Freakonomics Radio
Hosted by Stephen J. Dubner
Thinking of Bitcoin as just a digital currency is like thinking about the Internet as just e-mail. Its potential is much more exciting than that.
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Hey, podcast listeners. We made the episode you're about to hear because you asked for it. You sent us emails, many, many emails, over the last several months, maybe over the last couple of years, with questions like these. What is Bitcoin? Bitcoin. Bitcoin. Bitcoins.
What exactly is a Bitcoin? Can I get that? You know what this is? It's a digital currency.
I do know that it involves the internet, so that's cool. All right, so what is Bitcoin? It strikes me that the world is currently divided into two groups of people. Those who care a great deal about Bitcoin and either love it or hate it, and those who couldn't care less. Now, the second group is large, but the first group is noisy. And as a result, you've been hearing a great deal about Bitcoin in the media. You've heard that it's a digital currency, a cryptocurrency technically, whose price has risen from about five cents per Bitcoin to much, much higher than that.
The value of Bitcoin skyrocketed to a new record of $900 today.
You've heard that Bitcoin was launched in 2009 after a white paper on the topic was published a year earlier by a secretive person, or perhaps group of people, who go by the name Satoshi Nakamoto, and who, according to Newsweek, in the latest attempt to expose the brains behind Bitcoin, may or may not be a 64-year-old Japanese-American man living in Los Angeles County.
A man outed by Newsweek magazine as the creator of Bitcoin is now denying that he is the founder of the digital currency.
I have nothing to do with Bitcoin. I was just an engineer doing something else.
You may have also heard that only 21 million Bitcoins will ever be circulated, and that each coin is created by a form of mining in which a powerful computer has to solve hard math problems.
And so the mining, basically, was a way to rig into the protocol a systematic way to distribute the currency. So you're not worried that, say, somebody's going to have a whole lot of Bitcoins and flood the market overnight, which could then cause your Bitcoin to be worth less.
You may have even heard people call this mining wasteful.
So it's just burning a lot of electricity, enough to power, you know, many, many homes. I've heard estimates as high as 3 million homes could be powered with the electricity that goes to Bitcoin mining.
You've probably heard that Bitcoin has enemies in high places, in the US government, for instance.
Senator Joe Manchin is working to ban something called Bitcoin.
And in governments abroad.
A Chinese government crackdown on domestic trading of the virtual currency Bitcoin is starting to have an effect.
You may have heard that alleged criminals like Bitcoin...
The CEO of one of the world's leading Bitcoin exchanges, BitInstant, has been arrested in New York. Prosecution claims Charlie Shrem was involved in a drug-money laundering scheme via the Silk Road website.
And you've definitely heard about the biggest heist in digital currency history.
It was only virtual money, but it is gone. The largest Bitcoin exchange declared bankruptcy in Japan today. The Mt. Gox online exchange, based in Japan, was hacked out of 850,000 coins of the virtual currency earlier this week, valued at near half a billion dollars.
This incident produced headlines declaring that the Bitcoin revolution is over. The skeptics say, "Thank God, what took so long?", while the boosters say, "You're kidding? Over? Bitcoin revolution hasn't even begun yet."
One way to look at it is, basically, Mt. Gox has to fail for Bitcoin to be able to go mainstream, because Mt. Gox was never set up to be able to take Bitcoin mainstream, which is what's basically happening now.
So is Bitcoin headed for the mainstream or oblivion? What problem does it solve? Or is it a solution in search of a problem? And, perhaps most important, should you care?
From WNYC, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.
Just say your name and what you do. And since you've done so much, that's so amazing, feel free to brag. Don't be, you know, super shy, okay?
You know, I'm from the Midwest, and so we really don't do that.
Do your best. At least say, will you say your name at least?
I will. I'll admit to that much. So my name is Mark Andreessen. In a former life, I was an inventor and entrepreneur, and more recently, I've become a professional venture capitalist.
Andreessen's VC firm, Andreessen Horowitz, has had a hand in a number of big-name tech companies, like Facebook.
