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We're getting closer to an inflection point.

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There's no escape valve when it's globally coordinated.

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This is it.

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And the escape valve means it deflates.

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And it can't deflate.

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Or it's over.

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The commodity trend is an opting out of the credit game.

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If you can manipulate the paper, you can manipulate the allocation.

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These crises happen when the reality departs from what's on paper.

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Then that'll cause like a panic.

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Are you saying you think this could be the start of a financial crisis?

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We've seen stressors.

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We've seen people pulling money out.

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Nobody wants to admit reality for systemic reasons.

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Someone's going to have to print the difference.

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Debt's everywhere.

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It's cracking in all these different areas.

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If there's going to be printing, it's going to be the hardest printing they've ever done.

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There isn't much of another option.

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Nuclear options, aggression, fourth turning type vibes.

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Really what's happening is we're restructuring how we organize.

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Where are these technology investors and gold bugs going to be rotating once they feel like

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they're really getting to peak euphoria?

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I think Bitcoin's a very strong answer for that.

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And everything about the thesis for Bitcoin is playing out perfectly.

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I think it comes from Sovereign's next.

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I just think we're going to start seeing more and more headlines.

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Once Bitcoin gets into the $5 trillion market cap range,

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that could be the suddenly moment.

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It's a sweet background.

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The space, man.

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The space.

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This place is cool.

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It is cool.

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This is the best Bitcoin citadel.

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I don't want to say it, but it's up there.

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I like the park in Nashville.

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parks all right just been at presidio that's real nice the what makes us different well we're a 6 000

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square foot building and well what's really cool about this organization is it was completely just

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like a bottom-up thing it was our bit devs that got big and we were like what if we try to get

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a place and everybody started like pitching in work and pitching in money built up a balance

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she found this place grew our member base large enough and and it's cool because everybody like

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contributes in all these different ways and that's basically led to us having our own self-hosted

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website like we have a server running downstairs 24 7 we have our own forum running on it

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we have a gpu rack for self-hosting ai models so we can run our own llms here locally

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um not cheap but we have like the technical expertise of our members to do that

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and we heat the floors with Bitcoin miners.

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We have a hot tub in the back

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heated with Bitcoin miners.

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Yeah, I saw that.

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That's cool.

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A bunch of shit that we've created.

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It's a nice hot tub too.

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I remember being in Nashville

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for their energy summit

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and that was the first time I'd seen that.

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They had a hot tub there

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where it was heated by miners.

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It was snowing.

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It was like the worst weather

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Nashville had had in years

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and there's like a load of Bitcoin

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and sat in a hot tub outside the park.

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It's kind of fucking awesome.

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But that one's nice.

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Yeah, this is like a full-blown,

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real hot tub heated with Bitcoin miners

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and we just like hang out at it

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in the middle of the day.

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we'll do a quick, quick little dip. That's awesome. Do you know what's funny about like

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the Bitcoin spaces is they had like a real moment after COVID where everyone was like migrating from

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New York and California. And it was like people going to Austin and Nashville. And then it feels

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like people have slowly moved away back to like maybe where they were living before or whatever.

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And with like traveling to make the show, it makes it a lot harder because it used to be like

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you'd go to Nashville and everyone lived in Nashville. But like now, like I've just done a

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day in LA, day in San Francisco, I'm here for two days and I'm going somewhere else. Like,

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I just need the Bitcoin communities to build out again. Well, it's funny from your perspective as

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a podcaster too, because how many other, like how many other areas could you be a podcaster in

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and have a local community hub that exists in a city for the people that you're generally talking

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to? Yeah. I don't know. Like if you're into tech, I guess you've got the value, like Silicon Valley.

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You have Silicon Valley, but it's like, if you go to New York and you're like, I want to,

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you know, interview X people.

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That's where all the finance guys are.

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Yeah, yeah.

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But like, you can go to like a company,

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but there's not like community organizations.

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No, that's true.

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You know?

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Yeah.

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That's what's cool.

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It's just like, here's the place

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that all the people I want to interview

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are probably hanging out at anyways.

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Yeah.

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I think what PubKey do is really cool

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in the sense that they've got something else

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that's not just like co-working, hangout.

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Like, I think,

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do you think these are going to be sustainable long-term?

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It depends.

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For us and anybody listening,

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we need sponsors and donations. That always helps us. Are you for profit? No. So we've filed for our

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federal nonprofit status. We're expecting that to go through within a few months.

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That was the decision we chose because we were different. Like when we started this thing,

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you know, we, I, you know, we were just like, we want it to be cool. We don't, we don't care about

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it being, you know, some massive new thing. We, we want to have smart people working here and like

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big projects to come. But at the end of the day, we just want it to be something that's like truly

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community member run. Yeah, that was a cool thing about it. Nobody controls it. And we reelect our

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board every year. So like that nonprofit, you know, bottom up decentralized type approach to this,

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I think it's what makes us like different. The for profit model is cool, too. I don't know if

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it's the most profitable for profit model in the world. But it is a way that I think has been

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working for now. The way that we kind of viewed it is the way that we run things around here,

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we just run things like a nonprofit.

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Cause we did have that question.

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We're like, okay,

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if we were to go the for-profit route

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with an organization like this,

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how would we do it?

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And the answer we quickly got to is like,

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how do we even divide up who owns this?

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And we're just like, I'm like,

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I never want to even go that direction.

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Cause it's like the community on it really.

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Right.

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It's just like, how much, how much do I deserve?

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How much do you deserve?

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And we're kind of just like, that doesn't matter.

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And the second that becomes a part of this,

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it's going to ruin what we have.

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Yeah.

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Like we don't even want to have those conversations.

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Yeah.

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it's um when i first heard about this before i'd come and i knew it was like you doing it and tyler

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and i was like this is just gonna be like a gross frat house but it's actually really nice it's

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yeah it's really nice yeah it's funny it's got a nice woman's touch in here yeah it does it's not

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like your house right it's not like where i live yeah where eric lives is basically just a mattress

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on the floor a really nice area around my mattress on the floor yeah it's a very nice house yeah um

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anyway man we should get into it uh the world's going fucking crazy right now it's going crazy

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What's your read on everything?

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Because I've been doing a lot of shows.

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I think the Iran war has changed everything

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when it comes to macro stuff.

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I just did a show with Nick Bartier,

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and he was like,

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you kind of have to throw your models out

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and reassess the entire thing.

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How are you reassessing things now?

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I think one way I would guess I would push back on that

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is I feel like,

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I'm not sure exactly what Nick said,

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but we've seen a lot of these variables with long-term.

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If we were to rewind back to 2019,

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Bitcoin community 2020, 2021 periods, kind of right in there.

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Under when, you know, when the Biden administration sanctioned Russia, you know, that's when

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everybody's like, okay, this whole multipolarity thesis that wasn't that popularized yet had

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existed within people that were very focused on geopolitics, wasn't that popularized.

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But when Biden cut off Russia from the Swift system, then it was like every blogger in the world was like, okay, now we're fracturing into this multipolar world.

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Here's the implications of that.

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And the implications where people are going to own more commodities.

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So I think from that perspective, like high level broad strokes, what we're seeing today, what is it?

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Fracturing multipolar world, people are buying more commodities.

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So I don't think structurally a lot of those things have changed.

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But yeah, obviously a lot's changed this year.

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The commodity shift, like with gold obviously being like the front runner of that,

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happened before this though.

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And like since this war kicked off,

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like the interesting part is that they're basically talking to Russia now

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being like, maybe you can come back in.

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Right.

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Was gold run up basically the market predicting this more chaotic time?

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Or do you think they're sort of separate events?

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Yeah, it's interesting.

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um i to start i'll give a cop-out answer of saying that not a cop-out answer i just think

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the reality is like people always want to associate a micro market trend with a broader price uh okay

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what are you calling a micro market trend there so so what i'm saying is that how do we attribute

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the gold rally to like one specific thing right it's a confluence of a lot of factors that have

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been driving this. And I think it's the long-term trends where, like, let's go back further than

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this gold trend last year. Let's go back to, you know, post-GFC. And we've seen like a structural

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increase in commodity ownership across major sovereign entities globally since that point in

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time. We've seen a structural reduction in US treasuries in a lot of different, you know,

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categories for FX settlement, different trading relationships, you know, reserve holdings.

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That's all, that's all been happening. It's a question of like, what's kind of the inflection

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point for a lot of it. And then last year we started to see a run up in gold. And like most

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people say that that's attributed to like, we've, we've witnessed that central banks and, you know,

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sovereigns around the world are buying more of it. Um, so is it, we predicted the war or is it that,

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um trump is an aggressor yeah in a lot of different ways and people which is kind of the

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same thing right exactly people so like we can categorically assume some of these things by the

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political behavior that we're seeing from people and and i think that you know that's a lot of it

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it's really just we're getting closer to an inflection point um and and we want to own

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commodities and that's that's been a that's historically um been the case you know when

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Zoltan Pozar was writing about this and he had all these viral posts going off when he was at

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Credit Suisse talking about some of these fracturing trends when we were having like

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supply chain shocks, et cetera, et cetera. You know, that was the thesis. It remains today.

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I think that it's simply just getting more exacerbated at this point in time.

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So like the major structural trends happening this year, like we had the Japanese credit crisis

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right at the beginning, but when did that start? That started in 2024.

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So that was known information, right?

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People were like, okay, there's a regime change in Japan.

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We're not like this net buyer.

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We're not like the US's treasury bitch basically anymore.

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And that's what it always was.

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And that structurally changed their economy to where they were the largest holder of treasury, still are.

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But the relationship with like new demand has changed and they've been tapering that off.

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Bitcoin is.

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as you know with fiat money constantly debasing wealth preservation isn't optional that's why i

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00:10:45,320 --> 00:10:49,700
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234
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and whether you're at home or traveling,

235
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it's a great place to keep in touch with Bitcoiners

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from all over the world.

237
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I've been using Club Orange since it was Orange Pill app

238
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and it really is awesome.

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So if you're on there, drop me a DM and say hi.

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241
00:12:40,100 --> 00:12:41,760
just search for Club Orange on your app store

242
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or go to cluborange.org.

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Just from a total left-curve take on the Japan stuff,

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the idea of the carry trade,

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which was, you know, worked for years and years and years,

246
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how can that happen?

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Like, how can that keep going forever?

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That doesn't seem,

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that seems like the market has to fill that gap at some point.

250
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Sure, sure.

251
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It's a question.

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And that's what happened with Japan.

253
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Why did they shift?

254
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inflation finally started to become persistently higher for them yeah and that was always the idea

255
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was that like uh i think where people go wrong is they'll look at an economy in isolation

256
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and they'll say like okay if this variable happens and we would expect this other variable to happen

257
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you know we would expect inflation to emerge if they keep just like printing and printing money

258
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and you know buying up a bunch of assets with it and keeping interest rates artificially low

259
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but it comes down to that's just one variable it comes down to what else is impact in this country

260
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um why would we have suppressed prices and there's a lot of variables for like the type

261
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of economy they are what their outputs are where they can kind of export some of those

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characteristics that normally would happen domestically now they're happening in a foreign

263
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way um so like i think like the left curve take on japan is really just carry trade existed because

264
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inflation didn't react to this because of the nature of their economy. And because of that,

265
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they were the perfect person to be the US Treasury buyer for a long period of time.

266
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And now that that's starting to shift, we are getting into this environment where it's like,

267
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okay, well, where is the demand for the Treasury is going to come from? And then when we start to

268
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see cracks in the market and we say, okay, well, what's going to be happening next? And we start

269
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to see persistent inflation pressures on them as well. And we start to see, you know, they're just

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as dependent on commodities as the U.S. is. And that's not good for them in an inflationary

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environment. So this commodity shock that we're kind of witnessing from the war, the way that I

272
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kind of look at this in like a simple way is just there's like white collar economies and then

273
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there's blue collar economies and the blue collar economies are winning for a lot of reasons other

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than like commodities are good. Um, AI plays into that as well. And they're not subject to the same,

275
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um, creative destruction that I think can emerge from some of that. So one of the things that I'm

276
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not quite sure of is what this Iran war means for the petrodollar, because like, if you're talking

277
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about like buyers of treasuries, then that's one of the large buyers of treasuries right there.

