Balaji: The Fed Does Invisibly What Lenin Did With Guns — And You're Not Supposed to Notice | Impact Theory W/ Tom Bilyeu & Balaji

Today’s guest is Balaji, the one-and-only, infamous entrepreneur, tech visionary, and macro-thinker who’s never afraid to say what everyone else is just… whispers about. Whether you’re worried, inspired, or just plain confused about where America is headed (or if it’s headed anywhere at all), this conversation with Tom Bilyeu is the crash course in modern chaos you didn’t know you NEEDED. Balaji isn’t here just to talk about the future—he’s laying out the collapse of the current world order, how technology AND tribal politics are shredding America into pieces, and why every “side” thinks it’s losing (and what no one is seeing about the bigger picture). Whether it’s debt, AI, China, or why California wants to tax billionaires out of existence—girl, WE ARE GOING THERE. Shopify: Sign up for your one-dollar-per-month trial period at https://shopify.com/impactQuince: Free shipping and 365-day returns at https://quince.com/impactpodDuck. Ai: Protect your privacy at https://duck.ai/impactBlinkist: Start your free trial at https://blinkist.com/impactQuo: Try for free PLUS get 20% off your first 6 months at https://quo.com/impactPique: 20% off at https://piquelife.com/impactMonetary Metals: Future-proof your wealth at https://monetary-metals.com/impactCozy Earth: code IMPACT for 20% off https://cozyearth.comSumm: code TOMVIP20 for 20% off your first year at https://summ.com?via=tombilyeu&coupon=TOMVIP20 https://summ.com?via=tombilyeu&coupon=TOMVIP20 What's up, everybody? It's Tom Bilyeu here: If you want my help... STARTING a business:join me here at ZERO TO FOUNDER https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show: https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show https://tombilyeu.com/zero-to-founder?utm_campaign=Podcast%20Offer&utm_source=podca[%E2%80%A6]d%20end%20of%20show&utm_content=podcast%20ad%20end%20of%20show SCALING a business:see if you qualify here. https://tombilyeu.com/call: https://tombilyeu.com/call Get my battle-tested strategies and insights delivered weekly to your inbox:sign up here. https://tombilyeu.com/: https://tombilyeu.com/ FOLLOW TOM: Instagram:https://www.instagram.com/tombilyeu/ Tik Tok:https://www.tiktok.com/@tombilyeu?lang=en Twitter:https://twitter.com/tombilyeu YouTube:https://www.youtube.com/@TomBilyeu You know that feeling something is majorly shifting beneath the surface? Here, Balaji explains why America is breaking apart—not just government, but at the soul level. We lay out why the internet is upstream from every disruption, and how AI isn’t just killing jobs—it’s targeting entire TRIBES inside the US. Are you blue America, red America, or tech America? Listen as Balaji supports his claims with real data and charts: from solar in Africa to the gold “singularity,” from collapsing media to the “wokeness” arms race post-2010. He pulls back the curtain on why California became a one-party state, how Democrats and Republicans are at war with each other AND the internet… and what it all means for the future of your money, your job, and your freedom. SHOWNOTES [00:00] America doesn’t exist? The rise of “sub-tribes” and why labels are now meaningless [00:11] How digital and physical AI are disrupting “blue” and “red” jobs [01:06] AI, solar panels, robots, agents—the multiple “singularities” taking over every industry [05:48] Collapse in religiosity, skyrocketing gender/ideology gaps, and why parties are now split male vs. female [06:28] Why the internet is the root force changing everything (the “force diagram” of disruption) [07:39] HOW AI targets Democrats vs. Republicans—what jobs are actually threatened [10:32] Blue states go anti-AI, legal workarounds, and the “asymmetry” in who fights back [11:43] How America disrupts the West (and why Western Europe may be doomed for a bad century) [13:44] America is over, but the internet is just beginning—understanding “debt” and the end of empires [15:16] Keynesianism = Communism (but for wimps), the invisible theft by the Fed, and how inflation really robs you behind closed doors [22:10] Why technological deflation is GOOD (and why the system wants you to fear it) [25:03] Drawing parallels with the Soviet collapse, how “asset seizure” works in modern economies [29:05] The Cantillon Effect—who really gets rich off the money printer? [35:00] The chart: When blue America lost the media game, and red America lost manufacturing [38:04] Wokeness, the Techlash, and using morality as a weapon: How both parties went “scorched earth” on each other Major eye-openers, right? Make sure to breathe… and yes, he’s just getting started. Follow Balaji: Twitter/X: https://twitter.com/balajis Website: https://balajis.com Book: The Network State (https://thenetworkstate.com) Learn more about your ad choices. Visit megaphone.fm/adchoices https://megaphone.fm/adchoices See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tom Bilyeu?

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• 0:45Tom Bilyeu?

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• 1:07Speaker 01

  America doesn't exist. There's blue America and red America and tech America and all these different sub tribes within it. The word American is like the word Korean.

• 1:17Tom Bilyeu?

  Yo, you're saying something here, Balaji.

• 1:19Speaker 01

  Digital AI disrupts Democrat jobs and physical AI disrupts Republican jobs. Democrats destroyed democracy in California. And the reason is California is a one party state. The mad understanding of the world is that the world is exploiting Americans. A few hundred bucks going to people in Maui, for example, when their house is burned down. But billions going to Ukraine.

• 1:39Tom Bilyeu?

  Walk me through how America breaks apart if this continues.

• 1:47Tom Bilyeu?

  Balaji Shirinavasan, welcome back, man.

• 1:51Speaker 01

  Good to be here.

• 1:52Tom Bilyeu?

