Bitcoin As The Apex Predator | Robert Breedlove | Pomp Podcast #502

bang bang what's going on guys hope you guys are really excited about this interview i really enjoyed it i think you will as well but before we get into that make sure that you like this video so that more people on youtube can find it make sure you're subscribed to the channel and don't forget that blockfi is the sponsor today they've got three products you can buy and sell crypto on their crypto exchange you can deposit crypto and earn up to 8.6 apy in an interest bearing account or you can deposit crypto and take out a us dollar loan against your crypto collateral you can use the description right here or you can go to blockfi.com to learn more all right let's get in this episode i hope you guys enjoy this one [Music] all right guys bang bang i have robert back with me thank you so much for doing this sir glad to be here palm thanks for having me the last time we talked it was uh pre covid um and we had a fantastic conversation really just breaking down uh kind of ray dalio's thoughts around uh gold stores value bitcoin uh etc sounds like he has uh come around uh quite a bit and uh maybe he's not a full-blown bitcoiner yet but uh but is definitely closer than he was back then uh maybe give us just kind of a an overview in terms of what you've been up to over the last year and a half or two years yeah last time we spoke almost exactly a year ago and it was i guess about two weeks before the covet meltdown um and that you know as we were just touching on it's been like this singular accelerating event for the bitcoin thesis the digital age in general um so very strange times but also kind of exciting to be in in the bitcoin space um dalio it seems has come around somewhat uh i think his most recent stance on bitcoin was that it's one hell of an invention so he's still not he still seems like he's a bit lost in the blockchain buzz world buzzword jungle um and he still has some concerns about you know volatility and could bitcoin be disrupted by another crypto asset et cetera et cetera so kind of looking at it as a consumer product i don't think he's fully grasped the nature of an internet protocol uh the nature of the the social layer built on top of it right that people holders specifically all the rules in bitcoin are optimized for holders so there's really you can't there's not any design space left to introduce a value proposition that can break that network effect of bitcoin i mean not a conceivable one i mean anything can happen who knows but um you know bitcoin is essentially as we touched on in the last episodes has perfected all the properties of money and now we're talking about a one trillion dollar asset i mean this thing yeah as sailor alluded to that when these digital networks get above 100 billion which is you know 10x ago for bitcoin they tend to become indomitable right they have such an entrenched network effect um i you know the i guess you could say the brand recognition too is really important that you can't even mention a competitive crypto asset without comparing it to bitcoin so bitcoin has this kind of self-reinforcing narrative in the world and that's ultimately what it is right it's an idea the whole thing's an idea and it it runs countervailing to all of the entrenched power interests and central banks right their premise on the opposite world view that we should just be able to expand the money supply arbitrarily at will to fix all of our problems you know bitcoin flips the whole thing on its head and says no we should have a firmly fixed money supply that is a a sound power reservoir for the the energy that we sacrifice the time and energy we sacrifice to obtain money the money supply should reflect the scarcity of the time and energy we sacrifice to obtain it and this idea i think is just just tearing it's just breaking out throughout the world right you know again coven we have this uh the sharpest liquidity collapse in market history this is a in the march 12th black thursday event was a faster global equities drawdown and flight to safety than the 1929 collapse now the so far the repercussions of that have not been as severe um but as we know when you just increase artificial liquidity try to paper over these disasters you're just delaying and exacerbating the ultimate correction to economic reality and i think there was one headline um i think it was jim cramer's show where it showed like bottom of the screen stock market all-time high screen behind him 40 million americans unemployed so we've the central bank model has totally diverged the market from its underlying valuation fundamentals and now everything's become much more a product of policy than supply and demand and you know things would be pretty bleak and grim without bitcoin right now because it's the only thing that um i guess is still rooted in supply and demand almost that you can find in the world everything that can't be printed right now is overpriced right in commercial real estate equities uh anything that's being substituted in as a store value since the store value function of money has been totally compromised fiat is at a historic all-time high price point and bitcoin it seems at least that it's although it's at an all-time high it's really just beginning this long run to actually do what we say it was going to do which is consume all the monetary premium in the world and you know what we're trillion dollar asset today that store value market cap globally is probably closer to 250 trillion so hard to believe as it may be there's still a lot of upside in this market absolutely one of the people who unlike ray dalio uh really really understands bitcoin and has become a massive proponent since last time we talked is michael saylor you recently produced an entire series called the sailor series where you just talked with him and so maybe talk through a little bit uh in terms of your understanding of his worldview and then what you took away from the recording of that series yeah so another one of these just out of the blue events was actually sailor and microstrategy um you know he was in a unique position and that his company was sitting on a lot of cash um stealer for the audience may not know is the ceo of microstrategy they're a nasdaq listed business intelligence firm um they had been running a pretty conservative ship uh financially at least for the past decade they're sitting on a nice treasure of cash about 500 million dollars and in the wake of kobet uh you know as michael's making his media rounds he just had to figure out what to do with this melting ice cube and they evaluated all their alternatives and ultimately decided on bitcoin so it was interesting i think this was august maybe when he announced originally and i just woke up one day saw this announcement i'm like what is this it's crazy some big corporation has bought a ton of bitcoin and then in my i've got a twitter dm from him and he's sending me a link to the article and so we start having a conversation and you know it turns out he had been following a lot of the the maximalists and you know your show and other people's writings for a long time or you know relatively long time a few months and he the interesting interesting thing about that for me was that this guy went from essentially you know he had disclaimed bitcoin back in 2013 i don't think he thought a lot about it between 13 and 2020 to my knowledge