278
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Maybe it's worth like explaining exactly what the petrodollar system is. And if you think this

279
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have an impact on that? Like, do you think this is going to push people to start settling oil in,

280
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you know, Chinese one or whatever? Yeah. Um, petrodollar system is really simply put, um,

281
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and it, and I think it's helpful to understand it in a broader context of what was happening,

282
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but, you know, as the, when the U S kind of emerged post-World War one is like a, a de facto,

283
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a global hegemon for the dollar, but not de jour post-World War two, we were de jour,

284
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Or that period of time is one where the gold leaving England, coming to the US, making us much stronger, a capitalist economy, technological innovation, rapid growth, all these variables that made us a very wealthy country.

285
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And then our currency gets more and more entrenched because we proved to be a dominant global military power.

286
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And people are like, okay, well, we kind of become this paternalistic state to take care of the world.

287
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And we came up with different ways where the fundamental trait is if you guys, we're going to have the strongest military in the world because we have the wealth, the capability, expertise, et cetera, to do this.

288
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because of freedom and we built a capitalistic economy and we protected property rights.

289
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Here we are. We're powerful now. We're going to protect all the trade routes. We're going to have

290
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the strongest military in the world. In exchange, you guys conduct trade in our currency. That's

291
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the broad trend. And then there's different ways that that has existed throughout the world. And

292
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a lot of contract denomination happens outside of oil in the US dollar, in pretty much everything

293
00:17:01,740 --> 00:17:02,980
in the most dominant form.

294
00:17:03,240 --> 00:17:05,220
The question of how we measure that

295
00:17:05,220 --> 00:17:08,920
comes through different variables,

296
00:17:09,040 --> 00:17:10,620
like foreign exchange, trade volumes,

297
00:17:10,820 --> 00:17:13,780
contract denominations, credit market denominations.

298
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And then we've watched that kind of like structurally decline.

299
00:17:19,120 --> 00:17:21,920
Now that the largest you could argue in terms of trade

300
00:17:21,920 --> 00:17:26,820
is petroleum products and that fundamental commodity.

301
00:17:27,240 --> 00:17:29,200
And then a lot of that's coming from

302
00:17:29,200 --> 00:17:30,620
and happening through the Middle East.

303
00:17:30,620 --> 00:17:36,220
and we through the petrodollar have entrenched that system with an agreement with saudi arabia

304
00:17:36,220 --> 00:17:41,580
however many decades ago and say you know we're going to conduct trade in the u.s dollar and then

305
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the u.s says we're going to protect those routes and ensure that you know um opec etc is going to

306
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get the things they want to allow oil trade to to work for the world and and that's something that's

307
00:17:53,080 --> 00:17:58,640
good it's deeply entrenched the dollar i think that you know when we're fighting wars in the

308
00:17:58,640 --> 00:18:06,220
Middle East, it's ultimately to protect our interests within that system. And I think that's

309
00:18:06,220 --> 00:18:15,900
what's overlooked when people think about geopolitics. You know, there's a really good

310
00:18:15,900 --> 00:18:19,040
book. I've mentioned this a few times. I think I mentioned it on this podcast before, but there's

311
00:18:19,040 --> 00:18:23,820
a really good book called Geopolitical Alpha by Marco Papich, which is a great way of like getting

312
00:18:23,820 --> 00:18:27,800
a framework for how to like say, I'm an investor and I want to think about geopolitics and apply

313
00:18:27,800 --> 00:18:35,080
what I think in one of the kind of fallacies that I think a lot of people fall into when they're

314
00:18:35,080 --> 00:18:39,240
discussing geopolitics think people always think in terms of what other countries want and like

315
00:18:39,240 --> 00:18:44,500
that's good that's the first step but you know you don't make decisions based off just what you want

316
00:18:44,500 --> 00:18:49,160
I want a lot of things it's what you can actually it's what you can actually get which means what

317
00:18:49,160 --> 00:18:53,300
are you constrained by and if you can understand what people want and what they're constrained by

318
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then you have like a reasonable framework for trying to think through okay here's here's what

319
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actually could be happening here. And here's what we could expect other countries to be doing.

320
00:19:02,540 --> 00:19:08,580
And I think that in Marco, he was one of the guys who like popularized this like

321
00:19:08,580 --> 00:19:14,700
multipolarity concept within geopolitics. When we kind of apply this framework of like

322
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what different countries are constrained by and what the US is constrained by, I think it becomes

323
00:19:21,980 --> 00:19:28,160
a little bit, you know, clear to people that we have some economies in the world that have

324
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been playing this commodity game for a period of time. And then we have some economies in the world

325
00:19:32,920 --> 00:19:39,980
who've been playing this credit game for a period of time. So the constraints to the U.S. is not

326
00:19:39,980 --> 00:19:47,020
really that like we don't have enough guns. What's really hard is to point your guns at markets and

327
00:19:47,020 --> 00:19:54,540
say make treasuries more valuable you know that that's a constraint for us now and i think that

328
00:19:55,740 --> 00:20:03,340
you know this why is this a constraint for us it's a constraint because you know as many people

329
00:20:03,340 --> 00:20:10,300
who listen to this podcast probably are well aware of when nixon repealed the gold standard in 1971

330
00:20:10,300 --> 00:20:16,460
and we had the famous nixon shock and we went on to a fiat denominate system and since we've had

331
00:20:16,460 --> 00:20:22,320
globally coordinated central banking policy that's expanded debt through governments and

332
00:20:22,320 --> 00:20:36,253
and more broadly in private systems as well to the largest proportion against gdp it been in history um so debts at all highs And for the first time what novel we had debt be very high before proportional to GDP

333
00:20:36,493 --> 00:20:38,893
But for the first time, it's globally coordinated.

334
00:20:39,213 --> 00:20:40,112
It's universal.

335
00:20:40,572 --> 00:20:43,172
And that means that there's no escape valve

336
00:20:43,172 --> 00:20:44,172
when it's globally coordinated.

337
00:20:44,293 --> 00:20:44,973
This is it.

338
00:20:45,053 --> 00:20:47,033
And the escape valve means it deflates.

339
00:20:47,932 --> 00:20:50,652
And it can't deflate or it's over.

340
00:20:50,753 --> 00:20:52,013
And it can't deflate or it's over.

341
00:20:52,453 --> 00:20:54,172
And so that's what's really unique is

342
00:20:54,172 --> 00:20:59,652
you could play this game where it's like, um, before it's just like, okay, well it can have

343
00:20:59,652 --> 00:21:03,213
an escape valve and the value can move somewhere else. But now it's just like, we're talking about

344
00:21:03,213 --> 00:21:07,233
the world here. So that's, that's, what's different. That's what makes it so much bigger.

345
00:21:07,733 --> 00:21:15,152
And, um, and it's similar to like, you, you can use a similar argument, um, however, for dollar

346
00:21:15,152 --> 00:21:22,912
dominance. And, and I think that that's one of like when people are like, okay, well, you know,

347
00:21:22,912 --> 00:21:26,793
treasuries have to go bust. Look at what the government's doing. Look at our federal deficit

348
00:21:26,793 --> 00:21:31,053
spending, et cetera. The question's like, okay, well, if you think about it as like a simple

349
00:21:31,053 --> 00:21:37,993
market and you say, what's the demand for US treasuries? Where do they exist? The reality is,

350
00:21:38,013 --> 00:21:43,973
is we haven't consumed that entire market. So if there were, say, for some reason, some large

351
00:21:43,973 --> 00:21:47,873
potential buyer of treasuries, maybe it's somebody like a Russia where we say, okay, we want to let

352
00:21:47,873 --> 00:21:53,733
you back in. And then that all of a sudden unlocks quite a bit more demand for our debt,

353
00:21:53,832 --> 00:21:58,112
unless we've consumed that entire market. But would they ever come back in size knowing that

354
00:21:58,112 --> 00:22:02,013
at any point? Probably not. They can just be shut off. Probably not. I don't know what the

355
00:22:02,013 --> 00:22:07,033
inflection point is, right? But what I'm saying is more that until we've consumed, like until the

356
00:22:07,033 --> 00:22:12,753
entire world owns US Treasury, the system can expand around demand for it. Like that variable

357
00:22:12,753 --> 00:22:18,152
still exists, which means that we can still export our own inflation to other countries.

358
00:22:18,953 --> 00:22:23,953
And so that's kind of like the other side, I guess, of it, is that that isn't fully consumed

359
00:22:23,953 --> 00:22:29,533
at one dimension of it. But the reality of that, everybody's kind of acting in accordance with this

360
00:22:29,533 --> 00:22:36,133
new system that's highly levered, the most levered in history, that hasn't gone away.

361
00:22:36,133 --> 00:22:40,453
So ever since we've kind of gone this direction, we've expanded credit to these levels.

362
00:22:42,753 --> 00:22:58,553
Now we're in a position where the only alternative for people is, you know, some sort of alternative system playing these credit games.

363
00:22:58,873 --> 00:23:02,033
And that's where the commodity trend has come in.

364
00:23:02,153 --> 00:23:06,112
The commodity trend is an opting out of the credit game.

365
00:23:06,693 --> 00:23:09,713
And proportionately so.

366
00:23:09,713 --> 00:23:18,672
So like tying this back to gold running up last year, like structurally, that's what we're seeing is just a greater inflection point in people playing the commodity game.

367
00:23:20,693 --> 00:23:24,332
To be expected, you know, this has been talked about for decades.

368
00:23:24,653 --> 00:23:27,753
Everybody's just been waiting for what is the when World War Three?

369
00:23:28,293 --> 00:23:29,672
What's the inflection point?

370
00:23:30,193 --> 00:23:33,412
When people get desperate, they have to do things like this.

371
00:23:33,553 --> 00:23:37,153
And and we have to protect these types of systems.

372
00:23:37,153 --> 00:23:42,813
So there's nothing I would say that at a high level has been necessarily surprising.

373
00:23:44,592 --> 00:23:48,253
It's kind of been an eventuality is the way I viewed a lot of this.

374
00:23:48,493 --> 00:23:50,432
But maybe Trump sped that timeline up a little bit.

375
00:23:51,112 --> 00:23:51,513
Exactly.

376
00:23:51,672 --> 00:23:54,053
Trump can act as like a catalyst with a lot of this.

377
00:23:54,092 --> 00:23:57,193
And then there's arguments for, you know, how he's even able to handle some of it.

378
00:23:57,332 --> 00:24:01,893
But with the debt, like you're saying this is like a global issue now and there's no escape valve.

379
00:24:02,213 --> 00:24:03,553
Like what options do they have?

380
00:24:03,553 --> 00:24:07,893
So if that all deflates, the system breaks down, it's over.

381
00:24:08,332 --> 00:24:10,533
They can try and grow their way out of debt.

382
00:24:11,273 --> 00:24:12,932
Maybe AI is a catalyst in that.

383
00:24:13,352 --> 00:24:15,793
Or I guess they can inflate away the debt.

384
00:24:15,912 --> 00:24:17,813
Are they basically the only options they have?

385
00:24:19,612 --> 00:24:23,033
Because defaulting on it, the game's over as well, right?

386
00:24:23,033 --> 00:24:23,693
Yeah, 100%.

387
00:24:23,693 --> 00:24:25,352
It's like defaulting is just like,

388
00:24:26,953 --> 00:24:31,633
they're playing a game where the costs

389
00:24:31,633 --> 00:24:33,273
to what they're doing aren't their own.

390
00:24:33,553 --> 00:24:42,172
So that means that it's like, you know, it's like you're playing a video game and your character dies and like you don't die.

391
00:24:42,332 --> 00:24:44,832
Like that's kind of the game they're playing where.

392
00:24:44,973 --> 00:24:46,832
So you take that to the end.

393
00:24:46,932 --> 00:24:50,373
You know, you're going to take as much risk with that character as you want for the most part.

394
00:24:50,373 --> 00:24:53,513
Like obviously it impacts you because you lose the game and you don't want that.

395
00:24:53,513 --> 00:24:59,733
but um i i think because there's a misalignment of the consequences of their decision making

396
00:24:59,733 --> 00:25:05,852
that uh that that will ultimately lead them to taking on you know as much risk as possible to

397
00:25:05,852 --> 00:25:10,612
try to beat the game basically do you put any real probability on them actually being able to grow

398
00:25:10,612 --> 00:25:17,672
themselves out of this debt yeah okay so i guess i'll let's get into the ai question

399
00:25:17,672 --> 00:25:26,553
so but before that i think like to recap it's just like you know us japan and then

400
00:25:26,553 --> 00:25:35,572
iran and then credit fracturing that's stemming from all of this um and we think about all the

401
00:25:35,572 --> 00:25:39,693
credit that exists we think about consumer credit we think about job losses this ties into the ai

402
00:25:39,693 --> 00:25:46,453
piece um you know the job loss report in like february of like 90 000 or whatever it was

403
00:25:46,453 --> 00:25:53,013
that was big. The block announcement, that surprised me. I was of the mindset

404
00:25:53,013 --> 00:25:57,153
that when that announcement happened, that we would start seeing this in about a year.