  Good to have you. I have obviously been all over your X feed, paying attention to everything that you've been talking about, and I think you are uniquely qualified to address what's going on right now. AI is taking a crazy amount of jobs. The entire world order is changing in violent fashion. And what I want to know is, what is causing all of the disruption? And how are the smartest people in the world responding to it?

• 2:19Speaker 01

  AI is highly productivity increasing. And with that productivity increase, you can do one of two things. You can A, cut costs, slim down, flatten the hierarchy, and so on and so forth, right? By essentially AI-ifying your operation. Or B, you can keep your operation the same size, and then increase what it does, right? So you can get basically more... So it's like a productivity bump, where you can do more with less, or you can do more with more. Let me give some specifics, right? So if you just take a look at the link that I just shared with you, right? One way I think about it is, you know Ray Kurzweil's thing of the singularity is here?

• 2:59Tom Bilyeu?

  Yep.

• 3:00Speaker 01

  Right? So what if you had the plural version? The singularities are here, right? Meaning, there's actually many curves that are going, voof, like this, you know, up into the right, or down into the right, very fast, right? And let me show you some of them, okay? So this is like the solar singularity, which is showing that in Africa, solar power is just absolutely mooning.

• 3:25Tom Bilyeu?

  It's wild. For anybody not looking at their phone right now, these are straight lines up.

• 3:30Speaker 01

  Yes. And this is kind of like when smartphones just started working. When smartphones started working, they just went, like, you know, when the economics work, it gets taken to its logical conclusion, and just suddenly they started getting snapped up in Africa. Solar panels have gotten so robust, so cheap, they're resistant to, like, rocks hitting them, and so on. You know, the glass doesn't shatter, they can just work anywhere. You know, I'm a big nuclear guy, I love nuclear, but it's really nuclear and solar, not or. And the reason is, solar is Just so easy to set up relative to nuclear. You can just roll it off the truck or whatever, set it up. You know, it's much, much easier permit wise, everything wise. It takes up way more horizontal space. It's not as scalable. It doesn't provide like, you know, reliable power in the same way the batteries are improving that.

• 4:15Speaker 01

  Anyway, point is though, solar is real. It's no longer like, uh, it can work in Africa without subsidies. Okay. So that's the solar singularity. Okay. Here's another one. The internet dating singularity. You see this one?

• 4:27Tom Bilyeu?

  Yep.

• 4:28Speaker 01

  Right. Essentially all previous modes of how humans meet have been replaced. Right. By just the internet in like 10, 20 years. Right. Okay. Then here is the gold singularity. Just, I'm sure you've talked about this on your show, right? Just gold going vuv like this since, you know, the 2024 election, right? Basically more than doubling. Um, here is the robot singularity, not quite like as up and to the right as that, but it's pretty up and still, right? It's impressive. That's right. Um, this is like the tariff singularity, so to speak, right? Just what I'm talking about are these radical changes like this, like this, you know, right?

• 5:10Speaker 01

  And, um, then this is like the agent. Now this one, by the way, is, uh, there's a very, very interesting comment. You've seen this one, which is like the time for tasks an agent can do probably, right? It basically says, oh, agents are getting more and more capable. They can do more and longer what a human can do and so on and so forth. After I posted this, somebody actually in a useful way on X gave me feedback. And there's a whole post that I'm going to put up, which says, this is actually a flawed, uh, chart that basically, um, these, this is not actually, uh, it's not actually a good measure of how long those things can take, right?

• 5:52Speaker 01

  It's not a true benchmark. Um, and it's, uh, it's something where it's like what a human can do. This thing can do in some amount of time, a 50% accuracy rate and so on and so forth. But it's, it's a, they think, they argue it's a very tortured benchmark. So I'll give that citation after. So this one, big A grain of salt, and it may actually write a post detailing that critique and giving it more distribution. Nevertheless, a lot of people think this is happening, right? And I think it's happening to some extent, maybe not quite as much as this. Why is it happening to some extent? Well, clearly, you and I have used Claude Co-Work, we use Claude Code. Clearly, it can do more tasks for longer than it could in 2022.

• 6:31Tom Bilyeu?

  Yeah, I am always aghast at anybody who tries to downplay the rate at which AI is changing things. And I'm like, you clearly don't own a business. Like, there's no way. The on-the-ground reality of using AI is startling.

• 6:44Speaker 01

  Yes, that's right. So there's the argument of this graph, there's a counterargument that critiques the numbers in this graph and the benchmarks. There's a counterargument which is, it definitely has been increasing, right? So how much is TBD? So let's at least say there's something there. Fine. Then, this is not quite, this is kind of what you were talking about, not quite a singularity, but certainly a downward slump, right, over here, right? And you can see something like this for religiosity has also, you know, collapsed, right? This is a big one, which is the gender divergence in many countries, ideology gap between, like, you know, women and men.

• 7:23Tom Bilyeu?

  That is crazy.

• 7:24Speaker 01

  Yes. And this is something where, in many ways, the parties are basically women versus men, is left versus right.

• 7:32Tom Bilyeu?

  Now, Apology, are you, do you see, like, okay, this is a lot, we're gonna start losing people just because it's so many, so many? Is there one driving mechanism that's creating all of this?

• 7:42Speaker 01

  Yes, I think the internet is upstream about everything, and why?

