#276 – Michael Saylor: Bitcoin, Inflation, and the Future of Money

Michael Saylor is the CEO of MicroStrategy and a prominent holder and proponent of Bitcoin. Please support this podcast by checking out our sponsors: – Scale: https://scale.com/lex – Coinbase: https://coinbase.com/lex to get $10 in free Bitcoin – Audible: https://audible.com/lex to get $9.95 a month for 6 months – NetSuite: http://netsuite.com/lex to get free product tour – SimpliSafe: https://simplisafe.com/lex and use code LEX EPISODE LINKS: Michael’s Twitter: https://twitter.com/saylor MicroStrategy: https://microstrategy.com/ Michael’s Book: https://amzn.to/37J2iA0 Book mentioned: https://amzn.to/3jwsIaP PODCAST INFO: Podcast website: https://lexfridman.com/podcast Apple Podcasts: https://apple.co/2lwqZIr Spotify: https://spoti.fi/2nEwCF8 RSS: https://lexfridman.com/feed/podcast/ YouTube Full Episodes: https://youtube.com/lexfridman YouTube Clips: https://youtube.com/lexclips SUPPORT & CONNECT: – Check out the sponsors above, it’s the best way to support this podcast – Support on Patreon: https://www.patreon.com/lexfridman – Twitter: https://twitter.com/lexfridman – Instagram: https://www.instagram.com/lexfridman – LinkedIn: https://www.linkedin.com/in/lexfridman – Facebook: https://www.facebook.com/lexfridman – Medium: https://medium.com/@lexfridman OUTLINE: Here’s the timestamps for the episode. On some podcast players you should be able to click the timestamp to jump to that time. (00:00) – Introduction (07:09) – Grading our understanding (19:27) – Inflation (39:03) – Government (1:00:13) – War and power (1:11:23) – Dematerializing information (1:42:45) – Digital energy and assets (1:54:23) – Oil barrel vs Bitcoin (2:03:43) – Layers of Bitcoin (2:20:53) – Bitcoin’s role during wartime (2:25:37) – Jack Dorsey (2:41:58) – Bitcoin conflict of interest (2:48:39) – Satoshi Nakamoto (2:54:04) – Volatility (3:06:30) – Bitcoin price (3:18:46) – Twitter verification (3:27:42) – Second best crypto (3:33:24) – Dogecoin (3:37:57) – Elon Musk (3:43:26) – Advice for young people (3:54:54) – Mortality (3:57:59) – Meaning of life

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

• 0:00Lex Fridman?

  The following is a conversation with Michael Saylor, one of the most prominent and brilliant Bitcoin proponents in the world. He is the CEO of MicroStrategy, founder of Saylor Academy, graduate of MIT, and Michael is one of the most fascinating and rigorous thinkers I've ever gotten a chance to explore ideas with. He can effortlessly zoom out to the big perspectives of human civilization and human history and zoom back in to the technical details of blockchains, markets, governments, and financial systems. And now, a quick few-second mention of each sponsor. Check them out in the description. It's the best way to support this podcast. We got Scale for machine learning, Coinbase for crypto,

• 0:45Lex Fridman?

  Audible for audiobooks, NetSuite for efficiency, and SimpliSafe for security. Choose wisely, my friends. And now, onto the full ad reads. As always, no ads in the middle. I try to make this interesting, but if you skip them, please still check out our sponsors. I enjoy their stuff. Maybe you will, too. This episode is brought to you by a new sponsor called Scale, which is a data labeling platform, a machine learning assisted data labeling platform. Scale Rapid works with any use case or task, including image, video, text, annotation and classification, 3D data, and it supports 20-plus languages.

• 1:25Lex Fridman?

  The annotation task is actually a fascinating and a difficult problem to solve, and I find that the machine learning community, especially in the academic setting, in the research setting, don't give it enough credit. Certainly don't spend enough time on it, but don't give enough credit at the beauty and the power of great annotation. So the data labeling task, properly formulated and using the proper tools, the best tools for the job, is essential, not just for the success of a company, but also for the success of solving the fundamental problem. You can go to scale.com/lex today and get your first batch of data labeled up to 50 bucks for free.

• 2:09Lex Fridman?

  Again, that's scale.com/lex. Scale.com/lex.

• 2:15Lex Fridman?

  This episode is also brought to you by Coinbase, which is a trusted and easy to use platform to buy, sell, and spend cryptocurrency. I use it and I love it. You could buy Bitcoin, Ethereum, Cardano, Dogecoin, all the most popular digital currencies. We actually talk about Coinbase, I believe, quite a bit, directly or indirectly in this episode with Michael Saylor. I believe he places Coinbase as a layer three technology. Talking about Bitcoin as a layer one technology, maybe Lightning Network is a layer two technology, and Coinbase is a layer three technology, all of them being essential. Really what Coinbase specializes in is creating

• 2:59Lex Fridman?

  a centralized place, which is necessary in order to create a kind of ease of use, which is exactly what I said. It is super easy to use, super easy to learn about this cryptocurrency, to get it and to track it. So anyway, go to Coinbase.com/lex to get 10 bucks in free Bitcoin when you sign up. That's Coinbase.com/lex. Coinbase.com/lex. This episode is also brought to you by Audible, an audiobook service that has given me hundreds, if not thousands, of hours of education and, dare I say, happiness through listening to audiobooks. I just actually ran 12 miles and I was listening to Audible.

• 3:43Lex Fridman?

  It just fills my mind with a kind of calm reflection, more than podcasts, more than music, more than silence. Audiobooks, great audiobooks, can take you to a place, can take you to a time, can make you think in a way like nothing else. Like not even reading a book. A great voice reading an audiobook, it could just transport you into another dimension. To get a discount, you can visit audible.com/lex or text LEX to 500-500. They have thousands of titles to choose from. Visit audible.com/lex now. That's audible.com/lex.

• 4:29Lex Fridman?

  This episode is also brought to you by NetSuite. NetSuite allows you to manage financials, human resources, inventory, e-commerce, and many more business-related details, all in one place. Running a company, something that I have dreamed of doing and I still want to do, is really, really hard for many reasons. There is hard things I like to do that I might help on, and then there's hard things that I would probably get in the way of. And many of the things that NetSuite helps with is I would get in the way of. The financials, the HR, if it's an e-commerce business,

• 5:13Lex Fridman?

  and sort of managing the inventory, all that kind of stuff. That's like the stuff, the day-to-day, that makes the company run. That's not the engineering, that's not the design, that's not the big-picture ideas. That's the meat and potatoes of a company. You have to have the best tools to take care of that. Right now, you can get special financing. Head to netsuite.com/lex to get their one-of-a-kind financing program. That's netsuite.com/lex, netsuite.com/lex. This episode is also brought to you by SimpliSafe, a home security company designed to be simple and effective. It takes 30 minutes to set up. You can customize the system for your needs at simplisafe.com/lex.

• 5:57Lex Fridman?

  I have it set up in my place, and I love it. It was super easy. That's, I guess you would say, in terms of physical space, that's the first layer of protection I'm using. I have many, many layers. And here in Texas, there's many more layers than you can just imagine. Anyway, in terms of just cameras, monitoring, and communicating to me if something went wrong, it's just, everything has to work well. And SimpliSafe makes that super easy. Everything works well. I can check everything. The setup is super easy. It just works, no question asked. Anyway, go to simplisafe.com/lex to customize your system and

• 6:38Lex Fridman?

  Claim your free indoor security camera plus 20% off with interactive monitoring. Again, that's simply scale.com slash Lex. This is the Lex Fridman podcast and here is my conversation with Michael Saylor.

• 7:09Lex Fridman?

  Let's start with a big question of truth and wisdom. When advanced humans or aliens or AI systems, let's say five to 10 centuries from now, look back at Earth on this early 21st century. How much do you think they would say we understood about money and economics, or even about engineering, science, life, death, meaning, intelligence, consciousness, all the big interesting questions?

• 7:38Speaker 01

  I think they would probably give us a B minus on engineering, on all the engineering things, the hard sciences.

• 7:49Lex Fridman?

  A passing grade.

• 7:51Speaker 01

  Like, we're doing okay. We're working our way through rockets and jets and electric cars and electricity, transport systems and nuclear power and spaceflight and the like. And, you know, if you, if you look at the walls that grace the great court at MIT, it's full of all the great thinkers and, and they're all pretty admirable, you know? If you could be with Newton or Gauss or Madame Curie or Einstein, you know, you would respect them. I would say they'd give us like a, a D minus on economics. Like, you know, an F plus or a D minus.

• 8:34Lex Fridman?

  You see, have an optimistic vision. First of all, optimistic vision of engineering. Because everybody you've listed, not everybody, but most people you've listed is just over the past couple of centuries. And maybe stretches a little farther back, but mostly all the cool stuff we've done in engineering is the past couple of centuries.

• 8:52Speaker 01

  I mean, Archimedes, you know, had his virtues.

• 8:57Speaker 01

  You know, I studied the history of science at MIT and I also studied aerospace engineering. And, and so I clearly have a bias in favor of science. And if I look at the past 10,000 years and I consider all of the philosophy and the politics and their impact on the human condition, I think it's a wash. For every politician that came up with a good idea, another politician came up with a bad idea.

• 9:22Lex Fridman?

  Yeah.

• 9:22Speaker 01

  Right? And it's not clear to me that, you know, most of the political and philosophical, you know, contributions to the, to the human race and the human conditions have advanced so much. I mean, we're still taking, you know, taking guidance and admiring Aristotle and Plato and Seneca and the like. And on the other hand, you know, if you think about what has made the human condition better, fire, water, harnessing of wind energy, like try to row across an ocean, right? Not easy.

• 10:01Lex Fridman?

  And for people who are just listening or watching, there's a beautiful sexy ship from 16th, 17th century.

• 10:08Speaker 01

  This is a 19th century handmade model of a 17th century sailing ship, which is of the type that the Dutch East India Company used to sail the world and trade. So that was made, you know, the original was made sometime in the 1600s. And then this model is made in the 19th century by individuals.

• 10:30Lex Fridman?

  Both the model and the ship itself is engineering at its best. And just imagine, just like rockets flying out to space, how much hope this filled people with exploring the unknown, going into the mystery. Both the entrepreneurs and the business people and the engineers and just humans, what's out there? What's out there to be discovered?

• 10:50Speaker 01

  Yeah, the metaphor of human beings leaving shore or sailing across the horizon, risking their lives in pursuit of a better life is an incredibly powerful one.

• 11:02Speaker 01

  In 1900, I suppose the average life expectancy is 50. During the Revolutionary War, you know, while our founding fathers were fighting to establish, you know, life, liberty, pursuit of happiness, the Constitution, average life expectancy of like 32, somewhere between 32 and 36. So, all the sound and the fury doesn't make you live past 32, but what does, right? Antibiotics. Conquest of infectious diseases, if we understand the science of infectious disease, sterilizing a knife and harnessing antibiotics gets you from 50 to 70, and that happened fast, right?

• 11:46Speaker 01

  That happens from 1900 to 1950 or something like that. And I think if you look, look at the human condition, you ever get on one of those rowing machines where they actually keep track of your watts output when you're on the? Yeah. It's like 200 is a lot. Okay, 200 is a lot. So, a kilowatt hour is like all the energy that a human, a trained athlete can deliver in a day, and probably not 1% of the people in the world could deliver a kilowatt hour in a day. And the commercial value of a kilowatt hour, the retail value is 11 cents today, and the wholesale value is 2 cents.

• 12:31Speaker 01

  And so, you have to look at the contribution of politicians and philosophers and economists to the human condition, and it's like a best of wash, one way or the other. And then if you look at the contribution of John D. Rockefeller, when he delivered you a barrel of oil, and the, you know, the energy in oil, liquid energy, or the contribution of Tesla, you know, as we deliver electricity, and what's the impact on the human condition if I have electric power, if I have chemical power, if I have wind energy?

• 13:11Speaker 01

  If I can actually set up a reservoir, create a dam, spin a turbine, and generate energy from a hydraulic source?

• 13:22Speaker 01

  That's extraordinary, right? And so our ability to cross the ocean, our ability to grow food, our ability to live, it's technology that gets the human race from, you know, a brutal life where life expectancy is 30 to a world where life expectancy is 80.

• 13:44Lex Fridman?

  You gave a D minus to economists. So are they too like the politicians awash in terms of there's good ideas and bad ideas? And that tiny delta between good and bad is how you squeak past the F plus onto the D minus territory?

• 14:01Speaker 01

  I think most economic ideas are bad ideas.

• 14:05Lex Fridman?

  Most.

• 14:06Speaker 01

  You know, like, take us back to MIT and you want to solve a fluid dynamics problem, like, like, design the shape of the hull of that ship. Or you want to design an airfoil, a wing. Or if you want to design an engine or a nozzle in a rocket ship, you wouldn't do it with simple arithmetic. You wouldn't do it with a scaler. There's not a single number, right? It's vector math, you know, computational fluid dynamics is n-dimensional, higher level math, you know, complicated stuff. So when, when an economist says the inflation rate is 2%, that's a scaler.

• 14:48Speaker 01

  And when an economist says, it's not a problem to print more money because the velocity of the money is very low, monetary velocity is low, that's another scaler. Okay, so the truth of the matter is inflation is not a scaler. Inflation is an n-dimensional vector. Money velocity is not a scaler. Saying what's the velocity of money? Oh, it's slow or it's fast. It ignores the question of what medium is the money moving through? In the same way that, you know, what's the speed of sound? Okay, well, what is sound, right?

• 15:31Speaker 01

  Sound, you know, sound is a compression wave. It's energy moving through a medium, but the speed is different. So for example, the speed of sound through air is different than the speed of sound through water. And sound moves faster through water. It moves faster through a solid and it moves faster through a stiffer solid. So there isn't one.

• 15:53Lex Fridman?

  What is the fundamental problem with the way economists reduce the world down to a model? Is it too simple? Or is it just even the first principles of constructing the model is wrong?

• 16:04Speaker 01

  I think that the fundamental problem is if you see the world as a scaler, you simply pick the one number which is, which supports whatever you want to do. And you ignore the universe of other consequences from your behavior.

• 16:23Lex Fridman?

  In general, I don't know if you've heard of, Eric Watson has been talking about this with Gage theory. So different, different kinds of approaches from the physics world, from the mathematical world to extend past this scaler view of economics. So Gage theory is one way that comes from physics. Do you find that way of exploring economics interesting? So outside of cryptocurrency, outside of the extra technologies and so on, just analysis of how economics works, do you find that interesting?

• 16:56Speaker 01

  Yeah, I think that if we're gonna wanna really make any scientific progress in economics, we have to apply much, much more computationally intensive and richer forms of mathematics.

• 17:09Lex Fridman?

  So simulation perhaps, or?

• 17:11Speaker 01

  Yeah, you know, when I was at MIT, I studied system dynamics. You know, they taught it at the Sloan School. It was developed by Jay Forrester, who, who.

• 17:23Speaker 01

  Was an extraordinary computer scientist. And when we created models of economic behavior, they were all multi-dimensional, nonlinear models. So if you want to describe how anything works in the real world, you have to start with the concept of feedback. If I double the price of something, demand will fall and attempts to to create supply will increase and there will be a delay before the capacity increases. There'll be an instant demand change and there'll be rippling effects throughout every other segment of the economy, downstream and upstream of such a thing.

• 18:03Speaker 01

  So it's kind of common sense, but most economics, most classical economics is always, you know, taught with linear models, you know, fairly simplistic linear models. And oftentimes, even I'm really shocked today that the entire mainstream dialogue of economics has been captured by scalar arithmetic. For example, if if you read, you know, read any article in New York Times or the Wall Street Journal, right, they just refer to it, there's an inflation number or the CPI or the inflation rate is X. And if you look at all the historic studies of the impact of inflation, generally, they're

• 18:47Speaker 01

  all based upon the idea that inflation equals CPI and then they try to extrapolate from that and you just get nowhere with it.

• 18:57Lex Fridman?

  So at the very least, we should be considering inflation and other economics concept as a nonlinear dynamical system. So nonlinearity and also just embracing the full complexity of just how the variables interact, maybe through simulation, maybe some have some interesting models around that.

• 19:16Speaker 01

  Wouldn't it be refreshing if somebody for once published a table of the change in price of every product, every service and every asset in every place over time?

• 19:26Lex Fridman?

  You said table, some of that also is the task of visualization, how to extract from this complex set of numbers, patterns that.

• 19:37Lex Fridman?

  Somehow indicate something fundamental about what's happening. So like summarization of data is still important. Perhaps summarization not down to a single scale of value. But looking at that whole sea of of numbers, you have to find

• 19:55Lex Fridman?

  patterns like what is inflation in a particular sector? What is maybe change over time, maybe different geographical regions? You know, things of that nature. I think that's kind of, I don't really even what that task is. You know, that's what you could look at machine learning. You can look at AI with that perspective, which is like, how do you represent what's happening efficiently, as efficiently as possible? That's never going to be a single number, but it might be a compressed model that captures something, something beautiful, something fundamental about what's happening.

• 20:28Speaker 01

  It's an opportunity for sure, right?

• 20:33Speaker 01

  You know, if we take, for example, during the pandemic, the the response of the political apparatus was to lower interest rates to zero and to start to start buying assets, in essence, printing money. And the defense was there is no inflation.

• 20:55Speaker 01

  But of course, you had one part of the economy where it was locked down. So it was illegal to buy anything. But you couldn't, you know, it was either illegal or it was impractical. So it would be impossible for demand to manifest. So of course, there is no inflation. On the other hand, there was instantaneous, immediate inflation in another part of the economy. For example, you lower the interest rates to zero. At one point, we saw the the swap rate on the 30 year note go to 72 basis points. Okay, that means that the value of a long dated bond immediately inflates.

• 21:35Speaker 01

  So the bond market had hyperinflation within minutes of these financial decisions. The asset market had hyperinflation. We had what you call a K-shaped recovery, what we affectionately call a shake K-shaped recovery. Main Street shut down, Wall Street recovered, all within six weeks. The inflation was in the assets, like in the stocks, in the bonds. You know, if you look today, you see that typical house, according to the Case Schiller Index today, is up 19.2% year over year. So if you're a first-time home buyer, the inflation rate is 19%.

• 22:20Speaker 01

  The formal CPI announced a 7.9%. You can pretty much create any inflation rate you want by constructing a market basket, a weighted basket of products or services or assets that yields you the answer. I think that, you know, the fundamental failing of economists is, first of all, they don't really have a term for asset inflation, right?

• 22:50Lex Fridman?

  What's an asset, what's asset hyperinflation? You mentioned bond market swap rate, and asset is where the all majority of the hyperinflation happened. What's inflation, what's hyperinflation, what's an asset, what's an asset market? I'm gonna ask so many dumb questions.

• 23:07Speaker 01

  In the conventional economic world, you would, you would treat inflation as the rate of increase in price of a market basket of consumer products, defined by a government agency.

• 23:22Lex Fridman?

  So they have like traditional things that a regular consumer would be buying. The government selects like toilet paper, food, toaster, refrigerator, electronics, all that kind of stuff. And it's like a representative basket of goods that lead to a content existence on this earth for a regular consumer.

• 23:45Speaker 01

  They define a synthetic metric, right? I mean, I'm going to say you should have a thousand square foot apartment and you should have a used car and you should eat, you know, three hamburgers a week. Now 10 years go by and the apartment costs more. I could adjust the market basket via, you know, they call them hedonic adjustments. I could decide that it used to be in 1970, you needed a thousand square feet, but in the year 2020, you only need 700 square feet because we've miniaturized televisions and we've got more efficient electric appliances and because things have collapsed into the iPhone, you just don't need as much space.

• 24:26Speaker 01

  So now I, you know, it may be that the apartment costs 50% more, but after the hedonic adjustment, there is no inflation because I just downgraded the expectation of what a normal person should have.

• 24:38Lex Fridman?

  So the synthetic nature of the metric allows for manipulation by people in power?

• 24:42Speaker 01

  Pretty much. I guess my criticism of economists is rather than embracing inflation based upon its fundamental idea, which is the rate at which the price of things go up, right? They've been captured by mainstream conventional thinking to immediately equate inflation to the government issued CPI or government issued PCE or government issued PPI measure, which was never the rate at which things go up. It's simply the rate at which a synthetic basket of products and services the government wishes to track go up. Now, the problem with that.

• 25:28Speaker 01

  Is two big things. One thing is the government gets to create the market basket. And so they keep changing what's in the basket over time. So, I mean, if I keep, if I said three years ago, you should go see 10 concerts a year. And the concert tickets now cost $200 each. Now it's $2,000 a year to go see concerts. Now I'm in charge of calculating inflation. So I redefine, you know, your entertainment quota for the year to be eight Netflix streaming concerts. And now they don't cost $2,000. They cost nothing and there is no inflation, but you don't get your concerts, right? So the problem starts with continually changing the definition of the market basket.

• 26:13Speaker 01

  But in my opinion, that's not the biggest problem. The more egregious problem is the fundamental idea that assets aren't products or services. Assets can't be inflated.

• 26:28Lex Fridman?

  What's an asset?

• 26:30Speaker 01

  A house, a share of Apple stock, a bond. A Bitcoin is an asset or a Picasso painting.

• 26:42Lex Fridman?

  So. Not a consumable good, not a, not, not, not an apple that you can eat.

• 26:49Speaker 01

  Right. If I throw away an asset, then I'm not on the hook to track the inflation rate for it. So what happens if I change the policy such that, let's, let's take the classic example. A million dollar bond at a 5% interest rate gives you $50,000 a year in risk free income. You might retire on $50,000 a year in a low cost jurisdiction. So the cost of social security or early retirement is $1 million when the interest rate is 5%. During the, the crisis of March of 2020, the interest rate went on a 10 year bond went to 50 basis points. So now the cost of that bond is $10 million.

• 27:31Speaker 01

  Okay, the cost of social security went from $1 million to $10 million. So if you wanted to work your entire life, save money, and then retire risk-free and live happily ever after on a $50,000 salary, living on a beach in Mexico, wherever you wanted to go, you had hyperinflation. The cost of your aspiration increased by a factor of 10 over the course of, you know, some amount of time. In fact, in that case, that was like over the course of about 12 years, right? As the inflation rate ground down, the asset traded up. But the, you know, the conventional view is, oh, that's not a problem because it's good that that assets, it's good that the bond is highly priced because we own the

• 28:16Speaker 01

  bond. Or what's the problem with the inflation rate in housing being 19%? It's an awful problem for a 22-year-old that's starting their first job, that's saving money to buy a house. But it would be characterized as a benefit to society by a conventional economist who would say, well, housing asset values are higher because of interest rate fluctuation, and now the economy's got more wealth. And, uh, and so that's, that's viewed as a benefit.

• 28:47Lex Fridman?