then all of a sudden he has his covet event where he has to reevaluate his liquidity profile and how he's going to maintain shareholder value um in the treasury so from march 2020 to august i was talking about the course of five months he basically fully accelerated on the bitcoin rabbit hole right he went through all the all the content we produced all the writing he knew it all um and so the amazing thing about that to me was and i i thought this before that the thesis of bitcoin although it's extremely complicated very multidisciplinary you have to understand things from many different angles to really to grok bitcoin or to understand it the general value proposition is not that complicated once you get it right it's just money that has a fixed supply so you can't it's money that can't be stolen value that can't be stolen to inflation deauthorization confiscation all of these things and i had this thesis that people would wake up to this relatively simple once this idea got out and it sort of shook off the flood that that still plagues it a little bit that people would um take this idea up very quickly because it's just money that can't be reproduced in a world where money is being infinitely reproduced by the central bank and i thought he you know sailor's acceleration in the rabbit hole was one great example of that he just he went zero to heroes so to speak in this course of a few months so in our conversations i was talking to him and i said you know i had this idea for a show i didn't even know what it would be at this point podcast youtube channel whatever i just said i wanted to sit down with the best thinkers in the bitcoin space but also in in the macroeconomic world so it's not just a bitcoin focused podcast and talk to them [Music] in a long form discussion so i would sit down and talk to you as long as it took we could talk for 50 hours if you wanted and the idea was to get to the first principles of your world view so basically externalizing the mind of these amazing thinkers and show the world how they think how they build their worldview and my thesis behind this was that in a lot of this coming from the book sovereign individual which we talked about last time too in the 1500s i guess it was around 1490 when gutenberg invented the printing press we collapsed the cost of information access so all of a sudden we went from like 10 million books produced in the prior 500 years there were 10 million books produced in a decade once the printing press was made available and the consequence of this was a there was a great many more thinkers emerging in the world a great uh much more variety of thought emerging in the world and a lot of this uh new critical thinking was actually heretical to the institution of the day which was the church so the printing press sort of led to the downfall of the church as the dominant institution of the world but the thought there was that it's the when we decrease the cost of accessing information we actually increase general critical thinking or general intelligence right people can access information more freely ideas are much more free-flowing so i thought that here in the digital age maybe we're seeing something similar we've once again collapsed the cost of information you know we have the the library of the world so to speak at our fingertips through a smartphone or a laptop that maybe this would be a similar type of vent to the gutenberg printing press and we're actually going to increase critical flight thinking in the world and increase kind of general intelligence so what i wanted to bring into this new paradigm was long-form discussions that would it would almost be like the intellectual olympics in a way like you sit down and you see someone that's got you know a long track record of experience um you know clearly a brilliant guy he wrote a book in 2010 called the mobile wave that basically said go out and buy facebook apple amazon netflix google they're going to dominate the world clearly that thesis played out perfectly over the past decade um and just you know help spread i guess the information that these people have obtained uh that they that they've won basically through hard one to experience um throughout their careers and and share that with the world and see if people um would have an affinity for it and it turns out i think the thesis is right so far i'm getting feedback on the sailor series specifically that it's some of the best content people have ever seen because this guy gave you a little idea we really tried to build his entire worldview from first principles so we started in the stone age we're talking about stone age technologies like fire hydraulics which are you know using water to overcome gravity missiles and building this view of how mankind is the animal that channels energy across time and space toward the achievement of aims that's what distinguishes us from every other animal is that we can plan we can build these intellectual structures we then go out and harness energy to to energize those structures and create things in the world that's what civilization is and just brick by brick building this intellectual edifice that took us from the stone age into the industrial age into the digital age frankly and then uh evaluating bitcoin to that long scope of how this impacts everything going forward how it totally changes the game and sailor is just a master speaker um he drops in so many wonderful analogies comparing bitcoin to the discovery of steel or bitcoin to the discovery of antiseptics right um making the point that you know fiat currency is like toxic money actually it infects our socioeconomic structures and now we have a money that that's basically free of unpredictability and how that's just a total game changer so we recorded um two sessions initially about five hours each that came out to about nine episodes we're scheduled to do at least one more session that could be between another one and three episodes uh going forward i'm going to sit down with other prolific thinkers in the space jeff booth is next uh we're already working on that conversation framework uh just got an all-star cast lined up and for me this is amazing because this is something i would be doing no matter what uh it really is a passion project it deeply satisfies my own intellectual curiosity as i'm trying to write and think about these things in new and varied perspectives like to get inside someone's mind to this extent changes me like i'm i now think differently as a result of interacting with sailor uh throughout the series and um yeah i'm just super excited about it i think um we can keep you know i think people really like the first one and i'm hoping they're gonna like uh the ones to come here so absolutely so michael saylor kind of cracked open the dam if you will in terms of uh corporations buying bitcoin uh and putting it on their balance sheet uh he did it in a very kind of transparent uh honest way uh and what i mean by that is uh he basically said to shareholders i am considering doing this if you do not want to be a part of this strategy basically i'll buy back your shares at a premium and then he went ahead and started to execute this strategy he has continued to kind of take out very low interest loans um or debt and by using capital markets uh is able to continue to fund the further purchase of more and more bitcoin i think he's at now over 90 000 bitcoin that is put on