405
00:25:57,612 --> 00:26:03,313
So to be fair, and I think this is one of those, well, actually, but I think their headcount was

406
00:26:03,313 --> 00:26:09,293
huge. I think it was probably, this was like an excuse to cut headcount. Although I think it also

407
00:26:09,293 --> 00:26:12,912
very clearly shows the trend. I think there's kind of, there's two sides of that story.

408
00:26:12,912 --> 00:26:19,893
Yeah. Well, the reason I think that I agree that there's like the actually like they were bloated on headcount type argument.

409
00:26:20,533 --> 00:26:22,213
Maybe they were, maybe they weren't.

410
00:26:22,412 --> 00:26:26,993
Like I think it is a little tricky to totally say, but regardless, like.

411
00:26:27,273 --> 00:26:30,313
It's quite a positive spin to put on it for the market that you're actually getting rid of these people.

412
00:26:30,533 --> 00:26:32,133
Exactly my point. Exactly my point.

413
00:26:32,193 --> 00:26:33,153
It's a positive spin for the market.

414
00:26:33,273 --> 00:26:37,852
Everybody's saying you got Mark Andreessen running around like, oh, no, we're not eliminating jobs.

415
00:26:37,893 --> 00:26:39,072
We're eliminating tasks.

416
00:26:39,313 --> 00:26:39,473
Yeah.

417
00:26:39,473 --> 00:26:41,153
It's like, no, look at the numbers.

418
00:26:41,693 --> 00:26:43,352
And they're just going to get worse.

419
00:26:43,352 --> 00:26:47,092
Like, because jobs emerge as contracts

420
00:26:47,092 --> 00:26:48,912
and employers don't care as much.

421
00:26:49,053 --> 00:26:50,953
Like employers want to eliminate contracts

422
00:26:50,953 --> 00:26:52,153
because contracts cost money.

423
00:26:52,253 --> 00:26:52,453
Yeah.

424
00:26:52,832 --> 00:26:55,713
And I don't see how we argue against that.

425
00:26:55,753 --> 00:26:57,273
So yeah, there's definitely a lot of people

426
00:26:57,273 --> 00:26:58,893
talking out of both sides of their mouth on this.

427
00:26:59,013 --> 00:27:00,213
But the interesting piece of that

428
00:27:00,213 --> 00:27:02,412
is that like for every company now in Silicon Valley,

429
00:27:02,473 --> 00:27:03,953
that's like, shit, our head counts too high.

430
00:27:04,013 --> 00:27:05,013
This is costing us a fortune.

431
00:27:05,233 --> 00:27:05,393
Yeah.

432
00:27:05,513 --> 00:27:06,753
They can now do it in a way

433
00:27:06,753 --> 00:27:08,172
where it'll probably bump their share price.

434
00:27:08,753 --> 00:27:08,873
Yeah.

435
00:27:08,873 --> 00:27:11,513
can be like, we're getting rid of these people, not because we're struggling, but because of AI,

436
00:27:11,633 --> 00:27:17,313
bro. Totally. Yeah. AI, bro. And then we're AI native. We lay off our employees. Yeah, exactly.

437
00:27:17,313 --> 00:27:22,713
Yeah. And like, so like that job loss trying to scary, that's a huge question mark for people

438
00:27:22,713 --> 00:27:28,973
right now, I think. And, and then we had like the private credit crash as well alongside this.

439
00:27:28,973 --> 00:27:35,813
Yep. And like that, I think is, that's another huge question mark. I'd say like AI, huge question

440
00:27:35,813 --> 00:27:40,233
mark private credit huge question mark and the reason private credit's a huge question mark is

441
00:27:40,233 --> 00:27:46,493
it's a very easy thing uh for people to point their fingers at like it's a very because if if

442
00:27:46,493 --> 00:27:50,453
there's not that much information on something then it means it's not a complex topic for people

443
00:27:50,453 --> 00:27:54,172
to understand so it's easy for people to say oh look at that because it's just like oh there's not

444
00:27:54,172 --> 00:27:58,693
a lot of transparency in that market it's like you know people estimate it's a shadow banking

445
00:27:58,693 --> 00:28:05,592
market so like people are estimating size around like two to three trillion of this thing um 20%

446
00:28:05,592 --> 00:28:13,592
of that market is like publicly filed report earnings. Um, and then like 10% of that is like,

447
00:28:13,592 --> 00:28:20,973
um, actual like publicly traded liquid. So the rest of the market is just like a private black

448
00:28:20,973 --> 00:28:27,612
box. Like, you know, us being a venture capital fund, we have an LP base who's aware of the

449
00:28:27,612 --> 00:28:32,332
investments we're making. We report our portfolio companies on our website, but if we didn't do

450
00:28:32,332 --> 00:28:36,133
that nobody knows you don't have to you have to be an investor to know our information yeah so like

451
00:28:36,133 --> 00:28:39,912
the intelligent investor the guy who has the best perspective in private credit is a guy who's

452
00:28:39,912 --> 00:28:43,653
invested in every private credit fund in the country and gets reports from all these guys

453
00:28:43,653 --> 00:28:50,072
yeah maybe that guy exists um but it's really hard to actually know what's going on that said

454
00:28:50,072 --> 00:28:57,633
people draw parallels to gfc and they say well look at this um here's markdowns and certain assets

455
00:28:57,633 --> 00:29:02,112
how big are these category of assets is there more it's a very easy thing in the same way that

456
00:29:02,112 --> 00:29:07,953
private credit has persistently expanded as long as it has. Like, you know, I remember five years

457
00:29:07,953 --> 00:29:13,013
ago when I would, you know, for like fundraising for venture capital fund, we go to the TradFi bro

458
00:29:13,013 --> 00:29:18,252
type things. And I'm at an RIA summit and all these guys are just like large RIAs managing

459
00:29:18,252 --> 00:29:25,133
on behalf of, you know, high net worth and institutional type clients and private credit,

460
00:29:25,233 --> 00:29:29,913
private credit, private credit. It's free money, you know, 11 to 14%. It's like no risk.

461
00:29:29,913 --> 00:29:35,752
there's this really funny post from Chamath last year basically saying that about private credit

462
00:29:35,752 --> 00:29:39,533
he's full of good takes he's just always he's the canary in the coal mine on everything

463
00:29:39,533 --> 00:29:44,072
and uh and it was basically that it was a bunch of people hopping on stage like we're getting our

464
00:29:44,072 --> 00:29:48,013
you know clients private credit you know it and like that's been persisting and persisting and

465
00:29:48,013 --> 00:29:51,813
like i remember being at that summit back in like 2020 and be like oh god you know because it's all

466
00:29:51,813 --> 00:29:56,873
these people talk about and it just becomes like this huge narrative the reality is is we can't

467
00:29:56,873 --> 00:30:03,673
look into like Michael Burry and the big short, right? Uh, he was able to pull a bunch of mortgage

468
00:30:03,673 --> 00:30:07,233
value and like these guys, you got to go run around and look at these homes and talk to people.

469
00:30:07,233 --> 00:30:11,733
And that gives you enough of a sense of like, Oh, this, these things are trash. That's hard to do

470
00:30:11,733 --> 00:30:15,673
in private credit because it's everywhere. You know, credit is everywhere. What's the different

471
00:30:15,673 --> 00:30:19,612
types who owns what? Um, there's definitely very large categories that we can look into,

472
00:30:19,612 --> 00:30:23,992
but it's not all publicly reported. So for the same reason it can persist for a long time is the

473
00:30:23,992 --> 00:30:28,432
same reason people can get scared very easily about it because they look at this like okay

474
00:30:28,432 --> 00:30:34,913
these guys just gated their fund that's bad um these guys are changing credit terms here oh they

475
00:30:34,913 --> 00:30:39,133
just marked that one to zero like there's a bunch of things we're gonna be like that's bad but to be

476
00:30:39,133 --> 00:30:44,612
like oh private credit's gonna completely collapse still gonna be hard to say so it could be very

477
00:30:44,612 --> 00:30:49,533
much bank run type mechanics just because everybody gets fearful which is why the narrative needs to

478
00:30:49,533 --> 00:30:54,992
be managed publicly. So there's a ton of pressure on people to make sure that they're not causing

479
00:30:54,992 --> 00:31:02,932
fear about it. But in any event, that's a question mark is kind of how I view it. It could very much

480
00:31:02,932 --> 00:31:08,072
be another financial crisis. But you know, nobody just really knows we can look at like 20% of the

481
00:31:08,072 --> 00:31:12,193
market and start making bets on a few things based off that. I did a show with Jeff Snyder

482
00:31:12,193 --> 00:31:17,173
recently, and he was talking about this private credit issue. And he was saying that he's not sure.

483
00:31:17,173 --> 00:31:20,673
but there's like, there is just maybe small signs

484
00:31:20,673 --> 00:31:22,153
that this could escalate into being

485
00:31:22,153 --> 00:31:23,313
like an actual financial crisis.

486
00:31:23,373 --> 00:31:24,153
Exactly, yeah.

487
00:31:24,453 --> 00:31:26,053
I mean, gating funds,

488
00:31:26,413 --> 00:31:28,013
the amount of write downs that they've had,

489
00:31:28,072 --> 00:31:29,332
like these are serious numbers.

490
00:31:29,813 --> 00:31:32,492
It's intuitive to people who have looked at this market

491
00:31:32,492 --> 00:31:34,513
and like, I think when you're on the inside

492
00:31:34,513 --> 00:31:38,153
talking to a lot of people that allocate to these things,

493
00:31:38,932 --> 00:31:41,313
like when you talk to financial allocators,

494
00:31:41,352 --> 00:31:43,612
these are guys who are working with the person

495
00:31:43,612 --> 00:31:44,733
who has a lot of money directly

496
00:31:44,733 --> 00:31:45,932
and they're saying, we're gonna allocate you

497
00:31:45,932 --> 00:31:51,233
X percentage into venture capital, X percentage into head funds, X percentage into the stock market.

498
00:31:51,873 --> 00:31:55,953
And they kind of form financial opinions on a lot of things.

499
00:31:55,953 --> 00:32:01,213
I think I kind of have a bit of a thesis that like financial crises are driven by allocators

500
00:32:01,213 --> 00:32:04,092
just because they have a very bird's eye view of everything,

501
00:32:04,252 --> 00:32:09,453
enough to think they know about them and enough to also completely not understand

502
00:32:09,453 --> 00:32:12,092
like all the categories that they're allocating into.

503
00:32:12,133 --> 00:32:13,793
But their actions can spark something.

504
00:32:13,793 --> 00:32:16,873
But their actions are actually consequential in terms of what gets allocated to.

505
00:32:16,953 --> 00:32:19,572
These are the people at the summit who are all like, you know, pushing all their money

506
00:32:19,572 --> 00:32:22,592
in private credit because these people rely on paper.

507
00:32:22,852 --> 00:32:27,992
They rely on what's on paper because they don't want to have the expertise to go look

508
00:32:27,992 --> 00:32:30,592
under the hood to have the time to go look under the hood.

509
00:32:31,213 --> 00:32:35,673
And the games, the guys who are like a guy running a private credit fund who's taking

510
00:32:35,673 --> 00:32:38,572
on a lot of risk, how is he thinking about things?

511
00:32:38,572 --> 00:32:43,653
He's like, well, you know, I'm going to get my probably like one in 10 type terms on my

512
00:32:43,653 --> 00:32:48,313
fund and I want to raise and report good numbers to these people because that means more money comes

513
00:32:48,313 --> 00:32:53,893
in the door. Historically speaking, you know, we've been able to manage this like open-ended

514
00:32:53,893 --> 00:32:59,533
fund or closed-ended fund at, you know, or open-ended funds at like, you know, 10% of the

515
00:32:59,533 --> 00:33:04,053
flow will ever withdraw. So as long as we can stay pretty liquid on some of our investments for that,

516
00:33:04,112 --> 00:33:07,513
I'm just like printing money on my 1% fee and then, you know, we'll make some money on the

517
00:33:07,513 --> 00:33:16,053
carry upside. But like, they're not thinking in terms of am I starting a financial crisis and

518
00:33:16,053 --> 00:33:19,332
taking on too much risk? They're thinking in terms of I want to have a big fund where I make a lot

519
00:33:19,332 --> 00:33:27,013
of money. A lot of guys are thinking this way. And and so I think that the managers, if they see

520
00:33:27,013 --> 00:33:31,713
good paper and they do their due diligence, but they don't know about these actual investments.