  So the, what's being missed here? Like the suffering of the average person or the, uh, the struggle, the suffering, the pain of the average person? Like metrics that captured that within the economic system? Is that, is it, when you're talking about...

• 29:04Speaker 01

  One way to say it is, a conventional view of inflation as CPI understates the human misery that's inflicted upon the working class and, and on mainstream companies, uh, by, uh, by the political class. And so it's a massive shift of wealth from the working class to the property class. It's a massive shift of power from the free market, uh, to the centrally governed or the controlled market. It's a massive shift of power from the people to the government. And, and maybe one, one more illustrative point here, Alexis, is, uh, what do you think

• 29:48Speaker 01

  the inflation rate's been for the past 100 years?

• 29:52Lex Fridman?

  Oh, you're talking about the scaler again?

• 29:54Speaker 01

  If you if you took a survey of everybody on the street and you asked them, what do they think inflation was? What is it? You know, you remember when Jerome Powell said our target's 2%, but we're not there?

• 30:06Speaker 01

  If you go around the corner, I have posted the deed to this house sold in 1930. Okay, and the number on that deed is $100,000, 1930. And if you go on Zillow and you get the Z estimate.

• 30:25Lex Fridman?

  Is it higher than that?

• 30:26Speaker 01

  $30,500,000.

• 30:28Lex Fridman?

  Yeah.

• 30:29Speaker 01

  So that's 92 years, 1930 or 2022. And in 92 years, we've had 305x increase in price of the house. Now, if you actually back calculate, you can you come to a conclusion that the inflation rate was approximately 6.5% a year, every year. For 92 years. Okay, and and there's nobody, nobody in government, no conventional economists that would ever admit to an inflation rate of 7% a year in the US dollar over the last century.

• 31:07Speaker 01

  Now, if you if you dig deeper, I mean, one one guy that's done a great job working on this is Sayfadeen Amos, who wrote who wrote the book The Bitcoin Standard. And he notes that on average, it looks like the inflation rate and the money supply is about 7% a year, all the way up to the year 2020. If you look at the S and P index, which is a market basket of scarce desirable stocks. It returned about 10%. If you talk to 10% a year for 100 years. The money supply is expanding at 7% 100 years.

• 31:45Speaker 01

  If you actually talk to economists or you look at the the economy and you ask the question, how fast does the economy grow in its entirety year over year? Generally about 2% to 3% like the the sum total impact of all this technology and human ingenuity. Might get you a 2.5, 3% improvement a year.

• 32:06Lex Fridman?

  As measured by GDP. Is that are you okay with that?

• 32:10Speaker 01

  I'm not sure. I'm not sure I'd go that far yet, but I would just say that. If you had the human race doing stuff,

• 32:17Lex Fridman?

  Yeah.

• 32:18Speaker 01

  And if you ask the question, how much more efficiently will we do the stuff next year than this year? Or how, what's the value of all of our innovations and inventions and investments in the past 12 months? You'd be hard pressed to say we get 2% better. Typical investor thinks they they're 10% better every year. So if you look at what's going on, really, when you're holding a million dollars of stocks and you're getting a 10% gain a year, you really get a 7% expansion of the money supply. You're getting a 2% or 3% gain under best circumstances. And another way to say that is, if the money supply stopped expanding at 7%

• 33:02Speaker 01

  a year, the S and P yield might be 3% and not 10%. It probably should be.

• 33:09Speaker 01

  Now, that that gets you to start to ask a bunch of other fundamental questions like, if I borrow a billion dollars and pay 3% interest and the money supply expands at 7% to 10% a year, and I ended up making a 10% return on a, you know, billion dollar investment paying 3% interest, is that fair? And who who suffered so that I could do that? Because in an environment where you're just inflating the money supply and you're holding the assets constant, it stands to reason that the price of all the assets is going to appreciate somewhat proportional to the money supply. And the difference in asset appreciation is going to

• 33:52Speaker 01

  be a function of the scarce desirable quality of the assets and to what extent can I make more of them? And to what extent are they are they truly limited in supply?

• 34:04Lex Fridman?

  Yeah, so we'll get to a lot of the words you said there, the scarcity, and so connected to how limited they are and the value of those assets. But you also said, so the expansion of the money supply, which is, put another way is printing money. And so is that always bad, the expansion of the money supply? Is this, just to put some terms on the table so we understand them?

• 34:32Lex Fridman?

  You nonchalantly say it's always the on average expanding every year, the money supply is expanding every year by seven percent. That's a bad thing? That's universally a bad thing?

• 34:43Speaker 01

  It's awful. I guess to be precise, it's the currency. I mean, money, I would say money is monetary energy or economic energy. And the economic energy has to find its way into a medium. So if you want to move it rapidly, as a medium of exchange has to find its way into currency. But the money can also flow into property, like a house or gold. If the money flows into property, it'll probably hold its value much better. If the money flows into currency, right? If you had put $100,000 in this house, you would have 305x return

• 35:24Speaker 01

  over 92 years. But if you had put the money, $100,000 in a safe deposit box and buried it in the basement, you would have lost 99.7% of your wealth over the same time period. So, so the expansion of the currency creates, creates a massive inefficiency in the society, what I'll call an adiabatic lapse. It's what we're doing is we're bleeding the civilization to death.

• 35:55Lex Fridman?

  What's the adiabatic, adiabatic, what's that word?

• 35:58Speaker 01

  Adiabatic lapse.

• 35:59Lex Fridman?

  Adiabatic.

• 36:00Speaker 01

  Right? And aerospace engineering, you want to solve any problem, they, they start with the phrase, assume an adiabatic system. And what that means is a closed system.

• 36:10Lex Fridman?

  Okay.

• 36:10Speaker 01

  So I've, I've got a container, and in that container, no air leaves and no air enters, no energy exits or enters. So it's a closed system.

• 36:20Lex Fridman?

  So you got the closed system lapse.

• 36:23Speaker 01

  Okay. What's a closed, okay, I'm gonna use a

• 36:27Lex Fridman?

  There's a leak in the ship.

• 36:28Speaker 01

  I'm gonna use a physical metaphor for you, because you're the jujitsu, right? Like, like you got 10 pints of blood in your body. And so before your next workout, I'm gonna take one pint from you. Now you're gonna go exercise, but you're one point, you've lost 10% of your blood. Okay. You're not gonna perform as well. It takes about one month for your body to replace the red blood platelets. So what if I tell you every month you gotta show up and I'm gonna bleed you?

• 36:57Lex Fridman?

  Yeah.

• 36:58Speaker 01

  Okay, so, uh, so if I'm draining the energy, I'm draining, I'm draining the blood from your body, you can't perform. If you, adiabatic lapse is when you go up in altitude. Every thousand feet, you lose three degrees. You go at 50,000 feet, you're 150 degrees colder than sea level. That's why you, you know, you look at your instruments and instead of 80 degrees, you're minus 70 degrees. Why is the temperature falling? Temperature's falling because it's not a closed system, it's an open system. As the air expands, the density falls. Right? The energy, uh, per, uh, per cubic whatever, you know, falls and therefore the temperature falls, right?

• 37:43Speaker 01

  The heat's falling out of the solution. So when you're inflating, let's say you're inflating the money, the currency supply by 6%. You're sucking 6% of the energy out of the fluid that the economy is using to function.

• 38:00Lex Fridman?

  So the currency, this kinda ocean of currency, that's a, that's a nice way for the economy to function. It's the most kind of, uh, it's being inefficient when you expand the money supply, but it's, uh, that look, it's liquid, I'm trying to find the right kind of adjective here. It's how you, you do transactions at a scale of billions.

• 38:21Speaker 01

  Currency is the asset we use, uh, to move monetary energy around and you could use the dollar or you could use the peso or you could use the bolivar.

• 38:30Lex Fridman?

  Selling houses and buying houses is much more inefficient. Uh, or like, uh, you, you can't transact between billions of people with houses.

• 38:40Speaker 01

  Yeah, properties don't make such good mediums of exchange. They make better stores of value and they, they have utility value if it's a, if it's a ship or a house or, or a plane or a bushel of corn, right?

• 38:55Lex Fridman?

  Can I zoom out just for, can we zoom out, keep zooming out until we reach the origin of human civilization? But on the way, ask, you gave economists a D minus. I'm not even gonna ask you what you give to governments.

• 39:10Lex Fridman?

  Do you think their failure, economists and government failure, is malevolence or incompetence?

• 39:19Speaker 01

  I think policymakers are well intentioned, but generally, all government policy is inflationary and all government, it's inflammatory and inflationary. So what I mean by that is, you know, when you have a policy pursuing supply chain independence, if you have an energy policy, if you have a labor policy, if you have a trade policy, if you have a, you know, any kind of foreign policy, a domestic policy, a manufacturing policy, every one of these, a medical policy, every one of these policies interferes with the free market and generally prevents some rational actor from doing it in a cheaper,

• 40:04Speaker 01

  more efficient way. So when you layer them on top of each other, they all have to be paid for. If you want to shut down the entire economy for a year, you have to pay for it, right? If you want to fight a war, you have to pay for it, right? If you don't want to use oil or natural gas, you have to pay for it. If you don't want to manufacture semiconductors in China and you want to manufacture them in the US, you got to pay for it. If I rebuild the entire supply chain in Pennsylvania and I hire a bunch of employees and then I unionize the employees, then not only am I, I idle the factory in the Far East, it goes to 50% capacity. So, so whatever it sells, it has to raise the price on. And

• 40:48Speaker 01

  then I drive up the cost of labor for every other manufacturer in the US because I'm competing against them, right? I'm changing their condition. So, everything gets less efficient, everything gets more expensive. And of course, the government couldn't really pay for its policies and its wars with taxes. We didn't pay for World War I with tax. We didn't pay for World War II with tax. We didn't pay for Vietnam with tax. In fact, you know, when you trace this, what you realize is the government never pays for all of its policies with taxes.

• 41:20Lex Fridman?

  Because it's too painful to ask, to raise the taxes to truly, transparently pay for the things you're doing with taxes, with taxpayer money, because they feel the pain.

• 41:31Speaker 01

  That's one interpretation, or it's just too transparent. If people, if people understood the, the, the true cost.

• 41:38Lex Fridman?

  Of war. They wouldn't want to go to war.

• 41:41Speaker 01

  If you were told that you would lose 95% of your assets, you know, and 90% of everything you will be, ever will be taken from you, you might reprioritize your thought about a given policy and you might not vote for that politician.

• 41:58Lex Fridman?

  But you're still saying incompetence, not malevolence. So fundamentally, government creates a bureaucracy of incompetence is kind of how you look at it.

• 42:08Speaker 01

  I think a lack of humility, right? Like, uh, like if, if people had more humility than they would realize.

• 42:18Lex Fridman?

  Humility about how little they know, how little they understand about the function of complex systems.

• 42:23Speaker 01

  There's a phrase from Quinn Eastwood's movie, Unforgiven, where he says, "A man's got to know his limitations."

• 42:30Speaker 01

  I, I, I think that a lot of people overestimate what they can accomplish and experience. Experience in life causes you to, uh, to reevaluate that. So I, I mean, I've done a lot of things in my life and, and generally, my mistakes were always my good ideas that I enthusiastically pursued. To the detriment of my great ideas that required 150% of my attention to prosper. So I think people pursue too many good ideas, you know, they all sound good, but there's just a limit to, to what you can accomplish. And everybody underestimates the challenges of, of implementing an idea.

• 43:19Speaker 01

  Right? And they always overestimate the benefits of the pursuit of that. And so I think it's an overconfidence that causes an over-exuberance in pursuit of policies. And as the ambition of the government expands, so must the currency supply. You know, I could say the money supply, but let's say the currency supply. You can triple the number of pesos in the economy, but it doesn't triple the amount of manufacturing capacity in the said economy. And it doesn't triple the amount of assets in the economy, it just triples the pesos. So as you increase the currency supply,

• 44:01Speaker 01

  then the price of all those scarce desirable things will tend to go up rapidly. And the confidence of all of the institutions, the corporations and the individual actors and trading partners will collapse.

• 44:19Lex Fridman?

  If we take a tangent on a tangent, and we will return soon to the big human civilization question.

• 44:29Lex Fridman?

  So if government naturally wants to buy stuff it can't afford, what's the best form of government? Anarchism? Libertarianism? So not even, there's not even armies, there's no borders, that's anarchism.

• 44:48Speaker 01

  The least.

• 44:50Lex Fridman?

  The smallest possible, the smallest possible.

• 44:53Speaker 01

  The best government would be the least, and the debate will be over that.

• 44:58Lex Fridman?

  When you think about this stuff, do you think about, okay, government is the way it is. I, as a person that can generate great ideas, how do I operate in this world? Or do you also think about the big picture? If we start a new civilization somewhere on Mars, do you think about what's the ultimate form of government? What's at least a promising thing to try?

• 45:25Speaker 01

  You know, um.

• 45:29Speaker 01

  I have laser eyes on my profile on Twitter, Lex. What does that mean? And the significance of laser eyes is to focus on the thing that can make a difference. Yes. And um, if I look at the civilization, um, I would say

• 45:48Speaker 01

  half the problems in the civilization are due to the fact that our understanding of economics and money is defective. Half, fifty percent. I don't know, it's worth five hundred trillion dollars worth of problems. Like, money, uh, money represents all the economic energy in the civilization and it kind of equates to all the products, all the services and all the assets that we have and we're ever gonna have. So that's half. The other half of the problems in the civilization are medical and, and military and political and philosophical and, you know, and, uh, natural.

• 46:32Speaker 01

  And I think that there are a lot of different solutions to all those problems and they're all, they are all, uh, honorable professions and, and they all merit a lifetime of consideration for the specialist in all those areas. I, I think that what I could offer that's constructive is,

• 46:56Speaker 01

  inflation is completely misunderstood. It's a much bigger problem than we understand it to be. We need to introduce engineering and science techniques into economics if we want to further the human condition. All government policy is inflationary.

• 47:14Speaker 01

  You know, and another pernicious myth is inflation is always and everywhere a monetary phenomenon. You know, a famous quote by Milton Friedman, I believe, it's like, it's a monetary phenomenon. That is, inflation comes from expanding the currency supply. It's a nice phrase, and it's oftentimes quoted by people that are anti-inflation. But again, it just signifies a lack of appreciation of what the issue is. Inflation is, if I had a currency which was completely non-inflationary, if I never printed another dollar, and if I eliminated fractional reserve banking from the face of the earth, we'd still have inflation.

• 47:56Speaker 01

  And we'd have inflation as long as we have government that is capable of pursuing any kind of policies that are in themselves inflationary, and generally, they all are.

• 48:09Lex Fridman?

  So in general, inflationary is the big characteristic of human nature, that governments, collection of groups that have power over others and allocate other people's resources, will try to, intentionally or not, hide the costs of those allocations, like in some tricky ways, whatever the options are available.

• 48:34Speaker 01

  You know, hiding the cost is like, is like the tertiary thing. Like, the primary goal is the government will attempt to do good, right?

• 48:44Lex Fridman?

  And that's the fundamental, that's the primary problem?

• 48:47Speaker 01

  They will attempt to do good, and they will, and they will do it, and they will do good imperfectly, and they will create oftentimes as much damage, more damage than the good they do. Most government policy will be iatrogenic. It will, it will create more harm than good in the pursuit of it, but it is what it is. The secondary, the secondary issue is they will unintentionally pay for it by expanding the currency supply without realizing that they're...

• 49:20Speaker 01

  They're actually paying for it in a suboptimal fashion. They'll collapse their own currencies while they attempt to do good. The tertiary issue is they will mismeasure how badly they're collapsing the currency. So for example, if you go to the Bureau of Labor Statistics, you know, and look at the numbers printed by the Fed, they'll say, oh, it looks like the dollar's lost 95% of its purchasing power over 100 years. Okay, they sort of fess up there's a problem, but they make it 95% loss over 100 years. What they don't do is realize it's a 99.7% loss over 80 years.

• 50:00Speaker 01

  So they will mismeasure just the horrific extent of the monetary policy in pursuit of the foreign policy and the domestic policy, which they overestimate their budget and their means to accomplish their ends, and they underestimate the cost. And they're oblivious to the horrific damage that they do to the civilization because the mental models that they use, that are conventionally taught, are wrong, right? The mental model that like, it's okay, we can print all this money because the velocity of the money is low, right?

• 50:45Speaker 01

  Because money velocity is a scaler and inflation is the scaler and we don't see 2% inflation yet and the money velocity is low and so it's okay if we print trillions of dollars. Well, the money velocity was immediate, right? The velocity of money through the crypto economy is 10,000 times faster than the velocity of money through the consumer economy, right? It's like, I think Nick pointed out when you spoke to him, he said it takes two months for a credit card transaction to settle, right? So you want to spend a million dollars in the consumer economy, you can move it six times a year. You put a million dollars in a gold, gold will sit in a vault for a decade.

• 51:30Speaker 01

  Okay, so the velocity of money through gold is 0.1. You put the money in the stock market and you can trade it once a week. The settlement is T plus two. Maybe you get to two to one leverage. You might get to a money velocity of a hundred a year in the stock market. You put your money into the crypto economy and these people are settling every four hours. And, and you know, if you're offshore, they're trading with 20x leverage. So if you, if you settle every day and you trade with 20x leverage, you just went to 7,000. So the velocity of the money varies. I think the politicians, they, they don't really understand inflation and they don't understand economics.

• 52:14Speaker 01

  But, but you can't blame them because the economists don't understand economics. Because the, because if they did, they would be creating multivariate computer simulations where they actually put in the price of every piece of housing in every city in the world, the full array of foods and the full array of products and the full array of assets. And then on a monthly basis, they would publish all those results. And where, and that's a high bandwidth requirement. And I, I think the people don't really want to embrace it. And, and also there's the most pernicious thing. Like there's that phrase, you know, you, you can't tell people what to think,

• 52:59Speaker 01

  but you can tell them what to think about. The most pernicious thing is, is I get you to misunderstand the phenomena. So that even when it's happening to you, you don't appreciate that it's a bad thing and you think it's a good thing. So if housing prices are going up 20% year over year, and I say, this is great for the American public because most, most of them are homeowners, then I have, I have misrepresented a phenomena. Inflation is 20%, not 7%. And then I have misrepresented it as being a positive rather than a negative. And people will stare at it and you could even show them their house on fire

• 53:43Speaker 01

  and they would perceive it as being great because it's warming them up and they're going to save on their heat costs.

• 53:49Lex Fridman?

  It does seem that the cruder the model, whether it's economics, whether it's psychology.

• 53:55Lex Fridman?

  The easier it is to weave whatever the heck narrative you want, and not in a malicious way, but just like it's some kind of like emergent phenomena, this narrative thing that would tell ourselves. So you can tell any kind of story about inflation. Inflation is good, inflation is bad. Like the crude of the model, the easier it is to tell a narrative about it. And that's what the, so like if you take an engineering approach, it's, I feel like it becomes more and more difficult to run away from sort of a true, deep understanding of the dynamics of the system.

• 54:32Speaker 01

  I mean, honestly, if you, if you went to a hundred people on the street and you asked them to define inflation, how many would, how many would say it's a vector tracking the change in price of every product, service, asset in the world over time?

• 54:48Lex Fridman?

  No.

• 54:48Speaker 01

  Not many. Now, if you, if you went to them and you said, you know, do you think 2% inflation a year is good or bad? The majority would probably say, well, here it's good. You know, the majority of economists would say 2% inflation a year is good. And of course, there's, look at the ship next to us. What if I told you that the ship leaked 2%, right, of its volume every something, right? The ship is rotting 2% a year. That means the useful life of the ship is 50 years. Now ironically, that's true. Like a wooden ship had a 50 year to 100 year life. 100 would be long, 50 years, not unlikely. So

• 55:31Speaker 01

  when we built ships out of wood, they had a useful life of about 50 years. And then they sunk, they rotted. There's nothing good about it, right? You build a ship out of steel, you know, and it's zero as opposed to 2% degradation. And how much better is 0% versus 2%? Well, 2% means you have a useful life of, you know, it's half life of 35 years. 2% is a half life of 35 years. That's basically the half life of money and gold. If I store your life force in gold, under perfect circumstances, you have a useful life of 35 years. 0% is

• 56:12Speaker 01

  a useful life of forever. So 0% is immortal. 2% is 35 years average life expectancy.

• 56:22Speaker 01

  So the idea that you would think the life expectancy of the currency in the civilization should be 35 years instead of forever is kind of a silly notion. But the tragic notion is it was, you know, seven into 70 or 10 years. The money has had a half-life of 10 years, except for the fact that in weak societies in Argentina or the like, the half-life of the money is three to four years, in Venezuela, one year. So the United States dollar and the United States economic system was the most successful economic system in the last 100 years in the world. We won every war. We were the world's superpower.

• 57:06Speaker 01

  Our currency lost 99.7% of its value, and that means horrifically, every other currency lost everything, right? In essence, the other ones were 99.9, except for most that were 100% because they all completely failed. And, you know, you've got a mainstream economic community, you know, that thinks that inflation is a number and 2% is desirable. It's kind of like, you know, remember George Washington? You know how he died?

• 57:42Lex Fridman?

  No.

• 57:43Speaker 01

  Well-meaning physicians bled him to death.

• 57:47Lex Fridman?

  Hmm.

• 57:48Speaker 01

  Okay. The last thing in the world you would want to do to a sick person is bleed them, right? In the modern world. I think we understand that oxygen is carried by the blood cells and, you know, and if, you know, there's that phrase, right? A triage phrase. What's the first thing you do in an injury? Stop the bleeding. Single first thing, right? You show up after any action. I look at you. Stop the bleeding because you're going to be dead in a matter of minutes if you bleed out. So it strikes me as being ironic that orthodox conventional wisdom was bleed the patient to death.

• 58:31Speaker 01

  And this was the most important patient in the country, maybe in the history of the country. And it's, and we bled him to death, trying to help him. So when you're actually inflating the money supply at 7%, but you're calling it 2% because you want to help the economy, you're literally bleeding the, the free market to death. But the sad fact is George Washington went along with it because he thought that they were going to do him good. And the majority of, of the society, most companies, most, most conventional thinkers, you know, the working class, they go along with this because they think that someone has their best interest at mind.

• 59:16Speaker 01

  And the people that are bleeding them to death believe, they, they believe that prescription because their mental models are just so defective. And then understanding of energy and engineering and, and, and the economics that are at play is, is crippled by these mental models.

• 59:37Lex Fridman?

  But that's both the bug and the future of human civilization, that ideas take hold, they unite us, we believe in them, and we make a lot of cool stuff happen by, as an average sort of, just the fact of the matter, a lot of people believe the same thing. They get together and they get some shit done because they believe that thing. And then some ideas can be really bad and really destructive, but on average, the ideas are, it seemed to be progressing in, in a direction of good. Let me just step back. What the hell are we doing here, us humans on this earth? How do you think of humans? How special are humans?