that balance sheet kind of four four and a half billion dollars worth of value based on today's prices talk a little bit about what you evaluate uh the impact of this decision obviously we've seen square go out they did a 50 million dollar purchase that another 170 million uh comes out to about five percent of their cash position uh we've seen tesla about seven eight percent of their cash position about 1.5 billion uh and there's a whole host of other kind of you know crypto related businesses that obviously hold bitcoin on their treasury as well in the public markets but how do you evaluate kind of what we're seeing with corporations actually buying bitcoin and putting it on their balance sheets yeah i think at a very high level we're seeing this game theory that many bitcoiners have long identified you know as early as 2011 12 13 14. we knew how the game theory of money operated uh what was different about bitcoin is that this is the first asset that kind of emerged at the retail level first before permeating these larger levels of uh organization so i think that it's a really really big deal i mean sailor is will probably go down i joked with him at the opening the show that for a company called microstrategy this might be the most brilliant macro strategy ever executed um if the bitcoin thesis continues to play out and the way that we think it will and the way that it currently is um you know he stands to become one of the most wealthy people in the world um and microstrategy stands become one of the most successful companies in the world and it's it's all a result of the game theory or the or you can also think of this as the vortex of incentives that is bitcoin and that it basically has bootstrapped itself into existence by paying everyone to interact with it and again we saw this work at the individual level initially where people could just mine it convert electricity into bitcoin then people found some value in its exchange properties you know it can't be seized it can be moved 24x7 etc etc so then it gained a market value and as as has been said that was kind of the the miracle event once bitcoin established a market exchange value against fiat currency um it became that was the beginning of its monetization essentially everything from that event has just been a step function of its uh constricting supply flow so every four years is construct constricting by 50 and it's just bootstrapped itself upward and for sailor to make a move that bold i mean first of all this guy was is predisposed to understanding bitcoin again a guy that wrote the mobile wave he understands network effects he runs a business intelligence firm he gets software i think the last piece that he dropped in after march 2020 was just you know central banking basically or monetary policy or austrian economics whatever that monetary element was that he plugged in just sort of crystallized this world view for him on bitcoin and no matter what amount of work we have done like us bitcoin ambassadors and talking about and educating writing about it uh money always speaks louder than words you know actions speak louder than words so the fact that he's now up to you know the initial allocation was 500 million dollars from his treasury he has since taken on uh some very cost effective debt i think his first round of convertible notes um unsecured debt was it 75 basis points i think the latest round was at zero so it's literally taking on free debt capital um and the reason he's able to do that is because of the optionality bitcoin is installed on his balance sheet effectively so credit providers are willing uh to lend him money at zero percent or 75 basis points so that they can get the option on uh microstrategy stock which has the bitcoin on its balance sheet so it sort of serves as a proxy for an option on bitcoin effectively and this all points to kind of a point he's made repeatedly is that every company now faces similar incentives they have to uh decide to plug into the bitcoin network in one way or another either putting it on their balance sheet or as square is doing they're selling bitcoin right which forced other corporations to adopt a similar strategy they have to compete or die exactly so now paypal selling bitcoin um yeah i expect to see that continue and um this points to where i think fiat will just ultimately fail against bitcoin because everyone so now we've seen this game theory permeate from the retail level to corporates we now expect it in the next say five to ten years to see it permeate at the sovereign wealth fund of the central bank level but every market actor whether you're an individual or you're at the other end of the spectrum faces incentives today to borrow dollars or borrow fiat at low cost to buy bitcoin on term debt and then pay back depreciated dollars so this is and this is something pierre richard wrote about in 2014 it's called speculative attack right when every market actor faces incentives to borrow in the weak currency buy the strong money i don't like calling bitcoin to currency because it's not governmental so buy the strong money sell the weak money buy the strong money and then pay back the weak money at uh after inflation has eroded some of that real debt burden this is like the uh the the digital acid or something that's going to be eating the fiat structure from all sides and that everyone wants to know borrow and sell basically go short dollars and long bitcoin and this incentive is faced by all market actors um really starts to make you believe that this thing could all play out much more quickly than we thought um you know even this time last year we were talking about this as like you know ray dalio had not taken any had not taken bitcoin seriously at all up until that point so in my mind then it was like oh we're probably 25 years out from a central bank taking this seriously but now you know coven as this great accelerator has just changed everything and uh it seems now that um the the musical chairs the game of musical chairs has started at the corporate level people are going to be racing to take a seat at the table that is the bitcoin network and now that we're north of a trillion dollar market cap uh we're almost to the point where it's taken very seriously as a macro asset i'd say once you break five trillion market cap uh it is a very serious macro asset and then every capital pool the world will want to have uh some exposure to it that's when things get really interesting because the supply curve of bitcoin like it's it's perfect information we all know what it is now all the way into the future and thus far in its history its price has adhered to that supply curve so we're still what we're seeing today is still a function of the may 2020 having right we typically have these having events 12 to 18 months later we have a huge price pump if that pattern continues to repeat the incentives to front run bitcoin become astronomical because everyone's looking at the same curve saying this thing's just going to keep going up i my strategy is to sit down at this table before anyone else sits down on this table as the as market actors do that they're actually increasing the market cap of bitcoin increasing the likelihood of its success and further imposing that calculus on other market actors so i think it is just a very interesting event i think sailor will be regarded as a pioneer frankly in bitcoin um and he you know he is