridman (37:36.980)

If I told you, you can only have water or diamonds

Saifedean Ammous (37:39.180)

for the rest of your life.

Lex Fridman (37:40.500)

You choose water, obviously,

Lex Fridman (37:42.340)

but nobody's ever had to make that choice.

Lex Fridman (37:44.940)

You only make your choices at the margin.

Lex Fridman (37:47.220)

So at the margin where we are, modern civilization,

Lex Fridman (37:50.300)

we have an abundance of water.

Saifedean Ammous (37:51.540)

That's why we have civilization

Lex Fridman (37:53.100)

and diamonds are very rare and scarce.

Lex Fridman (37:54.980)

And people are only buying,

Lex Fridman (37:58.340)

you buy your first diamond when you're gonna get married,

Saifedean Ammous (38:01.780)

you give it to your wife

Lex Fridman (38:03.260)

and that's gonna be the first few grams of diamond

Saifedean Ammous (38:06.660)

that she's ever gonna own.

Lex Fridman (38:07.500)

Giving my wife water.

Saifedean Ammous (38:09.980)

Smart move.

Lex Fridman (38:10.820)

You should definitely give her Bitcoin instead of diamonds.

Saifedean Ammous (38:13.180)

I tell my wife, I occasionally remind her

Lex Fridman (38:15.660)

of how many Bitcoin we could have had

Saifedean Ammous (38:18.100)

if I bought her Bitcoin with the price of the diamond ring.

Lex Fridman (38:20.300)

What's the downside of, by the way, diamonds

Lex Fridman (38:22.580)

from the analysis of like gold and so on?

Lex Fridman (38:25.620)

Ah, that's a great question.

Saifedean Ammous (38:28.420)

Arguably, diamonds are a scam.

Lex Fridman (38:30.060)

Because they became popular as a thing in marriage

Saifedean Ammous (38:37.500)

after gold was banned,

Lex Fridman (38:39.060)

after gold ownership was banned in the US in the 1930s

Lex Fridman (38:41.780)

and in many places around the world.

Lex Fridman (38:43.460)

So before that, you'd give gold.

Lex Fridman (38:44.900)

And the reason you'd give gold in a dowry, in a wedding

Lex Fridman (38:49.380)

is because it wasn't just that it's pretty and shiny,

Saifedean Ammous (38:52.500)

it's because it's money.

Lex Fridman (38:53.700)

And so if you die, your wife can take the gold

Lex Fridman (38:58.060)

and she can live off of it.

Lex Fridman (39:00.460)

It's a demonstration that you're giving her

Saifedean Ammous (39:01.860)

something valuable.

Lex Fridman (39:03.180)

And that's because nobody can make a lot more gold.

Saifedean Ammous (39:05.820)

It has the high stock to flow ratio.

Lex Fridman (39:07.140)

But then they banned gold ownership,

Saifedean Ammous (39:09.700)

or they allowed people to only own

Lex Fridman (39:11.100)

very tiny quantities of gold.

Lex Fridman (39:12.780)

And that's when the diamond industry stepped in

Lex Fridman (39:15.420)

and marketed diamonds as the thing that you need to give.

Lex Fridman (39:19.940)

But the problem with it is, of course,

Lex Fridman (39:21.500)

that the diamonds aren't like gold.

Saifedean Ammous (39:23.780)

They're not very hard to make more of.

Lex Fridman (39:27.100)

And the reason we have scarcity in diamonds

Saifedean Ammous (39:29.700)

is really artificial.

Lex Fridman (39:30.580)

There's effectively a monopoly of diamond producers.

Saifedean Ammous (39:34.420)

They restrict the supply.

Lex Fridman (39:36.580)

And it's a pretty dirty business.

Lex Fridman (39:39.060)

And the way that they do it is,

Lex Fridman (39:40.300)

all of the talk about blood diamonds

Saifedean Ammous (39:44.140)

is a way for them to ensure their monopoly.

Lex Fridman (39:46.300)

So if you're part of the monopoly of diamond producers,

Saifedean Ammous (39:51.180)

then it doesn't matter how many people get killed

Lex Fridman (39:53.340)

producing your diamonds.

Saifedean Ammous (39:54.420)

If you're out of the monopoly,

Lex Fridman (39:55.860)

then human rights organizations descend on you

Lex Fridman (39:58.620)

and call for shutting you down for selling blood diamonds.

Lex Fridman (3:00:00.560)

and then you get, you pick sides.

Saifedean Ammous (3:00:03.060)

I mean, that's the thing about football.

Lex Fridman (3:00:04.560)

Part of the fun things about football, soccer,

Saifedean Ammous (3:00:07.640)

is like, you pick a guy, you pick a team,

Lex Fridman (3:00:11.200)

and fuck everyone else, and you just have fun talking shit.

Lex Fridman (3:00:13.780)

I mean, that's part of it, you know?

Lex Fridman (3:00:15.440)

It's great, it's great because I think,

Saifedean Ammous (3:00:18.360)

obviously it's a very stupid thing to do,

Lex Fridman (3:00:19.760)

but I think if you don't do it in football,

Saifedean Ammous (3:00:21.800)

you're gonna do it in real life.

Lex Fridman (3:00:22.640)

Elsewhere, that's right.

Saifedean Ammous (3:00:23.800)

That's why it's very good, like, that's it.

Lex Fridman (3:00:26.240)

Instead of hating people for their religion

Lex Fridman (3:00:28.360)

and for their skin color, hate them

Lex Fridman (3:00:31.000)

because they support Manchester United.

Saifedean Ammous (3:00:32.440)

Exactly.

Lex Fridman (3:00:33.960)

So you're a Liverpool fan, that's it.

Saifedean Ammous (3:00:35.160)

Yes, yes, hardcore, long term.

Lex Fridman (3:00:38.860)

But yeah, so to go back to the original point on Portugal.

Saifedean Ammous (3:00:41.820)

Energy.

Lex Fridman (3:00:42.660)

Yeah, energy.

Saifedean Ammous (3:00:43.500)

Bitcoin is not competing with Portugal

Lex Fridman (3:00:45.900)

because Bitcoin is buying energy

Saifedean Ammous (3:00:47.400)

from places where we can't buy it,

Lex Fridman (3:00:49.220)

because all the places where we can buy energy

Saifedean Ammous (3:00:52.240)

for our washing machines, we're bidding up the price

Lex Fridman (3:00:55.360)

enough to make it nonviable for Bitcoin.

Saifedean Ammous (3:00:58.000)

That's why, you know, you'll see those headlines

Lex Fridman (3:01:00.240)

about Bitcoin consuming more energy than Portugal.

Saifedean Ammous (3:01:02.360)

Well, if you look at Portugal, I mean,

Lex Fridman (3:01:04.200)

they've got giant power plants in Portugal,

Saifedean Ammous (3:01:06.080)

they've got millions of people,

Lex Fridman (3:01:07.400)

and they've got enormous amounts of infrastructure.

Lex Fridman (3:01:09.720)

Where are all of these infrastructure for Bitcoin mining?

Lex Fridman (3:01:13.200)

You don't see it in the cities.

Saifedean Ammous (3:01:14.840)

It's all isolated, it's all out away from the cities,

Lex Fridman (3:01:18.800)

or it's connected to grids that have serious overcapacity.

Lex Fridman (3:01:21.920)

So Bitcoin is not out there buying the expensive energy,

Lex Fridman (3:01:25.160)

taking energy away from people who can't afford it.

Saifedean Ammous (3:01:29.120)

It's out there buying its own energy

Lex Fridman (3:01:30.860)

because it doesn't need to buy the expensive energy

Saifedean Ammous (3:01:32.600)

that people really need.

Lex Fridman (3:01:34.400)

So one other criticism from an investment perspective,

Saifedean Ammous (3:01:37.440)

from a gambling perspective that people see

Lex Fridman (3:01:39.440)

is the volatility of Bitcoin.

Saifedean Ammous (3:01:41.520)

Of course, that's been somewhat decreasing over time,

Lex Fridman (3:01:44.000)

but what's your answer to the sort of criticism

Saifedean Ammous (3:01:48.640)

that Bitcoin is too volatile, I wanna stay away,

Lex Fridman (3:01:51.360)

it doesn't seem like a safe place for me

Lex Fridman (3:01:53.320)

to invest either short term or long term?

Lex Fridman (3:01:57.020)

There's no denying there's a volatility

Lex Fridman (3:01:58.520)

and there's a high oscillation in the value

Lex Fridman (3:02:00.320)

in the short term.

Lex Fridman (3:02:01.160)

So I think the safe way to approach that

Lex Fridman (3:02:05.360)

is in terms of position sizing.

Saifedean Ammous (3:02:07.760)

If the volatility bothers you,

Lex Fridman (3:02:10.560)

then you're overinvested perhaps.

Lex Fridman (3:02:12.720)

So maybe you should reduce the size of your position

Lex Fridman (3:02:17.480)

so that the volatility doesn't bother you.

Lex Fridman (3:02:19.640)

And this is the short answer that you know,

Lex Fridman (3:02:23.240)

like stack as much as your conviction

Saifedean Ammous (3:02:26.680)

will allow you to tolerate the volatility.

Lex Fridman (3:02:31.000)

And of course, the reason you should try

Lex Fridman (3:02:33.360)

and consider tolerating volatility more

Lex Fridman (3:02:36.200)

is the options are you hold fiat assets,

Saifedean Ammous (3:02:40.440)

which only go down stable, relatively stable,

Lex Fridman (3:02:43.800)

not a lot of volatility day to day,

Saifedean Ammous (3:02:46.120)

value of your dollar doesn't change 40% overnight,

Lex Fridman (3:02:50.600)

20% overnight or something like that.

Lex Fridman (3:02:52.880)

But it does go down reliably, it's gonna go down 40%.

Lex Fridman (3:02:56.120)

You can count on it, it might take a year,

Saifedean Ammous (3:02:58.040)

two years, five years, 10 years,

Lex Fridman (3:02:59.900)

compared to the things that you want to buy,

Saifedean Ammous (3:03:01.760)

it's gonna go down by 40%.

Lex Fridman (3:03:04.360)

And it's not gonna come back

Lex Fridman (3:03:05.960)

and it's gonna go down another 40%

Lex Fridman (3:03:07.560)

and then another 40% and then another 40%.

Lex Fridman (3:03:09.720)

So the option really is relatively short term stability

Lex Fridman (3:03:14.720)

with long term decline,

Saifedean Ammous (3:03:16.520)

or short term volatility with long term rise.

Lex Fridman (3:03:19.680)

And so that's another way in which Bitcoin teaches people

Saifedean Ammous (3:03:22.640)

to have a low time preference and think about the long term.

Lex Fridman (3:03:24.760)

So stack, accumulate and think of it in the long term.

Saifedean Ammous (3:03:29.240)

It's a function of the fact that Bitcoin is new.

Lex Fridman (3:03:31.200)

Bitcoin is currently less than 1%

Saifedean Ammous (3:03:32.960)

of the global money market.

Lex Fridman (3:03:34.200)

So there's about $100 trillion of money

Saifedean Ammous (3:03:36.520)

out there in the world.

Lex Fridman (3:03:37.560)

$100 trillion roughly of fiat

Lex Fridman (3:03:40.600)

and about $10 trillion of gold.

Lex Fridman (3:03:42.800)

And Bitcoin is less than $1 trillion.

Lex Fridman (3:03:44.880)

So one rich guy decides to get into Bitcoin,

Lex Fridman (3:03:48.400)

that's gonna show up on the Bitcoin chart.

Saifedean Ammous (3:03:50.160)

You look at it, Elon Musk decides to buy Bitcoin,

Lex Fridman (3:03:52.960)

you see the buy, you see the news,

Saifedean Ammous (3:03:55.160)

it happens and you see the pump.

Lex Fridman (3:03:57.840)

Elon Musk decides that he doesn't like Bitcoin,

Saifedean Ammous (3:03:59.880)

you see the drop.

Lex Fridman (3:04:01.200)

But a few years ago, it used to be

Saifedean Ammous (3:04:03.160)

that one random millionaire would cause that pump.

Lex Fridman (3:04:07.200)

Now you have to be the richest guy in the world to do that.

Saifedean Ammous (3:04:09.800)

In a few years, you're gonna have to be

Lex Fridman (3:04:11.600)

the richest country in the world to be able to do that

Saifedean Ammous (3:04:14.080)

to the Bitcoin price, maybe many years,

Lex Fridman (3:04:15.920)

maybe not a few years.

Lex Fridman (3:04:17.160)

But as Bitcoin grows, think about it

Lex Fridman (3:04:19.120)

as a liquid pool of money.

Saifedean Ammous (3:04:22.240)

Currently it's a small pool next to a much larger ocean,

Lex Fridman (3:04:25.280)

which is the entire money market.

Lex Fridman (3:04:26.800)

And so one person jumps from that to this small pool,

Lex Fridman (3:04:30.520)

they can make a big splash.

Saifedean Ammous (3:04:32.160)

As the pool grows, essentially the salability increases

Lex Fridman (3:04:36.120)

and the likelihood of one individual purchase

Saifedean Ammous (3:04:38.840)

affecting the price so violently decreases.

Lex Fridman (3:04:43.320)

And so over time, as the size of the market increases,

Saifedean Ammous (3:04:46.800)

I think we're gonna see the volatility decline

Lex Fridman (3:04:48.920)

more and more.

Saifedean Ammous (3:04:49.760)

Ultimately, if you look at gold historically,

Lex Fridman (3:04:52.840)

gold has been very, very stable.

Saifedean Ammous (3:04:54.680)

It did not achieve its stability

Lex Fridman (3:04:56.360)

because the central bank was in charge of gold supply

Saifedean Ammous (3:04:58.600)

or because there was a gold committee

Lex Fridman (3:05:00.880)

that decided how much gold gets produced.

Saifedean Ammous (3:05:03.960)

It achieved that stability because it became

Lex Fridman (3:05:06.760)

the most saleable good and so therefore became the good

Saifedean Ammous (3:05:09.880)

that contains the most cash balances in the world.

Lex Fridman (3:05:12.880)

And the end of the 19th century,

Saifedean Ammous (3:05:14.080)

everybody held cash balances in gold

Lex Fridman (3:05:16.840)

and new production was a tiny little addition

Saifedean Ammous (3:05:20.720)

to global production, to the supply.

Lex Fridman (3:05:23.680)

So that's what made gold the most relatively,

Saifedean Ammous (3:05:26.880)

I shouldn't say stable

Lex Fridman (3:05:27.920)

because nothing is stable in economics,

Lex Fridman (3:05:29.800)

but relatively it holds onto its value

Lex Fridman (3:05:31.920)

and it's much less volatile than digital currency,

Saifedean Ammous (3:05:35.120)

than national currencies.

Lex Fridman (3:05:37.240)

That's because it has the highest stock to flow ratio

Lex Fridman (3:05:41.280)

and that's because its supply is a tiny fraction

Lex Fridman (3:05:45.920)

of the liquid market.

Lex Fridman (3:05:47.360)

And as the liquid market grows,

Lex Fridman (3:05:48.840)

as the size of cash balances grows

Lex Fridman (3:05:50.400)

and trades in Bitcoin cancel each other out,

Lex Fridman (3:05:54.000)

you get only slight changes in value.

Lex Fridman (3:05:56.920)

So I think as Bitcoin matures, that's going to decline.

Lex Fridman (3:06:01.040)

So effectively, I think the end game

Saifedean Ammous (3:06:03.680)

is Bitcoin is huge, Bitcoin is worth something like,

Lex Fridman (3:06:08.760)

I think the total addressable market for Bitcoin

Saifedean Ammous (3:06:11.720)

is not just national currencies

Lex Fridman (3:06:14.000)

and gold's addressable market, but also government bonds.

Saifedean Ammous (3:06:16.560)

That's the really big one.

Lex Fridman (3:06:17.920)

So how do banks compare to gold?

Lex Fridman (3:06:20.160)

So you're saying it'll surpass gold, the 10 trillion?

Lex Fridman (3:06:23.240)

Yeah.

Lex Fridman (3:06:24.080)

What's bonds?

Lex Fridman (3:06:25.240)

Where does bonds stand?

Lex Fridman (3:06:26.880)

So then there's also national currencies,

Lex Fridman (3:06:28.840)

which are about 100 trillion

Lex Fridman (3:06:30.040)

and then there's government bonds,

Lex Fridman (3:06:31.160)

which are around $120 billion, sorry, trillion dollars.

Saifedean Ammous (3:06:36.320)

Trillion.

Lex Fridman (3:06:37.160)

Trillion, sorry.

Saifedean Ammous (3:06:38.000)

Yes, trillion.

Lex Fridman (3:06:38.840)

If we're saying billion, we meant trillion.

Saifedean Ammous (3:06:40.400)

Yeah.

Lex Fridman (3:06:42.800)

So you think bonds can move to Bitcoin?

Saifedean Ammous (3:06:46.240)

I've always held this is the prize, this is the main dish.

Lex Fridman (3:06:50.120)

Gold is the appetizer, bonds are the main dish

Saifedean Ammous (3:06:52.680)

because bonds have replaced gold.

Lex Fridman (3:06:53.520)

I have an appetizer.

Saifedean Ammous (3:06:54.720)

Yeah.

Lex Fridman (3:06:56.640)

I mean, bonds have replaced gold in people's portfolio.

Saifedean Ammous (3:06:59.880)

People, you remember when we were saying gold was,

Lex Fridman (3:07:02.520)

you'd hold it as a saving,

Saifedean Ammous (3:07:04.080)

as the secure part of your portfolio

Lex Fridman (3:07:05.560)

and then you take risk with the equity.

Saifedean Ammous (3:07:08.120)

Currently people do that

Lex Fridman (3:07:09.120)

by holding a part of their portfolio in bonds.

Saifedean Ammous (3:07:11.520)

That's the part that they treat as their saving account.

Lex Fridman (3:07:14.720)

And then the rest they use for not speculation,

Saifedean Ammous (3:07:18.160)

for investment in which they take risk.

Lex Fridman (3:07:19.920)

Yeah, speculation.

Lex Fridman (3:07:21.360)

And that's stocks and equity and other high risk assets.

Lex Fridman (3:07:27.360)

I think Bitcoin is not gonna replace equity.

Saifedean Ammous (3:07:29.720)

There will always be equity.

Lex Fridman (3:07:30.840)

There'll always be companies

Lex Fridman (3:07:31.760)

and people will wanna have equity.

Lex Fridman (3:07:34.160)

But it'll probably replace a big chunk

Saifedean Ammous (3:07:35.640)

of current equity markets

Lex Fridman (3:07:36.880)

because right now, if you want to save,

Saifedean Ammous (3:07:39.120)

it used to be that you hold bonds.

Lex Fridman (3:07:40.560)

Now, if you wanna save, you go into stock indexes.

Lex Fridman (3:07:43.400)

So I think Bitcoin likely eats a big chunk

Lex Fridman (3:07:46.160)

of equity markets because currently it's,

Saifedean Ammous (3:07:49.600)

people are using it as saving.

Lex Fridman (3:07:51.120)

And I think it eats all the bonds.

Saifedean Ammous (3:07:53.440)

That's my most ambitious statement.

Lex Fridman (3:07:56.800)

The question is the scale of time that happens across,

Lex Fridman (3:08:00.560)

but the most important statement you make is about trend.

Lex Fridman (3:08:03.520)

Yeah, and also, I mean, let's also remember

Saifedean Ammous (3:08:05.600)

currently bonds nominally don't beat inflation

Lex Fridman (3:08:08.880)

and in real terms,

Saifedean Ammous (3:08:09.880)

they don't come close to beating inflation.

Lex Fridman (3:08:13.320)

So currently with bonds,

Saifedean Ammous (3:08:15.800)

you're taking on credit default risk to buy a bond

Lex Fridman (3:08:19.640)

and also getting less money back in real terms.

Saifedean Ammous (3:08:23.720)

Well, Bitcoin doesn't offer you returns,

Lex Fridman (3:08:26.120)

but in real terms, it appreciates much more

Lex Fridman (3:08:28.160)

and it has, I believe, a lot less risk associated with it

Lex Fridman (3:08:31.320)

than any company or government.

Lex Fridman (3:08:34.000)

So let's make things spicy

Lex Fridman (3:08:35.480)

and ask if Bitcoin fails in the long term future.

Saifedean Ammous (3:08:40.280)

As you just said, economics, volatility,

Lex Fridman (3:08:43.240)

things happen in this world.

Saifedean Ammous (3:08:44.960)

The human civilization might end in this century.

Lex Fridman (3:08:48.400)

I hope it doesn't, but it might.

Saifedean Ammous (3:08:50.200)

There could be catastrophic events.

Lex Fridman (3:08:52.120)

If Bitcoin fails, it goes to zero, loses its number one spot.

Lex Fridman (3:08:57.360)

What would be the reason?

Lex Fridman (3:08:58.840)

If you're an alien visiting Earth 100 years from now

Lex Fridman (3:09:03.840)

and just were to analyze the situation,

Lex Fridman (3:09:05.840)

Bitcoin is a pretty new thing.

Lex Fridman (3:09:07.920)

So the possible trajectories of how the world evolves

Lex Fridman (3:09:10.480)

together with this new monetary technology

Saifedean Ammous (3:09:13.200)

is nearly infinite.