Twitter, Pinterest, you know, a very large number of the mobile apps people use all the time, e-commerce, we do a lot, and lots of other categories of technology.
Okay. And before that, and before that, and before that, you were doing things like helping build the first browser that a lot of us who got on the internet when it was new started to use, Netscape Navigator. Before that, Mosaic, yes?
Yeah, that's right. A group of colleagues and I built Mosaic, which was sort of the first widely-used web browser in the early 90s, and then later founded a company called Netscape that basically built commercial versions.
Andreessen's firm has invested about $50 million in two Bitcoin-related companies, one of which is Coinbase, a Bitcoin exchange and transaction service that is a rival to the now-defunct Mt. Gox. So Mark Andreessen has, quite literally, a vested interest in Bitcoin.
You say vested interest, I say skin in the game.
Okay, fair enough.
Is there money, money where my mouth is? But we'll have that debate another day.
So what gets someone like Andreessen so excited about Bitcoin?
At the core of what Bitcoin is, is the solution to a fundamental problem in computer science that's been around for decades that had never been solved before.
Now, if you're not a fan of computer science, this might get a little bit less interesting before it gets more interesting. But hang in there. "The problem Bitcoin solved," says Andreessen, "was known as the Byzantine generals' problem."
The metaphor, basically, is you have a group of generals in the Byzantine Empire, and they've surrounded a huge city. And there's these encampments that these generals have all the way around the city. And at some point, they're going to lay siege to the city. But they have the coordination problem, which is they have to be able to communicate with each other to develop the battle plan and to decide when to launch the attack. And so they're sending runners back and forth between the cities. The twist to it is, some of the generals are traitors, but none of the other generals know which ones are traitors. And so the question is, how do you coordinate a significant number of people who don't know each other and don't trust each other, being able to communicate securely, and be able to basically establish digital trust? And as you're probably well aware, digital trust is a concept that's brand new. Like, you know, one of the huge problems of the internet over 20 years is who do you trust? You know, which websites do you trust? Which people do you trust when you do a transaction? Who do you trust?
And so this idea of the Byzantine generals' problem turns out to apply directly to the internet as a whole. One of the things, as a consequence, that's been missing on the internet for 20 years is kind of a native concept of money, right? And so the ability to very easily pay somebody online, the ability to very easily charge for a piece of content, the ability to very easily exchange a digital title or a digital key or a digital contract, has just been missing because you have no mechanism for establishing trust. And so Bitcoin basically holds out the promise of being the first solution to establishing trust over an untrusted network.
Now, you may be thinking, "Wait a minute, I've been using the internet for years to pay people online, carry out all kinds of transactions. There's already a huge e-commerce infrastructure. Isn't this what banks and credit card companies already do?"
I think of Bitcoin as really a revolutionary new technology that is, in some ways, way past due.
That's Susan Athie. She's an economist at Stanford. She also studied computer science. And she's an advisor to Ripple, another virtual currency, which is a Bitcoin rival.
But in the financial world, we're still basically running the system on decades-old technology. So what's really revolutionary, I think, about the whole math-based currency movement is that people have figured out a way that I can send an item of value from one entity to another entity securely, almost instantly, and without a middleman.
Until now, middlemen were necessary to fight what is called the double spending problem. Let's say you download this radio program and then you send a copy to a friend. Now you each have a digital copy. That's nice, but in the case of digital money, that would not be so nice. You are not supposed to be able to spend your money and keep it too. Now, to avoid this, we've relied up till now on a middleman, like a credit card company or PayPal. What they do is essentially transfer IOUs back and forth to make sure that digital money is not spent twice.
The beauty of a new currency, which is part of a virtual currency protocol, is that what I'm moving from me to you is just an entry on a secure public ledger. And that public ledger is maintained by a set of computers all talking to each other using a protocol. So I don't have to worry about some bank giving me an IOU and then taking that IOU and handing it to another bank. Instead, if I make a transaction over the virtual currency, it's just an entry in the ledger. So I don't need a middleman.