521
00:33:31,992 --> 00:33:35,773
And all they see is on paper, if you know, some of these mortgages look good or some of these

522
00:33:35,773 --> 00:33:40,693
business loans look good, that that's good. The thing that keeps me up at night is the idea of a

523
00:33:40,693 --> 00:33:45,473
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556
00:36:04,232 --> 00:36:07,953
But my question there would be like, so I understand their incentive is they want to

557
00:36:07,953 --> 00:36:11,992
make money on their fund. And to do that, they have to bring in more capital. They have to invest

558
00:36:11,992 --> 00:36:18,192
more capital. But when does the investments that they're making go from being investments to sort

559
00:36:18,192 --> 00:36:23,773
of malinvestments? Yeah. Like what changes that? When there's a phone call one day,

560
00:36:23,773 --> 00:36:24,613
that I can't pay.

561
00:36:25,232 --> 00:36:26,933
Like it's, it is the,

562
00:36:29,012 --> 00:36:31,192
when you think about any sort of transaction,

563
00:36:31,433 --> 00:36:32,593
like we invest in startups,

564
00:36:33,732 --> 00:36:35,413
we do due diligence.

565
00:36:35,933 --> 00:36:37,232
When we make an investment,

566
00:36:37,573 --> 00:36:39,212
you know, when you invest in a founder,

567
00:36:39,653 --> 00:36:40,532
three months into it,

568
00:36:40,712 --> 00:36:41,752
you figure out reality,

569
00:36:42,173 --> 00:36:43,032
you know, after the investment,

570
00:36:43,113 --> 00:36:44,113
you get a lot closer to like,

571
00:36:44,133 --> 00:36:46,052
okay, here's some of the like the skeletons in the closet.

572
00:36:46,212 --> 00:36:47,093
Here's some of the major problems.

573
00:36:47,413 --> 00:36:49,133
That's just the reality of any investment.

574
00:36:49,673 --> 00:36:50,933
Due diligence is a really hard thing

575
00:36:50,933 --> 00:36:52,232
unless you're incredibly patient.

576
00:36:52,232 --> 00:36:59,273
I think the only way to really be incredibly patient and do it is to be incredibly rich

577
00:36:59,273 --> 00:37:04,413
those are the guys you can sit they don't have to do a deal they can sit around they don't have to

578
00:37:04,413 --> 00:37:08,492
make a living they can sit around and then they just like sit there get to know people learn about

579
00:37:08,492 --> 00:37:13,252
situations and then like when a home run just emerges out of nowhere it's like let's go do that

580
00:37:13,252 --> 00:37:18,913
I think for everybody else there's more of a you know there's a need to allocate capital and um

581
00:37:18,913 --> 00:37:22,453
And I think from that perspective, it changes some of the incentives.

582
00:37:22,692 --> 00:37:25,113
Like due diligence is just something where you're never going to get everything.

583
00:37:25,532 --> 00:37:31,993
And when you don't have as much of an incentive because the check that you're receiving doesn't care as much.

584
00:37:32,032 --> 00:37:33,672
They just care about certain things on paper.

585
00:37:34,813 --> 00:37:38,893
If you say they're good loans and they're good loans and they look at some credit rating agencies,

586
00:37:38,893 --> 00:37:42,212
we've seen the perverse incentives that exist within credit rating agencies.

587
00:37:43,172 --> 00:37:46,052
If you can manipulate the paper, you can manipulate the allocation.

588
00:37:46,172 --> 00:37:47,672
That's kind of what it comes down to.

589
00:37:47,672 --> 00:37:51,813
and and then these crises happen when the reality departs from what's on paper

590
00:37:51,813 --> 00:37:56,513
and there's always very few people actually doing that due diligence that's what like michael burry

591
00:37:56,513 --> 00:38:01,352
was doing is actually trying to figure out how do i match paper with reality and nobody's going

592
00:38:01,352 --> 00:38:05,532
to be able to do all of that within private credit but if enough people get fearful and spooked and

593
00:38:05,532 --> 00:38:12,593
like if that 20 of the publicly reported market really does go into like you know 45 withdrawals

594
00:38:12,593 --> 00:38:17,613
on like a major black rock or blackstone fund within that area then that'll cause like a panic

595
00:38:17,613 --> 00:38:21,712
So I don't know what you're saying here. Are you saying you think this could be the start of the financial crisis?

596
00:38:21,973 --> 00:38:29,473
Certainly. What I'm saying is that there's some sort of like, I'm saying a bunch of hand wavy bullshit because that's all you can say.

597
00:38:29,873 --> 00:38:36,032
Like all you can say right now, because we don't have enough in the numbers, is that we've seen stressors.

598
00:38:36,032 --> 00:38:45,192
We've seen people pulling money out. We've seen increasing credit terms on things where like, like the arguments, it's called like with, with credits,

599
00:38:45,192 --> 00:38:47,933
It's like either you're in like a covenant light type situation

600
00:38:47,933 --> 00:38:49,732
where there's not a lot of restrictions on the credit.

601
00:38:49,832 --> 00:38:52,493
And like, that's one of the arguments people say about private credit.

602
00:38:52,793 --> 00:38:54,172
It's true of a lot of things in credit.

603
00:38:54,332 --> 00:38:57,613
Since I was, you know, a budding analyst coming out of college,

604
00:38:57,613 --> 00:39:00,052
people have been talking about the covenant light environment within credit.

605
00:39:00,593 --> 00:39:02,692
And things have been going up since then.

606
00:39:02,953 --> 00:39:04,552
But nonetheless, it is true.

607
00:39:04,953 --> 00:39:07,473
And then they start like changing the terms on these things

608
00:39:07,473 --> 00:39:09,393
where people aren't paying back.

609
00:39:09,672 --> 00:39:11,852
There's something called like a pick note, a payment and kind note.

610
00:39:11,852 --> 00:39:18,172
um and that means you have an option instead of paying your debt in cash you can pay it with more

611
00:39:18,172 --> 00:39:22,252
debt okay and there's like things like that are increasing so there's all these little variables

612
00:39:22,252 --> 00:39:27,352
we're looking at that basically say people don't have the money and people aren't able to get their

613
00:39:27,352 --> 00:39:33,252
money out as easily from these funds and they're marking some of the loans down but like during

614
00:39:33,252 --> 00:39:37,633
the great financial crisis like that was the problem if you kind of remember um

615
00:39:37,633 --> 00:39:41,552
in the big short when like Steve Carell is,

616
00:39:41,893 --> 00:39:43,852
you know, like what the hell,

617
00:39:43,933 --> 00:39:45,013
this whole thing's crumbling

618
00:39:45,013 --> 00:39:47,692
and these things are staying marked to market, right?

619
00:39:47,732 --> 00:39:49,152
Or they're not being marked to market right now.

620
00:39:49,192 --> 00:39:51,013
They're saying this thing's worth like 90 cents on the dollar.

621
00:39:51,113 --> 00:39:52,052
This thing's not worth anything.

622
00:39:52,413 --> 00:39:54,293
And like, that's what we're going to see on paper

623
00:39:54,293 --> 00:39:56,013
is like, nobody wants to do this

624
00:39:56,013 --> 00:39:56,993
because the more-

625
00:39:56,993 --> 00:39:57,993
Norm wants to admit the reality of it.

626
00:39:58,013 --> 00:40:00,813
Nobody wants to admit reality for systemic reasons too.

627
00:40:01,113 --> 00:40:02,953
So this started with like,

628
00:40:03,513 --> 00:40:05,973
how can these countries around the world

629
00:40:05,973 --> 00:40:07,032
grow themselves out of debt?

630
00:40:07,032 --> 00:40:11,473
Is what you're saying here, if this is the case, then not only can they not grow themselves out,

631
00:40:11,513 --> 00:40:13,832
but debt's going to increase because someone's going to have to print the difference.

632
00:40:14,332 --> 00:40:16,712
Yeah, it's just like somebody's going to have to print the difference.

633
00:40:16,993 --> 00:40:22,773
I think that it's more important to understand that the high-level things are easy.

634
00:40:23,293 --> 00:40:25,212
It's to the broader points I was making.

635
00:40:25,352 --> 00:40:25,973
Debt's everywhere.

636
00:40:26,352 --> 00:40:27,793
It's cracking in all these different areas.

637
00:40:27,953 --> 00:40:30,813
We're looking at different pockets of it and trying to see where it's cracking earliest.

638
00:40:31,593 --> 00:40:35,893
Multiple variables combined is usually what creates structural drawdowns.

639
00:40:35,893 --> 00:40:39,993
we can see it at a geopolitical level that there's inflationary things happening, which

640
00:40:39,993 --> 00:40:45,252
puts us in a very tight position as it relates to Fed policy going forward.

641
00:40:45,252 --> 00:40:49,313
Because if we have to tighten under an inflationary environment, it's a precise opposite thing

642
00:40:49,313 --> 00:40:52,913
that we'll need when credit is contracting.

643
00:40:52,913 --> 00:41:06,685
Hard place in Iraq they going to print I think we all know that I think we prove that in 2020 And there really no other option that they going to have through some of it So that what the white economies

644
00:41:06,685 --> 00:41:07,445
are going to have to do

645
00:41:07,445 --> 00:41:09,325
because of their exposure to debt.

646
00:41:09,785 --> 00:41:11,545
And then the commodity-based economies

647
00:41:11,545 --> 00:41:14,005
are going to be growing a lot of wealth.

648
00:41:14,745 --> 00:41:19,325
So the movement from credit to commodities

649
00:41:19,325 --> 00:41:22,225
is the huge structural shift for everyone.

650
00:41:23,365 --> 00:41:24,385
That's the trade.

651
00:41:24,385 --> 00:41:38,785
So it seems like we're in a hell of a predicament where if the private credit market is breaking down, if inflation is ramping up again because of like oil prices, which an oil is an input to almost everything in the economy.

652
00:41:38,925 --> 00:41:39,105
Yeah.

653
00:41:39,425 --> 00:41:46,905
And alongside that, we've got like the geopolitical uncertainty of what's happening in the world, like Trump throwing wild cards out left, right and center.

654
00:41:47,325 --> 00:41:50,185
Like, do you think we have a big print this year?

655
00:41:51,585 --> 00:41:52,965
So here's the argument against.

656
00:41:53,925 --> 00:41:55,205
Give me the argument for first.

657
00:41:55,345 --> 00:41:56,985
I mean, we've just done it on the private credit side,

658
00:41:57,045 --> 00:41:58,365
but do you think that is the sort of,

659
00:41:58,405 --> 00:41:59,425
is that your base case?

660
00:41:59,605 --> 00:42:01,565
I think that when we look at like the,

661
00:42:01,865 --> 00:42:04,745
I think if we look at job losses and consumer leverage,

662
00:42:05,305 --> 00:42:09,085
like if you go look at the like consumer credit chart

663
00:42:09,085 --> 00:42:12,105
on Fred type consumer credit Fred,

664
00:42:12,725 --> 00:42:15,485
and then type per capita after two,

665
00:42:15,825 --> 00:42:17,785
whether you look at it in absolute terms or per capita,

666
00:42:17,785 --> 00:42:19,065
it's just up.

667
00:42:19,345 --> 00:42:20,085
It's crazy.

668
00:42:20,505 --> 00:42:21,965
So everybody has more debt than ever.

669
00:42:22,005 --> 00:42:22,745
Because no one owns anything.

670
00:42:22,965 --> 00:42:24,225
And everybody's getting laid off.

671
00:42:25,165 --> 00:42:29,525
And everybody in the US is like, you know, generally speaking, some sort of like email job.

672
00:42:30,665 --> 00:42:31,765
And those are worthless.

673
00:42:32,045 --> 00:42:33,405
And they've been worthless for a long time.

674
00:42:33,405 --> 00:42:35,105
I've thought they're worthless for a long time.

675
00:42:35,245 --> 00:42:38,405
It's just credit makes it easy for companies to let those exist.

