#244: The Quiet Master of Cryptocurrency -- Nick Szabo

Nick Szabo (@NickSzabo4 https://twitter.com/nickszabo4) is a polymath. The breadth and depth of his interests and knowledge are truly astounding. He's a computer scientist, legal scholar, and cryptographer best known for his pioneering research in digital contracts and cryptocurrency. The phrase and concept of "smart contracts" were developed by Nick with the goal of bringing what he calls the "highly evolved" practices of contract law and practice for the design of electronic commerce protocols between strangers on the Internet. Nick also designed Bit Gold https://en.bitcoin.it/wiki/Bit_Gold_proposal, which many consider the precursor to Bitcoin https://en.wikipedia.org/wiki/Bitcoin. This wide-ranging conversation is co-hosted by Naval Ravikant https://angel.co/naval, a mutual friend and one of the most successful investors in Silicon Valley, who also happens to be one of Nick's biggest admirers. We cover a lot, including: What is Bitcoin, what are cryptocurrencies, and what problem do they solve? What is "social scalability?" What is Ethereum and what makes it unique? Strengths and weaknesses? How will smart contracts actually get adopted or go mainstream? What are ICOs (Initial Coin Offerings)? Blockchain governance -- is there any existential risk? "Wet" versus "dry" code Pascal's scams Quantum thought What fields will you be working on in the future? Show notes and links for this episode can be found at www.fourhourworkweek.com/podcast http://www.fourhourworkweek.com/podcast. This podcast is brought to you by FreshBooks https://www.freshbooks.com/pages/tim?ref=11864&utm_source=tim-ferriss&utm_medium=podcast&utm_campaign=2016&utm_content=email. FreshBooks is the #1 cloud bookkeeping software, which is used by a ton of the start-ups I advise and many of the contractors I work with. It is the easiest way to send invoices, get paid, track your time, and track your clients. FreshBooks https://www.freshbooks.com/pages/tim?ref=11864&utm_source=tim-ferriss&utm_medium=podcast&utm_campaign=2016&utm_content=email tells you when your clients have viewed your invoices, helps you customize your invoices, track your hours, automatically organize your receipts, have late payment reminders sent automatically and much more. Right now you can get a free month of complete and unrestricted use. https://www.freshbooks.com/pages/tim?ref=11864&utm_source=tim-ferriss&utm_medium=podcast&utm_campaign=2016&utm_content=emailYou do not need a credit card for the trial. To claim your free month and see how the brand new Freshbooks can change your business, go to FreshBooks.com/Tim https://www.freshbooks.com/pages/tim?ref=11864&utm_source=tim-ferriss&utm_medium=podcast&utm_campaign=2016&utm_content=emailand enter "Tim https://www.freshbooks.com/pages/tim?ref=11864&utm_source=tim-ferriss&utm_medium=podcast&utm_campaign=2016&utm_content=email" in the "how did you hear about us" section. This podcast is also brought to you by Audible http://audible.com/tim. I have used Audible http://audible.com/tim for years, and I love audiobooks. I have two to recommend: The Graveyard Book http://www.audible.com/pd/Teens/The-Graveyard-Book-Full-Cast-Production-Audiobook/B00LXHQO22/?tag=offsitoftimfe-20 by Neil Gaiman Vagabonding http://www.audible.com/pd/Travel-Adventure/Vagabonding-Audiobook/B00GCHWZHG/?tag=offsitoftimfe-20 by Rolf Potts All you need to do to get your free 30-day Audible trial is visit Audible.com/Tim http://audible.com/tim. Choose one of the above books, or choose any of the endless options they offer. That could be a book, a newspaper, a magazine, or even a class. It's that easy. Go to†Audible.com/Tim http://audible.com/tim and get started today. Enjoy.

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• 0:01Speaker 00

  At this altitude, I can run flat out for a half mile before my hands start shaking.

• 0:06Speaker 01

  Can I ask you a personal question?

• 0:08Tim Ferriss?

  No, we're just seeing an appropriate time.

• 0:12Speaker 01

  I'm a cybernetic organism, living tissue over metal endoskeleton.

• 0:23Tim Ferriss?

  This episode is brought to you by FreshBooks. Man, oh, man, do a lot of listeners of this podcast and readers of mine love FreshBooks, to the extent that I ended up meeting with the CEO not very long ago. Why are they so popular? Well, they are the number one cloud accounting software designed exclusively for self-employed professionals, that's many of you, and used by more than 10 million people. You can send invoices, track your time, and get paid very, very quickly, which suits the needs of a lot of freelancers, a lot of entrepreneurs, and beyond. You can take pictures of receipts. You can link your credit card and debit card, so all the things you buy automatically appear in your FreshBooks in the right category, so on and so forth. Makes

• 1:03Tim Ferriss?

  taxes easy, makes invoices easy, makes your life easier. And also, in fact, I'd recommend a PDF. They didn't ask me to read this part, by the way. They put together a PDF a while back called "Breaking the Time Barrier," subtitle "How to Unlock Your True Earning Potential." So you can search for "Breaking the Time Barrier." A lot of people ask me, "How can I get a four-hour work week with a service business?" And the story in that ebook, it's PDF, is the short answer. It's really, really good. So I think you should also check that out. So "Breaking the Time Barrier", check it out. But also, why not test out FreshBooks? Claim your 30-day unrestricted free trial at freshbooks.com/tim and enter "TIMFERRIS," two R's and two S's, in the "How did you hear about us"

• 1:47Tim Ferriss?

  section. That sounds like we're going to get very little tracking. That's a lot of work. But just go to freshbooks.com/tim and try it out, because it is a very good product, and I think you will find it simplifies your life. Enjoy.

• 2:05Tim Ferriss?

  This episode is brought to you by Audible, which I've used for many, many years. I absolutely love audiobooks and they are one of my favorite ways to pass the time when I travel. I'm on the road all the time and Audible allows me to consume many more books than I possibly could otherwise. I have two audiobooks to recommend right off the bat. The first is perhaps my favorite audiobook of all time and it's the only audiobook I've wanted to listen to twice in a row. The Graveyard Book by Neil Gaiman. It's amazing and you will thank me. There are a few different versions. I like the version that Neil narrates himself. One of the most soothing voices of all time. The second book is Vagabonding by Rolf Potts, P-O-T-T-S,

• 2:47Tim Ferriss?

  which had a huge impact on my life and formed the basis for a lot of what would later become The Four Hour Work Week. So, go to audible.com/tim and you can choose one of these two books or any of many, many other options. That could be books, magazines and much more. As a listener of The Tim Ferriss Show, you can also access a free 30-day trial. Just go to audible.com/tim. You can't make more time, but you can make the most of it. So, turn your travel or your commute into something more with a free trial at Audible. Go to audible.com/tim to start now and get your free 30-day trial.

• 3:27Tim Ferriss?

  Hello, boys and girls. This is Tim Ferriss and welcome to another episode of The Tim Ferriss Show, where it is always my job to tease out the habits, routines, philosophies, favorite books, et cetera, from world-class performers, so you can test each of those in your own life. And guests range from, say, those in business, sports, military, all the way to the esoteric and sometimes the very unexpected. And this guest checks a lot of boxes. His name is Nick Szabo. That's S-Z-A-B-O. Many of you may not recognize his name, but hopefully by the end you'll want to know. Everything that he puts out and read every essay that he puts on the internet,

• 4:10Tim Ferriss?

  he is a polymath. The breadth and depth of his interests and knowledge are truly astounding, and I mean jaw dropping. It's just beyond belief what this guy can cover. He's a computer scientist, legal scholar, and cryptographer, best known for his pioneering research in digital contracts and cryptocurrency. And I've long been fascinated by cryptocurrency, but secretly not really understood anything about it, or certainly the subtleties. And this episode is really a masterclass. We go from the very, very basic, all the way up to the cutting edge and what the future holds. Nick, for instance, developed the phrase and concept of smart contracts with the goal of bringing

• 4:51Tim Ferriss?

  what he calls the highly evolved practices of contract law and practice to the design of electronic commerce protocols between strangers on the internet. Nick also designed BitGold, which many consider the precursor to Bitcoin. This particular conversation is co-hosted by one of my favorite people, Naval Ravikant, a mutual friend and one of the most successful investors in Silicon Valley, who also happens to be one of Nick's biggest admirers. And for those who enjoy Naval here, you may also enjoy his first episode with me from 2015, which was voted on Product Hunt the second-best podcast episode of the year across all podcasts,

• 5:32Tim Ferriss?

  with the exception of my Jamie Foxx episode. So you can listen to that if you like. It's called the evolutionary angel episode, tim.blog/naval. But let's get back to how much we cover with Nick, because it's a lot. And you need not be intimidated. You don't need to be a computer scientist. I am not. You don't need to know anything about currency. I know very little. But we get into the history of money. We talk about Bitcoin, what it is, what cryptocurrencies are, and what problems they solve. We define social scalability. What is that and why is it important? What is Ethereum? What makes it unique? Strengths and weaknesses. We talk about different types of cryptocurrencies. We talk about things called, for instance, altcoin. What the hell is that? We get into it. What are ICOs?

• 6:17Tim Ferriss?

  Initial Coin Offerings. We talk about who might invest or not invest. And certainly, this is not investment advice. It's for informational purposes only. So talk to your financial professional before allocating resources or money anywhere. Okay? Cover my ass. Good. How will smart contracts actually get adopted or go mainstream? Right? If you think of, say, Bitcoin as something that is very fringe, when will it hit the tipping point? What might the elements be that would lead to that? Blockchain governance? Is there any existential risk? Could governments or regulators shut down something like Bitcoin? What is wet code versus dry code? This is a super, super cool distinction that I really enjoyed. What are Pascal's scams or quantum thought?

• 7:01Tim Ferriss?

  We dig into all sorts of nooks and crannies, including what Nick might work on in the future? What fields does he want to explore? And so on. So this was, to me, a really, really fun and mind-expanding conversation. You do not need to be technical or an engineer to enjoy it and get a lot out of it. Because at the core, we are really looking at how two people who are very, very smart, meaning Nick and Naval, process the world, what lenses they use to view the world, and how that dictates their actions and how they get better results. So if you want more from Nick, and we'll talk about this at the very end of the conversation also, but you have to check out the essays on his blog, which is called Unenumerated.

• 7:44Tim Ferriss?

  It's unenumerated.blogspot.com. But that can wait for later. And then you will know why many of the thought leaders in Silicon Valley and around the world really pay a lot of attention to Nick. So without further ado, please enjoy this wide-ranging conversation with Nick Szabo.

• 8:05Tim Ferriss?

  All right, gentlemen. I think the hour has arrived. Naval, welcome back.

• 8:11Naval Ravikant?

  Thank you. It's good to be back once again.

• 8:13Tim Ferriss?

  Nick, pleasure to meet you.

• 8:15Speaker 04

  Nice to meet you.

• 8:15Tim Ferriss?

  And I'm very excited and also intimidated by the conversation we're about to have. As context for people listening, we're going to delve into some subjects I have an acute interest in, but extreme ignorance of. So I will let Naval do a lot of the driving. And I figured a place we could start is at the beginning, at least where you guys met. So how did you two first connect?

• 8:42Naval Ravikant?

  Yeah, like most of my close relationships these days, I formed them on Twitter. And I think of Twitter as the place where I go to to have a great conversation when I can't have one locally, which seems to be all the time. And the more time that I spend on Twitter, the more I sort of curate this incredible group of very intelligent people that I just get to know purely through the quality of their thoughts. And so I think when I was getting into cryptocurrencies and blockchains, doing my homework on it, I stumbled across a blog called Unenumerated. And maybe Nick can go into what the origins of that word are. But it was obviously written by a polymath, someone who wrote about everything.

• 9:24Naval Ravikant?

  I got into the blog and then I started following the author, which was Nick on Twitter, retweeted a few of his tweets and got into little bite-sized 160-character conversations. And here we are.

• 9:33Tim Ferriss?

  How is that relationship developed? In other words, how are we here today? And you could take a stab at that.

• 9:39Naval Ravikant?

  Yeah.

• 9:40Tim Ferriss?

  Nick's going to do plenty of talking, so we can certainly have him chime in. But if you want to, if you want to lead us to how we ended up here today.

• 9:48Naval Ravikant?

  Yeah, I mean, it was just more and more tweeting back and forth, reading Nick's articles. There's one that he put up recently around social scalability, which I thought was literally mind blowing. Like, I thought I knew a lot about cryptocurrencies, but it really just helped me reframe what I knew in a better mental model. You know how Charlie Munger talks about mental models? So I've actually picked up at least four or five mental models from Nick, which I think is more than I may have from any human being other than Charlie Munger. I was tweeting out sections of that article. Then somebody said, well, Nick and Naval should do a podcast. And I was like, well, they never do a podcast with me. And then Nick said, sure, I'll do a podcast. So here we are.

• 10:29Tim Ferriss?

  Nick, could you maybe help us with some definitions? So cryptocurrency, there are a number of other words that are going to come up a lot. And these are words that I feel at many dinner parties and say Silicon Valley, people will not ask about because they're afraid they're the only ones at the table who don't actually know how to define it. But since I can't play the part of knowing what I don't know in this case, what is cryptocurrency? And how did you become interested in it or start thinking about it?

• 10:56Speaker 04

  Cryptocurrency, as the name suggests, is protected by cryptography. And in particular, the modern cryptocurrency like Bitcoin and Ethereum and so forth are protected by, their integrity is protected by cryptography, a structure called a Merkle tree. You can think of it as a fly getting trapped in amber. If you say, "I shot JFK," and then put it through this process of the Merkle tree, putting it on the blockchain, then it's there. You can't, and you've signed it with your private key, then you can't later deny, "Oh, I didn't say that." That allows you to like make a statement, you know, "I'm paying such and such amount of Bitcoin to somebody else," and then put it there after a few cycles called block

• 11:40Speaker 04

  times, which take about 10 minutes each. It gets exponentially more difficult to deny or take back that this transaction took place.

• 11:48Tim Ferriss?

  How did you first begin thinking about these types of constructs or any of this really? Where did the interests begin?

• 11:57Speaker 04

  Well, we had a group called the Cypher Punks back in the 1990s. Tim May and Eric Hughes and John Gilmore and so forth. And Tim May had, so partly this is political, that Tim May had a vision of Galt's Gulch in cyberspace. So if any of your audience are Ayn Rand fans, they'll recognize the reference to Galt's Gulch as this place you can go to get away from things and do your business without outside interference. In the book, that was like a physics fantasy, but Tim goes, "Well, we have strong cryptography now, so we can do that." And I thought, "Well, yes, but you still want to do things like enforce contracts and protect property and so forth." So I started thinking about, and to some extent, some other people started thinking about how to apply computer science to...

• 12:43Speaker 04

  To protect your business in cyberspace.

• 12:45Tim Ferriss?

  This bleeds into, I did just enough reading to hopefully have questions to ask. I didn't want to read so much that I left out basics, fundamentals for people. Cryptography, if most people think that, they hear that word, maybe the exposure they've had is watching a movie that involves an Enigma machine or something like that. But what is cryptography?

• 13:07Speaker 04

  The original cryptography is, if you saw that movie, is keeping secrets. This case in that movie, the Nazis failing to keep secrets from the British and Alan Turing. Because their cryptography wasn't strong enough. But these days you have really strong cryptography. So breaking it in that brute force manner, like they broke the Nazi codes is pretty unlikely these days. There are some other things you can do, like take people's private keys and so forth. But the brute force attack doesn't work anymore. I mean, there are some old ciphers where it's starting to work. But as long as you have the latest stuff like Bitcoin does, then you're fine.

• 13:44Naval Ravikant?

  Yeah, I would say it's like basically keeping secrets through mathematics. And there are many, many breakthroughs that enable cryptocurrencies. But one of the key things to understand in cryptography is this concept of one-way encoding, one-way hash functions. Basically, I can take some data, run it through a mathematical transformation. And what comes out of the other side is really hard to undo. It's really hard to work backwards. So it's kind of a one-way thing.

• 14:12Tim Ferriss?

  So is when people send encrypted email through, say, PGP or something like that? Is that an example of that?

• 14:17Naval Ravikant?

  Yeah, basically what I've done, so in the old days, if I was encrypting something, we would both have the same key, right? And so, or I would have a key that I would take your key, I would encrypt with your key, send it to you, you have the key, you can decrypt with the key. But the problem was, how do I figure out what your key is? How do I figure out how to encrypt it? And because your key can both encrypt and decrypt. So if I had a hold of your key, then I could open the message. So it was very unsafe to transmit that key. And so one of the innovations that came along was this idea of splitting the key into a public key and a private key. So private key is what you hold on to that can decrypt and encrypt stuff. Your public key, on the other hand, other people can encrypt. To it for you, but they can't use it to decrypt your stuff.

• 14:59Tim Ferriss?

  It's a write-only.

• 15:00Naval Ravikant?

  It's a write-only. Yeah, it's a one-way kind of thing. So I mean, this is probably beyond the scope of this discussion, but it's worth digging a little bit into what are called one-way hash functions and public keys and private keys because they underlie a lot of cryptography. And they seem like complicated concepts, but they're not that complicated. And I would argue this is one of those mental models that you kind of have to figure out to start operating in the modern technological world. But cryptocurrencies essentially use these one-way hash functions to make statements like, I gave Tim $10, right? So if I said, I gave you $10, normally, we need a central authority to verify that. Like, the bank has to verify that and the central bank has to verify.

• 15:39Tim Ferriss?

  Well, this leads to the question of, and I'm not going to interrupt beyond this, but why, why create cryptocurrency? Why is it important? What are the benefits?

• 15:47Naval Ravikant?

  Yeah, so I mean, one huge benefit is we don't need anymore a trusted third party to verify that transaction. We can do it in the cloud through a distributed network, which is kind of what the cryptocurrency does. But I'll let Nick talk more about this. But he had a great quote that I think is very relevant, where he said, "This is the dawn of trustworthy computing." Right? Because before, these computers are kind of untrusted. Like, if I send you money from my computer to your computer, we're really relying on Visa and the banks and a bunch of intermediaries just actually say, yes, the money got to you and the money is no longer mine. But computers don't like to operate like that. Computers, you know, computer code,

• 16:28Naval Ravikant?

  especially stuff that's running in the cloud on its own, shouldn't have to rely on an offline, wet space, meet space institution to enforce that kind of thing. So cryptocurrencies take the concept of money and they take it native into computers, where everything is settled with computers and doesn't require external institutions or trusted third parties to validate things.

• 16:54Tim Ferriss?

  Just to try to paraphrase that from my own understanding. So in other words, you don't have to say, trust a stranger to do something. You don't have to trust a central authority to be the arbiter of whatever decisions end up being made or implemented. It's built into the technology itself.

• 17:12Naval Ravikant?

  Yeah.

• 17:13Tim Ferriss?

  Why is cryptocurrency important to you?

• 17:16Speaker 04

  So it's important for, I think, the partially political reason to gain more independence of your life from these institutions. And it just creates new capabilities, like somebody now in Guatemala can base somebody in Canada without using an intermediary in New York City or something. That's just greatly advantageous for global commerce, I think.

• 17:39Naval Ravikant?

  Yeah, so if I can just dig into that a little bit more.

• 17:42Tim Ferriss?