Without us knowing each other ahead of time, I can send you a unique piece of digital property that might be digital cash, or a digital key, or a digital contract.
That's Marc Andreessen again.
It's a unique piece of digital property. I can send it to you. What then happens is the network basically validates the transaction. And after the transaction is validated, everybody else in the network is able to inspect that transaction and they're able to confirm that I originally owned that piece of property, and now you originally owned that piece of property. And I didn't transfer it to three other people at the same time. I didn't lie about the fact that I transferred it. You didn't lie about the fact that you now own it. And basically, everybody can inspect this blockchain anytime they want, and they can basically prove through the math of Bitcoin that that transaction actually took place. And that's kind of the magic to the system.
The blockchain that Andreessen just mentioned is what Susan Athie was describing earlier as a public ledger. It is a log of all transactions in the Bitcoin ecosystem. Now, banks and other financial institutions already have ledgers of their own, which let them transfer funds internally or with other trusted parties. But now, it seems, Bitcoin's blockchain technology could do this without the middleman, which means faster and cheaper.
And that actually opens up all sorts of economic possibilities, some of which we can talk about, but some that we probably haven't even imagined yet.
Okay, what sort of economic possibilities does that open up? Well, if you're in the retail, banking, or credit card industry, mostly bad possibilities. Those industries have made fortunes by taking a cut of every transaction, which a virtual and virtually frictionless currency like Bitcoin could perform for much, much less. Now, what's the big deal about that? What kind of markets might benefit?
One is the remittance market. So we have poor people from developing countries go abroad, and then they remit their money back home to their home country to feed their children or their parents and their families. And the fees can be around 10%.
Mark Andreessen, not surprisingly, sees a lot of potential upsides, too.
Some of that business will be transactions. Some of that business will be digital contracts. Some of that business will be digital keys, digital signatures. And then a system will start to work itself into things like anti-fraud, or things like public payments, or things like micropayments.
Wait a minute, anti-fraud? Aren't banks and credit card companies already pretty good at anti-fraud?
Well, credit card fraud, we actually know basically what credit card fraud costs the economy, which is it's basically most of the credit card fees. And so, economy-wide, across all credit card transactions, credit card fees range basically between 2% and 3%. The majority of that is paying for fraud. And so, one way to think about credit card fraud is credit card fraud is a 2% to 3% drag on the entire economy. It's an artifact of the fact that credit cards were never designed to be used the way that they're being used today. Credit cards never anticipated online transactions. Credit cards, by the way, the credit card system never anticipated malware running inside a cash register at Target, right?
Right.
In the 1950s, that was an inconceivable idea, which is when credit cards were dreamed up. And so, if you have a payment system like Bitcoin, where you don't have the credential exchange, and you have no risk of identity fraud, and you have no risk of people being able to run transactions on your credit card after the fact, you could basically eliminate that entire category of fraud.
Now, Mark, I think one part of the Bitcoin story that's confusing for people is that most of the coverage, at least in the past five or six months, has been about the volatility of the currency itself, of Bitcoin as a currency, right?
Sure.
So, it sounds to me like you're saying the uses of Bitcoin being so wide and deep... That we should all appreciate, or at least appreciate the potential of it. That said, the volatility of the currency scares people, and including scaring off some of the people that Bitcoin supporters like yourself would probably like to not be so scared of. So it just makes me wonder, maybe this is impossible, and I just don't understand the constraints. Wouldn't Bitcoin as a transaction method, as a kind of frictionless transaction, be better if it weren't also a currency or pegged to a currency? Or is that not the way this problem could have been solved?
So it's a very complicated, we would have to take another six hours to go through this in detail. I'll give you a couple of headlines on it, though. First of all, Bitcoin can be used as a transaction system without being used as a currency. It can be used that way. And so, like, literally, the way that would happen is, when you go to buy something on the internet, you basically do a conversion of dollars to Bitcoin, send the money across the wire, and then the merchant on the other end immediately converts Bitcoin right back to dollars.
And what's the transaction fee on that?