Lex Fridman (3:09:15.080)

So if it fails, one of those trajectories

Saifedean Ammous (3:09:17.280)

surely involves Bitcoin failing.

Lex Fridman (3:09:19.360)

What would be the reason?

Saifedean Ammous (3:09:21.360)

I think the most likely reason that it could fail,

Lex Fridman (3:09:23.680)

I don't think this is likely in general,

Lex Fridman (3:09:25.800)

but I think it is the most likely

Lex Fridman (3:09:27.280)

of all the unlikely things that could destroy Bitcoin,

Saifedean Ammous (3:09:30.480)

is governments go back on a gold standard.

Lex Fridman (3:09:34.240)

Oh, interesting.

Lex Fridman (3:09:35.360)

So they make, in your view, a better decision

Lex Fridman (3:09:38.320)

than the current system, just not the best decision.

Saifedean Ammous (3:09:41.440)

Yeah.

Lex Fridman (3:09:42.280)

I thought you would go much darker.

Saifedean Ammous (3:09:44.040)

But, so that's, yeah, okay, interesting.

Lex Fridman (3:09:47.440)

So maybe because of Russia, because of China and so on,

Saifedean Ammous (3:09:50.020)

because of the current war,

Lex Fridman (3:09:52.160)

they might reconsider the power that America holds

Saifedean Ammous (3:09:57.560)

because of the monetary,

Lex Fridman (3:09:59.240)

because it being the primary currency,

Lex Fridman (3:10:01.120)

and they'll start thinking about going on a gold standard.

Lex Fridman (3:10:05.520)

Yeah, but it would also require the US and the Europeans

Lex Fridman (3:10:08.160)

and everybody to want to join in this system

Lex Fridman (3:10:10.280)

and sing Kumbaya and play nice with each other

Saifedean Ammous (3:10:13.200)

around the gold standard.

Lex Fridman (3:10:15.280)

I think, you know, given that gold already

Saifedean Ammous (3:10:17.160)

is about 10 times larger than Bitcoin,

Lex Fridman (3:10:19.560)

so it has a first mover advantage,

Saifedean Ammous (3:10:23.440)

if governments were to go and peg their currencies

Lex Fridman (3:10:25.640)

to gold again, the price of gold would shoot up 5, 10x,

Lex Fridman (3:10:30.720)

and it would rise in value a lot more.

Lex Fridman (3:10:33.480)

Of course, that doesn't necessarily kill Bitcoin.

Saifedean Ammous (3:10:36.120)

No, again, I'm not saying it's likely to happen.

Lex Fridman (3:10:37.800)

I'm saying it's, I imagine, less likely,

Saifedean Ammous (3:10:41.400)

less unlikely than all the other unlikely scenarios.

Lex Fridman (3:10:44.280)

Because, you know, even with a nuclear war,

Saifedean Ammous (3:10:46.560)

like 90% of the planet is destroyed,

Lex Fridman (3:10:50.320)

the 10% continue to run Bitcoin.

Saifedean Ammous (3:10:55.880)

That's a quote.

Lex Fridman (3:10:57.160)

Okay, there's a movement,

Saifedean Ammous (3:10:59.400)

a community of people referred to as Bitcoin maximalists.

Lex Fridman (3:11:03.520)

I've seen you referred, at least in the past,

Saifedean Ammous (3:11:05.640)

as the leader of the Bitcoin maximalists,

Lex Fridman (3:11:10.160)

probably because of your book,

Saifedean Ammous (3:11:12.320)

Bitcoin Standard, consider the Bible in general.

Lex Fridman (3:11:14.720)

You're one of the leaders in this space.

Lex Fridman (3:11:18.200)

Do you regret any of the toxicity and derision

Lex Fridman (3:11:22.000)

that often or perhaps sometimes originates

Lex Fridman (3:11:25.760)

from this community?

Lex Fridman (3:11:28.080)

Definitely not.

Saifedean Ammous (3:11:28.960)

I'm not in the position to regret other people's actions,

Lex Fridman (3:11:31.640)

so let's just be clear.

Saifedean Ammous (3:11:33.280)

I think the rhetoric of community is,

Lex Fridman (3:11:37.360)

I reject this rhetoric because I think it's a way

Saifedean Ammous (3:11:41.160)

for kind of political manipulation and subversion

Lex Fridman (3:11:45.880)

to try and portray people as part of a community

Lex Fridman (3:11:49.640)

and hold people responsible for other people's actions,

Lex Fridman (3:11:52.100)

which I think is ridiculous.

Saifedean Ammous (3:11:53.440)

So, you know, some guy on the internet

Lex Fridman (3:11:55.700)

said something mean to somebody,

Lex Fridman (3:11:57.520)

and then this is very common,

Lex Fridman (3:11:59.440)

and I always try and not get involved in these things.

Lex Fridman (3:12:03.480)

So some guy who identifies as a Bitcoiner

Lex Fridman (3:12:05.520)

says something to somebody that's very wrong.

Saifedean Ammous (3:12:08.360)

Of course it happens.

Lex Fridman (3:12:09.520)

Tens of millions of people use Bitcoin around the world,

Lex Fridman (3:12:13.440)

and a lot of these, I'd say parasites,

Lex Fridman (3:12:16.680)

people who don't have anything productive

Saifedean Ammous (3:12:18.280)

to do with their life, you know, outrage merchants,

Lex Fridman (3:12:21.600)

they'll come out and say something along the lines of,

Saifedean Ammous (3:12:24.080)

you know, the Bitcoin maximalists are toxic,

Lex Fridman (3:12:27.880)

they're holding Bitcoin back, and they need,

Lex Fridman (3:12:30.360)

and of course it's manipulative.

Lex Fridman (3:12:31.440)

The point behind it is they want to get to you,

Saifedean Ammous (3:12:34.440)

they want to get people who are, you know,

Lex Fridman (3:12:36.280)

not that nobody with 300 followers

Saifedean Ammous (3:12:38.240)

who said something silly,

Lex Fridman (3:12:40.360)

they want to get the notable people

Saifedean Ammous (3:12:42.800)

to basically change their message.

Lex Fridman (3:12:44.600)

So the idea is, you know, I'm supposed to apologize

Saifedean Ammous (3:12:47.680)

because somebody with 300 followers

Lex Fridman (3:12:49.160)

I've never met in my life who calls themselves a Bitcoiner

Saifedean Ammous (3:12:52.520)

said a mean word, and then I need to apologize,

Lex Fridman (3:12:55.080)

and I also need to cut down on my rhetoric

Saifedean Ammous (3:12:57.160)

about other digital currencies, and I need to do that.

Lex Fridman (3:13:00.500)

So I'm only responsible for my own actions,

Lex Fridman (3:13:03.600)

and I don't recall regretting anything.

Lex Fridman (3:13:07.040)

Okay, but let me push back

Saifedean Ammous (3:13:08.560)

or push further into that direction.

Lex Fridman (3:13:10.240)

Fine, let's leave community aside.

Saifedean Ammous (3:13:11.880)

Labels suck, for sure.

Lex Fridman (3:13:14.320)

But you have a spicy way about you on Twitter.

Saifedean Ammous (3:13:19.680)

Even in this conversation, you know,

Lex Fridman (3:13:21.600)

you had some good, strong words to say about movement.

Saifedean Ammous (3:13:25.960)

I've always believed life is too short to mince words.

Lex Fridman (3:13:29.460)

One day I'm gonna be dead, and on my deathbed

Saifedean Ammous (3:13:32.720)

I'm not gonna look back and say,

Lex Fridman (3:13:35.140)

I wish I was a little bit more circumspect

Saifedean Ammous (3:13:38.000)

in expressing my opinions.

Lex Fridman (3:13:39.160)

I'm far more likely to think, you know what,

Saifedean Ammous (3:13:40.900)

I wish I said what I really think.

Lex Fridman (3:13:44.360)

Yes, life is too short to hold back your opinion.

Lex Fridman (3:13:47.560)

The question is, what is really your opinion?

Lex Fridman (3:13:50.480)

Because you're many people in one.

Lex Fridman (3:13:55.320)

So there's a person that loves,

Lex Fridman (3:13:56.760)

there's kindness for the human beings,

Saifedean Ammous (3:13:58.360)

there's a person that gets annoyed,

Lex Fridman (3:14:00.120)

there's a person that enjoys disagreement,

Saifedean Ammous (3:14:03.200)

there's a person that enjoys collaboration.

Lex Fridman (3:14:05.720)

And you can emphasize all of those different things,

Saifedean Ammous (3:14:07.900)

each of those different things,

Lex Fridman (3:14:09.360)

weigh it differently in your online interaction.

Saifedean Ammous (3:14:12.240)

There's some aspects of online interaction

Lex Fridman (3:14:15.120)

that encourages, in different communities,

Saifedean Ammous (3:14:18.080)

online interaction is one community

Lex Fridman (3:14:20.560)

that encourages kind of derision and mockery and so on.

Lex Fridman (3:14:24.520)

So you can choose if you want to engage

Lex Fridman (3:14:26.800)

that part of yourself or some other part of yourself.

Saifedean Ammous (3:14:29.280)

Economics is another community that enjoys

Lex Fridman (3:14:34.280)

being like very straightforward

Saifedean Ammous (3:14:36.520)

about their disagreements, pretty harsh.

Lex Fridman (3:14:38.980)

It's fun to watch because it feels like you arrive

Saifedean Ammous (3:14:41.880)

at the truth much faster because you tear each other apart.

Lex Fridman (3:14:45.960)

But that's a choice, that's a deliberate choice.

Lex Fridman (3:14:49.760)

And I don't want to label an entire community of people

Lex Fridman (3:14:53.700)

by its extremes, I don't think you should do that.

Lex Fridman (3:14:56.480)

But there's cultural characteristics you start to notice

Lex Fridman (3:14:59.160)

when you go to France, it's a certain way.

Saifedean Ammous (3:15:00.800)

When you go to Britain, London is different than rural.

Lex Fridman (3:15:04.160)

Britain and New York is different than Iowa.

Saifedean Ammous (3:15:08.140)

You start to notice things.

Lex Fridman (3:15:09.200)

I mean, you don't want to generalize,

Saifedean Ammous (3:15:10.600)

there's all kinds of people everywhere,

Lex Fridman (3:15:12.020)

but there's a certain way of communication

Saifedean Ammous (3:15:15.080)

on crypto, Twitter in general,

Lex Fridman (3:15:16.780)

but also Bitcoin maximalists

Saifedean Ammous (3:15:19.280)

that I even early on received a bunch of heat.

Lex Fridman (3:15:21.920)

I was like, what the hell?

Lex Fridman (3:15:24.080)

So listen, there's definitely a difference

Lex Fridman (3:15:27.040)

when I go to the computer science community,

Saifedean Ammous (3:15:29.460)

the machine learning community,

Lex Fridman (3:15:31.340)

it's way friendlier than the cryptocurrency community.

Saifedean Ammous (3:15:35.020)

I have much more freedom to actually be what I enjoy being,

Lex Fridman (3:15:39.940)

which is asking simple dumb questions.

Saifedean Ammous (3:15:42.680)

Even when I've already spent years,

Lex Fridman (3:15:44.880)

sometimes decades with an idea,

Saifedean Ammous (3:15:46.280)

I like asking dumb questions anyway.

Lex Fridman (3:15:48.960)

The crypto folks punish you for this,

Saifedean Ammous (3:15:52.000)

for curiosity, for exploration.

Lex Fridman (3:15:56.400)

I understand the mechanism

Saifedean Ammous (3:15:57.760)

because so many other people come into that community

Lex Fridman (3:16:00.900)

and they might masquerade as curious,

Lex Fridman (3:16:04.240)

but really they're trying to inject,

Lex Fridman (3:16:06.440)

they're trying to sell some kind of altcoin,

Saifedean Ammous (3:16:08.080)

there's some scheme, there's some scheme to make money.

Lex Fridman (3:16:10.920)

And so I understand,

Saifedean Ammous (3:16:12.480)

maybe that's just the dynamics of the community by nature.

Lex Fridman (3:16:14.920)

It's not like you respond appropriately

Saifedean Ammous (3:16:18.200)

to the amount of charlatans in the community.

Lex Fridman (3:16:22.240)

So if the fraction of charlatans is low,

Saifedean Ammous (3:16:25.320)

maybe you can afford to be more loving and kind and so on.

Lex Fridman (3:16:27.960)

And when the fraction of charlatans is high,

Saifedean Ammous (3:16:30.840)

you have to be harsher.

Lex Fridman (3:16:32.720)

Perhaps, perhaps.

Lex Fridman (3:16:34.560)

But I think also the stakes are extremely high

Lex Fridman (3:16:37.400)

in this situation.

Lex Fridman (3:16:38.240)

And I think if you don't like Bitcoiners,

Lex Fridman (3:16:40.320)

if you think Bitcoiners are toxic,

Saifedean Ammous (3:16:41.800)

wait till you meet fiaters.

Lex Fridman (3:16:44.440)

The fiat community has financed world wars and genocides

Lex Fridman (3:16:49.120)

and tyrants and the mass death and destruction.

Lex Fridman (3:16:53.920)

The fiat community, if you wanna use that term,

Saifedean Ammous (3:16:56.560)

I don't believe that you should,

Lex Fridman (3:16:57.800)

but I mean, fiat has destroyed the savings

Saifedean Ammous (3:17:00.960)

of pretty much anybody who's lived

Lex Fridman (3:17:02.480)

through the last 20th century.

Saifedean Ammous (3:17:03.880)

Pretty much anybody who's lived through the 20th century,

Lex Fridman (3:17:05.760)

no matter where you lived,

Saifedean Ammous (3:17:07.000)

Switzerland, US, Ethiopia, Russia,

Lex Fridman (3:17:09.920)

you've gone through fiat problems.

Saifedean Ammous (3:17:12.480)

You've had hyperinflation, you've had bank confiscation.

Lex Fridman (3:17:15.520)

There isn't a family in the world today

Saifedean Ammous (3:17:17.320)

that hasn't had its wealth destroyed over the last century.

Lex Fridman (3:17:21.320)

They all have a story about the inflation

Lex Fridman (3:17:24.440)

and the hyperinflation.

Lex Fridman (3:17:25.840)

And Bitcoin offers us a way out of this.

Lex Fridman (3:17:27.720)

And shitcoins, altcoins are essentially fiat world's

Lex Fridman (3:17:34.920)

last gasp attempt to try and salvage fiat,

Saifedean Ammous (3:17:39.240)

to try and salvage the idea that some people

Lex Fridman (3:17:41.400)

will continue to be able to print money

Lex Fridman (3:17:43.520)

and other people will have to use that money.

Lex Fridman (3:17:46.200)

You know, this is Twitter, it's a free market,

Saifedean Ammous (3:17:49.000)

it's the internet.

Lex Fridman (3:17:50.240)

You don't have to follow anybody, that's the thing.

Lex Fridman (3:17:52.560)

So what I find really objectionable about the people

Lex Fridman (3:17:57.440)

who are so butthurt always about Bitcoin maximalists

Saifedean Ammous (3:18:00.440)

is you don't have to click follow on people you don't like.

Lex Fridman (3:18:04.120)

There are 300 million Twitter accounts.

Lex Fridman (3:18:06.680)

And if you choose to follow the accounts

Lex Fridman (3:18:09.400)

that say things that annoy you

Lex Fridman (3:18:11.200)

and then complain about the fact

Lex Fridman (3:18:12.640)

that they say things that annoy you,

Saifedean Ammous (3:18:15.320)

I'm sorry, but you're an idiot

Lex Fridman (3:18:16.480)

that you don't know how to use Twitter.

Saifedean Ammous (3:18:18.280)

Just follow the accounts that you like.

Lex Fridman (3:18:20.360)

It's, you know, you don't have to be part of this.

Saifedean Ammous (3:18:24.000)

You don't have to listen to those people.

Lex Fridman (3:18:25.280)

You can choose, there are a lot of Bitcoiners

Saifedean Ammous (3:18:27.120)

that don't act like this.

Lex Fridman (3:18:28.200)

You can just unfollow the ones that you don't like.

Saifedean Ammous (3:18:30.360)

Since in the past year, man, time flies.

Lex Fridman (3:18:33.800)

I've met a lot of them and I enjoy them a lot.

Lex Fridman (3:18:36.320)

And you build that community of people that you enjoy.

Lex Fridman (3:18:38.400)

There are less that communicate in the way you enjoy.

Lex Fridman (3:18:40.680)

And it's becoming me at this point

Lex Fridman (3:18:42.600)

that I block with love, I think.

Saifedean Ammous (3:18:44.760)

Yes.

Lex Fridman (3:18:45.600)

Because I did not.

Saifedean Ammous (3:18:47.080)

I block very prolifically

Lex Fridman (3:18:48.600)

and I strongly recommend people continue to block.

Saifedean Ammous (3:18:51.160)

I think Twitter is, you know,

Lex Fridman (3:18:52.480)

you're not gonna get to interact

Saifedean Ammous (3:18:53.760)

with 300 million accounts anyway.

Lex Fridman (3:18:55.440)

So you wanna be constantly curating the experience

Saifedean Ammous (3:18:58.480)

by getting rid of people you don't like

Lex Fridman (3:19:00.440)

and following people that you like.

Lex Fridman (3:19:02.360)

And that's just how, you know,

Lex Fridman (3:19:03.880)

after 10 years of using Twitter,

Saifedean Ammous (3:19:05.440)

you know, you get, you accumulate the block list,

Lex Fridman (3:19:08.040)

which is very big, which I'm very happy for.

Saifedean Ammous (3:19:09.840)

I'm gonna pass on to my children.

Lex Fridman (3:19:11.480)

That's, on your deathbed,

Saifedean Ammous (3:19:15.760)

the grandchildren will gather around

Lex Fridman (3:19:17.640)

and your grandfather can finally share the full list.

Saifedean Ammous (3:19:22.560)

Yeah.

Lex Fridman (3:19:23.400)

So like, again, it's just a Twitter account.

Saifedean Ammous (3:19:25.320)

If it bothers you so much, ask yourself why it bothers you

Lex Fridman (3:19:28.640)

that some people are so,

Saifedean Ammous (3:19:29.920)

I'm not referring to you obviously,

Lex Fridman (3:19:31.640)

but I mean, the people that are constantly aggravated

Saifedean Ammous (3:19:34.280)

about this, I don't get bothered by anything on Twitter.

Lex Fridman (3:19:36.560)

I just block immediately.

Lex Fridman (3:19:38.240)

And I get to curate the experience that I enjoy.

Lex Fridman (3:19:40.960)

And I recommend people do that.

Saifedean Ammous (3:19:43.240)

It's really a lot less pathetic than complaining

Lex Fridman (3:19:46.280)

about strangers saying things you don't like,

Saifedean Ammous (3:19:48.000)

which a lot of, and of course the reason for it is,

Lex Fridman (3:19:51.480)

you know, I mean, when I say it's stupid,

Saifedean Ammous (3:19:53.960)

it's not really stupid.

Lex Fridman (3:19:55.000)

There's an ulterior motive there.

Lex Fridman (3:19:56.320)

And the ulterior motive is,

Lex Fridman (3:19:58.000)

hey, I have this shit coin that I made

Saifedean Ammous (3:19:59.840)

with five other friends of mine.

Lex Fridman (3:20:01.640)

And I'd like you to,

Saifedean Ammous (3:20:02.920)

I'd like to ride your coattails, Bitcoiners,

Lex Fridman (3:20:05.280)

and I'd like you to please help me promote this shit coin.

Saifedean Ammous (3:20:07.480)

Like this is, I get this practically every week,

Lex Fridman (3:20:10.280)

whether through email or through Twitter,

Saifedean Ammous (3:20:12.520)

where, hey, you know, this is our shit coin.

Lex Fridman (3:20:15.880)

You know, it's just like Bitcoin,

Lex Fridman (3:20:17.440)

but it's better because it does this and this and that.

Lex Fridman (3:20:19.520)

And, you know, basically how can we get you

Lex Fridman (3:20:22.520)

to promote this shit coin for us?

Lex Fridman (3:20:24.600)

And being straightforward and forthright

Saifedean Ammous (3:20:27.360)

is a great productivity hack,

Lex Fridman (3:20:29.800)

because, you know, you just tell those people,

Saifedean Ammous (3:20:32.200)

no, I'm not interested.

Lex Fridman (3:20:33.200)

It's a stupid shit coin.

Lex Fridman (3:20:34.040)

And I wish you quick and swift failure

Lex Fridman (3:20:36.160)

before you take a lot of people's money.

Lex Fridman (3:20:39.640)

And that's what I genuinely think.

Lex Fridman (3:20:41.760)

Well, but I'll just be upfront with the fact,

Saifedean Ammous (3:20:44.240)

at least for my taste,

Lex Fridman (3:20:45.600)

just labeling everything as a shit coin worries me.

Lex Fridman (3:20:50.880)

So this is my own preference.

Lex Fridman (3:20:52.120)

It's not a judgment on you.

Saifedean Ammous (3:20:53.400)

It's just my own preference

Lex Fridman (3:20:54.840)

that I'm afraid I'll miss good ideas.