proving that thesis at the corporate level and now i think we're just waiting with baited breath to see it happen at the central bank level yeah so speaking of that i think that everyone knew individuals were buying i think that there had been a lot of focus on financial institutions kind of wall street showing up i actually think we have really bad short-term memories not that many people were ready for corporations in 2020 and into 2021 but that has happened in a much faster clip than i thought you know uh was previously expected anyone who would have claimed in beginning of 2020 that within a year uh tesla would be buying a billion and a half dollars of bitcoin on their balance sheet uh i think would uh would be absolutely nuts and i think from there what you end up getting is uh the final question which is what about the central banks right so we have individuals we have financial institutions we have corporations that next big inflection point is a central bank where many central banks doing this i think your opinion is that it is inevitable but is that actually inevitable why do you think that and kind of what is the timeline that you think is most reasonable when evaluating yeah tesla is a great example of just the second step in that game of musical chairs right sailor buys 1.3 billion at the time i think that was 1.3 tesla buys 1.5 right so i would exp i think those numbers um are closely related for a reason right saying like how much should we buy and tesla's treasurer or cfo saying well how much did the other guy buy about 1.3 let's buy 1.5 so that as silly as it sounds i think that's actually how a lot of this game will be played out in terms of the timing of central bank purchase it is so impossible to say and i know it's kind of a cop-out but the digital age if it has proven anything to us it is that the exponential change it is brought about is so holistically unfathomable how fast it can be um you know we've gone from in the past 20 years from the internet say 25 years the internet is a joke to everything's on the internet now everything right everything we do and not only that the internet also is in our pocket now or the fully baked internet we're not talking about the little nokia flip phone with a mediocre browser it's it's a super computer now in our pocket and it's only getting faster so the i really am increasingly of the belief that we are in a renaissance-like event the world will look back on this uh this period in history as a major mega-political transition from an analog age into a digital age right in the same way we look back at the transition from the agricultural age to the industrial age for instance and all of the institutions that served us in the past right if we if we think just looking at the central bank itself the structure of the central bank is characterized by the money right so the money is upstream of everything the reason we have a central bank frankly is because gold is expensive to secure and it's heavy and it's hard to move across space so we had a great tool that was selected on the marketplace for holding its value across time uh which was gold well it became kind of globally dominant money but it constricted our ability to scale economic activity because it's hard it's very expensive to transact across space and for a global a world becoming characterized by globalized trade if you imagine that we had to actually ship gold around the world for every transaction uh it kind of points towards how self-defeating and how expensive that would be so we the central bank emerged as the ultimate custodian of gold and it issued paper currency to augment the lack of portability in gold so now we have this large custodian that centrally manages the gold and issues paper backed by it but with this custody model came the requirement to trust the central bank that they won't abuse the money supply right that they'll always maintain a one-to-one pack between currency and gold and clearly that trust if nothing else defines the history of banking is that that trust is violated repeatedly um so in a way it's as if gold is the game we've always been playing um you know we could say that another way to think about this is that it's the common misconception today is that governments are the originators of money governments issue money but that's not actually true what money emerges when we have property rights basically so when we uh in the agricultural age and we started creating savings in the form of grain capital etc to protect that capital the protection service was the government so it's the local group that specialized in violence that protected you from other specialists and violence to protect those savings so money government actually emerges from money basically once we have property and savings the government emerges as a protection service for those savings the the type of money we have again has shaped the institutions we have today so we've got gold leading to the central bank and the question now becomes we've been playing this one game everyone's trying to accumulate as much money as possible across history that led to gold becoming the most dominant money in the world the question now becomes 5 000 year old tech gold 12 year old tech bitcoin a digital disrupter to the only game we've ever been playing the original governor of human action if you will money is the governor of human action not government it's whoever holds the gold makes the rules as the old accident goes this i think bitcoin makes it so interesting is that it is the latest and greatest testament to the disruptive potential of the digital age we've already seen digital age totally upend say the uh the media landscape the advertising landscape um taxis ride sharing like you name the industry it's been impacted more or less severely by digital technology but at the the pinnacle of this this sub this uh recurrent analog institution disruption the largest and most dominant world is the central bank which is premised on gold and now we have this digital tool disrupting it from the bottom up right it's disrupting gold which then opens the central bank model makes it irrelevant and that you know the the 100 trillion dollar question so to speak is what are they going to do about it what are they going to do it's increasingly obvious that most attack vectors on bitcoin just will not work to stop it outright there's in all of the thinking that's been done about bitcoin no one has identified a credible unilateral attack vector that could take down the network i mean the the analogous question is how do you shut down the internet worldwide forever it's not even good enough to shut it down for just a day you need to shut it down permanently everywhere um so short of like a super global catastrophe there's not a lot that can be done to stop the internet therefore there's not a lot that can be done to stop bitcoin so then the question becomes what are they going to do to adapt to this new reality and as i've argued in a lot of my writing uh this is kind of like the old i think it was gandhi that maybe said this who knows i read it on the internet so it might be wrong first they laugh at you then they fight you then they uh adopt to whatever first first they ignore you then they laugh at you then they fight you then you win that's right exactly so bitcoin's going through that progression essentially and i think we may be somewhere at the fight stage maybe