Yeah, so the transaction itself, in that case, is free, because Bitcoin transactions today are free. And then, in the long run, there will be very small transaction fees associated with that kind of thing. The main fee that you would pay for the transaction use case today is the fee to exchange Bitcoin in dollars back and forth. That today is running about 1%, but you can imagine those fees coming down fairly quickly. And then you get into this interesting question, if you're a merchant, would you rather pay the 1% or, you know, sub 1% to be able to do the exchange? Or would you be willing to bear the volatility for some period of time? For example, until you could potentially spend the Bitcoin. And you might spend the Bitcoin by buying something from one of your suppliers, or you might spend the Bitcoin by, you know, having a refund program, a rebate program, a loyalty program back to your customers, or whatever it is. And so that'll be part of kind of the economics that will determine, you know, who chooses
to hold Bitcoin versus who chooses to convert it back to regular currency. Similarly, very shortly, there will be derivatives, there will be Bitcoin derivatives, and there will be Bitcoin insurance. And so, as a merchant, one of the things you'll be able to do is hold Bitcoin and then buy a derivative that protects you against currency fluctuations, which, of course, is what people doing business internationally will do today. If you're doing business, you know, in Japan, and you don't want to bear, you know, the yen, you know, currency fluctuations, you buy a derivative that protects you from that. That's not quite available yet, but that will be coming very, very shortly. And that's one of the business opportunities that is clearly, you know, a big opportunity on top of Bitcoin.
So what are the advantages of a currency and/or transaction platform that is not affiliated in any way with a government?
So there are people who will tell you that's a really, really big deal. Like, I think in the US, you know, with certain exceptions, like 2008. You know, generally in the West and the US, we're blessed with a fairly stable financial system, with a fairly stable monetary system, with a fairly stable government. You know, we complain about our government all the time, but like, it works pretty well. I think the benefit to Bitcoin not being connected to a government is much greater in poorly-run countries. And, you know, you go all over the planet, once you get outside of the US, there's like, you know, 150 countries that have what we would consider to be subpar governance. Right? And so typically, they have, you know, corrupt governments. And then you also have a lot of countries that have very badly-run banking systems and very badly-run central banks. And so I think in a lot of the rest of the world, outside the US, outside of Western
Europe, there is a fair amount of demand from people to be able to do things that we take for granted, like being able to exchange money without it getting stolen, or to be able to store money someplace where, you know, the central bank can't just hyperinflate it.
So you can see why Marc Andreessen is such an evangelist for Bitcoin, aside from the fact that his firm has Bitcoin investments. But what about the Mt. Gox exchange getting hacked to death to the tune of several hundred million dollars? What about the potential criminal uses of a virtual currency? Who's supposed to be looking out for all that?
Coming up on Freakonomics Radio, you'll hear from one man who is ready for that job.
I'm the superintendent of financial services for the state of New York.
And he knows what he's up against.
It's very hard to transport a million dollars in hard currency overseas. You can't just put it in a backpack and get on a plane very easily. But it is very easy to do that now, digitally, using Bitcoin.
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From WNYC, this is Freakonomics Radio. Here's your host, Stephen Dubner.
So one reason we're doing this episode on Bitcoin is that, as we said at the top, so many of you readers and listeners asked for a Bitcoin episode. Now, you also asked about Bitcoin when we were running our public radio pledge drive, asking you to go to Freakonomics.com and make a donation, which, by the way, you can still do whenever you want. And a lot of you wrote to say that, hey, I'd love to make a donation, but I use Bitcoin for online transactions, and your radio station, WNYC, does not accept Bitcoin.
My name is Eric Dean. I'm the Senior Director of Business Development here at WNYC.
So why doesn't WNYC accept Bitcoin? I mean, Tesla's doing it, and Overstock.com is doing it, a comic book shop in Bozeman, Montana's doing it. So what would it take for WNYC to accept Bitcoin?
I think it would take a turnkey provider that we could go to that would essentially say, yes, you can just put this little widget on your site, you can set your prices in dollars, we will do all the translation on the back end, we will take all of that headache off of your shoulders.