Saifedean Ammous (3:20:57.840)

I think when you're, me personally,

Lex Fridman (3:20:59.440)

when I'm too certain about things,

Saifedean Ammous (3:21:01.600)

when I'm too tribal about things,

Lex Fridman (3:21:03.800)

I'll miss actually really strong ideas,

Saifedean Ammous (3:21:06.640)

outlier ideas, totally new ideas.

Lex Fridman (3:21:09.360)

So that worries me.

Saifedean Ammous (3:21:10.880)

One of the downsides of the way Bitcoin is,

Lex Fridman (3:21:16.120)

how much shit is at stake financially

Saifedean Ammous (3:21:18.560)

is that it's less open to good,

Lex Fridman (3:21:20.480)

and actually by design, that it's not changing,

Saifedean Ammous (3:21:23.560)

like with the hard forks and so on,

Lex Fridman (3:21:25.440)

that there's not a kind of curiosity

Saifedean Ammous (3:21:28.040)

about exploration of ideas.

Lex Fridman (3:21:30.920)

Of course, in some way,

Saifedean Ammous (3:21:33.120)

that curiosity can start getting injected

Lex Fridman (3:21:35.640)

when you start talking about other layers

Saifedean Ammous (3:21:37.480)

built on top of Bitcoin,

Lex Fridman (3:21:39.360)

when you start talking about applications

Saifedean Ammous (3:21:40.920)

or different things like lightning network,

Lex Fridman (3:21:43.320)

that's where the curiosity can emerge.

Lex Fridman (3:21:45.520)

But still, that's why with cryptocurrency in general,

Lex Fridman (3:21:48.080)

I just try to keep an open mind.

Lex Fridman (3:21:49.440)

And just the shit coin as a term

Lex Fridman (3:21:52.440)

is just a good statement

Saifedean Ammous (3:21:53.520)

that I'm gonna close my mind to.

Lex Fridman (3:21:54.920)

That's the way I hear it.

Lex Fridman (3:21:57.560)

But coming out of your mouth,

Lex Fridman (3:21:59.360)

because you say a lot of other edgy stuff,

Saifedean Ammous (3:22:01.080)

it's just more you having fun.

Lex Fridman (3:22:02.960)

That's the way I hear it.

Lex Fridman (3:22:03.800)

But if I said something like that,

Lex Fridman (3:22:05.320)

I would feel like I'm closing my mind.

Saifedean Ammous (3:22:08.440)

I mean, let me give you the counter argument to that.

Lex Fridman (3:22:10.640)

How much time do you spend emailing back

Saifedean Ammous (3:22:13.080)

all of these Nigerian Prince email scams

Lex Fridman (3:22:15.520)

that you know email you tell you,

Lex Fridman (3:22:16.760)

send me $5,000 and I'll send you $15 million?

Lex Fridman (3:22:19.880)

None. None.

Lex Fridman (3:22:21.280)

Why are you being close minded

Lex Fridman (3:22:22.840)

to all of these great ideas?

Saifedean Ammous (3:22:23.920)

Well, no, but I'm also...

Lex Fridman (3:22:25.920)

You know, maybe one of them

Saifedean Ammous (3:22:26.840)

will actually send you $15 million.

Lex Fridman (3:22:28.440)

But I don't know if I know the difference

Saifedean Ammous (3:22:29.880)

between the Nigerian Prince

Lex Fridman (3:22:32.040)

and many other people I do talk to

Saifedean Ammous (3:22:34.160)

who are colleagues and so on

Lex Fridman (3:22:35.680)

that are also emailing me.

Lex Fridman (3:22:37.400)

And they're also offering me things,

Lex Fridman (3:22:39.840)

but they don't sound as ridiculously spammy.

Saifedean Ammous (3:22:42.360)

Yeah, but I mean, the moment that somebody tells you,

Lex Fridman (3:22:44.120)

hey, I'm gonna give you $15 million for nothing,

Saifedean Ammous (3:22:46.520)

just if you send me $5,000,

Lex Fridman (3:22:48.520)

you know, you're getting something for nothing.

Lex Fridman (3:22:49.960)

And essentially, with all of the digital currencies,

Lex Fridman (3:22:53.080)

it's the same pitch.

Saifedean Ammous (3:22:53.920)

Say, hey, you know, come use this thing

Lex Fridman (3:22:56.520)

that'll allow you to do things that...

Saifedean Ammous (3:22:58.240)

All of the things that they pretend that they can do

Lex Fridman (3:23:00.400)

that can be done with computers

Saifedean Ammous (3:23:01.880)

without having digital currencies.

Lex Fridman (3:23:03.280)

You know, we already have AWS that does cloud computing,

Saifedean Ammous (3:23:06.440)

that does everything that shitcoins pretend to do.

Lex Fridman (3:23:09.600)

The only difference is AWS doesn't have

Saifedean Ammous (3:23:11.360)

its own monetary system tacked on top of it

Lex Fridman (3:23:13.440)

to allow Jeff Bezos to basically print his own money.

Lex Fridman (3:23:17.520)

But don't you think there's some gray area?

Lex Fridman (3:23:19.560)

So let me go for the historical record

Lex Fridman (3:23:22.160)

and let's see if you've changed

Lex Fridman (3:23:23.600)

as a philosopher, economist, human being.

Saifedean Ammous (3:23:27.720)

You tweeted three years ago.

Lex Fridman (3:23:29.640)

Oh, well.

Saifedean Ammous (3:23:30.760)

Anyone who believes proof of stake in work

Lex Fridman (3:23:33.040)

is either one completely clueless

Saifedean Ammous (3:23:35.840)

at how and why Bitcoin works at all

Lex Fridman (3:23:38.120)

or two, a con artist using it as a buzzword

Saifedean Ammous (3:23:41.600)

to promote a worthless scam like Ethereum.

Lex Fridman (3:23:44.720)

Do you still believe that Ethereum is a scam

Lex Fridman (3:23:50.080)

and in general, proof of stake?

Lex Fridman (3:23:51.680)

You're either clueless if you think it's interesting.

Saifedean Ammous (3:23:55.280)

Yeah, no, I still stand by that.

Lex Fridman (3:23:57.320)

I think the...

Lex Fridman (3:23:58.160)

Would you classify Ethereum as a shitcoin?

Lex Fridman (3:24:00.240)

For sure.

Saifedean Ammous (3:24:01.080)

It's the mother asshole from which the shitcoins spring.

Lex Fridman (3:24:05.520)

The royal, the king shitcoin.

Saifedean Ammous (3:24:07.200)

Yeah.

Lex Fridman (3:24:08.040)

I think the key thing is,

Saifedean Ammous (3:24:09.920)

the way to think about there's another tweet

Lex Fridman (3:24:11.400)

from a couple of years ago,

Saifedean Ammous (3:24:12.360)

which is essentially proof of work

Lex Fridman (3:24:14.600)

was like the invention of flight.

Saifedean Ammous (3:24:16.320)

Like we've gotten this machine

Lex Fridman (3:24:17.400)

and we managed to get it to fly off the ground.

Lex Fridman (3:24:19.920)

And proof of stake is,

Lex Fridman (3:24:21.440)

hey, we found a great way to make airplanes cheaper

Lex Fridman (3:24:25.320)

and faster by not making them fly.

Lex Fridman (3:24:30.040)

By keeping them on the ground.

Saifedean Ammous (3:24:31.640)

Like the invention of proof of work,

Lex Fridman (3:24:34.040)

the reason the entire digital currency space exists

Saifedean Ammous (3:24:38.080)

is because Bitcoin operates based on proof of work.

Lex Fridman (3:24:40.880)

If Bitcoin was based on proof of stake,

Saifedean Ammous (3:24:43.040)

it would have died or been shut down from day one.

Lex Fridman (3:24:45.680)

But that's a hypothesis and a lot of people believe that

Lex Fridman (3:24:49.280)

and I think they have a lot of strong support.

Lex Fridman (3:24:51.360)

But basically, proof of work is grounded in physics

Saifedean Ammous (3:24:55.960)

in the real world.

Lex Fridman (3:24:56.880)

The proof of stake is more about...

Saifedean Ammous (3:24:58.960)

It's politics.

Lex Fridman (3:24:59.800)

It's the Federal Reserve.

Saifedean Ammous (3:25:00.880)

It's exactly what we have.

Lex Fridman (3:25:02.280)

It's exactly what we have.

Saifedean Ammous (3:25:03.520)

It's just a group of people who get to decide the rules.

Lex Fridman (3:25:06.920)

And it's essentially a system that is,

Saifedean Ammous (3:25:09.800)

it's a security, it's a company.

Lex Fridman (3:25:11.120)

So it's not an innovation in any sense.

Saifedean Ammous (3:25:13.680)

It's a step backwards to what we already had,

Lex Fridman (3:25:16.000)

which is you get a bunch of people in charge of the money.

Saifedean Ammous (3:25:18.640)

Now, the only reason it survives in this,

Lex Fridman (3:25:22.680)

the reason I call these things scam

Lex Fridman (3:25:24.440)

and I have no problem with calling them a scam

Lex Fridman (3:25:25.880)

is because they fraudulently present themselves

Saifedean Ammous (3:25:29.520)

as being decentralized.

Lex Fridman (3:25:31.120)

They present themselves as just being a different way

Saifedean Ammous (3:25:33.240)

of doing decentralization than Bitcoin, when it's not.

Lex Fridman (3:25:36.600)

It's just they're writing Bitcoin's coattails

Lex Fridman (3:25:39.160)

and they're writing the fact that most people

Lex Fridman (3:25:40.920)

don't quite understand what Bitcoin is and how it works

Saifedean Ammous (3:25:43.480)

to portray themselves as a cheaper, better,

Lex Fridman (3:25:45.600)

more efficient way of doing what Bitcoin does.

Saifedean Ammous (3:25:48.400)

It's not.

Lex Fridman (3:25:49.320)

It's a less legally accountable way

Saifedean Ammous (3:25:52.680)

of doing what central banks do.

Lex Fridman (3:25:54.920)

Right, so and the basic criticism is that

Saifedean Ammous (3:25:56.920)

there's a group of people,

Lex Fridman (3:25:58.120)

sometimes a very small group of people

Saifedean Ammous (3:25:59.720)

that can control the parameters

Lex Fridman (3:26:01.800)

of the operation of the system.

Lex Fridman (3:26:03.360)

So over time, you can't trust,

Lex Fridman (3:26:06.840)

it's not gold under the mattress.

Saifedean Ammous (3:26:09.120)

It doesn't have that kind of heart.

Lex Fridman (3:26:10.600)

It's not property.

Lex Fridman (3:26:11.440)

And I really very strongly recommend your discussion

Lex Fridman (3:26:14.000)

with Saylor for people who want to elaborate more on this.

Saifedean Ammous (3:26:16.480)

There's a bunch of people in charge,

Lex Fridman (3:26:17.800)

which means that legally,

Saifedean Ammous (3:26:20.160)

they should be doing this under securities law.

Lex Fridman (3:26:23.040)

But even as an anarchist,

Saifedean Ammous (3:26:24.480)

if I don't want to care about that,

Lex Fridman (3:26:26.320)

the technical implication of it is,

Saifedean Ammous (3:26:28.640)

this is never going to be adopted

Lex Fridman (3:26:30.200)

as a neutral way of transferring value on the internet

Saifedean Ammous (3:26:33.080)

because you need something

Lex Fridman (3:26:35.440)

that enemies can trade with one another.

Saifedean Ammous (3:26:37.440)

You can't have something

Lex Fridman (3:26:38.440)

that has a small group of people in charge

Saifedean Ammous (3:26:40.360)

because A, this small group of people themselves

Lex Fridman (3:26:43.000)

can be corrupted and B, they can be coerced.

Saifedean Ammous (3:26:47.200)

You can put a bunch of people in a room,

Lex Fridman (3:26:49.120)

put a gun to their head,

Lex Fridman (3:26:50.120)

and you can change everything

Lex Fridman (3:26:52.560)

in any of these digital currencies.

Lex Fridman (3:26:53.960)

And that's why I think you'll find a lot more sympathy

Lex Fridman (3:26:58.240)

among fiaters to shitcoins.

Saifedean Ammous (3:27:01.480)

The Keynesian economist to Ethereum fanboy pipeline

Lex Fridman (3:27:05.560)

is a very strong one because it's the same thing.

Saifedean Ammous (3:27:09.920)

It's like you like the idea

Lex Fridman (3:27:11.400)

of people being in charge of money

Lex Fridman (3:27:13.080)

and you think you're going to be the one

Lex Fridman (3:27:14.440)

who's going to be in charge of money.

Lex Fridman (3:27:15.600)

So you see a lot of this phenomenon

Lex Fridman (3:27:18.080)

and you see the same people that want gold

Lex Fridman (3:27:20.480)

and don't like central banking, they get into Bitcoin.

Lex Fridman (3:27:23.680)

Yeah, so just to actually push back on a couple of things.

Lex Fridman (3:27:27.520)

So one is theater.

Lex Fridman (3:27:29.800)

It sounds like I'm trying to be a sophisticated Brit

Saifedean Ammous (3:27:32.800)

talking about theater,

Lex Fridman (3:27:34.200)

but for many reasons not making me feel good about that.

Lex Fridman (3:27:38.800)

So day by day, things change.

Lex Fridman (3:27:42.040)

You used to be one of those.

Lex Fridman (3:27:44.600)

So people evolve, people learn.

Lex Fridman (3:27:46.760)

People that are supporters of Bitcoin

Saifedean Ammous (3:27:48.160)

might eventually become supporters of Ethereum

Lex Fridman (3:27:51.920)

or go back to supporting fiat.

Saifedean Ammous (3:27:53.600)

We don't know.

Lex Fridman (3:27:54.440)

People evolve for different reasons.

Saifedean Ammous (3:27:56.440)

You grow up, you mature, or you become enlightened.

Lex Fridman (3:28:00.520)

So I think every single person sort of,

Saifedean Ammous (3:28:03.840)

as this technology is evolving, as this world is evolving,

Lex Fridman (3:28:07.560)

as wars break on, as your politics change,

Saifedean Ammous (3:28:10.280)

as the monetary system is constantly put under stress,

Lex Fridman (3:28:14.160)

people will evolve.

Lex Fridman (3:28:15.080)

So we're trying to all figure it out together.

Lex Fridman (3:28:17.400)

That's why like open mindedness here,

Saifedean Ammous (3:28:19.080)

I think for people like me at least seems essential.

Lex Fridman (3:28:23.120)

I know, so I expect you to be answering

Saifedean Ammous (3:28:25.440)

all of the spam emails you get.

Lex Fridman (3:28:27.600)

I will, prince by prince by prince.

Lex Fridman (3:28:29.640)

But no, I don't have a clear understanding

Lex Fridman (3:28:32.880)

what is a good investment in my time,

Lex Fridman (3:28:34.200)

what is a good investment in my money.

Lex Fridman (3:28:36.000)

That doesn't seem clear because things,

Saifedean Ammous (3:28:40.440)

things are good at promoting themselves.

Lex Fridman (3:28:42.120)

I'm not talking about the different kinds of things

Saifedean Ammous (3:28:45.300)

like Ethereum, altcoins, and so on.

Lex Fridman (3:28:47.360)

I just mean life, like dating, jobs, friendships.

Saifedean Ammous (3:28:52.360)

Like everybody's advertising themselves

Lex Fridman (3:28:56.900)

as a great investment, right?

Lex Fridman (3:28:59.340)

But you don't know and you have to keep an open mind.

Lex Fridman (3:29:02.040)

And also I don't, and be sort of self introspective

Saifedean Ammous (3:29:06.860)

about what, how like biases I operate under

Lex Fridman (3:29:12.260)

and ways I delude myself,

Saifedean Ammous (3:29:14.860)

like hallucinations that I'm living under.

Lex Fridman (3:29:16.800)

It's like breaking out of all these hallucinations.

Saifedean Ammous (3:29:19.880)

It's very hard to introspect thinking like

Lex Fridman (3:29:22.900)

what are the assumptions under which I live my entire life

Saifedean Ammous (3:29:25.900)

that might be actually false assumptions.

Lex Fridman (3:29:27.900)

That's a really difficult thought process to take.

Saifedean Ammous (3:29:31.060)

It's a dangerous one.

Lex Fridman (3:29:32.500)

It's the nature if you gaze long into the abyss,

Saifedean Ammous (3:29:35.300)

the abyss gaze into you.

Lex Fridman (3:29:37.260)

It's like Alex Jones talks about this.

Saifedean Ammous (3:29:40.060)

I mean he's living, he's got demons in his head.

Lex Fridman (3:29:43.660)

So he has like all these conspiracy theories

Saifedean Ammous (3:29:45.780)

that it holds in his head

Lex Fridman (3:29:46.700)

but it begins to really destroy him.

Lex Fridman (3:29:48.820)

So it's a psychological burden to carry.

Lex Fridman (3:29:51.140)

So if you question, if you question authority,

Saifedean Ammous (3:29:53.420)

if you question government, if you question culture,

Lex Fridman (3:29:55.940)

the way things have been done, it's really difficult.

Lex Fridman (3:29:59.880)

And the biases you operate under,

Lex Fridman (3:30:02.340)

it's really difficult to question them.

Lex Fridman (3:30:03.740)

So I think like being constantly open minded

Lex Fridman (3:30:07.620)

and self critical, not constantly,

Lex Fridman (3:30:10.060)

but a little bit every day is important I think.

Lex Fridman (3:30:12.780)

Yeah, but I mean, you know, you're talking to somebody,

Saifedean Ammous (3:30:15.180)

I grew up in Ramallah in Palestine in the West Bank.

Lex Fridman (3:30:18.700)

I've changed my mind on all kinds of different things.

Saifedean Ammous (3:30:22.260)

The fact that I was even open to the idea of Bitcoin

Lex Fridman (3:30:25.260)

is required, has required an enormous, enormous amount of,

Saifedean Ammous (3:30:29.180)

it's a heck of a journey.

Lex Fridman (3:30:30.180)

So I'd much rather appreciate, you know, direct arguments

Saifedean Ammous (3:30:34.740)

rather than these kinds of general fluffy,

Lex Fridman (3:30:37.580)

you know, you should be, oh, of course, yes,

Saifedean Ammous (3:30:39.140)

you should be open minded,

Lex Fridman (3:30:40.060)

but you know, also you come up with conclusions

Lex Fridman (3:30:42.620)

and you delete spam email sometimes

Lex Fridman (3:30:44.260)

when you know that it is spam

Saifedean Ammous (3:30:45.380)

because you have to move on with your life.

Lex Fridman (3:30:46.740)

You can't, there's an opportunity cost

Saifedean Ammous (3:30:48.380)

to considering every spam email, so.

Lex Fridman (3:30:50.140)

Well, to me, okay, so I'll just say

Saifedean Ammous (3:30:52.340)

from my relatively sort of shallow perspective,

Lex Fridman (3:30:56.980)

almost like a technical person, mostly,

Saifedean Ammous (3:30:59.300)

my understanding of economics is weak.

Lex Fridman (3:31:02.700)

Proof of stake is not obviously

Saifedean Ammous (3:31:07.620)

a weak consensus mechanism relative to proof of work.

Lex Fridman (3:31:10.960)

So that's not obvious to me that that goes wrong

Lex Fridman (3:31:14.880)

and becomes corrupted in the way

Lex Fridman (3:31:16.440)

that governments get corrupted

Saifedean Ammous (3:31:18.160)

because it still seems decentralized.

Lex Fridman (3:31:21.680)

Now, your criticism of governance is an interesting one,

Lex Fridman (3:31:24.800)

but if you put that aside,

Lex Fridman (3:31:26.680)

it still is a decentralized mechanism

Lex Fridman (3:31:29.280)

and it's more transparent than the mechanism

Lex Fridman (3:31:32.680)

that governments operate on.

Saifedean Ammous (3:31:33.800)

It isn't, it's exactly what the Federal Reserve is.

Lex Fridman (3:31:35.800)

The Federal Reserve is a proof of stake system.

Saifedean Ammous (3:31:37.680)

The Federal Reserve is owned by its constituent banks

Lex Fridman (3:31:40.680)

and so the rules of the Federal Reserve

Lex Fridman (3:31:42.400)

and the regulations are determined by the ownership,

Lex Fridman (3:31:44.800)

which is the banks.

Lex Fridman (3:31:45.640)

So it's exactly what the Federal Reserve is.

Lex Fridman (3:31:47.800)

But it's too backdoor, the agreements

Saifedean Ammous (3:31:50.520)

between the banks and the Federal Reserve.

Lex Fridman (3:31:53.760)

It feels like a lot of those agreements

Saifedean Ammous (3:31:55.100)

are made between individuals that sort of behind the scenes.

Lex Fridman (3:31:58.760)

It's not hard to, it's opaque.

Saifedean Ammous (3:32:01.160)

Yes, but the only way that a proof of stake system

Lex Fridman (3:32:03.560)

will take off is if you have a military

Saifedean Ammous (3:32:05.560)

to force people to use it.

Lex Fridman (3:32:07.280)

That's the thing.

Saifedean Ammous (3:32:08.120)

Ultimately, there's no way that it's going to take off

Lex Fridman (3:32:10.360)

on a free market.

Lex Fridman (3:32:11.760)

And that's why for all of the bluster

Lex Fridman (3:32:14.040)

about wanting to move to a proof of stake system,

Saifedean Ammous (3:32:16.280)

Ethereum have been saying this since 2014.