  Definitely dig in. I also, at some point, because this word has plagued me for a few years now, blockchain. I do not know what it means, and I don't know why it's called blockchain.

• 17:50Naval Ravikant?

  I actually thought Nick's earlier analogy of a fly getting trapped in amber is kind of brilliant. Like, if you see a fly in amber and it's got, you know, a millimeter of amber around it, well, that could have been done yesterday, or, you know, a year ago. But if you see the fly is trapped in a huge block of amber, you know it's been there for a long, long time. It's been accumulating. So a blockchain is a series of blocks. Each block is a series of computations done by computers all over the world using serious cryptography in a way that's very hard to undo. So each block is like another thin layer of amber.

• 18:25Tim Ferriss?

  I see.

• 18:25Naval Ravikant?

  And the chain of blocks represents the depth of that amber, how long that fly has been trapped in, and therefore, how you can trust that on a signal. Anything deep down in the blockchain is mathematically, cryptographically, and just economically impossible to undo.

• 18:43Tim Ferriss?

  Got it. Okay.

• 18:44Naval Ravikant?

  Actually, I shouldn't use words like impossible in cryptography. It's always improbable.

• 18:48Speaker 04

  Highly improbable.

• 18:51Tim Ferriss?

  What are some other core concepts that people should understand, just as the cryptocurrency 101, or currency 101? I mean, depending on where we want to go with that.

• 19:03Naval Ravikant?

  I even want to start with, like, what is money?

• 19:05Speaker 04

  Sure.

• 19:06Naval Ravikant?

  Because we're throwing around the word currency and money and people talk about gold, the store of value. And, you know, Nick actually created Bitgold, which was, some would argue, a critical foundational predecessor to Bitcoin. Bitcoin had an additional breakthrough or two that employ that Bitgold did not, but Bitgold was the giant on whose shoulders Bitcoin stands. And Nick also created both the phrase and the concept and the theory behind smart contracts, which we're now starting to hear about in the context of other cryptocurrencies like Ethereum. But I think we should just, this is a complicated enough topic that it's worth just starting with, like, what is money? If you ask 10 people on the street what money is, you'd probably get 10 different answers.

• 19:47Speaker 04

  Sure.

• 19:48Naval Ravikant?

  So I think it's important just to be rigorous about that.

• 19:50Speaker 04

  And if you ask a lawyer, he'll get an answer that's radically different than if you ask an economist as well. If you ask a lawyer, they'll say something like an official government currency. So of course Bitcoin and gold, you can't write checks for those because those are not legal official government currencies. So that's the, that's the kind of narrow, modern legal definition. Economists use the definition of medium of exchange, which is a much broader definition, but that also assumes that, you know, the only important transactions are people exchanging things, which in our modern economies is a good assumption. But if you actually go back to the origins of money, which I've liked to study, you find things like inheritance and compensation for injuries as equivalent to a modern lawsuit, but not necessarily with

• 20:33Speaker 04

  governments and courts, more like wars to enforce the, force the verdict. And bride wealth, there's certain fitness critical, critical to Darwinian fitness that other animals can't do that humans can. And that form of, I like to call it collectibles because now I've extended the definition of money far broader than probably any economist would want to. But, so I call it collectibles. So it's very similar. So the Uroch Indians, for example, use shells to, and they would have tattoo marks on their arm. They're serious about their shells. They would have tattoo marks on their arm to measure the length of shells. And that told you the denomination, the value of, of how valuable that shell was, which corresponds to how scarce it was in nature. And they would use these for inheritance, for injury compensation, for bride wealth and so forth.

• 21:19Naval Ravikant?

  Yeah, so it sounds like, you know, as so I think that the common theory is that humans have only been using money for a few thousand years, but I think some of the work you've done on origins of money shows that actually it's hundreds thousand years.

• 21:31Speaker 04

  Yeah, you can go back in the archaeological record and it's a puzzle for 100,000 years in our Darwinian world that people lived in. Why would people do something so frivolous as, you know, adorn themselves with shell necklaces, yet those are among the most common artifacts, right up there with axes, practical axes that you can use to cut things in the archaeological record.

• 21:52Naval Ravikant?

  Yeah, so I mean, on the money thing, like I've also tried to wrap my head around this. And as Nick said, economists would say it's a medium of exchange. As the historical record shows, it's a store of value. So even if you're not exchanging it, you just want to store value. You may not want to store bread or rocks or houses. So you store.

• 22:10Tim Ferriss?

  Or they may be practical to transport.

• 22:13Naval Ravikant?

  Exactly. And then it's also a unit of account. So in other words, like you have to denominate prices in something. I'm not going to tell you how many loaves of bread a car costs. So I need to be able to just pick a unit of account to do it.

• 22:25Tim Ferriss?

  Don't judge. I only do that occasionally.

• 22:26Naval Ravikant?

  So it is all of those things. And I think one of the places where people fall down on cryptocurrencies, they say, well, no one's using Bitcoin to buy anything right now. So it may not be fulfilling the medium of exchange function, but it is, it may be fulfilling a different function, like store of value. It might be a Swiss bank account in everyone's pocket or in their mind, or it might be the defense against a Cyprus style bank haircut.

• 22:47Tim Ferriss?

  Or it could be the, the future that is here, but not evenly distributed, right?

• 22:51Naval Ravikant?

  Absolutely.

• 22:52Tim Ferriss?

  You can go to Palo Alto, to Copa Cafe and buy coffee with Bitcoin right now.

• 22:56Naval Ravikant?

  Yeah. And within my social circle, there is a large group of people who will take Bitcoin as legal tender. Like you can go to them and settle debts in Bitcoin and they will happily take it.

• 23:06Tim Ferriss?

  Or if you want to buy, say, scientific abstracts or articles from a Russian website, they may only take Bitcoin as well.

• 23:14Naval Ravikant?

  Yeah, and it does seem a little bubbly, which is you know, you kind of say, well, it's only money because everyone believes it's money. But one definition I really liked of money is money is the bubble that never pops. So if we had, if the tulip bubble had never popped, we'd probably be dealing in tulips today. Now, it popped for fairly good reasons, which is tulips make for lousy money, they're hard to store, they're hard to transport, they're hard to subdivide. But cryptocurrencies actually are the exact opposite end of that scale. They are easier to store, easier to transport, easier to subdivide, cheaper in many ways, and more defensible than almost any other form of money or gold or commodity.

• 23:56Tim Ferriss?

  Now, what makes, since we're talking about money or currency, what makes money valuable? I think this might be interesting to just dig into for a second, because you have, say, at certain points in time, paper pegged to gold, right? And then, reading today, because it's another word that I've seen a lot, but aside from the car company, I was not sure what fiat really meant. So if we're talking about, don't even know if they're even around anymore, what distinguishes, say cryptocurrency or makes cryptocurrency valuable? Is it the rarity? What are the factors that determine that?

• 24:31Speaker 04

  Well, I mean, the scarcity is an essential, essential part of it. If it starts inflating on you, then your share of it goes down. So the scarcity is quite essential to it. Other things are you want it to be easy and secure to store and transport. And Bitcoin has the advantage that you can send to people all over the world and store it on a hardware wallet, which is a fairly secure way to store it. And the most important part of it-

• 24:57Tim Ferriss?

  What is a hardware wallet?

• 24:59Speaker 04

  So hardware wallet, so your normal computers are pretty insecure. And that's one of the stories of blockchains is that this distributed system is a lot more secure than an individual computer.

• 25:10Speaker 04

  So your own computer could have malware, viruses and so forth. So hardware wallet is a separate piece like on a USB stick. You plug in, it has its own chip on it. And Bitcoin, your private key gets stored on that chip rather than on the computer.

• 25:23Tim Ferriss?

  Got it.

• 25:24Naval Ravikant?

  Yeah, there's a zillion ways to store Bitcoin. You could do it on your computer, but then your computer is connected to the internet. Security hole. You could put it in an online exchange, but then you're just trusting an unregulated bank. You can put it in a hardware wallet, which says, makes it a dedicated device. You can put it on a piece of paper and stick it in your bank account.

• 25:43Tim Ferriss?

  Is that cold storage?

• 25:44Naval Ravikant?

  That's cold storage. Yeah, that's cold storage.

• 25:46Tim Ferriss?

  This is where I know the words, but not what they mean.

• 25:49Naval Ravikant?

  This is one of the, yeah, this is one of the craziest things about this concept. Cause money and speech turn out to be the same thing. Money, information, math, they're the same thing. So in a Bitcoin world, I can literally write down my Bitcoin address and keys on a piece of paper and put in a safety deposit box and it's basically in cold storage. I could even put it in my head. I can memorize the key phrases and I could cross borders with a billion dollars in my brain. So it's a very powerful, but mind bending, literally concept in that sense.

• 26:20Tim Ferriss?

  Is this a point where it makes sense to talk about smart contracts? Or is that a non sequitur?

• 26:25Naval Ravikant?

  No.

• 26:25Tim Ferriss?

  Or is there, is there a good bridge?

• 26:27Naval Ravikant?

  Yeah, no, I think, I think we should get into it. First, I want to make sure that we understand what blockchains and Bitcoin are, right? It might be worth going into like, what are the key innovations that enabled Bitcoin?

• 26:37Tim Ferriss?

  And I'll leave you to dictate when this makes sense or either of you guys. But the article that you sent me about the, I guess, fat protocol layer.

• 26:47Naval Ravikant?

  Right. I'll get into that later.

• 26:48Tim Ferriss?

  Okay, we'll get there. That's a little teaser for folks. I'll let you lead it then.

• 26:53Naval Ravikant?

  Yeah, so I think it's worth getting into like, what is the Bitcoin computer, right? Cause there is basically, you can abstract and think of Bitcoin as running on a blockchain computer. And maybe Nick can take a stab at defining what it is. By the way, this is one of those things where I think if you ask 10 different people in cryptocurrencies, what Bitcoin is and what a blockchain is and what blockchain computer is, you'll get 10 different answers.

• 27:14Tim Ferriss?

  You know, some people are more qualified than others.

• 27:16Naval Ravikant?

  Well, it's also just, it's new. It's hard to figure out. These are very abstract concepts, ideas being turned into code. And they are all, Bitcoin is almost to computers what like quantum mechanics is to physics. It throws a lot of people in the field off.

• 27:31Tim Ferriss?

  Well, it's also like quantum physics because you have a lot of.

• 27:36Tim Ferriss?

  Well-intentioned, like hippies and new agey people who will misappropriate and use it completely incorrectly.

• 27:42Naval Ravikant?

  Absolutely.

• 27:43Tim Ferriss?

  So not to say there are a lot of new agey hippie people getting into cryptocurrency, there might be, but I think you also have that challenge.

• 27:50Naval Ravikant?

  Yeah, it's just layers of understanding. Like, I don't know how to write code for a Merkle tree. I don't know how to take apart a Bitcoin block and analyze it. So in some level, I'm still, you know, a new agey hippie trying to figure it out. But I think it's worth getting into like, what is the blockchain computer and how does it enable Bitcoin?

• 28:08Speaker 04

  I guess first of all, before I drop into that, another important concept to the architecture that hasn't been mentioned yet is replication. So there's thousands of copies of these things running on what are called full nodes all over the world.

• 28:21Tim Ferriss?

  And those are servers?

• 28:22Speaker 04

  Right, right. So there are servers. They can be laptops or larger machines. But there are thousands of them running all over the world. So anybody who has a copy of this can, their machine can do a full validation for itself. And it's kind of the most secure way to run, run a cryptocurrency.

• 28:37Naval Ravikant?

  Yeah. Sorry to interrupt you, but basically what's going on is if I give Tim $10 and then Tim gives Nick those $10, the way we keep track of it is through a piece of paper or in the old days with the Euroc Indians, it would be a shell of a certain measurement. But now with Bitcoin, there's a ledger. We basically just keep track in a ledger entry that Naval moved this $10 to Tim, Tim moved the $10 to Nick. Now, the problem is who maintains the sanctity of that ledger? Can you just forge that ledger? So historically, the central bank wouldn't maintain the sanctity of the ledger or the fact that you have a certain dollar bill with a serial number and it maintains the sanctity of the ledger. But now Bitcoin has the craziest answer you can imagine, but it turns out to work, which is everybody

• 29:20Naval Ravikant?

  has a copy of the ledger. So every one of the Bitcoin network who's running a node keeps a copy of the ledgers from the dawn of Bitcoin till now. And that is a testament to the computing power and memory that we have available in modern computers, that people can do this at home. You can run a full Bitcoin node where you keep a copy of every single Bitcoin transaction from the dawn of time till now. And all these computers running together essentially validate with each other, like, are our ledgers the same? Are we using the same ledger? And whose ledger is correct in case there's a disagreement? And that's where kind of all the blockchain comes in, doing all this cryptography.

• 29:56Speaker 04

  And then another thing that's replicated, besides the data and the integrity cryptography we talked about, is code, computer programs. And kind of the second definition of smart contracts, we'll get into the first definition later, but the second definition is simply describing this code that's replicated, that's running on all these nodes. And that code can do things like enforce on Bitcoin, it can do some fairly simple things that add some sophistication, like require multiple signatures to do a spend, for example. So like, you can think of signature authority in an office where multiple people have to sign off on something. You can set up your Bitcoin to do that using one of these smart contracts, one of these pieces of code replicated.

• 30:40Tim Ferriss?

  That might be taking us back, or taking us ahead, or neither.

• 30:45Naval Ravikant?

  We're wandering through the blockchain, it's complicated.

• 30:46Tim Ferriss?

  Yeah, it's a smart contract. In essence, are you taking what would rely on human beings, and embedding it into the technology, so that there's, you don't have to rely on a standard set of ethics, a reliable set of behavior? Is that a smart contract?

• 31:06Speaker 04

  Yeah, so to some extent, there are some areas of contracts, some kinds of contractual clauses, usually but not always, associated with the financial aspects of the contract, that you can, they're really logically structured, and you can code that into the computer, put it on the blockchain, and then it runs over a really high integrity. And that means that somebody in Albania can do a smart contract with somebody in Zimbabwe, and to the extent that they can formalize their deal mathematically with, through this logic code, they don't have to rely on Albanian authorities or the Zimbabwe authorities, they can just do business directly.

• 31:44Tim Ferriss?

  And you had a great term for this. This is getting into the dry versus wet code, right? So dry being... Computer-based, wet being potentially the legalese and the head of a lawyer in Albania and the legalese and the head of a lawyer in Zimbabwe, which is going to be a whole whole just slew of mess potentially.

• 32:05Speaker 04

  Right. So I like to think all that legalese you see in a contract is as a as a program that runs on the brains of a lawyer. It doesn't usually run on brains of normal people.

• 32:14Tim Ferriss?

  This is gonna, I'm trying not to take us too too far afield of what we're talking about. How did you become so interested in contracts?

• 32:21Speaker 04

  So it's part of, I guess libertarian ideology, but it's also part, I went to law school and it's also part of law school 101, that property and contract law are the kind of the two fundamental building blocks of our commercial society. Yeah. So I was interested in how do you enforce those in cyberspace?

• 32:40Tim Ferriss?

  I don't meet many people. I meet people who have, say, JD MBA or JD PhD. I don't meet many people who have JD and computer science degree.

• 32:51Naval Ravikant?

  And libertarian on top of that.

• 32:53Tim Ferriss?

  And libertarian on top of that. Although I have heard there are some libertarians running around the Bay Area.

• 32:57Naval Ravikant?

  Yeah, but JD.

• 32:59Tim Ferriss?

  Apparently I'm a libertarian, I've been told.

• 33:00Naval Ravikant?

  Relatively to the average person in Silicon Valley.

• 33:02Tim Ferriss?

  Well, I live in San Francisco and own guns and they're like, you're libertarian. I'm like, is that it? Really? Is that easy? I got my, my, my card. Okay. How did you end up doing both of those degrees? I haven't run into that before.

• 33:13Speaker 04

  The law degree is in large part based on smart contracts and wanting to do a reality check of the stuff I'd thought of as a computer scientist.

• 33:20Tim Ferriss?

  I see. So the computer science came first.

• 33:23Speaker 04

  Yeah.

• 33:23Tim Ferriss?

  And then the JD was.

• 33:25Speaker 04

  Went to study the wet code.

• 33:30Tim Ferriss?

  Now that I know how a computer works, let me go look at an abacus and see what that's like. Okay. Very cool.

• 33:36Naval Ravikant?

  Yeah. So, so I think some of this is smart contracts, which by the way, as I said earlier, Nick created not just the concept, the theory behind it. Smart contracts are essentially taking that wet code, converting it to dry code, and then putting it inside blockchain. So it's immutable. After a while that it's, it becomes a fly trapped in amber. If we made an agreement, and the simplest smart contract, by the way, is just, I gave you money and you got the money. That's a very, very simple contract that got fulfilled. So, but you can put much more complex.

• 34:05Tim Ferriss?

  So a contract is promise and fulfillment of promise. Or is there an easier way to think about it? Because when I think contract, I think of all these clauses, all right, termination, arbitration, term, et cetera. I think of all these because I look at way too many contracts.

• 34:18Speaker 04

  Now, so you can think of the primordial granddaddy of all smart contracts as the vending machine. So vending machine, in contract law terms, it verifies a performance. You put in your quarter and it verifies you put in the quarter through its mechanical, I'm talking about old fashioned vending machines. It has logic in that says, okay, you put in a quarter, the soda costs a dime, so I'm going to give you a dime and a nickel back and the soda you selected. So you can think of writing this in a contract tediously that, you know, if, if the party of the first puts in a quarter, you know, the party of the second will give them back. But of course you want to do this in a machine, right? Yeah, don't give the lawyers any idea.

• 35:04Speaker 04

  It's verifying a performance on the one hand, somebody, it's observing that somebody did their payment or their other performance of a contractual deal. And then on the other hand, it's automating a performance, it's dispensing, dispensing the goods. So the codes are kind of the two basic things smart contracts can do. They, they verify somebody's performance and they automate performance. Now, the third thing is if you have, and there's a bunch of stuff that's inherently wet, most of the stuff that you can code into smart contracts as those two kinds of things are like payments and various financial conditions, you can do a lot of financial stuff like options and collateralized loans and so forth, futures. But for things that are inherently wet, though, nobody's figured out how to have the computer

• 35:47Speaker 04

  verify or automate the performance yet, you can, you know, invoke an arbitrator, a signature structure like multi-sig to have humans approve certain steps.

• 35:58Tim Ferriss?

  In what, will be an example of where you or someone else might want multi-sigs in that universe?

• 36:05Speaker 04

  If you're doing something with an escrow, for example, that you have the person or persons responsible for the collateral verifying that the contract was performed, then they can free up the collateral.

• 36:18Tim Ferriss?

  Got it. So if you wanted to buy a house but had to do inspections and wanted to use Bitcoin.

• 36:23Speaker 04

  Right.

• 36:23Tim Ferriss?

  That'd be a good situation.

• 36:25Naval Ravikant?

  Yeah. And there are things you can do now with smart contracts, what you call on-chain, where you can have all the money and the collateral and the escrow and the data as close to computerized as possible. So the stuff that people are starting to do with smart contracts now is pretty mind-blowing.

• 36:39Tim Ferriss?

  Can we talk about the article you sent me? And I know it seems like it might not be the right...

• 36:43Naval Ravikant?

  Yeah.