• 1:00:20Lex Fridman?

  How did human civilization originate on this earth? And what is this human project that we're all taking on? You mentioned fire and water and apparently bleeding you to death is not a good idea. I thought, always thought you can get the demons out in that way, but that was a recent invention. So what, what's this thing we're doing here?

• 1:00:46Speaker 01

  I think what distinguishes human beings from all the other creatures on the earth is, is our ability to engineer. We're engineers, right?

• 1:00:58Lex Fridman?

  To solve problems or just build incredible, cool things?

• 1:01:04Speaker 01

  Engineering, harnessing energy and technique to make the world a better place than you found it. Right? From the point that we actually started to play with fire, right? That, that was a big leap forward. Harnessing the power of, of kinetic energy and missiles, another, another step forward. Every city built on water. Why water? Well, water's bringing energy, right? If you actually, if you actually put a turbine, you know, on a river, or you, or you capture a change in elevation of water, you've literally harnessed gravitational energy. But, you know, water's also bringing you food. It's also

• 1:01:48Speaker 01

  giving you, you know, a cheap form of getting rid of your waste. It's also giving you free transportation. You want to move one ton blocks around. You want to move them in water. So I think, I mean, the, the, the human story is really the story of engineering a better world. And, and the rise in the human condition is determined by those groups of people, those civilizations that were best at harnessing energy.

• 1:02:21Speaker 01

  If you if you look, you know, the Greek civilization, they built it around around ports and seaports and and water and created a trading network. The Romans were really good at harnessing all sorts of of engineering. I mean, the aqueducts are a great example. If you go to any big city, you travel through cities in the Med, you find that, you know, the carrying capacity of the city or the island is 5,000 people without running water. And then if you can find a way to bring water to it increases by a factor of 10. And so, human flourishing is really only possible through that channeling of energy, right?

• 1:03:02Speaker 01

  That eventually takes the the form of air power, right? I mean, that ship, I mean, look at the intricacy of those sails. I mean, it's just the model is intricate. Now, think about all of the experimentation that took place to figure out how many sails to put on that ship and how to rig them and how to repair them and how to operate them.

• 1:03:25Lex Fridman?

  There's thousands of lives spent thinking through all the tiny little details, all to increase the efficiency of this, the effectiveness, the efficiency of this ship as it sails through water. And we should also note there's a bunch of cannons on the side, so obviously.

• 1:03:44Speaker 01

  Another form of engineering, right? Energy harnessing with explosives.

• 1:03:50Lex Fridman?

  To achieve what end? That's another discussion, exactly.

• 1:03:52Speaker 01

  Suppose we're trying to get off the planet, right?

• 1:03:56Lex Fridman?

  Well, there's a selection mechanism going on, so natural selection, this whatever, however, evolution works, it seems that one of the interesting inventions on Earth was the predator-prey dynamic, that you want to be the bigger fish. That violence seems to serve a useful purpose if you look at Earth as a whole. We, as humans, now like to think of violence as really a bad thing. It seems to be one of the amazing things about humans is we're ultimately tend towards cooperation. We want to, we like peace. If you just look at history, we want things to be nice and calm and, but just wars break

• 1:04:39Lex Fridman?

  out every once in a while and lead to immense suffering and destruction and so on. And they have a kind of...

• 1:04:47Lex Fridman?

  Uh, like resetting the palate.

• 1:04:51Lex Fridman?

  Effect. It's one that's full of just

• 1:04:56Lex Fridman?

  immeasurable human suffering, but it's like a way to start over.

• 1:05:00Speaker 01

  We're quite the apex predator on the planet. And I, I Google something the other day, you know, what's the most common form of mammal? Life on the earth.

• 1:05:12Lex Fridman?

  By, by number of organisms?

• 1:05:15Speaker 01

  Count.

• 1:05:15Lex Fridman?

  By count.

• 1:05:16Speaker 01

  And the answer that came back was human beings. I was shocked. I couldn't believe it, right? It says like, apparently if we're just looking at mammals, the, the answer was human beings are the most common, which was very interesting to me. I, I almost didn't believe it, but I was trying to, you know, eight billion or so human beings.

• 1:05:33Lex Fridman?

  It's a lot.

• 1:05:33Speaker 01

  There's no other mammal that's got more than eight billion. If you walk through downtown Edinburgh and, and Scotland and you look up on this hill and this castle up on the hill. You know, and you talk to people and the story is, oh yeah, well, that was a, that was a British castle before it's a Scottish castle before it was a pick castle before it was a Roman castle. Before it was, you know, some other Celtic castle before, you know, then they found 13 prehistoric castles buried one under the other, under the other. And you get to, you get to conclusion that a hundred thousand years ago, somebody showed up and grabbed the high point, the apex of the city.

• 1:06:14Speaker 01

  And they built a stronghold there and they flourished and their family flourished and their tribe flourished until someone came along and knocked them off the hill. And it's been a, a non-stop, never-ending fight by the, the aggressive, most powerful entity, family, organization, municipality, tribe, whatever.

• 1:06:34Lex Fridman?

  Off the hill.

• 1:06:36Speaker 01

  For that one hill. Going back since time immemorial. And, you know, you, you scratch your head and, and you think, it seems like it's like just this never-ending.

• 1:06:50Lex Fridman?

  But does that lead, if you just, all kinds of metrics, that seems to improve the quality of our cannons and ships as a result. Like, it seems that war, just like your laser eyes focuses the mind on the engineering tasks.

• 1:07:05Speaker 01

  It is that. And, and, and it does remind you that the winner is always the most powerful. And we throw that phrase out, but no one thinks about what that phrase means. Like, who's the most powerful or the, you know, or the most powerful side one? But they don't think about it and they think about power, energy delivered in a period of time. And then you think a guy with a spear is more powerful than someone with their fist. And someone with a bow and arrow is more powerful than the person with the spear. And then you realize that somebody with bronze is more powerful than without. And steel is more powerful than bronze.

• 1:07:48Speaker 01

  And if you look at the Romans, you know, they persevered, you know, with artillery and they could stand off from 800 meters and blast you with smithereens. You know, you study the history of the bullic slingers, right? And, you know, you think we invented bullets, but they invented bullets to put in slings thousands of years ago. They could have stood off 500 meters and put a hole in your head. Right? And so there was never a time when humanity wasn't vying to come up with an asymmetric form of projecting their own power via technology.

• 1:08:28Lex Fridman?

  And absolute power is when a leader is able to control a large amount of humans, they're facing the same direction, working in the same direction to leverage energy.

• 1:08:43Speaker 01

  The most organized society wins.

• 1:08:46Lex Fridman?

  Yeah.

• 1:08:47Speaker 01

  When the Romans were dominating everybody, they were the most organized civilization in Europe. As long as they stayed organized, they dominated. And at some point they over expanded and got disorganized and they collapsed. And I guess you could say that, you know, the struggle of the human condition, it catalyzes the development of new technologies, one after the other. It penalizes anybody that rejects ocean power, right? Gets penalized, you reject artillery, you get penalized. You reject atomic power, you get penalized. If you reject digital power, cyber power, you get penalized.

• 1:09:29Speaker 01

  And the underlying control of the property keeps shifting hands from, you know, one institution or one government to another based upon how rationally they're able to channel that energy and how well organized or coordinated they are.

• 1:09:46Lex Fridman?

  Well, that's really interesting thing about both the human mind and governments, that they, once they get a few good, and companies, once they get a few good ideas, they seem to stick with them. They reject new ideas. It's almost, whether that's emergent or however that evolved, it seems to have a really interesting effect because when you're young, you fight for the new ideas. You push them through, then a few of us, humans, find success, then we get complacent. We take over the world using that new idea. And then the new young person with the better new idea challenges you and you, as opposed to pivoting,

• 1:10:31Lex Fridman?

  you stick with the old and lose because of it. And that's how empires collapse. And it's just both at the individual level that happens when two academics fighting about ideas or something like that, and at the, at the human civilization level, governments, they hold on to the ideas of old. It's fascinating.

• 1:10:50Speaker 01

  Yeah, an ever persistent theme in the history of science is the paradigm shift. And the paradigms shift when the old guard dies and a new generation arrives. Or the paradigm shifts when there's a war and everyone that disagrees with the idea of aviation finds bombs dropping on their head. Or everyone that disagrees with whatever your technology is has a rude awakening. And if they totally disagree, their society collapses and they're replaced by that new thing.

• 1:11:23Lex Fridman?

  A lot of the engineering you talked about had to do with ships and cannons and leveraging water. What about this whole digital thing that's happening? Been happening over the past century.

• 1:11:38Lex Fridman?

  Is that still engineering in your mind? You're starting to operate in these bits of information.

• 1:11:45Speaker 01

  I think there's two big ideas. The first wave of ideas were digital information. And that was the internet wave been running since 1990 or so, for 30 years. And the second wave is digital energy. So if I look at digital information,

• 1:12:04Speaker 01

  this idea that we want to digitally transform a book. I'm going to dematerialize every book in this room into bits. And then I'm going to deliver a copy of the entire library to a billion people. And I'm going to do it for pretty much de minimis electricity. If I can dematerialize music, books, education, entertainment, maps, right? That, that is an incredibly like exothermic transaction. It gives, it's a crystallization when we collapse into a lower energy state as a civilization. And we give off massive amounts of energy.

• 1:12:48Speaker 01

  Like, if you look at what Carnegie did, the richest man in the world created libraries everywhere at the time. And he gave away his entire fortune. And now we can give a better library to every six year old for nothing. And so what's the value of giving a million books to eight billion people? Right? That's, that's the explosion in prosperity that comes from digital transformation. And when we do it with maps, you know, I, I transform the map. I put it into a car, you get in the car and the car drives you where you want to go with the map. Right? And how much better is that than a Ram McNally Atlas right here? It's like, it's like a million times better.

• 1:13:30Speaker 01

  So the first wave of digital transformation was the dematerialization of all of these informational things which are non-conservative. That is, you know, I could take Beethoven's Fifth Symphony, played for by the best orchestra in Germany. And I could give it to a billion people and they could play it a thousand times each. At less than the cost of the one performance, right? So, so I deliver culture and education and erudition and intelligence and insight to the entire civilization over digital rails. And the consequences of the human race are first order, generally good, right? The world is a better place.

• 1:14:12Speaker 01

  It drives growth and you create these trillion dollar entities like Apple and Amazon and Facebook and Google and Microsoft, right? That is the first wave. The second wave.

• 1:14:24Lex Fridman?

  Do you mind? I'm sorry to interrupt, but that first wave. It feels like the impact that's positive. You said the first order impact is generally positive. It feels like it's positive in a way that nothing else in history has been positive. And then we may not actually truly be able to understand the orders of magnitude of increase in productivity in just progress of human civilization until we look back centuries from now. It just feel, or maybe I'm like the, just like just looking at the impact of Wikipedia.

• 1:15:04Speaker 01

  Right.

• 1:15:05Lex Fridman?

  The giving access to basic wisdom or basic knowledge and then perhaps wisdom to billions of people. If you can just linger on that for a second, what's your sense of the impact of that?

• 1:15:21Speaker 01

  You know, I would say if you're a technologist philosopher, the impact of a technology is so much greater on the civilization and the human condition than a non-technology that is almost not worth your trouble to bother trying to fix things a conventional way. So let's take example. I have a foundation, the Sailor Academy, and the Sailor Academy gives away free education, free college education, to anybody on Earth that wants it. And we've had more than a million students. And if you go and you take the physics class,

• 1:16:03Speaker 01

  the lectures were by the same physics lecturer that taught me physics at MIT. Except, when I was at MIT, the cost of the first four weeks of MIT would have drained my family's life, collective life savings, for the first last hundred years.

• 1:16:18Lex Fridman?

  Yep.

• 1:16:19Speaker 01

  Like, a hundred years' worth of my father, my grandfather, my great-grandfather, they saved every penny they had after a hundred years. They could have paid for one week or two weeks of MIT. That's how fiendishly expensive and inefficient it was. So, I went on scholarship. I was lucky to have a scholarship. But, on the other hand, I sat in the back of the 801 lecture hall, and I was like right up in the rafters. It's an awful experience on these like uncomfortable wooden benches, and you can barely see the blackboard. And you gotta be there synchronously. And the stuff we upload, you can start it and stop it and watch it on your iPad or watch it on your computer and rewind it multiple times and sit in a comfortable chair

• 1:17:04Speaker 01

  and you can do it from anywhere on Earth, and it's absolutely free. So I think about this, and I think, you want to improve the human condition, you need people with postgraduate-level education. You need PhDs. And I know this sounds kind of elitist, but you want to cure cancer and, you know, you want to go to the Stars Fusion Drive. We need new propulsion, right? We need, we need extraordinary breakthroughs in every area of basic science, you know, be it biology, or propulsion, or material science, or computer science. You're not doing that with an undergraduate degree. You're certainly not doing it with a high school education.

• 1:17:48Speaker 01

  But the cost of a PhD is like a million bucks. There's like 10 million PhDs in the world. If you go do the, if you check it out, there's 8 billion people in the world. How many people could get a PhD or would want to? Maybe not 8 billion, but a billion? 500 million? Let's just say 500 million to a billion. How do you go from 10 million to a billion highly educated people? All of them specializing in, and I don't have to tell you how many different fields of human endeavor there are. I mean, your life is interviewing these experts and there's so many, right? You know, it's, it's, it's amazing.

• 1:18:28Speaker 01

  So how do I give a multimillion dollar education to a billion people? And there's two choices. You can either endow a scholarship, in which case you pay $75,000 a year. Okay. 75 thou, let's pay a million dollars and a million dollars a person. I can do it that way. And you're never, even if you had a trillion dollars. If you had 10 trillion dollars to throw at the problem, and we've just thrown 10 trillion dollars at certain problems. You don't solve the problem, right? If I, if I put 10 trillion dollars on the table and I said educate everybody, give them all a PhD, you still wouldn't solve the problem.

• 1:19:08Speaker 01

  Harvard University can't educate 18,000 people simultaneously, or 87,000, or 800,000, or 8 million. So you have to dematerialize the professor and dematerialize the experience. So you put it all as streaming on-demand, computer-generated education. And you create simulations where you need to create simulations and you upload it. It's like, the human condition is being held back by 500,000 well-meaning, um, average algebra teachers?

• 1:19:46Speaker 01

  I love them. I mean, please don't take offense if you're an algebra teacher, but instead of 500,000 algebra teachers going through the same motion over and over again, what you need is, is like one or five or 10 really good algebra teachers and they need to do it a billion times a day or a billion times a year for free. And if we do that, there's no reason why you can't give infinite education, certainly in, in science, technology, engineering and math, right? Infinite education to everybody with no constraint. And I, I think the same is true, right? With just about every other thing.

• 1:20:29Speaker 01

  You, if you wanna bring joy to the world, you need digital music. If you wanna bring, you know, enlightenment to the world, you need digital education. If, if you, you know, wanna bring anything of consequence in the world, you gotta digitally transform it and then you gotta manufacture it something like a hundred times more efficiently as a start, but a million times more efficiently is, is probably opti-, you know, that's, that's hopeful. Maybe you have a chance. If you look at all of these space endeavors and everything we're thinking about getting to Mars, getting off the planet, getting to other worlds,

• 1:21:10Speaker 01

  number one thing you gotta do is you gotta make a fundamental breakthrough in an engine. People dreamed about flying for thousands of years, but until, until the internal combustion engine, you didn't have enough, you know, enough energy, enough, enough power in a light enough package in order to solve the problem. And, and the human race has all sorts of those fundamental engines and materials and techniques that we need to master. And each one of them is a lifetime of experimentation of someone capable of making a seminal contribution to the body of human knowledge.

• 1:21:54Lex Fridman?

  There are certain problems like education that could be solved through this process of dematerialization. And by the way, to give props to the 500K algebra teachers.

• 1:22:05Lex Fridman?

  When I look at YouTube, for example, one possible approach is each one of those 500,000 teachers probably had days and moments of brilliance. And if they had the ability to contribute to in the natural selection process, like the market of education, where the best ones rise up, that's, that's a really interesting way, which is like, the best, the best day of your life, the best lesson you've ever taught could be found and sort of broadcast to billions of people. So all of those kinds of ideas can be made real in the digital

• 1:22:44Lex Fridman?

  world. Now, traveling across planets, you still can't solve that problem with the dematerialization. What you could solve potentially is dematerializing the human brain, where you can transfer, transfer hu, like you don't need to have astronauts on the ship. You can have a floppy disk carrying a human brain.

• 1:23:07Speaker 01

  Touching on those points, you'd love for the 500,000 algebra teachers to become 500,000 math specialists, and maybe they clump into 50,000 specialties as teams, and they all pursue 50,000 new problems, and they put their algebra teaching on autopilot. That's the same, that's the same as when I give you 11 cents worth of electricity, and you don't have to row, you know, row a boat eight hours a day before you can eat, right? It would be a lot better, you know, that you would pay for your food in the first eight seconds of your day, and then you could start thinking about other things, right? With regard to technology, you know, one thing that I learned studying technology,

• 1:23:52Speaker 01

  when you look at S-curves, is until you start the S-curve, you don't know whether you're 100 years from viability, 1,000 years from viability, or a few months from viability.

• 1:24:07Lex Fridman?

  So. Isn't that fun? That's so fun. The, the early part of the S-curve is so fun. Because you don't know.

• 1:24:16Speaker 01

  In 1900, you could have got any number of learned academics to give you 10,000 reasons why humans will never fly. Right? And in 1903, the Wright brothers flew. And by 1969, we're walking on the moon. So the advance that we made in that field was extraordinary. But for the 100 years and 200 years before, they were just back and forth and nobody was close. And that's the happy part. The happy part is we went from flying 20 miles an hour or whatever to flying 25,000 miles an hour in 66 years. The unhappy part is I studied aeronautical engineering at MIT in the 80s.

• 1:25:02Speaker 01

  And in the 80s, we had Gulfstream aircraft. We had Boeing 737s. We had the space shuttle. And you fast forward 40 years and we pretty much had the same exact aircraft. The efficiency of the engines was 20, 30% more. Right? We slammed into a brick wall around 69 to 75. Like, in fact, you know, the Global Express, the Gulfstream, these were all engineered in the 70s, some in the 60s. The actual, the fuselage silhouette of a Gulfstream, of a G5 was the same shape as

• 1:25:44Speaker 01

  a G4, is the same shape as a G3, is the same shape as a G2. And that's because they were afraid to change the shape for 40 years because they worked it out in a wind tunnel, they knew it worked. And when they finally decided to change the shape, it was like a $10 billion exercise with modern supercomputers and computational fluid dynamics.

• 1:26:07Lex Fridman?

  Why was it so hard? What was, what is, what is that wall made of that you slammed into?

• 1:26:12Speaker 01

  The right question is, so why does a guy that went to MIT that got an aeronautical engineering degree spend his career in software? Like, why is it that I never, a day in my life, with the exception of some Air Force Reserve work, I never got paid to be an aeronautical engineer and I worked in software engineering my entire career?

• 1:26:30Lex Fridman?

  Maybe software engineering is the new aeronautical engineering in some way. Maybe, like, maybe you hit fundamental walls in certain, until you have to return to it centuries later.

• 1:26:42Lex Fridman?

  Or no?

• 1:26:43Speaker 01

  The National Gallery of Art was endowed by a very rich man, Andrew Mellon, and you know how he made his money?

• 1:26:52Speaker 01

  Aluminum.

• 1:26:54Speaker 01

  Okay, and, and so, and you know what kind of airplanes you can create without aluminum?

• 1:27:02Speaker 01

  Nothing, right?

• 1:27:04Lex Fridman?

  So it's a materials, so it's a materials problem.

• 1:27:05Speaker 01

  Okay, so 1900, we, we made massive advances in metallurgy, right? I mean, that was, that was US steel, that was iron to steel, aluminum. Massive fortunes were created because this was a massive technical advance. And then we also had the internal combustion engine and, you know, the story of Ford and General Motors and Daimler Chrysler and the like is informed by that. So you have no jet engines, no rocket motors, no internal combustion engines, you have no aviation. But even if you had those engines, if you were trying to build those things with steel, no chance, you had to have aluminum. So there's like two pretty basic technologies.

• 1:27:49Speaker 01

  And once you have those two technologies, stuff happens very fast. So tell me the, the, the last big advance in like jet engines. There hasn't been one. Like there has, the last big advance in rocket engines, hasn't been one. The big advances in spaceship design, from what I can see, are in the control systems, the, the gyros and the ability to land. Right, in a stable fashion, that's pretty amazing, landing a rocket.

• 1:28:19Lex Fridman?

  Also in the, um, at least according to Elon and so on, the manufacture of the more, more efficient and less expensive manufacturer of rockets. So like it's a production, whatever that you call that discipline of at scale manufacture, at scale production, so factory work, but it's not 10x. I mean, maybe it's 10x over a period of a few decades.

• 1:28:44Speaker 01

  When we figure out how to operate a spaceship, you know, on the water in your water bottle for a year.

• 1:28:53Lex Fridman?

  Yeah.

• 1:28:53Speaker 01

  Right. Now, then you've got a breakthrough. So the bottom line is propulsion, propellant, propulsion technology, uh, propellants and the materials technology, they were critical to getting on that aviation S curve. And then we slammed into a wall in the seventies and the Boeing seven forty seven, the Global Express, the Gulf Stream, these things were the space shuttle. They were all pretty much reflective of that. And then we kind of, then we stopped. And at that point, you have to switch to a new S curve. So the next equivalent to the internal combustion engine was the CPU and the next aluminum equivalent was silicon. So when we actually started developing

• 1:29:36Speaker 01

  CPUs, transistor gave way to CPUs. And if you look at the, the power, right, the bandwidth that we had on computers and Moore's law, right? What if the efficiency of jet engines had doubled every three years? Right? In the last 40 years, where we'd be right now. Right? So, so I, I think that if you're, if you're a business person, if you're looking for commercially viable application of your mind, then you have to find that S curve. And ideally, you, you have to find it in the first five, six, 10 years. But people always miss this. Let's, let's take

• 1:30:19Speaker 01

  Google Glass. Right? Google Glass was an idea 2013. The year is 2022 and people were quite sure this was going to be a big thing, but

• 1:30:30Lex Fridman?

  And it could have been at the, at the beginning of the S curve.

• 1:30:33Speaker 01

  But fundamentally, we didn't really have an effective mechanism. I mean, people getting vertigo and they're, you know,

• 1:30:40Lex Fridman?

  But you didn't know that at the beginning of the S curve.

• 1:30:43Speaker 01

  Right?

• 1:30:43Lex Fridman?

  I mean, maybe some people had a deep intuition about the fundamentals of augmented reality. But you don't know that. You don't have those, uh, you're looking through the fog. You don't know.