Lex Fridman (3:32:19.080)

It's now been eight years that they've been talking about it.

Saifedean Ammous (3:32:22.860)

We still haven't seen the proof of stake system

Lex Fridman (3:32:25.420)

operational in the wild.

Saifedean Ammous (3:32:26.440)

It's vaporware for all practical and intentional.

Lex Fridman (3:32:28.400)

Oh, Cardano's proof of stake.

Saifedean Ammous (3:32:30.020)

It's potential.

Lex Fridman (3:32:31.600)

I mean, you can do it in a centralized way,

Lex Fridman (3:32:33.600)

but can it survive?

Lex Fridman (3:32:36.760)

Can it last for a long time?

Saifedean Ammous (3:32:38.840)

I don't think so.

Lex Fridman (3:32:39.660)

I think it can last perhaps initially with marketing,

Saifedean Ammous (3:32:44.280)

with centralized marketing, you can promote it.

Lex Fridman (3:32:46.280)

But ultimately, user demand,

Saifedean Ammous (3:32:50.520)

the people that are not interested in speculating

Lex Fridman (3:32:53.160)

because they want to get rich on this,

Saifedean Ammous (3:32:54.440)

the people that are going to use it,

Lex Fridman (3:32:55.820)

they're going to want to use it because they can trust

Saifedean Ammous (3:32:58.280)

that it is not going to be messed with.

Lex Fridman (3:33:00.800)

Yes, but there's also applications.

Saifedean Ammous (3:33:03.280)

That's also a lightning network.

Lex Fridman (3:33:04.600)

But there's applications on top.

Saifedean Ammous (3:33:06.360)

Well, the reason I'm interested in things like Ethereum

Lex Fridman (3:33:09.720)

is you might think it's ridiculous.

Saifedean Ammous (3:33:11.800)

I thought it was ridiculous, but NFTs.

Lex Fridman (3:33:14.840)

So you can have NFTs probably on top of Bitcoin,

Lex Fridman (3:33:18.160)

but you don't because there's no marketing on Bitcoin

Lex Fridman (3:33:20.440)

because all of these ideas get promoted

Saifedean Ammous (3:33:22.920)

on proprietary shitcoins because, yes.

Lex Fridman (3:33:25.400)

But there's the network effects of ideas, of applications.

Lex Fridman (3:33:28.760)

So they just take off for some reason.

Lex Fridman (3:33:30.440)

And human civilization is such that you get excited

Saifedean Ammous (3:33:33.360)

about stuff and large amounts of people believe a thing

Lex Fridman (3:33:35.560)

and they start to get excited and it actually has impact.

Saifedean Ammous (3:33:38.120)

Like the fact that NFTs can have an impact on the art world

Lex Fridman (3:33:41.520)

or the world in general is wild to me.

Lex Fridman (3:33:45.360)

But it worked.

Lex Fridman (3:33:46.600)

So the question is.

Saifedean Ammous (3:33:47.800)

David Rothcall has an impact on the art world.

Lex Fridman (3:33:50.320)

That doesn't say much.

Saifedean Ammous (3:33:51.960)

Well, I'm saying these ideas have,

Lex Fridman (3:33:54.080)

we're collective intelligent beings

Lex Fridman (3:33:56.240)

and we can believe a thing and that has power.

Lex Fridman (3:33:59.840)

That has led to major wars and all those kinds of things.

Lex Fridman (3:34:02.820)

So it's interesting to me that NFTs took hold.

Lex Fridman (3:34:07.360)

And the question is, is there distributed DApps?

Saifedean Ammous (3:34:09.880)

Is there distributed apps built on top

Lex Fridman (3:34:11.480)

of different blockchains

Lex Fridman (3:34:13.000)

that might somehow transform the world?

Lex Fridman (3:34:14.960)

You have to kind of keep an open mind to that.

Saifedean Ammous (3:34:17.760)

Cause right now it's like,

Lex Fridman (3:34:19.440)

it's like I'm the same place with that

Saifedean Ammous (3:34:21.320)

as I am with like virtual reality.

Lex Fridman (3:34:23.320)

It's like, all right, this seems like a really

Saifedean Ammous (3:34:26.560)

intellectually promising set of ideas here,

Lex Fridman (3:34:29.880)

but there's something either technically

Saifedean Ammous (3:34:31.600)

or socially not quite taking hold.

Lex Fridman (3:34:33.920)

Why?

Lex Fridman (3:34:35.520)

And I don't know what the right answer is.

Lex Fridman (3:34:37.440)

So with virtual reality, what's the right answer?

Saifedean Ammous (3:34:39.820)

Is it just technically the latency is too high

Lex Fridman (3:34:43.940)

or the games are not good enough?

Saifedean Ammous (3:34:46.560)

Or is it a fundamentally flawed idea

Lex Fridman (3:34:48.560)

that you can live in a virtual world and enjoy it?

Lex Fridman (3:34:51.240)

That the physical world is just orders of magnitude better?

Lex Fridman (3:34:54.320)

Or a two dimensional display is just as good

Lex Fridman (3:34:57.720)

as a three dimensional world?

Lex Fridman (3:34:59.160)

I don't know.

Lex Fridman (3:35:00.000)

Why is virtual reality not taking off?

Lex Fridman (3:35:01.240)

It's been since the 80s, right?

Saifedean Ammous (3:35:03.280)

I don't have strong opinions on it,

Lex Fridman (3:35:05.120)

on the prospect of the technology.

Saifedean Ammous (3:35:07.720)

Personally, I don't want to ever imagine myself

Lex Fridman (3:35:10.600)

having something on my eyes.

Saifedean Ammous (3:35:12.200)

I'd rather just go out into the real world.

Lex Fridman (3:35:15.200)

But I don't have strong opinions on virtual reality.

Saifedean Ammous (3:35:17.760)

I do have on dApps and NFTs.

Lex Fridman (3:35:20.000)

Yeah, what's your criticism of dApps and NFTs?

Lex Fridman (3:35:22.640)

Is this a distraction?

Lex Fridman (3:35:23.720)

It's a way to sell a flawed technology?

Saifedean Ammous (3:35:27.740)

The problem with dApps is, I mean,

Lex Fridman (3:35:29.600)

it's just the economics of it makes no sense

Saifedean Ammous (3:35:31.880)

in the sense that currently,

Lex Fridman (3:35:35.840)

if you wanted to run an application,

Saifedean Ammous (3:35:37.880)

whatever the application is,

Lex Fridman (3:35:40.000)

you want to run it on AWS,

Saifedean Ammous (3:35:41.720)

you pay a specific amount of money,

Lex Fridman (3:35:43.080)

you want to run it on your own laptop,

Saifedean Ammous (3:35:44.860)

you pay a specific amount of money per kilobyte of data.

Lex Fridman (3:35:48.320)

If you wanted to run the same thing on a distributed ledger,

Saifedean Ammous (3:35:50.960)

where you're distributing the data

Lex Fridman (3:35:52.280)

over thousands of computers worldwide,

Saifedean Ammous (3:35:54.760)

it's infinitely more expensive.

Lex Fridman (3:35:56.560)

And that's why we haven't seen any of these dApps take off.

Lex Fridman (3:36:00.600)

And that's why I've said this many years ago,

Lex Fridman (3:36:03.320)

the only working application

Saifedean Ammous (3:36:04.880)

of blockchain technology is Bitcoin.

Lex Fridman (3:36:07.080)

Because with Bitcoin, you know,

Saifedean Ammous (3:36:09.280)

with a few hundred bytes of data,

Lex Fridman (3:36:11.360)

with a few bytes of data,

Saifedean Ammous (3:36:12.440)

you could move a billion dollars worth of economic value

Lex Fridman (3:36:17.740)

from here to China and move it safely and reliably.

Lex Fridman (3:36:21.360)

So that power,

Lex Fridman (3:36:24.200)

I can't see it being justified

Saifedean Ammous (3:36:27.360)

for anything that is not as mission critical,

Lex Fridman (3:36:29.360)

as moving large amounts of value,

Saifedean Ammous (3:36:32.280)

which require very little amount of information.

Lex Fridman (3:36:34.980)

So when you look at all of the buzzwords

Saifedean Ammous (3:36:36.480)

that the Ethereum and other altcoin marketing people

Lex Fridman (3:36:40.400)

like to use, and you know,

Saifedean Ammous (3:36:43.160)

if you want to wonder really why

Lex Fridman (3:36:44.760)

we come to this kind of aggression

Saifedean Ammous (3:36:46.840)

is because we've heard all of this, you know,

Lex Fridman (3:36:48.320)

I've had all of these hucksters come to me for years,

Saifedean Ammous (3:36:50.960)

you know, it's been, I've had, you know, people in 2016

Lex Fridman (3:36:54.640)

talk to me about how Ethereum blockchain technology

Saifedean Ammous (3:36:59.360)

is going to revolutionize real estate deeds in India.

Lex Fridman (3:37:02.880)

I remember this guy,

Saifedean Ammous (3:37:05.320)

I'm not going to mention his name,

Lex Fridman (3:37:07.760)

but this guy was, you know, 2016,

Lex Fridman (3:37:09.600)

and he sold a lot of shitcoins

Lex Fridman (3:37:11.320)

and he made a lot of money off of shitcoins

Saifedean Ammous (3:37:13.440)

based on all these silly ideas.

Lex Fridman (3:37:15.820)

We're going to have Blackjack on a distributed ledger.

Saifedean Ammous (3:37:19.040)

We're going to have Indian real estate

Lex Fridman (3:37:20.400)

on a distributed ledger.

Lex Fridman (3:37:22.200)

And it's just, it's concerned trolling marketing.

Lex Fridman (3:37:25.080)

You know, oh, there's a problem with real estate in India,

Saifedean Ammous (3:37:28.120)

real estate deeds, blockchain fixes this, buy my shitcoin.

Lex Fridman (3:37:32.120)

And then people buy the shitcoin,

Saifedean Ammous (3:37:33.920)

Indian real estate isn't fixed,

Lex Fridman (3:37:35.760)

and the guy gets rich and they move on.

Lex Fridman (3:37:38.520)

But I mean, I'm still waiting for a dap to actually emerge.

Lex Fridman (3:37:42.500)

Like, you know, it's, the promise that we keep hearing

Saifedean Ammous (3:37:46.760)

is something completely world changing,

Lex Fridman (3:37:49.560)

world transforming.

Lex Fridman (3:37:51.000)

And the reality is not one app.

Lex Fridman (3:37:53.240)

Like there's one of my good friends, Jimmy Song,

Saifedean Ammous (3:37:56.160)

eventually they refused to go ahead with the bet.

Lex Fridman (3:37:57.800)

He wanted to bet with one of the Ethereum people

Saifedean Ammous (3:38:00.520)

about these daps.

Lex Fridman (3:38:02.840)

You know, the Ethereum people are constantly saying

Saifedean Ammous (3:38:04.320)

those daps are going to grow

Lex Fridman (3:38:05.360)

and they're going to have so many applications

Lex Fridman (3:38:07.480)

and they're going to have so many ideas.

Lex Fridman (3:38:09.120)

And the reality is all the apps that work

Lex Fridman (3:38:11.720)

are centralized apps, you know?

Lex Fridman (3:38:13.080)

So there is no Uber on the blockchain.

Saifedean Ammous (3:38:16.560)

There is no Twitter on the blockchain.

Lex Fridman (3:38:20.400)

There is no social media on the blockchain

Saifedean Ammous (3:38:21.640)

because these are businesses

Lex Fridman (3:38:23.200)

and businesses require a centralized authority

Saifedean Ammous (3:38:25.560)

to make decisions.

Lex Fridman (3:38:26.800)

You can't have it be decentralized.

Saifedean Ammous (3:38:29.160)

Listen, you're frustrated,

Lex Fridman (3:38:30.680)

and I could see it over a few years

Saifedean Ammous (3:38:33.000)

of just having dealt with a humongous influx of charlatans.

Lex Fridman (3:38:37.960)

I wouldn't say frustrated, I'm amused.

Lex Fridman (3:38:39.800)

And it's no, it's water off my back.

Lex Fridman (3:38:43.480)

No, but a man that uses,

Lex Fridman (3:38:45.080)

and a community that uses the word shit coin

Lex Fridman (3:38:47.920)

is a little bit, you call it amusement.

Lex Fridman (3:38:50.800)

And I think amusement is a way

Lex Fridman (3:38:53.520)

to deal with the frustration.

Saifedean Ammous (3:38:55.880)

It's a channel and you have frustration.

Lex Fridman (3:38:57.680)

Like sometimes when you have to deal with bullshit,

Saifedean Ammous (3:39:01.680)

the best way is just to laugh at the absurdity of it all.

Lex Fridman (3:39:04.240)

And that's what you mean by amusement.

Lex Fridman (3:39:07.160)

But the fact is like,

Lex Fridman (3:39:10.320)

there's things like artificial intelligence for,

Lex Fridman (3:39:13.240)

what is it, how many decades, seven decades,

Lex Fridman (3:39:18.400)

has been off and on promising to change everything.

Lex Fridman (3:39:23.520)

And it has failed time and time again

Lex Fridman (3:39:28.080)

to deliver to the promise.

Lex Fridman (3:39:30.320)

But that doesn't mean there's something fundamental

Lex Fridman (3:39:32.560)

and really powerful about both the small

Lex Fridman (3:39:34.720)

and the big things going on

Lex Fridman (3:39:36.520)

within the actual research and development

Saifedean Ammous (3:39:39.320)

within those communities.

Lex Fridman (3:39:40.360)

There's a lot of exciting developments.

Lex Fridman (3:39:41.960)

And the scale at which those developments

Lex Fridman (3:39:44.320)

might actually have a transformative impact,

Saifedean Ammous (3:39:46.680)

the time scale is unclear.

Lex Fridman (3:39:48.960)

It seems like we're certainly overpromising.

Saifedean Ammous (3:39:51.760)

We dream too big and too aggressively

Lex Fridman (3:39:54.360)

in the AI community, but in a lot of communities.

Lex Fridman (3:39:56.320)

And I'm happy to give people the benefit of the doubt

Lex Fridman (3:39:58.440)

when they're overpromising,

Lex Fridman (3:39:59.840)

but not when they're making their own money.

Lex Fridman (3:40:01.680)

When you start making your own currency,

Saifedean Ammous (3:40:03.640)

then you don't get the benefit of the doubt.

Lex Fridman (3:40:05.680)

Because if your idea needs you to have a new currency

Saifedean Ammous (3:40:08.440)

that you print when Bitcoin is out there,

Lex Fridman (3:40:10.600)

then I'm gonna go ahead and assume

Saifedean Ammous (3:40:12.560)

that you're doing this for the money.

Lex Fridman (3:40:13.400)

It's a good time to mention

Saifedean Ammous (3:40:14.360)

that I am actually launching my new coin called LexCoin.

Lex Fridman (3:40:19.080)

You mean ShitCoin.

Saifedean Ammous (3:40:20.000)

Yes.

Lex Fridman (3:40:20.840)

Oh, God.

Saifedean Ammous (3:40:22.480)

I'm gonna have to block you with love.

Lex Fridman (3:40:26.120)

Okay, one thing I wanted to ask you about

Saifedean Ammous (3:40:28.200)

is the Feds, this paper they released in January 20th

Lex Fridman (3:40:34.920)

on the potential central bank digital currency, CBDC.

Lex Fridman (3:40:39.160)

What are your thoughts about that?

Lex Fridman (3:40:40.360)

Is it just another, like, is there pros and cons to this?

Saifedean Ammous (3:40:43.560)

Is it at all interesting to you

Lex Fridman (3:40:45.160)

that they're even considering this kind of thing?

Saifedean Ammous (3:40:47.160)

I used to think that it's just basically a waffle.

Lex Fridman (3:40:51.760)

It's meaningless.

Lex Fridman (3:40:53.320)

And because as it exists,

Lex Fridman (3:40:55.120)

the dollar is a central bank digital currency.

Saifedean Ammous (3:40:57.520)

The vast majority of dollars are digital.

Lex Fridman (3:40:59.520)

And, but I think the way that over the last couple of years

Saifedean Ammous (3:41:03.280)

I've changed my mind on this,

Lex Fridman (3:41:04.240)

I think there's some serious substance behind these ideas.

Lex Fridman (3:41:08.320)

And what they mean effectively

Lex Fridman (3:41:10.720)

is the disintermediation of the banking system

Lex Fridman (3:41:14.000)

and giving everybody an account at the Federal Reserve.

Lex Fridman (3:41:17.000)

This is kind of the really dangerous idea.

Lex Fridman (3:41:21.240)

And I think this is enormously significant.

Lex Fridman (3:41:22.840)

Effectively, as somebody who's lived in the Soviet Union,

Lex Fridman (3:41:25.800)

what this is, is the return of the Gosbank

Lex Fridman (3:41:27.880)

on a global scale with modern technology.

Lex Fridman (3:41:30.720)

So under the Soviet Union,

Lex Fridman (3:41:31.760)

there was something called the Gosbank or People's Bank.

Lex Fridman (3:41:34.760)

And that was the only bank in the country.

Lex Fridman (3:41:36.280)

And you had an account with the National Bank.

Lex Fridman (3:41:39.440)

And if you said something wrong,

Lex Fridman (3:41:42.800)

your money got terminated from the Gosbank.

Saifedean Ammous (3:41:45.880)

Now, imagine that combined

Lex Fridman (3:41:47.440)

with the power of digital technology.

Lex Fridman (3:41:50.520)

And you can see that this could be

Lex Fridman (3:41:52.360)

an enormously powerful technology really,

Saifedean Ammous (3:41:56.080)

because if banks are out of the picture,

Lex Fridman (3:41:58.800)

then we changed the fundamental reality of fiat

Saifedean Ammous (3:42:03.160)

as being the creation of money through lending.

Lex Fridman (3:42:05.840)

And then it becomes the creation of money truly by fiat,

Saifedean Ammous (3:42:08.800)

by government fiat.

Lex Fridman (3:42:10.080)

So we moved to a system in which money is just basically,

Saifedean Ammous (3:42:14.320)

it's like we have money that is pieces of paper.

Lex Fridman (3:42:16.560)

And every time we've had money,

Saifedean Ammous (3:42:18.040)

we've had fiat money that was just pieces of paper,

Lex Fridman (3:42:20.440)

it collapsed very quickly.

Saifedean Ammous (3:42:22.840)

With the current system, money is credit.

Lex Fridman (3:42:25.160)

And the creation of credit is restricted to some point.

Lex Fridman (3:42:28.240)

And the creation of credit is self correcting.

Lex Fridman (3:42:30.160)

I discussed this in the fiat standard.

Saifedean Ammous (3:42:32.040)

If the central bank allows banks to create too much credit,

Lex Fridman (3:42:35.120)

that creates a bubble.

Lex Fridman (3:42:35.960)

And then there's a collapse in the money supply,

Lex Fridman (3:42:38.280)

which prevents hyperinflation from happening

Saifedean Ammous (3:42:40.280)

because the money creation is self destructive,

Lex Fridman (3:42:44.160)

it's self correcting.

Lex Fridman (3:42:45.800)

So you end up with an average of like 7% per year increase

Lex Fridman (3:42:49.880)

because you have 10% for five years

Lex Fridman (3:42:52.840)

and then you get negative 20% for one year

Lex Fridman (3:42:55.840)

and it's correcting.

Lex Fridman (3:42:57.760)

But now if you get rid of the credit creation mechanism,

Lex Fridman (3:43:00.000)

it's just assigning money directly,

Saifedean Ammous (3:43:02.240)

we're likely gonna get much faster inflation.

Lex Fridman (3:43:04.840)

And I think that's obviously the huge problem

Lex Fridman (3:43:08.200)

and perhaps the even bigger problem

Lex Fridman (3:43:10.240)

is the enormous amount of power

Saifedean Ammous (3:43:12.440)

that it gives to governments.

Lex Fridman (3:43:14.160)

It allows them to create an awful dystopia

Saifedean Ammous (3:43:18.000)

where you've got your money on your phone

Lex Fridman (3:43:22.520)

and anything you do is completely supervised

Lex Fridman (3:43:27.120)

and controlled through your spending.

Lex Fridman (3:43:28.680)

So they wanna introduce a new lockdown,

Saifedean Ammous (3:43:31.880)

then they'll just make your money not work.

Lex Fridman (3:43:34.040)

Your money is broken today, you can't spend money

Saifedean Ammous (3:43:36.920)

or you can only spend money in your local supermarket

Lex Fridman (3:43:39.440)

for the next three months

Saifedean Ammous (3:43:40.360)

because you can't leave your neighborhood,

Lex Fridman (3:43:42.560)

your money stops working outside of your neighborhood.

Saifedean Ammous (3:43:45.160)

This Chinese social credit score system

Lex Fridman (3:43:48.040)

is an example of this.

Lex Fridman (3:43:50.040)

And I think, I don't know, I don't have a crystal ball,

Lex Fridman (3:43:53.680)

so I don't know what the likelihood is

Saifedean Ammous (3:43:55.160)

of implementing something like this in the US.

Lex Fridman (3:43:58.160)

I've discussed it with Michael Saylor,

Saifedean Ammous (3:43:59.920)

he thinks it's highly unlikely.