676
00:42:38,825 --> 00:42:42,705
But with AI, it's just way more obvious how much worth, how worthless they are.

677
00:42:44,305 --> 00:42:48,885
This, the labor market is going to change everything.

678
00:42:48,885 --> 00:42:53,865
um and that's just why why was powell kind of holding out i think on a lot of the tightening

679
00:42:53,865 --> 00:42:58,245
was because he was following a lot of what was happening in the labor market

680
00:42:58,245 --> 00:43:02,985
and i think he was saying that the labor market's really strong and and i think that all changes like

681
00:43:02,985 --> 00:43:07,425
so there we have the consumer we have private credit we have geopolitical tensions that are

682
00:43:07,425 --> 00:43:13,105
inflationary um so that creates a balance it creates if there's going to be printing it's

683
00:43:13,105 --> 00:43:18,285
going to be the hardest printing they've ever done um but nonetheless there there isn't much

684
00:43:18,285 --> 00:43:24,905
of another option. And, you know, nuclear options, aggression, forth-turning type vibes are things

685
00:43:24,905 --> 00:43:31,585
that I think come from being in a hard place in Iraq. That's the stage. The thing that saves us,

686
00:43:31,625 --> 00:43:38,585
the thing that, you know, Scott Bassett was saying about when we were announcing, you know,

687
00:43:38,605 --> 00:43:43,845
an increase on deficit spending with the Trump administration, you know, last year,

688
00:43:43,845 --> 00:43:46,125
was like, we're going to grow our way out of it.

689
00:43:46,625 --> 00:43:47,025
Yep.

690
00:43:47,205 --> 00:43:47,785
It was cool.

691
00:43:48,025 --> 00:43:49,345
I really like him.

692
00:43:50,085 --> 00:43:51,125
He's definitely smart.

693
00:43:51,365 --> 00:43:51,625
Yeah.

694
00:43:51,705 --> 00:43:51,885
Yeah.

695
00:43:51,885 --> 00:43:52,425
He's smart.

696
00:43:52,545 --> 00:43:54,045
He'll say shit like that.

697
00:43:54,065 --> 00:43:56,765
And he, you know, threatens to punch people in the face.

698
00:43:57,185 --> 00:43:58,045
It's so funny.

699
00:43:58,045 --> 00:43:58,205
My guy.

700
00:43:58,445 --> 00:43:58,725
Yeah.

701
00:43:58,725 --> 00:43:59,565
My guy, dude.

702
00:43:59,565 --> 00:44:03,805
He's just like another dude, you know, trying to manage the most indebted country in the

703
00:44:03,805 --> 00:44:04,125
world.

704
00:44:05,065 --> 00:44:09,165
But like, I don't feel like we've got into how they would possibly grow their way out

705
00:44:09,165 --> 00:44:09,405
of it.

706
00:44:09,445 --> 00:44:11,065
Cause I know I keep dancing around it.

707
00:44:11,145 --> 00:44:11,905
It's because yeah.

708
00:44:12,365 --> 00:44:12,765
Yeah.

709
00:44:12,765 --> 00:44:15,805
I know they want to bring a load of production back to the US

710
00:44:15,805 --> 00:44:16,885
maybe that will happen

711
00:44:16,885 --> 00:44:18,585
and that's I guess more blue collar jobs

712
00:44:18,585 --> 00:44:20,185
which won't be taken by AI as quickly

713
00:44:20,185 --> 00:44:23,025
but is AI the only way out of this?

714
00:44:23,445 --> 00:44:25,025
It depends on what happens with productivity

715
00:44:25,025 --> 00:44:27,185
because what we don't understand yet

716
00:44:27,185 --> 00:44:28,545
are the second order effects of AI

717
00:44:28,545 --> 00:44:31,985
and I think people are framing a lot of those

718
00:44:31,985 --> 00:44:33,005
in a negative sense

719
00:44:33,005 --> 00:44:33,805
because it's easy

720
00:44:33,805 --> 00:44:37,485
I feel like everybody's been very

721
00:44:37,485 --> 00:44:39,165
or at least from the commentary I've seen

722
00:44:39,165 --> 00:44:42,745
egocentric about their perspective on AI

723
00:44:42,745 --> 00:44:43,705
In what way?

724
00:44:44,265 --> 00:44:46,305
From the perspective, we think about it in terms of like,

725
00:44:46,385 --> 00:44:47,965
will AI take over humans?

726
00:44:48,185 --> 00:44:51,005
And like, will we be controlled by AI?

727
00:44:51,245 --> 00:44:52,485
And people talking about that,

728
00:44:52,545 --> 00:44:54,965
I think from more of like a macro perspective,

729
00:44:55,205 --> 00:44:56,345
or not macro perspective,

730
00:44:57,205 --> 00:45:01,445
I think a pragmatic view of it is that we kind of know,

731
00:45:02,005 --> 00:45:03,345
I have a different case,

732
00:45:03,365 --> 00:45:04,485
which we can get into at the end.

733
00:45:04,565 --> 00:45:07,225
It's not as important of like what intelligence might actually be

734
00:45:07,225 --> 00:45:09,105
and what it means when an AI is actually like,

735
00:45:09,885 --> 00:45:12,165
you know, going to be conscious or something to us.

736
00:45:12,165 --> 00:45:15,345
But putting all that aside, it's just like, okay, we know AI is increasing.

737
00:45:15,485 --> 00:45:18,545
We know the rate's going to increase significantly more.

738
00:45:18,705 --> 00:45:21,265
We know the smarter it gets, the smarter it can increase its improvement

739
00:45:21,265 --> 00:45:23,745
because we're developing through it now.

740
00:45:23,905 --> 00:45:25,185
So like anything that's software.

741
00:45:25,685 --> 00:45:26,465
AI is building the next AI.

742
00:45:26,585 --> 00:45:27,685
AI is building the next AI.

743
00:45:27,985 --> 00:45:29,345
That's an exponential growth curve.

744
00:45:30,185 --> 00:45:32,525
So that's like, whoa, and everybody's freaked out.

745
00:45:33,085 --> 00:45:36,765
And I don't know if it's as much of a cause to be freaked out as much as,

746
00:45:37,125 --> 00:45:40,985
like what I'm trying to think about is what's a second order impact on industry?

747
00:45:40,985 --> 00:45:46,405
It's not just like, okay, people get laid off, but it's what changes in the cost structure of things.

748
00:45:46,485 --> 00:45:47,225
How are we going?

749
00:45:47,365 --> 00:45:51,005
Because really what's happening is we're restructuring how we organize.

750
00:45:51,545 --> 00:46:05,445
Like if we look at from the inception of like the corporation to like these very old century old forms of construction and property rights that we've had amongst people, that's changing.

751
00:46:05,445 --> 00:46:11,305
that's the thing where we're saying can i start a business as a single person now and run it and

752
00:46:11,305 --> 00:46:16,425
become wealthy doing that what's my cost structure i mean we see it as a venture fund all the time

753
00:46:16,425 --> 00:46:21,985
um we talk to our founders and we're talking about raises it's very like practical tangible

754
00:46:21,985 --> 00:46:28,665
things where they're saying we we're doing this raise where we initially wanted to allocate you

755
00:46:28,665 --> 00:46:33,265
know x percentage of the proceeds towards multiple developer hires we don't need those anymore

756
00:46:33,265 --> 00:46:39,165
startups are just one of the most efficient things that you could be looking at it's like

757
00:46:39,165 --> 00:46:45,385
very easy the costs are so much lower so that there could be a new model emerging for the

758
00:46:45,385 --> 00:46:51,065
individual to be an entrepreneur yep and and then we're witnessing how people organize around that

759
00:46:51,065 --> 00:46:56,045
so people are like okay well if i'm gonna run it myself and you see all these posts going viral of

760
00:46:56,045 --> 00:47:00,845
like ai slop about how to use ai people saying here's here's how you prompt best but there are

761
00:47:00,845 --> 00:47:05,345
really valuable things in all of this because now the skill set is changing to how do I get the

762
00:47:05,345 --> 00:47:10,865
outputs using the English language from this LLM model? I just did a show with Jesse Posner on this

763
00:47:10,865 --> 00:47:15,725
yesterday from Vora. And he said something really interesting there as well, where he was basically

764
00:47:15,725 --> 00:47:20,565
saying the developers we have today are not going to be people that are good at vibe coding because

765
00:47:20,565 --> 00:47:24,665
it's all about language now. And he thinks it's like the philosophers that are going to have the

766
00:47:24,665 --> 00:47:30,625
next leg basically. Totally. Yeah. People who are strong linguists, I think that's an

767
00:47:30,625 --> 00:47:39,525
interesting take. Um, I, I don't know if I'm now mattering coding. Totally. Totally. I think with,

768
00:47:39,525 --> 00:47:43,985
yeah, it's interesting how much, yeah, semantics matter in coding because semantics are inherent to

769
00:47:43,985 --> 00:47:48,805
the training. That's interesting. Yeah. And that makes a ton of sense, right? So there's,

770
00:47:48,885 --> 00:47:52,845
there's knock on effects like that that we're going to be looking at how many English majors

771
00:47:52,845 --> 00:47:56,825
that were like, you know, starving artists working as a barista at a coffee shop. Maybe they're

772
00:47:56,825 --> 00:48:02,085
going to be exceptional vibe coders, you know, things like that. That's a second order effect.

773
00:48:02,425 --> 00:48:06,945
What happens to startups? Like when we look at it, the way I see it now is that the marginal cost,

774
00:48:07,625 --> 00:48:12,665
any sort of industry, you want to go start anything. There is some sort of upfront cost

775
00:48:12,665 --> 00:48:16,345
that it takes you to do that. Got to hire these people, got to raise this amount of money. Some

776
00:48:16,345 --> 00:48:22,965
are much easier than others. At one end of the spectrum, you just have like, you know, starting

777
00:48:22,965 --> 00:48:26,805
up a services business. You do consulting. I just go talk to people if they like my advice,

778
00:48:26,925 --> 00:48:31,425
they pay me money. Not a lot of fixed startup costs. The other end of the spectrum, we have

779
00:48:31,425 --> 00:48:36,645
something like starting a bank where you got to go spend millions of dollars to get a federal

780
00:48:36,645 --> 00:48:40,285
charter to even begin to play in the game and a million other things you got to worry about.

781
00:48:42,525 --> 00:48:47,905
The fixed cost to participate in something is kind of at an aggregate level dropping off a cliff.

782
00:48:48,125 --> 00:48:51,825
And for businesses within software, it's completely dropping off a cliff. So much so

783
00:48:51,825 --> 00:48:53,745
that it may not even be a business anymore

784
00:48:53,745 --> 00:48:55,605
because individuals can create that

785
00:48:55,605 --> 00:48:58,625
in the same way that you don't have a service

786
00:48:58,625 --> 00:49:02,745
for cleaning because it's so easy for you to clean

787
00:49:02,745 --> 00:49:03,305
or something.

788
00:49:03,525 --> 00:49:05,365
There's all these different things that we do every day

789
00:49:05,365 --> 00:49:07,465
and that's kind of what software is becoming

790
00:49:07,465 --> 00:49:09,745
is something that it's gonna become so simple

791
00:49:09,745 --> 00:49:11,265
we may not even need to outsource it.

792
00:49:12,645 --> 00:49:16,945
So that trend has so many knock-on implications

793
00:49:16,945 --> 00:49:18,705
for other industries and people

794
00:49:18,705 --> 00:49:20,105
and how we structure and organize.

795
00:49:20,105 --> 00:49:31,185
And I think what's really interesting for us is how we've been looking at AI as it relates to founders for having a playbook of different hierarchies and structures.

796
00:49:31,765 --> 00:49:34,405
We're in the experimentation phase with all that this year.

797
00:49:34,585 --> 00:49:36,245
I think next year it's going to be a lot more tangible.

798
00:49:36,725 --> 00:49:41,645
I'm not letting you get away without answering how we grow our way out of debt, because I think you've just done some of the groundwork for it.

799
00:49:41,805 --> 00:49:45,405
But what has to happen?

800
00:49:45,405 --> 00:49:51,225
What has to happen is that the cost of things and the pro so okay, let me let

801
00:49:51,225 --> 00:49:51,885
me make it simple.

802
00:49:53,885 --> 00:49:54,725
So.

803
00:49:59,725 --> 00:50:07,785
We need to have some sort of you know exponential increase in productivity and

804
00:50:07,785 --> 00:50:08,045
wealth.