• 1:30:54Speaker 01

  So the point is, we're year zero in 2013 and we're still year zero in 2022 on that augmented reality. And when somebody puts out a set of glasses that you can wear comfortably without getting vertigo, right? Uh, without any disorientation that managed to have the stability and the bandwidth necessary to sync with the real world, you'll be in year one. And and from that point, you'll have a 70 year or some some interesting future until you slam into a limit to growth.

• 1:31:29Lex Fridman?

  Yeah.

• 1:31:30Speaker 01

  And then it'll slow down. And this this is the story of a lot of things, right? I mean, John D Rockefeller got in the oil business in the 1860s. And the oil business, as we understood it, you know, became fairly mature, you know, by the 1920s, the 30s. And then it actually stayed that way until we got to fracking and which was like 70 years later and then it burst forward. So.

• 1:31:59Lex Fridman?

  The interesting story about Moore's Law, though, is that you get this like constant burst of S curves on top of S curves on top of S curve. It's like the moment you start slowing down or almost ahead of you slowing down, you come up with another innovation, another innovation. So Moore's Law doesn't seem to happen in every technological advancement. It seems like you only get a couple of S curves and then you're done for a bit. So I wonder what the pressures there are that resulted in such success over several decades and still going.

• 1:32:33Speaker 01

  Humility dictates that nobody knows when the S curve kicks off and you could be 20 years early or 100 years early. Leonardo da Vinci, you know, they were Michelangelo, they were designing flying machines hundreds and hundreds of years ago. So humility says you're not quite sure when it's when you really hit that commercial viability. And it also dictates you don't know when it ends. Like, when will the party stop? When will Moore's Law stop? And we'll get to the point where they're exponentially diminishing returns on silicon performance. And when you, just like we got exponentially diminishing returns on jet engines, you

• 1:33:17Speaker 01

  know, and it just takes an exponential increase in effort to make it 10% better. But while you're in the middle of it, then you know you can do things. So the reason that the digital revolution is so important is because the underlying platforms, the bandwidth of and the performance of the components and I say the components are the radio protocols, mobile protocols, the the batteries.

• 1:33:48Speaker 01

  The CPUs and the displays, right? Those four components are pretty critical. They're all critical in the creation of an iPhone. I wrote about it in the book, The Mobile Wave, and they catalyzed this entire mobile revolution. Because they have advanced and continue to advance, they created a very fertile environment for all these digital transformations. And the digital transformations themselves, right, they call for creativity in their own, right? Like, I think the interesting thing about, let's take digital maps, right?

• 1:34:30Speaker 01

  When you conceptualize something as a dematerialized map, right, it becomes a map because I can put it on a display, like an iPad, or I can put it in a car, like a Tesla. But if you really want to figure it out, you can't think like an engineer. You need to think like a fantasy writer. Like, this is where it's useful if you studied, if you played Dungeons and Dragons and you read Lord of the Rings and you studied all the fantasy literature. Because when I dematerialize the map, first I put 10 million pages of satellite imagery into the map, right? That's a simple, physical transform.

• 1:35:13Speaker 01

  But then I start to put telemetry into the map and I keep track of the traffic rates on the roads and I tell you whether you'll be in a traffic jam if you drive that way, and I tell you which way to drive. And then I start to get feedback on where you're going and I tell you the restaurant's closed and people don't like it anyway. And then I put an AI on top of it and I have it drive your car for you. And eventually, the implication of digital transformation of maps is I get in a self-driving car and I say, "Take me someplace cool where I can eat." And how did you get to that last step, right? It wasn't simple engineering. There's a bit of fantasy in there, a bit of magic.

• 1:35:56Lex Fridman?

  Design, art, whatever the heck you call it. It's whatever, yeah. Fantasy injects magic into the engineering process, like imagination.

• 1:36:07Lex Fridman?

  Like precedes great revolutions in engineering. It's like imagining a world like of what you can do with the display. How will the interaction be? That's where Google Glass actually came in. Augmented reality, virtual reality. People are playing in the space of sci fi imagination.

• 1:36:26Speaker 01

  They called a moonshot. They tried. It didn't work, but to their credit, they stopped trying, right?

• 1:36:31Lex Fridman?

  And then there's new people. They keep dreaming. There's dreamers all around us. I love those dreamers and most of them fail and suffer because of it. But some of them win Nobel prizes or become billionaires.

• 1:36:44Speaker 01

  Well, what I would say is if half the civilization dropped what they were doing tomorrow and eagerly started working on launching a rocket to Alpha Centauri.

• 1:37:00Speaker 01

  It might not be the best use of our resources because it's kind of like if half of Athens in the year 500 B.C. eagerly started working on flying machines. If you went back and you said, what advice would you give them? You would say, you know, it's not going to work till you get to aluminum and you're not going to get to aluminum till you work out the steel and certain other things. And you're not going to get to that until you work out the calculus of variations and some metallurgy. There's a dude Newton that won't come along for quite a while and he's going to give you the calculus to do it. And until then it's hopeless. So you might be better off to work on the Aqueduct or to focus upon sails or something.

• 1:37:42Speaker 01

  So if I look at this today, I say, there's massive profound environment. Civilization advances to be made through digital transformation of information. And you can see them like that. This is the story of today. This is not the story of today, right? It's 10 years old, what we've been seeing.

• 1:38:02Lex Fridman?

  We're living through different manifestations of that story today too, though. Like social media, that, the effects of that is very interesting because ideas spread even you talk about velocity of money. The velocity of ideas keeps increasing.

• 1:38:17Speaker 01

  Yeah.

• 1:38:18Lex Fridman?

  So like Wikipedia is a passive store. It's a store of knowledge. Twitter is like a.

• 1:38:26Lex Fridman?

  It's like a water hose or something. It's like spraying you with knowledge whether you want it or not. It's like social media is just like this explosion of ideas. And then we pick them up and then we try to understand ourselves because the drama of it also plays with our human psyche. So sometimes there's more ability for misinformation, for propaganda to take hold. So we get to learn about ourselves. We get to learn about the technology that can decelerate the propaganda, for example, all that kind of stuff. But like the reality is we're living, I feel like we're living through a singularity in the digital information space. And we're not, we don't have a great understanding of exactly how it's transforming our lives.

• 1:39:10Speaker 01

  This is where money is useful as a metaphor for significance, because if money is the, is the economic energy of the civilization, then something that's extraordinarily lucrative, that's going to generate a monetary or a wealth increase is a way to increase the net energy in the civilization. And ultimately, if we had 10 times as much of everything, we'd have a lot more free resources to pursue all of our advanced scientific and mathematical and theoretical endeavors. So let's take Twitter. Right? Twitter is something that could be 10 times more valuable than it is. Right? Twitter's, Twitter could be made 10 times better.

• 1:39:53Lex Fridman?

  Oh, by the way, I should say that people should follow you on Twitter. Your Twitter account is awesome.

• 1:39:57Speaker 01

  Thank you.

• 1:39:58Lex Fridman?

  It could be made 10 times better, yeah.

• 1:40:00Speaker 01

  Yeah, Twitter can be made 10 times better. If we take, if we take YouTube or take education, we could generate a billion PhDs. And, and the question is, do you need any profound breakthrough in materials or technology to do that? The answer is not really. Right? So if you want to, you could make Apple, Amazon, Facebook, Google, Twitter, all these things better. The-

• 1:40:29Speaker 01

  The United States government, if they took 1% of the money they spend on the Department of Education, and they simply poured it into digital education, and they gave degrees to people that actually met those requirements, they could provide 100x as much education for 1/100 of the cost, and they could do it with no new technology. That's a marketing and political challenge. So I don't think every objective is equally practical. And I think the benefit of being an engineer, or thinking about practical achievements,

• 1:41:10Speaker 01

  is when the government pursues an impractical objective, or when anybody, an entrepreneur, not so bad with entrepreneur because they don't have that much money to waste, when a government pursues an impractical objective, they squander trillions and trillions of dollars and achieve nothing. Whereas if they pursue a practical objective, or if they simply get out of the way and do nothing, and they allow the free market to pursue the practical objectives, then I think you can have profound impact on the human civilization.

• 1:41:47Speaker 01

  If I look at the world we're in today, I think that there are multi-trillion, 10, 20, 50 trillion dollars worth of opportunities in the digital information realm yet to be obtained. But there's hundreds of trillions of dollars of opportunities in the digital energy realm that, not only are they not obtained, the majority of people... Don't even know what digital energy is. Most of them would reject the concept. They're not looking for it. They're not expecting to find it. It's inconceivable because it is a paradigm shift.

• 1:42:32Speaker 01

  But in fact, it's completely practical. Right under our nose. It's staring at us and it could make the entire civilization work dramatically better in every, every respect.

• 1:42:45Lex Fridman?

  So you mentioned in the digital world, digital information is one. Digital energy is two. And the possible impact on the world and the set of opportunities available in the digital energy space is much greater. So how do you think about digital energy? What is it?

• 1:43:07Speaker 01

  So I'll start with Tesla. He had a very famous quote. He said, if you want to understand the universe, think in terms of energy, vibration and frequency.

• 1:43:19Speaker 01

  And it gets you thinking about what is the universe? And of course, the universe is just all energy. And then what is matter? Matter is low frequency energy. And what are we? You know, we're vibrating for, you know, ashes to ashes, dust to dust. I can turn a tree into light. I can turn light back into a tree. If, if I consider the entire universe and it's very important because we don't really think this way. Let's take the New York disco model. What if I walk into a nightclub and there's loud music blaring in New York City? What's really going on there?

• 1:44:01Speaker 01

  Right? If, if you blast out 15, 14 billion years ago, the universe has formed. Okay, that's a low frequency thing. The universe, 4 and a half billion years ago, the sun, maybe the earth are formed.

• 1:44:15Speaker 01

  The continents are 400 million years old. The schist that New York City is on is some hundreds of millions of years. But the Hudson River is only 20,000 years. There's a building that's probably 50 years old. There's a company operating that disco or that club, which is five to 10 years old. There's a person, a customer, walking in there for an experience for a few hours. There's music that's oscillating at some kilohertz. And then there's light.

• 1:44:46Lex Fridman?

  Right.

• 1:44:47Speaker 01

  And you have all forms of energy, all frequencies, right? All layered, all moving through different medium. And how you perceive the world is a question of at what frequency do you want to perceive the world? And I think that once you start to think that way, you're catalyzed to think about what would digital energy look like and why would I want it? And what is it? So why don't we just start right there? What is it? The most famous manifestation of digital energy is Bitcoin. Bitcoin's a crypto asset.

• 1:45:31Speaker 01

  It's a crypto asset that has monetary value.

• 1:45:34Lex Fridman?

  Can we just linger on that? Bitcoin is a digital asset that has monetary value. What is a digital asset? What is monetary? Why use those terms versus the words of money and currency? Is there something interesting in that disambiguation of different terms?

• 1:45:56Speaker 01

  I'd call it a crypto asset network. The goal is to create a billion-dollar block of pure energy in cyberspace.

• 1:46:08Speaker 01

  One that I could then move with no friction at the speed of light. Right? It's the equivalent to putting a million pounds in orbit. How do I actually launch something into orbit? Right? How do I launch something into cyberspace such that it moves friction free? And the solution is a decentralized proof-of-work network. Right? Satoshi's solution was, I'm going to establish a protocol running on a distributed set of computers that will maintain a constant supply of never more than 21 million Bitcoin

• 1:46:48Speaker 01

  subdivisible by 100 million Satoshis, each transferable via transferring private keys. Now, the innovation is to create that in a ethical, durable fashion. Right? The ethical innovation is, I want it to be property and not a security. A bushel of corn, an acre of land, a stack of lumber, and a bar of gold, and a Bitcoin are all property. And that means they're all commonly occurring elements in the world.

• 1:47:30Speaker 01

  You could call them commodities, but commodity is a little bit misleading, and I'll tell you why in a second. But they're all distinguished by the fact that no one entity, or person, or government controls them. If you have a barrel of oil, and you're in Ukraine versus Russia versus Saudi Arabia versus the US, you have a barrel of oil. Right? And it doesn't matter what the premier in Japan, or the mayor of Miami Beach thinks about your barrel. They cannot wave their hand and make it not a barrel of oil, or a cord of wood. Right? And so, property is just a naturally occurring element in the universe. Right?

• 1:48:15Lex Fridman?

  Why use the word ethical? And sorry to, I may interrupt occasionally. Why ethical assigned to property?

• 1:48:24Speaker 01

  Because if it's a security, a security would be an example of a share of a stock, or a crypto token controlled by a small team. And, and in the event that something is a security because some small group, or some identifiable group can control its nature, character, supply, then it really only becomes ethical to promote it or sell it pursuant to fair disclosures. So I give you maybe practical example. I'm the mayor of Chicago. I give a speech. My speech, I say, I think everybody in Chicago should own their own farm,

• 1:49:09Speaker 01

  and have chicken, a chicken in the backyard, and their own horse, and an automobile. That's ethical. I give the same speech, and I say, I think everybody in Chicago should buy Twitter stock. Sell their house, or sell their cash and buy Twitter stock. Is that ethical? Not really. At that point, you've entered into a conflict of interest, because what you're doing is you're promoting an asset which is substantially controlled by a small group of people, the board of directors, or the CEO of the company. So if, you know, how would you feel if the President of the United States said, I really think Americans should all buy Apple stock?

• 1:49:53Speaker 01

  You would, you know, especially if you worked at Google, or if you worked anywhere, you'd be like, why isn't he saying buy mine? Right? A security is, is a proprietary asset, in some way, shape, or form. The, and the whole nature of securities law, it starts from this ancient, ancient idea, thou shalt not lie, cheat, or steal. Okay? So if... If I'm going to sell you securities, or I'm going to promote securities as a public figure, or as an influencer, or anybody else, right? If I create my own yo-yo coin, or Mikey coin, and then there's a million of them,

• 1:50:35Speaker 01

  and I tell you that I think that it's a really good thing, and Mikey coin will go up forever, right? And everybody buys Mikey coin, and then I give 10 million to you, and don't tell the public, right? I cheated them. Maybe if I have Mikey coin, and I think there's only 2 million Mikey coin, and I swear to you, there's only 2 million, and then I get married, and I have 3 kids, and my 3rd kid is in the hospital, and my kid's gonna die, and I have this ethical reason to print 500,000 more Mikey coin, or else people are gonna die, and everybody tells me it's fine, you know? I've still abused, you know, the investor, right? It's an ethical challenge.

• 1:51:16Speaker 01

  If you look at ethics laws everywhere in the world, they all boil down to having a clause which says that if you're a public figure, you can't endorse a security, you can't endorse something that would cause you to have a conflict of interest. So if you're a mayor, a governor, a country, a public figure, an influencer, and you want to promote, or promulgate, or support something using any public influence, or funds, or resources you may have, it needs to be property, it can't be security. So it goes beyond that, right? I mean, like, would the Chinese want to support an American company, right?

• 1:52:01Speaker 01

  As soon as you look at what's in the best interest of the human race, the civilization, you realize that if you want an ethical path forward, it needs to be based on common property, which is fair. And the way you get to a common property is through an open, permissionless protocol. If it's not open, right, if it's proprietary and I know what the code says and you don't know what the code says, that's that makes it a security. If if it's permissioned, if you're not allowed on my network, or if you can be censored or booted off my network, that also makes it a security.

• 1:52:46Speaker 01

  So, so when I talk about property, I mean, the challenge here is how do I create something that's equivalent to a barrel of oil in cyberspace? And that means it has to be a non-sovereign bearer instrument, open, permissionless, not censorable, right? If I could do that, then I could deliver you 10,000 dematerialized barrels of oil, and you would take settlement of them. And you would know that you have possession of that property, irregardless of the opinion of any politician, or any company, or anybody else in the world.

• 1:53:31Speaker 01

  That, that's a really critical characteristic. And it actually is, it's probably one of the fundamental things that makes Bitcoin special. Bitcoin isn't just a crypto asset network. It's easy to create a crypto asset network. It's very hard to create an ethical crypto asset network. Because you have, you have to create one without any government or corporate corporation or investor exercising undue influence to make it successful.

• 1:54:03Lex Fridman?

  So, open, permissionless, non-censorable. So, basically, no way for you without explicitly saying so, outsourcing control to somebody else. So, it's a kind of... You have full control, even with a barrel of oil. What's the difference between a barrel of oil and a Bitcoin to you? What is the, because you kind of mentioned that both are property. Is, you mentioned Russia and China and so on. Is it the ability of the government to confiscate? In the end, governments can probably confiscate no matter what the asset is. But you want to lessen the effort involved.

• 1:54:47Speaker 01

  A barrel of oil is a bucket of physical property, liquid property. And Bitcoin is a digital property.

• 1:54:54Lex Fridman?

  But it's easier to confiscate a barrel of oil.

• 1:54:58Speaker 01

  It's easier to confiscate things in the real world than things in cyberspace. Much easier.

• 1:55:05Lex Fridman?

  So that's not universally true. Some things in the digital space are actually easier to confiscate because just the nature of how things move easily with information, right?

• 1:55:16Speaker 01

  So I think in the Bitcoin world, what we would say is that Bitcoin is the most difficult property that the human race possesses or has yet invented to confiscate. And that's by virtue of the fact that you could take possession of it via your private key. So if you've got your 12 seed phrases in your head, then that would be the highest form of property, right? Because I literally have to crack your head open and read your mind to take it. It doesn't mean I couldn't extract it from you under duress, but it means that it's harder than every other thing you might own. If you, in fact, it's exponentially harder.

• 1:55:56Speaker 01

  If you consider every other thing you might own, a car, a house, a share of stock, gold, diamonds, property rights, intellectual property rights, movie rights, music rights, anything imaginable, they would all be easier by orders and orders of magnitude to seize. So digital property in the form of a, you know, a set of private keys is by far the apex property of the human race. In terms of ethics, I want to make one more point. It's like, I might say to you, Lex, I think Bitcoin is the best, most secure, most durable crypto asset network in the world is going to go up forever. And there's nothing better in the world. I might be right, I might be wrong.

• 1:56:41Speaker 01

  But the point is, because it's property, it's ethical for me to say that. If I were to turn around and say, you know, Lex, I think the same about MicroStrategy stock, MSTR, that's a security, okay? If I'm wrong about that, I have civil liability or other liability because, because I could go to a board meeting tomorrow and I could actually propose we issue a million more shares of MicroStrategy stock. Whereas the thing that makes Bitcoin ethical for me to even promote is the knowledge that I can't change it. If, if I knew that I could make it 42 million instead of 21 million and I had the button back here.

• 1:57:26Lex Fridman?

  Yeah.

• 1:57:27Speaker 01

  Right? Then, then I have a different degree of ethical responsibility. Now, I could tell you, your life will be better if you buy Bitcoin, and it might not. You might go buy Bitcoin, you might lose the keys and be bankrupt and your life ends and your life is not better because you bought Bitcoin, right? But it wouldn't be my ethical liability any more than if I were to say, Lex, I think you ought to get a farm. I think you should be a farmer. I think a chicken in every pot, you should get a horse, I think you'd be better. I mean, these are all, they're all opinions expressed about property, which may or may not be right, that you may or may not agree with.

• 1:58:08Speaker 01

  But in, in a legal sense, if we read the law, if we understand securities law, and I would say, you know, most people in the crypto industry, you know, they don't, they didn't take companies public and so they're not really focused on the securities law. They don't even know the securities law. If you focus on the securities law, that would say you just can't legally sell this stuff to the general public or promote it without a full set of continuing disclosures signed off on by a regulator. So, so there's a fairly bright line there with regard to securities. But when you get to the, when you get to the secondary issue, it's how do you actually

• 1:58:51Speaker 01

  build a world based on digital property if public figures?

• 1:58:58Speaker 01

  Can't embrace it or endorse it. You see, so you're not going to build a better world based upon Twitter stock, if that's your idea of property, because Twitter stock is a security and Twitter stock is never going to be a non-sovereign bearer instrument in Russia, right, or in China, right? It's not even legal in China, right? It's not a global permissionless, open thing. It will never be trusted by the rest of the world and legally it's impractical, but, you know, would you really want to put $100 trillion worth of economic value on Twitter stock if there's a board of directors and a CEO that could just get up and like take half of it tomorrow? The answer is no.

• 1:59:40Speaker 01

  So if you want to, if you want to build a better world based on digital energy, you need to start with constructing a digital property. And I'm using property here.

• 1:59:53Lex Fridman?

  Open, permissionless.

• 1:59:56Speaker 01

  In the legal sense.

• 1:59:57Lex Fridman?

  Okay.

• 1:59:58Speaker 01

  But I would also go to the next step and say, property is low-frequency money. So if you, if I give you a million dollars and you want to hold it for a decade, you might go buy a house with it, right? And the house is low-frequency money. You converted the, the million dollars of economic energy into a structure called a house. Maybe after a decade, you might convert it back into energy. You might sell the house for currency and it'll be more, worth more or less, depending upon the monetary climate.

• 2:00:34Lex Fridman?

  The frequency means what here? How quickly it changes state?

• 2:00:39Speaker 01

  How quickly does something vibrate? So if, if I transfer $10 from me to you for a drink and then you turn around and you buy another, right? We're vibrating on a frequency of every few hours, right? The energy is changing hands. But it's not likely that you sell and buy houses every few hours, right? The frequency of, of a, of a transaction in real estate is every 10 years, every five years. It's a much lower frequency transaction. And.

• 2:01:14Speaker 01

  So when you think about what's going on here, you have extremely low frequency things, which we'll call property, then you have mid-frequency things, I'm gonna call them money or currency, and then you have high-frequency, and that's energy. And that's why I use the illustration of you got the building, you got the light, and you got the sound, and they're all just energy moving at different frequencies. Now Bitcoin is magical, and it's, it is truly the innovation, it's like a singularity, because it represents

• 2:01:55Speaker 01

  the first time in the history of the human race that we managed to create a digital property, properly understood. It's, it's easy to create something digital, right? Every coupon and every scan on Fortnite and Roblox and, and Apple TV credits and all these things, they're all digital something, but they're securities, right? Shares of stock are securities. Whenever anybody transfers, when you transfer money on PayPal or Apple Pay, you're transferring in essence a security or an IOU. And so transferring a bearer instrument with final settlement in, in the internet domain or in cyberspace, that's

• 2:02:40Speaker 01

  a critical thing. And anybody in the crypto world can do that. All the cryptos can do that. But what they can't do, what 99% of them fail to do is be property. They're securities.

• 2:02:54Lex Fridman?

  Well, there's a line there, I'd like to explore a little further. For example, what about when you, Coinbase or something like that, when there's an exchange that you buy Bitcoin is in, you start to move away from this kind of, some of the, some of the aspects that you said makes up a property, which is this...

• 2:03:20Lex Fridman?

  Nonsensible and permissionless and open. So in order to achieve the convenience, the effectiveness of the of the transfer of energy, you have to leverage some of these other places that remove the aspects of property. So maybe you can comment on that.