• 7:48Speaker 01

  I think the, so the reason I gave all those graphs is to show that it's not, like, many people just focus on one disruption. But in physics, for example, you have to have a force diagram. For example, if you throw a ball, like, or let's say there's a rocket, right? Gravity is acting downward on it, but the rocket engine is acting upward on it. And you have to take the balance of this upward force and this downward force, and then you get the trajectory of the thing. And if the rocket engine is changing, it's, you know, like, the force that it is applying is itself changing, you have to calculate all this stuff out, right? So it's not simply enough to look at one force in isolation, you have to look

• 8:30Speaker 01

  at what's called a force diagram. Okay. So what I do is I enumerate as many of these things as I can on individuals, on businesses, on On countries, on sectors, and I try to say, where is like the net state of this gonna be?

• 8:47Speaker 01

  Okay, so, um, let me give the upstream and then let me give

• 8:50Tom Bilyeu?

  You're probably gonna have to explain what you mean by the net state of it.

• 8:53Speaker 01

  Sure, sure, sure. So, let me give a concrete example. Let's say, let's take AI, okay? So, AI is something that actually goes after, um, what kinds of jobs does it disrupt? Basically, digital AI disrupts Democrat jobs, and physically, I disrupts Republican jobs.

• 9:12Tom Bilyeu?

  That is such an interesting way to look at it. Yeah, I get it.

• 9:15Speaker 01

  Okay, so, so digital AI goes after journalists, doctors, lawyers, bureaucrats, artists, right? Everybody who is like, you know, a, uh, a university-educated creative, how Democrats like to think of themselves, right? It disrupts media, it disrupts Hollywood, right? Okay. And conversely, um, physical AI disrupts manufacturing and disrupts the military. Everything Republicans pride themselves on, right? What is physical AI? Physical AI is robots, right? Digital AI is agents to first order, okay? And, um, so with physical AI, that's Chinese robots.

• 10:00Speaker 01

  Digital AI is internet agents, okay? And so, when you, when you see that this is causing this disruption on Democrats and Republicans, on blue Americans and red Americans, they're both going to counter-attack it.

• 10:15Speaker 01

  Democrats more aggressively because the physical AI hasn't, I mean, it's partially hit the Republicans, but it's not really all the way there yet, right? They perceive it through the mechanism of China.

• 10:26Tom Bilyeu?

  You think they will fight as hard when it hits them as hard? Or is there a difference in, uh, strength of reaction based on party?

• 10:35Speaker 01

  For now, there's a difference in strength of reaction based on party. Because it is a total L for Democrats and it's only, it's a partial W for Republicans because it's certainly hurting Democrats more than it's hurting Republicans right now. So, blue states are going to be more aggressively anti-AI than red states. For example, New York is passing laws that like restrict the use of AI. Like, you have to consult with a lawyer or something like that before using AI for legal docs, or it's not privileged. There's various rulings like this that are sort of legal guild type rulings, you know, right? And there'll probably be workarounds for that, like, you know,

• 11:17Speaker 01

  an inexpensive lawyer for whatever, five bucks an hour. Now they're your lawyer and it's under privilege and then you can use privileged AI. There'll be various workarounds, I think, you'll see for that. Nevertheless, blue states are very much anti-AI. It disrupts their sense of self, right? Like what they take pride in, you know? Basically, roughly speaking, Democrats will be and are as mad about the disruption of the internet as Republicans are mad about the disruption of China.

• 11:47Tom Bilyeu?

  Taking a short break, but there's more Impact Theory after. Stay tuned. There's a reason Quince sells cashmere for $60, and it isn't the cashmere. It's real 100% Mongolian cashmere. It's the same stuff luxury labels charge a fortune for. Quince just works directly with ethical factories and cuts out the middleman. So there's no need for a markup and no logo tax. The $60 goes to the actual sweater, not the fancy name on the tag. That's why everything they make runs 50 to 80% less. And it's not just the cashmere. I ordered a few things myself, their fleece joggers, a couple of their tees, which I wear obsessively.

• 12:28Tom Bilyeu?

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• 13:13Tom Bilyeu?

  attacks with details specific enough to look legit AI has made a lot of things possible including scams like this but AI still needs raw material it gets it from data brokers who sell your name address phone number to anyone willing to pay incogni goes after that supply they handle removal requests across 420 plus harmful broker sites and they keep checking back as brokers constantly try to relist you on the unlimited plan the exposure scanner hunts down your information send a link and their privacy experts handle the takedown track your progress in the app and get a monthly risk assessment showing exactly where you stand

• 13:54Tom Bilyeu?

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• 14:24Speaker 01

  it's particularly true for America it's to a lesser extent true because the thing is a lot of other Western countries were disrupted by America already and so this is like the disruption of the disruptor and so they're like two cycles behind in a sense right which means some of them could leapfrog but I think many in Western Europe are just kind of gonna have a bad century but

• 14:56Tom Bilyeu?

  Okay, aggressive, I like it.

• 14:58Speaker 01

  Yeah, well, just very, very briefly on that is I think many countries, not all, but many countries had a terrible 20th century. They were under communism, they're under socialism, you know, that's Eastern Europe, Russia, India, China, Southeast Asia with Vietnam and so on, Vietnam War, right, all these, all these places that had a terrible 20th century, actually including big chunks of Latin America, which were, you know, places like El Salvador and so on, that had drugs, inflation, crime, right, they developed civilizational antibodies to communism, socialism, inflation, drugs, right, and thus arose, for example, you know, the basically

• 15:41Speaker 01

  capitalist regimes in, or regimes, governments, what have you, in Eastern Europe, in India, right, that reversed decades of decline, and similarly, you know, Bukele or Malay or now Hernando de Soto in Latin America, that's three, you know, three is a trend, right, three basically capitalist leaders who are against what, you know, basically tore down Latin America last century, right, for the most part. So, but on the other side of things, you had Western Europe and the US and Canada that had been so prosperous for so long that they ended up thinking prosperity was their birthright and essentially degenerated, right?