• 36:43Tim Ferriss?

  It was very helpful to me.

• 36:44Naval Ravikant?

  Sure.

• 36:45Tim Ferriss?

  So do you want to dig in?

• 36:46Naval Ravikant?

  Yeah. So there's this, there's this concept of what Bitcoin and Ethereum and these other cryptocurrencies are doing is they're, they're the new protocols. And what is a protocol? A protocol is kind of like a, God, now I'm going to get trapped in definitions, but a, a protocol is sort of how computers, it's a standard for how computers exchange information. So for example, you and I speaking the English language is a form of protocol, but then also like...

• 37:11Tim Ferriss?

  HTTP.

• 37:12Naval Ravikant?

  Yeah. I'm supposed to pause every five seconds and then you're supposed to get a chance to speak. That's part of the protocol. We say hello to each other's greeting. It's part of the protocol.

• 37:19Tim Ferriss?

  So we have verbal packets like TCP IP.

• 37:21Naval Ravikant?

  Yeah, exactly.

• 37:22Tim Ferriss?

  And also another protocol.

• 37:23Naval Ravikant?

  Yeah. And then the internet, these protocols are TCP IP, HTTP, SMTP. Every time your email gets sent from one server to another, it's using the SMTP, Simple Mail Transfer Protocol. And these protocols power the internet. And the assumption that was made in the early days of the internet was that, well, bandwidth is cheap, servers are cheap, hardware is cheap. So it's free. If I want to send you a packet, it's free. If you want to receive the packet, it's free. It doesn't cost anything. But those assumptions are breaking down. We have denial of service attacks, which is basically your computer demands resource from my computer that I'm saying no, but you're asking so many times for free that it just overwhelms me. Spam is another example. I can send you a zillion emails at hardly

• 38:06Naval Ravikant?

  any cost, but it costs you a lot of attention. So these free protocols are, are becoming poor assumptions. The worst place for a poor assumption... On a protocol is a protocol for exchanging money. If I say, Tim, I want to give you $10, that has to be scarce in some way. It can't just be, it can't be a free transaction, right? Because it's money, it's exchanging hands. So we need a concept of protocols that underlie scarce resources, that allocate scarce resources. And what's going on is cryptocurrencies and blockchains are creating these, what are now being called FAT protocols. And we'll put an article in the, in the show notes about this. But FAT protocols are protocols that actually exchange scarce value. And they keep data in the protocol.

• 38:51Naval Ravikant?

  They maintain data.

• 38:52Tim Ferriss?

  That's the key piece, right? Or in a way?

• 38:54Naval Ravikant?

  Yeah, there's two key pieces. One is scarcity, which is regulated by a token. So in the Bitcoin protocol, the scarce piece is the Bitcoin itself. And the protocol is about the exchange of money. And the token is Bitcoin. And then there's data that you can put in the blockchain. Like I could, for example, take a, an article that I wrote, I could hash it, the one-way crypto hash, put it in the blockchain, prove that it came from me. And then it gets trapped in the amber, again, like the fly, and no one can undo it later. And as, and secured by the value of the blockchain. So these, these new protocols, these FAT protocols are very different. They're going to exchange, they're going to enable a new kind of internet that we did not have before. That's a thesis of kind of the FAT protocol argument.

• 39:38Tim Ferriss?

  Just for, for people listening who, like me, were trying to find their way, their way through the darkness with a lot of this stuff. When I read that piece, which is on the Union Square Ventures website. Hi Fred and guys. I'm blanking on the name of the author, but very good.

• 39:51Naval Ravikant?

  Joel Montenegro.

• 39:53Tim Ferriss?

  There we go. And the, the, the before and after example that was given, or one of them was you have these thin protocols, HTTP, et cetera. And then you have these services built on top of them that become silos of information, whether that's Facebook, Google, whatever it might be. And then they develop their own means of authentication and so on. So you have these captive stores of information. You have security risks on top of that. So now perhaps you're doing your banking through a web server. And conversely, when you then have the, and I hate to use this word, but sort of the democratized

• 40:35Tim Ferriss?

  data that is built into the protocol itself, say in the case of Bitcoin, where now you have all of these nodes that have, for the purposes of illustration, every transaction start to finish. It's more secure, you're less captive, and it conforms to the libertarian slash Ayn Rand ideals that we were talking about earlier. And the illustration that was given that I thought was fascinating and may or may not hold true for decades, but was that you have protocols that they're necessary but not valuable, right? They're available, they're like utility to the public. And then you have these billion-dollar, multi-billion-dollar companies built on top of it, Facebook, Google, et cetera. Then you have, conversely, Bitcoin, which has a market cap of X, I don't know what it is.

• 41:20Naval Ravikant?

  25 billion today.

• 41:21Tim Ferriss?

  Okay, and then the companies built on top of it are in the

• 41:24Naval Ravikant?

  Vanishingly small.

• 41:25Tim Ferriss?

  In the tens or hundreds of millions at most, right? So it's a complete flip in terms of

• 41:30Naval Ravikant?

  Yeah, the value is getting captured by the fat protocol. Yeah, I do recommend this article, it's actually John, sorry, Joel Monegro, I got his last name wrong, but he wrote a brilliant piece on this. But the thesis is that because these protocols are storing your identity and data on the, on the protocol, in the protocol itself, the applications don't capture you as much, you're not stuck in the applications. And the value is captured by the tokens in the protocol.

• 41:56Tim Ferriss?

  Does that mean, this is, this is just putting on the investor hat for a second, that people are going to be incentivized to just create more and more different types of cryptocurrency and then reserve to try to capture that?

• 42:09Naval Ravikant?

  That's exactly what's happening. So I wrote a post on this called "The Bitcoin Model for Crowdfunding", and this is a couple of years back, and I thought these things called "appcoins" would show up, where for every application, rather than going and raising VC money, you just attach a token to it and you crowdfund it. And that's kind of what's happening now with what they call ICOs, Initial Coin Offerings. And there's been hundreds and hundreds of these, and you know, it's a little bubbly. In fact, it's very bubbly, a lot of them are getting bid up out of control. Some of it comes from the fact that a few of these protocols do need their own token, they can't use Bitcoin. But most of the times, it's really just the developers have an incentive to create a token, bolt it on and try and capture the value. But it's, but it's, it's an interesting model for funding open source software and protocols that didn't really exist before.

• 42:53Tim Ferriss?

  Are bubbles a bad thing? And this is something I've also been reading about that I'm really, I don't know if you have any thoughts on this, but in many people's minds, bubbles are a bad thing. But I read a counterargument for the first time today, which was after a bubble bursts, then you have out of the money investors who are incentivized in regaining the value of what has declined by creating services and applications that are now these sort of thin applications, which then preserves the sort of long-term viability of X, whatever that might be, which I hadn't really considered before.

• 43:29Speaker 04

  Well, there is a sense in which many bubbles are unavoidable because the future is a genuinely uncertain place.

• 43:35Naval Ravikant?

  Yeah, especially, these are reflexive industries where the notion of reflexivity is like my prediction alone changes the potential outcome. And the extreme example is like a prediction market predicting the death of somebody. If there's enough money on that, it turns into an assassination market. So bubbles are inherently, I think, just a part of any system that involves network effects. If I think, and money is the ultimate network effect, I accept US dollars as money because you accept US dollars as money and so on. If we all believe that, if we all believe tomorrow that tulips were valuable again, we'd be trading in tulips. So if I believe that you're going to accept this as money, then I want to put more money

• 44:19Naval Ravikant?

  in and you want to put more money in, the network effect sort of creates a bubble. And as Nick said, the future's an uncertain place. So sometimes we'll be wrong or we'll have to step back. There'll be a little bit of a releasing of energy. I read something a couple of years back that showed that as the stock market is becoming more efficient, it's actually becoming more volatile. It's not becoming less volatile, it's becoming more volatile because it's reacting faster and faster to information changes.

• 44:45Tim Ferriss?

  That's like the story, well, you can look at long-term capital management where there are all sorts of high-frequency trading. So you have not only humans, right, who are increasingly interconnected, but you also have computers.

• 44:56Naval Ravikant?

  Right. Now, there's a big trade derailment in China that caused a political change that causes the futures market in China to shift, that causes the US stock market to go down, right? Computers are getting better and better at absorbing that information, extrapolating out the consequences. And so the markets have become more and more volatile. So over time, we should see Bubbles form faster, pop more quickly. And I think they'll fall into a power law distribution. Like there'll be ones that'll be really large. There'll be ones that'll be really small. But this idea that the future is going to be very smooth and linear and predictable is a human illusion.

• 45:34Tim Ferriss?

  Yeah. Yeah.

• 45:38Tim Ferriss?

  I think that's a fair assumption. Nick, what are the biggest misconceptions or common misunderstandings related to cryptocurrency or Bitcoin? Or like, what does smart people get wrong? If there's anything where you're like, God, this like X drives me nuts. If I hear one more person who should know better.

• 45:59Speaker 04

  Well, we could get into the whole block size issue because there's this parameter. We shouldn't, but I probably will talk about it a little bit. There's this, there's this, it's a technical security parameter. It's called the block size. How the general public glommed onto this, I do not know. But there's, there's an obsessive group of people who think of this as some kind of artificial barrier to more transactions per second on Bitcoin. Really, it's, it's job is it's, it's a fence preventing people from overhoming, flooding the network with lots of transactions that the full nodes I talked about can't handle. That, that transaction history keeps building and building.

• 46:39Naval Ravikant?

  At a very simple level, if, if every computer is storing a copy of every transaction, then you can't have an infinite number of transactions because the computer will explode. And so what you do is if you, if you keep increasing the number of transactions too, too quickly, then you only allow a smaller and smaller shrinking set of computers to run the code, which reduces who, who's actually in charge of the security. Before you might've had a million computers, then you're down to 100,000 big computers. Then there's only a few thousand large players, then eventually down to five people who can store the entire history. And then you're basically back to central banks. So the debate is, should we keep allowing more and more transactions?

• 47:21Naval Ravikant?

  Because what if people, everyone wants to buy a Starbucks using their Bitcoin? Or should we only limited to very high value transactions? And instead preserve the diversity of people who can, who can run the code?

• 47:33Speaker 04

  Yeah, I mean, this shouldn't even be a public debate. It's like the public debating and voting on the graphite reactor setting or graphite.

• 47:41Speaker 04

  Things, settings that prevent a nuclear reactor from overheating and melting down.

• 47:45Tim Ferriss?

  Right, let them debate the bike shed.

• 47:46Speaker 04

  Yeah, and there are certain things you should let the engineers decide, and this is one of them. And for some reason, there's just a whole group of people who wanna wanna pull out those graphite moderator rods and have it going full steam.

• 48:03Naval Ravikant?

  Yeah, one of the problems with the Bitcoin is that because a lot of people hold a little bit of Bitcoin, everyone has a financial incentive and they're all talking their own book and they get really emotional about it. Nick had this great tweet that I liked that best way to destroy your investment in Bitcoin is to gather an internet mob to go and redesign Bitcoin.

• 48:20Tim Ferriss?

  Right.

• 48:21Naval Ravikant?

  And that's a little bit of what's happening right now.

• 48:23Tim Ferriss?

  Well, you were saying, you know, before we started recording, that a lot of you've you've never seen so many scientists be uncivil towards one another.

• 48:30Naval Ravikant?

  Yeah, I think I think the worst Twitter is Trump Twitter, where everyone's getting outraged over politics all the time. But the second worst Twitter right now is blockchain Twitter, where you'll have PhDs from Cornell and University of Maryland, all kinds of credential places, literally calling each other horrific names online, casting aspersions on other people's moral cat moral character, calling them trolls, dragging them through the mud, and they they each have their little local tribal mob behind them. Over things like the block size debate, which, as Nick says, you know, it's actually in the parameter settings in a nuclear reactor.

• 49:04Tim Ferriss?

  Well, it's it's, I mean, it makes me think of, there are a bunch of sort of expressions that jump to mind. You're saying you're talking their own book. So the uninformed has to be very careful about asking a barber if they need a haircut, right? You need to know what the incentives are.

• 49:17Naval Ravikant?

  Exactly.

• 49:17Tim Ferriss?

  And I'm sure people have heard the expression, it's not very flattering, but a man is as loyal as his options. It's might be, you know, a scientist or someone who is otherwise civil is as civil as their incentives, right?

• 49:28Naval Ravikant?

  Yes.

• 49:29Tim Ferriss?

  Once you have enough to gain or lose.

• 49:31Naval Ravikant?

  Yeah, incentives are everything. It's like Charlie Munger says, if you can be working on incentives, don't work on anything else. And in fact, you know, going back to Bitcoin, the Bitcoin design for a second, Bitcoin is brilliantly designed because of the underlying game theory and incentives.

• 49:45Tim Ferriss?

  Yeah, could we talk just for a second about what is Bitcoins? We talked about cryptocurrency. What makes Bitcoin, what made Bitcoin and what makes Bitcoin unique? If that's, if we could maybe talk about that.

• 49:56Speaker 04

  You can think about it in a couple layers, the, the most important and fundamental layer is a computer science later, layer where we prove that it would take 51% of the computational power, the hash rate to attack this thing and do things like double spend.

• 50:12Naval Ravikant?

  Basically changing that ledger, right? So it's like, you can't change the ledger. The beauty is the flying amber analogy is a great one because once we, you and I have done a transaction, the network has agreed on the transaction, going back and then doing it is nearly impossible. But while that amber is being laid down, there can still be some mischief. So one of the big misconceptions of Bitcoin is that, well, if 51% of the computers in the network, which are run by people called miners, they're called miners. It's the old analogy, digging for gold, so they're digging for Bitcoin. But really what they're doing is they're laying down that amber. If 51% of these people collude, then does that mean they can go back and change the ledger? No, they can't change the existing ledger, but they can cause mischief with the current transactions or the current layer that's being laid down. It's one of the big misconceptions.

• 50:57Naval Ravikant?

  So sorry to interrupt.

• 50:58Speaker 04

  Yeah, so that's one of the, the computer science limitations of it. And the other one is doing software upgrades. Software upgrades kind of change the rules even more so.

• 51:09Naval Ravikant?

  Yeah.

• 51:10Speaker 04

  And so those two things end up getting, especially it's a software upgrades, end up getting very politicized.

• 51:16Naval Ravikant?

  Yeah, Bitcoin fundamentally, what, what's going on, it's a, Nick first created BitGold, right? Do you want to talk about what the innovation in BitGold was or how the BitGold system worked? And then we can layer on Bitcoin.

• 51:27Speaker 04

  Sure, I mean, BitGold was inspired by kind of this origins of money research and how do I? And also there was an era called private banking, where you could take your, your bank note and go up to a bank window and get gold. And the bank, the paper money we have today looks very much like these banknotes did. I'm a thing I call authority resemblance, or sort of faking and pretending to, that this is still really valuable stuff. And the illusion works apparently for the most part, but, but they used to work very differently. You used to be able to go up to a window and, and get actual gold for your paper.

• 51:56Naval Ravikant?

  Yeah, now it's just tulips, it's just green, green flattened tulips.

• 51:59Speaker 04

  Yeah, it was debt, now it's just the paper itself, you gotta just trust the paper itself in the federal reserve. But in any case, I was inspired by what people.

• 52:07Tim Ferriss?

  Which is a fiat currency, I never actually.

• 52:09Naval Ravikant?

  Fiat currency is just a paper that's backed by nothing. So before it was shells, then we went to gold, then we went to gold-backed paper, and now we're down to just paper.

• 52:18Speaker 04

  Creating that banknote itself is easy enough to do. That's basically what PayPal and a company I was working for called Digicash with David Chauvin and stuff are doing. That trust-based paper note that was issued by some central authority. But I became dissatisfied though because at the end of the day, you want to go to that window and get something else that's more what I call trust minimized. So gold is valuable all over the world. If you go back to these more primitive tribes, the gold and the shells and so forth, you know, you could pay them to next tribe and next tribe over. All your neighbors would accept them as well. They wouldn't accept your IOU because you know, you're not going to trust people you could go war with tomorrow. But they would accept the shells or the copper beads or the gold beads. The first gold artifact, by the way, is a bead in the first copper artifact. Those are apparently the

• 53:03Speaker 04

  most important earliest uses of metal, not knives or weapons or tools or so forth. In any case, so I was looking for this trust minimizing, like how to do this in cyberspace? Since I had read stuff, I know it's not just some magical property of gold that makes it valuable and other things aren't or something, or some intrinsic, you know, it started off, you can use it in electrical circuits or so forth. No, there's something about what I call the unforgeable costliness of it, the scarcity of it, the naturally trust minimized scarcity of it. You don't have to trust somebody to keep it scarce. I tried to recreate this in cyberspace using proof of work, Adam Back's hash cash.

• 53:46Speaker 04

  And so basically the biblical design did that. And then it used a replication technique, which had originally been developed.

• 53:53Tim Ferriss?

  Could you explain that? I apologize to backtrack, but the proof of work, what do you mean by that?

• 53:57Speaker 04

  Okay, so proof of work is a mathematical puzzle, a computation that the computer does that says, okay, you have to solve this. And we know from computer science, it'll take so long to solve. But we also know from computer science that it's

• 54:13Speaker 04

  It's a kind of a problem that you can improve the hardware, which is why everybody uses design specialized hardware for it.

• 54:18Tim Ferriss?

  Got it.

• 54:19Speaker 04

  Now, because unlike normal cryptography, it's well, that's not even unlike normal cryptography in that way. But it's something that you can do a lot faster if you have hardware.

• 54:30Naval Ravikant?

  Proof of work is basically you have to, you have people here who are basically laying down the layer of amber on the fly. Right. And so they have to basically commit resources to do it. It has to be costly to do that. You need scarcity in the system, right? So that scarcity is created by the costliness of the computing power that you throw at it. So basically, the more computer power you want to throw at the Bitcoin network, the more seriously the Bitcoin network takes your vote. And we have to know your computing power is dedicated to the Bitcoin network. It's not, you know, off surfing the internet or doing something else. So you have to commit it to doing work just for the Bitcoin network. And the proof is through mathematical functions.

• 55:08Tim Ferriss?

  Got it.

• 55:08Naval Ravikant?

  So you basically have puzzles to solve. The Bitcoin network, the algorithms, give the computers puzzles to solve. If the computers solve the puzzles, they can prove that yes, I put economic value, time, heat, power, computation into solving this problem. So now I get a vote on what the ledger looks like and I get a chance to be paid in coin. So this is what the miners do. The miners do the work to secure the network using computers. They provide that proof to the network. The network pays them in new coins that it's minting.

• 55:38Tim Ferriss?

  Got it.

• 55:39Speaker 04

  Anyway, so Satoshi had an innovation where he uses this proof of work as part of the security.

• 55:44Tim Ferriss?

  For people who don't know, who is Satoshi, who that name?

• 55:48Speaker 04

  Well, it's some unknown character out there that has disappeared. Yeah, our group.

• 55:52Naval Ravikant?

  Yeah, whoever created Bitcoin, you know, obviously built on Nick's work, built on Hal Finney's work, Wei, there were a couple of great computer scientists who did this work. But whoever actually built the working implementation, because I think Nick, you had, you had the theory of Bitcoin, but you're not a serious enough programmer to create Bitcoin.