• 2:03:40Speaker 01

  Let me give you a good model for that. If you think about the layer one of Bitcoin, the layer one is is the property settlement layer and we're we're going to do 350,000 transactions or less a day, 100 million transactions a year is the bandwidth on the layer one. And it would be an ideal layer one to move a billion dollars from point A to point B with the massive security. The role of the layer one is is two things. One thing is I want to move a large sum of money through space with security. I can move any amount of Bitcoin in a matter of minutes for dollars on layer one.

• 2:04:25Speaker 01

  The second important feature of the layer one is I need the money to last forever. Right? I need the money indestructible, immortal. So so the bigger trick is not to move a billion dollars from here to Tokyo. The big trick is to move a billion dollars from here to the year 2140. And and that's that's what we want to solve with layer one. And and the best real metaphor in New York City would be the granite or the schist. What you want is a city block of bedrock. And how long has it been there? Like millions of years it's been there. And how fast do you want it to move? You don't.

• 2:05:06Speaker 01

  In fact, the single thing that's most important is that it not deflect. If it deflects a foot in 100 years, it's too much. If it deflects an inch in 100 years, you might not want that. So the layer one of Bitcoin is a foundation upon which you put weight. How much weight can you put on it? You put a trillion, 10 trillion, 100 trillion, a quadrillion? How much weight's on the bedrock in Manhattan, right? Think about 100-story buildings. So the real key there is the foundational asset needs to be there at all. So the fact that you can create a $100 trillion Layer 1 that would stand for 100 years,

• 2:05:49Speaker 01

  that is the revolutionary breakthrough, first time. And the fact that it's ethical, right? It's ethical and it's common property, global, permissionless. Extremely unlikely that would happen. People tried 50 times before and they all failed. They tried 15,000 times after and they've all been, they've all generally failed. 98% have failed and a couple have like been less successful. But for the most part, that's an extraordinary thing.

• 2:06:20Lex Fridman?

  Now- Just really quickly pause, just to define some terms. If people don't know, Layer 1 is, that Michael's referring to is, in general, what people know of as the Bitcoin technology originally defined, which is the blockchain, there's a consensus mechanism of proof of work, a low number of transactions, but you can move a very large amount of money. The reason he's using the term Layer 1 is now that there's a lot of ideas of Layer 2 technologies that are built on top of this bedrock that allow you to move a much larger number of transactions.

• 2:07:02Lex Fridman?

  Sort of higher frequency, I don't know what terminology you want to use, but basically be able to use now something that is based on Bitcoin to then buy stuff, be a consumer, to transfer money, to use it as currency.

• 2:07:19Lex Fridman?

  Just to define some terms.

• 2:07:21Speaker 01

  Yeah. So the Layer 1 is the foundation for the entire cyber economy. And-

• 2:07:31Speaker 01

  We don't want it to move fast. What we want is immortality, incorruptible, indestructible. Right? That's what you want, integrity from the Layer 1. Now, there's Layer 2 and Layer 3. And Layer 2, I would define as an open, permissionless, non-custodial protocol that uses the underlying Layer 1 token as its gas fee.

• 2:08:00Lex Fridman?

  So what custodial mean? And how does the different markets like, is Lightning Network?

• 2:08:06Speaker 01

  So Lightning Network would be an example of a Layer 2, non-custodial. So the Lightning Network will sit on top of Layer 1. It'll sit on top of Bitcoin. And what you want to do is solve the problem of, it's well and fine. I don't want to move a billion dollars every day. What I want to move is $5 a billion times a day. So if I want to move $5 a billion times a day, I don't really need to put the entire trillion dollars of assets at risk every time I move $5. All I really need to do is put $100,000 in a channel or $1 million in a channel.

• 2:08:48Speaker 01

  And then I do 10 million transactions where I have $1 million at risk. And of course, it's kind of simple. If I lower my security requirement by a factor of a million, I could probably move the stuff a million times faster. And that's how Lightning works. It's non-custodial because there's no corporation or custodian or counterparty you're trusting. Right? There's the risk of moving through the channel. But Lightning is an example of how I go from 350,000 transactions a day to 350 million transactions a day. So on that Layer 2, you could move the Bitcoin in seconds

• 2:09:33Speaker 01

  for fractions of pennies. Now, that's not the end-all, be-all. Because the truth is, there are a lot of open protocols. Lightning probably won't be the only one. There's an open market competition of other permissionless, open-source protocols to do this work. And in theory...

• 2:09:52Speaker 01

  Any, any other crypto network that was deemed to be property, deemed to be non- security, you would all, you could also think of as potentially a layer two to Bitcoin. Right? There's a debate about are there any and what are they? And, and we can leave that for a later time.

• 2:10:09Lex Fridman?

  But why do you think of them as layer two as opposed to contending for layer one?

• 2:10:16Speaker 01

  Yeah, actually, if they're using their own token, then they are a layer one. If you create an open protocol that uses the Bitcoin token as the, as the fee, then it becomes a layer two.

• 2:10:28Lex Fridman?

  Okay.

• 2:10:29Speaker 01

  Right? Bitcoin itself, right, incentivizes its own transactions with its own token. And that's what makes it layer one.

• 2:10:38Lex Fridman?

  Okay. What's layer three then?

• 2:10:40Speaker 01

  Layer three is a custodial layer. So if you want to move Bitcoin in milliseconds for free, you move it through Binance or Coinbase or Cash App. So this is a very straightforward thing. I mean, it, it seems pretty obvious when you think about it, that there are going to be hundreds of thousands of layer threes. There may be dozens of layer twos. There might, I mean, Lightning is A1, but it's not the only one. Anybody can invent something. Right? And, and we can have this debate about custodial, non-custodial.

• 2:11:17Lex Fridman?

  Don't you think there's a monopolization possibilities at layer three? So, um, you know, coin, you mentioned Binance, Coinbase. What if they start to dominate and basically everybody's using them practically speaking? And then it becomes too costly to memorize the, the private key in your brain. I mean, or like a cold storage of layer one technology.

• 2:11:45Speaker 01

  The idealist fear the layer threes because they think, and especially they detest, they would detest a bit. There's almost like a layer four, by the way, if you want to. A layer four would be I've got Bitcoin on an application, but I can't withdraw it. So I've got an application that's backed by Bitcoin, but the Bitcoin is sealed. It's a proprietary example, and I'll give you an example of that. That would be like grayscale. If I own a share of GBTC. And so I own a security. Actually, you know, you could own MSTR. If you own a security or you own a product that has Bitcoin embedded in it,

• 2:12:27Speaker 01

  you get the benefits of Bitcoin, but you don't have the ability to withdraw the asset.

• 2:12:33Lex Fridman?

  To get on the security market at layer four, am I understanding this correctly?

• 2:12:39Speaker 01

  I don't know if I would say, I don't, not all securities are layer four, but, but anything that's a proprietary product based upon with Bitcoin embedded in it, where you can't withdraw the Bitcoin is another application of Bitcoin. So if, if you think about different ways you can use this, you can either stay completely on the layer one and use the base chain for your transactions, or you can limit yourself to layer one and layer two lightning. And the purist would say, we stay there, get your Bitcoin off the exchange. But you could also go to the layer three. When Cash App supported Bitcoin, they made it very easy to buy it. And then they gave you the ability to withdraw.

• 2:13:24Speaker 01

  When PayPal, or I think Robinhood, let you buy it, they wouldn't let you withdraw it. And there was a big community uproar and people want, they want these layer threes to, to make it possible to withdraw the Bitcoins. You could take it to your own private wallet and get it off the exchange. I think the answer to the question of, well, is corruption possible is? Corruption is possible in all human institutions and all governments everywhere. The difference between digital property and physical property is when you own a building in Los Angeles and the city politics turn against you, you can't move the building.

• 2:14:03Speaker 01

  And when you own a share of a security, that's like a US traded security, and you wish to move to some other country, you can't take the security with you either. And when you own a bunch of gold and you try to get through the airport, they might not let you take it. So Bitcoin is advantageous versus all those because you actually do have the option to withdraw your asset from the exchange. And if you, you know, if you had Bitcoin with fidelity and you had shares of stock with fidelity, and if you had bonds and sovereign debt with fidelity, and if you own some, some, you know, mutual funds and some other

• 2:14:47Speaker 01

  random limited partnerships with fidelity, none of those things can be removed from the custodian. But the Bitcoin, you can take off the exchange, you can remove from the custodian. So, so.

• 2:15:01Lex Fridman?

  It's still possible.

• 2:15:02Speaker 01

  There's a deterrent. There's a deterrent that's an anti-corrupting element. And the phrase is an armed society is a polite society, right? Because you have the optionality to withdraw all your assets from the crypto exchange, you can enforce fairness. And at the point where you disagree with their policies, you can, within an hour, move your assets to another counterparty or take personal custody of those assets. And you don't have that option with most other forms of property. Maybe you don't have as much optionality with any other form of property on earth. And so what makes digital property distinct is the fact that it has the most optionality for custody.

• 2:15:49Speaker 01

  Now coming back to this digital energy issue, the real key point is the energy moves in milliseconds for free on layer threes. It moves in seconds or less than seconds on layer twos. It moves in minutes on the layer one. And I don't think it makes any sense to even think about trying to solve all three problems on the layer one because it's impossible to achieve the security and the incorruptibility and immortality if you try to build that much speed and that functionality and performance. In fact, if you come back to the New York model, you really wanted a block of granite, a building and a company. That's what makes the economy, right?

• 2:16:34Speaker 01

  If you said, if I said to you, you're going to build a building, but you can only have one company in it for the life of the building, it would be very fragile, like very brittle. What company 100 years ago is still relevant today? You want all three layers because they all oscillate at different frequencies. And, and you know, there's a tendency to think, well, it's, it's got to be this L1 or that L1, not really. And sometimes people think, well, I don't really want any L3. But companies, it's not an even or, companies are better than crypto asset networks at certain things. If you want complexity, you want to implement complexity or you want to implement compliance

• 2:17:19Speaker 01

  or customer service, right? Companies do these things well, right? We know you couldn't decentralize Apple or Netflix or even YouTube. The performance wouldn't be there and the subtlety wouldn't be there. And you can't really legally decentralize certain forms of banking and insurance because they will become illegal in the political jurisdiction they're in. So unless you're a crypto anarchist and you believe in no companies and no nation states, right? Which is just not very practical, not anytime soon. Once you allow that nation states will continue and companies have a role,

• 2:18:03Speaker 01

  then the layered architecture follows and the free market determines who wins. For example, there are layer threes that that's let you acquire Bitcoin and withdraw Bitcoin. There are there are other applications that let you acquire but not withdraw. And and they're they don't get the same market share, but they might give you some other advantage. There are there are certain layer threes like Jack Dorsey's Cash App where they just incorporated Lightning, an implementation of it. So.

• 2:18:41Lex Fridman?

  Into Cash App.

• 2:18:42Speaker 01

  So that makes it more that makes it advantageous versus an application that doesn't incorporate Lightning. If you think about the big picture, the big picture is eight billion people with mobile phones, served by a hundred million companies doing billions of transactions an hour. And and the companies are settling with each other on the base layer in blocks of eighty million at a time. And then the companies are trading with the consumers, right? In proprietary layers like layer three and then

• 2:19:23Speaker 01

  on occasion, people are shuffling assets across custodians with Lightning Layer Two, because you don't want to pay five dollars to move fifty dollars. You want to pay a twentieth of a penny to move fifty dollars. And so all of these things create efficiency in the economy. And Lex, if you want to consider how much efficiency? If if you gave me a billion dollars in twenty years, I couldn't find a way to trade with another company or a counterparty in Nigeria. Like, no, no amount of money. You give me ten billion dollars. I couldn't do it. Because you get shut down at the banking level. You can't link up a bank in Nigeria with a bank in the US.

• 2:20:08Speaker 01

  You get shut down at this credit card level because they don't have the credit cards or they won't clear. You get shut down at the compliance FCPA level because because you wouldn't be able to implement a system that interfaced with somebody else's system if it's not in the right political jurisdiction. On the other hand, three entrepreneurs in Nigeria on the weekend could create a website that would trade in this lightning economy using open protocols without asking anybody's permission. So you're talking about something that's like a million times cheaper, less friction and faster to do it if you want to get money to move.

• 2:20:54Lex Fridman?

  What do you think that looks like? So now there's a war going on in Ukraine. There's other wars, Yemen going out throughout the world in this most difficult of states that a nation can be in, which is at war. Civil war or war with other nations. What's the role of Bitcoin in this context?

• 2:21:18Speaker 01

  I mean Bitcoin's a universal trust protocol, a universal energy protocol, if you will. English is one. Okay, what I see is a bunch of fragmentation of applications. For example, you know, the Russian payment app is not going to work in Ukraine. The Ukraine payment app is not going to work in Russia. The US payment apps won't work either of those places as far as I know. So, you know, and Argentina, their payment app may not work in certain parts of Africa. So what you have is is a different local economies where people spin up their own applications,

• 2:21:58Speaker 01

  compliant with their own local laws or, you know, in war zones, not compliant, but just spinning up.

• 2:22:07Lex Fridman?

  So how do you build something that's not compliant? What is the revolutionary act here? When you don't agree with the government or what you want to free yourself from the constraints? So here's the thing, when a nation is really at war. Especially if it's an authoritarian regime, it's going to try to control the pop, like lock everything down, the spread of information. How do you break through that? Do you do the thing that you mentioned, which is you have to build another app essentially that allows the flow of money outside the legal constraints placed on you by the government? So basically break the law?

• 2:22:47Speaker 01

  Metaphorically speaking, if you want to break out of the constraints of your culture, you learn to speak English. For example, it's not illegal to speak English, or even if it is, right? Doesn't matter, but but English works everywhere in the world. If you can speak it, and then you can tap into a global commerce and intelligence network. So Bitcoin is a language. So you learn to speak Bitcoin, or you learn to speak Lightning, and then you tap into that network in, you know, whatever manner you can.

• 2:23:19Lex Fridman?

  But the problem is it's still very difficult to move Bitcoin around in Russia and Ukraine now during war. And there was a sense to me that the cryptocurrency in general could be the savior for helping people. There's millions of refugees that are moving all around. It's very, it's very difficult to move money around in that space to help people.

• 2:23:44Speaker 01

  I think we're very early. Like, like, we're very embryonic here. If you look at the

• 2:23:49Lex Fridman?

  Who's we? Sorry. We as a human civilization, are we operating in the cryptocurrency space?

• 2:23:54Speaker 01

  I think the entire crypto economy is very embryonic, and the, and the human race's adoption of it is embryonic. We're like 1%, 2% down that adoption curve. If you take Lightning, for example, the, you know, the first real commercial applications of Lightning are just in the last 12 months. So we're like year one. We might be approaching year two of commercial Lightning adoption. And if you look at Lightning adoption, Lightning's not built into Coinbase, is not built into Binance, is not built into FTX. You know, Cash App just implemented the first implementation, but not all the features are

• 2:24:35Speaker 01

  built into it. There's a few dozen, a dozen Lightning wallets circulating out there. So I think that, you know, we're probably going to be 36 months of software development at the point that every Android phone and every iPhone has a Bitcoin wallet or a crypto wallet in it of sorts. That's a big deal. If Apple embraced Lightning, that's a big deal.

• 2:25:04Lex Fridman?

  So the adoption is the thing, like in a war zone, adoption, the people who struggle the most in war are people who weren't doing that great before the war started. They don't have the technological sophistication. The hackers and all those kinds of people will find a way. It's just regular people who are just struggling to make day by day living. And so if the adoption permeates the entire culture, then you can start to move money around in the digital space. What if from a psycho, if you can psychoanalyze Jack Dorsey for a second. So he's one of the early adopters, or he's one of the people pushing the early

• 2:25:47Lex Fridman?

  adoption, this layer three, so inside Cash App. What do you make of the man, of this decision as a business owner, as somebody playing in the space? Like what, why did he do it? And what does that mean for others at this scale that might be doing the same? So incorporating Lightning Network, incorporating Bitcoin into their products?

• 2:26:12Speaker 01

  I think he's been pretty clear about this. He feels that Bitcoin is an instrument of economic empowerment for billions of people that are unbanked and have no property rights in the world. If you want to give an incorruptible bank...

• 2:26:33Speaker 01

  To eight billion people on the planet. That's the same as asking the question, how do you give a full education through PhD to eight billion people on the planet? And the answer is a digital version of the 20th century thing running on a mobile phone. And Bitcoin is a bank in cyberspace, is run by incorruptible software, and it's for everybody on Earth. So I think when Jack looks at it, he's very sensitive to the plight of everybody in Africa. You look at Africans, right? Like, you're gonna give them banks? You're not gonna put a bank branch on every corner? That's an obscene waste of energy. You're not gonna run copper wires across the continent?

• 2:27:16Speaker 01

  That's an obscene waste of energy. You're not gonna give them gold and, you know, so, so how are you going to provide people with a decent life? The metaphor, I think, is relevant here, the biological metaphor. Lex is a type 1 diabetic. If you're a type 1 diabetic, you can't form fat. And if you can't form fat, then you can't store excess energy. So that means that, I mean, fat is the ultimate organic battery, and if you've got 30 pounds of it, you can go 60 days without eating. But if you can't generate insulin, you can't form fat cells, and if you can't form fat cells and store energy, then you can eat yourself to death.

• 2:28:00Speaker 01

  I mean, you will eat and you will die. You'll starve to death. So the lack of property rights is like being a type 1 diabetic. And so if you look at most people everywhere in the world, they don't have property rights, they don't have effective bank, and they don't, and their currency is broken. Like, what are the, what are the two things that, in theory, would serve as the equivalent of a, of a, an organic battery, or an economic battery to civilization? It would be, I have a currency which holds its value, and I can store it in a bank. So a risk, a risk-free currency derivative.

• 2:28:44Speaker 01

  I pay you your money, you take your life savings, you put it in the bank, you save up for your retirement, you live happily ever after. That's the American dream, right? That's the idyllic situation. The real situation is, there are no banks, you can't get a bank account. So I give you your pay in currency, and then I double the supply and I give it to my cousin, or I give it to whatever cause I want, or I use it to buy weapons, and then you find a loaf of bread costs triple next month is what it costs, and your life savings is worthless. And so in that environment, everybody's ripped back to Stone Age barter. And the problem with

• 2:29:25Speaker 01

  that, even Stone Age barter, is you're gonna carry your life savings on your back, and what happens when the guy with a machine gun points it at your head and just takes your life savings? So, so I think from Jack's point of view, he thinks that life is, this is maybe too strong, but these are my words, "life is hopeless for a lot of people, and Bitcoin is hope."

• 2:29:48Speaker 01

  Because, because it gives everyone an engineered monetary asset that's a bearer instrument, and it gives them a bank on their mobile phone, and they, they don't have to trust their government or another counterparty with their life force. So, there's a secondary thing I think he's interested in, which is, the first thing is the human rights issue, and the second thing would be, the friction to trade cross borders is so great, right? Like, you know, you're like AI,

• 2:30:33Speaker 01

  so I'll give you a beautiful notion. Maybe one day, there'll be an artificially intelligent creature in cyberspace that is self-sufficient and rich.

• 2:30:47Lex Fridman?

  Like that would have sovereignty.

• 2:30:49Speaker 01

  Can a robot own money or property? How about can a Tesla car? Can I actually put enough money in a car for it to drive itself and maintain itself forever? Or can I create an artificially intelligent creature in cyberspace that is endowed? Such that it would live a thousand years and continue to do its job? Right? You know, we have a word for that in the real world is institution. Harvard, Cambridge, Stanford, right? There are institutions with endowments that go on in perpetuity. But what if I wanted to perpetuate a software program?

• 2:31:31Speaker 01

  And with something like digital property with Bitcoin and Lightning, you could do it. And on the other hand, with banks and credit cards, you couldn't, right? You couldn't ever. So, so you can create things that are beautiful and lasting. And what's the difference in speed? Well, so I can either trade with everybody in the world at the speed of light, friction free, in 24 hours, writing a Python script. Or I can spend $100 billion to trade with a few million people in the world

• 2:32:15Speaker 01

  after it takes them six months of application. The impedance is like a 10 million to one difference. Right? And the metaphors are literally like launching something in orbit versus almost orbit or vacuum sealing something. Does it last forever? And does it orbit forever? Or does it go up and come down and burn up? Right? And I think Jack is interested in.

• 2:32:44Speaker 01

  You know, putting freedom in orbit, right?

• 2:32:47Lex Fridman?

  Putting freedom.

• 2:32:49Speaker 01

  Putting freedom in orbit. And he said it many times. He said, this is the, the internet needs a native currency.

• 2:32:55Lex Fridman?

  Yeah.

• 2:32:56Speaker 01

  Right? And, and no political construct or security can be a native currency. You need a property and you need a property that can be moved a million times a second. Can you oscillate it at 10 kilohertz or 100 kilohertz? And the answer is only if it's a pure digital construct, permissionless and open. And so I think he, that he's enthusiastic as the technologist and he's enthusiastic as the humanitarian. And what he's doing is to support both those areas. He's supporting the Bitcoin and the Lightning Protocol by building them into his products.

• 2:33:35Speaker 01

  But he's also building the applications, which you need at the cash app level in order to commercialize and deliver the functionality and the compliance necessary. And they're related.

• 2:33:48Lex Fridman?

  And I should also say, he's just a fascinating person. For a random reason that I couldn't even explain if I tried, I met him a few days ago and gave him a great big hug in the middle of nowhere. There was no explanation. He just appeared. That's a fascinating human. His relationship with art, with the world, with human suffering, with technology is fascinating. I don't, I don't know what his path looks like, but it's interesting that people like that exist. And in part, I'm saddened that he no longer is involved with Twitter directly as a CEO.

• 2:34:30Lex Fridman?

  Because I was hoping something inside Twitter would also integrate some of these ideas of what you're calling digital energy, to see how social networks, something I'm really interested in and passionate about, could be transformed. Let me ask you, just for educational purposes, what's the, can you please explain to me what Web 3 and the beef between Jack and Marc Andreessen is exactly? Did you see what happened? Sorry to have you analyze Twitter like it's Shakespeare, but can you please explain to me why, why there is any, any drama over this topic?

• 2:35:09Speaker 01

  First of all, Web 3 is a term that's used to refer to, you know, the part of the economy that's token financed. So if I'm launching an application and my idea is to create a token along with the application and issue the token to the community so as to finance the application and build support for it, I think that that's the most common interpretation of Web 3. There are other interpretations too, and so I'm just going to refer to that one. And I think the beef, in a nutshell, not articulated, but I'll articulate it, is whether or not you should focus all your energy creating applications on top of an

• 2:35:51Speaker 01

  ethical digital property like Bitcoin, or whether you should attempt to create a competitor to it, which generally would be deemed as a security by the Bitcoin community. So I'm going to put on my Bitcoin hat here.