kind of coming out of bitcoin's honeymoon period maybe they do uh attempt to increase regulatory hostility towards bitcoin at the end points you know exchanges and custodians and other venues uh which is points to the importance of always holding your own keys um but i think bitcoin survives that because again the network will survive that there's none government doesn't have any mechanisms that can really jeopardize the network itself they can sort of just impact the consumer endpoints so when we get beyond the fight stage that's when i think they just start acquiring it as a means of of insurance against its success you already hear rumors about you know venezuela doing this they're selling passports for bitcoin you hear rumors about countries in the middle east actually monetizing um some of their their energy there with bitcoin mining uh also using it as a means to circumvent u.s sanctions so there are all of these sources of demand for bitcoin that no government can eradicate and i think the first central bank that publicly discloses the purchase of bitcoin is just going to heat this thing up to a level of of game theory that we can't even imagine um because then you're running the same calculus but at a level where not only do they have the largest balance sheets in the world but they can also just print money and buy the thing so that's when i expect escape velocity for bitcoin to be achieved so if we zoom out for a second um and we basically look at this as um it's pretty un well understood how we got here at this point right if you've been paying attention if you've been um kind of interested or cured or curious you can go read that everywhere i think what people are trying to figure out is where are we going um and so if we look forward i don't know 25 years what does that world look like is bitcoin in every individual every financial institution every corporation's balance sheet and every central bank reserve are there uh all-out violent wars over this just walk me through from where we are today to what you think you know 25 years from now the world looks like and then how do we get there yeah this is uh extremely complicated question because we quite actually have no historical precedent whatsoever another way to maybe think about this is the way the models of socioeconomic organization we have right whether it's capitalism or socialism um they're they're really just social devices or or you could think of them like a tool basically itself so in the 20th century for instance we had this both ideological and economic contention between soviet russia which was a command and control economy and u.s capitalism and the reason us out-competed the ussr and the ussr ultimately broke down bankrupted and fragmented is because the model of we'll see capitalism in parentheses because it's not pure capitalism they've always had essentially planned money but it was most markets were free compared to soviet russia where no markets were free it's because they were able to mobilize the collective intelligence of market actors through the price signal and therefore they're able to uh create a lot more wealth through trade so it's a more energy efficient right we gain more energy efficiency or productivity by trading with one another then we do having one singular plan or director tell us what to do because the intelligence of that bureaucratic body can never rival the intelligence of a distributed network of market actors so you had this distributed distributed computing network a free market capitalist competing against a centralized computing network of soviet russia pricing czar right us capitalism therefore outcompeted soviet communism for that reason it was a more energy-efficient tool if you will and i think that whatever this model that comes in the wake of bitcoin we could say it's purified capitalism like in the original sense of capitalism which has minimized state intervention um i in some of my more recent writing have started to call it sovereignism because for the first time in history bitcoin it gives individuals and entities any market actor full sovereignty over their own money they don't need to depend on any other custodian or institution to facilitate value flows across space and time so it enables this new mode of of socioeconomic organization that's that was never before possible for bitcoin and that's why i think it is difficult to comprehend the implications of this um and difficult to explain frankly because we don't have a lot of direct historical analogy but to get a sense of and where this goes and why i think it goes that direction we can just look at the average u.s taxpayer so the average u.s taxpayer today is paying about ten thousand dollars ten thousand five hundred dollars each year to the irs so direct taxation that's the average tax bill um that does not include inflation so that does not include loss of purchasing power on inflation which as we've touched on before uh the quote that everyone loved is there's no better way to fertilize the rich man's field uh than with the sweat of the poor man's brow that's what inflation is essentially it disproportionately affects the poor retirees pensioners anyone living on fixed income so it's an additional invisible tax but we won't even look at that we'll just look at direct taxation ten thousand dollar ten thousand five hundred dollars per year paid in direct taxes to the irs if that amount of money the ten thousand dollars was instead put into a savings account that yielded ten percent per year over 40 years so after 40 payments uh and 40 years of interest accrual to that account that sum becomes 4.4 million dollars so the incentive that just the average u.s taxpayer faces the guy paying stroking a check 10 000 per year to the irs the decision of whether or not to adopt bitcoin becomes would you switch your savings account from your local bank to the bank of bitcoin for 4.4 million dollars in retirement savings and again we haven't even included inflation which if we look at inflation in 2020 uh u.s tax revenue direct tax credit was 3.9 trillion dollars we printed about 4.1 trillion dollars so we could say that the inflation tax was you know effectively doubled the direct tax rate so you could say that ten thousand dollar uh payment per year probably getting hit for another ten thousand dollars per year uh based on inflation now again it depends where he's at in the in the hierarchy he does the old assets so the old dollars et cetera et cetera um but we could say that okay that 4.4 million would then be an 8.8 million dollar decision for your average guy your average guy or girl this although i don't think clearly not many market actors have awakened to this calculus yet i think over time as governments are increasingly bankrupt right we know that governments are the least efficient operators in the world just go to your local dmv to see how efficient things are they they're not accountable to their p l like every other entrepreneur in the world they're just able to print money and paper over mistakes and bad decision making and continue uh and the example of this that i think safety pointed out was in lebanon they have the the lebanese rail authority railroad authority still operates today and they haven't had a track a railroad in lebanon for like 30 years so it's like these these i forget who said there's nothing more permanent than a temporary government solution so they're