• 16:24Tom Bilyeu?

  I agree so aggressively, I'm getting a cramp.

• 16:27Speaker 01

  Yes, so now, here's the good news. The good news is, I do think that unfortunately, America is over, but the internet is just beginning.

• 16:38Tom Bilyeu?

  Okay, bold statement, so before we just blow past that.

• 16:41Speaker 01

  Yeah, so, but let me go back to the previous, yeah.

• 16:44Tom Bilyeu?

  Okay, do you need to touch on that first? Because I want to understand the mechanism, because I have a hypothesis about that.

• 16:50Speaker 01

  Okay, go, go, go.

• 16:50Tom Bilyeu?

  For me, this is a debt question, and, and any answer that does not include debt in terms of America's ails, I would be very aggressive in my rebuttal, I'll say that.

• 17:01Speaker 01

  Totally, totally agree with you, but it is like a force diagram where there's multiple forces acting at the same time, right, so.

• 17:08Tom Bilyeu?

  Do you think debt is bigger or internet?

• 17:10Speaker 01

  Debt is the inflationary force, and China and the internet are the deflationary forces.

• 17:16Tom Bilyeu?

  Hmm. Deflationary from a crisis-led position? Because deflation from innovation is wonderful.

• 17:23Speaker 01

  Yes.

• 17:24Tom Bilyeu?

  Deflation from crisis, bad.

• 17:26Speaker 01

  Uh, deflation from innovation. So basically, the existing system, the US and Western European system, is essentially at the end of the line, where you have, um, decades of Keynesianism, uh, Keynesianism, and essentially-

• 17:44Tom Bilyeu?

  Can you just give a sentence on what you mean by that?

• 17:46Speaker 01

  Sure, yes. Keynesianism is like communism, but for wimps. Okay? Communism goes, like, when the communists want to take 10%... Is that good? Right?

• 17:57Tom Bilyeu?

  That's fantastic.

• 17:59Speaker 01

  Okay, so let me explain what I mean by that. Soviet communism, uh, when Lenin wanted to go and steal all the property, he actually, you know, Lenin's hanging order, for example, like, kill the kulaks and so on. They basically had lists of all the farms and so on in, in the country, and they would send guys with guns to kick in the door, they'd rape the wife, they'd kill the father, they'd take the son to a gulag. Brutal, brutal. This is what collectivization meant, right? For the people, right? It meant the party would basically steal all this property. And a farm, by the way, is like a factory, in the sense of, you know, how do you actually grow the, the beets or the radishes? It's like a whole process of how you aerate them and irrigate them, and if you... All, all that knowledge went away when you killed the farmer or, or stole the farm, which is why all this famine's resulted.

• 18:44Speaker 01

  It's like a machine that you don't know how to operate. Anyway, point is, in order to do that, they had to actually go physically house to house and shoot people and take their stuff. Okay? To steal 10% of the property, they actually had to have physically guys with guns. American Keynesianism has innovated on that. Why? Because they don't have to, when, when the Fed wants to steal 10% of, of all property, right? They just hit a button, and they inflate the money supply, and nobody feels it. In fact, some people even think that they've gotten richer because their asset prices have gone up. Right? Because their house price or their S and P or whatever has gone up in nominal terms.

• 19:28Speaker 01

  But it's like, you know, let's say there were 10 units of stock and you had one and you had 10%, okay? Now, another 90 units are issued and you get one, right? So you went up nominally from one unit of stock to two units of stock, but you went down percentage-wise from 1 out of 10 to 2 out of 100. Right? So your nominal went up from 1 to 2, but your percentage went down from 10% to 2%. That's exactly what's happening with inflation. People can understand it when it's dilution on a cap table, right?

• 20:07Tom Bilyeu?

  The average person doesn't even know what a cap table is.

• 20:09Speaker 01

  Fine. Okay, you're right.

• 20:11Tom Bilyeu?

  I know what you mean.

• 20:13Speaker 01

  You know what I mean? So the thing is, it's just abstract enough that when, for example, when people are at Chipotle, okay, I don't know if you've seen this phenomenon of people videotaping the guy at Chipotle because they're not giving them enough guacamole.

• 20:26Tom Bilyeu?

  I have not.

• 20:28Speaker 01

  Okay. Well, the common man just sees all of these corporations trying to nickel and dime them and give them less guacamole for the same amount of money, hitting them with shrinkflation in terms of packaging, the quality of food is going down, the quality of service is going down. They're seeing all that and they're thinking these corporations are getting greedier. What they're not seeing is that both the individual and the company, which is of course also run by individuals, have both been robbed by the Fed.

• 20:57Tom Bilyeu?

  Yeah.

• 20:58Speaker 01

  So they're both having to do more with less. And so every economic relationship, the Fed has stolen 10% from the economy with that print and it's left everybody else to fight over the scraps. And then it does it again and it shrinks the amount of wealth, but it does so invisibly because it's stealing it for itself. That's why I say Keynesianism is communism but for reams. Because like in evolution, you know, camouflage evolves all the time, right? Like, you know, a mosquito anesthetizes before drinking the blood, right? Versus a saber-toothed tiger that you can see coming, you know? Or you have, what do people in the military wear? They wear camouflage, right? What's a stealth bomber? It's, that's camouflage.

• 21:43Speaker 01

  It's both engineered and evolved in nature. Like a snake has camouflage, right? So Keynesianism is communism that's evolved even more camouflage. Communism already had camouflage because it portrayed itself as sharing and caring, but it was actually, you know, stealing and whatnot. Keynesianism, go ahead.

• 22:01Tom Bilyeu?

  Nah, I was just agreeing.