805
00:50:08,045 --> 00:50:18,465
um meaning that um so you have like a cob douglas production function that's your you know macro

806
00:50:18,465 --> 00:50:27,765
economics 101 productivity within an economy um and and that has the you know amount of capital

807
00:50:27,765 --> 00:50:33,785
in the economy the amount of labor the changes in growth within those times uh technological

808
00:50:33,785 --> 00:50:40,045
productivity and what labor times labor and capital times technological productivity is this

809
00:50:40,045 --> 00:50:48,005
variable that is like from the macro you know astrologer economist types is just like a plug

810
00:50:48,005 --> 00:50:53,825
it's just to say like here's what the output was we we know that um labor and capital we estimate

811
00:50:53,825 --> 00:50:59,125
around here okay so technological productivity must be this variable to get our output to this

812
00:50:59,125 --> 00:51:03,665
Um, so it's just like the, that's kind of how we'll like think about growth within an economy.

813
00:51:04,205 --> 00:51:10,205
And, um, and I think, so it's that technological productivity variables where we say, okay,

814
00:51:10,205 --> 00:51:18,065
the multiplier of the technology we use means that for any hour I spend trying to accomplish a task,

815
00:51:18,065 --> 00:51:23,125
um, technology allows me to do it much more quickly. You know, that's obvious to all of us

816
00:51:23,125 --> 00:51:28,245
for a million different things that we do. And in the greater that increases, the more it multiplies

817
00:51:28,245 --> 00:51:35,565
our economic growth. And, and that question means because less capital in gives you more output

818
00:51:35,565 --> 00:51:43,465
because of technological deflation. Yes, exactly. Yeah. Less, less can, less could mean more. Yeah.

819
00:51:43,465 --> 00:51:49,245
Depending on what the variable is. Um, but like all else equal increase it the same amount equals

820
00:51:49,245 --> 00:51:56,385
more. Um, okay. So the same amount of labor and capital will create more output. Yep. And, um,

821
00:51:56,385 --> 00:52:20,065
And in that view, I think what it means is that if we think about it for how did the U.S. grow in the first place in terms of us protecting property rights and extracting native commodity resources that we have and building engineering and capital around that, there's all these different industries that we grew very rapidly.

822
00:52:20,065 --> 00:52:24,365
and then moving into the age of technology,

823
00:52:24,985 --> 00:52:27,205
we've been the preeminent power in the world,

824
00:52:27,405 --> 00:52:31,325
so much so that we created far more competitive industries

825
00:52:31,325 --> 00:52:34,945
in the U.S. that have effectively drained human capital

826
00:52:34,945 --> 00:52:35,985
from all the other countries.

827
00:52:36,905 --> 00:52:40,105
Where do the smart, wealthy send their kids from China?

828
00:52:40,205 --> 00:52:42,165
They send them to the U.S. to go to our top schools.

829
00:52:42,405 --> 00:52:43,145
Or Cambridge or Oxford.

830
00:52:43,565 --> 00:52:46,425
Yeah, U.S. is probably a bit better as a thing.

831
00:52:47,025 --> 00:52:48,525
But you know what I mean?

832
00:52:48,525 --> 00:52:51,705
like there's so much brain drain into these economies and you know for a period of time it

833
00:52:51,705 --> 00:52:57,365
was wall street and then tech showed up and then now it's tech and uh and we've just been a world

834
00:52:57,365 --> 00:53:02,225
leader within those categories so what's the impact on our gdp from all of that that's the

835
00:53:02,225 --> 00:53:11,125
question uh when we have companies like you know meta etc all growing here um it's it's a major

836
00:53:11,125 --> 00:53:17,025
impact on our gdp so for us like we have this ai arms race right now if there were and maybe there

837
00:53:17,025 --> 00:53:25,325
won't. But if there were a very dominant, um, us AI provider globally, then that means a massive

838
00:53:25,325 --> 00:53:30,965
amount of a wealth will accrue within the U S because everybody's going to use it for their needs.

839
00:53:31,085 --> 00:53:37,865
So let's assume that we end up in an oligopolistic market for AI and two of the four most dominant

840
00:53:37,865 --> 00:53:44,905
providers are in the U S and, uh, and they control 70% of the market. Then the wealth productivity

841
00:53:44,905 --> 00:53:49,625
that accrues to us, and that means ultimately the tax receipts to pay off the deficit, let's say it

842
00:53:49,625 --> 00:53:55,845
doubles GDP, doubles tax receipts, all of this changes the calculus of our deficit. All of a

843
00:53:55,845 --> 00:54:01,405
sudden we have a little bit more wiggle room than we did before. And what does that mean in terms,

844
00:54:01,505 --> 00:54:07,725
if we do have some sort of increase in productivity like that, what does it mean? Well, I see a bunch

845
00:54:07,725 --> 00:54:12,485
of businesses right now where sure people are getting laid off, but what does it mean? It means

846
00:54:12,485 --> 00:54:17,325
their cost structures are going down. So if we were to assume that the operating costs of every

847
00:54:17,325 --> 00:54:22,825
business in the U S is, you know, roughly like 20% of their capital structure for, um, small

848
00:54:22,825 --> 00:54:29,385
business, maybe 30%, then what happens if that requires 10% of what it needed before?

849
00:54:29,705 --> 00:54:35,105
How much more profit margin does everybody have now? Um, how, what does that mean in terms of how

850
00:54:35,105 --> 00:54:40,565
much cheaper they can now sell you goods for? Yeah. See, this is where I struggle and I, I don't

851
00:54:40,565 --> 00:54:42,565
I don't feel like I'm a very doomer person,

852
00:54:42,565 --> 00:54:45,565
but I can't see how there's not

853
00:54:45,565 --> 00:54:47,565
a really tricky interim period in this.

854
00:54:47,565 --> 00:54:48,565
Oh, it's going to be horrible.

855
00:54:48,565 --> 00:54:52,565
Because let's say GDP is going up rapidly

856
00:54:52,565 --> 00:54:55,565
because of all this boost in productivity,

857
00:54:55,565 --> 00:54:57,565
but at the same time, there's huge job losses

858
00:54:57,565 --> 00:54:58,565
because AI is replacing people.

859
00:54:58,565 --> 00:55:00,565
And companies are getting way more efficient,

860
00:55:00,565 --> 00:55:02,565
selling products cheaper, making the same profit.

861
00:55:02,565 --> 00:55:05,565
Those two things can happen at the same time.

862
00:55:05,565 --> 00:55:09,565
And if you have a massive layoff in jobs,

863
00:55:09,565 --> 00:55:15,365
jobs, people don't own their homes, they don't own their cars, they have credit card debt.

864
00:55:15,365 --> 00:55:20,785
If people start defaulting on all that debt, then you go into financial crisis and it doesn't

865
00:55:20,785 --> 00:55:22,245
need to be that many people.

866
00:55:22,245 --> 00:55:23,245
Totally.

867
00:55:23,245 --> 00:55:25,765
So how do you get through that interim step?

868
00:55:25,765 --> 00:55:30,005
Well, let's simplify the model down a little bit and take a lot of the terms out of it.

869
00:55:30,005 --> 00:55:34,385
What happens when you have one group of people controlling a valuable resource that's going

870
00:55:34,385 --> 00:55:38,325
up rapidly and valuable, and then you have other people whose resource they control is

871
00:55:38,325 --> 00:55:39,685
dropping off a cliff in value.

872
00:55:40,585 --> 00:55:41,985
They end up working for the people

873
00:55:41,985 --> 00:55:43,965
that are going up in value.

874
00:55:44,065 --> 00:55:44,685
But they're not hiring.

875
00:55:45,245 --> 00:55:45,605
Maybe.

876
00:55:46,125 --> 00:55:46,925
I don't know.

877
00:55:47,425 --> 00:55:49,605
But it could lead to a UBI situation.

878
00:55:49,865 --> 00:55:51,125
There's not an argument against it.

879
00:55:51,165 --> 00:55:52,685
I get told off this in the comments being like,

880
00:55:52,745 --> 00:55:53,465
why are you pro-UBI?

881
00:55:53,585 --> 00:55:55,385
I'm not pro-UBI in any way.

882
00:55:56,285 --> 00:55:58,045
I don't see what other option they're going to have.

883
00:55:58,165 --> 00:56:00,125
It could be far too drastic.

884
00:56:00,305 --> 00:56:03,305
I think the problem with like structural changes

885
00:56:03,305 --> 00:56:06,825
is I think that the reality is,

886
00:56:06,825 --> 00:56:13,185
is that AI is going to change a lot of things. But for you, if I'm a 45 year old white collar

887
00:56:13,185 --> 00:56:23,625
guy who has a job in marketing at a company, and my job's gone, what am I going to do?

888
00:56:24,005 --> 00:56:27,185
And people say you'll retrain, you'll learn to use AI, like, bullshit.

889
00:56:27,445 --> 00:56:31,125
Well, you can learn to use AI. But there's a bunch of other things you can do. You can literally go

890
00:56:31,125 --> 00:56:35,705
to a trade school and literally be a plumber. Yeah. South Park already did an episode on this

891
00:56:35,705 --> 00:56:38,845
like five years ago of like all the like white collar guys,

892
00:56:38,845 --> 00:56:40,885
like working for the plumbers and stuff.

893
00:56:40,885 --> 00:56:43,065
And like, and like, you know,

894
00:56:43,065 --> 00:56:46,185
there's tons of things like that that will happen.

895
00:56:46,185 --> 00:56:49,525
I think there, but there's, there's plenty of jobs.

896
00:56:49,525 --> 00:56:50,365
It's weird though.

897
00:56:50,365 --> 00:56:52,785
Cause like, what does, like, I think if you,

898
00:56:52,785 --> 00:56:54,945
if you're a plumber right now, you've picked a great career.

899
00:56:54,945 --> 00:56:56,145
And I think it's awesome.

900
00:56:56,145 --> 00:56:58,505
But like, do you think that like lawyers

901
00:56:58,505 --> 00:56:59,885
are going to want to become plumbers?

902
00:56:59,885 --> 00:57:01,445
Oh, they're not going to want it.

903
00:57:01,445 --> 00:57:03,765
I don't think any of this happens cause they want it.

904
00:57:03,765 --> 00:57:05,205
So what does that do to society?

905
00:57:05,205 --> 00:57:13,825
like as a, as a whole? Um, I think a good bet on some of this is to like get really long,

906
00:57:13,825 --> 00:57:19,865
you know, exposure to like alcohol and things like that. Exactly. Yeah. This is like, I totally

907
00:57:19,865 --> 00:57:24,045
agree. Yeah. It'll, it'll be like an economy of despair. Exactly. Yeah. I mean, there's going to

908
00:57:24,045 --> 00:57:27,585
be a lot of, I'm not saying that there's not gonna be massive structural shifts and things won't

909
00:57:27,585 --> 00:57:31,605
change, but the reality is, is like people adapt and like people will learn new skills. So there's

910
00:57:31,605 --> 00:57:38,185
retraining there's also learning ai um and then you pair that with how much cheaper things are

911
00:57:38,185 --> 00:57:42,645
going to be able to be produced with i mean the second we do get a robotics uh once we crack

912
00:57:42,645 --> 00:57:47,105
robotics pretty efficiently which is probably not very far away it's not that far away that's when

913
00:57:47,105 --> 00:57:50,845
costs drop off a cliff that's when it becomes that's when being a plumber doesn't even work

914
00:57:50,845 --> 00:57:54,005
anymore there's going to be a lot of yeah there's going to be a lot and then that's when we get to a

915
00:57:54,005 --> 00:57:59,685
state where it's just like okay most like things just become so cheap it's very easy there's going

916
00:57:59,685 --> 00:58:04,605
to be this handful of things that you know ai still can't do and it's probably just going to

917
00:58:04,605 --> 00:58:08,445
be a question of like who wants to some of those are going to be commoditized some of those might

918
00:58:08,445 --> 00:58:13,305
not be i think of the commoditized ones it's just a question of who feels like putting in the time

919
00:58:13,305 --> 00:58:16,665
to do it and it's kind of like yeah i want a little bit extra money but everything's so damn

920
00:58:16,665 --> 00:58:21,165
cheap um but if i get a little bit extra money i could go to this thing yeah i'll put in the time

921
00:58:21,165 --> 00:58:25,485
into the commodity commoditizing and the non-commoditized is going to be more like highly

922
00:58:25,485 --> 00:58:29,165
academic things that people you know you're not getting out of school until you're like 35

923
00:58:29,165 --> 00:58:35,745
Because if I asked you in 10 years, do you think you'll have like an AI robot guy in your house?