eight the only reason they're able to do that is because they're able to steal from society so governments need to steal more and more over time to remain relevant as that overreach escalates market actors are going to wake up to this option this exit option like i can just go into bitcoin and get out of the inflation game or or whatever tax they're being hit with they can go and hold bitcoin uh borrow against it even right which is a tax efficient strategy of taking liquidity against it and and suffer no no tax impact i think this creates a hydraulic pressure pushing market actors to the exit right will be to exit the fiat currency complex and go into bitcoin and every incremental saver that decides to hold their savings in bitcoin necessarily has to divest their fiat so they're selling fiat to buy bitcoin right and this further accelerates uh the inflationary pressures on the dollar which further accelerates other market actors exiting so this is the feedback loop that i think drives people into bitcoin people and market actors institutions and everything over time so then the question becomes which is very deeply and interestingly explored in the book the sovereign individual what happens next because if everyone moves their savings into bitcoin all of a sudden inflation is no longer a revenue source for the government which again if we look at the us government last year that was 50 of their revenue pretty much was inflation direct taxation becomes much more complicated because all of a sudden you're in this asset that is largely unrealized gains for people that are holding savings in it you can't really tax unrealized gains like you pass the law on it but you're just then encouraging people to take their savings elsewhere which with bitcoin you have this hyper mobile capital you can move to any jurisdiction in the world anyone that treats you well right you can go and take the residence there so it's this escalation um i guess this option for people to move their savings into a non-state bank which we call bitcoin like the ultimate offshore bank if you will it's going to force governments to treat their citizens more honestly it's going to force them to compete for citizenship to compete for their business so to speak so it's imposing uh the free market paradigm on at the governmental level which is not something they're accustomed to they're accustomed to treating their taxpayers like cattle right they could just raise them up sheer them down whenever they need to um which is the analogy that the book uses actually says in the 21st century those cows will grow wings basically and we can now take flight and and uh go and move to where we are treated best so as inflation revenues go to zero or near zero taxation revenues start to collapse as well this bankrupts the nation-state model of human organization and so the big question is what happens now how do we organize ourselves post-statism and i've started writing a series on this i you know it's difficult to explain and comprehend what happens uh we have a few analogies like i alluded to the one about soviet russia earlier um the book goes into some more examples about what happened post-feudalism how society restructured itself um but it's important to realize that it's the old andreessen quote right the software is eating the world that just rings louder and louder to me with every passing year so it's not just every business is in the technology game now like you can't you can't not be in the technology game like everyone uses technology it's just it's very deeply enmeshed in our day-to-day life as we're proving right now on this call it's also eating the institutions we have used to organize ourselves across history for hundreds of years like the dominant institution of the world now faces digital disruption by bitcoin and um i don't know i would say for deeper thoughts on that come check out the series i'm writing it covers the sovereign individual but also uh putting some of my my own lens on it and also things i've learned in these these conversations like with sailor and others about how they see the future playing out when you think back to what does happen when that kind of status uh environment fails or or at least drastically reduces in its power and kind of reach um soviet russia i think you mentioned feudalism what happened in those situations or what are the main takeaways that people should know about yeah the first thing that tends to happen is um governments get increasingly desperate right they're basically so you can think of inflation by the way as a slow implicit default of government they have they have cash are they written checks that they can't cash effectively so they're defaulting on this debt in slow motion by inflating the currency so they'll print more currency to pay their bills and they they externalize the cost of that money printing onto society so by printing money or engaging in quantitative easing the central bank is harvesting the economic surplus of the of entrepreneurs of the productive economy they're not infusing any new wealth into the economy printing like creating a new paper certificate that we call the dollar that is not value that is just a claim on the savings that we've created in the world the buildings the equipment the time the knowledge all of that uh late stage governments tend to be printing faster and faster because this thing as we we've touched on previously the fiat currency complex being a debt based money it requires steadily more collateral and leverage to remain sustainable right there's this uh increasing appetite for interest basically to be siphoned off the productive economy and back to the owners uh of the debt and this thing and all of the costs of that are externalized through inflation so it tends to accelerate uh when we look at something like weimar germany this has really perverse consequences actually because people think they're getting wildly rich they their homes are becoming more valuable their businesses are increasing in value so all assets denominated in the failing currency are becoming nominally more expensive so it has this deceptive quality of thinking you're becoming wealthy when in fact it's the currency that is failing um so i would say that tends to be one thing another thing that that happens which i would argue we're seeing today is that since nothing holds value there's no sound store value people become uh their time preferences increase a lot which means they become much more uh likely to gamble and engage in super risky ventures um they you know gambling in the stock market was a big thing in weimar germany i would say that's what we're seeing today in a lot of ways there's a lot of um you know not not to knock on the wall street that's group i think they've done an amazing thing by proving uh a d the effectiveness of a decentralized organization versus centralized organizations but there's a lot of gambling there too right it's people are just getting easy money borrowing easy money and they're just betting on stock prices going up forever so um increased speculation in in stock and other other asset categories um and then see the currency is getting deprecated all the while and then what finally happens is that people try to get their money out of the country right when the the writing is clearly on the wall for everyone um that this thing's going into hyperinflation people either try to get