And does that mean they buy the risk as well?
Exactly. So we will guarantee that you will get a rate of this amount over the next month, because there's no swaps, there's no futures that we can buy in Bitcoin right now. So they would handle all of that and just say, we will make it so you can do this. And overall, the net transaction fee is still going to be lower than every other credit card processor.
What you're describing sounds a little bit like a bank.
Yeah.
Yes, it does. So who's... Okay, so I'm guessing that as we're speaking, there are hundreds, if not thousands, if not hundreds of thousands of people thinking about doing exactly this. Do you know anything about these markets?
I know of a few startups that are exploring this, again, serving that kind of middleman risk mitigation function, right? So we will guarantee you a rate for the next 24 hours, and we will handle all the processing. Again, the actual technology to accept it is not that hard. It's really just getting the dollars out of the other end. So they've popped up. None of them are firms I've ever heard of. I have no idea what the capitalization is of any of those firms. I have no idea if it's like a guy in a basement, just mining Bitcoins and doing whatever. But as soon as there's a name that kind of leaps off the page, and I go, okay, that's somebody that we could do business with, then absolutely, I talk to them.
It's so similar to what happened with the early web. It's almost exactly the same.
That's Marc Andreessen again. Web pioneer then, Bitcoin booster now.
In the early days of the internet, almost all the big telecom CEOs said this thing will never work. Almost all, by the way, the big technology CEOs said this thing will never work. The media CEOs all said this will... Let me tell you a quick story. When we started Netscape, we met with the CEOs of the six major telecom companies and the six major media companies. We basically did a tour. And 11 out of 12 left us out of their offices and said, "Look, there's just no way. There's just no way." It's like, "Have you tried to use this? It's super slow. It doesn't work. And the screens are fuzzy. And like, I can't imagine. And, you know, like, advertisers are never going to advertise in this thing. And like, consumers are never going to use this." The early days of the web were not primarily people talking about how great it was going to be. The early days of the web were primarily people talking about all the bad uses. And so if you go back and pull the coverage from 93, 94...
All right, Marc, we can do that for you. Here from NBC's Today Show in 1994 are Katie Couric, Bryant Gumbel, and Elizabeth Argus. That little mark with the A and then the ring around it?
At.
See, that's what I said. Katie said she thought it was about.
Yeah. Oh.
But I'd never heard it...
Or around.
I'd never heard it said. I'd always seen the mark, but never heard it said. And then it sounded stupid when I said it. Violence at NBC. What is internet anyway?
Internet is that massive computer network. The one that's becoming really big now.
Well, yeah. How does one... What, do you write to it? Like, mail?
No, a lot of people use it.
Now, to be fair, it wasn't just morning show hosts who didn't get the internet. The economist Paul Krugman, who'd go on to win the Nobel Prize, here's what he wrote in 1998 in Red Herring Magazine. Quote, "The growth of the internet will slow drastically as the flaw in Metcalfe's Law, which states that the number of potential connections in a network is proportional to the square of the number of participants, becomes apparent. Most people have nothing to say to each other. By 2005 or so, it will become clear that the internet's impact on the economy has been no greater than the fax machines."
All right, so maybe it's not fair to make fun of Paul Krugman either. Predicting the future, as we've said around here again and again, is pretty hard. But that's kind of my point here. For every person who tells you that Bitcoin is nothing but a bubble that'll blow up any day now, or who tells you that Bitcoin is poised to solve every financial problem known to man, well, neither of them have any way of knowing. We'll have to wait and see. Although, I will tell you this: One economist did talk about the future of Bitcoin before Bitcoin even existed. It was Milton Friedman, also a Nobel laureate, in 1999, just a year after Paul Krugman told us the Internet was only a fad.
I think that the Internet is going to be one of the major forces for reducing the role of government. The one thing that's missing, but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A. The way in which I can take a $20 bill and hand it over to you, and there's no record of where it came from. And you may get that without knowing who I am. That kind of thing will develop on the Internet, and that will make it even easier for people to use the Internet. Of course, it has its negative side.