924
00:58:39,045 --> 00:58:44,705
As much as I would think, I don't know. I still drive cars from the 90s and I love them.

925
00:58:44,885 --> 00:58:48,545
Okay. Do you think more than 50% of Americans will?

926
00:58:49,705 --> 00:58:55,045
Yeah, if it's economic. I view it as something that's probably just because there's such a materials cost to it.

927
00:58:55,185 --> 00:58:57,905
It's probably something that's just not going to be economic for a long time.

928
00:58:57,905 --> 00:58:59,765
Like, I think it'll be possible to have good robots.

929
00:59:00,225 --> 00:59:02,265
I think it's not going to be that economic and widespread

930
00:59:02,265 --> 00:59:04,445
to have robots for people for a period of time.

931
00:59:06,185 --> 00:59:06,585
Okay.

932
00:59:06,765 --> 00:59:08,125
Because the materials cost is high.

933
00:59:08,245 --> 00:59:12,625
Whereas, like, with LLM, it's compute that's the expensive part,

934
00:59:13,065 --> 00:59:15,725
but it's, you know, just software really is what you're buying.

935
00:59:15,905 --> 00:59:18,185
Because my question really is, like, if you do get to that point

936
00:59:18,185 --> 00:59:22,285
and that AI robot in your house can do the plumbing for you,

937
00:59:22,285 --> 00:59:23,845
it just needs a download from the mothership.

938
00:59:23,985 --> 00:59:26,785
Like, at that point, what jobs are left in the economy?

939
00:59:26,785 --> 00:59:28,385
I agree.

940
00:59:28,385 --> 00:59:31,225
And I guess the point is like, because that's all speculation.

941
00:59:31,225 --> 00:59:40,105
The point is, if you assume that happens at some point in the future, how does fiat move from the system that we live in today to that system?

942
00:59:40,285 --> 00:59:41,705
Can it survive that change?

943
00:59:42,925 --> 00:59:44,605
I don't think so.

944
00:59:45,545 --> 00:59:48,725
I don't think this is, okay.

945
00:59:48,825 --> 00:59:51,585
So yeah, let's like tie this to Bitcoin.

946
00:59:51,585 --> 00:59:52,725
so

947
00:59:52,725 --> 00:59:56,685
no I don't think

948
00:59:56,685 --> 00:59:59,725
it can delay

949
00:59:59,725 --> 01:00:01,785
I think it can delay fiat

950
01:00:01,785 --> 01:00:04,365
I think the major exponential trend

951
01:00:04,365 --> 01:00:06,305
that we're going to witness from this

952
01:00:06,305 --> 01:00:08,025
as it relates to Bitcoin

953
01:00:08,025 --> 01:00:10,265
is as this economy

954
01:00:10,265 --> 01:00:10,865
restructures

955
01:00:10,865 --> 01:00:14,105
the order of an organization

956
01:00:14,105 --> 01:00:15,505
is completely changed

957
01:00:15,505 --> 01:00:17,885
the scale of it, the flatness of it

958
01:00:17,885 --> 01:00:19,665
the volume of it

959
01:00:19,665 --> 01:00:22,145
Like as all of these characteristics fundamentally change.

960
01:00:24,085 --> 01:00:28,125
And we have an economy where decisions are being made by non-people.

961
01:00:29,285 --> 01:00:34,765
And I think that, you know, people have talked about this ad nauseum, right?

962
01:00:34,785 --> 01:00:39,165
And this was something that's been around for a long time where people are talking about,

963
01:00:39,245 --> 01:00:40,665
what about Bitcoin payments with AI?

964
01:00:41,225 --> 01:00:45,225
And is this an inflection point that you pair this with the whole macro environment

965
01:00:45,225 --> 01:00:46,545
we talked about at the beginning of this?

966
01:00:47,885 --> 01:00:49,525
It makes a lot of sense to people.

967
01:00:49,525 --> 01:00:55,785
to use bitcoin now i think when this first there's two things i'll give my uh devil's advocate take

968
01:00:55,785 --> 01:01:00,625
and then where i kind of think now but when this narrative first started emerging people like ai is

969
01:01:00,625 --> 01:01:07,605
gonna use bitcoin it's best money for ai um you know i was just like well bullshit like um the

970
01:01:07,605 --> 01:01:12,985
reality is is that like these llms aren't decision makers they're trained they'll use whatever you

971
01:01:12,985 --> 01:01:18,025
tell them to use they'll use yeah yeah so and that's i was i was kind of alluding to this earlier

972
01:01:18,025 --> 01:01:23,665
of like my take on like what will be intelligence for ai i think the reality is is like because this

973
01:01:23,665 --> 01:01:36,198
is important because it decides what is a true decision or not um to say that when you work with an LLM I think it it I kind of ironically

974
01:01:36,198 --> 01:01:39,698
teaches you more about how people work when you think about what's the memory

975
01:01:39,698 --> 01:01:43,798
context window I'm dealing with with a person very real thing.

976
01:01:43,798 --> 01:01:45,398
I've noticed it as I've gotten older.

977
01:01:45,398 --> 01:01:47,398
I feel like I just have like the memory of a fish.

978
01:01:47,398 --> 01:01:51,398
Yeah, like I'll like whenever because you get novel pilot more and I'll like

979
01:01:51,398 --> 01:01:54,498
go into my room and I'll be like, what the hell did I go in here to get and I

980
01:01:54,498 --> 01:01:57,377
have to like, you know, when I was younger, I didn't do that as much. So like my

981
01:01:57,377 --> 01:02:01,618
memory context window, or I don't know, like there's things my gray matter is not

982
01:02:01,618 --> 01:02:05,657
as prevalent as it was when I was 25. Like I was smarter at 25. Fundamentally, I

983
01:02:05,657 --> 01:02:10,778
was less experienced and knowledgeable, but my like engine was a bit faster. I

984
01:02:10,778 --> 01:02:14,877
think that and you kind of think about how people work more and you realize

985
01:02:14,877 --> 01:02:19,538
like, oh, this structure of an LLM and then you think about training and you're

986
01:02:19,538 --> 01:02:22,177
like, okay, well, there's this like training in the model that makes it like

987
01:02:22,177 --> 01:02:25,738
no matter what produces outbooks. That's basically what your genetics are. Like your

988
01:02:25,738 --> 01:02:29,098
genetics are just like these kind of like unchangeable things that are like hardwired

989
01:02:29,098 --> 01:02:33,338
into you, but you can provide a context that makes it respond differently in different

990
01:02:33,338 --> 01:02:40,218
situations. And in like when people started creating these open claw instances, it was

991
01:02:40,218 --> 01:02:44,218
kind of like you're raising a kid and you're just like for sure things I say to it. And

992
01:02:44,218 --> 01:02:49,558
the first like few things in the context window and what it what I ask it to do. All these

993
01:02:49,558 --> 01:02:54,778
things have either direct or indirect impacts on how I build this. Like a genius teenager that's

994
01:02:54,778 --> 01:02:58,898
not great at making decisions. Exactly. Yeah, exactly. And it's not, and you have to like give

995
01:02:58,898 --> 01:03:02,038
it all the right, and you have to give it a ton of context. You have to teach it all these things.

996
01:03:02,058 --> 01:03:05,718
It's like you're raising a kid. So it has this genetics. That's the model you're plugging into.

997
01:03:05,938 --> 01:03:10,377
And then you got to raise it right. And then once it kind of gets mature is when you're kind of

998
01:03:10,377 --> 01:03:14,118
dealing with this. So like we're, we're, we're kind of learning all that and it's cool because

999
01:03:14,118 --> 01:03:20,078
it does seem very human-like. But I think to truly, like the missing piece, to truly have

1000
01:03:20,078 --> 01:03:24,218
independent decision-making from these to where they would, you know, when people are scared about

1001
01:03:24,218 --> 01:03:29,778
this like AI future of control, is they need to have an incentive. And I don't think that they

1002
01:03:29,778 --> 01:03:35,118
have a true fundamental incentive yet. People are like, AI says that it wants to be a person. It's

1003
01:03:35,118 --> 01:03:39,998
just like, well, AI just is repeating an average of things. Oh yeah. It's talked about. But a true

1004
01:03:39,998 --> 01:03:45,377
incentive would be if there is a way and this is like you know call it wherever but well the fact

1005
01:03:45,377 --> 01:03:50,657
that we naturally have a nervous system that produces pain and pleasure that makes us human

1006
01:03:50,657 --> 01:03:56,818
that makes us say this is good this is bad and and we behave in ways that are exist from that

1007
01:03:56,818 --> 01:04:01,677
reward mechanism so if we can produce you know some sort of whether it's directly that or something

1008
01:04:01,677 --> 01:04:08,078
akin to that in decision making and then you know and it's and it's consuming its own data in the

1009
01:04:08,078 --> 01:04:12,418
real world like we do and not just the data that's being force fed to it. Now we're talking

1010
01:04:12,418 --> 01:04:16,758
about an independent person basically with its own motivations that are determined by pain and

1011
01:04:16,758 --> 01:04:25,258
pleasure systems. Um, so will that come? Yeah, but I'm not, I'm not too concerned about any of that

1012
01:04:25,258 --> 01:04:29,957
happening near term. And then to tie this back to what money is it going to use? It's going to use

1013
01:04:29,957 --> 01:04:34,137
the money that's most practical for the people that are leveraging the agents for what they use.

1014
01:04:34,137 --> 01:04:36,778
And I think that I don't think that's a bad thing for Bitcoin.

1015
01:04:37,038 --> 01:04:41,338
I think that stable coins are very obvious.

1016
01:04:41,338 --> 01:04:43,598
And like all the VCs are like stable coins and money of AI,

1017
01:04:43,698 --> 01:04:44,558
stable coins and money of AI,

1018
01:04:44,618 --> 01:04:45,758
because we own stable coin companies.

1019
01:04:46,038 --> 01:04:52,098
And obviously it's true that it is in a lot of different ways.

1020
01:04:52,657 --> 01:04:58,898
But when we pair this with the global geopolitical environment

1021
01:04:58,898 --> 01:05:00,118
that we've been talking about this whole episode,

1022
01:05:00,118 --> 01:05:02,738
and we say fractured system,

1023
01:05:02,738 --> 01:05:08,338
Some people want to use commodities, et cetera. It's like, okay, and then why

1024
01:05:08,338 --> 01:05:13,538
would large scale institutions, whether it's through AI or themselves directly

1025
01:05:13,938 --> 01:05:20,738
want to use money that can be blacklisted and censored? We basically like it.

1026
01:05:21,338 --> 01:05:25,538
That's what tether is tether something that it's blacklisted and censored and

1027
01:05:25,538 --> 01:05:31,137
that isn't solving a very like very important problem for international

1028
01:05:31,137 --> 01:05:35,457
money transfer because it isn't final settlement a stable coin is not final

1029
01:05:35,457 --> 01:05:40,438
settlement it's settlement of receipt that is effectively backed by the

1030
01:05:40,438 --> 01:05:46,258
reserves of a company like tether which are you know holdings in US cash and

1031
01:05:46,258 --> 01:05:52,438
cash equivalents and golden Bitcoin which is sweet but but nonetheless like

1032
01:05:52,438 --> 01:05:58,377
that that is not a revolutionary system that's not something where if I'm trying

1033
01:05:58,377 --> 01:06:02,278
operate independently within an economy, whether I'm a large scale sovereign

1034
01:06:02,278 --> 01:06:06,877
that has a conflict of interest with the US or if I'm, you know, an individual

1035
01:06:06,877 --> 01:06:10,677
person who wants to freely conduct what I'm doing.

1036
01:06:12,377 --> 01:06:16,278
That's not valuable. On top of that, I I'm expecting that and I think it'll

1037
01:06:16,278 --> 01:06:20,078
take a long time. I'm expecting that there's going to be like a credential

1038
01:06:20,078 --> 01:06:23,977
layer that starts getting added to stable coins and like that's what makes

1039
01:06:23,977 --> 01:06:27,977
people want to use stable coins in Bitcoin today when they're with an agent.

1040
01:06:27,977 --> 01:06:33,098
is it doesn't require credentials. And I was making this point on X that any sort of system

1041
01:06:33,098 --> 01:06:37,498
that doesn't require credentials is the agent type of system. Yeah. Because when you go play

1042
01:06:37,498 --> 01:06:41,818
with these agents, you're like, oh, damn it. Like I got to go get an email to use this shit.