trade their money for consumable or durable goods things that can't be printed things that have uh an energy intensity or require sacrifice to produce whether this is food or buildings or anything that that's a real capital asset or they try to get their money actually out of the country and transmit it to somewhat to a jurisdiction with a more uh more stable monetary regime and the the endgame of that too like we saw in with ussr is that the whole this giant nation was held together basically by its ability to confiscate wealth from all its uh citizens when that mechanism breaks down uh the country tends to fragment so so government shrinks things relocalize in the case of the ussr there are a lot of these countries that end in stan that were formerly conquered that became independent countries again so the the overarching theme is that as the nation-state model is bankrupted it tends to fragment um into smaller pieces and um you know ultimately relocalizes government when you think through um what would happen in the united states is it a replica of uh those situations that you just described or do you think that the creation and uh kind of pervasiveness of technology uh would actually change maybe what happens in the analog uh geography-based world and actually there would be more of a fragmentation a coalescing uh in kind of a digital world like how do you look at soviet russia uh it's really hard to kind of understand what would have happened if there was the internet and kind of when all that played out but any thoughts there of comparing the uh uh the digital world and um and kind of the analog world yeah i think the big difference here is that again market actors in those situations would try to leave one bad situation to get into a less bad situation so to get out of uh maybe the russian rule and into the u.s dollar for instance um there was no true exit option there was no way out of fiat currency because all or we could say monopolized currencies they haven't always been fiat but they've always been centrally controlled and planned you could only move from one centrally planned monetary regime to another it's kind of your best hope but bitcoin is it's a radically new frontier because it is this unstoppable free market money right you think of it think of it as a global digital non-state based money for a for a non-state economy right that we can actually enter this digital domain that no nation state has dominion over um and actually the individual is is empowered maximally to with options basically you have optionality and optionality is freedom that you can now move your capital anywhere in the world you can custody it in any number of high security schemas and whatnot so how this plays out in say maybe the united states is i think you could see a similar fragmentation uh i believe actually in the texas state constitution they have the right to succeed from the united states based on a number of parameters and someone can fact-checking on that it's been a few years since i've looked at it but when centralized power structures are getting you know defunded so to speak as savers are moving into bitcoin they lose relevance in many ways and so i think you would see especially powers that are uh we could say say governments that are self-sufficient like a texas has its own energy grid it's got coastal access it's you know relatively large geography you'd see something like that maybe take place first maybe texas could actually uh break off in the u.s but in the long run people just start to self-organize it it moves away from this top-down monopolistic command-and-control economy where you're told what to do right you just how many of us have consensually negotiated our tax treaties with the government right we don't we get a bill that says this is what you pay these are the services you get you're welcome right you don't get any say-so in that that commercial interaction but or we will or we will send armed men to put you in jail exactly right um and sailor had a great analogy for this too he's saying that everyone in miami is very polite because most people carry firearms right so even a sweet old lady like you're going to be extra polite to everyone because you never know who's packing heat so this the the option to do a thing can be more powerful than actually doing the thing it doesn't mean people are running around miami shooting each other necessarily but just the fact that they possibly could tends to make people uh accord uh a little more nicely than they might otherwise so bitcoin restores this symmetry of power between the individual and government or institutions um in a way that we've never seen before it really is something radically new um and yeah i think that we'll we already see so much self-organization in the digital age right we the groups like uh these clubhouse chats i don't know if you've been involved a few of those recently like these are people just coalescing around an idea talking about it forming their own independent networks removing information and capital now through these apps and electronic media through digital media it's like in the property rights basically which by the way that's what government's original intent was right it was to preserve the peace in the local environment protect the property so people could trade and people could resolve any uh disputes about private property non-violently they could have recourse to the courts so they didn't have to go and you know raise pitchforks against one another well now property rights in bitcoin are preserved by the mining network right it's it's disrupted the need the original need for government so government just like gold is being disrupted from its original principles of money like the five properties it's bitcoin's more divisible durable recognizable portable scarce and gold that's why it's out competing it bitcoin better secures property rights again in a if we look at a tool or socioeconomic structure as being the the system or idea that best allocates energy across time so how do we spend the least energy possible towards satisfying this aim the aim of property rights just being that whatever fruits of my labor that i sacrifice to obtain something i can preserve that in something so if it's a physical item i actually need a little bubble of uh protection around me otherwise people can just come and steal your stuff and you don't have police to call you don't have courts etc etc but with bitcoin we have this property right that's you know it's metaphysical it's just digital information uh must much more cost effective to secure and it exists independent of the courts of the monopoly on violence of government entirely so now that people are able to do this people are empowered with all with all of this optionality to communicate and move capital uh across these self-organizing digital networks it just obfuscates the need for nation-state organization and private property protection so you know my my high level thesis on all of this because again it's hard to get it all into words is that the world is becoming a video game basically is it all more and more of our relationships and important functions in life are mediated by digital technology and screens um you know dating is a video game now people are swiping left swiping right all of these important things that we used to need to do many of the important things we used to have to do in person we can