• 56:12Speaker 04

  Well, I'm a serious programmer, but I was too, didn't get around to programming Bitcoin. So yeah, it was a design.

• 56:19Naval Ravikant?

  And so whoever created Bitcoin, probably a group, because it looks like a very sophisticated effort, did it pseudonymously or anonymously. And the name that they used was Satoshi Nakamoto.

• 56:32Speaker 04

  Bitcoin was designed on the theory to use this proof of work as a, what I call unforgeable costliness or to constrain the supply curves. You know, it's scarce. And Satoshi's big innovation was to, well, let me backtrack and describe a little more bickled. So there's a protocol designed for to keep airplanes from crashing because you don't want your computer to go crash an airplane and cause the airplane to crash, right? You want your computer to just be able to crash an airplane without the airliner itself going down. So what you need is to distribute this around. So you have several chips all around the airplane and then they talk to each other. And then if they get contradictory information, they do what you might call voting. They'll take the majority

• 57:15Speaker 04

  and consider that to be the correct one. And that turns out to be they mathematically proved that this was the optimal model, given those assumptions that you know how many chips there are and so forth. And this is called Byzantine consensus. So I took that and used it for this replication business to replicate the data around the ledger round with a Merkle tree for the transaction history and so forth. What Satoshi did was a really big innovation. Besides, of course, actually making software people could use, which I never did. He used the proof of work and security. He said, because on the internet, you can't count your chips securely. You don't know, I have a chip in the tail and a chip in the wing and so forth. There's a sock puppet problem. People, one person can

• 57:55Speaker 04

  pretend to be 100 and one computer can pretend to be 100. Satoshi based it on proof of work basis, security that voting, like if the preponderance of the hash rate tells me that the transaction is history has been updated in such and such a way, then that's, that's it. And again, that's good up to 51%. That's where the 51% attack comes from.

• 58:15Naval Ravikant?

  Basically, one computation, one vote is the way to think about it.

• 58:18Speaker 04

  Got it.

• 58:20Naval Ravikant?

  And actually, you know, one of the, one of the problems that people have with the Bitcoin network is design. So basically Bitcoin, you have all these computers around the world that are joining together to create this shared blockchain computer. They get votes in proportion to how much CPU power they're allocating. They vote on what the valid transactions are that then go into this ledger and get sealed in the amber of the blockchain. And the whole system kind of works. But a naive person looking from the outside, as you said, like the hippies coming to blockchains, one of their first objections is you're wasting all this computer power, you're wasting all this energy, you're wasting all this network resources because they're constantly chatting with each other in the network. These computers are broadcasting packets each other all the time. And they just say it's wasteful.

• 59:06Naval Ravikant?

  And I think that was an argument that a lot of people make, and even I kind of fell for that one, where I was like, okay, you know, eventually someone will come up with a better solution than proof of work and go to proof of steak, or a few other kind of ideas that have been thrown around. And then Nick just recently wrote this brilliant piece on social scalability. And by the way, you got a doctorate recently, an honorary doctorate?

• 59:27Speaker 04

  Oh, yeah, at the University, Universidad Francisco Maracay in Guatemala.

• 59:34Naval Ravikant?

  What is your doctorate in?

• 59:35Speaker 04

  It's in social sciences and also an honorary professorship as well. So yeah, it's great. It's a very long.

• 59:40Naval Ravikant?

  You're the only social scientist that can talk at this level.

• 59:45Speaker 04

  Well, I mean, that's the kind of honorary doctorate they give.

• 59:47Naval Ravikant?

  Yeah.

• 59:48Speaker 04

  But yeah, it's a great list of luminary. So yeah, I'm very honored to have that.

• 59:51Naval Ravikant?

  Yeah, they cited your social scalability article. And so the social scalability argument, I thought, is a really powerful one. I don't know if you want to try and summarize that for the listeners?

• 1:00:01Speaker 04

  I'm sure. So the idea, basic idea is that if you look at a graph of human capabilities, it's basically flat, with the same IQs we had, you know, except for there's a small thing called the Flynn effect. But under that, you know, 100,000 years ago, our brains were roughly the same size as they are today. And computers, on the other hand, have been, you know, doubling every few years their capabilities in various ways, their memory, their CPU power, network bandwidth, and so forth. And so, and you can think of this in the future and get into all sorts of speculation about the future. But what I like to think of it as, we have this whole surplus we've built up of resources. And yet, we're still doing things institutionally with armies of bureaucrats and stuff, very similar to

• 1:00:45Speaker 04

  what we're doing, you know, when computers were, you know, a thousandth of the power they are now, or a millionth of the power they are now.

• 1:00:51Naval Ravikant?

  Yeah, or what they were doing in the Mongol Empire.

• 1:00:53Speaker 04

  Yeah. So in any case, so can we do some substitutions? Can we substitute, take advantage of this great surplus? So computer scientists are normally, and engineers are normally trained to think, optimize the machine, make the machine itself really efficient. What I'm saying is that you can think the other way. Are there ways to make the machine a lot less efficient? And

• 1:01:14Tim Ferriss?

  Give you some greater capability so that such as, for example, the ability of somebody in Albania to pay somebody in Zimbabwe without going through a trusted intermediary or human bureaucracy, ways to do that, you know, even if they cost a lot more and look really bad to an engineer who likes to think about efficiency. So and Bitcoin is a great example of that. It's a proof of work as part of its security and in my mind to create that scarcity.

• 1:01:42Naval Ravikant?

  Yes, stepping back for a second, what separates humans from other animals is that we are social across genetic boundaries. So, you know, even Neanderthals, you can have 150 Neanderthals on a battlefield because they're all genetically related, but you can have 5,000 Homo sapiens on the battlefield because they believe in the abstract idea of Christianity and they can communicate that story to each other.

• 1:02:04Tim Ferriss?

  Right.

• 1:02:05Naval Ravikant?

  And so Bitcoin enables a form of social scalability where it allows now humans who don't know each other, who don't trust each other, who may never see each other again and don't even reveal their identities or locations to each other, to still transact securely, not just with money, but also with contracts, any complex logic they can dream up that they can code up. They can do it through this very slow and very inefficient computer, but it removes all these layers of humans, bureaucrats and toll takers from the operation.

• 1:02:36Tim Ferriss?

  Right. So you're able to exceed the Dunbar number, right?

• 1:02:39Naval Ravikant?

  Exactly. Yeah, the 150 people Dunbar number. So you're basically trading computational scalability for social scalability.

• 1:02:47Tim Ferriss?

  Well, and just to maybe put it another way, and I'd love to be correct if this isn't right, but there's a, there's another quote of yours, Nick, that I really like. Trusted third parties are security holes.

• 1:02:59Naval Ravikant?

  Yeah.

• 1:02:59Tim Ferriss?

  I think relates to this very nicely. And there's a bit on blockchain computers that I think is relevant. So why, why make the trade off? Why allow all of this inefficiency? Right. And I'm not going to read this entire thing, but it's the blockchain computer, this distributed blockchain computer is much slower, more costly than a web server. I have one very rough estimate, about 10,000 times slower, more costly. But since on the blockchain, you're, you're running the portion of an application that needs to be the most reliable and secure, what you call the fiduciary called code, because the downside risk is so high, you can afford to have. Pounds of inefficiency, particularly with hardware that is dropping in cost and increasing

• 1:03:43Tim Ferriss?

  in capability year on year, right?

• 1:03:46Speaker 04

  Yeah, we've accumulated this great, great hardware capacity surplus that we're only starting to take advantage of. And so you can use that to do like the proof of work, the very, the strong security protocols that take some computational effort. And the, also the making the copies, we have lots of memory, lots of disk space, lots of bandwidth, not vast amounts, but enough to, you can, you can take a small transaction and replicate it around the world, make thousands of copies. That helps creates that flying amber, in fact, where you can't deny it later because everybody's got copies of it.

• 1:04:17Naval Ravikant?

  In a way, like, I think you had a definition of social scalability in your article. It's not precise, but close enough where you basically said, one way to estimate how socially scalable a technology is, is by how many people can use it.

• 1:04:31Speaker 04

  Right.

• 1:04:32Naval Ravikant?

  And when it comes to cash today, like, like the US dollar, it's, you know, accepted, probably the most widely accepted currency in the world, but we're still talking hundreds of millions to maybe a billion people can really use it in their everyday life, whereas Bitcoin, in theory, when it's, when it's adopted, can be used by anyone to pay anyone as long as you're connected to the internet. And everyone's connecting to the internet. It scales better.

• 1:04:57Tim Ferriss?

  I'm going to ask a question that came up a lot, and it's one that I don't have any, any ability to answer. Is it possible to, for any government entity to regulate Bitcoin or cryptocurrencies out of existence? If so, where would you put the likelihood of such a thing happening or being able to be implemented?

• 1:05:17Speaker 04

  Well, I mean, because these copies are all over the world, they're never going to get rid of these copies. Somebody's always going to have the transaction history and can start it up again.

• 1:05:25Tim Ferriss?

  Yep.

• 1:05:26Speaker 04

  So that in a sense makes it very difficult to regulate. There are easier parts of it to regulate, such as the exchanging of fiat currency, your local currency, to Bitcoin and back and forth. Those still happen through centralized exchanges, which both makes them fairly easy to regulate.

• 1:05:46Speaker 04

  And also makes them insecure trusted third parties or security holes. So if you want to get in and out of Bitcoin, you're usually doing it through these centralized exchanges. And that's where the vast majority of thefts and hacks of Bitcoin have occurred.

• 1:06:00Naval Ravikant?

  Yeah, the exchanges essentially end up like banks. They're honeypots for regulators. They're honeypots for thieves. Is there, how do you buy or sell, say Bitcoin without going through? Today you do that through a central, through an exchange. There's also sort of local meetups. There's like, there's these sites like local Bitcoins and there's a few others. There's a big one coming up in China now where you can just sort of coordinate a meetup with somebody in a dark alley and you exchange cash for Bitcoin. So people can fall back to that. And, and the volume on those kinds of distributed exchanges has gone up a lot. If you look at BitTorrent, which is the file sharing technology, which accounts for like a ridiculous amount of internet traffic. Bram Cohen invented it.

• 1:06:41Naval Ravikant?

  You know, that thing on given day can account for being a quarter to half of internet traffic. And you can bet the governments have been trying to shut that down because right now the governments are overzealous in nothing in so much as enforcing copyright law. I mean, you want to drive, you know, you want to drop the full weight of the federal government on you. You either engage in, you know, terrorist activity or you violate copyright law. They're like roughly equivalent, right? They'll drop helicopters in your house in New Zealand, you know, ask him.com for violating copyright law, even if you've never set foot in the US. He lived such an understated lifestyle too. Yeah, exactly. He was so subtle. I don't even know how to caught on to him. But yeah, so I don't, I don't think governments can really shut it down.

• 1:07:22Naval Ravikant?

  Not only that, but any government that really embraces Bitcoin or any of these cryptocurrency, doesn't have to be Bitcoin, they could even kind of start up a new one if they wanted to. Is this going to benefit so much from really owning the money that's native to the internet? You know, I call Bitcoin the internet of money because it's, it's really native to how code works. So if you really want to future proof yourself, it's like, it's like, imagine if the US cracked down on it and said, no more cryptocurrencies. That would be saying, like saying, no more HTTP, right? And the country that did adopt HTTP, and by the way, this is the HTTP of money, would end up so much better off that you'd just be shooting yourself in the head. So I think smart people, smart money in the US already recognizes that.

• 1:08:06Naval Ravikant?

  And so it's seeping up into the government where they're figuring out like, yeah, we could. We could be draconian about this. We'll just drive it out of the country. It's already happening to some extent. A lot of the ICOs that are happening are happening out of Switzerland or Gibraltar. Those teams are leaving the US, actually, because especially places like New York have been very heavy-handed in their regulations. So you're just driving out innovation.

• 1:08:29Tim Ferriss?

  What is the incentive for, say, New York to be supportive or at least maybe cast a blind eye to development of this type of technology?

• 1:08:41Naval Ravikant?

  Just like the internet took out Hollywood with Netflix and Spotify. And it took out newspapers with publishing and Twitter and Facebook. And it's taken out all kinds of industries. The internet is going to fundamentally change and possibly take out the finance industry as we know it. And the new finance industry is going to settle wherever the home of innovation is for smart contracts and cryptocurrency. This is my belief, obviously, not investment advice, but I think this is Silicon Valley's replacement of a lot of the infrastructure of finance. And so if New York chooses to drive that out, then New York will no longer be the center of finance.

• 1:09:23Tim Ferriss?

  Got it.

• 1:09:23Naval Ravikant?

  Every time I go to New York, I'm actually highly entertained because I see all these huge towers. I see all these peoples in suits and I know that 90% of them will be obsolete within 20 years.

• 1:09:35Tim Ferriss?

  Nice horse and buggy, pal. I like the car.

• 1:09:36Naval Ravikant?

  Yeah, I would not be thinking about going into investment banking right now because a lot of that job is going to be automated. Commercial banking automated. You know, the bankers were the miners of the last generation. They got paid in the currency to secure the currency. So when the Fed wants to...

• 1:09:51Tim Ferriss?

  Yeah, and they weren't even the miners. They were the traders.

• 1:09:53Naval Ravikant?

  Yeah, when the Fed wants to distribute currency, they give it to the banks. And guess what? The banks have sticky fingers and then they allocate it out to the rest of us very sparingly. And the new bankers are the miners. The new Fed is the cryptographers. But really, the new owners of the infrastructure are the holders of the coin, which is everybody or could be everybody.

• 1:10:13Tim Ferriss?

  Is cryptocurrency, or let's say Bitcoin, inversely correlated to any particular other asset classes? For instance, when people are fearful of, say... Currency devaluation, they might run to gold, right? I've seen this in places like Argentina, seen it in the US, seen it all over. Do you see that also with Bitcoin in any particular pattern?

• 1:10:35Naval Ravikant?

  Yeah, they definitely are a store of value because Bitcoin, there's only going to be 21 million ever. The whole way the protocol is designed, you can't create a single one more. And a bunch have been lost, so, you know, because they're hard to secure.

• 1:10:47Tim Ferriss?

  Hold on, how do they get lost?

• 1:10:50Naval Ravikant?

  Well, you could lose your key.

• 1:10:51Tim Ferriss?

  Oh, I see what you're saying.

• 1:10:52Naval Ravikant?

  You come up with some really complicated-

• 1:10:53Tim Ferriss?

  You forget your goddamn number.

• 1:10:55Naval Ravikant?

  Or you're trying to defend it, you're trying to hide it from hackers. So you come up with some really elaborate scheme on how to secure it, and then you lose it. Or people have lost the computer that it was on, you know, so they're-

• 1:11:04Tim Ferriss?

  Have you heard any catastrophic stories?

• 1:11:06Naval Ravikant?

  Oh, sure, there's stories of people with like, you know, digging through garbage dumps with bulldozers, trying to find that old computer, which they threw out, which had, you know, 10,000 Bitcoin on it.

• 1:11:16Speaker 04

  You need a good hardware wallet that makes encrypted backups, so that you're neither stolen from nor lose your key.

• 1:11:23Naval Ravikant?

  Yeah, so, I mean, there's a finite number of Bitcoin. So Bitcoin is electronic gold. There is a generation of kids who will grow up that as long as they've been alive, like my son, when he's older, as long as he's been alive, there will have been gold and there will have been Bitcoin.

• 1:11:38Tim Ferriss?

  You think the likelihood of Bitcoin in any way falling out of reach for people like your son is close to zero?

• 1:11:47Naval Ravikant?

  I don't, I think Bitcoin itself may suffer because it has governance issues. And another currency, like we should talk about Ethereum and some of the others that are coming up, might take its place. But the idea that blockchain computers are going to go away is ridiculous. That's like saying the internet's going to go away. It's just too fundamental of a technology. Barring a total mathematical breakthrough that obsoletes all encryption, which would also be the end of the commercial internet as we know it, I think that some kind of blockchain computer will dominate currency, store of value, contract law, and any kind of financial instrument, prediction markets, all kinds of things in the future. So to my kids-

• 1:12:30Naval Ravikant?

  They will choose electronic gold. They will choose BitGold and its successors over real gold.

• 1:12:36Tim Ferriss?

  Nick, what is, this is another one of these words that comes up at dinner parties and various conversations, and I kind of nod along because I'm embarrassed to ask questions, fearing I'm the only one at the party. Kind of like everybody goes to summer camp and they all miss their mom, but no one wants to talk about it and admit. Ethereum. What is Ethereum?

• 1:12:56Speaker 04

  So, so we talked about the blockchain computer. So Bitcoin, I don't know if your audience can hearken back to the beginning of Apple, Apple Computer, where Steve Wozniak was working at Hewlett Packard on a scientific calculator, and it had a certain limited scripting language that, you know, specialized for that. It wasn't a full-fledged general-purpose language that you could do lots with. But what he did was he got excited that his circuitry, you know, chips were getting cheap enough that you could do the full-fledged, what they call Turing machine, after Alan Turing, because he's one of the inventors of it. I'm a full-fledged general-purpose machine that can do any mathematically feasible computation. And so Bitcoin is like a restricted computer. It does certain things, specialize like the

• 1:13:40Speaker 04

  multi-sig I talked about and certain other, other things it can do. But Ethereum is, is a much more general-purpose computer, and it also stores long-term state better, which is, it's a technical thing, but it's an important difference. So basically Ethereum has great potential for this reason. It has potential to do smart contracts much better than Bitcoin does. The drawback going to this is it also increases the attack surface. It's what Ethereum's doing is riskier.

• 1:14:10Tim Ferriss?

  The attack surface.

• 1:14:11Speaker 04

  Attack surface. So you can think of, of your house as having an attack surface. There's windows and doors and places where people can get in, right? Well, the Ethereum thing has more surfaces that people could potentially get in because people are doing more things.

• 1:14:26Tim Ferriss?

  Got it. Just more vulnerabilities that correlate to more functionality.

• 1:14:30Speaker 04

  Right, so.

• 1:14:31Naval Ravikant?

  It's a much more flexible computer, so you can talk to it in many, many more ways. You can inject bad code in, you can hack it in many, many more ways.

• 1:14:38Speaker 04

  And another thing that makes it risky is that it's newer. It's not much more advanced than where in terms of its maturity and getting out all the bugs and stuff as Bitcoin was when people were paying 10,000 Bitcoin for a pizza. And yet, what's the Ethereum market cap now?

• 1:14:57Naval Ravikant?

  I think it just crossed like eight or nine billion today.

• 1:14:59Speaker 04

  Yeah.

• 1:15:00Naval Ravikant?

  But the market caps are fuzzy because if you calculate it properly based on the future issues of the coin, it might actually be approaching Bitcoin's market cap. It might be in the 20 billion range, once you take inflation into account.

• 1:15:09Speaker 04

  Anyway, even with just the 10 millions out there or 8 billions out there now, that's a lot more money than Bitcoin had at the same stage of maturity. So I definitely say it's at a riskier state, but it's also a much greater potential.

• 1:15:21Naval Ravikant?

  Yeah, I mean, this is so now we're, I think we've done a lot of backgrounding.

• 1:15:27Naval Ravikant?

  And I think what people really want to hear from Nick about is a little bit more of the advanced stuff, right? Because you did Bitcoin, you did smart contracts. So they kind of want to know where you think the future is headed. And I know the future is impossible to predict, and again, it's not investment advice. But very generically, what platforms are you most excited about? Where would you spend your time if you were like a young, fresh person walking into this space?