Lex Fridman (3:44:02.000)

He thinks the people who've been pushing this

Saifedean Ammous (3:44:05.280)

are very far from the position of power

Lex Fridman (3:44:07.160)

and the traditional monetary and financial system

Saifedean Ammous (3:44:10.680)

is going to survive intact.

Lex Fridman (3:44:13.600)

I certainly hope so.

Saifedean Ammous (3:44:15.480)

I think this would be a terrible thing if it comes to pass.

Lex Fridman (3:44:17.960)

But I don't think, many people think

Saifedean Ammous (3:44:19.120)

that it is something that would undermine Bitcoin.

Lex Fridman (3:44:21.400)

Like a lot of common objection to Bitcoin is,

Saifedean Ammous (3:44:24.560)

well, governments are just gonna launch

Lex Fridman (3:44:26.160)

their own digital currencies

Lex Fridman (3:44:27.600)

and then Bitcoin is gonna die.

Lex Fridman (3:44:28.920)

And I think this is completely missing the point.

Saifedean Ammous (3:44:31.040)

People think Bitcoin is important because it's digital.

Lex Fridman (3:44:33.520)

It's not.

Saifedean Ammous (3:44:34.680)

National currencies can be digital.

Lex Fridman (3:44:36.920)

Bitcoin is important because it's not inflationary

Lex Fridman (3:44:39.520)

and because nobody controls it.

Lex Fridman (3:44:41.400)

Central bank digital currencies

Saifedean Ammous (3:44:42.720)

are likely to be very inflationary

Lex Fridman (3:44:44.840)

and they're likely to have very strong control at the top.

Lex Fridman (3:44:47.800)

So if anything, they are an advertisement for Bitcoin

Lex Fridman (3:44:50.480)

rather than a replacement for it.

Saifedean Ammous (3:44:52.720)

If it's Bitcoin, if it's gold,

Lex Fridman (3:44:54.040)

it's a way for multiple nations to partake.

Lex Fridman (3:44:56.920)

So if you were to imagine a future

Lex Fridman (3:44:59.560)

where we move from the fiat standard

Saifedean Ammous (3:45:03.720)

back to the gold standard and then to the Bitcoin standard

Lex Fridman (3:45:06.760)

or skipping that, going directly to the Bitcoin standard,

Lex Fridman (3:45:10.320)

what would it take?

Lex Fridman (3:45:12.160)

Is it gradual, is it immediate?

Lex Fridman (3:45:14.760)

What are possible trajectories that take us?

Lex Fridman (3:45:17.480)

Well, basically where the final sort of empirical

Saifedean Ammous (3:45:19.800)

observation is that you overtake,

Lex Fridman (3:45:22.160)

Bitcoin overtakes first gold and then bonds

Saifedean Ammous (3:45:26.600)

in terms of its monetary power in the world.

Lex Fridman (3:45:31.760)

But like just specifically from a government perspective,

Lex Fridman (3:45:34.360)

how do we move the United States, China, Russia,

Lex Fridman (3:45:37.160)

India, European Union to a Bitcoin standard?

Saifedean Ammous (3:45:43.320)

I'm not entirely concerned about

Lex Fridman (3:45:45.000)

whether governments move or not.

Saifedean Ammous (3:45:46.200)

In fact, I'd be very happy for them not to move

Lex Fridman (3:45:50.040)

as long as possible so that individuals can accumulate

Saifedean Ammous (3:45:53.320)

more and more Bitcoin while it's still cheap.

Lex Fridman (3:45:56.400)

So the people will move and the governments will catch up.

Saifedean Ammous (3:46:01.320)

Yeah, and I think this is kind of what I allude to.

Lex Fridman (3:46:04.000)

I mean, the point of the fiat standard,

Saifedean Ammous (3:46:05.680)

the fiat standard is really a Bitcoin book

Lex Fridman (3:46:07.880)

and it talks about fiat most of the time,

Lex Fridman (3:46:10.080)

but it does so to analyze Bitcoin and the rise of Bitcoin.

Lex Fridman (3:46:13.960)

In the final chapter, I discuss how I think

Saifedean Ammous (3:46:16.480)

this relationship plays out.

Lex Fridman (3:46:22.080)

The way that I tend to think of it

Saifedean Ammous (3:46:23.320)

is that most likely what's going to happen

Lex Fridman (3:46:25.040)

is we're gonna have kind of a financial apartheid

Saifedean Ammous (3:46:28.720)

where there's going to be two monetary systems.

Lex Fridman (3:46:31.080)

One is government controlled and it comes

Saifedean Ammous (3:46:34.520)

with increasing amounts of surveillance and inflation.

Lex Fridman (3:46:37.720)

And then if you want, you can just opt out of that

Lex Fridman (3:46:41.360)

and get into Bitcoin.

Lex Fridman (3:46:42.840)

And it's likely going to be difficult for governments

Saifedean Ammous (3:46:45.680)

to stop people from getting into Bitcoin

Lex Fridman (3:46:48.360)

for all of the technical reasons

Saifedean Ammous (3:46:49.840)

that make it very hard to stop Bitcoin.

Lex Fridman (3:46:52.280)

So then we have this alternative that is Bitcoin,

Saifedean Ammous (3:46:54.120)

which is not inflationary and does not have

Lex Fridman (3:46:57.960)

a central authority that can censor it.

Saifedean Ammous (3:47:00.840)

I think gradually is my hope

Lex Fridman (3:47:04.800)

and I also think my most likely scenario,

Lex Fridman (3:47:07.320)

but maybe I am biased because everybody thinks

Lex Fridman (3:47:10.920)

what they want is what's gonna happen.

Saifedean Ammous (3:47:13.000)

I think we're just gonna witness the same relationship

Lex Fridman (3:47:16.280)

because governments make their currencies

Lex Fridman (3:47:18.800)

so that they can devalue them and Bitcoin thrives on that.

Lex Fridman (3:47:22.560)

And more and more people are gonna learn,

Saifedean Ammous (3:47:24.080)

more and more people are gonna find out.

Lex Fridman (3:47:26.120)

And whether it's through curiosity or self interest

Saifedean Ammous (3:47:29.840)

or through the destruction of the national currency,

Lex Fridman (3:47:32.400)

all roads lead to a Bitcoin.

Lex Fridman (3:47:34.800)

So more and more people are gonna buy Bitcoin,

Lex Fridman (3:47:36.480)

the price of Bitcoin is going to go up.

Lex Fridman (3:47:38.000)

And as it goes up, Bitcoin becomes a more significant part

Lex Fridman (3:47:41.120)

of the world economy.

Lex Fridman (3:47:42.040)

And this is something that the skeptics don't get.

Lex Fridman (3:47:45.360)

Like a lot of the academic skeptics to Bitcoin,

Saifedean Ammous (3:47:48.800)

they offer up all of these theories

Lex Fridman (3:47:50.840)

about why they think Bitcoin can't work

Lex Fridman (3:47:53.520)

and then they present it and they think,

Lex Fridman (3:47:56.120)

they've delivered the knockout blow

Saifedean Ammous (3:47:58.040)

as if Bitcoin needs their permission

Lex Fridman (3:47:59.640)

or the world is going to need their permission.

Saifedean Ammous (3:48:01.200)

Well, the reality is people are gonna join Bitcoin

Lex Fridman (3:48:02.880)

out of greed, out of self interest.

Saifedean Ammous (3:48:05.000)

Number go up technology is really

Lex Fridman (3:48:07.760)

what's going to get everybody in.

Lex Fridman (3:48:10.000)

And that's really the Trojan horse for fixing the world.

Lex Fridman (3:48:14.520)

Come for the greed and stay for the revolution.

Saifedean Ammous (3:48:16.880)

It's gonna keep going up

Lex Fridman (3:48:18.640)

because people don't like to be poor,

Saifedean Ammous (3:48:21.240)

except for most economists and academics.

Lex Fridman (3:48:24.600)

People don't like to be poor.

Saifedean Ammous (3:48:25.760)

People don't enjoy getting their wealth destroyed

Lex Fridman (3:48:28.440)

and they care more about their self interest

Saifedean Ammous (3:48:30.440)

than they care about economic theories

Lex Fridman (3:48:32.560)

about whether this works as money or not.

Saifedean Ammous (3:48:34.600)

They see their cousin escaped hyperinflation

Lex Fridman (3:48:37.280)

and managed to get a bigger house

Saifedean Ammous (3:48:38.520)

because they bought Bitcoin five years ago.

Lex Fridman (3:48:40.360)

They realized maybe I should stop mocking my cousin

Lex Fridman (3:48:43.760)

and start buying more Bitcoin.

Lex Fridman (3:48:45.120)

And this is, I think an indomitable force

Saifedean Ammous (3:48:47.560)

that's going to continue.

Lex Fridman (3:48:49.240)

And one thing, most Bitcoiners tend to lean

Saifedean Ammous (3:48:53.920)

toward an apocalyptic transition.

Lex Fridman (3:48:57.200)

Fiat's gonna collapse, we're gonna get hyperinflation,

Saifedean Ammous (3:48:59.000)

everything's gonna be terrible

Lex Fridman (3:49:00.280)

and then we're gonna move to Bitcoin.

Lex Fridman (3:49:02.600)

And I present the case for why I think

Lex Fridman (3:49:05.400)

maybe that might not be the case.

Saifedean Ammous (3:49:07.000)

Maybe we won't get this kind of apocalyptic scenario.

Lex Fridman (3:49:10.840)

And this was like the conclusion of the fiat standard,

Saifedean Ammous (3:49:14.440)

which is once you realize that mining fiat

Lex Fridman (3:49:16.800)

is creating debt and Bitcoin is allowing.

Lex Fridman (3:49:20.920)

So in order to have fiat money,

Lex Fridman (3:49:22.360)

we need to have people borrow.

Saifedean Ammous (3:49:23.920)

We need to have people make loans.

Lex Fridman (3:49:26.040)

And the problem that fiat money runs into today

Saifedean Ammous (3:49:29.800)

is that if you wanna save money,

Lex Fridman (3:49:31.880)

if you wanna hold savings, you have a problem.

Lex Fridman (3:49:35.320)

Where do you put your savings?

Lex Fridman (3:49:36.720)

So you put your savings in debt

Saifedean Ammous (3:49:38.800)

in the creation of more bonds.

Lex Fridman (3:49:41.000)

Wherever you take your savings,

Saifedean Ammous (3:49:42.560)

you create a bubble in those things.

Lex Fridman (3:49:44.200)

And this is why we see a bubble in the stock market,

Saifedean Ammous (3:49:46.000)

a bubble in the bond market, a bubble in housing.

Lex Fridman (3:49:48.840)

It's because people are looking for savings,

Saifedean Ammous (3:49:51.080)

looking for a place where they can save.

Lex Fridman (3:49:52.360)

All of those things are crappy saving instruments

Saifedean Ammous (3:49:54.760)

because they're like copper

Lex Fridman (3:49:58.480)

and that there's nothing to stop the people behind them

Saifedean Ammous (3:50:00.720)

to make more of them.

Lex Fridman (3:50:01.800)

House builders can build more houses.

Saifedean Ammous (3:50:05.200)

Governments can issue more bonds.

Lex Fridman (3:50:07.760)

The crappy fraudulent companies can list

Saifedean Ammous (3:50:10.120)

on the stock market and make more stocks.

Lex Fridman (3:50:12.320)

Well, Bitcoin finally offers us an outlet.

Saifedean Ammous (3:50:14.480)

We don't need to keep creating more debt.

Lex Fridman (3:50:16.800)

We can invest in this asset that is hard

Lex Fridman (3:50:20.560)

and that is internationally liquid

Lex Fridman (3:50:23.040)

and that nobody can make more of.

Lex Fridman (3:50:25.120)

So there is no bubble in it.

Lex Fridman (3:50:26.840)

There is no mechanism for somebody to increase the supply

Lex Fridman (3:50:30.160)

and bring the price crashing down,

Lex Fridman (3:50:31.880)

like with copper and real estate and bonds.

Lex Fridman (3:50:34.520)

So Bitcoin is the way out.

Lex Fridman (3:50:36.440)

And this is why I think there's a good case to be made

Saifedean Ammous (3:50:38.840)

for why the fiat authorities might embrace Bitcoin

Lex Fridman (3:50:42.560)

because they'll see it is their way out

Saifedean Ammous (3:50:44.440)

of this enormous debt bubble that everybody is stuck in.

Lex Fridman (3:50:49.040)

Particularly, the richest and most powerful people

Saifedean Ammous (3:50:51.080)

in the world and the richest

Lex Fridman (3:50:53.240)

and most powerful governments in the world

Saifedean Ammous (3:50:54.560)

are the world's biggest borrowers.

Lex Fridman (3:50:56.320)

They're the ones in a lot of debt.

Lex Fridman (3:50:57.840)

So a continuous slow devaluation of the value of that debt

Lex Fridman (3:51:02.960)

as people upgrade and move on to a hard asset

Saifedean Ammous (3:51:05.440)

that continues to appreciate is the peaceful way

Lex Fridman (3:51:10.440)

that we wind down the fiat ponzi, I think.

Saifedean Ammous (3:51:13.000)

You could see it being like a political,

Lex Fridman (3:51:15.320)

part of a political platform for future people

Saifedean Ammous (3:51:18.280)

that run for president, those kinds of things to address.

Lex Fridman (3:51:21.920)

Obviously, it's not just for the powerful and the rich.

Saifedean Ammous (3:51:26.120)

The people are bothered by the debt.

Lex Fridman (3:51:28.240)

The people are bothered by everything

Saifedean Ammous (3:51:30.240)

that you describe with fiat.

Lex Fridman (3:51:31.920)

And if you wanna sell yourself in a democracy

Saifedean Ammous (3:51:35.520)

as a good leader, you might want to make

Lex Fridman (3:51:38.200)

that part of the platform.

Saifedean Ammous (3:51:39.720)

You mentioned you know Michael Malice.

Lex Fridman (3:51:41.400)

He just texted me asking me to ask you,

Lex Fridman (3:51:46.320)

what do you like best about Michael Malice?

Lex Fridman (3:51:49.040)

If you can spend five to 10 to 20 to an hour

Saifedean Ammous (3:51:52.800)

talking about the genius of Michael Malice,

Lex Fridman (3:51:54.760)

what do you like?

Lex Fridman (3:51:57.280)

Where does one even start?

Lex Fridman (3:51:58.440)

Well, obviously, the haircut first.

Saifedean Ammous (3:52:00.240)

Yeah, he just gets sexier with age, that's for sure.

Lex Fridman (3:52:04.000)

That's good.

Lex Fridman (3:52:05.400)

Do you know his ideas, his trolling and humor,

Lex Fridman (3:52:10.800)

have you gotten a chance to interact with him?

Saifedean Ammous (3:52:12.960)

Yes, yes, I've met Michael maybe 10, 12 years ago

Lex Fridman (3:52:16.360)

in New York.

Saifedean Ammous (3:52:17.400)

I used to live in New York when he used to live in New York.

Lex Fridman (3:52:20.120)

Met him a couple of times.

Saifedean Ammous (3:52:21.160)

There was a bunch of anarchists in New York

Lex Fridman (3:52:24.440)

used to throw a happy hour once a month.

Saifedean Ammous (3:52:27.320)

It was called the High Time Preference Hoppe Hour

Lex Fridman (3:52:31.720)

in honor of Hans Hermann Hoppe.

Lex Fridman (3:52:34.000)

So I met him there a couple of times

Lex Fridman (3:52:35.440)

and we followed each other on Twitter for a while.

Saifedean Ammous (3:52:39.320)

Is it interesting that you're aware

Lex Fridman (3:52:41.240)

of philosophical differences in your worldviews?

Saifedean Ammous (3:52:45.160)

No, I think we pretty much see eye to eye.

Lex Fridman (3:52:48.800)

I think the difference is mainly that he spends

Saifedean Ammous (3:52:51.720)

a lot of time focusing on American politics

Lex Fridman (3:52:53.800)

and American pop culture,

Saifedean Ammous (3:52:55.360)

which I don't pay much attention to, I guess.

Lex Fridman (3:52:57.840)

So you look more at the monetary system,

Saifedean Ammous (3:53:00.400)

the economics of it all, and just the history

Lex Fridman (3:53:02.680)

and just looking at it, zooming out at the big picture

Saifedean Ammous (3:53:07.000)

of it all.

Lex Fridman (3:53:07.840)

Although recently he's working on a book called

Saifedean Ammous (3:53:09.440)

The White Pill and he's been, every time I see him,

Lex Fridman (3:53:14.080)

I mean, he's in some dark aspect of the 20th century.

Saifedean Ammous (3:53:18.880)

He's just like, I just finished writing about Holodomor.

Lex Fridman (3:53:22.160)

As you might imagine, he's not taking much, I believe,

Saifedean Ammous (3:53:25.440)

of a monetary perspective on things.

Lex Fridman (3:53:27.840)

His book, his writing, at least for time,

Saifedean Ammous (3:53:30.600)

has a kind of philosophical ideology perspective

Lex Fridman (3:53:34.200)

that's outside of the monetary system.

Lex Fridman (3:53:37.120)

But you argue that those are actually inextricably linked.

Lex Fridman (3:53:41.600)

Yeah, and I don't think he would disagree.

Saifedean Ammous (3:53:43.640)

He would.

Lex Fridman (3:53:44.640)

But a book has to be, can only be so long, I suppose.

Saifedean Ammous (3:53:49.160)

It can only focus on so many things.

Lex Fridman (3:53:52.680)

If you can put on your wise sage hat

Lex Fridman (3:53:56.200)

and give some advice to young people.

Lex Fridman (3:53:58.560)

I mean, the past four hours have been a kind of advice,

Lex Fridman (3:54:02.000)

but if you can focus, and if somebody in high school

Lex Fridman (3:54:05.320)

or college is thinking about what to do with their career,

Saifedean Ammous (3:54:09.400)

can have a successful career, or to have a life

Lex Fridman (3:54:11.680)

they can be proud of, what would you tell them?

Saifedean Ammous (3:54:13.660)

I'd say probably the most important advice

Lex Fridman (3:54:15.640)

that I would give is to find a way

Saifedean Ammous (3:54:17.320)

to give value to other people.

Lex Fridman (3:54:20.240)

This is really the key thing.

Saifedean Ammous (3:54:21.680)

You need to wake up every morning

Lex Fridman (3:54:23.680)

and figure out how to serve others.

Saifedean Ammous (3:54:25.640)

This is the key to everything you want in life.

Lex Fridman (3:54:30.200)

Everything that you want is on the other side

Saifedean Ammous (3:54:32.440)

of you serving others.

Lex Fridman (3:54:34.440)

So figure out how you can serve others in a good way,

Lex Fridman (3:54:37.500)

how you can do it in a way that they value.

Lex Fridman (3:54:39.600)

And you've got an incredible mechanism

Saifedean Ammous (3:54:42.280)

for figuring that out, which is the market.

Lex Fridman (3:54:45.040)

Go out there and do things for other people.

Lex Fridman (3:54:47.160)

And you know, the market will tell you.

Lex Fridman (3:54:49.760)

The market will tell you exactly.

Saifedean Ammous (3:54:51.600)

If you're young, you have the enormous advantage

Lex Fridman (3:54:53.480)

of being able to make mistakes, essentially,

Lex Fridman (3:54:56.800)

and learn from them.

Lex Fridman (3:54:58.120)

So go out there, do things of value for others,

Saifedean Ammous (3:55:02.120)

figuring out how you can do something that contributes,

Lex Fridman (3:55:06.320)

what is it that you can do that contributes

Lex Fridman (3:55:07.920)

the most value to other people's lives?

Lex Fridman (3:55:10.120)

And increasingly, I think with the modern technology,

Saifedean Ammous (3:55:13.200)

this is increasingly becoming online.

Lex Fridman (3:55:15.520)

And I think you should consider

Lex Fridman (3:55:18.800)

how you can create value online,

Lex Fridman (3:55:21.360)

because that scales beyond anything that you can do

Saifedean Ammous (3:55:25.320)

in the physical world in a very, very,

Lex Fridman (3:55:27.920)

well, maybe not beyond, obviously,

Saifedean Ammous (3:55:29.320)

there are profitable businesses in the physical world.

Lex Fridman (3:55:33.200)

But I think online is enormous potential,

Lex Fridman (3:55:36.640)

and coding, I think, is enormously powerful.

Lex Fridman (3:55:39.080)

I'm not a coder myself, but I strongly recommend

Saifedean Ammous (3:55:41.040)

people get into learning how to code.

Lex Fridman (3:55:44.120)

And I think it's probably the thing

Saifedean Ammous (3:55:46.380)

that carries the most power.

Lex Fridman (3:55:48.720)

So initially, we were working with our hands,

Saifedean Ammous (3:55:51.560)

we started working with machines,

Lex Fridman (3:55:52.760)

machines are much more productive.

Saifedean Ammous (3:55:54.480)

Well, code is an even higher level of productivity

Lex Fridman (3:55:57.600)

where you basically program the machines to produce things.

Saifedean Ammous (3:56:00.900)

So, you know, few clicks of a keyboard,

Lex Fridman (3:56:05.240)

and you can move millions of machines

Saifedean Ammous (3:56:07.440)

around the world in certain ways.

Lex Fridman (3:56:09.240)

So it carries an enormous amount of value.