now do digitally and that just decreases the need for the analog institutions that that provided security pre-digital in the digital age so and who knows like you know the tech is just getting started by the way like we're still hamstrung i think in many ways that we need a laptop or we need a smartphone what happens when augmented reality or virtual reality really becomes more mainstream and they were able to overlay the real world with digital data either you know the whole idea of google glass was to get the tech out of the way so the more the hardware gets out of the way i think the more we accelerate this transition into sovereignism or or post-state capitalism whatever you want to call it yeah it's fascinating to me to kind of think through this because i think you you said it perfectly nobody actually knows right um before uh before we wrap up is there anything specific uh that you can identify that uh other than central bank starting to buy bitcoin that you would say is hey this is an inflection point or a milestone that i've got my eye on i don't know when it happens but when it happens people will be able to say that is you know an important moment um yeah definitely you know touched on the central bank buying it i think i'll say this about the pandemic situation um actually the book sovereign individual has been pressured in a lot of ways and a pandemic was actually predicted in that book to be used as one of the main state responses to social upheaval and immediately before the pandemic we had unprecedented millions worldwide protesting their government there's still a lot of it going on today um so i don't i don't know you know that's the timing of that is quite interesting to me either that and i'm not saying necessarily that the a lot of people call it the scam dimmick like i don't know that it was purely manufactured or created but the state response to the virus has certainly been many orders of magnitude uh more severe than prior health scares you know we had the swine flu and all these things before that government didn't react in this way so there seems to be mixed motives let's say of this this latest uh response um i think you know another breakthrough will be when we see a lot of state like so there for instance in north america um a lot of the energy infrastructure specifically on like related to natural gas is just wasted today so that wasted that flared natural gas could be capped with bitcoin mine and monetize instead so bitcoin as we've discussed previously it provides this energy buyer of last resort i think states too will be really forced to embrace bitcoin for that reason because again they're suffering financially as well they're trying to print more money to stay ahead of um stay ahead of their own bad decision making historically and i think that they kind of get forced further along the risk spectrum as well that they need to start mining bitcoin and that states that control uh these energy sources or energy producers that would otherwise not that otherwise would not have a way to monetize that energy will now be forced to start monetizing i think that could become an inflection point for bitcoin that when you actually see um you know large territories monetizing uh unused or underused energy sources into bitcoin um then it's only a step functional way of those producers themselves accepting payment in bitcoin holding bitcoin you've now reduced the selling pressure on bitcoin again because miners which today are the source of most most of the uh open market selling to cover their energy bills and operational expenditures that source of selling goes away so now you put even more upward pressure on the price um and you know another point that was made recently was a lot of these miners that are going public they'll go into capital markets and borrow at bar against their balance sheet at 0 or 50 or maybe 100 basis points and just pay their bills with with leverage with debt capital leverage level up and take uh pay that bills with debt capital such that they can hold more that bitcoin on the balance sheet so i think there's a lot of these avenues that are going to really constrict the selling of bitcoin by miners over time and i think those will be major inflection points um because i'll just put so much upward pressure on the bitcoin price that it will you know potentially push us into this hyper bitcoinization type scenario i am uh i am on uh the same wavelength as you are as uh this is all gonna happen it's a foregone conclusion uh it's just a matter of how aggressively it happens uh and ultimately what that timeline looks like but as we have learned those who have the kind of longest term horizon uh tend to get the best rewards uh in this game and so i think you've done a fantastic job of articulating that over uh over the years and continuing to do so now um for people who want to uh go watch the sailor series uh or watch some of the other series that you've coming out where can we send them to uh to find you on the internet or find those uh pieces of content that you're putting out yeah um and thanks for having me i think you know you're doing a great job with this platform you've definitely pioneered a lot of the space yourself and bringing more mass awareness to bitcoin and and this mass transformational wave of innovation that we're we're living through so thanks for that um my twitter page is where i post links to most of my work my last name is breedlove so my twitter handle is at read love22 b-r-e-d-l-o-v-e 2-2 the show is called the what is money show uh and i named it that by the way because as we know describing bitcoin in a few words especially for someone that doesn't understand it is not very easy there's a lot to unpack there but i found that this question what is money like if you can get someone just asking themselves that question seriously and researching it uh diligently that they'll stumble on kind of the gold and bitcoin thesis at some point so i'm trying to kind of incept sort of like inception that movie where you're just planning this little seed getting people to ask themselves the question what is money and i think it just uh continues to uncover a lot of interesting truth for me as well it's just a it's a really deep question seemingly simple but actually really deep um so you can that's on uh both youtube so it's the what is money show you can search by my name on youtube we also have a website for it which is what is moneypodcast.com um we just again released the sailor series we're almost done with that one uh booth series will be next uh and then i've got a big big cast for the first 10 long form series um yeah that's it that's me all right at breedlove22 on uh twitter right yes awesome man listen robert i i really really enjoy talking to you every time we will definitely do this again in the future so thanks so much for doing it and uh hopefully everyone learned assumptions i hope so thanks again for having me

Channel: Anthony Pompliano

Views: 75,786

Keywords: bitcoin, btc, podcast, pomp, anthony pompliano, crypto, cryptocurrency, blockchain, finance, investing, fintech, tech, technology, investing news, financial news, btc price, bitcoin price, markets, bitcoin news, media, pomp podcast

Id: VTCzVWgJJWs

Length: 69min 36sec (4176 seconds)

Published: Mon Mar 01 2021

Reddit Comments

[u/WestCoastAus]

If everyone has more money (because they all held Bitcoin), will prices go up?