• 2:36:08Lex Fridman?

  Yeah.

• 2:36:09Speaker 01

  Right? All the tokens that are, if it's driven by a venture capitalist, well, it's a security. If there's a CEO and a CTO, it's a security. All these projects, they're companies, foundations are companies, right? If you call them a project or a foundation, it doesn't make it not a security. They're all, in essence, collections of individuals that are issuing equity in the form of a token. And if there's a pre-mine, an IPO, an ICO, a foundation, or any kind of, any kind of protocol where there's a group of engineers that have influence

• 2:36:50Speaker 01

  over it, then to a securities lawyer, or, you know, to most Bitcoiners, and definitely to anybody that's steeped in securities law, you're looking and say, well, that passes the Howey test. It's, it looks like a security. It should be sold to the public pursuant to, you know, disclosures and regulations. And you're just ducking the IPO process, right? And so now we get back to the ethical issue. Well, the ethical issue is...

• 2:37:23Speaker 01

  If you're trading it as a commodity and representing it as a commodity while truthfully it's a security, you know, then it's a violation of ethics rules and it's probably illegal.

• 2:37:33Lex Fridman?

  Well, you're, you keep leaning on this. Let me push back on that part.

• 2:37:36Speaker 01

  Yeah.

• 2:37:36Lex Fridman?

  Maybe you can educate me, but you keep leaning on this line of securities law as if it, with all due respect to lawyers, as if that line somehow defines what it, what is and isn't ethical. I think there's a lot of correlation, as you've discussed, but I'd like to leave the line aside. If the law calls something as a security, it doesn't mean in my eyes that it is unethical. I mean, there could be some technicalities and lawyers and people play games with this kind of stuff all the time. But I take your bigger point that if there's a CEO, there's a project lead that's fundamentally, well, that to you is fundamentally different than the, the structure of Bitcoin.

• 2:38:20Speaker 01

  It's not that creating securities is unethical. I, I created a security. I took a company public, right? That's not the unethical part. It's completely ethical to create securities. You know, Block is a security. All companies are securities. The unethical part is to represent it as property when it's a security and, and to promote it or trade it as such.

• 2:38:42Lex Fridman?

  This whole promotion, that's also a technical thing because you're, like what, what counts as a not as promotion is a legal thing and you get in trouble for all these things, but that, that's the game that lawyers play. There's an ethical thing here, which is like, what's the right to promote a not, you know? To me, propaganda is unethical, but it's usually not illegal.

• 2:39:08Speaker 01

  If you roll the clock back 20 years, right? All the boiler room pump and dump schemes were all about someone pitching a penny stock.

• 2:39:19Lex Fridman?

  Sure.

• 2:39:19Speaker 01

  You know, selling swampland in Florida. And if you roll the clock back forward 20 years and I create my own company and I represent it as the same thing and I don't make the disclosures, right? You're, you're just one step removed from the boiler room scheme.

• 2:39:36Lex Fridman?

  Yeah.

• 2:39:37Speaker 01

  And that's what's distasteful about it. There are ways to sell securities to the public, but there are, but there are expectations. Maybe.

• 2:39:46Speaker 01

  We could forget about whether the security laws are ethical or not, right? I will leave that alone. We'll just start with the biblical definition of ethics.

• 2:39:55Lex Fridman?

  Yes.

• 2:39:56Speaker 01

  Don't lie, cheat, or steal. So if I'm going to sell something to you, I need to fully disclose what I'm selling to you. Right? And that, that's a matter of great debate right now. And so I think that that's part of the debate. But the other part of the debate is

• 2:40:17Speaker 01

  whether or not we need more than one token. Like, uh,

• 2:40:23Speaker 01

  we need at least one, right? We need, we need at least one digital property.

• 2:40:27Lex Fridman?

  One is better than zero.

• 2:40:28Speaker 01

  Because zero means there is no digital economy.

• 2:40:31Lex Fridman?

  Yes.

• 2:40:32Speaker 01

  And by the way, you know, the conventional view of maximalists is they think there's only one and everything else isn't. That's not the point I'm going to make. I would say we know there is, as there is at least one digital property, and that is Bitcoin.

• 2:40:48Speaker 01

  If you can create a truly decentralized, non-custodial, you know, bearer instrument that is not under the control of any organization that is fairly distributed, then you might create another or multiple, and there may be others out there. But

• 2:41:11Speaker 01

  I think that the frustration of a lot of people in the Bitcoin community, and I share this with Jack, is we could create $100 trillion of value in the real world simply by building applications on top of Bitcoin as a foundation. And so continually trying to reinvent the wheel and, and create competitive things is a massive waste of time and it's diversion of human,

• 2:41:44Speaker 01

  human creativity. It's like, we have an ethical good thing.

• 2:41:48Lex Fridman?

  Yep.

• 2:41:49Speaker 01

  And now we're going to try to create a third or a fourth one. Why?

• 2:41:55Lex Fridman?

  Well, let's talk about it. So first of all, I'm with you, but let me ask you this interesting question because we talked about properties and securities. Let's talk about conflict of interest. You said you could advertise public, you have a popular Twitter account. It's, it's hilarious and insightful.

• 2:42:14Lex Fridman?

  You do promote Bitcoin in a sense. I don't know if you would say that. But do you think there's a conflict of interest in anyone who owns Bitcoin promoting Bitcoin? Is it the same as you promoting the farming?

• 2:42:30Speaker 01

  I would say, no, there's an interest. I think that I think that you can promote a property or an idea to the extent that you don't control it. I think that the point at which you start to have a conflict of interest is when you're promoting a proprietary product or proprietary security. A security in general is proprietary asset. So, for example, if you look at my Twitter, you will find that I make lots of statements about Bitcoin. You won't ever see me making a statement that, say, MicroStrategy stock will go up forever. I'm not promoting a security MSTR

• 2:43:13Speaker 01

  because, at the end of the day, MSTR is a security. It is proprietary. I have proprietary interest in it. I have a disproportionate amount of control and influence on the direction.

• 2:43:27Lex Fridman?

  The control is the problem. The control is the problem. Because you have interest in both. You can very, if Bitcoin is as successful as we're talking about, you are very possibly can become the richest human on earth, given how much you own in Bitcoin, right? The wealthiest, not the richest. I don't know what those words mean.

• 2:43:48Speaker 01

  I would benefit economically.

• 2:43:50Lex Fridman?

  Econom- you would benefit economically.

• 2:43:52Speaker 01

  That's true.

• 2:43:53Lex Fridman?

  So, the reason that's not conflict of interest is because the word property, that Bitcoin is an idea and Bitcoin is open.

• 2:44:06Speaker 01

  I don't control it. In essence, the ethical line here is, could I print myself 10 million more Bitcoin or not? Right?

• 2:44:17Lex Fridman?

  Or can anyone, right? It's not just you. It's can anyone? Because can you promote somebody else's? Yes, I guess you can. Like if you can you promote us, uh, Apple.

• 2:44:30Speaker 01

  It's like, it's like you could have a Twitter account where you promote oil or you promote camping. Or you promote family values or promote, you know, a carnivore diet or promote the Iron Man, right?

• 2:44:43Lex Fridman?

  That you're not going to get wealthier if you promote camping. Cause you can't own a steak and I mean.

• 2:44:51Lex Fridman?

  You own a lot of Bitcoin. What is that? What is that? What? Don't you own a stake in the idea?

• 2:44:57Speaker 01

  Yeah, I would, I would grant you that.

• 2:45:01Lex Fridman?

  But the lack of control is the fundamental ethical line that you just, you don't have. All you are is you're a fan of the idea. You believe in the idea and the power of the idea.

• 2:45:13Speaker 01

  Yeah, I think.

• 2:45:14Lex Fridman?

  You can't take that idea away from others.

• 2:45:16Speaker 01

  Let's come back to, let me give you some maybe easier examples. If you were the head of the Marine Corps. Right? And, uh.

• 2:45:27Speaker 01

  And someone came to you and said, I created Marine coin and, uh, and the twist on Marine coin is, is I want you to tell every Marine that they'll get an extra Marine coin, you know? When they, when they get their next stripe. And then I'm going to give you, you know, and I'm going to let you buy Marine coin now. And then after you buy Marine coin, I want you to like, uh, promote it. To them. Right? At some point. If, if you start to have a disproportional influence on it, or if you're in a conversation with people with disproportionate influence becomes conflict of interest. And it would make you profoundly uncomfortable, I think. If the head of the Marine Corps started promoting anything that looked like a security.

• 2:46:11Speaker 01

  Now, if the head of Marine Corps started promoting canoeing.

• 2:46:16Speaker 01

  You might think he's kind of wacky, like maybe, like, that's kind of a waste of time and distraction. So, but, but. But to the extent that canoeing is not a security, not a problem unless you, you know. Ultimately, the, the issue of decentralization is really a critical.

• 2:46:35Lex Fridman?

  Not having a head.

• 2:46:36Speaker 01

  One.

• 2:46:36Lex Fridman?

  So is, is it something? Can, can Bitcoin be replicated?

• 2:46:44Lex Fridman?

  So the, all the things that you're saying that make it a property, can that be replicated? Have any other-

• 2:46:49Speaker 01

  I think it's possible to create other crypto properties.

• 2:46:52Lex Fridman?

  Does it, does the, having a head, like, of a project, a thing that limits its ability to be a property? If you, if you try to replicate a project? Is that the fundamental flaw?

• 2:47:07Speaker 01

  I, look, I, I think the real fundamental issue is you just never want it to change. Like, like, uh, if you really want something decentralized, you want a genetic template that substantially is not going to change for a thousand years. So I, I think Satoshi said it at one point, he said, "The nature of the software is such that by version point one, its genetic code was set."

• 2:47:34Speaker 01

  If, if there was any development team that's continually changing it, you know, on a routine basis, it becomes harder and harder to maintain its decentralization because now, now there's the issue of who's influencing the changes.

• 2:47:49Lex Fridman?

  Yeah.

• 2:47:50Speaker 01

  So what you really want is, um, is a very, very simple idea, right? The simplest idea, "I'm just going to keep track of who owns 21 million parts of energy." And when someone proposes big functional upgrades, you, you almost don't, you don't really want that development to go on the base layer. You want that development to go on the layer threes because now Cash App has a proprietary set of functionality and it's a security. And if you're going to promote the use of this thing, you're not going to, you're not going to promote the layer three security because that's a, an, an edge to a given entity and you're trusting the counterparty.

• 2:48:33Speaker 01

  You're going to promote the layer one or at most, the layer two.

• 2:48:39Lex Fridman?

  Okay, so one of the fascinating things about Bitcoin, and sorry to romanticize certain notions, but Satoshi Nakamoto, that the founder is anonymous. Maybe you can speak to whether that's useful, but also I just like the psychology of that, to imagine that there's a human being that was able to create something special and walk away. So first, are you Satoshi Nakamoto?

• 2:49:06Speaker 01

  I'm certain I'm not. No, actually, I, you know, I think the providence is really important. And if I were to look at the highlighted points, I think having a founder that was anonymous or stood anonymous is important. I think the founder disappearing is also important. I think that the fact that Satoshi coins never moved is also important. I think the lack of an initial coin offering is also important. I think the lack of a corporate sponsor is important. I think the fact that it traded for 15 months with no commercial value was also important.

• 2:49:47Speaker 01

  You know, I think that the simplicity of the protocol is very important. I think that the outcome of the block size wars is very important. And all of those things add up to common property. They're all indicia, indicators of a digital property as opposed to security. If there was a Satoshi sitting around, sitting on top of $50 billion worth of Bitcoin, it would, I don't think it would cripple Bitcoin as property, but I think it would undermine its digital property. And if I wanted to undermine a crypto asset network,

• 2:50:32Speaker 01

  I would do the opposite of all those things. I would launch one myself. I would sell 25% or 50% to the general public. I would keep some of the initial, I would premine some stuff or early mine it, you know, and I would keep an influence on it. Those are all the opposite of what you would do in order to create common property. And so I see the entire story as Satoshi giving a gift of digital property to the human race and disappearing.

• 2:51:05Lex Fridman?

  Do you think it was one person? Do you have ideas of who it could be?

• 2:51:09Speaker 01

  Don't care to speculate.

• 2:51:12Lex Fridman?

  But do you think it was one person?

• 2:51:14Speaker 01

  I think it was one person. Maybe in conjunction with a bunch of others. I mean, it might have been a group of people that were working together, but certainly there's a Satoshi.

• 2:51:22Lex Fridman?

  I mean, just so fascinating to me that one person could be so brave and thoughtful. Or do you think a lot of his accent, like the block size wars, the decision to make a block a certain size, all the things you mentioned led up to the characteristics that make Bitcoin property. Do you think that's an accident or it was deeply thought through? Like, how does, this is almost like a history of science question.

• 2:51:48Speaker 01

  People tried it for, they tried 40 of them, right? I mean, I think there's a, there's a history of attempting to create something like this and it was tried many, many times and, and they failed for different reasons. And I think that it's like Prometheus tried to start a fire 47 times and maybe the 48th time it sparked. And, and that's how I see this. This is the first one that sparked.

• 2:52:10Speaker 01

  And, and it sets a roadmap for us. And I, and I think if you're looking for any one word to characterize, it's fair. Right? The whole point of the network is it's a fair launch, a fair distribution. Like, yeah, I have Bitcoin, but I bought it.

• 2:52:30Speaker 01

  In fact, I, you know, at this point, we've paid $4 billion of you real cash to buy it. If, if I was sitting on the same position and I had it for free, then there's always this question of, did I, you know, or I bought it for a nickel, a coin or a penny a coin? The question is, was it fair? And, and that's a very hard question to answer. Right? Did you acquire the Bitcoin that you own fairly? And if you roll the clock back, you know, you could have bought it for a nickel or a dime, but that was when it was a million times more likely to fail. Right? When the risk was greater, the cost was lower.

• 2:53:10Speaker 01

  And then over time, the risk became lower and the cost became greater. And the real critical thing was to allow the marketplace, absent any powerful interested actor.

• 2:53:25Speaker 01

  Right? It's almost like if Satoshi had held a million coins and then stayed engaged for 10 more years tweaking things in the background, there'd still be that question. But what we've got is really a beautiful thing. We've got a, we've got a chain reaction in cyberspace or an ideology spreading virally in the world that, that has seasoned in a fair ethical fashion. Sometimes it's a very violent, brutal fashion with all the volatility, right? And there's been a lot of, you know, a lot of sound and fury along the way.

• 2:54:02Lex Fridman?

  How do you psychoanalyze? How do you deal from a financial, from a human perspective with the volatility? You mentioned you could have gotten it for a nickel and the risk was great. Where's the risk today? What's your sense?

• 2:54:16Speaker 01

  You know, we're 13 years into this entire activity. I think the risk has never been lower. If you look at all the risks, right? The risk, the risks in the early years are, is the engineering protocol proper? Like one megabyte block size, 10 minute clock frequency cryptography is first, will it be hacked or will it crash? 730,000 blocks and it hasn't crashed. Will it be hacked? Hasn't been hacked. But you know, it's a Lindy thing, right? You wait 13 years to see if it'll be hacked. But on the other hand, with a billion dollars, it's not as interesting a target as it is with 100 billion.

• 2:54:57Speaker 01

  And when it gets to be worth a trillion, then it's a bigger target. So, so the risk has been bleeding off over time as the network monetized. I think the second question is, will it be banned? You couldn't know. It could, it literally could have been banned at any time, many times early on. In fact, in 2013, I tweeted on that subject. I thought it would be banned. I, I made a very famous tweet.

• 2:55:23Lex Fridman?

  Infamous tweet, yeah.

• 2:55:24Speaker 01

  I thought it was, it was going to be banned. In 2014, the IRS designated it as property and gave it property tax treatment. Okay. So. They could have given it a tax treatment where you had to pay tax on the unrealized capital gains every year, and it probably would have crushed it to death. Right? You know, so it could have been in any number of places banned by a government, but in fact, it was legitimized as property. And then the question is, would it be hacked or would it be copied? Would it be something better than that? And it was copied 15,000 times. And you know the story of all those. And they either diverged to be something totally different and not comparable, or

• 2:56:09Speaker 01

  someone trying to copy a non-sovereign bearer instrument, store of value, found that their networks crashed to be 1% of what Bitcoin is. So now we're sitting at a point where all those risks are out of the way. I would say that year one of institutional adoption is, it started August 2020. That's when MicroStrategy bought $250 million worth of Bitcoin, and we put that out on the wire. We were the first publicly traded company to actually buy Bitcoin. I don't think you could have found a $5 million purchase from a public company before we did that. So that was kind of like a gun going off.

• 2:56:50Speaker 01

  And then in the next 12 months, Tesla bought Bitcoin, Square bought Bitcoin. And I'd say now we're in year two of institutional adoption. And about 24, should be 24 publicly traded Bitcoin miners by the end of this quarter. So you're looking at 36 publicly traded companies, and you've got 50, at least in a range of $50 billion on the balance, Bitcoin on the balance sheet of publicly traded companies, and hundreds of billions of dollars of market cap of Bitcoin-exposed companies. So I would say the asset, decade one was entrepreneurial, experimental.

• 2:57:37Speaker 01

  Decade two is a rotation from entrepreneurs to institutions and is becoming institutionalized. So maybe decade one, you go from zero to a trillion and decade two, you go from one trillion to 100 trillion.

• 2:57:49Lex Fridman?

  What about governments, government adoption, institutional adoption? Is governments important in this, maybe making it, some governments incorporating it into as a currency, into their banks, all that kind of stuff? Is that important? And if it is, when will it happen?

• 2:58:09Speaker 01

  It's not essential for the success of the asset class, but I think it's inevitable in various degrees over time. But the most likely thing to happen next is large acquisitions by institutional investors of Bitcoin as a digital gold, where they're just swapping out gold for digital gold and thinking of it like that. And the government entities most likely to be involved with that would be sovereign wealth funds. If you look at all the sovereign wealth funds that are holding big tech stock, equities, the Swiss, the Norwegians, the Middle Easterners.

• 2:58:48Speaker 01

  If you can hold big tech, then holding digital gold would be, you know, not far removed from that. That's a non-controversial adoption. I think there are opportunities for governments that are much more profound, right? If a government started to adopt Bitcoin as a treasury reserve asset, that's much bigger than just an asset investment, that's 100x bigger.

• 2:59:19Speaker 01

  And you could imagine that's like a trillion dollar opportunity. Like any government that wanted to adopt it as a treasury reserve asset would probably generate trillions of dollars, a trillion or more of value. And then, you know, the thing that people think about is, well, will oil ever be priced in Bitcoin? Or any other export commodity? I think there's like 1.8 trillion dollars or more of export commodities in the world. And right now, they're all priced in dollars. I think that this is a colorful thing, but not really that relevant. Like, you could sell all that stuff in dollars. The relevant decision that any institution makes, whether they're a nonprofit, a university,

• 3:00:03Speaker 01

  a corporation, or a government, is what's your Treasury Reserve asset? And if your Treasury Reserve asset is the peso, and if the peso is losing 20% or 30% of its value a year, then, you know, your balance sheet is collapsing within five years. And if the Treasury Reserve asset is dollars and currency derivatives and US Treasuries, then you're getting your seven... Right now, it's probably 15% or more monetary inflation. We're running double the historic average. You could argue triple, somewhere between double and triple, depending upon what your metric is.

• 3:00:47Speaker 01

  So, you know, do I think it'll happen? I think that they're conservative, but they have to be shocked. And I think there is a shock. The late Russian sanctions are a big shock when the West sees $300 billion worth of Russian gold and currency derivatives. I think, you know, you got the famous quote by Putin that, you know, "We have to rethink our Treasury strategies." And that pushes everybody toward a commodity strategy. What commodities do I want to hold? I think that's got a lot of people thinking. I think it's got the Chinese thinking. Everybody wants to be the reserve currency, right? So, if I buy $50 billion worth of dollars every year, then I buy 500 billion over a

• 3:01:32Speaker 01

  decade, and I probably pay $250 billion of inflation cost on the backs of my citizens in a decade. So...

• 3:01:46Lex Fridman?

  So, inflation could be one of the sources of shock. And you wonder if there is a switch to Bitcoin, whether it would be a bang or a whimper. Like, what is the nature of the shock, of the transition?

• 3:01:58Speaker 01

  I think that...

• 3:02:01Speaker 01

  The year 2022 is pretty catalytic for digital assets in general and for Bitcoin in particular. The Canadian trucker crisis, I think, educated hundreds of millions of people and made them start questioning their property rights and their banks. I think the Ukraine war was a second shock, but I think that the Russian sanctions was a third shock. Yeah. I think all three of them, and I think hyperinflation in the rest of the world is a fourth shock, and then persistent inflation in the US is a fifth shock. So I think it's a perfect storm.

• 3:02:43Speaker 01

  And if you put all these events together, what do they signify? They signify the rational conclusion for any person thinking about this is, I'm not sure if I can trust my property. I don't know if I have property rights. I don't know if I can trust the bank. And if I'm politically at odds with the leader of my own country, I'm going to lose my property. And if I'm politically at odds with the owner of another country, I'm still going to lose my property. And when push comes to shove, the banks will freeze my assets and seize them.

• 3:03:22Speaker 01

  And I think that that is playing out in front of everybody in the world, such that your logical response would be, I'm going to convert my weak currency to a strong currency. Like I'll convert my peso and lira to the dollar. I'm going to convert my weak property to strong property. I'm going to sell my building downtown Moscow. And I'd rather own a building in New York City. I'd rather own in a powerful nation than be stuck with a building in Nigeria or a building in Argentina or whatever.

• 3:04:05Speaker 01

  So I'm going to sell my weak properties to buy strong properties. I'm going to convert my physical assets to digital assets. I'd rather own a digital building than own a physical building. Because if I had a billion dollar building in Moscow, who can I rent that to? But if I have a billion dollar digital building, I can rent it to anybody in any city in the world, anybody with money, and the maintenance cost is almost nothing, and I can hold it for 100 years. Okay, so it's indestructible building. And then finally, I want to move from having my assets in a bank with a counterparty to self custody assets, right? So, and this

• 3:04:45Speaker 01

  is not, it's not just Ukraine, but this is like the story in Turkey, Lebanon, Syria, Afghanistan, Iraq, South America. You don't really want to be sitting with $10 million in a bank in Istanbul. The bank's gonna freeze your money, convert it to lira, devalue the lira, and then feed it back to you over 17 years, right?

• 3:05:08Lex Fridman?

  So self custody assets would be layer one Bitcoin?

• 3:05:12Speaker 01

  Self custody assets, it's like, if I, if I got my own hardware wallet, and I've either got, your, your highest form of self custody would be Bitcoin on your own hardware wallet, or Bitcoin in your own self custody. And the other, the other thing people think about is how do I get crypto dollars, like Tether, like some stable coin?

• 3:05:35Lex Fridman?