• 22:03Speaker 01

  Right. So Keynesianism is even more abstract where it surrounds itself with all kinds of nonsense mathematical symbols. By the way, the Soviets did that as well. They had all these schools of Marxist economics and, you know, there were some real math that came out of it, but for the most part their premises were wrong, so their conclusions were wrong. Okay? And Keynesianism, the fundamental premise of Keynesianism is wrong, which says that, and it gets inflation-deflation point. Basically Keynesianism says rapid inflation is bad, but deflation is also bad. Why? It would cause hoarding. Okay? So therefore, a gradual amount of inflation, what they call the New Zealand 2% target every year is, is good, right?

• 22:48Speaker 01

  Because that allows the money supply to inflate, to accommodate for growth and so on and so forth. And what they mean by hoarding, by the way, is if your unit of account, let's say, let's say your dollar became more and more valuable every year. Okay, eventually it would get to the point that to buy a house, you would have to, it would be one whole dollar. Okay? And you'd have to, you wouldn't be able to break it up into pieces, or it would be one cent per house. Okay? And then they'd say, oh, that cent is too valuable. Therefore, you know, we need to actually devalue it so now it's liquid enough that you can trade, right? This may have been an argument in the past, but it's not actually an argument in the present because in the digital era, you can just add a decimal place. Right, so you can get around liquidity traps.

• 23:33Speaker 01

  So this is the whole argument for why they inflate or whatever, by simply adding a decimal place in the digital realm. So anyway, that's a whole separate point. Coming back, the premise of Keynesianism is that lots of inflation is bad, but deflation is also bad. And deflation, by the way, for the average person, they, under normal circumstances, they would think of deflation as good. Why? Things get cheaper every year because of technological improvements. Like, you know, for example, there's a new process, the Haber process. It makes like ammonia, you know, cheaper to produce, right? That should bring down your costs. That's a great example of technological innovation reducing costs, right? All the stuff that we have on the internet is reducing costs in the digital realm. It's so much cheaper to search for flights.

• 24:17Speaker 01

  You don't have to go to a travel agent to look up medical advice or something like that with an AI agent. All those things are deflationary. The, um, the alternative to Keynesianism is essentially the idea of technological hyperdeflation, that actually we should accelerate, that actually everything should get cheaper every year. Houses should get cheaper, everything should get cheaper. And the Keynesian would say, no, no, no, that if everything gets cheaper every year, this is the other reason they say not to do it. They say everyone would hoard their money. They wouldn't, if, if something got cheaper next year, why would you buy it ever? You would just wait for it to get cheaper. You would hoard your money. There'd be no economic activity. That's their theory. But there's a counterargument to that as well, which is Moore's Law. In practice, computers actually have gotten cheaper.

• 25:02Speaker 01

  Like you know that a Mac, for example, is going to be better in a year or two years. You know, whether it's literally transistor density doubling every 18 months. That's the technical definition of Moore's Law. You know broadly, computers get better pretty quickly. Nevertheless, people buy computers really, really, really, I mean, that, they, they spend a lot of money on computers. They're not waiting, partially because that deflation itself creates economic opportunities. So the value of waiting for that productivity instrument versus getting it today and then building on it is, you know, there's a time value. Anyway, coming back up.

• 25:36Tom Bilyeu?

  People buy things when they want them. So it is what it is. But what we were Trying to address, as you were saying, that you have a deflationary effect from China and the internet. And I'm trying to figure out if you're saying that's a good thing or a bad thing.

• 25:47Speaker 01

  It is a good thing. Thank God it exists.

• 25:49Tom Bilyeu?

  Well, help us understand, because from an American context, China eating our lunch does not feel like a good thing. China taking jobs does not feel like a good thing. Like, I think most people here are pretty keenly aware that we're now in a Cold War with China.

• 26:04Speaker 01

  Let me take it out of the American perspective for a second to make it a little less emotional, okay? For the average Russian in the 80s, their quality of life dropped dramatically when communism ended. And their main geopolitical rival were the Americans. And they lost territory, they lost life expectancy, they had drug overdoses, they had mafias running their things. All kinds of bad things happened after the end of communism. Still, in the medium to long run, few Russians would want to go back to communism. Like, it was like, even if they didn't like, they still don't like the Americans. They're still, in fact, fighting the Americans, right?

• 26:46Speaker 01

  Nevertheless, it was good that there was an alternative to communism. Right? That is a complex thing that doesn't just, it's not a Hollywood thing of good versus bad, right? It was short-term bad in many ways. It was arguably long-term good in some ways. Though, of course, it's not a Hollywood ending, because, obviously, like, the Russians, while they may be capitalist in some way, they're also mad about losing their empire. You know, they have very conflicted, everybody has a very conflict relationship to the whole Soviet Union, because Russians were big and strong then. They had bases in Vietnam and Angola. They were big and strong around the world. And didn't they help beat the Nazis, right? And then, conversely, all the people in, like, Eastern Europe would say, "Well, yeah, but the Russians occupied us,

• 27:31Speaker 01

  and they forced Russia on us, and, you know, and communism was imposed on it, blah, blah, blah." Everybody has, like, all kinds of recriminations when an empire breaks down. So, in the same way, Keynesianism is bad for Americans, just like communism is bad for Russians. And a lot of people in cryptocurrency understand that. They understand that it's unhealthy. And they also understand that they need to kick the habit at some point. And, in fact, they are being forced to kick the habit, because in the absence of a counterforce to Keynesianism... What happens is, they don't just take 10% of the wealth. They take 30% and 80% and then 99% because they can print infinitely, right?

• 28:12Tom Bilyeu?