Saifedean Ammous (3:56:11.300)

I think I always tell all young people to learn to code,

Lex Fridman (3:56:15.200)

it's the best thing.

Saifedean Ammous (3:56:16.360)

I used to tell it to my students when I was at university,

Lex Fridman (3:56:18.680)

I tell them to drop out and go learn to code.

Saifedean Ammous (3:56:21.640)

It's probably a better use of their time and money.

Lex Fridman (3:56:23.680)

Well, you could probably do both.

Saifedean Ammous (3:56:25.440)

Yeah.

Lex Fridman (3:56:26.280)

University has an interesting function.

Saifedean Ammous (3:56:28.080)

I mean, probably you and I have different perspective

Lex Fridman (3:56:30.440)

on this, probably has to do with a little bit

Saifedean Ammous (3:56:32.240)

of a different journey in terms of fields,

Lex Fridman (3:56:35.800)

because I'm so, I've stayed engineering focused

Saifedean Ammous (3:56:38.420)

for a long time, and there's less,

Lex Fridman (3:56:40.400)

some of the troubles you might highlight

Saifedean Ammous (3:56:41.840)

in the education system, there's less troubles

Lex Fridman (3:56:44.280)

of that kind in engineering,

Saifedean Ammous (3:56:46.760)

because math hasn't changed for a long time.

Lex Fridman (3:56:49.880)

So a lot of it is just doing hard things,

Saifedean Ammous (3:56:53.360)

being forced to do hard things,

Lex Fridman (3:56:55.400)

and becoming a bit of a generalist,

Saifedean Ammous (3:56:57.740)

while on the side, you're also becoming a specialist

Lex Fridman (3:57:01.840)

based on your own passion, driven by your own passion.

Lex Fridman (3:57:04.380)

So school, at least high school,

Lex Fridman (3:57:06.720)

I don't know about the university,

Lex Fridman (3:57:07.680)

but high school has a really nice,

Lex Fridman (3:57:11.440)

one of the only times in your life,

Saifedean Ammous (3:57:13.600)

at least in my life, I was forced,

Lex Fridman (3:57:17.280)

but now I see given the opportunity

Saifedean Ammous (3:57:20.880)

to spend my entire day learning broadly.

Lex Fridman (3:57:24.480)

And that's something, I don't know,

Saifedean Ammous (3:57:25.960)

the way time works, it just runs away from you,

Lex Fridman (3:57:28.000)

and you never really get a chance to do,

Saifedean Ammous (3:57:30.160)

learn quite that broadly again.

Lex Fridman (3:57:33.720)

That's the curse of specialization,

Saifedean Ammous (3:57:35.320)

is you kind of never get a chance

Lex Fridman (3:57:37.360)

to study biology, chemistry.

Saifedean Ammous (3:57:39.200)

If you're a physicist, time runs away from you.

Lex Fridman (3:57:42.680)

So enjoy the broad education of it.

Lex Fridman (3:57:46.960)

But yeah, like you said,

Lex Fridman (3:57:48.760)

find the things that valued by the market.

Lex Fridman (3:57:53.160)

And on the other side of it, you said all the good stuff.

Lex Fridman (3:57:56.200)

So that's also a way to get happiness.

Saifedean Ammous (3:57:58.520)

Yeah, and I'll also add,

Lex Fridman (3:57:59.960)

the horse that I like to whip all the time

Saifedean Ammous (3:58:01.780)

is the low time preference aspect of things,

Lex Fridman (3:58:04.240)

saving with Bitcoin.

Lex Fridman (3:58:06.080)

So I think my advice to young people is,

Lex Fridman (3:58:08.640)

when you're young, you think of the world

Saifedean Ammous (3:58:11.100)

in a very short term, generally.

Lex Fridman (3:58:13.720)

You're focused on the present,

Lex Fridman (3:58:15.800)

and you think that everything that's happening

Lex Fridman (3:58:17.380)

in the present is the most important thing

Saifedean Ammous (3:58:18.920)

that's ever gonna happen in the history of humanity.

Lex Fridman (3:58:21.640)

Lower your time preference, think about the future,

Saifedean Ammous (3:58:23.640)

think about, think further down the line,

Lex Fridman (3:58:25.620)

think about the consequences of the things you do,

Lex Fridman (3:58:28.340)

and then what?

Lex Fridman (3:58:29.180)

And so you do this now, it feels good today,

Lex Fridman (3:58:31.120)

but then what happens tomorrow?

Lex Fridman (3:58:33.520)

You go out, you drink, you enjoy yourself,

Saifedean Ammous (3:58:35.320)

well, think about the hangover.

Lex Fridman (3:58:37.380)

But more in longterm, think about the implication

Saifedean Ammous (3:58:40.280)

of living this kind of life.

Lex Fridman (3:58:42.320)

Think about every decision that you make,

Saifedean Ammous (3:58:44.280)

the longterm implication of it.

Lex Fridman (3:58:46.080)

And part of that is Bitcoin,

Saifedean Ammous (3:58:47.640)

part of that is save in Bitcoin.

Lex Fridman (3:58:49.560)

I urge everybody to put savings in Bitcoin for the longterm.

Saifedean Ammous (3:58:54.520)

Don't buy Bitcoin for the short term,

Lex Fridman (3:58:56.400)

don't buy Bitcoin today so that you can sell it,

Saifedean Ammous (3:58:59.240)

don't put your savings in Bitcoin today

Lex Fridman (3:59:00.780)

so that you can sell it all next month and buy a house.

Saifedean Ammous (3:59:04.240)

Put money in Bitcoin that you expect to keep in Bitcoin

Lex Fridman (3:59:07.560)

for another five, 10 years or so,

Saifedean Ammous (3:59:11.640)

at least four years is what I recommend for people.

Lex Fridman (3:59:13.980)

So keep a low time preference,

Saifedean Ammous (3:59:15.960)

focus on the future, and save in Bitcoin.

Lex Fridman (3:59:18.320)

And learn about how to buy Bitcoin,

Lex Fridman (3:59:21.320)

how to learn about all this technology.

Lex Fridman (3:59:23.420)

Part of this is this conversation,

Lex Fridman (3:59:24.800)

but there's so much awesome material out there.

Lex Fridman (3:59:26.560)

And thank you, by the way,

Saifedean Ammous (3:59:28.240)

for this gift of a hardware wallet.

Lex Fridman (3:59:30.520)

Nice.

Lex Fridman (3:59:31.360)

So you should definitely invest in it yourself.

Lex Fridman (3:59:33.880)

And what would you call this?

Lex Fridman (3:59:36.760)

These are?

Lex Fridman (3:59:37.600)

Open dimes.

Saifedean Ammous (3:59:38.420)

Open dimes, yeah.

Lex Fridman (3:59:39.400)

So this is like USB that you can,

Saifedean Ammous (3:59:41.800)

like a hardware device that stores Bitcoin.

Lex Fridman (3:59:44.080)

Yeah, so you don't have to worry

Saifedean Ammous (3:59:45.560)

about knowing the password.

Lex Fridman (3:59:47.720)

It contains the password within it and it's tamper proof.

Lex Fridman (3:59:50.420)

So you can save the Bitcoin on it and.

Lex Fridman (3:59:52.240)

So when the apocalypse comes,

Saifedean Ammous (3:59:54.380)

you need the value to be stored,

Lex Fridman (3:59:56.920)

an actual thing that you can have

Saifedean Ammous (3:59:58.440)

in your physical possession.

Lex Fridman (3:59:59.880)

Yeah.

Lex Fridman (40:02.180)

And they're also restricting

Lex Fridman (40:03.180)

the production of artificial diamonds.

Saifedean Ammous (40:04.460)

This is the other thing.

Lex Fridman (40:05.300)

You can make artificial diamond,

Saifedean Ammous (40:06.420)

you can't make artificial gold.

Lex Fridman (40:08.420)

So they restrict the production of artificial diamond

Lex Fridman (40:11.060)

and they try and insist that, you know,

Lex Fridman (40:13.500)

you shouldn't take artificial diamonds,

Lex Fridman (40:15.420)

but they're indistinguishable from real diamonds.

Lex Fridman (40:18.820)

So it's an artificial scarcity.

Lex Fridman (40:20.340)

And I think there's gonna come a point at some point

Lex Fridman (40:22.140)

that this monopoly is gonna break.

Lex Fridman (40:23.380)

And a lot of people are gonna be left with essentially

Lex Fridman (40:28.460)

highly devalued jewelry.

Saifedean Ammous (40:30.540)

I'm gonna take this segment of the podcast,

Lex Fridman (40:32.780)

when I'm getting married, when the sun's up,

Lex Fridman (40:34.580)

and then instead you're getting water or Bitcoin.

Lex Fridman (40:38.660)

Yes, water and Bitcoin is all you need.

Lex Fridman (40:40.660)

So marginal analysis, focusing on the margin

Lex Fridman (40:44.140)

is the thing that allows you

Saifedean Ammous (40:45.380)

to most accurately capture human nature,

Lex Fridman (40:47.900)

the actual day to day decisions that we humans make.

Saifedean Ammous (40:50.820)

Yeah, that's really revolutionized economics, so 1870.

Lex Fridman (40:55.620)

And that was Menger's work.

Lex Fridman (40:59.180)

And then he had a student, Eugen Bomberg,

Lex Fridman (41:02.580)

who developed capital theory.

Lex Fridman (41:05.020)

And then he had a student, Ludwig von Mises,

Lex Fridman (41:07.060)

who is arguably the most important economist ever.

Lex Fridman (41:10.620)

And he developed theory of money.

Lex Fridman (41:12.620)

And he wrote a book in 1912

Saifedean Ammous (41:14.980)

called The Theory of Money and Credit.

Lex Fridman (41:17.420)

And then in the 40s, he wrote Human Action,

Saifedean Ammous (41:20.180)

which is a big treatise on economics.

Lex Fridman (41:23.300)

And I think this is the correct tradition of economics.

Lex Fridman (41:27.340)

And before World War I, this was just known as economics.

Lex Fridman (41:32.340)

And then after what happened in World War I,

Lex Fridman (41:35.580)

and I discussed this in detail in the Fiat Standard,

Lex Fridman (41:37.740)

is that the Bank of England essentially went off gold

Lex Fridman (41:42.220)

and tried to pass off their own credit

Lex Fridman (41:45.220)

as being as good as gold in order to finance the war.

Lex Fridman (41:49.780)

And incidentally here,

Lex Fridman (41:51.380)

this is part of the history that is not discussed often.

Saifedean Ammous (41:54.060)

This is presented as an innovation.

Lex Fridman (41:57.340)

Later on, they needed essentially a propaganda school

Saifedean Ammous (42:00.860)

that would justify what they did.

Lex Fridman (42:03.260)

And later on, it's presented as,

Saifedean Ammous (42:05.420)

oh, hey, we realized that gold was not good.

Lex Fridman (42:08.180)

And now look, we've built this thing

Saifedean Ammous (42:10.700)

that is better than gold,

Lex Fridman (42:11.860)

where now the government can just print money

Saifedean Ammous (42:13.500)

whenever it wants.

Lex Fridman (42:14.380)

And now gold money is not an issue anymore,

Saifedean Ammous (42:17.980)

which is extremely idiotic

Lex Fridman (42:20.060)

because the whole point of money

Saifedean Ammous (42:22.140)

is that it's not easy to make.

Lex Fridman (42:23.380)

If it's easy to make, it's not money anymore.

Saifedean Ammous (42:24.900)

It's just destroying the entire function of money.

Lex Fridman (42:27.500)

And we've seen that happen extensively

Saifedean Ammous (42:28.980)

in the 20th century

Lex Fridman (42:30.380)

after countries went off the gold standard.

Lex Fridman (42:32.860)

So essentially Keynesian economics

Lex Fridman (42:35.060)

is just inflation apologia.

Saifedean Ammous (42:36.660)

It's just propaganda to justify inflationism.

Lex Fridman (42:39.940)

And it's profoundly nonsensical.

Saifedean Ammous (42:43.180)

It's built on the idea that if you just make more money,

Lex Fridman (42:47.220)

you can stimulate economic production.

Lex Fridman (42:49.460)

And of course, this is very self serving

Lex Fridman (42:51.420)

to the central banks and to the banks

Lex Fridman (42:53.180)

and to the governments who promote this nonsense.

Lex Fridman (42:56.260)

And this is also very pervasive.

Saifedean Ammous (42:58.700)

If you've had the misfortune of studying at a university

Lex Fridman (43:01.300)

over the last century,

Saifedean Ammous (43:02.740)

you were taught Keynesian garbage economics.

Lex Fridman (43:04.860)

You were taught that if there's a problem in the economy,

Saifedean Ammous (43:09.020)

the way to fix it is that the government prints money,

Lex Fridman (43:11.580)

the government lowers the interest rate,

Lex Fridman (43:13.420)

and then that leads to more economic production,

Lex Fridman (43:17.300)

which is completely nonsensical.

Lex Fridman (43:18.860)

So you're, again, for the listener,

Lex Fridman (43:23.460)

you're using strong words, you know, push back

Saifedean Ammous (43:26.220)

just to find, to please devil's advocate

Lex Fridman (43:30.420)

to hopefully one day arrive at the truth.

Lex Fridman (43:33.380)

So just because it's in the interest

Lex Fridman (43:37.020)

of the central banks and the government,

Saifedean Ammous (43:38.980)

the interests and the models of Keynesian economics

Lex Fridman (43:43.860)

and the government are aligned doesn't mean they're wrong.

Lex Fridman (43:47.460)

So let's give them a chance.

Lex Fridman (43:49.860)

So the conventional wisdom, perhaps economics wisdom,

Saifedean Ammous (43:54.260)

is that inflation is good in moderation

Lex Fridman (43:58.420)

as it encourages spending,

Lex Fridman (44:00.060)

but too much is bad because it completely devalues,

Lex Fridman (44:03.720)

destroys people's savings.

Lex Fridman (44:05.260)

So a little bit of inflation is good to stimulate spending.

Lex Fridman (44:09.080)

And I mean, I suppose this is one of the things

Saifedean Ammous (44:13.160)

that's supported by Keynesian economics.

Lex Fridman (44:17.100)

Why is that wrong?

Saifedean Ammous (44:17.940)

This is basically the whole point of Keynesian economics,

Lex Fridman (44:19.620)

is to try and find an endless array of explanations

Saifedean Ammous (44:23.420)

to explain why inflation is a good thing.

Lex Fridman (44:25.780)

Well, the chicken and the egg.

Lex Fridman (44:28.340)

So that's the cynical take.

Lex Fridman (44:30.540)

This is a propaganda machine

Saifedean Ammous (44:32.000)

to sell the government's narrative.

Lex Fridman (44:34.060)

The less cynical take is there's a bunch of economists

Saifedean Ammous (44:36.860)

who are telling, who...

Lex Fridman (44:38.900)

Who figured out this thing

Lex Fridman (44:39.820)

and it happens to be good for banks and governments.

Lex Fridman (44:42.380)

Just because it's good for them doesn't mean...

Lex Fridman (44:43.860)

And it justifies the existence of government

Lex Fridman (44:45.980)

and your basic, I don't think it's your basic assumption,

Lex Fridman (44:50.620)

but a foundational principle of your thought

Lex Fridman (44:53.660)

is that a lot of government is not a good thing.

Saifedean Ammous (44:56.660)

Your first gut instinct, government bad.

Lex Fridman (45:00.440)

Like I mentioned, I live next door to Michael Malice,

Saifedean Ammous (45:02.940)

who probably beats you on the intensity

Lex Fridman (45:07.140)

and how quickly he says government bad.

Lex Fridman (45:10.060)

So there's a potential argument for government good.

Lex Fridman (45:16.380)

Some government is good.

Saifedean Ammous (45:17.460)

Maybe a lot of government is good.

Lex Fridman (45:19.040)

Maybe we need a lot of centralized management

Saifedean Ammous (45:22.280)

for resource allocation and so on

Lex Fridman (45:23.900)

because we humans specialize, we're too busy and so on.

Lex Fridman (45:26.940)

So there's an argument for that that exists.

Lex Fridman (45:30.020)

You probably disagree with any possible argument

Saifedean Ammous (45:32.220)

on that side, but anyway,

Lex Fridman (45:33.260)

so why is that idea of Keynesian economics wrong?

Saifedean Ammous (45:36.820)

I'm gonna focus for this on the money idea,

Lex Fridman (45:39.560)

the idea that a little bit of inflation is good.

Saifedean Ammous (45:42.380)

The idea here, I mean, the criticism is that

Lex Fridman (45:46.260)

without inflation, people wouldn't spend

Lex Fridman (45:48.300)

and then the economy would come to a grinding halt.

Lex Fridman (45:50.940)

And that's nonsensical because people spend

Saifedean Ammous (45:53.220)

not because they wanna keep this magical monster

Lex Fridman (45:56.080)

called the economy going.

Saifedean Ammous (45:58.060)

People spend because they need to consume

Lex Fridman (45:59.940)

because that's how we live, that's how we survive.

Saifedean Ammous (46:02.600)

You need to eat, you need shelter,

Lex Fridman (46:04.360)

you need clothes to keep you warm.

Lex Fridman (46:06.540)

And as technology advances, the capabilities

Lex Fridman (46:09.620)

of the things that we can do with our time increases

Lex Fridman (46:14.840)

and so we wanna buy more things.

Lex Fridman (46:16.680)

So people buy things because people want to consume.

Saifedean Ammous (46:19.420)

There's a limitless desire to consume,

Lex Fridman (46:21.780)

that there's no shortage of reasons for people to consume,

Saifedean Ammous (46:26.780)

shortage of reasons for people to consume,

Lex Fridman (46:28.820)

whether it's food or Ferraris or private jets.

Saifedean Ammous (46:33.380)

People just always wanna buy more.

Lex Fridman (46:35.340)

Can I interrupt just really quick?

Lex Fridman (46:36.980)

What about the fear about the uncertainty of the future

Lex Fridman (46:40.040)

where they might want to buy things

Lex Fridman (46:45.940)

but they're really afraid because it seems like

Lex Fridman (46:48.140)

there's a lot like a pandemic going on or whatever it is.

Saifedean Ammous (46:50.340)

Yeah, that's good.

Lex Fridman (46:51.700)

So fear of uncertainty, can you have too much fear?

Saifedean Ammous (46:55.740)

Here's the thing, what I was saying is,

Lex Fridman (46:57.660)

I was making the point that we don't need

Saifedean Ammous (47:00.460)

to be motivated to consume.

Lex Fridman (47:02.140)

Like we have the insatiable desire to consume.

Saifedean Ammous (47:05.180)

Everybody would like to have more of all kinds of things.

Lex Fridman (47:08.520)

Everybody would like to have a bigger house.

Saifedean Ammous (47:10.420)

Well, not everybody, some people have a big enough house

Lex Fridman (47:12.300)

but everybody would like a house,

Saifedean Ammous (47:14.220)

everybody would like a car, jet, all kinds of things,

Lex Fridman (47:18.780)

electronics, machines.

Lex Fridman (47:20.920)

So we don't need a desire to consume.

Lex Fridman (47:23.940)

But of course the limit on how much we consume

Saifedean Ammous (47:26.500)

is opportunity cost.

Lex Fridman (47:29.300)

Why don't you buy a Ferrari?

Saifedean Ammous (47:30.820)

Well, because that's really expensive

Lex Fridman (47:32.300)

and it would mean that, well, maybe you do have a Ferrari

Lex Fridman (47:35.140)

but I mean, most people don't buy a Ferrari

Lex Fridman (47:36.860)

because it's too expensive, they can't afford it.

Saifedean Ammous (47:39.860)

They'd have to work too hard to get it.

Lex Fridman (47:41.820)

And if they do get it, it might mean that

Saifedean Ammous (47:45.100)

they can't afford their house anymore.

Lex Fridman (47:46.500)

So we have to economize, that's a good thing.

Lex Fridman (47:49.680)

And we have to also think of the future.

Lex Fridman (47:51.920)

And so humans consume,

Saifedean Ammous (47:54.180)

we don't need more motivation to consume.

Lex Fridman (47:57.080)

We have to deal with the economic reality

Saifedean Ammous (47:59.500)

of the things that limit us from consuming more.

Lex Fridman (48:02.980)

So what Keynesians present is that

Saifedean Ammous (48:06.700)

when there is a problem in the economy,

Lex Fridman (48:08.660)

like there was after World War I,

Saifedean Ammous (48:11.700)

the problem is always caused by the inflation.

Lex Fridman (48:17.180)

And what the Keynesian hucksters do

Saifedean Ammous (48:18.860)

is that they look at the inflation,

Lex Fridman (48:21.380)

at the consequences of inflation

Lex Fridman (48:23.260)

and blame it on people not spending enough.

Lex Fridman (48:25.580)

When people are doing the rational thing,

Saifedean Ammous (48:27.340)

the money is, so there was inflation,

Lex Fridman (48:30.500)

caused an unsustainable boom, it caused the recession.

Lex Fridman (48:34.380)

And now a lot of people lost their jobs

Lex Fridman (48:36.060)

and they don't have enough money

Saifedean Ammous (48:37.020)

to go out and spend frivolously.

Lex Fridman (48:39.940)

So they save for the future, the future is uncertain.

Saifedean Ammous (48:42.740)

That's a good thing, that's how you fix things.