• 1:15:48Speaker 04

  So I am excited about Ethereum and Ethereum Classic. And there's a what's called a side chain for Bitcoin called Rootstock that they hope to combine together the best of Ethereum with Bitcoin on the chain. So you can trade the Bitcoin currency, but do the Turing complete, full-fledged smart contracts. The potential there is that, and there very well could be other Turing. I mean, there's a few other Turing complete ones out there and probably quite a bit more in the works as well. Anyway, the potential for this stuff is that doing cross-border things and other things where you're crossing a trust boundary and you don't necessarily have access to good legal, affordable legal counsel.

• 1:16:32Speaker 04

  For financial contracts, especially as the low-hanging fruit, because those are usually very well-defined. And bureaucrats like to make complications and add all sorts of epicycles to them. But really, an option in the future and stuff, they're logically and temporally pretty simple things to do. And once you get more of the underlying assets, you can do options and futures, you know, as for example, exchanging Bitcoin for Ethereum. And we're getting all these other tokens that are going to be on these blockchains that you'll be able to include in that. Now, if you go off blockchain, you've got to kind of take a different tack.

• 1:17:09Naval Ravikant?

  In other words, if you're connecting your smart contract to the real world, you need to know what happened in the real world to decide whether or not to execute your smart.

• 1:17:15Speaker 04

  Right. So if you're doing an Apple stock, for example, because that's a traditionally defined thing that depends on traditional systems to make it work, incentivize Apple to pay the dividends and do what they do. In any case, if you want to do that, then all of a sudden you're back in the traditional financial world. And the traditional financial people know that. Right now, there's like a cultural disconnect that Bitcoin people have a really cool technology and but they hate the people in the financial community and don't want to talk to them, don't want to learn from them. And same to some extent with the Ethereum people as well. And on the other hand, the financial community people hate and don't understand blockchains and cryptocurrency. In fact, there was this whole bunch of very dubious startups that raised a bunch of money

• 1:18:00Speaker 04

  to do things they call blockchains that weren't, they didn't have blocks, they didn't have chains, they weren't, didn't have the security I was talking about. But the marketing people wanted to call them blockchains. They could pretend to be like Bitcoin and, you know, with the price going way up.

• 1:18:12Naval Ravikant?

  $50 million in financing later.

• 1:18:14Speaker 04

  Yeah.

• 1:18:15Naval Ravikant?

  Are these like most of the private blockchain companies?

• 1:18:17Speaker 04

  Yeah, I'm not going to name names, but yeah. So the financial people don't understand that and they've gotten burned by some of these companies. So they hate, they hate it. But what really I think for the entrepreneurial opportunity, and if some of your listeners want or looking for an entrepreneurial opportunity, is to marry these two. So take the best of traditional finance, take the best of the blockchains. Ethereum, if you're doing sophisticated smart contracts and willing to take some risks. And Bitcoin, if your main thing is cross-border payments. Take these and marry them together. Figure out ways to securely reflect assets on the blockchain using both traditional financial controls and bureaucracy and taking advantage of technology.

• 1:19:00Speaker 04

  I think that's the, that's the opportunity people haven't done yet because of this cultural disconnect.

• 1:19:05Tim Ferriss?

  What would you say are some of the most important or valuable components of the traditional finance world? Like, where would you start?

• 1:19:13Speaker 04

  The traditional paper world was really good. It had a thing called separation of duties, where as we talked about, multiple people signing off on things and looking things, and you have to go through multiple stages. Like, if you get an order, the salesperson has to give the order to the accounting department, and they have to give the order to the manufacturing people. And everybody records it. So it's like a little mini, mini-paper blockchain that people used to have. With computers, that's kind of gotten messed up, and hackers can, who know what they're doing, can take advantage that these systems don't work as well now. But if you, to a great extent, you can make them work, and people do make them work, you know, with stock clearing and settlement and issuance and so forth. So anyway, yeah, there are experts in the financial community that do

• 1:19:58Speaker 04

  that. If you can, if you can make them love, instead of hate, blockchains, then you'll have a great, great skill set combination, if you can get the blockchain people and those guys together.

• 1:20:08Naval Ravikant?

  Yeah, you're an interesting one, because you combine law and computer science to do unusual things. And what you're basically saying is you can combine traditional finance and now computer science to do unusual things. And somewhere in that intersection set, you can take a process that's entirely paper and move the part of it that belongs on the blockchain on the blockchain while plugging in the paper part.

• 1:20:29Speaker 04

  Or it used to be paper, and somebody just naively ported it in some naive, insecure fashion to computers. And now you can use blockchains to make it much more secure and trust minimized, yeah.

• 1:20:40Tim Ferriss?

  On the side of educating oneself. So let's say there are people, and I'm sure there are, listening, who are part of the traditional finance world, who say, "That sounds like a great idea. I want to learn how to love Bitcoin and cryptocurrency. I want to learn about this." How would you suggest they choose reliable sources of information? Because, as we've noted before, it's a bit of the Wild, Wild West in some respects. You don't have, not everyone is making disclosures about what their, their own portfolio might look like. So there are, there are a lot of, sort of, barbers telling you should, you should get a haircut. And how would you suggest people think about that?

• 1:21:21Speaker 04

  I mean, if you're technical and want to dive into the engineering and the technology of it, the Bitcoin White Paper is still by far the best place to start. And Vitalik Buterin's Ethereum White Paper also.

• 1:21:34Tim Ferriss?

  What was that name again?

• 1:21:35Speaker 04

  Vitalik Buterin.

• 1:21:37Naval Ravikant?

  He's the guy who created, or he's a lead developer on Ethereum. He's actually an interesting guy, young prodigy, probably like 20 or 21 now, started when he was 18. Absolutely brilliant.

• 1:21:48Speaker 04

  There is a guy named Aviv Zohar who's written some great papers. One of them is on Ghost, which is what Ethereum is based on. And he's got a follow up to that whose name escapes me. And he's also written, co-authored a great paper on attacks against Bitcoin from the underlying network. So he's one of the experts on the security of Bitcoin, which is a skill and knowledge set in scarce supply.

• 1:22:11Naval Ravikant?

  Yeah, one of the, one of the problems and opportunities here is that, you know, going back to that earlier thing, it's about money being the bubble that never pops. Bitcoin is kind of a Ponzi scheme that starts with smart people. So the smartest people understand it first, then they sell it to like the people who need the cryptography explained to them, like me. And then we sell it to the people who need the next level down. And the whole thing could pop and end badly. So I'm not saying go put all your money in Bitcoin. But I think to understand blockchain computers, you sort of have to get into the math and the code and the hard stuff. But if you wait to figure it out, by the time everyone can figure it out with the same tools, it'll kind of be too late from an investment or earning perspective.

• 1:22:54Tim Ferriss?

  It'll be too late from an investment perspective, but not from a, from the utilization standpoint.

• 1:22:59Naval Ravikant?

  No, of course.

• 1:22:59Tim Ferriss?

  You'll be able to use money just as we use dollars, but you're not going to be investing in something that is going to hockey stick.

• 1:23:05Naval Ravikant?

  Yeah, the challenge for the industry is like today Bitcoin has all these advantages over gold, you know, it's, it's more easily transmissible. It's more subdivisible, it's more easily stored, it can be communicated by computers. But to the average person, that means nothing. All they need to, what they need to experience is they need to receive some Bitcoin in a transaction. And then send some Bitcoin transaction, have the experience be so much better than every other experience they've had with money or with gold. And the tools just aren't there yet. Like right now, securing your Bitcoin for yourself is still difficult. The hardware wallets are getting better, but it's still kind of a nightmare. So I think the industry still has a decade of work to do to make cryptocurrencies live up to their potential. And the idea space is so large and there are all these companies working on it, but.

• 1:23:50Naval Ravikant?

  Every year, it gets a little easier to use. It has a few more use cases. It gets a little easier to store. And the smart contracts that are built on it become a little more interesting. So that is a process. And eventually, you'll be able to use Bitcoin without knowing anything about it. It's like you can use US dollars without knowing how the Federal Reserve Open Market Committee works. And, you know, does lending and issues Treasury bills and all that stuff. There's only a few geeks who need to know that in the world of finance. And you can just use money like it's money.

• 1:24:20Tim Ferriss?

  Just to clarify one thing you said, you said money is the bubble that never pops. You're talking about the concept of money.

• 1:24:25Naval Ravikant?

  Yeah, the concept of money.

• 1:24:26Tim Ferriss?

  Because individual currencies certainly.

• 1:24:29Naval Ravikant?

  Sure, I mean, tomorrow.

• 1:24:30Tim Ferriss?

  I've lived in Argentina between like 2000, 2004.

• 1:24:32Naval Ravikant?

  Yeah, if tomorrow, we all believe that the US dollar is just a green piece of paper and I can't eat it. I can't do anything with it. Or if like aliens came and took over the world and, you know, we offered them little green pieces of paper. They're just using to start a bonfire or something, right? So it's the money is just a concept. And we have to agree on what that scarce element is. And today, that scarcity is enforced by governments with guns and central banks. And it breaks down national borders. And the people who secure that money for you take a huge tax, roughly a third of the economy in exchange for it. And eventually, it will be a distributed network of computers acting in self-interest, who are going to secure that scarcity of that money. And hopefully, their tax is going to be a lot lower.

• 1:25:15Tim Ferriss?

  What else would, you're obviously much more on the pulse of this. But what other topics could be beyond my pay grade? It probably is, but should we explore with Nick?

• 1:25:25Naval Ravikant?

  Yeah, I think, you know, just talking about blockchains in general. So we started with Bitcoin, the blockchain, which is around transferring money. There's Ethereum blockchain and others like it, which are about computation and running like very slow, but very trust minimized, reliable contracts. What other uses can you see for blockchains coming up that you think, maybe a little far fetched, maybe 10 years out, but what's, you know, what's the possibility space?

• 1:25:54Speaker 04

  Well, I mean, one of the possibilities is that I'm really excited about the cross-border thing to have, say, grandmothers in India and teenagers in somebody's basement in Indiana doing what people formerly thought were sophisticated financial contracts, such as options, futures, etc., you know, through this online vending machine in the cloud that's blockchain. So that's an exciting and probably to many people disturbing possibility that I think is going to be coming up in the next 10 to 20 years.

• 1:26:25Naval Ravikant?

  Yeah, I mean, so you could have like people loaning each other money or creating credit instruments or engaging in prediction markets and things like that. Yeah. What do you mean by prediction markets?

• 1:26:35Speaker 04

  Well, I'll talk about one that the insurance people are working on, which is related, which is parametric contracts. So normally an insurance will pay out, you know, if you get damages from a flood and they have to come estimate your damages, which is basically a wet human exercise and, you know, eyeballing how moldy your wall is and how much you got flooded and stuff. But a drier way to do this is called parametric contracts where like if you're a hotel in an area got hit by a hurricane, you can measure how much business you lost on your accounting books. And you can parameterize that and basically have your smart contract pay off if your books go below a certain time or pay you more as the further your books go down.

• 1:27:17Speaker 04

  So that ensures kind of what you really want to ensure they the hotel really wanted to ensure, which is their business. And it's also drier. It can be done by software verifying, you know, what the books are. So you can make a smart contract out of that. And there are other parameterized contracts as well, based on other things that computers can sense and measure.

• 1:27:36Naval Ravikant?

  Yeah. And prediction markets are, you know, people can actually make predictions and get paid if their predictions are correct or lose money if their predictions are wrong. And then these prediction markets can also serve as arbiters of truth and pricing into these smart contracts. So for example, you know, in Nick's case, Nick's example, you tie in directly to the hotel's books, the hotel's lost revenue. And so you know whether or not to pay Hotel, but if there's a flood, I want to say was the hotel in the affected area? Was the hotel itself affected? You need now what's called an oracle. You need someone who's basically going to go in there and say like, yes, this happened. No, they didn't. And prediction markets through very sophisticated engineering,

• 1:28:20Naval Ravikant?

  which I think is beyond the scope of this conversation, basically try and pay that person for telling the truth in a reliable way. And so you can use that to to cross the divide between the wet space and dry space or from the the real world into computers to have them do these things. You can see you can see the insurance markets being completely overhauled by blockchain computers. And insurance is a huge industry.

• 1:28:43Tim Ferriss?

  It's gigantic.

• 1:28:44Naval Ravikant?

  A lot of that just belongs in the blockchain. I don't think you're going to have like, you know, bankers in Bermuda doing this 20 years from now.

• 1:28:51Tim Ferriss?

  You do not think?

• 1:28:52Naval Ravikant?

  I don't think, yeah.

• 1:28:54Tim Ferriss?

  Because of the technical barriers to understanding or challenges, let's say, lead, I think, the space to be susceptible to, say, charlatans for very smart who can fool people who don't understand technical aspects.

• 1:29:08Naval Ravikant?

  There's a lot of scams in the space.

• 1:29:09Tim Ferriss?

  How do you, what are the characteristics of charlatans or scams in the space?

• 1:29:16Naval Ravikant?

  You know, it used to be easier to spot. The louder they talked, the scamier they were. Now I think it's they've the scammers have gotten really sophisticated. Some of these scammers are like version five of their scam. So they'll be selling some coin and they'll be talking about how it like enables some functionality when reality, the code doesn't, or they have some backdoor where they're selling you a scarce coin, but they can print a lot of them. So in that sense, you know, there's there's a couple of coins that are sort of in the top set that are regarded as top flight that are legit.

• 1:29:46Tim Ferriss?

  But you. What are those?

• 1:29:47Naval Ravikant?

  Bitcoin, Ethereum are kind of the best known ones. Then there's sort of a second tier contender list of, you know, Zcash, Monero, Litecoin, et cetera. You know, there's some new ones coming up like Tazos. They seem more legit, but you you have to know your stuff and do your homework. It's not something where I would recommend you just run out and buy. And then there's a long tail of coins where there's a diamond in the rough here or there, but there's a lot of junk too. But what's attracting people? It's just how much money you can make in this space. You know, Bitcoin has basically doubled in value every year since its founding. It's a it's and you know, you do that for eight, 10 years and you end up with a very, very steep curve. Something like Ethereum, if you bought it when it was sold in the original pre-sale today,

• 1:30:30Naval Ravikant?

  and just a few years later, you'd be sitting on hundreds and hundreds of times your money and you'd be fully liquid.

• 1:30:36Naval Ravikant?

  But this is not unrecognized. The space has increased in value so much. The market cap of all the cryptocurrencies has more than doubled just in the last quarter. So there's a lot of hot money flowing in. Will it flow back out? Possibly. Are we in a bubbly environment? Probably. Will this bubble pop? Nobody knows. Will it pop across the board or will it pop selectively?

• 1:30:56Tim Ferriss?

  Yeah, or will it pop later than a different pop? So it won't matter because there'll be a flight of money from one asset class to another.

• 1:31:01Naval Ravikant?

  Exactly. Or will the value switch from Bitcoin to Ethereum? Will Bitcoin fork into two competing coins because people are arguing over whether the block size should be increased or not? There's so much craziness.

• 1:31:13Tim Ferriss?

  Just to just to pause on that word because this, when I was attempting to educate myself and doing a pretty mediocre job of it, this word fork came up over and over again. And so in my mind, I'm envisioning, because I've been reading a lot about the

• 1:31:27Tim Ferriss?

  so the making of the modern world and Genghis Khan and all this stuff. And anyway, thanks, Dan Carlin, for the Hardcore History. You would always, you would have these internal factions that would then split off as two or more separate groups. In this context, what does fork mean and how should how should I think about it in a coherent way?

• 1:31:48Naval Ravikant?

  This is this is open source code, so I can take Bitcoin, I can create a copy tomorrow, and I can change it so that all the benefits go to Naval. And right, and that's a fork of Bitcoin that I'll call Navalcoin. Now, in reality, people hopefully do more interesting forks. So there's a fork of Bitcoin called Litecoin, which uses a different mining algorithm, a different way to authenticate the miners. There's another fork called Zcash, which uses different privacy routines to basically allow for private transactions. So other people can't look in the ledger and know who spoke to who.

• 1:32:19Tim Ferriss?

  Got it. So not every node has a full ledger.

• 1:32:22Naval Ravikant?

  Correct. Well, and every node has a full ledger, but it's cryptographically hidden. So you can't tell who sent who how much money.

• 1:32:29Speaker 04

  Now, now, in the forks you just talked about, Zcash and Litecoin, they started over from scratch. They they started their own transaction history from scratch. There's another more troublesome kind of fork where you don't start from scratch. You're just upgrading the current software with the same transaction with the ongoing transaction history. And you're trying to convince people to follow. And it's become a very political political process.

• 1:32:53Naval Ravikant?

  You're fighting over the current transactions.

• 1:32:56Speaker 04

  To, and since, you know, Bitcoin has, you know, the the 20 plus billion billion dollar value. You know, people would much rather, you know, make, put their favorite idea into Bitcoin than go off and start their own cryptocurrency from scratch.

• 1:33:10Naval Ravikant?

  It's like Bitcoin, only better.

• 1:33:12Speaker 04

  Yeah, yeah, yeah. So there's there's tremendous political fights over over upgrades in this space. And that's where the bad blood comes.

• 1:33:20Naval Ravikant?

  There's a huge debate right now in the Bitcoin world where they're fighting over. And and the basic question is, do you increase the size of the ledger? It's it's the block size debate. Do you increase the size of the blocks to hold more transactions? So then you can bring down the cost of each transaction so that I can go and buy coffee in Bitcoin. Or do you leave Bitcoin alone and treat it more as like a Swiss bank where you only move around money rarely in large quantities? And the smaller transactions are done on another layer on top where you create another software layer on top. They call it like Lightning Network is an example of that layer, which can be used for very small, very fast transactions. Micro payments or not even micro, but even like paying $5 for, you know, at Starbucks.

• 1:34:05Naval Ravikant?

  Because Bitcoin, literally every time you do a transaction, there are thousands to tens of thousands of computers all over the world that are recording that, replicating that and storing that for all the time.

• 1:34:13Speaker 04

  Right.

• 1:34:13Naval Ravikant?

  That's a lot of work.

• 1:34:14Speaker 04

  Yep.

• 1:34:15Naval Ravikant?

  Whereas you could probably run all of Visa's computational power on a single iPad today. But it's much more centralized systems are much more efficient, but they're much less secure. That's kind of the trade off.

• 1:34:25Speaker 04

  Yeah. And so this, yeah, I mean, the first choice isn't for the blockchain itself really a viable choice in terms of scaling. Is it scales from, you know, 10 times the value of transactions, value per. Second of transactions is today because the capacity is limited. There's these full nodes that are running that require a certain bandwidth. They have to talk to a lot of people, make a lot of copies to replicate the stuff around. And so there's a second layer and of all was talking about that really the people buying the coffee are going to have to transition to. And this has caused a lot of friction because people are going to have to transition for the the small everyday purchases from Bitcoin, the blockchain itself to this second layer.

• 1:35:09Speaker 04

  And there's competing designs for the second layer and so forth. And so there's, there's plenty of, of things to cause political friction.

• 1:35:17Naval Ravikant?