  Well, so I'm gonna, I'm gonna give you that the internet is like that. The internet's a big win for that, if for no other reason than we can have cryptographic currency to access a lifeboat, hard money, I can exit out of the Keynesian madness. I'm not tracking on China. China is also printing their own money. Maybe one day they'll back it with gold, but I, what I'm, I get from a, they make cheap widgets, yay, but they also cratered the jobs. So from a US perspective, that argument feels a little bit muddy. So I'm gonna, I'll pull out of that unless you think there's really a way to land that plane, otherwise we're gonna end up debating that endlessly.

• 28:46Speaker 01

  Yeah, I wanna land the plane, I wanna land the plane. And so, the thing is, it is hard to have binocular vision, because like, if one is on, let's say, center-right in, in, in America, you're basically just gonna see China as bad, because it is bad for the center-right American on balance. And if you're center-left or left, you're gonna see the internet as bad, because it is bad for Democrats on balance from a jobs and stature standpoint and so on, right? However, I would say that, when, just to address two quick points, let's come back up to the stack. When China prints money, it is also doing an asset seizure, right? Because, just like Keynesianism.

• 29:29Speaker 01

  The difference is, they don't have a global reserve currency, so they're, it's basically just like a tax on their own people, number one. So that's a big difference, they're not exporting it to others. And number two is, with that tax, they've actually allocated it intelligently because they have better central planners than America does. Why do they have better central planners? It's because, at every level, like, the way the Communist Party works is, you run a thousand person town, and then you can run a 10,000 person city, small city, then 100,000 person, and so on and so on. It's like a, it's like a giant corporation where you get promotions based on both patronage and your numbers. And essentially, the deal that Deng Xiaoping made, after taking over China and making it

• 30:14Speaker 01

  capitalist in 1978, is that, the, the guy who ran a million person city could take 10% off the top, and become a billionaire, if he increased the productivity of that city by 10 billion. So it's as if they had an informal equity stake via corruption, right?

• 30:33Tom Bilyeu?

  It's so wild.

• 30:35Speaker 01

  It's wild, right? And there's a book called How China Works on This. Now, the thing is, like, corruption is bad. What you prefer is the Singapore style, where public officials are just incorruptible, and they're paid well, and so on and so forth. Because they're managing these giant budgets, so you get highly competent people running them, right? However, while corruption is bad, communism is more corrupt and worse. So moving towards that corrupt kind of intermediate state meant that these guys who are running these cities had some incentive, a significant incentive, to allow for economic growth within their cities. And all these Chinese cities competed with each other, and as a consequence, that's why China rose.

• 31:18Speaker 01

  There's more I can say about it, but basically, the point being that when China prints money, they actually use the tax, A, it's mainly a domestic tax, B, they use it more intelligently because they have better central planners. Why do they have better central planners? Because they're actually naturally selected for kind of an entrepreneurial type within China in part, a quantitative type, which they're not in America, because they can get a cut of it in China, which they can't really in America, as I'll get to. And then, finally, they get another benefit from it, which is the one that people talk about, which is, from the perspective of exports, their currency being low in value means that their exports are cheaper abroad.

• 32:00Speaker 01

  So essentially, they get multiple benefits out of it if they can allocate the money correctly. The problem is, for America, is that the global reserve currency is the greatest business model of all time. So the difference with the American Keynesianism is that when a dollar is printed, it's dollar inflation's global taxation. So it is not being imposed on 300 million Americans, it's being imposed on the billions of dollar holders worldwide, who hold dollars directly or indirectly. For example, they hold stocks which can only be bought in dollars, or they have Delaware companies, or something like that, right? Basically, they're part of the US financial legal system directly or indirectly, right? I mean, to give you some sense, even in the 2010s, Alibaba, China's most valuable company,

• 32:45Speaker 01

  went public on the NIC, right? That was how ridiculously dominant the US financial legal system was, okay? So, dollar inflation is global taxation actually inverts the traditional MAGA understanding, or the MAGA understanding of the world. The MAGA understanding of the world is that the world is exploiting Americans. And there's some truth to this, where like you have a few hundred bucks going to people in Maui, for example, when their house is burned down, but billions going to Ukraine. And the MAGA person does see that, and there is truth to that. They're saying, "We are citizens of America, and we're getting no money, but these foreign wars are getting money. What's going on?" And so on and so forth. That's true. What they're not seeing, however, is the more subtle and invisible

• 33:30Speaker 01

  thing, which is the global taxation, where billions of people are being taxed by dollar inflation, and Americans as a set are benefiting from that, even if the red American gets it last. Why do they say Americans as a set? When the money is printed, blues got it first, because blue banks would get it first. That's the so-called, that's another key part of it, which is the Cantillon effect, right? You take these simple principles and you combine them, and you get a fairly complicated dynamic, right? The Cantillon effect says, basically, whoever's closer to the money printer gets it first. Okay? So, for example, visualize them rolling off a bunch of new hundreds. They don't actually do it like that. They

• 34:13Speaker 01

  hit a button digitally. But if they roll off a bunch of new hundreds, a bunch of new counterfeit one hundreds, the first guys who get those hundreds, like the banks, can use them to buy assets and so on. And then eventually, eventually, it filters down so that some cashier in Kansas gets that counterfeited new hundred-dollar bill, but its purchasing power has crashed by the time it gets to them.

• 34:33Tom Bilyeu?

  Yep.

• 34:34Speaker 01

  Okay? So, the red American is correct, in a sense. They feel that something bad is happening to them, and their intuition is correct. But the mechanism is important. It's not that the person in Thailand or Uruguay is oppressing the red American. They're also getting taxed. By the Dollar Empire.