Lex Fridman (48:46.380)

You begin the recovery by, well, you lost some wealth,

Lex Fridman (48:49.900)

so you spend less, like if your business goes bust,

Lex Fridman (48:52.780)

if you lose your job, it's natural and smart

Saifedean Ammous (48:56.020)

that you stop spending money

Lex Fridman (48:57.740)

on the frivolous thing that you used to spend

Lex Fridman (49:00.180)

and you save it for the future.

Lex Fridman (49:01.500)

You invest in something else, you get a new job.

Lex Fridman (49:04.220)

And then once you've recovered, you start spending more.

Lex Fridman (49:06.380)

This is very sane and very good

Lex Fridman (49:08.900)

and it's the way to recovery.

Lex Fridman (49:11.300)

But essentially the Keynesians have used this

Saifedean Ammous (49:14.660)

as a justification for more inflation

Lex Fridman (49:17.460)

because inflation is an addiction.

Saifedean Ammous (49:19.340)

Once the government gets down the path

Lex Fridman (49:21.300)

of spending money to solve its problems,

Saifedean Ammous (49:23.780)

then every problem looks like it can be solved

Lex Fridman (49:26.860)

by more inflation.

Lex Fridman (49:27.820)

And so this is where Keynesian economics comes in.

Lex Fridman (49:31.420)

And of course, the Keynesian economics

Saifedean Ammous (49:34.220)

is based on the work of Keynes, which came in the 1930s.

Lex Fridman (49:38.980)

And this is the key point,

Saifedean Ammous (49:40.100)

like it's portrayed in the textbook

Lex Fridman (49:42.740)

as if it's just the scientific breakthrough

Saifedean Ammous (49:46.620)

that somebody in the 1930s, this genius,

Lex Fridman (49:49.300)

came about and realized that,

Saifedean Ammous (49:50.860)

oh, we don't actually need gold.

Lex Fridman (49:53.260)

We don't need hard money.

Saifedean Ammous (49:54.260)

We can actually just print all the money.

Lex Fridman (49:56.620)

And in reality, of course, it was just the very thin,

Saifedean Ammous (4:00:00.700)

That's exactly what this is.

Lex Fridman (4:00:02.220)

You've had a heck of a life.

Saifedean Ammous (4:00:04.640)

You've been in a bunch of places in this world.

Lex Fridman (4:00:07.880)

A lot of places.

Saifedean Ammous (4:00:08.940)

Life is not easy in some of those places.

Lex Fridman (4:00:12.840)

What has been, if you can take a step

Saifedean Ammous (4:00:14.840)

to maybe a bit of a dark step for a short time,

Lex Fridman (4:00:19.320)

what has been maybe darkest time period,

Saifedean Ammous (4:00:23.720)

place you've ever gone in your mind,

Lex Fridman (4:00:26.040)

a dark period of your life,

Lex Fridman (4:00:28.520)

a struggle you had to overcome, had to survive?

Lex Fridman (4:00:32.160)

Well, I'm Palestinian.

Lex Fridman (4:00:33.680)

So that is the tragedy of my life.

Lex Fridman (4:00:36.560)

I'm Palestinian Jordanian.

Saifedean Ammous (4:00:38.960)

My family's suffered a lot because of this historically.

Lex Fridman (4:00:43.920)

I grew up in Ramallah in the West Bank.

Saifedean Ammous (4:00:47.040)

I wasn't ideal to see that.

Lex Fridman (4:00:51.560)

People like to think of it as this intractable conflict

Saifedean Ammous (4:00:54.200)

between two bitter enemies.

Lex Fridman (4:00:55.800)

But the reality of the matter is that it's not.

Saifedean Ammous (4:00:59.800)

A foreign ideology came in with the idea

Lex Fridman (4:01:02.020)

that this country needs to be occupied

Saifedean Ammous (4:01:04.480)

by people from only one religion

Lex Fridman (4:01:06.880)

and the existing population, which,

Saifedean Ammous (4:01:09.720)

I mean, Jews had always lived in Palestine historically.

Lex Fridman (4:01:12.600)

And at the turn of the 20th century,

Saifedean Ammous (4:01:15.040)

they were only 10% of the population.

Lex Fridman (4:01:16.920)

But then with the birth of fiat money,

Saifedean Ammous (4:01:19.600)

incidentally, the link with all of this is that

Lex Fridman (4:01:22.880)

when the Bank of England went off gold,

Saifedean Ammous (4:01:25.640)

a big reason why they were able to pull that off

Lex Fridman (4:01:28.200)

was that the Rothschild banking family supported them.

Lex Fridman (4:01:31.040)

And in exchange, the Rothschilds got Palestine.

Lex Fridman (4:01:33.520)

And the Balfour Declaration was written

Saifedean Ammous (4:01:37.640)

by the government of Britain to the Rothschild family,

Lex Fridman (4:01:42.720)

telling them that they'd like to make Palestine

Saifedean Ammous (4:01:47.600)

a homeland for Jews.

Lex Fridman (4:01:49.480)

So obviously that's not very convenient

Saifedean Ammous (4:01:51.880)

for people who are not Jewish, for whom that is a homeland.

Lex Fridman (4:01:54.720)

And the past 80 years has been a very painful struggle.

Saifedean Ammous (4:01:59.720)

If you happen to not be Jewish.

Lex Fridman (4:02:01.320)

And obviously, you know, obviously Palestinians

Saifedean Ammous (4:02:04.600)

have done all kinds of things trying to fight back

Lex Fridman (4:02:06.640)

and they've done all kinds of wrong things.

Lex Fridman (4:02:09.040)

But I don't think you can escape the fundamental reality

Lex Fridman (4:02:12.000)

underlying this, which is that if you're not Jewish,

Saifedean Ammous (4:02:15.000)

you are being moved out of the land.

Lex Fridman (4:02:18.080)

And so it's happened in 1947, 48,

Saifedean Ammous (4:02:21.080)

happened in 1976, 1967,

Lex Fridman (4:02:24.600)

more land was taken over by Israel.

Saifedean Ammous (4:02:26.460)

Now you see it with the settlements.

Lex Fridman (4:02:28.960)

You know, if you ignore the day to day headlines

Lex Fridman (4:02:31.080)

and you ignore the media propaganda

Lex Fridman (4:02:33.080)

and you ignore all of this,

Saifedean Ammous (4:02:34.760)

there's a very clear thing that is happening,

Lex Fridman (4:02:36.600)

which is more land owned by an exclusive ideology

Saifedean Ammous (4:02:42.280)

that believes this land needs to be owned

Lex Fridman (4:02:43.920)

by people from one religion

Lex Fridman (4:02:45.480)

and everybody else is being kicked out.

Lex Fridman (4:02:47.860)

And so that is the tragedy of my life.

Lex Fridman (4:02:52.600)

And my wife is also a Palestinian refugee from Lebanon

Lex Fridman (4:02:55.920)

and her family was evicted from Jaffa,

Saifedean Ammous (4:02:59.520)

which is today on the outskirts of Tel Aviv.

Lex Fridman (4:03:02.880)

They still have their homes in Jaffa.

Saifedean Ammous (4:03:05.480)

Their homes are being, you know,

Lex Fridman (4:03:06.760)

they got kicked out of their homes

Lex Fridman (4:03:08.120)

and their lands and their property.

Lex Fridman (4:03:09.720)

They became refugees in Lebanon.

Lex Fridman (4:03:11.620)

So my children, you know, it's an ongoing tragedy.

Lex Fridman (4:03:14.920)

It's not something that is,

Saifedean Ammous (4:03:18.160)

a lot of the people that think of it as,

Lex Fridman (4:03:20.920)

you know, they think Palestinians are just out there

Saifedean Ammous (4:03:22.760)

to get Israelis because they hate them,

Lex Fridman (4:03:25.120)

but it's an inescapable tragedy.

Saifedean Ammous (4:03:27.720)

I don't have a home anywhere.

Lex Fridman (4:03:29.200)

Is there an escape from this tragedy in the future

Saifedean Ammous (4:03:32.200)

that you see if you zoom out across the scale of decades,

Lex Fridman (4:03:38.480)

will we see,

Saifedean Ammous (4:03:41.860)

I hesitate to say peace,

Lex Fridman (4:03:44.320)

but a significant decrease in human suffering

Lex Fridman (4:03:50.080)

in this part of the region?

Lex Fridman (4:03:52.160)

I certainly hope so.

Lex Fridman (4:03:53.360)

And I think, you know, my interest in Bitcoin comes from,

Lex Fridman (4:03:58.120)

came from a place of desperation with the situation there.

Saifedean Ammous (4:04:02.000)

Traditional politics is a dead end.

Lex Fridman (4:04:05.880)

I don't see what I can be doing

Saifedean Ammous (4:04:08.080)

to make things better there using traditional politics.

Lex Fridman (4:04:11.900)

And I think a good friend of mine, Pierre Rochard,

Saifedean Ammous (4:04:14.600)

you may know him on Twitter,

Lex Fridman (4:04:16.120)

one of the brightest minds in Bitcoin in my opinion,

Saifedean Ammous (4:04:18.800)

he told me his theory is that Bitcoin

Lex Fridman (4:04:20.960)

is gonna bring peace to the Middle East

Saifedean Ammous (4:04:22.560)

because land is a shit coin.

Lex Fridman (4:04:24.120)

And I think he's got a very good point there,

Saifedean Ammous (4:04:30.040)

that this fixation with land

Lex Fridman (4:04:32.360)

and the bitterness with which people have to live,

Saifedean Ammous (4:04:35.400)

land is likely to decline

Lex Fridman (4:04:38.520)

when people are gonna have a form of property

Saifedean Ammous (4:04:40.800)

that they can keep.

Lex Fridman (4:04:42.240)

And so hopefully that will help in one way.

Lex Fridman (4:04:45.000)

And of course the more obvious way

Lex Fridman (4:04:47.200)

is that this is a conflict of governments

Lex Fridman (4:04:50.080)

and it's a conflict that is financed by fiat.

Lex Fridman (4:04:52.480)

And from day one, the entirely insane notion

Saifedean Ammous (4:04:56.560)

that you could build a national and ethnic homeland.

Lex Fridman (4:05:01.640)

And of course, this is the early 20th century.

Lex Fridman (4:05:03.880)

So the idea behind Zionism is coming from the same place

Lex Fridman (4:05:09.000)

where all these other ethnic nationalisms of Europe

Saifedean Ammous (4:05:11.720)

were emerging.

Lex Fridman (4:05:12.560)

And we saw how well, how horribly these worked out.

Lex Fridman (4:05:16.520)

But the idea that you could,

Lex Fridman (4:05:19.280)

it's one thing to say we wanna build a homeland

Saifedean Ammous (4:05:21.240)

for Germans in Germany.

Lex Fridman (4:05:23.600)

It's one thing to say we wanna build the homelands

Saifedean Ammous (4:05:25.240)

for Germans somewhere else.

Lex Fridman (4:05:28.040)

And that was Palestine, that was Zionism.

Lex Fridman (4:05:32.400)

And that was only possible thanks to fiat,

Lex Fridman (4:05:34.640)

thanks to the ability of the British government

Lex Fridman (4:05:36.600)

and all these other governments to continue to finance

Lex Fridman (4:05:39.400)

this colonialist effort over time.

Lex Fridman (4:05:42.120)

And it continues to finance war

Lex Fridman (4:05:45.880)

and we see war all over the world continue to escalate

Saifedean Ammous (4:05:50.360)

because the people who'd make the decision

Lex Fridman (4:05:53.480)

to escalate the war are not the ones who are paying for it

Lex Fridman (4:05:55.720)

and they're not the ones who are fighting.

Lex Fridman (4:05:57.120)

They're the ones who sit in offices.

Lex Fridman (4:05:59.080)

And in the case of most of Middle Eastern conflict,

Lex Fridman (4:06:02.000)

it's people who live abroad.

Saifedean Ammous (4:06:05.320)

It's people who are abroad who are not part of it

Lex Fridman (4:06:07.000)

who just are emotionally charged to it

Saifedean Ammous (4:06:09.160)

because they watch it on TV.

Lex Fridman (4:06:11.160)

So you have billions of Muslims around the world

Lex Fridman (4:06:14.280)

and Jews around the world

Lex Fridman (4:06:16.520)

who feel extremely emotionally attached to it.

Saifedean Ammous (4:06:19.400)

They're not the ones fighting.

Lex Fridman (4:06:20.360)

They're not the ones paying their own money.

Saifedean Ammous (4:06:22.520)

They're just getting governments to send money

Lex Fridman (4:06:24.880)

and to send weapons and to take part.

Lex Fridman (4:06:27.520)

And it's fun as a spectator sport

Lex Fridman (4:06:32.520)

for most of these people

Saifedean Ammous (4:06:33.960)

because they don't get to live in it.

Lex Fridman (4:06:35.440)

But I got to live in it, I saw it.

Saifedean Ammous (4:06:37.080)

I grew up there.

Lex Fridman (4:06:37.920)

I saw the settlement expansion.

Lex Fridman (4:06:40.800)

And recently a few weeks ago, I went back to Ramallah

Lex Fridman (4:06:43.800)

and it's amazing every time you go,

Saifedean Ammous (4:06:47.400)

the settlements are just growing in an astonishing way.

Lex Fridman (4:06:50.920)

Like it's not just housing units that are going up.

Saifedean Ammous (4:06:55.240)

It's an entire attempt to build,

Lex Fridman (4:06:58.720)

to basically suffocate Palestinian areas

Lex Fridman (4:07:01.640)

and force Palestinians to leave

Lex Fridman (4:07:03.060)

or keep them living in horrific conditions.

Lex Fridman (4:07:07.580)

And if I may, just because I have family in Ukraine,

Lex Fridman (4:07:11.760)

I have family in Russia, since this war,

Saifedean Ammous (4:07:15.620)

echoes of similar things are happening

Lex Fridman (4:07:17.760)

in that part of the world too.

Lex Fridman (4:07:19.600)

And I shudder to think about the decades to come

Lex Fridman (4:07:23.600)

of the hate that is brewing,

Saifedean Ammous (4:07:25.400)

the suffering that is brewing

Lex Fridman (4:07:27.200)

based on decisions and pressures

Lex Fridman (4:07:29.920)

and from not always people directly impacted by this.

Lex Fridman (4:07:36.840)

So again, it feels like that military conflict

Saifedean Ammous (4:07:40.960)

is not just a creation of like people on the ground.

Lex Fridman (4:07:45.360)

It's a creation of leaders, power centers.

Lex Fridman (4:07:48.160)

And perhaps, again, I'm not smart enough,

Lex Fridman (4:07:52.440)

but even the monetary system probably has a role to play.

Saifedean Ammous (4:07:55.600)

I absolutely think it does.

Lex Fridman (4:07:56.880)

Monetary system is what allows people

Saifedean Ammous (4:08:00.640)

to just continue to treat war as a spectator sport.

Lex Fridman (4:08:04.160)

That's really what it comes down to.

Lex Fridman (4:08:06.000)

And it starts with World War I and it's continued.

Lex Fridman (4:08:09.120)

And this is why really, I think I've said this before,

Saifedean Ammous (4:08:13.320)

I've tweeted this before and it was a pretty popular tweet,

Lex Fridman (4:08:15.720)

but it also got a lot of people to dismiss the idea

Saifedean Ammous (4:08:20.160)

with mockery, of course.

Lex Fridman (4:08:22.040)

But I really think Bitcoin is the only technology

Saifedean Ammous (4:08:24.320)

that's going to end World War I.

Lex Fridman (4:08:26.400)

Once World War I started,

Saifedean Ammous (4:08:28.440)

we got into this endless conflict

Lex Fridman (4:08:30.120)

that's been ongoing since then.

Saifedean Ammous (4:08:32.240)

If you look at all the world's conflicts today,

Lex Fridman (4:08:33.840)

pretty much they all trace back to World War I.

Lex Fridman (4:08:36.400)

And it's because when that Pandora's box

Lex Fridman (4:08:39.760)

of government control of money was opened,

Saifedean Ammous (4:08:42.560)

there was no longer a real restraint on war

Lex Fridman (4:08:44.960)

except complete defeat and complete destruction

Lex Fridman (4:08:47.640)

and complete death.

Lex Fridman (4:08:48.480)

The war had to be total.

Saifedean Ammous (4:08:50.200)

Before that, under the gold standard,

Lex Fridman (4:08:54.320)

kings would send professional armies

Saifedean Ammous (4:08:57.040)

to fight each other in battlefields.

Lex Fridman (4:08:59.760)

And as soon as it became clear

Saifedean Ammous (4:09:02.080)

that one side was establishing an advantage,

Lex Fridman (4:09:04.640)

the fighting would stop and the kings would settle,

Saifedean Ammous (4:09:10.400)

would agree to new terms.

Lex Fridman (4:09:12.240)

Because it was extremely expensive

Saifedean Ammous (4:09:13.440)

to build a professional army and you ran out of money.

Lex Fridman (4:09:16.480)

So it was always the smartest thing to do

Saifedean Ammous (4:09:18.280)

is to just stop fighting whenever you could.

Lex Fridman (4:09:20.960)

And wars would take place.

Saifedean Ammous (4:09:23.040)

Countries would fight each other in the battlefield.

Lex Fridman (4:09:25.360)

But in the cities, life went on as normal.

Lex Fridman (4:09:28.160)

And people within the same cities,

Lex Fridman (4:09:30.000)

within the cities of the two countries

Saifedean Ammous (4:09:31.640)

would be trading with one another.

Lex Fridman (4:09:33.720)

Life would go on, but the war would be there.

Lex Fridman (4:09:35.440)

And it was just an independent part of politics

Lex Fridman (4:09:40.440)

that all right, we have a problem over this piece of land.

Saifedean Ammous (4:09:43.360)

Let's take it outside.

Lex Fridman (4:09:45.640)

We don't fight in the civilian areas.

Saifedean Ammous (4:09:48.120)

We go to the battlefield.

Lex Fridman (4:09:49.520)

We fight with professional armies.

Lex Fridman (4:09:50.960)

And in fact, sometimes the conflicts would be,

Lex Fridman (4:09:53.360)

the armies would line up

Lex Fridman (4:09:55.160)

and they would just have a small contingent

Lex Fridman (4:09:58.520)

of the two armies fight with one another.

Lex Fridman (4:10:00.120)

And as soon as one of them establishes an advantage,

Lex Fridman (4:10:02.560)

then all right, well, you won, let's move on with it.

Saifedean Ammous (4:10:07.480)

Governments were far, far, far more careful

Lex Fridman (4:10:09.760)

about their monetary policy and their, sorry,

Saifedean Ammous (4:10:14.480)

their war policy when they couldn't print their money.

Lex Fridman (4:10:17.120)

And that has changed with Fiat.

Lex Fridman (4:10:19.160)

And that has allowed this new emergence of this class

Lex Fridman (4:10:22.400)

of what I like to call chicken hawks

Saifedean Ammous (4:10:24.480)

of people who sit in offices

Lex Fridman (4:10:26.240)

like the entire foreign policy establishment

Saifedean Ammous (4:10:28.960)

in Washington, DC.

Lex Fridman (4:10:30.800)

People who have never fought in war,

Saifedean Ammous (4:10:32.600)

whose children will never fight a war,

Lex Fridman (4:10:34.640)

who'll never pay to fight a war,

Saifedean Ammous (4:10:36.640)

who'll never suffer a broken window

Lex Fridman (4:10:39.320)

in their house because of war,

Saifedean Ammous (4:10:41.280)

sitting there and based on these fucking moronic garbage

Lex Fridman (4:10:45.160)

that they teach at moronic Fiat universities

Saifedean Ammous (4:10:48.080)

about politics and geopolitics,

Lex Fridman (4:10:50.120)

making decisions about, we need to invade that country

Lex Fridman (4:10:52.920)

and we need to send war there.

Lex Fridman (4:10:54.080)

And they can do that because they have

Saifedean Ammous (4:10:56.040)

this endless money printer.

Lex Fridman (4:10:57.880)

And that's why, back under gold,

Saifedean Ammous (4:11:01.080)

if you were a warrior, you went and actually joined the war.

Lex Fridman (4:11:05.040)

And that, the people who pontificated about war

Saifedean Ammous (4:11:08.920)

were the people who had experience with war,

Lex Fridman (4:11:10.520)

the people who were sending their own children to war,

Saifedean Ammous (4:11:13.160)

the people who were fighting with their own money.

Lex Fridman (4:11:15.400)

Now you have all these fat parasitics come

Saifedean Ammous (4:11:18.280)

sitting in Washington, DC deciding,

Lex Fridman (4:11:20.240)

and Washington is just an example,

Lex Fridman (4:11:21.880)

but all over the world this exists.

Lex Fridman (4:11:23.720)

People who have never fought,

Saifedean Ammous (4:11:24.680)

who'll never carry the consequences,

Lex Fridman (4:11:26.360)

are going to devalue the world's money

Saifedean Ammous (4:11:29.560)

in order to go and have other people's children

Lex Fridman (4:11:32.760)

fight each other because of stupid garbage

Saifedean Ammous (4:11:35.640)

they learned about politics in university.

Lex Fridman (4:11:40.760)

You said you value low time preference,

Lex Fridman (4:11:44.360)

but I have news for you, that one day you will die,

Lex Fridman (4:11:48.160)

as far as we know, you're a mortal being.