  Yeah, going back to the money definition, the debate is, is Bitcoin really a store of value or is it a medium of exchange? And, and so Nick, I know you don't want to get into the middle of the politics of it, but just from pure computer science perspective, like if you were designing, you know, if you're redesigning a Bit Gold today and you wanted to incorporate some of these learnings, where would you fall in on? Would you go for larger blocks? Would you go for a second layer?

• 1:35:41Speaker 04

  Oh, no, I definitely go for a second layer. I mean, I designed Bitcoin Gold with two layers because.

• 1:35:45Naval Ravikant?

  And can you explain just, I must have lost something, just what that second layer is one more time?

• 1:35:50Speaker 04

  The first layer is the blockchain itself, the Bitcoin, we call the capital B blockchain, doing the secure transactions and the ones you can do from Albania to Zimbabwe without a trusted third party going through the blockchain. And the second layer and the ability to grow the transactions per second on that is very limited. You can grow the value per transaction quite substantially, but the ability to grow a transaction per second is limited because those have a certain size and you have to make copies of them around and so forth.

• 1:36:23Naval Ravikant?

  I see. So the second layer would be for the coffee, the pizza?

• 1:36:26Speaker 04

  Yeah. And so as this grows, as more and more people start using this, they're competing for that, that limited block space and the fees are going up. And so if you want to have a cup of coffee without having to pay as much fee as you paid for the coffee, you know, in two or three or four years from now, you're going to have to use one of these side chain or what I call peripheral financial network that it's collateralized on the blockchain. It's almost trust as trust minimized as the blockchain itself, but it's for lower value transactions and only periodically settle on the blockchain.

• 1:37:00Tim Ferriss?

  We talked a little bit about the, I suppose, third-party tools, sort of application layer, exchanges and so on, the user experience being suboptimal currently. But what if you could wave a magic wand and make certain things happen, make certain people invest in, say, Bitcoin, what is, what would be required to help Bitcoin cross the chasm to be, become much more mainstream? Maybe it's just inevitable and it's a matter of time, that could be it. But if you wanted to accelerate the process and it was like, okay, we, you can make wave a magic wand and you can choose any group of people to invest, say, $10 billion into Bitcoin or whatever the number is, and then fix X, Y, and Z, that would help mass adoption and the crossing of the chasm. What are the things

• 1:37:45Tim Ferriss?

  that come to mind?

• 1:37:46Speaker 04

  Well, I mean, currencies have traditionally been associated with governments because especially in the modern times, they're the largest creditor and the largest debtor. And so they're, they have the plurality of the say in what is the, you know, the, the money other people are going to use. So right now Bitcoin is being used for various niche purposes where the fiat system, which is a very, what's it called, permission system. So blacklist people, I've met people at Bitcoin conferences, they've got plenty of money and stuff, but they've been blacklisted. They can't open bank accounts and so forth. So there's

• 1:38:20Naval Ravikant?

  Yeah, actually, the hardest thing.

• 1:38:22Speaker 04

  No, not necessarily. It could be just they're, you know, they're suspected of something or the money laundering laws are such that, you know, if somebody does something that looks suspicious, you have to block it. And so there's a lot of, of that kind of very erroneous, error-prone permissioning that goes on with the bank system that doesn't go on with Bitcoin.

• 1:38:44Tim Ferriss?

  Yeah, or PayPal. I was just thinking of a friend from New Zealand for a host of Sort of coincidental factors just had a huge, huge nightmare in his head that took months to resolve.

• 1:38:55Naval Ravikant?

  Yeah, the way I participate in cryptocurrency investing these days, because I don't want to have to worry about how do you procure it, how do you secure it, or even what to buy, is I invest in hedge funds in this space. And I've actually joined one loosely as a venture partner. And the biggest problem they have is getting bank accounts, because the regulators just dig in too much. If you're sending money in and out of Bitcoin or Ethereum exchanges, it's just something they haven't seen. And they don't want to deal with it because banks don't, they don't have a system to charge you more for new weird stuff. So just plugging into the existing banking infrastructure is hard. And that's probably where if they're, if countries do crackdowns, it'll probably happen in that area.

• 1:39:38Tim Ferriss?

  So how do you fix it? Or if, if you had close to infinite resources and could just make certain things happen to facilitate good things or prevent bad things?

• 1:39:50Naval Ravikant?

  Yeah, I mean, first, I would plug them into the existing banking system in a much better way. The existing banks, you know, should accept that if there's a legitimate player here, they're only working with currencies that aren't scams. Maybe they have some, you know, bonded collateral or something like that, and they're legit actors. They should be part of the banking system because this is the future of the banking system.

• 1:40:11Tim Ferriss?

  There must be banks, because banks are in all shapes and sizes.

• 1:40:14Naval Ravikant?

  They do exist. They do exist. It's just they're much harder to find than you would think. So, and they're more-

• 1:40:20Tim Ferriss?

  Romania down the street from 20 Western Unions.

• 1:40:22Naval Ravikant?

  And they're warming up to it. The forward looking ones are warming up to it. But we're talking about going from like one bank in the country to like 10 banks in the country, you know, or five. So it's still not a large set. And these are small banks generally.

• 1:40:33Tim Ferriss?

  I feel like Singapore should get on that. It's a good test case.

• 1:40:36Naval Ravikant?

  This is why some of these companies are going to Singapore, actually. And actually, the worrying trend that I'm seeing is a lot of the more interesting development teams and companies are all locating overseas.

• 1:40:46Tim Ferriss?

  Yeah, fleeing overseas.

• 1:40:48Speaker 04

  One thing is that Bitcoin and the other cryptocurrencies, they operate under such different principles of the banking system that people in the banking system, they look at, you know, these debates about block size and the people calling each other names and the basically low level of trust that exists because it can exist in the Bitcoin community. And they're horrified because you couldn't run a bank that way. You have to, you have to be much more polite and careful and

• 1:41:13Tim Ferriss?

  Because they're wetware.

• 1:41:14Speaker 04

  Right, right. Because it's a wet social system rather than based primarily on dry computer science.

• 1:41:20Naval Ravikant?

  Yeah, you have a, you have a system here that allows anonymous trolls to engage in complex financial transactions. So they can, they can scream at each other and call each other names while still doing business.

• 1:41:29Speaker 04

  Yeah, exactly.

• 1:41:31Naval Ravikant?

  That's the power of the system. It looks horrific to anyone else from the outside.

• 1:41:35Speaker 04

  And that's why you have this cultural gap is because people in the banking system look at this and they go, this is, this is terrible. This can't possibly work.

• 1:41:43Naval Ravikant?

  But to actually answer your question as to like what infrastructure needs to exist to make this space happen, security is a big issue. I think your average person today, if they buy coin, they don't know how to deal with what's called custody, which is just how do you hold on to it in a way that if you, if you don't go overboard in security, you get hacked. And if you go overboard in security, you're going to forget your password or lose the private key.

• 1:42:04Tim Ferriss?

  You're going to be bulldozing.

• 1:42:04Naval Ravikant?

  Yeah, then you've got a bulldozer going through a garbage dump, you know, or your, or your kid's playing with a computer and wipes out your, your wallet file. And there's no way to get it back. So I think the security, the custody has to be solved. And as Nick mentioned earlier, there are hardware wallets that are out there. They're starting to get pretty good. They're getting good enough now that, you know, the sophisticated people can use them. But eventually they'll have to get so good that the average person can just use them without having to think too much.

• 1:42:33Speaker 04

  Yeah.

• 1:42:33Naval Ravikant?

  One of the interesting things here is that Nick's blog is called Unenumerated. And I'm going to let him explain what that means.

• 1:42:42Speaker 04

  Well, yeah, so the tagline is an endless variety of topics. It might, it's gonna come to an end someday, but I don't limit myself, basically, is what it means on the topic. If I, if I think of something, it'll probably be relevant somehow, but it doesn't necessarily have to be. So I don't wanna like peg myself as a certain, into a certain subject matter, basically, is what it means.

• 1:43:04Naval Ravikant?

  Yeah, and so I think it's a larger point where Nick doesn't pigeonhole himself in his interests or his identity. And so that allows him to be more free and explore a wider range of intellectual topics. And so that's why I really enjoy reading the blog. And so that gives me sort of the next set of questions, which are all around just random things on your blogs that I, that I've read, or things that I've heard you talk about, which may not necessarily relate to Bitcoin or blockchains. Now, you were the first to really convincingly argue, and this goes way back, about why microtransactions on the internet were much less likely than people thought. Because when I was growing up on the internet in the late 90s, everyone thought microtransactions were just around the corner.

• 1:43:45Tim Ferriss?

  What would be an example of a microtransaction?

• 1:43:46Naval Ravikant?

  It's like every time I hit a webpage with a, with an article, I pay 10 cents to read that webpage. Or every time I listen to a song, I pay a penny to listen to that song.

• 1:43:56Speaker 04

  Well, it goes to a distinction I made earlier, the computational costs versus our mental costs. And the computational costs have gotten a lot cheaper, and our brain's still the same size. So when you're doing a transaction, you're doing a, a thought in your brain about, is it worth it? And that thought itself is costly. And it's as costly now as it's ever been. Modulo, you know, you get a few extra market prices and some more information, but the, our brain is still the same size. So just because computer scientists were thinking, well, because we've reduced the cost so much, now we can do these really tiny, tiny things, because we can do things much tinier than a penny. But the trouble is our brains can't handle it.

• 1:44:40Speaker 04

  Computers could, but our brains can't. So that's what the idea of mental transaction costs.

• 1:44:45Tim Ferriss?

  The mental burden.

• 1:44:46Speaker 04

  Right.

• 1:44:46Tim Ferriss?

  And so there's a quote that I really enjoyed. And I'm going to try to not take us too off track, but there is no track. That's the good news. This is Alfred North Whitehead. So quote, "It is a profoundly erroneous truism repeated by all copybooks and by eminent people when they are making speeches that we should cultivate the habit of thinking about what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them." End quote. Is this applied elsewhere in your life outside of blockchain, thinking about code and so on?

• 1:45:29Tim Ferriss?

  I mean, do you, are there ways that you minimize cognitive burden in other ways in your life?

• 1:45:33Speaker 04

  Minimize cognitive burden in other ways?

• 1:45:35Tim Ferriss?

  Or just making these small decisions, sort of cognitive microtransactions?

• 1:45:39Speaker 04

  Yeah, I would have to think about that for other things. I know what I was thinking there also, he was being quoted by Frederick Hayek, who was talking about how knowledge is distributed in markets. And so markets have traditionally been a tool where we can communicate what we want and how much we have for it and stuff. And that really economized, we're only accumulating, you know, we're only using a few numbers instead of, you know, going on and on about what we want and how much we need and how much we deserve it more than the other guy and so forth. So that right there, it's a tool of social scalability because it reduces what could be a long and drawn out argument over, you know, to a few numbers.

• 1:46:17Tim Ferriss?

  Yeah, I was asking, we obviously don't have to get into it because there may not be a ready answer, but because I was, I was with a friend, very, very successful investor, close buddy of mine. We were walking through the airport, just having a conversation. And he said, no, I've realized that I optimize now. I used to optimize everything. He said, now I optimize one or two things and for everything else, it's just good enough. I basically de-optimize everything else. And it's made me, in his mind, incredibly more effective by actively de-optimizing, which, which I find an interesting concept.

• 1:46:50Naval Ravikant?

  Yeah, I mean, you just can't focus on everything. Like Charlie Munger is a famously bad driver.

• 1:46:57Naval Ravikant?

  He's probably a menace on the road and it's a good, he probably takes Uber now, hopefully. But what's the point of being a good driver today, right? Especially if you have some other scope in your life where you can add unique value.

• 1:47:10Naval Ravikant?

  Yeah, in fact, so. Reading your blog, there are all these other little gems that I've found that-

• 1:47:16Tim Ferriss?

  Can we go back to word or name origin for one second?

• 1:47:19Naval Ravikant?

  Sure.

• 1:47:19Tim Ferriss?

  Does unenumerated have anything to do with the Ninth Amendment of the United States Constitution?

• 1:47:25Speaker 04

  It does relate to that, too, because unenumerated rights, meaning, you know, there's new things gonna happen with technology and other unexpected things in the future, and you need to define rights around those. And so you don't want to limit yourself to just that old list of, you know, "We have a right to a free printing press, but we don't have a right to speak freely, you know, on Facebook or Twitter or so forth." And so you have to adapt old ideas to the future.

• 1:47:56Naval Ravikant?

  Yeah, so basically, just because the right is not explicitly listed there doesn't mean you don't have it. In fact, all the unenumerated rights you have by default, and it's only the ones that are actually restricted are the ones that are restricted. And that's something that I think our government and Constitution scholars of the day just completely forget, as shown by the whole surveillance debate. I mean, it shouldn't even be a debate. There's no, I mean, the right to privacy is very clear. And even if it's not explicitly spelled out, our phones are private, and our computers are private, and our conversations are private. The ways of thinking, you know, the process of thought itself is kind of interesting, right? After a while, you get introspective enough, and you're like, "How am I doing on my thinking itself?"

• 1:48:38Naval Ravikant?

  And one of the things that we run into online a lot is people jump on any little contradiction, right? If I say something on Twitter, and if I said something different a year ago, or maybe out of context in a different conversation, people will jump on me and say, "Well, that's not what you said," and so and so, it's like a big gotcha, right? So I think we have this false consistency that we all try and throw up, when the reality is we're always changing our minds. And, you know, I forget who said it, but somebody said, "When the facts change, I change my mind." What do you do, right? So I've gotten, I've gotten okay with this concept of contradicting myself, right? Walt Whitman also said, "Like, I contradict myself. Very well then, I contradict myself. I am vast. I contain multitudes," right?

• 1:49:23Naval Ravikant?

  So I've gotten used to that. But then I encountered a concept in your writing, Nick, that I liked, which is called quantum thought. I don't know if you even remember this. Do you even remember what I'm talking about?

• 1:49:33Speaker 04

  Sure, so, well, that comes from law school, so law- Law school, they teach a very different way of thinking in that you need to take, you know, both the defendant's and the plaintiff's side of the issue, both sides of the issue, and run down the arguments as if each one of them is true. They contradict each other, of course, or at least the conclusions and some of the sub arguments contradict each other. And so I compare this to Schrodinger's cat. Maybe it's alive, maybe it's dead, maybe the defendant's guilty, maybe they're not. And you have to keep both of these in your mind at once.

• 1:50:11Naval Ravikant?

  Yeah, so, I mean, this is not how we are socially taught to think. Socially, we're taught you have to have a point of view, you have to have an answer, you have to pick a side, pick your tribe, fit in and then defend it and be consistent. But the reality is really complicated. And so if you're really smart and you're operating on the edge of any field or trying to figure out anything new, you probably need to have quantum thought. You probably have to hold both states in your head and constantly weighing probabilities. And if you're not shifting back and forth, then either you're not doing something cutting edge or you're not being intellectually honest with yourself.

• 1:50:47Tim Ferriss?

  So I have a question for you about this. And I'll just start with just an anecdote, which was, I was at a friend's house recently and it was a gathering of 20 people or so. And there was some structure to the weekend and people were broken out into groups to have various discussions. Everyone there, very intelligent, normally highly rational, and politics was the topic of the day. And it just devolved into acid spitting and craziness almost immediately, with the exception of one session. And the reason that session was different is that the moderator said, before we get started, I want to go around

• 1:51:28Tim Ferriss?

  the room and everyone needs to pick one piece, it could be a tiny piece of the opposite side, the person they disagree with, and just argue for its validity for even 60 seconds and go around the room and did that. And it took 10 minutes. And then everyone was much more open minded and patient and productive in the conversation. So my question for you leading off of that is, How have you trained yourself to practice quantum thought? Or how would you recommend someone develop that? Because it's not something that most folks think about. Certainly something historically I didn't dedicate a lot of time to thinking about.

• 1:52:12Tim Ferriss?

  I was always more concerned with defending whatever position.

• 1:52:14Naval Ravikant?

  I feel like everyone else should be engaging in it.

• 1:52:18Naval Ravikant?

  Whereas I should stick to my positions. Those are correct.

• 1:52:21Speaker 04

  No, well, I mean, it's good. It took, you know, quite a few laws, takes a few law school tests to get used to it. So one thing you can do is take the first year of law school and learn how to do this. But imagining that you're the other person, certainly in going through their arguments. And you might even imagine it as a courtroom and you trade places. You argue for one side and then the other. So you even can think of it as a courtroom in your mind. I think might help some people.

• 1:52:47Tim Ferriss?

  Seems like people who have either self-selected by gravitating towards debate or taken debate where they're forced to take opposite positions and counter arguments. Helpful as well.

• 1:52:59Naval Ravikant?

  Yeah, this is classic Socrates, right? He would always, he would always just keep digging and arguing the point. And you could never pin him down on his beliefs because he was always exploring the thought space.

• 1:53:09Tim Ferriss?

  And well, it's also, I mean, this practice just for people who are like, I don't want to be open minded. But okay, and they're not going to explicitly say that. But if you want to be maximally persuasive, you know, Charles Darwin actually did this very, very well. What I'm about to say in the Origin of Species is instead of straw manning, and I think Sam Harris has used this expression, steel manning. So in other words, he would, he would try to anticipate the objections that people would have. And then he would not take the sort of weak and flimsy version of their argument. He would build it up and make it as compelling as possible before he would counter it in his own writing.

• 1:53:48Naval Ravikant?

  That's the intellectual, the honest way to do it, which is.

• 1:53:50Tim Ferriss?

  It's the honest way. It's also the very, very effective way.

• 1:53:53Naval Ravikant?

  Right. Yeah, because then you're actually, then you're actually arguing on the real merits, not on what you, not on the anecdote you picked or a piece of it that you picked to attack.

• 1:54:02Tim Ferriss?

  So Neil Strauss is an eight time New York Times bestselling author. He's been on the podcast, but he said every time he edits his own work, first he edits for himself. So he keeps, he wants to keep it interesting, fun for himself. Second, he edits for his fans. Make sure everything is clear and then he edits for his haters so that he can steel man and bulletproof things to the extent possible.

• 1:54:21Naval Ravikant?

  Twitter's taught me that. I mean, you have got 160 characters. Everything you say 140 most of the time. Everything you say will be taken out of context and used to attack you. So you really just have to boil it down. You have to hone it. And I tweet mainly because it helps me clarify my own thinking.

• 1:54:41Speaker 04

  Yeah, it's quite the exercise, actually.

• 1:54:43Naval Ravikant?

  Yeah, I think the accidental limit from text messaging days turned out to be a huge bonus for Twitter. Yeah, I mean, so just kind of moving on a little bit, there are these other little phrases you coined that helped me crystallize my own thoughts. So there's a class of things that people seem to worry a lot about these days, whether it's an asteroid hitting the earth, or, you know, apocalyptic scenarios, floods.

• 1:55:12Tim Ferriss?

  Skynet.

• 1:55:12Naval Ravikant?

  Skynet, AI, you know, let's just say even like near term climate change predictions. Like, I think we're all supposed to be underwater by 2020 or something, right? But there's definitely a class of people who will take anything on the internet and blow it out of proportion. Sometimes it can be a warning, sometimes it can be good, sometimes it can be bad. Like, the general AI thing is another one of these. And you summarized this whole class of statements under what I thought was a brilliant little moniker, Pascal scams. And where does that come from?