It means that the gangsters, the people who are engaged in illegal transactions, will also have an easier way to carry on their business.
Ah, the gangsters. It always comes back to the gangsters, even though gangsters have always done pretty well with cash, as have tax evaders. But still, you can see how a virtual currency like Bitcoin could alarm not only the banks and credit card companies, whose fees might get hit, but regulators and lawmakers.
Like this guy.
My name is Benjamin Losky. I'm the superintendent of financial services for the state of New York. And in that role, I run the Department of Financial Services, which oversees all banks, insurance companies, and everything in between in the state of New York.
OK, now, I've read that your office oversees entities with a total asset value of $6.2 trillion. First of all, is the number right? 6.2 trillion?
A give or take.
Not that I expect you to have the... OK, that's a lot of money. Bitcoin, therefore, as of today at least, would represent a tiny, tiny, tiny, tiny drop in the biggest, biggest, biggest bucket. Why are you worried about Bitcoin? Or why are you concerned enough to think you might should be worried?
Look, I think I'm both concerned, worried, and excited about Bitcoin. I think it has potentially a big, a bright future to it. And it could really, potentially, at least the technology, could revolutionize or at least improve upon our existing payment systems. And I think we're in a period where we're going to have just a lot of change over the next five to 10 years in mobile payments and how we, you know, the collision between the traditional banking sector and technology.
Losky recently organized a two-day fact-finding mission to help his office write some of the first Bitcoin regulation in the United States. So what did he learn?
It holds a lot of potential. And as we design this regulatory scheme for Bitcoin, for virtual currencies, we want to make sure we are setting rules of the road that enable innovation to continue, that allow the sort of positives, the potential really interesting future that Bitcoin can have as a way for people, especially to engage in international transactions, to happen and to happen efficiently. But at the same time, we learned, and I think the law enforcement panel was very clear on this, that there are very... Very unique, tough challenges for law enforcement when it comes to virtual currencies.
They gave the example of it's very hard to transport a million dollars in hard currency overseas. You can't just put it in a backpack and get on a plane very easily. But it is very easy to do that now digitally using Bitcoin. And with uses of other technologies that there was testimony about, things like what are called tumblers that make people even more anonymous, it's become a real hurdle sometimes for law enforcement to try and track down who is engaging in some of these transactions.
Lawski, like the economist Susan Athie, thinks Bitcoin could reshape the remittance market.
Right now, there are thousands and thousands of New Yorkers who work very hard every day to send money back home to their families in whatever country they're from. And right now, they're paying fees for those wire transactions each week at the end of the week, 7, 8, 9 percent. And that's a lot of money for people who often can't afford it.
And Lawski heard about potential uses that he hadn't even imagined.
There was some testimony about how one of the potential advantages of Bitcoin as a currency was that it was programmable. It was a programmable currency. And I didn't really understand that. And I asked a couple of different panels what that meant and could they expand upon it. And the first day, one of the gentlemen answered and said, well, you can, for example, color code, and that's not literally, but in the technology, the Bitcoins you're using to have them perform certain functions. It's code as well. And he said, at one point, he said, you know, you could be coding it in such a way that you would be paying for transactions and at the same time, the code could be working
on a cure for cancer. And that, again, I'm still trying to get my mind around that. I'm not sure I fully understand that. But I think there is clearly a kernel of very interesting computer programming innovation that's built into virtual currency that holds a lot of promise.
That's fascinating. You know, when you said color coding, where my mind jumped to, and I'm just curious what you'd say about this. You know, let's pretend that the US government wants to give $10 million to some country to feed its people on Wednesday, and the money shows up in cash on Thursday. Well, that cash can go to buy anything, obviously. Cash is fungible, and that's what we love about it. That's what's great about it. But on the other hand, if I could color code that Bitcoin or other cryptocurrencies so that it can be used actually to buy food and wheat and soy and so on, and not rocket launchers, well, that's a great piece of, that's a great ability for me to have in a currency that acts like cash, yeah?