Lex Fridman (4:11:51.200)

Do you think about your death?

Lex Fridman (4:11:52.560)

Do you think about your mortality?

Lex Fridman (4:11:55.240)

Are you afraid of it?

Lex Fridman (4:11:57.920)

I've spent a lot of time introspecting

Lex Fridman (4:12:02.560)

and thinking about these things,

Lex Fridman (4:12:03.680)

and I value life a lot.

Saifedean Ammous (4:12:06.080)

I value my time on earth a lot,

Lex Fridman (4:12:08.320)

and you'll see this in my dealings with people.

Lex Fridman (4:12:12.280)

Go back to Twitter, why am I so brash and straightforward?

Lex Fridman (4:12:15.360)

It really is because life is short.

Saifedean Ammous (4:12:17.440)

Because I don't want to waste,

Lex Fridman (4:12:19.120)

I think on my, I've said this before,

Saifedean Ammous (4:12:25.080)

on my tombstone, let it be written.

Lex Fridman (4:12:27.600)

He never let anyone waste his time twice in his life.

Saifedean Ammous (4:12:32.040)

His life is short.

Lex Fridman (4:12:33.360)

Yeah, you can waste my time once,

Saifedean Ammous (4:12:35.000)

you can get me to do something,

Lex Fridman (4:12:36.280)

and then I realize that was a waste of time,

Saifedean Ammous (4:12:37.680)

you will never get me to waste my time twice.

Lex Fridman (4:12:39.760)

And so you show up in my Twitter with something stupid,

Saifedean Ammous (4:12:42.880)

you're never showing up in my Twitter ever again.

Lex Fridman (4:12:45.440)

You give people a chance, but you're a fast learner.

Saifedean Ammous (4:12:47.640)

Yeah, and I try and use my time very wisely,

Lex Fridman (4:12:50.760)

and I'm unapologetic about it.

Saifedean Ammous (4:12:52.840)

My time is the most precious thing,

Lex Fridman (4:12:54.320)

and the way to get on my shit list forever

Saifedean Ammous (4:12:58.400)

is to try and take away my time and to abuse my time.

Lex Fridman (4:13:02.240)

If you do that, it's the one unforgivable sin for me.

Lex Fridman (4:13:08.720)

And I think that's really, I think that's my way

Lex Fridman (4:13:11.600)

of coming to terms with mortality.

Saifedean Ammous (4:13:13.040)

We're all gonna die, and so let's make the most out of it

Lex Fridman (4:13:15.640)

while we're still here.

Lex Fridman (4:13:16.640)

And of course, the other way you come to terms

Lex Fridman (4:13:18.000)

with mortality is you have children.

Saifedean Ammous (4:13:21.240)

Given what you just said, doubly so,

Lex Fridman (4:13:26.000)

it's a huge honor that you would spend

Saifedean Ammous (4:13:27.600)

your valuable time with me.

Lex Fridman (4:13:29.480)

This is the first time you did it,

Lex Fridman (4:13:30.920)

so you probably regret all of it,

Lex Fridman (4:13:32.840)

so we'll probably never see each other again.

Lex Fridman (4:13:35.200)

But I'm glad you at least took the chance to do it.

Lex Fridman (4:13:38.280)

It's a huge honor, man.

Saifedean Ammous (4:13:39.280)

I've been a huge fan of yours.

Lex Fridman (4:13:40.880)

I think you have impact on the world

Saifedean Ammous (4:13:44.160)

that you probably are not even aware of.

Lex Fridman (4:13:46.000)

It's tremendous, and a lot of people love you,

Lex Fridman (4:13:49.160)

and your work is important.

Lex Fridman (4:13:50.280)

Even, you know, I disagree with some things you say,

Lex Fridman (4:13:53.560)

and there's people that disagree with you,

Lex Fridman (4:13:55.080)

but everybody respects you.

Lex Fridman (4:13:57.000)

And thank you so much for spending

Lex Fridman (4:13:58.240)

your really valuable time with me today, brother.

Saifedean Ammous (4:14:00.120)

Thank you, sir, really appreciate it.

Lex Fridman (4:14:01.680)

This was not a waste of time,

Lex Fridman (4:14:02.720)

and I'd be happy to do it again.

Lex Fridman (4:14:04.800)

Thanks for listening to this conversation

Saifedean Ammous (4:14:06.360)

with Savedina Moose.

Lex Fridman (4:14:07.760)

To support this podcast,

Saifedean Ammous (4:14:09.000)

please check out our sponsors in the description.

Lex Fridman (4:14:11.520)

And now, let me leave you with some words

Saifedean Ammous (4:14:13.680)

from the Austrian economist Friedrich Hayek.

Lex Fridman (4:14:17.440)

Economic control is not merely control

Saifedean Ammous (4:14:19.920)

of a sector of human life

Lex Fridman (4:14:21.480)

which can be separated from the rest.

Saifedean Ammous (4:14:23.480)

It is the control of the means for all our ends.

Lex Fridman (4:14:27.640)

Thank you for listening, and hope to see you next time.

Saifedean Ammous (50:00.620)

flimsy, idiotic justification

Lex Fridman (50:02.500)

for what governments were already doing for 20 years.

Saifedean Ammous (50:05.100)

They'd already gone off the gold standard

Lex Fridman (50:07.580)

and they'd gone through 20 years

Saifedean Ammous (50:09.900)

in which they were lying to their population,

Lex Fridman (50:11.900)

telling their population we're still on a gold standard,

Lex Fridman (50:14.020)

but there are problems caused by various random things.

Lex Fridman (50:18.460)

But don't worry, we're gonna be going back

Saifedean Ammous (50:20.100)

on the gold standard.

Lex Fridman (50:20.940)

20 years later, after they went off the gold standard,

Saifedean Ammous (50:23.980)

they come up with this justification for why,

Lex Fridman (50:27.060)

oh, actually the gold standard was bad.

Lex Fridman (50:29.860)

And this is a really pernicious thing about it is

Lex Fridman (50:32.900)

the problems that were caused by us

Saifedean Ammous (50:34.500)

going off the gold standard

Lex Fridman (50:36.380)

were caused by the gold standard.

Lex Fridman (50:39.020)

And we're going to fix them

Lex Fridman (50:40.620)

by going off the gold standard even more.

Saifedean Ammous (50:42.820)

Just because government is lying and it's shady

Lex Fridman (50:45.900)

and it does these kinds of things

Saifedean Ammous (50:47.220)

doesn't mean Keynesian economics is wrong.

Lex Fridman (50:49.660)

So just, because I wanted to separate a few things you said.

Saifedean Ammous (50:53.100)

It could very well be very wrong

Lex Fridman (50:55.260)

and they could indeed be hucksters.

Saifedean Ammous (50:57.020)

All of these, such colorful language.

Lex Fridman (51:00.820)

I love you deeply for this, this is fun.

Saifedean Ammous (51:03.260)

Yeah, but I mean, it's like somebody like Krugman

Lex Fridman (51:05.300)

doesn't use this kind of language when discussing Austrians.

Saifedean Ammous (51:07.940)

It's just that when actors like him use it,

Lex Fridman (51:10.700)

it's presented as if it is legitimate

Saifedean Ammous (51:13.220)

because he's part of the major shows.

Lex Fridman (51:15.620)

So the case they make and the criticism Keynesians make

Saifedean Ammous (51:22.100)

of Austrian economics and the case they make

Lex Fridman (51:24.820)

for Keynesian economics is it's based on empirical evidence.

Lex Fridman (51:28.180)

So Austrian economists are pie in the sky theorists

Lex Fridman (51:33.660)

about like how human nature works.

Lex Fridman (51:37.340)

And it's just all theory.

Lex Fridman (51:39.460)

And just like you said, Keynesian economics

Saifedean Ammous (51:41.540)

kind of sell it as a science, data driven science.

Lex Fridman (51:44.780)

And so where's the data, bro?

Lex Fridman (51:50.580)

So one way of saying it is how do you know

Lex Fridman (51:55.660)

if we get rid of inflation?

Lex Fridman (51:57.980)

How do you know if we get rid of central banks?

Lex Fridman (52:00.020)

If we push towards that direction,

Saifedean Ammous (52:02.620)

we will have a better world, a better functioning economy,

Lex Fridman (52:06.740)

better functioning markets, better functioning society.

Saifedean Ammous (52:10.900)

This is another inaccurate way in which they present.

Lex Fridman (52:14.620)

The economics, they present as if it's just theory

Lex Fridman (52:16.620)

and that the data doesn't matter, but that's not the case.

Lex Fridman (52:19.780)

What the Austrians say is that without guiding theory,

Saifedean Ammous (52:23.140)

data is mute, data is dumb, data can't say anything.

Lex Fridman (52:26.460)

So theory first, and then you have to have models

Saifedean Ammous (52:32.620)

to provide context for interpretation of the data.

Lex Fridman (52:35.940)

And it's a sign of just how little self awareness they have

Saifedean Ammous (52:38.780)

that they think that they're just being led by the data

Lex Fridman (52:42.260)

when they're being led by Keynes's moronic theories.

Lex Fridman (52:47.300)

And they use the data to justify those theories

Lex Fridman (52:50.900)

and to stick by them.

Lex Fridman (52:52.380)

And in fact, they are the ones whose theories

Lex Fridman (52:54.980)

cannot be refuted because it's just

Saifedean Ammous (52:58.460)

government mandated religion.

Lex Fridman (53:00.380)

So according to Keynes's nonsense,

Lex Fridman (53:06.100)

so the way that they justify the inflationism is this,

Lex Fridman (53:10.660)

and I'm just using this to give an example

Saifedean Ammous (53:12.380)

of what you're talking about in terms of theory,

Lex Fridman (53:14.580)

the way they justify the inflationism

Saifedean Ammous (53:15.980)

to tie it back to the original point,

Lex Fridman (53:17.780)

they justified it, all right, we need money to spend.

Lex Fridman (53:20.100)

And then the level of spending in the economy

Lex Fridman (53:22.140)

is what determines the state of the economy.

Lex Fridman (53:23.700)

And I've taught macro economics

Lex Fridman (53:25.140)

at university level for a while.

Lex Fridman (53:26.460)

So I know Keynesian nonsense better than most Keynesians

Lex Fridman (53:31.300)

know Austrians, if not all of them, I guarantee you.

Lex Fridman (53:34.260)

And so the way they see it is the level of spending

Lex Fridman (53:38.180)

in the economy is what determines the state of the economy.

Saifedean Ammous (53:40.380)

There's a level of output and there's a level of spending.

Lex Fridman (53:42.660)

So there's like the factories on the one side

Saifedean Ammous (53:44.420)

that are churning out goods,

Lex Fridman (53:45.940)

and those goods have a certain quantity and value,

Saifedean Ammous (53:48.740)

market value, and it's completely nonsensical of course,

Lex Fridman (53:51.660)

because how can the value of the goods produced

Lex Fridman (53:54.820)

be different from the value of the spending?

Lex Fridman (53:56.660)

But let's put that aside for a second.

Lex Fridman (54:00.060)

So the amount of spending that happens in the economy

Lex Fridman (54:02.420)

determines the state of the economy.

Saifedean Ammous (54:04.100)

If the value of the production, which they call Y

Lex Fridman (54:07.820)

is higher than the aggregate expenditures,

Lex Fridman (54:10.340)

so this is the production

Lex Fridman (54:11.300)

and then the aggregate expenditure is lower,

Saifedean Ammous (54:13.420)

then we don't have enough spending to buy all the goods.

Lex Fridman (54:16.700)

And then that causes a recession.

Saifedean Ammous (54:18.220)

The factories start laying off workers

Lex Fridman (54:20.740)

and then the laid off workers start spending less.

Lex Fridman (54:23.300)

And then that leads to aggregate expenditure

Lex Fridman (54:25.500)

dropping even further.

Lex Fridman (54:26.940)

And so it's a vicious cycle

Lex Fridman (54:28.300)

where the economy gets into recession.

Lex Fridman (54:30.540)

And the only way out is for Keynes's bankster buddies

Lex Fridman (54:33.980)

and government buddies to print a lot of money

Saifedean Ammous (54:36.060)

to give to themselves.

Lex Fridman (54:37.460)

And then that will...

Saifedean Ammous (54:39.460)

That's one interpretation.

Lex Fridman (54:40.740)

But to print more money to increase the expenditure

Saifedean Ammous (54:44.900)

that to match the supply.

Lex Fridman (54:46.260)

To match the level of output.

Saifedean Ammous (54:47.380)

Sounds pretty good to me, I'm sold.

Lex Fridman (54:49.180)

All right.

Saifedean Ammous (54:50.820)

Even though you're saying huckster, so.

Lex Fridman (54:52.620)

Yes.

Saifedean Ammous (54:53.460)

I just, you know, the way, I love you very much,

Lex Fridman (54:56.500)

but like just for people who are listening,

Saifedean Ammous (54:59.660)

I think it's, I love the way you talk and it's great

Lex Fridman (55:03.700)

and keep doing it, but just for context,

Saifedean Ammous (55:05.900)

like I don't know anything that involves human nature

Lex Fridman (55:10.860)

deserves this level of certainty.

Saifedean Ammous (55:12.460)

I, at least my position is that we don't know

Lex Fridman (55:15.300)

what the hell we're doing on basically anything.

Saifedean Ammous (55:18.180)

Perhaps, but I mean.

Lex Fridman (55:19.300)

Like there's a lot, like certainty can get us in trouble

Saifedean Ammous (55:23.740)

is my worry.

Lex Fridman (55:24.580)

I don't know much about economics.

Saifedean Ammous (55:27.180)

I don't even know, you know, financial systems,

Lex Fridman (55:29.500)

monetary systems, but I just seen us get in trouble

Saifedean Ammous (55:33.980)

with human psychology, certainty,

Lex Fridman (55:36.260)

certainty of ideologies in general.

Saifedean Ammous (55:38.380)

You mentioned Marxism and so on.

Lex Fridman (55:40.340)

I came from the Soviet Union.

Saifedean Ammous (55:42.180)

There's a lot of people that are very certain

Lex Fridman (55:44.460)

throughout the history of the 20th century

Saifedean Ammous (55:46.580)

that communism is the utopia that humanity should strive for.

Lex Fridman (55:52.540)

So I'm nervous around certainty.

Saifedean Ammous (55:54.380)

I could be wrong, but you know, you ask me for my opinion.

Lex Fridman (55:57.220)

Yes, yes.

Saifedean Ammous (55:58.060)

Sorry, so it's that little bit of a caveat.

Lex Fridman (56:00.220)

So to go back to the idea, then on the other hand,

Saifedean Ammous (56:03.180)

you have the level of, if the other situation

Lex Fridman (56:05.980)

is when the level of spending is higher

Saifedean Ammous (56:07.740)

than the amount of aggregate output.

Lex Fridman (56:09.980)

In that situation, you have too much spending.

Lex Fridman (56:11.780)

So therefore what ends up happening is inflation.

Lex Fridman (56:14.580)

So according to the Keynesian worldview,

Saifedean Ammous (56:16.100)

this is really important because this is a way

Lex Fridman (56:18.220)

that I'm gonna get to your point about empirical data

Lex Fridman (56:20.900)

and to show you why they're not correct.

Lex Fridman (56:26.540)

Yeah, they're not correct about what they say

Saifedean Ammous (56:28.300)

about empirical data.

Lex Fridman (56:29.580)

So then what this means is that there's a level of output

Lex Fridman (56:32.580)

and there's a level of aggregate expenditure.

Lex Fridman (56:34.180)

The aggregate expenditure can either be higher

Saifedean Ammous (56:36.060)

or lower than the output or equal to it.

Lex Fridman (56:38.620)

If it's higher, we get inflation.

Lex Fridman (56:41.700)

If it's lower, we get recessions, okay?

Lex Fridman (56:46.620)

So is there any universe in this model?

Saifedean Ammous (56:50.020)

Is there any potential universe

Lex Fridman (56:52.180)

in which you can have both inflation and a recession?

Lex Fridman (56:56.300)

According to the Keynesian model, you can't, right?

Lex Fridman (56:59.380)

Because aggregate expenditure cannot be both higher

Lex Fridman (57:02.700)

and lower than output.

Lex Fridman (57:04.980)

So therefore, if you were truly being an empirical person,

Saifedean Ammous (57:08.460)

if you were looking at evidence and trying to analyze data,

Lex Fridman (57:13.140)

you'd look at this and say, one example,

Saifedean Ammous (57:16.380)

you just need one example of high inflation

Lex Fridman (57:18.740)

and high unemployment to refute this entire model, right?

Lex Fridman (57:23.700)

And of course, the world is full of examples

Lex Fridman (57:25.980)

of high inflation and high unemployment.

Lex Fridman (57:28.140)

And that's what happened in the 19, and of course,

Lex Fridman (57:30.020)

they ignored it when it happens in poor countries

Saifedean Ammous (57:32.260)

because poor countries don't really matter.

Lex Fridman (57:34.500)

But then in the 1970s, that happened in the US

Lex Fridman (57:37.180)

and in the Western economies

Lex Fridman (57:38.260)

and the most advanced industrial economies.

Lex Fridman (57:40.380)

So historically, before then,

Lex Fridman (57:42.460)

you had all these Keynesian central bankers

Saifedean Ammous (57:47.180)

talking about this model and saying,

Lex Fridman (57:48.980)

well, aggregate expenditure is too low now

Lex Fridman (57:51.060)

and that's why we have unemployment.

Lex Fridman (57:52.420)

So we need to print more money.

Lex Fridman (57:53.580)

And then they print more money, inflation goes up,

Lex Fridman (57:56.500)

but also unemployment goes up because this model is broken.

Saifedean Ammous (58:01.860)

That's not how the world works.

Lex Fridman (58:04.300)

The level of aggregate spending in the economy

Saifedean Ammous (58:06.300)

is not a lever with which you can control

Lex Fridman (58:09.020)

inflation and unemployment.

Lex Fridman (58:10.820)

So what would a scientist do?

Lex Fridman (58:12.900)

What would a non Huckster do in this case?

Saifedean Ammous (58:17.300)

Admit the theory is wrong

Lex Fridman (58:18.660)

and find another way to reformulate it.

Lex Fridman (58:21.260)

Have the Keynesians done that?

Lex Fridman (58:23.020)

No, still the same garbage in the textbook

Saifedean Ammous (58:25.540)

that is being taught until today.

Lex Fridman (58:27.140)

So is it possible to have a non Keynesian model

Saifedean Ammous (58:29.700)

where one that still supports

Lex Fridman (58:31.980)

moderate amount of inflation is good for the economy?

Saifedean Ammous (58:34.580)

I mean, since the 1970s, since this has happened,

Lex Fridman (58:37.060)

yeah, this is what basically most fiat economists,

Saifedean Ammous (58:43.220)

as I like to call them,

Lex Fridman (58:44.060)

essentially anybody at a university financed by governments,

Saifedean Ammous (58:46.540)

which is financed by central banks,

Lex Fridman (58:47.860)

which is financed by fiat.

Saifedean Ammous (58:48.700)

Oh, we'll talk about that.

Lex Fridman (58:50.060)

The effect of fiat money on our life,

Saifedean Ammous (58:53.860)

as you write about in your book,

Lex Fridman (58:56.100)

fiat standard, one of them is education.

Saifedean Ammous (58:58.460)

I'm sure we'll disagree there too.

Lex Fridman (59:01.220)

Not smart enough to disagree, but I'll disagree anyway.

Lex Fridman (59:04.020)

So yeah, so a whole bunch of other models came up,

Lex Fridman (59:06.220)

but basically it's such an example of motivated reasoning.

Saifedean Ammous (59:10.660)

Like anybody who's got a familiarity

Lex Fridman (59:12.260)

with the scientific method

Saifedean Ammous (59:13.380)

or who's got an engineering background

Lex Fridman (59:14.900)

who comes into economics immediately has a lot of red flags.

Lex Fridman (59:18.580)

And I remember when I used to teach macro economics,

Lex Fridman (59:22.340)

I used to teach introductory macro economics.

Lex Fridman (59:24.500)

And it's a course that would be taken by econ majors

Lex Fridman (59:26.580)

as well as engineers.

Saifedean Ammous (59:27.660)

A lot of engineers would take it as an elective.

Lex Fridman (59:29.620)

And every time I'd explain,

Lex Fridman (59:31.060)

and I would just teach the Keynesian basic stuff.

Lex Fridman (59:33.260)

And every time I'd explain it,

Saifedean Ammous (59:34.180)

there's always that smart engineering kid

Lex Fridman (59:35.980)

who just looks at me and says,

Saifedean Ammous (59:37.980)

sir, this doesn't make any sense

Lex Fridman (59:39.620)

because this and this and that.

Lex Fridman (59:41.260)

And I'm always like, you get it exactly.

Lex Fridman (59:43.780)

You're correct.

Saifedean Ammous (59:44.700)

Because if you have any kind of shred of scientific thinking,

Lex Fridman (59:47.580)

you see that this is all motivated reasoning.

Saifedean Ammous (59:50.220)

Like the answer is government needs to print money.

Lex Fridman (59:52.820)

And here's a whole bunch of models brought up by people

Saifedean Ammous (59:56.740)

for why government printing money is good.

Lex Fridman (59:59.100)

And the reason they're coming up to this conclusion