• 1:55:44Speaker 04

  So that comes from Pascal's wager. And it can be applied to any, any claim that there's an infinite or very large reward or punishment, or outcome of positive or negative nature. And the argument goes that even if it's very improbable, because this reward or outcome is so large, you should pay attention to it.

• 1:56:08Naval Ravikant?

  Right. And Pascal originally basically said, you have to believe in God, because just in case, because if you're wrong, you're screwed for eternity.

• 1:56:14Tim Ferriss?

  Right. If God doesn't exist, who cares?

• 1:56:16Naval Ravikant?

  Right.

• 1:56:16Tim Ferriss?

  If God does exist, you don't believe.

• 1:56:18Naval Ravikant?

  Exactly. So you should believe. Yeah, that was the argument.

• 1:56:21Speaker 04

  The basic flaw in this kind of thing is there is an infinite number of Of infinite outcomes, if you expand your space to infinity, there's, there's an infinite number of things that can happen. So you can't, the, the odds of any one of them happening are infinitesimal.

• 1:56:35Naval Ravikant?

  Right.

• 1:56:36Speaker 04

  So you don't get a large expected value when you multiply infinite by infinitesimal.

• 1:56:44Speaker 04

  It's some undefined thing you can't really reason about, but.

• 1:56:48Naval Ravikant?

  But people do anyway.

• 1:56:49Speaker 04

  But people try anyway. So they, they say, well, even, you know, we, so this precautionary principle kind of stuff, you can only take it so far. And the other problem with improbable things is there are error bars on the probability. You don't know if it's, you know, one in a billion or one in, you know, quadrillions or something. So right there, that changes your expected value many orders of magnitude. And usually, you know, people are trying to get attention and so forth, or, you know, they have a job that depends on scaring you and they're trying to, uh, they're trying to make you believe the probability is higher.

• 1:57:24Naval Ravikant?

  Yeah. And to use Nassim Taleb's language, and you should definitely get him on the podcast at some point, by the way.

• 1:57:31Tim Ferriss?

  That's, that I can do. That should happen. I've had dinner with him a few times.

• 1:57:35Naval Ravikant?

  I think that would be highly entertaining.

• 1:57:36Tim Ferriss?

  Oh, yes.

• 1:57:37Naval Ravikant?

  I want a front row seat on that.

• 1:57:38Tim Ferriss?

  Oh, yes, it would be entertaining.

• 1:57:39Naval Ravikant?

  But if you use Taleb's language, you know, some black swan is likely to happen, but any particular black swan is very unlikely to happen. And so people are just trying to scare you with a particular black swan. And because it can end your world, even infinitesimal probability has to be taken seriously. And you can waste your entire life worrying about these things, whether it's suitcase nukes or, um, you know, another financial crisis or the world exploding or imploding or cooling off or whatever.

• 1:58:06Tim Ferriss?

  Now, just to, just to touch back on the black swan, though. Nassim and I first met, if you can imagine the circumstances, the day that Lehman Brothers officially sort of imploded, right? Highly improbable, at least if you're looking back sort of a few years prior. And he has done very, very well financially by not betting on all black swans, but betting on a few select black swans and bleeding in small chips for long periods of time before occasionally having some type of windfall like that, right? So in, when you're considering some of these improbable events, how do you decide which to hedge by certain behaviors or not? For instance, in San Francisco, the.

• 1:58:55Tim Ferriss?

  I really went deep and did training with the police department and fire department for disaster response, right? Looking at the potential consequences of, say, a high magnitude earthquake. And it's like, okay, it probably makes sense for me to spend a hundred bucks on Instacart and just get-

• 1:59:12Naval Ravikant?

  When in reality, you're probably just trip on your stairwell and-

• 1:59:14Tim Ferriss?

  Well, no, no, no, that's more likely. But the point I'm making is like, most people have a fire extinguisher in their kitchen that they will never use, right? You wear your seatbelt, but you've probably never been in a high-impact collision. So there are certain classes that are low-cost, very easy-

• 1:59:27Naval Ravikant?

  Yeah.

• 1:59:27Tim Ferriss?

  -in terms of preventative. So how do you think about, how do you personally think about this?

• 1:59:32Speaker 04

  Right. I mean, but an autorex, not-

• 1:59:35Tim Ferriss?

  No, that's not-

• 1:59:36Speaker 04

  Highly improbable outcome. Something happens a lot of people-

• 1:59:38Tim Ferriss?

  That's not an asteroid destroying the planet.

• 1:59:40Naval Ravikant?

  It's a probability thing.

• 1:59:42Tim Ferriss?

  Yeah.

• 1:59:42Naval Ravikant?

  Where is it on the probability spectrum? Is it, if it's one out of 10,000, you know, you should probably worry about it, or at least take basic precautions. If it could, if it has never happened yet, but could happen, and would wipe out all of humanity, or like once a generation, then it's sort of in the sphere where you just can't think about it, or you'll just go insane.

• 2:00:01Speaker 04

  Well, like, taking a personal-

• 2:00:02Tim Ferriss?

  A lot of people do go insane.

• 2:00:03Speaker 04

  You know, taking a personal precaution on a magnitude 10 quake in San Francisco, it could happen. The odds are low, but it could happen. You could keep that fire extinguisher around, you could add some water, you could add some things, but you know, the building you're in will just collapse on you anyway, so.

• 2:00:16Tim Ferriss?

  Well, yeah, I mean, there's-

• 2:00:19Naval Ravikant?

  Well, the extreme example of this, the one that, you know, a lot of people in our social circle are constantly peddling is the singularity example. It's a very seductive one, you know? Even Elon Musk, who's otherwise absolutely brilliant, seems to be taken in by it. And, you know, I give him credit for worrying about it and thinking it through and so on, but it's just another one of these Pascal scams, it seems like.

• 2:00:42Tim Ferriss?

  Well, can I come back to that, just because I know we're gonna-

• 2:00:45Naval Ravikant?

  That's a big-

• 2:00:45Tim Ferriss?

  We're about to, like, really smack the pinata with this.

• 2:00:49Naval Ravikant?

  Hornet's nest.

• 2:00:51Tim Ferriss?

  Or, yeah, exactly. It's not full of candy. I don't know, it depends, I guess, on how you go about it. But before we get there, Nick, is there anything that you worry about that many other people don't worry about?

• 2:01:02Speaker 04

  Things I worry about that many other people don't. I don't know. People worry about so many things.

• 2:01:07Tim Ferriss?

  No, they do.

• 2:01:08Speaker 04

  But I mean, people worry about privacy, but that seems to be going the wrong direction anyway. You talked about the singularity. I heard somebody coined the phrase, I forgot who it was, creepularity that were slowly, life is getting creepier and creepier as more strangers are peering in on more and more personal parts of our lives. So I worry about that.

• 2:01:27Tim Ferriss?

  Got it. Podcast won't help.

• 2:01:31Tim Ferriss?

  Do you take, do you take preventative, any particular preventative measures that other people might find helpful?

• 2:01:37Speaker 04

  I do, but a lot of them are security through obscurity. So I can't.

• 2:01:40Tim Ferriss?

  I got it. Understood.

• 2:01:45Tim Ferriss?

  All right. So singularity, lead the way in a while.

• 2:01:49Naval Ravikant?

  Actually, before we get into that, I think the privacy issue is really interesting one because physical privacy is being utterly destroyed. And I don't think people realize the extent to which it's going away because cameras are essentially ubiquitous and face wreck and everyone can track everything, except privacy is possible in one realm where it wasn't possible before, which is digital privacy. And that's encryption. That's the story of blockchains and blockchain computers. Blockchain computers can enable digital privacy to a level that you just couldn't get otherwise. So one of the sets of things we didn't talk about is things like Zcash and Monero and other blockchains that are all about privacy. I don't know if you want to touch on that at all.

• 2:02:30Speaker 04

  Yeah, there are a couple. So you can achieve, because Bitcoin doesn't require identity, you can achieve some minimal amount of privacy. But once they track, you know, go to, go to the, again, the Bitcoin fiat exchange, they can tie the address to an identity that way and trace it back. And there are some minimal.

• 2:02:51Naval Ravikant?

  Basically, if you buy on an exchange, they'll know what account that it, the money was sent to or the coins were sent to. And then every time the coins move, someone can analyze the blockchain because they have a copy too. They can say it went from account X to account Y, account Y to account Z. And they might lose track of you somewhere along the way. But I even heard someone say that law enforcement is starting to refer to. Bitcoin is prosecution futures. Sometime in the future, they will be able to unwind that transaction.

• 2:03:18Tim Ferriss?

  It'll be like analyzing Lance Armstrong's blood 10 years later. Yeah, like, oh, no, we do have that.

• 2:03:24Naval Ravikant?

  Yeah, we still have the copy and now the technology has gotten better. Right.

• 2:03:27Tim Ferriss?

  Prosecution futures.

• 2:03:29Speaker 04

  A guy named David Chom invented mixes and applying a mixing and blinding and applying this technique to money. Tor is a version applying it to communications, but applying this to money. So you can do a little bit of mixing or tumbling in Bitcoin, but Monero, you can do it quite a bit better. And then Zcash has an even more advanced privacy features.

• 2:03:53Naval Ravikant?

  Yeah, essentially, the Monero, and I don't want to, the Monero community is very acidic. And they fight the Zcash community, so they get into battles with each other. But there are different approaches, like one approach is I'm doing a transaction and there are five other people doing a transaction. We all pool our transactions together. And then, so someone who's trying to analyze the blockchain will just see that five transactions were done and these were five participants. But you've lost, they can't tell what went to whom. And something like Zcash takes it a step further and just the entire ledger is opaque. Like it's all cryptographically protected. You can't tell who exchanged what. And there are these crazy, complicated proofs that go into proving who still has what money.

• 2:04:38Naval Ravikant?

  And in theory, Zcash is much, is very private. It's sort of the extreme edge of privacy, but it's computationally extremely expensive and it's brand new cryptography, which hasn't yet withstood the test of time.

• 2:04:50Tim Ferriss?

  What makes a particular currency appreciate in value? I know this is probably a stupid sounding question, but I guess there's, because on one hand you have

• 2:05:03Tim Ferriss?

  these nuanced sort of technological features, right?

• 2:05:07Tim Ferriss?

  So someone might focus, or say, a particular currency might focus more on privacy. And then another might focus more on X, Y, and Z. Then you have supply and demand, right? If Kim Kardashian gets up tomorrow morning and decides that she's read a lot about Bitcoin and wants to Instagram about it for the next 10 days straight, I would imagine that would have an impact on prices.

• 2:05:29Naval Ravikant?

  I think you can look at a framework of, you can say, first of all, is this doing something novel and useful? Like, is this useful? Is privacy useful? Is computation useful? Is exchanging money useful? Then you can say, is this the right technology solution? Because there's probably 20 other blockchains competing for it. Then, is it being adopted? Is there a network effect? Do people have in their wallets? Does the infrastructure exist? Are they using it? And then supply and demand. And that gets gamed a lot. Sometimes the developers of these coins are pumping out more coins in the background. You don't know, or they reserve the right. You have to read the source code to figure it out. So that's why investing in some of these extreme so-called altcoins or appcoins is very scary. But there are other applications coming up that are really interesting.

• 2:06:14Naval Ravikant?

  So there's like a one coming out called Filecoin, where I'm a small investor, so disclaimer. But there are others, StorageA and others like that also, that are basically trying to create a network of distributed computers that will do storage for you. So instead of uploading your file to Dropbox or Amazon, you can upload massive files into these distributed storage networks that will take your data, encrypt it, split it across thousands of machines, and then they'll test to make sure your file is still available in the network if you ever need it back. And then you'll pay people in the coin. And so people who you don't know, grandmothers in India, might be holding a piece of your file and waiting to serve it back to you when you need it as a backup or just for storage or serving.

• 2:06:58Naval Ravikant?

  And you'll be paying them fully anonymously and from far away, and the whole transaction is handled through the network. There's another one called Blockstack, which is building an infrastructure for the decentralized internet, including domain names, nameserving done in a distributed fashion. Today, all the nameservers are controlled by ICANN and VeriSign. And so on. But what if you could split that out amongst a distributed network of computers? You could pay people in coin on the network for doing that. So these kinds of applications are coming up. And for each one of these, you look at like, is it novel? Is it useful? What's the competition? Is the code secure? Are the developers scammers? Are there backdoors? What's the supply and demand? So it's still completely Wild West, which is both the opportunity and the terror of it.

• 2:07:42Naval Ravikant?

  I mean, I think the average person who's investing in coins on most of them is probably going to lose their shirts over a long enough period of time because the scammers are really sophisticated. But I think the really smart people who know what they're doing and maybe get a little bit luckier are going to make generational fortunes.

• 2:07:58Tim Ferriss?

  Nick, what are your thoughts on singularity?

• 2:08:01Speaker 04

  So, well, getting back to Pascal.

• 2:08:03Tim Ferriss?

  I was going, I was going to try to do something clever with generations, but I was like, you know what?

• 2:08:06Naval Ravikant?

  I can do this. A lot of the ICOs are scams and Pascal scams are these big scams where like you can't calculate the probabilities because you're dealing with affinities. And the most recent of the Pascal scams that's making the rounds is the singularity movement.

• 2:08:21Speaker 04

  Yeah, so I mean, the idea of the singularity is they've seen this exponential growth in computer resources and the fact that computers are outstripping humans. And then they sort of impute from that that, and you can also see computers take over, you know, things that used to be considered a sign of intelligence to be able to add and subtract quickly. And now computers can do that billions of times faster than humans. So, and the gap keeps growing and growing. Once you, computer can do something, the gap's just going to keep growing and growing. But the idea of the singularity tends to be that you get a general intelligence. Like at some point, computers can do everything humans can do. And all of a sudden, you know, very quickly, they can do it faster and faster and faster. They start designing improved versions of themselves and it's a runaway effect.

• 2:09:06Speaker 04

  And humans soon become obsolete and.

• 2:09:08Naval Ravikant?

  Or prey for Terminators.

• 2:09:10Speaker 04

  And we can't predict. And so one of the, one of the conceits is the idea that, oh, we'll no longer be able to predict the future. The thing is, that's, that's basically true today for a lot of things. You can't, you know, you know, the stock market's an ongoing running singularity. You can't. Predict day to day, if you could, you can make a fortune. So.

• 2:09:27Naval Ravikant?

  Yeah, you laid out a lot of arguments against it. I mean, another one is just, what is this general intelligence thing? Like, humans are highly adapted to specialized machines and every other animal that's around today, including the cockroach, is just as evolved as we are. It's just different fitness functions. And so it has a different concept of intelligence that it needs to survive. And machine intelligence that we've developed so far is extremely specialized. So there probably is no such thing as general intelligence. Instead, what we have is machines that are brilliant at calculation, but terrible at other things. And now they're getting brilliant at face recognition, but that doesn't mean they're going to be really great at me solving my next debate with my wife.

• 2:10:04Tim Ferriss?

  Well, and then something else you touched on that I appreciated. And as a non-scientist, non-engineer, who sometimes pretends to do such in physical performance and whatnot. Quote, "There is, as Feynman said," it's Richard Feynman. Everybody should read Surely You're Joking, Mr. Feynman. But I digress. There is, as Feynman said, quote, "plenty of room at the bottom end," quote, "but it is by no means infinite, given actual demonstrated physics. That means all growth curves that look exponential or more in the short run turn over and become S-curves or similar in the long run. Unless we discover physics that we do not now know, as information and data processing under physics as we know it are limited by the number of particles we have access to, and that in turn can only increase in the long run by at most a cubic polynomial,

• 2:10:50Tim Ferriss?

  and probably much less than that, since space is mostly empty." It seems underlying this singularity is the assumption that exponential continues to be exponential indefinitely.

• 2:11:00Speaker 04

  Right. And we've had exponential growth for computers for most of the last century. And so we have this vast resources that I've already talked about to take advantage of. But the future, you're going to face these physics limits, you know, limits on the heat that your circuits give out, they turn into toasters and so forth. So, yeah, and it's the limits set by quantum mechanics. And we're, we've reached that in some, I don't think Moore's Law really applies to transistors necessarily anymore. The original Moore's Law of the number of transistors, I think that's our.

• 2:11:35Naval Ravikant?

  The physical limits of how far transistors can go. Then there's a question of are transistors even the right medium? Like maybe to exhibit our kind, our variation of specialized intelligence, it needs to be on wetware, like it needs to be on tissue. And we have not yet gotten to growing brain tissue and then programming it. That's a long ways off.

• 2:11:55Naval Ravikant?

  And then you have to deal with the fact that our brains evolve in, or our intelligence evolves in reaction to our environment. And even genetic algorithms evolve in reaction to fitness functions. So not only would you have to create a computer that could run on our tissue to exhibit our kind of intelligence, but then you would also have to put it in our kind of environment and its rate of learning would be limited by what inputs our environment can provide. And if you're going to go do all that work, then just have a baby. It takes nine months and we already know how to do it. And save yourself a lot of time.

• 2:12:24Tim Ferriss?

  Well, on that point related to environment, this is, and you've written quite a bit on this, but I underlined one portion quote. So these evolutionary techniques and other machine learning techniques are often interesting and useful, but the severely limited ability of computers to simulate most real world phenomena means that no runway is in store. Just potentially much more incremental improvements, which will be much greater in simulable arenas and much smaller in others. And will slowly improve as the accuracy and completeness of our simulation slowly improves. Just to underscore what you just said. You need access to the environment or the ability to create.

• 2:13:00Naval Ravikant?

  Right. There's also probabilistic argument against general intelligence, which is the universe is so vast and so large that if general, it's the same, it's the same people who make the general intelligence argument also make the we're living in a simulation argument. Well, they kind of both can't be true because if we're living in a simulation, then that means that at some point we already invented a general intelligence. Like when you get the technological capability to invent a simulation of this complexity, probabilistically, and you believe general intelligence are possible through the mechanism described in the singularity, then we probably already hit that along the way. So that means that whatever that general AI is already exists and we're just living inside its sim. So why do we have to worry about it suddenly emerging here than killing us all?

• 2:13:46Naval Ravikant?

  So the people who are both holding the simulation hypothesis in their head and the singularity being on the corner in their head are sort of at a deep level contradicting themselves.

• 2:13:55Tim Ferriss?

  Particularly if, I don't know, I guess the, so the simulation, I wish we had Sam Harris here to talk about, I don't know why I've mentioned him so many times, just talk about Free Well, he isn't, he's interesting to talk to about that, but the, the idea that something would come to be that is a thousand, a million times, a billion times more generalizably intelligent than we are and their priority would be killing us.

• 2:14:18Naval Ravikant?

  Yeah.

• 2:14:18Tim Ferriss?

  It's just like my, my, my directive in life being running around killing cockroaches. It's like, no, they're cockroaches. I don't really care so much about them, but it seems odd that that would be.

• 2:14:29Naval Ravikant?

  Yeah, I think that that movie, Her, actually did it pretty well, which is, you know, when the general AI evolved in that movie, it just left.

• 2:14:36Tim Ferriss?

  Yeah.

• 2:14:36Naval Ravikant?

  It didn't care about this world at all.

• 2:14:39Tim Ferriss?