• 34:54Tom Bilyeu?

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• 36:02Tom Bilyeu?

  Thanks for staying tuned. Now, let's get back to it. The Dollar Empire, just to get back to the initial question, which is, what is it about this moment that's causing all of this change?

• 36:13Speaker 01

  Ah, yes, right.

• 36:14Tom Bilyeu?

  So it feels to me like what you're saying is we are in a late-stage empire. Keynesian economics has run its course. We are in a post-World War II era where there's been stability for so long that people begin to think this is a birthright. And you layer on top of that, the internet changing the world, globalizing things more, and you get this convergence of factors where you have entitled people who are expecting a whole bunch of stuff for free. They're getting that stuff for free by printing, not recognizing that that printing is generating massive amounts of debt, which is generating massive amounts of inflation. And you have a rising China, which is completely disrupting the world order.

• 36:56Tom Bilyeu?

  In terms of you've got a rising superpower now to challenge the declining superpower. And so you put all that together, it's just inevitably going to be this moment of tremendous change. And now, on top of that, let's layer on what is the most transformational technology, certainly since the internet. I would say it's going to be even more transformational than that. But regardless, you've got this one-two punch of internet follow internet chased by multiple economic crises brought to you by debt and money printing, followed by the next radical transformation technologically, when we haven't even finished dealing with the internet.

• 37:33Speaker 01

  Yep, that's right. Here's my story. In 1991, right at the end of the Cold War. Okay, the US was the hyperpower, the most dominant power ever in history. And Democrats and Republicans were dominant, and the internet was tiny, and China China was tiny. Okay. Basically, commerce on the internet, there's something called the NSF acceptable use policy. It was only actually legalized in 1991. And China was only 10 years into going capitalist. Okay.

• 37:59Speaker 01

  By 2010, this is the first really important graph. Do you see this graph? You see it says newspaper advertising revenue adjusted for inflation?

• 38:08Tom Bilyeu?

  Yep.

• 38:10Speaker 01

  So let's call the newspapers a proxy for Democrats. Okay. Because they're 90% Democrats, or what have you in terms of journalists, right? Their peak was 2000, right? People, I think in retrospect, will say peak America was 2000, 2001, right before 9/11. Okay. So their peak was here. And then they kind of flattened and then crash after the financial crisis. And look at how Google's revenue and Facebook's revenue, the green chart just go whoosh like this.

• 38:41Tom Bilyeu?

  Yeah, for anybody not looking at their phone, it's basically a straight line up again.

• 38:44Speaker 01

  Yes, that's right. So Google and Facebook start going vertical in the late 2000s, early 2010s. Okay. And that's because the financial crisis in 2008 caused a shock, which forced people to do more with less. And they forced them to look at what could do that and say the one big part was looking at digital deflation, which was the internet. Okay. And ads are one piece, classifieds are another, there's many other pieces of this. This is just one very quantitative chart that shows the scale of the disruption to a very important Democrat stronghold. Okay. Then

• 39:16Speaker 01

  In 2010, the same thing was happening to the Republicans. Because the same financial stress after the financial crisis pushed people to do more or less, and they looked overseas to China. And that was the moment at which Chinese manufacturing flipped Republican manufacturing. Okay. So, right at the same time the internet was disrupting Democrats, China's disrupting Republicans in manufacturing. Okay. So this meant that the, literally the pie was shrinking for both Democrats and Republicans. So how'd they react? The Democrats, they reacted by attacking their two competing factions, which were Republicans and the internet. So first, they attacked Republicans. And this is a chart, New York Times word usage frequency 1970-2018. It's small over here, you can Google that and put that on screen.

• 40:01Speaker 01

  But it basically shows like toxic masculinity, white privilege, all those things went vertical in the year 2013. Not before, not after. I mean, they went after, but the thing is, they went totally vertical then because the New York Times made an editorial decision post-2013 to basically go woke. Why? That boosted traffic. Why'd they need traffic? Because the internet disrupted them. And this was also an ideological weapon against the Republicans. So they used wokeness against Republicans to argue, "We're morally good, you're evil and racist, therefore we should tax you and give it to our clients." Okay. So, wokeness was the Democrat weapon against Republicans. And then the tech lash was the Democrat weapon against the internet.

• 40:46Speaker 01

  As you may remember during this time, in the 2010s, all kinds of tech guys were canceled for all kinds of things, from the GitHub CEO, obviously Uber, Travis Kalanick was a very prominent example of this. But tech guys, large and small, were forced to hire DI Democrats at their companies. They were essentially, basically surveilled on the internet. Like, you like one thing, you hit like on one button, and Democrats would try to basically destroy you, take your company, and so on and so forth, because they were in wartime mode.

• 41:17Tom Bilyeu?

  Really fast, I want to abstract this out to a principle, this is really interesting, Balaji. So you're saying, all right, we have conditions where things are declining. You've got, as a proxy, you've got newspaper publication going down, but it's forced by the fact that we're having this economic crisis. But it's facilitated in a way by the internet. So the internet makes things cheaper that otherwise may have just gone away or whatever. And so you're getting this cross effect where both the Democrats and Republicans are, they realize their pie is shrinking for different reasons, but their pie is shrinking, and they begin fighting. So I'm the outsider here, looking at this sudden moment of rapid disruption and change. I'm trying to find what the mechanism is.

• 42:02Tom Bilyeu?

  I come sort of squarely to debt, which is responsible for the economic crises. But what you're really driving home, which is very interesting, is that there's an internet thing that you have to take into consideration, going to your force graph. There's an internet thing that's happening that I'm not giving enough credit to. And then there's that knock on sort of populist battle that's happening with the Democrats and Republicans that begins to play out very aggressively within the US. But the US, being the world's dominant superpower, the world's leading economy, that begins to have ripple effects out to the rest of the world. Am I mapping the mechanism here?