  Yeah.

• 3:05:36Speaker 01

  Like, I'd rather, if you had a choice, would you rather have your money in a bank in a war zone in dollars, or have your money in a stable coin on your mobile phone in dollars? Right? I mean, you'd take the latter risk rather than the former risk.

• 3:05:53Lex Fridman?

  In a war zone, definitely, yeah.

• 3:05:54Speaker 01

  And you can see that happening. Like, we've gone from 5 billion in stable coins to 200 billion

• 3:05:59Lex Fridman?

  Yeah.

• 3:06:00Speaker 01

  in the last 24 months.

• 3:06:02Lex Fridman?

  Yeah.

• 3:06:02Speaker 01

  So I do think there's massive demand for crypto dollars in the form of a US dollar asset, and there's, and everybody in the world would say, yeah, I want that. Well, unless you're just an extreme patriot, but most people in the world would say, I want that. And then a lesser group of people would say, I think I want to be able to carry my property in the palm of my hand, so I have self custody of it.

• 3:06:29Lex Fridman?

  So Bitcoin price has gone through quite a roller coaster. What do you think is the high point it's gonna hit?

• 3:06:38Speaker 01

  I think it'll go forever, right? I mean, I think the Bitcoin is going to, it's going to climb in a serpentine fashion. It's going to advance and come back and it's going to keep, it's going to keep climbing. I think that the volatility attracts all the capital into the marketplace. And so the volatility makes it the most interesting thing in the financial universe. It also generates massive yield and massive returns for traders. And that attracts capital. Like, we're talking about the difference between 5% return and 500% return. So the fast money is attracted by the volatility.

• 3:07:21Speaker 01

  The volatility's been decreasing year by year by year. I think that it's stabilizing. I don't think we'll see as much volatility in the future as we have in the past. I think that if we look at Bitcoin and model it as digital gold, you know, the market cap goes to between 10 and 20 trillion. But gold is, remember, gold is defective property. Gold is dead money. You have a billion dollars of gold that sits in a vault for a decade. It's very hard to mortgage the gold. It's also very hard to rent the gold. You can't loan the gold. No one's going to create a business with your gold. So gold doesn't generate much of a yield.

• 3:08:05Speaker 01

  So for that reason, most people wouldn't store a billion dollars for a decade in gold. They would buy a billion dollars of commercial real estate, property. And the reason why is because I can rent it and generate a yield on it that's in excess of the maintenance cost. So if you consider digital property, that's 100 to 200 trillion dollar addressable market. So I would think it, you know, it goes from 10 trillion to 100 trillion as people start to think of it as digital property.

• 3:08:34Lex Fridman?

  What does that mean in terms of price per coin?

• 3:08:38Speaker 01

  At 500,000, right? That's a 10 trillion dollar asset. At 5 million, that's a 100 trillion dollar asset.

• 3:08:47Lex Fridman?

  So if it crosses a million, it can go even higher?

• 3:08:50Speaker 01

  Yeah, I think it keeps going up forever. I mean, there's no reason it couldn't go to 10 million a coin, right? Because digital property isn't the highest form, right? Gold was that low-frequency money. Property is a mid-frequency money, but when I start to, when I start to program it faster, it starts to look like digital energy. And, and then it doesn't just replace property, then you're starting to replace bonds. It's 100 trillion in bonds, there's 50 to 100 trillion in other currency derivatives. And then, and then, and these are all conventional use cases, right?

• 3:09:30Speaker 01

  I think that there's 350 trillion to 500 trillion dollars worth of currency, currency derivatives in the world.

• 3:09:40Lex Fridman?

  Mm-hmm.

• 3:09:41Speaker 01

  And that, and when I say that, I mean, things that are valued based upon fiat cash flows. Any commercial real estate, any bond, any sovereign debt, any, any currency itself, any derivatives to those things, they're all derivatives, and they're all defective. And they're all defective because of this persistent 7 to 14% lapse, inflate, which we call inflation or monetary expansion. Can we switch subjects to talk about the energy side of it?

• 3:10:11Lex Fridman?

  Sure.

• 3:10:12Speaker 01

  Like the, the innovative piece?

• 3:10:14Lex Fridman?

  Yeah.

• 3:10:15Speaker 01

  Let's just start with this idea that I've got a hotel worth a billion dollars with a thousand rooms. When it becomes a dematerialized hotel?

• 3:10:23Lex Fridman?

  I love that word so much, by the way, dematerialized hotel.

• 3:10:27Speaker 01

  We're crossing the fountain blow here. Imagine the fountain blow is dematerialized.

• 3:10:30Lex Fridman?

  Yeah.

• 3:10:31Speaker 01

  The problem with a physical hotel is I've got to hire real people moving, subject to the speed of sound and physics laws and Newton's laws, and I can rent it to people in Miami Beach. But if it was a digital hotel, I could rent the room to people in Paris, London, and New York every night, and I can run it with robots. And as soon as I do that, I can rent it by the room hour, and I can rent it by the room minute. And so, I start to chop my hotel up into 100,000 room hours that I sell to the highest bidder anywhere in the world. And you can see, all of a sudden, the yield, the rent and the income of the property.

• 3:11:14Speaker 01

  Is dramatically increased. I can also see the maintenance cost of the property falls. I get on Moore's Law and I'm operating in cyberspace. So I got rid of Newton's laws. I got rid of all the friction and all the, all those problems. I, I tapped into the benefits of cyberspace. I created a global property. I started monetizing at different frequencies. And of course, now I can mortgage it to anybody in the world. Right? I mean, you're not going to be able to get a mortgage on a Turkish building from someone, you know, in South Africa. You have to, have to find someone that's local to the culture you're in.

• 3:11:55Speaker 01

  So when you start to move from analog property to digital property, it's not just a little bit better, it's a lot better. And what I just described Lex is like the DeFi vision, right? It's, it's the beauty of DeFi flash loans, money moving at high velocity. At some point, if, if the hotel is dematerialized, then what's the difference between renting a hotel room and loaning a block of stock? Right? I'm just finding the highest, best use of the thing.

• 3:12:31Lex Fridman?

  It, it feels like the magic really emerges though, when you build a lot, a market of layer two, layer three technologies on top of that. It's like, um, maybe you can correct me if I'm wrong, but for all these hotels and all these kinds of ideas, it's always touching humans at some point. And, uh, um, you know, consumers or humans, business owners and so on. So you have to create interface, you have to create services that make all of that super efficient, super fun to use, pleasant, effective, all those kinds of things. So you have to build in a whole economy on top of that.

• 3:13:09Speaker 01

  Yeah. And I happen to think that won't be done by the crypto industry at all. I think that'll be done by centralized applications. I think it'll be, you know, the citadels of the world, the high-speed traders of the world, the New Yorkers. I think, I think it'll be Binance, FTX, and Coinbase as a, as a layer three exchange that will give you the yield and will give you the loan and the, and the best terms. Because ultimately, you have to jump these compliance hoops. It's, it comes, like BlockFi can give you yield, but they have to do it in a compliant way with the United States jurisdiction.

• 3:13:48Speaker 01

  So ultimately, those applications to use that digital property and either, either generate a loan, give you a loan on it, or give you yield on it are going to come from companies. But the difference, the fundamental difference is it could be companies anywhere in the world. So if a company in Singapore comes up with a better offering, right, then the capital is going to start to flow to Singapore. I can't send 10 city blocks of LA to Singapore to rent during a festival, but I can send 10 blocks of Bitcoin to Singapore.

• 3:14:28Speaker 01

  So you've got a truly global market that's functioning and this asset, and is a second-order asset. For example, maybe you're an American citizen and you own 10 Bitcoin and someone in Singapore will generate 27% yield in the Bitcoin, but legally, you can't send the money to them or the Bitcoin to them. It doesn't matter because the fact that that exists means that someone in Hong Kong will borrow the 10 Bitcoin from somebody in New York and then they will put on the trade in Singapore and that will create a demand for Bitcoin, which will drive up the price of Bitcoin, which will result in an effective tax-free yield for the person in the US that's not even in the jurisdiction.

• 3:15:09Speaker 01

  So there's nothing that's going on in Singapore to drive up the price of your land in LA. But there is something going on everywhere in the world to drive up the price of property in cyberspace if there's only one digital Manhattan. And so there's, there's a dynamic there which is profound because it's global.

• 3:15:32Speaker 01

  But now, let's go to the next extreme. I'm still giving you a fairly conventional idea, which is, let's just loan the money fast on a global network, and let's just rent the hotel room fast in cyberspace. But now, let's move to maybe a more innovative idea. The first generation of internet, you know, brought a lot of productivity, but there's also just a lot of flaws in it. For example, Twitter is full of garbage, Instagram DMs are full of garbage, your Twitter DMs are full of garbage, YouTube is full of scams. Every 15 minutes, there's a Michael Saylor Bitcoin giveaway spun up on YouTube.

• 3:16:13Speaker 01

  My Office 365 inbox is full of garbage, millions of spam messages. I'm running four different email filters. My company spends a million dollars a year to fight denial of service attacks and all sorts of other security things. There are denial of service attacks everywhere against everybody in cyberspace all the time. It's extreme. And we're all beset with hostility, right? You've been a victim of it in Twitter. You know, you go on Twitter and people post stuff they would never say to your face, and then if you look, you find out that the account was created like three days ago, and it's not even a real person.

• 3:16:53Speaker 01

  So, you know, we're beset with phishing attacks and scams and spam bots and garbage, and why? And the answer is because the first generation of internet was digital information, and there's no energy. There's no conservation of energy in cyberspace. The thing that makes the universe work is conservation of energy. Like, if I went to a hotel room, I'd have to post a credit card, and then if I smashed the place up, there'd be economic consequences, maybe there'd be criminal consequences, there might be reputational consequences, you know, a lamp might fall on me, but in the worst case, I can only smash up one hotel room.

• 3:17:38Speaker 01

  Now imagine I could actually write a Python script to send myself to every hotel room in the world every minute, not post a credit card, and smash them all up anonymously.

• 3:17:51Speaker 01

  The thing that makes the universe work is friction, speed of sound, speed of light, and the fact that ultimately it's conservative. You're either energy or you're matter, but once you've used the energy, it's gone, and you can't do infinite everything. That's missing in cyberspace right now. And if you look at all of the moral hazards and all of the product defects that we have in all of these products, most of them, 99% of them, could be cured if we introduced conservation of energy into cyberspace. And that's what

• 3:18:32Speaker 01

  you can do with high-speed digital property, high-speed Bitcoin. And by high-speed, I mean not 20 transactions a day, I mean 20,000 transactions a day. So, how do you do that? Well, I let everybody on Twitter post 1,000 or 10,000 satoshis via a lightning wallet, a lightning badge. Give me an orange check. If you put up 20 bucks once in your life, you could give 300 million people an orange check. Right now, you don't have a blue check, Lex. You're a famous person. I don't know why you don't have a blue check. Have you ever applied for a blue check?

• 3:19:13Lex Fridman?

  No.

• 3:19:13Speaker 01

  There are 360,000 people on Twitter with a blue check. There are 300 million people on Twitter. So, the conventional way to verify accounts is elitist, archaic.

• 3:19:28Lex Fridman?

  Yeah, how does it work? How did you get a blue check?

• 3:19:31Speaker 01

  You go to apply and wait six months, and you have to post, you know, like, three articles in the public mainstream media that illustrates you're a person of interest.

• 3:19:41Lex Fridman?

  Interesting.

• 3:19:42Speaker 01

  Generally, they would grant them to CEOs of public companies, or the whole idea is to verify that, you know, that you are

• 3:19:50Lex Fridman?

  Yeah, who you are.

• 3:19:51Speaker 01

  Who you say you are.

• 3:19:52Lex Fridman?

  Right.

• 3:19:52Speaker 01

  But the question is, why isn't everybody verified?

• 3:19:54Lex Fridman?

  Right.

• 3:19:55Speaker 01

  And there's a couple of threads on that. One is, some people don't want to be doxed. They want to be anonymous.

• 3:20:01Lex Fridman?

  Sure.

• 3:20:01Speaker 01

  But there are even anonymous people that should be verified.

• 3:20:05Lex Fridman?

  Right.

• 3:20:06Speaker 01

  Because otherwise, you're subjecting their entire following to phishing attacks and scams and hostility.

• 3:20:15Speaker 01

  But the other, the other-

• 3:20:17Lex Fridman?

  What's the orange verification? So the, the, this idea, can you actually elaborate a little bit more? If you put up 20 bucks?

• 3:20:23Speaker 01

  Yeah, I think everybody on Twitter ought to be able to get an orange check if they could come up with like $10.

• 3:20:29Lex Fridman?

  And what is the power of that orange check? What, what does that verify exactly?

• 3:20:34Speaker 01

  You basically post a security deposit for your safe passage through cyberspace. So the way it would work is if you, if you've got $10 once in your life, you can basically show that you're credit worthy. And that's your pledge to me, that you're going to act responsibly. So you put the 10 or the $20 into the Lightning Wallet. You get an orange check. Then Twitter just gives you a setting where I can say, the only people that can DM me are orange checks. The only people that can post on my tweets are orange checks. So instead of locking out the public and just letting your followers, you know, comment, you lock out all the unverified. And that means people that don't want to post $10 security deposit can't comment.

• 3:21:20Speaker 01

  Once you've done those two things, then you're in a position to monetize malice. Right? Monetize motion or malice for that matter. But let's just say, for the sake of argument, you post something and 9,700 bots spin up, you know, and pitch their whatever scam. Right now, you sit and you go, "Report, report, report, report, report, report." And if you spend an hour, you get through half of them. You waste an hour of your life. They just spin up another 97 kazillion because they've got a Python script spinning it up. So it's hopeless. But on the other hand, if you report them and they really are a bot, it's, Twitter's got a method to actually delete the account.

• 3:22:05Speaker 01

  They know that they're bots. The problem is not they don't know how to delete the account. The problem is there are no consequences when they delete the account. So if there are consequences, Twitter could give, they could just seize the $10 or seize the $20 because it's a bot. It's, it's a malicious criminal act or whatever. It's a violation of platform rules. You end up seizing $10,000, give half the money to the reporter and half the money to the Twitter platform.

• 3:22:34Lex Fridman?

  And it's a really powerful idea, but that that's tying it, that's adding friction akin to the kind of friction you have in the physical world. You're tying, you have consequences, you have real consequences.

• 3:22:45Speaker 01

  It's putting conservation of energy.

• 3:22:47Lex Fridman?

  Conservation of energy.

• 3:22:48Speaker 01

  There's no friction, there's no nothing on this earth, right? I mean, you can't walk across the room without friction, right? So friction is not bad, right? Unnecessary friction is bad. So in this particular case, you're introducing conservation of energy and in essence, you're introducing the concept of consequence or truth into cyberspace. And that means if you do want to spend up 10 million fakes, fake less Friedman's, right?

• 3:23:21Lex Fridman?

  It's gonna cost you.

• 3:23:22Speaker 01

  It's gonna cost you $100 million to spend up 10 million fake Lexes.

• 3:23:26Lex Fridman?

  But the thing is, you could do that with the dollar, but your case, you're saying that it's more tied to physical reality when you do that with Bitcoin.

• 3:23:36Speaker 01

  Yeah, well, let's follow up on that idea a bit more. If you did do it with the dollar, then the question is, how do 6 billion people deposit the dollars? Right? Because what you're doing is, could you do it with a credit card? Like, how do you send dollars? You have to dox yourself. Like, it's not easy. So you're talking about inputting a credit card transaction, doxing yourself, and now you've just eliminated the 2 billion people that don't have credit cards or don't have banks. You've also got a problem with everybody that wants to remain anonymous. But you've also got this other problem, which is credit, you

• 3:24:15Speaker 01

  know, credit cards are expensive transactions, low frequency, slow settlement. So do you really want to pay 2.5% every time you actually show a $20 deposit? And maybe you could do a kluge version of this for a subset of people. It's like, it's 10% as good if you did it with conventional payment rails. But what you can't do is the next idea, which is, I want the orange badge to be used to give me safe passage through cyberspace, tripping across every platform.

• 3:24:55Speaker 01

  So when I, how do I solve the denial of service attacks against a website? I publish a website, you hit it with a million requests.

• 3:25:06Speaker 01

  Okay, now how do I deal with that? Well, I can lock you out and I can make it a zero trust website. And then you have to be coming at me through a trusted firewall or with a trusted credential. But that's, that's a pretty draconian thing. Or I could put it behind a lightning wall. A lightning wall would be, you know, I just challenge you, Lex. You wanna browse my website, you have to show me your 100,000 satoshis. Do you have 100,000 satoshis? Click. Okay, now you click away 100 times or 1,000 times. And after 1,000 times, you know, I'm like, well, now Lex, you're getting offensive. I'm gonna take a satoshi from you or 10 satoshis. A microtransaction. You wanna hit me a million times?

• 3:25:51Speaker 01

  I'm taking all your satoshis and locking you out. What you wanna do is you wanna go through 200 websites a day.

• 3:26:00Speaker 01

  And what you want, every time you cross a domain, you need to be able to in a split second, prove that you've got some asset. And now when you cross back, when you exit domain, you wanna fetch your asset back. So how do I, in a friction-free fashion, browse through dozens or hundreds of websites, post a security deposit for safe passage and then get it back? You couldn't afford to pay a credit card fee each time. When you think about 2.5% as a transaction fee, it means you trade the money 40 times and it's gone.

• 3:26:39Lex Fridman?

  Yeah.

• 3:26:40Speaker 01

  It's gone.

• 3:26:41Lex Fridman?

  Yeah. So you can't do this kind of hopping around through the internet with this kind of verification that grounds you to a physical reality. It's a really, really interesting idea. Why haven't that, hasn't that been done?

• 3:26:53Speaker 01

  I think you need two things. You need an idea like a digital asset like Bitcoin. It's a bearer instrument for final settlement. And then you need a high-speed transaction network like Lightning, where the transaction cost might be a 20th of a penny or, or less. And if you roll the clock back 24 months...

• 3:27:17Speaker 01

  I don't think you had the Lightning Network in a stable point. It's really just the past 12 months. It's an idea you could think about this year. And I think you need to, you need to be aware of Bitcoin as something other than like a scary speculative asset. So I really think we're just the beginning.

• 3:27:38Lex Fridman?

  The embryonic stage. I have to ask Michael Saylor, you said before, there's no second best to Bitcoin. What would be the second best? Traditionally, there's Ethereum with smart contracts, Cardano with proof of stake, Polkadot with interoperability between blockchains. Dogecoin has the incredible power of the meme. Privacy with Monero. I just can keep going. There's, of course, after the block size wars, the different offshoots of Bitcoin.

• 3:28:14Speaker 01

  I think if you, if you decompose or segment the crypto market, you've got crypto property. Bitcoin is the king of that. You know, and other Bitcoin forks that wanted to be, you know, a bearer instrument, store of value, would be a property, a Bitcoin cash or Litecoin, something like that. Then you've got cryptocurrencies. I don't think, I don't think Bitcoin's a currency because a currency I define in nation state sense. A currency is a digital asset that you can transfer as a, you know, in a transaction without incurring a taxable obligation. So that means has to be a stable dollar or a stable euro or a stable yen, a stable coin.

• 3:28:57Speaker 01

  So I think you've got cryptocurrencies, Tether, Circle, most famous. Then I think you've got crypto platforms, you know, and Ethereum is the most famous of the crypto platforms. The platform upon which, you know, with smart contract functionality, et cetera. And then I think you've got just crypto securities. It's just like my favorite whatever meme coin and I love it because I love it. And it's attached to my game or my company or my persona or my whatever. I think if you, if you, you know, pushed me and said, well, what's the second best? I would say the world wants two things. It wants crypto property as a savings account and it wants cryptocurrency as a checking account. And that means that the, that the most popular thing really is going to be a stable coin dollar.

• 3:29:43Speaker 01

  Right, and there's a, maybe a fight right now, it might be Tether, right? But a stable dollar, because I feel like the market opportunity, it's not clear that there'll be one that will win. The class of stable dollars is probably a one to 10 trillion dollar market easily.

• 3:30:03Speaker 01

  I think that in the crypto platform space, Ethereum will compete with Solana and Binance Smart Chain and the like.

• 3:30:10Lex Fridman?

  Are there certain characteristics of any of them that kind of stand out to you? Don't you think the competition is based on a set of features? Also, so the set of features that a cryptocurrency provides, but also the community that it provides. Don't you think the community matters and sort of the adoption, the dynamic of the adoption, both across the developers and the investors?

• 3:30:32Speaker 01

  If I'm looking at them, I mean, the first question is, is what's the regulatory risk? How likely is it to be deemed a property versus security? And the second is, is what's the competitive risk? And the third is what's the speed and the performance? And, you know, all those things, you know, lead to the question of what's the security risk? How likely is it to crash and burn? And how stable or unstable is it? And then there's the, you know, the marketing risk. I mean, there are different teams behind each of these things and communities behind them. I think that the big cloud looming over the crypto industry

• 3:31:14Speaker 01

  is regulatory treatment of cryptocurrencies and regulatory treatment of crypto securities and crypto platforms. And I think that won't be determined until the end of the first Biden administration. For example, there are people that would like only US FDIC insured banks to issue cryptocurrencies. They want JP Morgan to issue a crypto dollar backed one to one. But then in the US right now, we have Circle and we have other companies that are licensed entities that are backed by cash and cash equivalents, but they're not FDIC insured banks. There's also a debate in Congress about whether state chartered banks should be able to issue these things.

• 3:31:53Speaker 01

  And then we have Tether and others that are outside of the US jurisdiction. They're probably not backed by cash and cash equivalents. They're backed by stuff, and we don't know what stuff. And then finally, you have, you know, U S T and D I, which are algorithmic stable coins, right, that are even more innovative, further outside the compliance framework. So if you ask who's going to win, the question is really, I don't know, will the market decide? Or will the regulators decide? If the regulators get out of the way and the market fought out, well, then it's an interesting discussion.

• 3:32:31Lex Fridman?

  Yeah.

• 3:32:32Speaker 01

  And then I think that all bets are off if, if the regulators get more heavy handed with this. And I think you could have the same discussion with crypto properties, like, like the DeFi exchanges and the crypto exchanges, the S E C would like to regulate the crypto exchanges. They like to regulate the DeFi exchanges. That means they may regulate the crypto platforms and, and at what rate and in what fashion. And so I think that I could give you an opinion if, if it was limited to competition and the current regulatory regime. But I think that the regulations are, are so fast moving and it's so uncertain

• 3:33:11Speaker 01

  that it's, it, it, you can't make a decision without considering the potential actions of the regulators.

• 3:33:22Lex Fridman?

  I hope the regulators get out of the way. Can you still man the case that Dogecoin is, I guess, the second best cryptocurrency? If you don't consider Bitcoin a cryptocurrency, but instead a crypto property.