Yes, and I think my understanding, and it was really from the day-two testimony when I asked that question again about programmable currency, that that is one of the things that potentially you could have with the color coding. They also gave an example of a young person whose parents want to give them an allowance, but want to make sure it goes for certain things and not other things. You could program it in certain ways that would do that.
I have to say, I was surprised, a little bit excited, too, I guess, to hear Benjamin Losky, a state regulator, talk about how excited he is about the future uses of Bitcoin or something like it. It's quite unlike the view taken by Alan Greenspan, former chairman of the Federal Reserve.
Bitcoin, Dr. Greenspan. Bitcoin has been on a tear, up 80-fold this year. What are your thoughts on this? Is Bitcoin, in fact, a bubble?
I guess so. Let me say that currencies to be exchangeable have to be backed by something. When around the gold standard, gold and silver had intrinsic value.
Could it be the new gold? Not really backed by anything?
No, it has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. If you ask me, is this a bubble in Bitcoin? Yeah, it's a bubble.
So there's a number of top economists who have basically taken positions like that.
That's Mark Andreessen again.
It's a little bit like dogs watching TV. It's like, it's all very interesting, but like, whatever, until another dog shows up on screen and then the dog freaks out. Economists, like, this stuff is all like, whatever, technology, geek, nerds, whatever. And then currency is the flag, right? And so the minute the word currency shows up, like, all the economists perk up. Because if there's one thing the economists are all experts on, it's currency. And they think, they look at it, and then they're like, oh my god, people are paying $600 for this thing, it's just a piece of fake digital currency, like, people have just completely lost their minds. I don't think that they are looking at the underlying substance.
It is the underlying substance, the underlying capability of this new technology that excites people like Andreessen. Maybe it excites you too. But odds are, you haven't heard much or thought much about that technology. What you have heard about is this runaway, inflationary, possibly criminal, subject-to-hacking, weirdo anarchist cryptocurrency, and it has you confounded, maybe even frightened. If it makes you feel any better, that's how a lot of people were feeling a few centuries ago, when another transactional technology hit the market.
One of the characteristics of a new idea is all the experts who came up in the sort of old regime, look at it and laugh. By the way, the exact same thing happened with paper currency 300 years ago. Almost exactly 300 years ago, a Scottish economist, ironically, named John Law, basically invented this, at the time, crazy idea of paper currency or fiat currency. And actually, he was laughed out of Scotland, he was laughed out of the UK, and he was laughed, actually, all the way to France, where he became the French Finance Minister for King Louis XV. And every economist on the planet, 300 years ago, thought that he was a complete lunatic. And so I think this is just, this is the story, this is kind of the recurring story of how progress happens. It doesn't happen by the establishment all basically sitting up at once and saying, aha, that's a wonderful idea. Like, that's just not how it happens.
Hey, podcast listeners. Here's a riddle. Name an activity that millions upon millions of people do around the world, and yet, most of them would rather not do.
Yeah, I've tried to quit like 10 times.
I need to quit. I've tried many times. It does not work. I fail. I need a healthier lifestyle.
I could quit. I think just anytime if I made my mind up.
I'm smoking a cigarette right now, so.
What's the best way to quit smoking? That's next time on Freakonomics Radio.
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Hey, it's Kelly Ripa, and if you don't know, I have a podcast where I get to say whatever I want. Hold on, let me get a shovel and a body bag. I envision doing a podcast with the conversations that happen in my dressing room, off-camera, where people feel free to talk. No hair, no makeup. This is my kind of job. Only Kelly Ripa can ask me these questions. I'm flipping the script and saying what's really on my mind.
We're seeing a different side of you. It's a little bit more honest.
When the cameras go off, the real fun begins. Get my hair done over here. Hey! This is an off-camera podcast, so it doesn't even matter. It's unfiltered conversations and unexpected confessions.
My mom says, "Woody, I knew your dad."
Stop the press. I would like to volunteer to administer any and all DNA tests.
Maybe that should be part of the show?
Let's talk off-camera with me, Kelly Ripa. You just put that in the universe. Listen and follow wherever you get your podcasts.
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