• 42:41Speaker 01

  That's right. And let me give a little bit more, and let me go and add to your points. Okay, so let me show a little, and they'll add to the debt. Okay. So this is the Democrat side. Basically, their pie is shrinking, so they retaliate against their bordering factions, wokeness versus Republicans, and tech clash versus the internet. Okay. Republicans, meanwhile, they had been disrupted by Chinese manufacturing. So their pie is shrinking. So that's why, because, you know, people talked about how all these Rust Belt guys had lost their jobs, and Trump started saying, he was the one who said, China, China, China, remember in 2015?

• 43:13Tom Bilyeu?

  Oh, yes.

• 43:13Speaker 01

  Right? So China had not yet disrupted the Democrats, so they didn't care about it. The internet was not yet on Republican radars, they didn't care about it. So in the mid 2010s, if you look at their rhetoric, Republicans cared about China because it had been taking their jobs, and Democrats cared about the internet because it had been taking their jobs. Okay. So Trump was a reaction of Republicans versus Democrats. And, you know, the people call the right reactionary because it goes second. So wokeness really booted up in 2013, and Trump booted up also as a reaction by 2015. Right? Okay. So then Republicans also elected Trump to do what? The trade war versus China.

• 43:56Speaker 01

  Okay, so this was a four faction battle where Democrats tried wokeness versus Republicans and the tech clash versus the internet. Republicans tried Trump versus Democrats and the trade war versus China, except they lost. Basically, essentially, here's the magnificent seven, for example, there's a bunch of graphs I can show you. You see how this just rips up into the right and the remaining 493 stocks are flat? Yep. So Democrats lost to the internet. Basically, they lost control over, you know, media, they lost control over money, and they lost control over speech. Democrats lost control over media to AI, because Hollywood is being disrupted now. Like, clearly, where that's going to end up is Hollywood loses control. For sure.

• 44:39Speaker 01

  They've lost control over money, because they lost control with crypto, and they lost control over speech, because social media got uncensored, right? So, and this is a huge battle. 2024 can be conceptualized as the Democrats going all out against, among other things, their tech disruptors, because they tried to regulate AI with the Biden bills to stop AI. They tried to stop crypto with an all-out attack by Gary Gensler against crypto, and they tried to control speech with all the censorship and saying it's disinformation and whatnot, and they lost. A massive pitched battle, but they lost. Okay. Now, in 2025,

• 45:21Speaker 01

  I would argue, basically, the Republicans have also, unfortunately, lost to China. I'm more sympathetic to Republicans in some ways on this, but the Chinese, basically, won, in my view, the trade war, the proxy war, and the Cold War. Why? They have the world's largest navy, they have this gigantic manufacturing build-out. The US national security strategy basically says that they're withdrawing from East Asia, and that's the 2025 strategy. It says it in a way of a fighting retreat, where it says, oh, Japan needs to take on more security responsibilities and so on, but fundamentally, it's very different from the JFK, bear any burden, pay any price to feed communism. And so, the net of it

• 46:05Speaker 01

  is, basically, that Republicans have been disrupted in manufacturing military by China, Democrats have lost on the internet, and we're in kind of the mop-up phase right now, where... For example, the last ditch efforts by Republicans to tariff China, at best, will protect the home American market. But if you look abroad, you're seeing BYD outcompeting even Tesla in neutral markets like Hungary or Uruguay or something like that, right? Even our best guy Elon can't beat the Chinese in neutral markets where America can't impose tariffs. Conversely, what Democrats are doing is they're trying to have their unions block

• 46:44Speaker 01

  the use of AI at The Atlantic and The New York Times, right? So they're trying to wall themselves off within those domains that they still have formal power over to stop that disruption from hitting them, rather than leaning into it and disrupting themselves, right? So now, the debt, that's a background force here. But this factional thing, by the way, there's one more edit that I can add to that, which is, the internet is splitting apart into tech America and the global internet. And I think unfortunately, tech America is cruising for a bruising. Is tech America like Silicon Valley? Basically, the big vulnerability, I think, one way of thinking about the last few years,

• 47:28Speaker 01

  so I talked about disruption outside from the internet and China, right? Let's say the internet is now, there's a global internet because there's like Portuguese tech entrepreneurs and Singapore VCs and so on and so forth, right? There's Chinese open source models and there's cryptocurrency which is global and all this kind of stuff is global, right? I can show a graph which shows that there's now 420 cities to have unicorns. Only one of those is Silicon, have you seen that one?

• 47:57Tom Bilyeu?

  I have, yeah.

• 47:58Speaker 01

  Okay, fine. So you can put that one on screen, right? So 420 cities with unicorns, which means you don't have to be in Silicon Valley to build a unicorn. Okay. So that means Silicon Valley is less essential. Okay. And Silicon Valley is actually under attack now. That's why, basically, the entire concept of disrupting all these blue jobs while being in the bluest city, in the bluest state in the union, right? Being publicly a billionaire in San Francisco, having your face everywhere and talking about how they're taking all the Democrat jobs, while in a city and a state that's ruled by Democrats, is the most strategically insane kind of thing. And as a consequence, I think--

• 48:38Speaker 01

  Like the wealth tax against the tech billionaires in California, the 5% wealth tax forced Zuck out, Larry Page out, Sergey Brin out.

• 48:49Tom Bilyeu?

  That's it for part one. Make sure you are subscribed so you do not miss part two coming up soon.

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