• 3:33:35Speaker 01

  I would classify it as crypto property because the U S dollar is a currency. So unless your crypto asset is pegged algorithmically or stably to the value of the dollar is not a currency, it's a property or it's an asset.

• 3:33:49Lex Fridman?

  So then can you still man the case that Dogecoin is the best cryptocurrency then? Because Bitcoin is not even in that list.

• 3:33:59Speaker 01

  The debate is going to be whether it's property or security. And there's a debate whether it's decentralized enough. So let's assume it was decentralized.

• 3:34:08Lex Fridman?

  Yep.

• 3:34:08Speaker 01

  Well, it's, it's increasing at not quite five, what 5% a year inflation rate, but it's, it's not 5% exponentially. It's like a plus 5 million. 5% something captain is less, I forget the exact number, but it's an inflationary property. It's got a lower inflation rate than the US dollar. And it's got a much lower inflation rate than than many other fiat currencies. So I think you could say that.

• 3:34:38Lex Fridman?

  But don't you see the power of meme, the power of ideas, the power of fun, or whatever mechanism is used to captivate a community?

• 3:34:51Speaker 01

  I do, but there are meme stocks. It doesn't absolve you of your ethical and securities liabilities if you're, you know, if you're promoting it. So like, like, I don't have a problem with like, people buying a stock. It's just, the way I divide the world is, right? There's investment, there's saving, and there's speculation, and there's trading. So Bitcoin is an asset for saving. If you want to save money for 100 years, you don't really want to take on execution risk or the like. So you're just buying something to hold forever. For you to actually endorse something as a property, like if you said to me, Mike,

• 3:35:35Speaker 01

  what should I buy for the next 100 years? I say, well, some amount of real estate, some amount of scarce collectibles, some amount of Bitcoin, right? You can run your company, right? But but running your company is an investment. So the savings are properties. If you said, what should I invest in? I'd say, well, here's a list of good companies, private companies. You could start your own company. That's an investment, right?

• 3:36:00Speaker 01

  If you said, what should I trade? Well, I'm trading as like a proprietary thing. Like, I'm, I don't, I don't have any special insight into that. If you're a good trader, you know you are. If you said to me, what should you speculate in? We talk about meme stocks and meme coins. And and it's kind of sits up there. It sits right in the same space with what horse should you bet on? And what sports team should you gamble on? And should you bet on black six times in a row and double down each time? I mean, it's fun, but. At the end of the day, it's a speculation, right? You can't build a civilization.

• 3:36:41Lex Fridman?

  On speculation.

• 3:36:42Speaker 01

  On it. It's not an institutional asset. And in fact, where I'd leave it, right, is Bitcoin is clearly digital progress, which makes it an institutional-grade investable asset for a public company, a public figure, a public investor, or anybody that's risk averse. I think that the other, the top 100 other cryptos are like venture capital investments. And if you're a VC and if you're a qualified technical investor and you have a pool of capital and you can take that kind of risk, then you can parse through that and form opinions. It's just orders of magnitude more risky because of competition, because of ambition, and because of regulation. And if you take the meme coins, it's like, you know,

• 3:37:27Speaker 01

  when some rapper comes out with a meme coin, it's like, maybe it'll peak when I hear about it, right? It's like, I mean, SHIB was created as a coin such that it had so many zeros after the decimal point that when you looked at it on the exchanges, it always showed 0000. And it wasn't until like six months after it got popular that they started expanding the display so you could see whether the price had changed.

• 3:37:54Lex Fridman?

  That's speculation. You, you've been, maybe you can correct me, but you've been critical of Elon Musk in the past in the crypto space. Where do you stand on Elon's effect on Bitcoin and cryptocurrency in general these days?

• 3:38:08Speaker 01

  I believe that Bitcoin is a massive breakthrough for the human race that will cure half the problems in the world and generate hundreds of trillions of dollars of economic value to the civilization. And I believe that it's in an early stage where many people don't understand it and they're afraid of it and there's FUD and there's uncertainty, there's doubt, and there's fear. And it's a very noisy crypto world. And there's 15,000 other cryptos that are, are seeking relevance. And I think most of the FUD. Is actually fueled by the other crypto entrepreneurs.

• 3:38:49Speaker 01

  So the environmental FUD and the other types of uncertainty that's around Bitcoin, generally, they're not coming from legitimate environmentalists. They don't come from legitimate critics. They actually are guerrilla marketing campaigns that are being financed and fueled by other crypto entrepreneurs because they have an interest in doing so. So if I look at the constructive path forward, first, I think it'd be very constructive for corporations to embrace Bitcoin and build applications on top of it. You don't need to fix it. There's nothing wrong with it, right?

• 3:39:33Speaker 01

  Like, when you put it on a layer two and a layer three, it moves a billion times a second at the speed of light. So every beautiful, cool DeFi application, every crypto application, everything you could imagine you might want to do, you can do with a legitimate company and a legitimate website or mobile application sitting on top of Bitcoin or Lightning if you want to. So I think that to the extent that people do that, that's going to be better for the world. If you consider what holds people back, I think it's just misperceptions about what Bitcoin is.

• 3:40:15Speaker 01

  So I'm a big fan of just educating people. If you're not going to commercialize it, then just educate people on what it is. So for example, Bitcoin's the most efficient use of energy in the world by far, right? Most people don't necessarily perceive that or realize that. But if you were to take any metric, energy intensity... You put like $2 billion worth of electricity in the network every year and it's worth $850 billion. There is no industry in the real world, right, that that is that energy efficient. Not only that energy efficient, it's also the most sustainable industry.

• 3:40:58Speaker 01

  We just, we do surveys, 58% of Bitcoin mining energy is sustainable. So there's a very good story. In fact, every other industry, planes, trains, automobiles, construction, food, medicine, everything else. It's less clean, less efficient. So.

• 3:41:19Lex Fridman?

  So the basic debate was.

• 3:41:20Speaker 01

  I wouldn't say there is a debate. I would just say that to the extent that the Bitcoin community had any issue with Elon, it was just, you know, the, just this environmental, you know, uncertainty that he fueled in a couple of his tweets, right? Uh, which I think just is very distracting.

• 3:41:39Lex Fridman?

  Well, that was one of them, but I think it's like the Bitcoin maximalist, but generally the crypto community, what you call the, the crypto entrepreneurs are, you know, it's also they're using it for, I mean, for investment, for speculation, and therefore get very passionate about people's kind of celebrities, including you, like famous people.

• 3:42:03Speaker 01

  Right.

• 3:42:04Lex Fridman?

  Um, saying positive stuff about any one particular crypto thing, a thing you can buy in Coinbase. And so, um, they might be unhappy with Elon Musk that he's promoting Bitcoin and then not, and then promoting Dogecoin, then not. And this kind of, um, there's so much emotion tied up in the communication on this topic. And that's, I think that's where a lot of the.

• 3:42:34Speaker 01

  I, look, I don't have, I don't have a criticism of Elon Musk. He's free to do whatever he wishes to do. It's his life. In fact, Elon Musk is the, you know, the second largest supporter of Bitcoin in the world. So I think that the Bitcoin community tends to eat its own quite a bit.

• 3:42:51Lex Fridman?

  Yeah.

• 3:42:51Speaker 01

  It tends to be very, uh, very self-critical and instead of saying.

• 3:42:58Speaker 01

  Well, Elon is more supportive of Bitcoin than the other 10,000 people in the world, you know, with serious amounts of money. They're like, they focus upon, you know.

• 3:43:09Lex Fridman?

  Yeah, this is strange. Eating your own is just...

• 3:43:12Speaker 01

  Yeah, so I mean, I think he's free to do what he wants to do. Like, and I think he's done a lot of good for Bitcoin in, in putting it on the balance sheet of Tesla and holding it. And I think that sent a very powerful message.

• 3:43:26Lex Fridman?

  Do you have advice for young people? So you've had a heck of a life. You've done quite a lot of things. Start before MIT, but starting with MIT. Is there advice you have for young people in high school and college? How to have a career they can be proud of? How to have a life they can be proud of?

• 3:43:50Speaker 01

  I was asked by somebody for quick advice for his young children. He had, he had twins when they enter adulthood. He said, "Give me, give me your advice for them in a letter. I'm gonna give it to them when they turn 21," or something. So then he handed, I thought, I was at a party, and then he handed me this sheet of paper. And I thought, "Oh, he wants me to write it down right now." So I sat down, I started writing, and I figured, "Well, what would you want to tell someone at age 21?"

• 3:44:20Lex Fridman?

  You wrote it down?

• 3:44:21Speaker 01

  So I wrote it down. And then I tweeted it, and it's sitting on Twitter, but I tell you what I said. I said, "My advice if you're entering adulthood: Focus your energy. Guard your time. Train your mind. Train your body. Think for yourself. Curate your friends. Curate your environment."

• 3:44:49Speaker 01

  Keep your promises. Stay cheerful and constructive. And upgrade the world. Like, that was the 10.

• 3:44:58Lex Fridman?

  Upgrade the world, that's an interesting choice of words. Upgrade the world. Upgrade the world.

• 3:45:06Speaker 01

  It's like an engineer's.

• 3:45:07Lex Fridman?

  It's a very, yeah, it's a very engineering themed. Uh, keep your promises too. That's an interesting one.

• 3:45:16Speaker 01

  I think most people suffer because they, they just, they don't focus. Like, you gotta figure out, I, I think the big risk in this world is there's too much of everything.

• 3:45:27Lex Fridman?

  Yeah.

• 3:45:28Speaker 01

  Like, you can sit and watch chess videos 100 hours a week and you'll never get through all the chess videos. Right? There's, there's too much of every possible thing, every, too much of every good thing. So figuring out what you want to do and then everything will suck up your time, right? There's 100 streaming channels to binge watch on. So you gotta guard your time and then train your body, train your mind and control who's around you, control what surrounds you. So ultimately, in a world where there's too much of everything, then your success.

• 3:46:09Lex Fridman?

  Those laser eyes, it's like those laser eyes. You have to focus on just a few of those things.

• 3:46:17Speaker 01

  Yeah, I mean, I got a thousand opinions we could talk about and I could pursue a thousand things, but I don't expect to be successful. And I'm not sure that my opinion in any of the 999 is any more valid than the leader of thought in that area. So how about if I just focus upon one thing? And then, uh, and then, uh, deliver the best I can in the one thing. That's, that's the laser eye message. The rest get you distracted.

• 3:46:48Lex Fridman?

  Well, how do you achieve that? Do you, do you find yourself, given where you are in life, having to say no a lot?

• 3:46:56Lex Fridman?

  Or just focus comes natural when you just ignore everything around you. So how do you achieve that focus?

• 3:47:03Speaker 01

  I think it helps if people know what you're focused on.

• 3:47:06Lex Fridman?

  So you, everything about you just radiates that people know, people know this.

• 3:47:10Speaker 01

  If they, if they know what you're focused on, then you won't get so many other things coming your way. If you, you know, if you dally or if you, if you flirt with 27 different things, then you're going to get approached by people in each of the 27 communities, right?

• 3:47:30Lex Fridman?

  You mentioned beginning a PhD and giving your roots at MIT. Do you think there's, there's all kinds of journeys you can take to educate yourself? Do you think a PhD or school is still worth it?

• 3:47:46Lex Fridman?

  Or is there other paths through life that?

• 3:47:49Speaker 01

  Is it worth it if you have to pay for it? Is it worth it if you have to spend the time on it?

• 3:47:53Lex Fridman?

  The time and the money is a big cost.

• 3:47:57Speaker 01

  I, I think.

• 3:47:59Lex Fridman?

  Time probably the bigger one, right?

• 3:48:01Speaker 01

  It seems clear to me that the world wants more specialists. It wants, it wants you to be an expert in, and to focus on, in one area. And it's punishing, uh, generalist, uh, jack of all trades, especially people that are generalists in the physical realm. Cause if you're a specialist in the digital realm, you might very well, you're the person with 700,000 followers on Twitter and you show them how to tie knots or, you know, you're the banjo player, you know, with 1.8 million followers. And when everybody types banjo, it's you, right? And so the world wants people that, that do something well.

• 3:48:45Speaker 01

  And then it wants to stamp out 18 million copies of them.

• 3:48:52Speaker 01

  And so that argues in favor of focus. Now, I mean, the definition of a PhD is is someone with enough of an education that they're capable of or have made. I guess, I guess to get a PhD, technically, you have to have have done a dissertation where you made a, you know, a seminal contribution to the body of human knowledge. And if you haven't done that, technically, you know, you have a master's degree, but you're not a doctor. So if you're interested in any of the academic disciplines that a PhD would be granted for, then I can see that being a reasonable pursuit. But there are many people that are specialists. You know, you know, the adjamator?

• 3:49:34Lex Fridman?

  Yeah, yeah.

• 3:49:35Speaker 01

  The adjamator on YouTube?

• 3:49:36Lex Fridman?

  Yeah, yeah, yeah.

• 3:49:37Speaker 01

  He's, he's the world's greatest chess commentator.

• 3:49:40Lex Fridman?

  Yeah.

• 3:49:40Speaker 01

  And I've watched his career and he's got progressively better and he's really good.

• 3:49:45Lex Fridman?

  He's gonna love hearing this.

• 3:49:47Speaker 01

  Yeah, if the adjamator hears this, I'm a big fan of the adjamator. I have to cut myself off, right? Because otherwise you'll watch the entire Paul Morphy saga for your weekend. But the point really is YouTube is full of experts who are specialists in something. And they rise to the top of their profession and Twitter is too, and the internet is. So I, I would advocate that you figure out what you're passionate about and what you're good at. And you do focus on it, especially if, if the thing that you're doing can be automated.

• 3:50:29Speaker 01

  The, the problem is, you know, back to that 500,000 algebra teacher type comment. The problem is if it is possible to be automated, then over time, someone's probably gonna automate it. And, and that, that squeezes, you know, the state space of everybody else. It's like, like after the lockdowns, it used to be there are like all these local bands that played in bars. And everybody went to the bar to see the local band. And then during the lockdown, you would have like these six super groups and they would all get 500,000 or a million followers. And all these smaller local bands just got no attention.

• 3:51:13Speaker 01

  At all.

• 3:51:14Lex Fridman?

  Well, the interesting thing is, one of those 500,000 algebra teachers is likely to be part of the automation. So it's like, it's an opportunity for you to think, where's my field, my discipline evolving into? I talked to a bunch of librarians, just happened to be friends with librarians. And that's libraries will probably be evolving. And it's up to you as a librarian to be one of the, one of the, one of the few that remain.

• 3:51:42Speaker 01

  Yeah.

• 3:51:43Lex Fridman?

  In the rubble.

• 3:51:44Speaker 01

  If you're gonna give commentary on Shakespeare plays, I want you to basically do it for every Shakespeare play. Like, I want you to be the Shakespeare dude. Because once I, once, just like Lex, you're like.

• 3:51:56Lex Fridman?

  I don't know what kind of.

• 3:51:57Speaker 01

  You're, you're the deep thinking podcaster, right? Or you're, you're, you're the, you're the podcaster that goes after the deep intellectual conversations. And, uh, once I get comfortable with you, and I like you, then I start binge watching Lex.

• 3:52:15Lex Fridman?

  Yeah.

• 3:52:16Speaker 01

  But, but if you changed your format.

• 3:52:19Lex Fridman?

  Yeah.

• 3:52:19Speaker 01

  Through 16 different formats, so that you could compete with 16 different other personalities on YouTube, you probably wouldn't beat any of them, right? You would probably just kind of sink into the, you're, you're the number two or number three guy. You're not the number one guy in the format. And I think the, that the, the, the algorithm, right? The Twitter algorithm and the YouTube algorithm, they really reward the person that's focused on message, consistent. The world wants somebody they can trust that's consistent and reliable. And they, they kind of want to know what they're getting into because, and this is taken for granted, maybe, but, but there's 10 million people vying for every

• 3:53:04Speaker 01

  hour of your time. And so the fact that anybody gives you any time at all, is a huge.

• 3:53:11Lex Fridman?

  That's amazing.

• 3:53:11Speaker 01

  Privilege, right? And you should be thanking them.

• 3:53:14Lex Fridman?

  Yep.

• 3:53:14Speaker 01

  And, and you should respect their time.

• 3:53:16Lex Fridman?

  It's interesting. Like, everything you said is very interesting. But of course, from my perspective, and probably from your perspective, my actual life has nothing to do with, it's just being focused on stuff. And in my case, it's like, focus on doing the thing I really enjoy doing, and being myself, and not caring about anything else. Like, I don't care about views or likes or attention. And that just maintaining that focus is the way from an individual perspective, you live that life. But yeah, it does seem that there's the world and technology is rewarding the specialization and creating bigger and bigger platforms for the different specializations.

• 3:53:58Lex Fridman?

  And and that yeah, and then that lifts all both, actually, because the specializations get better and better and better at teaching people to do specific things and they educate themselves. And it's just, everybody gets more and more knowledgeable and more and more empowered.

• 3:54:12Speaker 01

  The reward for authenticity more than offsets the specificity with which you pursue your mission. It's like, like, another way to say it is like, nobody wants to read advertising. Like, if you were to spend $100 million advertising your thing, I probably wouldn't want to watch it.

• 3:54:32Lex Fridman?

  Yeah.

• 3:54:33Speaker 01

  But

• 3:54:33Lex Fridman?

  That's so fascinating.

• 3:54:35Speaker 01

  Yeah, we see the death of that.

• 3:54:37Lex Fridman?

  Yeah.

• 3:54:37Speaker 01

  And so the the commercial shows are losing their audiences and the authentic specialist or the authentic artist are are gaining their audience.

• 3:54:50Lex Fridman?

  And that's a beautiful thing. Speaking of deep thinking, you're just a human, your life ends. You've accumulated so much wisdom, so much money, but the ride ends. Do you think about that? Do you ponder your death, your mortality? Are you afraid of it?

• 3:55:13Speaker 01

  When I go, all my assets will flow into a foundation and the foundation's mission is to make education free for everybody forever. And if if I'm able to contribute to the creation of of a more perfect monetary system, then maybe that foundation will go on forever.

• 3:55:35Lex Fridman?

  The idea, the foundation of the idea. So not just the each of the foundations.

• 3:55:43Speaker 01

  It's not clear we're on the S curve of immortal life yet. Like, that's a biological question. And you asked that, you know, on some of your other interviews a lot. I think that we are on the threshold of Of immortal life for ideas or immortal life for certain institutions or computer programs. So if we can fix the money, then you can create a technically perfected endowment. And then the question really is, what are your ideas? What do you want to leave behind? And so if it's a park, then you endow the park, right? If it's if it's free education, you endow that if it's if it's some other ethical idea, right?

• 3:56:28Lex Fridman?

  Does it make you sad that there's something that you've endowed, some very powerful idea of digital energy that you put out to the you help put into the world and your mind, your conscious mind will no longer be there to experience it. It's just gone forever.

• 3:56:53Speaker 01

  I rather think that the the thing that Satoshi taught us is you should do your part during some phase of the journey and then you should get out of the way. And I think Steve Jobs said something similar to that effect in a very, very famous speech one day, which is, you know, death is a natural part of life and it makes way for the next generation. And I I think the goal is you upgrade the world, right? You leave it a better place, but you get out of the way. And I think when when that breaks down, you know, bad things happen.

• 3:57:36Speaker 01

  I think nature cleanses itself. There's a cycle of life.

• 3:57:41Lex Fridman?

  And speaking one of great people who did also get out of the way is George Washington. So hopefully when you get out of the way, nobody's bleeding you to death in hope of helping you. What do you think? A bit of a callback. What do you think is the meaning of this whole thing? What's the meaning of life? Why are we here? We talked about the rise of human civilization. It seems like we're engineers at heart, we build cool stuff, better and better use of energy, channeling energy to be productive. Why? What's it all for?

• 3:58:21Speaker 01

  You're getting metaphysical on me.

• 3:58:23Lex Fridman?

  Very. There's a beautiful boat to the left of us. Like, why do we do that? This boat that sailed the ocean? Then we build models of it to celebrate great engineering of the past?

• 3:58:34Speaker 01

  To engineer is divine. You can make lots of arguments as why we're here. We're here to, we're either here to entertain ourselves or we're here to, uh, to create something that's beautiful or something that's functional. I think if you're an engineer, you entertain yourself by creating something that's both beautiful and functional. So I think all three of those things, it's entertaining, but it's ethical. You know, you got to admire, you know, the, the first person that built a bridge, crossing a chasm, or the first person to work out the problem of how to get running water to a village. Or the first person to figure out how to, you know, dam up a river.

• 3:59:17Speaker 01

  Or mastered agriculture, or the guy that figured out, you know, how to grow fruit on trees or created orchards, you know, and maybe one day he had like 10 fruit trees. He's pretty proud of himself.

• 3:59:29Lex Fridman?

  So that's functional. There is also something to that, just like you said, that's just beautiful. It does get you closer to, um, like you said, the divine, something.

• 3:59:45Lex Fridman?

  When you, when you step back and look at the entirety of it, a collective of humans using a beautiful invention or creation or just, just something about this instrument is creating a beautiful piece of music.

• 4:00:05Lex Fridman?

  That seems just right. That's what we're here for. Whatever the divine is, it seems like we're here for that, that. And I of course love talking to you because, uh, from the engineering perspective, the functional is ultimately the mechanism towards the beauty.

• 4:00:20Speaker 01

  Isn't there something beautiful about, about making the world a better place for people that you love? Your friends, your family or yourself?

• 4:00:30Speaker 01

  You know, and when you think about the entire arc of human existence, and you roll the clock back 500,000 years, and you think about every struggle of everyone that came before us and everything they had to overcome in order to put you here right now. You know, you kind of, you got to admire that, right? You got to respect that.

• 4:00:56Lex Fridman?

  That's a heck of a gift they gave us. It's also a heck of a responsibility. Don't screw it up.

• 4:01:05Speaker 01

  If I dropped you 500,000 years ago and I said, figure out steel refining, or, or, you know, figure, figure out silicon chips fab reproduction, or, or whatever it is.

• 4:01:18Lex Fridman?

  Fly or fire.

• 4:01:20Speaker 01

  And so now we're here, and I guess the way you repay them is you fix everything in front of your face you can, right? And that means to, to someone like Elon, it means get us off the planet. Right? To someone like me, it's like, I think, you know, fix the energy in, in the system.

• 4:01:41Lex Fridman?

  And that gives me hope. Michael, this is an incredible conversation. You're an incredible human. It's a huge honor you would sit down with me. Thank you so much for talking today.

• 4:01:50Speaker 01

  Yeah, thanks for having me, Lex.

• 4:01:52Lex Fridman?

  Thanks for listening to this conversation with Michael Saylor. To support this podcast, please check out our sponsors in the description. And now let me leave you with a few words from Francis Bacon. Money is a great servant, but a bad master. Thank you for listening and hope to see you next time.