  So Naval, you've, you've mentioned a bunch of things you're not worried about. I'm, I'm curious to ask you the same question I asked Nick, which is, what are the things that occupy your mind more than perhaps other folks or many other people?

• 2:14:53Naval Ravikant?

  I try to keep a very low level of mental surface activity for anything other than whatever I'm directly dealing with in the moment. And one of the ways I'm trying to do that is by stripping away layers of identity. So I don't want to overly identify as Indian or American or libertarian or, or Democrat or any of those kinds of things because one that sort of keeps me from actually engaging in thinking as I need to, it's all preconceived beliefs. It makes me more defensive because once you, the reason you can't talk about politics to anybody is because it attacks their identity at a core level. Every tweet I put out, I now know that even if I attack a general class of activity, all the people

• 2:15:35Naval Ravikant?

  who are engaged in that activity will respond. So like I put out a tweet about how you want to, you know, value investing and venture investing are both long-term investing and trading is this a good get rich quick scheme, which doesn't work. And so of course, all the people who got really angry about that, I just clicked through their bio and sure enough, they're traders. Like that's what they do. They trade all the time and for Wall Street, that's how they. Make a living. So if you attack someone's identity, you've shut down all conversation with them. That's why political conversations don't work. So conversely, if you want to be rational and open minded, you should not have an identity. And the less of an identity you can absorb, can adopt, the better.

• 2:16:12Tim Ferriss?

  How do you train yourself to identify less as Indian, as X, as Y?

• 2:16:17Naval Ravikant?

  Human consistency bias is a powerful thing. So just when someone asks you, are you libertarian? Just say, I'm not anything.

• 2:16:25Naval Ravikant?

  If they say like religious, you know, they don't say anything like Krishna Murti is one of my favorite philosophers. When he met the Pope, you know, the Pope said to him like, you know, I'm Pope, blah, blah, blah. From this lineage and so on. Who are you? And Krishna Murti just said, I'm nobody. Right. But he was being serious. Like, I don't even know what I am. I'm just this thing that's here right now in this environment, reacting to the inputs from the environment. According to my conditioning and I'm trying to be as unconditioned as possible. By the way, that's why my Twitter.

• 2:16:58Naval Ravikant?

  My Twitter avatar is like a sketch of a human face. Cause it's trying to remind me to be unconditioned. You don't want to be over conditioned and you don't want to be overly strong with your identity.

• 2:17:08Tim Ferriss?

  You guys mentioned Twitter earlier. So one of the things that you may have noticed I do this, but I routinely put out things on Twitter and Facebook that.

• 2:17:17Tim Ferriss?

  I use to call my audience of hypersensitive people or that I know will just. Kick the hornets nest enough to force people to self select one way or the other.

• 2:17:30Naval Ravikant?

  Yeah.

• 2:17:30Tim Ferriss?

  And I have to be careful not to then accidentally create a group where they all have sort of. Exactly.

• 2:17:38Naval Ravikant?

  But you want to prune the trees in the forest.

• 2:17:40Tim Ferriss?

  I want to prune the trees a little bit, but also what that does is. It gives me more, I perceive having more freedom of speech or willingness to speak my mind. Because I'm progressively.

• 2:17:56Tim Ferriss?

  Creating less and less of a reputation to protect. Does that make any sense?

• 2:17:59Naval Ravikant?

  Yeah, that's right. I do the exact same thing, which is I would say every, every couple of months, my tweet stream gets a little edgier, right? As if sort of pushed out the people who can't deal with what I'm saying. And I've muted them or blocked them, or just they've unfollowed me or what have you. And I didn't used to block, but now I've had to like, it's just because there's always somebody who'll straw man whatever you're saying, get outraged and try and start a fire and assemble a mob around it to like, burn you at the stake. And unfortunately, a lot of the best people on Twitter have left because of that issue, right? Like P. Marker probably being the most famous, but you know, you can put out 100 tweets a day and you say one thing wrong in one of them and they're trying to burn you at the stake.

• 2:18:39Speaker 04

  It's always the most controversial ones of mine to get on, put on Reddit and spread beyond Twitter.

• 2:18:44Naval Ravikant?

  Absolutely.

• 2:18:45Tim Ferriss?

  Yeah, P. Marker, for those interested, that's Mark Andreessen.

• 2:18:48Naval Ravikant?

  I think this is a general phenomenon where society has not yet figured out how to deal with social media. I think like in my kids' generation, they'll be seeing all kinds of crazy things on Twitter and nobody will care. Nobody will lose a job over it. Nobody will get worked up over it because everyone who's saying everything crazy all the time. But right now, when we're transitioning from a world of our thoughts being private to our thoughts being public, people are still getting outraged. But to me, like, the people who get outraged are sort of the most anachronistic, least intelligent members of society. And I'm happy to leave them behind. The more easily outraged you are, the less I want to have to do with you. Begone. If you think words can hurt you, you're going to live in a world of misery and pain your entire life.

• 2:19:28Tim Ferriss?

  So on that note, I'd like to wrap, just kidding. So I want to gear shift for a second and ask a few questions of you, Nick, that are not directly related to, they might be, they might edge into it, but not directly related to cryptocurrency. The first is, if people want to explore your blog, and you have some very extensive writing, where might you suggest they start? Is there a particular piece or a few pieces that might be a good diving in point for people?

• 2:20:01Speaker 04

  Yeah, so for blockchains and cryptocurrency and smart contracts, probably the two best ones, Money Blockchains and Social Scalability is a recent blog post of mine.

• 2:20:13Speaker 04

  And then in a somewhat older blog post called Dawn of Trustworthy Computing.

• 2:20:19Tim Ferriss?

  What are some of the subjects that you enjoy exploring outside of the ones that we've already heard about in terms of the, we understand the fascination with money, currency, law. What are other interests that might not be immediately evident to people if they're reading your blog?

• 2:20:37Speaker 04

  Yeah, we also mentioned the origins of money.

• 2:20:39Tim Ferriss?

  Origins of money.

• 2:20:40Speaker 04

  A big interest and related interest of mine. And history in general, I read a lot of history.

• 2:20:45Tim Ferriss?

  Any particular?

• 2:20:46Speaker 04

  Like economic and legal history, mostly. So.

• 2:20:51Tim Ferriss?

  Are there any particular resources or books that you've enjoyed in that area?

• 2:20:57Speaker 04

  So Alfred Crosby's The Colombian Exchange, which is basically what Jared Diamond ripped off when he wrote his book.

• 2:21:06Speaker 04

  Alfred Crosby wrote the original better version.

• 2:21:09Naval Ravikant?

  Oh, no, you just ruined Jared Diamond for me. Turns out he was just a popular writer.

• 2:21:13Tim Ferriss?

  Yeah, Jared Diamond's hypothesis on what happened on Easter Island also turns out not.

• 2:21:18Naval Ravikant?

  That's right. I've heard.

• 2:21:19Tim Ferriss?

  Not hugely supported.

• 2:21:20Naval Ravikant?

  Not that.

• 2:21:21Tim Ferriss?

  Yeah, but yeah, we all, we all make our mistakes. The, it, one of the questions I ask guests on the podcast oftentimes is what books have you gifted the most to other people? And I don't know if you have any that come to mind.

• 2:21:36Speaker 04

  So Richard Dawkins, The Selfish Gene is, is sort of on my essential, everybody should read this list.

• 2:21:42Naval Ravikant?

  Yeah, definitely one of the classics. Although Dawkins is getting outraged on the internet a lot these days.

• 2:21:47Tim Ferriss?

  He's, he's good at.

• 2:21:49Naval Ravikant?

  Not the same kind of outrage.

• 2:21:50Tim Ferriss?

  Cording outrage. Oh my God, I saw a, yeah, public speak, public talk of his in Los Angeles, not too long, it was fantastic, but I was just like every given second, I'm like, I wonder if this room is going to explode. Like, not with outrage or applause, like literally.

• 2:22:09Tim Ferriss?

  Any other books that come to mind?

• 2:22:10Speaker 04

  And I mean, Matt Ridley's written several good books on, on evolution, social evolution, and a couple on genetic evolution as well.

• 2:22:18Tim Ferriss?

  How do you spell his last name?

• 2:22:19Speaker 04

  Matt, R I D L E Y.

• 2:22:21Tim Ferriss?

  Oh Ridley, okay, got it.

• 2:22:23Naval Ravikant?

  Yeah, I think three or four of my top 20 books of all time are all Ridley's. Rational Optimist, Genome, Red Queen, Origins of Virtue.

• 2:22:32Tim Ferriss?

  Which is your favorite? Or if you had to recommend, or one, if you had to recommend one?

• 2:22:35Naval Ravikant?

  Rational Optimist. He has Evolution of Everything, which I haven't read yet.

• 2:22:41Tim Ferriss?

  If you were teaching a, this is for you, Nick, if you were teaching a, let's call it a high school freshman class or seminar, could be on any topic, what would you teach?

• 2:22:54Speaker 04

  Hmm, well, I just gave some lectures at my honorary doctorate university on related lectures on the origins of money and blockchains and cryptocurrency. So to me, those are three closely related topics that I like to.

• 2:23:11Tim Ferriss?

  And how, over what period of time did you teach that class?

• 2:23:14Speaker 04

  Those were like hour-long lectures. So I tried to cram way too much into.

• 2:23:20Tim Ferriss?

  What would you hope people would take from those lectures if they only remembered two or three things? Is there, are there any core, critical takeaways you could hope them?

• 2:23:29Speaker 04

  So money's not arbitrary. If you look at the history, origins of money, see all sorts of different things, textiles and yap stones and this and that and so forth. But indeed, it's not arbitrary. They're very consistent things like unforgeable costliness, the demand for scarce supply, and the durability, people choosing durable objects.

• 2:23:50Speaker 04

  So that, that sort of realizing that by reading that is partly, well, help me figure out, yeah, you could do this in cyberspace as well. So.

• 2:24:00Tim Ferriss?

  What does in your, in your life, what does money buy you? I know it may sound like an odd question.

• 2:24:06Speaker 04

  In my life?

• 2:24:06Tim Ferriss?

  Yeah.

• 2:24:07Speaker 04

  Yeah.

• 2:24:09Speaker 04

  Not as much as one would have thought, because I find myself consuming time to do things that I would, I would like to substitute money for, but can't. I have to take the time to do them anyway, so.

• 2:24:25Tim Ferriss?

  What, what drives you to write as much as you do?

• 2:24:28Speaker 04

  Well, partly that's what I want to do in life.

• 2:24:30Tim Ferriss?

  So you enjoy the process of?

• 2:24:31Speaker 04

  I like the freedom of thought and stuff. And so I'd much rather sit at home thinking of my own stuff than, you know, thinking what my boss wants me to think.

• 2:24:42Tim Ferriss?

  What are things you'd like to write about that you haven't had a chance to explore yet? Or that you have on deck?

• 2:24:49Speaker 04

  So I've written some things about the industrial evolution that I have some unique thoughts on, but I'm so busy with other things I'll probably never get to. And on what I call the exploration explosion, how Europeans were able to go around the globe and take over the world's trade routes and so forth, you know, after Columbus. So there's all sorts of, those are two of my favorites, but there's plenty of others as well. I'll never have time to do.

• 2:25:16Tim Ferriss?

  Can you, can you give any teaser snippets or concepts from the industrial evolution?

• 2:25:23Speaker 04

  Well, I don't, I don't know if this made it on the recording, but the hourglass was mentioned earlier as an underrated invention, this humble glass thing with sand in it. So Europe invented like the mechanical clock and which I think most people recognize as an important invention, but they also at the same time, and not coincidentally that it happened at the same time, they invented the hourglass and the hourglass keeps, you know, time between one hour and another. And then the clock, which at the beginning was only in the bell tower, you know, chimes the hour for the whole city. And so it's the hourglass that people would time their, you know, their activities with and so forth. And professors would time their lectures and people would, you know, agree to meet

• 2:26:06Speaker 04

  at certain times and just that temporal coordination was happening quite a bit more in Europe than, than anywhere else. And they also turned it into an navigational technique called dead reckoning, where you would, you would look at your knot slipping through the water and then you'd use the hourglass to measure the time. And then you would also use that hourglass to record the time, record when you made the measurement. And so you'd keep track, just dead reckoning of how far you're going. And that's a technique Columbus used and Magellan used and so forth. So that hourglass was used in all that stuff and.

• 2:26:40Tim Ferriss?

  Underappreciated.

• 2:26:41Speaker 04

  Underappreciated.

• 2:26:42Naval Ravikant?

  And there's some poor guy's job, it was flip it every hour exactly in the hour.

• 2:26:48Tim Ferriss?

  If you had.

• 2:26:51Tim Ferriss?

  A gigantic billboard could put anything on it, just a message to get out to millions of people or more. What would you potentially put on that? Does anything come to mind?

• 2:26:59Speaker 04

  A gigantic billboard. Well, the phrase Naval quoted me earlier, trusted third parties are security holes. Anybody in the blockchain space, I would like to get that in their head. That's basically the key to the whole design, why the whole design is like it is and so forth.

• 2:27:15Tim Ferriss?

  Naval, do you have any other questions before I wrap up with a few?

• 2:27:18Naval Ravikant?

  No, I mean, I would just really encourage people to go read Nick's blog. He's a true polymath. He's written about stuff, as he mentioned, ranging from the hourglasses and clocks, the industrial revolution, to blockchains, to law and policy and privacy and rights and singularity and freedoms. And I just learn something every time I go to his blogs. I've probably now finished about half the pieces on there, and they're always highly inspirational and educational.

• 2:27:48Tim Ferriss?

  Yeah, people often ask me, the listeners ask me a question related to the maxim that you hear in Silicon Valley a lot, which is you're the average of the five people you associate with most. What do I do if I don't have access to five people I want to be the average of? And the answer, or one of the answers is read. Choose your reading sources very wisely. And I would agree, the depth and breadth of what you cover is really, really astonishing.

• 2:28:13Naval Ravikant?

  My smartest teachers, mentors, peers these days are all on Twitter and blogs, and they're mostly autodidacts. Like, they might have a, they're self-taught, right? Fancy word. But they might have degrees and whatever, but the reality is they're curious people. And the internet is the myth of the Library of Alexandria writ large. Like, you can find anything and everything. You can become an expert in anything. You can talk to anybody. So I used to feel guilty about spending so much time on the internet, but now I don't. As long as I'm reading interesting things from the people that I think are really smart, what's the downside?

• 2:28:52Tim Ferriss?

  Agreed. On Twitter, where can people say hello? What is your Twitter handle?

• 2:28:56Speaker 04

  Yeah, my Twitter handle is @nickzabo4.

• 2:29:00Tim Ferriss?

  Okay, and that's N I C K S Z

• 2:29:04Speaker 04

  Yes.

• 2:29:05Tim Ferriss?

  A B O, the number four.

• 2:29:07Speaker 04

  Number four, yeah.

• 2:29:08Tim Ferriss?

  Very cool. Well, that, I think, about covers it for a first gathering at Casa Naval. And you can get a 25% discount on Navalcoin if you go to tim.blog/podcast. No, I'm kidding. That is, that is handsome.

• 2:29:24Naval Ravikant?

  Prices are going up.

• 2:29:25Tim Ferriss?

  Prices are going up, but wait, that's not all. We'll have hopefully more for you guys soon. This was a real blast. Thanks so much for the time, Nick.

• 2:29:33Speaker 04

  Thank you.

• 2:29:33Tim Ferriss?

  This is really fun. And Naval, always a pleasure. Thank you for helping put this together.

• 2:29:39Naval Ravikant?

  Thank you for having us. It's fantastic.

• 2:29:41Tim Ferriss?

  And to everybody listening, we will have show notes, links to everything we mentioned, Nick's blog, books, as many resources as we can think up, probably Cryptocurrency 101, a handful of articles we'll recommend in sequence as well. In the show notes, you can find those at tim.blog/podcast. And that will take you to show notes for every other episode as well. And until next time, as always, thank you for listening. Hey, guys. This is Tim again. Just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me? Would you enjoy getting a short email from me every Friday that provides a little morsel of fun before the weekend?

• 2:30:25Tim Ferriss?

  And Five Bullet Friday is a very short email where I share the coolest things I've found or that I've been pondering over the week. That could include favorite new albums that I've discovered. It could include gizmos and gadgets and all sorts of weird shit that I've somehow dug up in the world of the esoteric, as I do. It could include favorite articles that I've read and that I've shared with my close friends, for instance. And it's very short. It's just a little tiny bite of goodness before you head off for the weekend. So if you want to receive that, check it out. Just go to 4hourworkweek.com. Fourhourworkweek.com all spelled out and just drop in your email and you will get the very next one. And if you sign up, I hope you enjoy it.

• 2:31:09Tim Ferriss?

  This episode is brought to you by Audible, which I've used for many, many years. I absolutely love audiobooks and they are one of my favorite ways to pass the time when I travel. I'm on the road all the time and Audible allows me to consume many more books than I possibly could otherwise. I have two audiobooks to recommend right off the bat. The first is perhaps my favorite audiobook of all time and it's the only audiobook I've wanted to listen to twice in a row. The Graveyard Book by Neil Gaiman. It's amazing and you will thank me. There are a few different versions. I like the version that Neil narrates himself. One of the most soothing voices of all time. The second book is Vagabonding by Rolf Potts, P-O-T-T-S, which had a huge impact on my life and formed the basis for a lot of what

• 2:31:54Tim Ferriss?

  would later become The Four Hour Work Week. So, go to audible.com/tim and you can choose one of these two books or any of many, many other options. That could be books, magazines, and much more. As a listener of The Tim Ferriss Show, you can also access a free 30-day trial. Just go to audible.com/tim. You can't make more time, but you can make the most of it. So, turn your travel or your commute into something more with a free trial at Audible. Go to audible.com/tim to start now and get your free 30-day trial. This episode is brought to you by FreshBooks. Man, oh, man, do a lot of listeners of this podcast and readers of mine love FreshBooks, to the extent that I ended up meeting with

• 2:32:38Tim Ferriss?

  the CEO not very long ago. Why are they so popular? Well, they are the number one cloud accounting software designed exclusively for self-employed professionals, that's many of you, and used by more than 10 million people. You can send invoices, track your time, and get paid very, very quickly, which suits the needs of a lot of freelancers, a lot of entrepreneurs, and beyond. You can take pictures of receipts. You can link your credit card and debit card, so all the things you buy automatically appear in your FreshBooks in the right category. So on and so forth. Makes taxes easy, makes invoices easy, makes your life easier. And also, in fact, I'd recommend a PDF. They didn't ask me to read this part, by the way. They put together a PDF a while back called Breaking the Time

• 2:33:22Tim Ferriss?

  Barrier, subtitle, How to Unlock Your True Earning Potential. So, you can search for Breaking the Time Barrier. A lot of people ask me, How can I get a four-hour work week with a service business? And the story in that ebook, it's PDF, is the short answer. It's really, really good. So I think you should also check that out. So Breaking the Time Bear, check it out. But also, why not test out FreshBooks? Claim your 30-day unrestricted free trial at freshbooks.com/tim and enter Tim Ferriss, two R's and two S's, in the "How did you hear about us?" section. That sounds like we're going to get very little tracking. That's a lot of work. But just go to freshbooks.com/tim and try it out because it is a very good product

• 2:34:04Tim Ferriss?

  and I think you will find it simplifies your life. Enjoy.