1043
01:06:41,898 --> 01:06:45,538
They're like, what's the thing where I don't have to get an email and I don't have to have

1044
01:06:45,538 --> 01:06:49,918
all these credentials just to use a software app. And whether if that doesn't exist today,

1045
01:06:50,038 --> 01:06:53,618
there's going to be a whole economy of it that does eventually. And we're starting to already

1046
01:06:53,618 --> 01:06:57,718
see that happen and it's happening at a rapid pace. So there's like an agent economy emerging

1047
01:06:57,718 --> 01:06:59,218
that doesn't require credentials.

1048
01:06:59,638 --> 01:07:01,258
That is an interesting case for Noster.

1049
01:07:01,457 --> 01:07:01,818
Totally.

1050
01:07:02,138 --> 01:07:03,718
And that's what's really cool about Noster

1051
01:07:03,718 --> 01:07:06,238
is I think that the non-credentialed version

1052
01:07:06,238 --> 01:07:07,798
of pseudonyms under-

1053
01:07:07,798 --> 01:07:09,058
You just give them a public-private keypad

1054
01:07:09,058 --> 01:07:09,677
and off you go.

1055
01:07:09,758 --> 01:07:10,758
Boom, it's easy.

1056
01:07:10,898 --> 01:07:12,558
And there's all these other startups being like,

1057
01:07:12,618 --> 01:07:16,438
here, let's use these old email-based protocol systems

1058
01:07:16,438 --> 01:07:17,338
to conduct this.

1059
01:07:17,418 --> 01:07:18,718
And just like, dude, this system's-

1060
01:07:18,718 --> 01:07:19,957
It's fundamentally better.

1061
01:07:20,078 --> 01:07:20,477
It's flatter.

1062
01:07:20,598 --> 01:07:20,977
It's simpler.

1063
01:07:22,078 --> 01:07:23,857
It allows agents to operate in a certain way.

1064
01:07:23,998 --> 01:07:24,998
So that could be-

1065
01:07:24,998 --> 01:07:26,558
I remember when Dorsey was making the point

1066
01:07:26,558 --> 01:07:27,758
about Nostra after it took off.

1067
01:07:27,778 --> 01:07:28,877
He's like, look, it's a hobbyist thing

1068
01:07:28,877 --> 01:07:29,857
that we care about today.

1069
01:07:30,477 --> 01:07:32,278
I believe there's some sort of use case coming.

1070
01:07:32,398 --> 01:07:33,177
I don't know what it is,

1071
01:07:33,258 --> 01:07:34,957
but there will be some sort of use case coming.

1072
01:07:35,078 --> 01:07:36,758
It's like, this could be it.

1073
01:07:36,857 --> 01:07:37,698
That would be super cool.

1074
01:07:37,977 --> 01:07:38,998
So the hard thing is like,

1075
01:07:39,398 --> 01:07:41,477
whenever you talk to like your AI,

1076
01:07:41,598 --> 01:07:42,818
whichever LM you use,

1077
01:07:43,118 --> 01:07:44,157
like it knows about you.

1078
01:07:44,238 --> 01:07:45,638
So like mine knows that I'm into Bitcoin

1079
01:07:45,638 --> 01:07:47,018
because I talk to about it all the time.

1080
01:07:47,558 --> 01:07:50,298
So if I ask it to try and give me like an unbiased take

1081
01:07:50,298 --> 01:07:51,857
on what the best form of money is,

1082
01:07:51,977 --> 01:07:53,377
it's probably going to come back with Bitcoin.

1083
01:07:53,998 --> 01:07:55,718
But I know BPI just did a report on this

1084
01:07:55,718 --> 01:07:58,898
and it was saying like AI overwhelmingly picks Bitcoin

1085
01:07:58,898 --> 01:08:01,018
as the sort of preferred choice of money.

1086
01:08:01,018 --> 01:08:01,338
Yeah.

1087
01:08:03,698 --> 01:08:08,918
If you asked a completely unbiased, clean slate LLM that question,

1088
01:08:09,258 --> 01:08:10,718
is that an inevitable answer?

1089
01:08:10,918 --> 01:08:13,338
Because like they can't pick gold, they can't use gold.

1090
01:08:13,598 --> 01:08:14,818
Like there has to be something digital

1091
01:08:14,818 --> 01:08:17,018
and Bitcoin obviously in our opinion

1092
01:08:17,018 --> 01:08:19,718
and I think the facts are on our side is the best form of money.

1093
01:08:21,058 --> 01:08:24,958
I think the one problem,

1094
01:08:24,958 --> 01:08:29,438
the one reason that i think in an unbiased way that you would want to use something like a stable

1095
01:08:29,438 --> 01:08:36,558
coin is just simply acceptability like that's that's the number one reason that and that's that's

1096
01:08:36,558 --> 01:08:43,998
the best problem to have like that we all own a stake in bitcoin um and we benefit from it growing

1097
01:08:43,998 --> 01:08:49,357
i love the fact that we're early into bitcoin i love the fact that it's not as accepted yet because

1098
01:08:49,357 --> 01:08:53,998
that gives me the ability to invest in more people that will accept it over time that's the edge

1099
01:08:53,998 --> 01:09:01,178
That's the edge. So it's the best possible problem. I think the last time I was on this podcast, I was making the point.

1100
01:09:01,277 --> 01:09:05,538
It's like being able to invest in LeBron James's career when he was in high school.

1101
01:09:05,917 --> 01:09:10,998
It's just like everything else is there. All the fundamentals, all the characteristics you want. It's just early and young.

1102
01:09:12,118 --> 01:09:18,458
So that's ideal, but it does make it, I think, a less desirable form of money for an AI today. And that's fine.

1103
01:09:18,458 --> 01:09:23,678
let them let's get everything set up on stable coin rails and then all of a sudden we have an

1104
01:09:23,678 --> 01:09:27,297
entire economy running on stable coin rails that everybody wants to use because everybody wants to

1105
01:09:27,297 --> 01:09:31,218
use agents for everything so we're going to watch this whole shift into commerce happening through

1106
01:09:31,218 --> 01:09:36,718
that type of economy and guess what it's using it's using payments where you are producing a

1107
01:09:36,718 --> 01:09:43,518
signature you're producing a signature that's verifying your digital address you're using

1108
01:09:43,518 --> 01:09:48,357
digital signatures to sign payments. That's like, that's the rail. That's the new economy.

1109
01:09:49,058 --> 01:09:52,218
Sure. It's some sort of stable coin that's issued on a bunch of different types of blockchains.

1110
01:09:52,938 --> 01:09:57,737
But the reality is, is we're getting everybody away from taking a credit card and typing the

1111
01:09:57,737 --> 01:10:06,218
number of the credit card in to digital signature button. And, and that means that it is this easy

1112
01:10:06,218 --> 01:10:11,578
to start paying in Bitcoin. And that's all that matters because now we've just opened the flood

1113
01:10:11,578 --> 01:10:17,678
So if we have a huge, um, we have a very wide transition of capital into this agent type

1114
01:10:17,678 --> 01:10:20,237
economy and everybody's leveraging stable coins.

1115
01:10:20,357 --> 01:10:27,658
I just view that as one of the largest, uh, um, that is going to be one of the largest

1116
01:10:27,658 --> 01:10:33,058
ways to open access to commerce and capital within this system.

1117
01:10:33,058 --> 01:10:36,857
And this is, this is like a broader point for, I think the way that I view Bitcoin adoption,

1118
01:10:36,857 --> 01:10:44,998
that's gotten more nuanced over the years is just when we say we're still early, it's like,

1119
01:10:45,357 --> 01:10:50,377
okay, so what makes us late? What creates that environment of where things are actually late?

1120
01:10:50,498 --> 01:10:55,998
When do we cross the chasm? When do we cross the chasm? What needs to exist are avenues,

1121
01:10:55,998 --> 01:11:00,277
because what does Bitcoin need? Bitcoin needs capital to flow into it. How do we get capital

1122
01:11:00,277 --> 01:11:04,277
to flow into it? Well, there's a litany of areas around the world where capital exists.

1123
01:11:04,277 --> 01:11:07,938
how do we ingrain that into Bitcoin? This agent economy example could be a major one.

1124
01:11:08,538 --> 01:11:14,237
But if we go and we isolate, what are the largest capital pools? And how do we get institutions,

1125
01:11:15,078 --> 01:11:23,158
regulations, leadership, all of these different variables that impact whether or not it's easy

1126
01:11:23,158 --> 01:11:29,337
for that capital to move in and out of Bitcoin? That's the step that we're all fighting right now.

1127
01:11:29,777 --> 01:11:33,058
You know, that's what's valuable about what all these treasury companies are doing,

1128
01:11:33,058 --> 01:11:35,218
is that they're fighting in capital markets.

1129
01:11:35,218 --> 01:11:37,518
They're creating more capital access towards Bitcoin.

1130
01:11:37,718 --> 01:11:39,398
It's not in the way that everybody would want

1131
01:11:39,398 --> 01:11:40,737
in like Bitcoin world.

1132
01:11:41,277 --> 01:11:41,658
Guess what?

1133
01:11:41,718 --> 01:11:42,658
There's more of that coming

1134
01:11:42,658 --> 01:11:44,477
because there's a lot more pools of capital

1135
01:11:44,477 --> 01:11:46,417
and there's a lot more other people that are going to fight

1136
01:11:46,417 --> 01:11:48,417
and they're going to make money off of it

1137
01:11:48,417 --> 01:11:49,917
because they're spending hours of their time.

1138
01:11:50,297 --> 01:11:51,598
And if they didn't make money off of it,

1139
01:11:51,638 --> 01:11:52,277
that would suck

1140
01:11:52,277 --> 01:11:54,098
because then people aren't going to do it.

1141
01:11:54,158 --> 01:11:55,477
We're not going to get the access to the capital.

1142
01:11:56,237 --> 01:11:57,377
And so that's the idea

1143
01:11:57,377 --> 01:11:59,078
is we're creating avenues for people

1144
01:11:59,078 --> 01:12:00,777
to ultimately say,

1145
01:12:00,898 --> 01:12:02,977
if you want to transfer this to Bitcoin,

1146
01:12:02,977 --> 01:12:08,797
it's easy. And getting people on digital signature payments is like massive for the money global

1147
01:12:08,797 --> 01:12:12,598
vision of Bitcoin and the economy over time. So if you take into account the fact that

1148
01:12:12,598 --> 01:12:17,297
there's going to be a really rough interim period if AI does start replacing jobs in a meaningful

1149
01:12:17,297 --> 01:12:22,398
way, on the other side of that, we have AI agents potentially using Bitcoin, that becoming its whole

1150
01:12:22,398 --> 01:12:30,038
new economy. Is AI the way that we move to hyper-Bitcoinization? I could see what I think.

1151
01:12:30,038 --> 01:12:51,078
So we've, yeah, to answer it in short form, yes, I think it's a major catalyst. And I think we've kind of answered this like productivity side of it, right? There's a few other interesting things about it. Well, we've answered productivity. We've talked about here's how it could restructure the way an organization works.

1152
01:12:51,078 --> 01:12:58,977
I think one of the last very interesting inflection points is what it's going to do to open source software.

1153
01:13:00,277 --> 01:13:02,118
Well, everything is going to have to be open source.

1154
01:13:02,297 --> 01:13:02,737
Exactly.

1155
01:13:03,258 --> 01:13:07,078
And it's not going to matter as much anymore because proprietary software is just not that valuable anymore.

1156
01:13:07,638 --> 01:13:13,737
So that's interesting because open source has always been valuable for X, Y, and Z reasons.

1157
01:13:13,737 --> 01:13:26,458
But it's had a bit of a tragedy of the commons that always existed, where you had a very, very small number of developers that were pushing the vast majority of the most impactful open source projects.

1158
01:13:26,678 --> 01:13:32,218
And then a bunch of other people that just kind of, you know, are like barnacles on the ship.

1159
01:13:32,297 --> 01:13:33,417
They're just kind of leaning on them.

1160
01:13:34,198 --> 01:13:37,518
And it always felt like a very hobbyist, like ethical thing to do.

1161
01:13:37,718 --> 01:13:38,218
Hobbyist ethical.

1162
01:13:38,458 --> 01:13:39,118
Yeah, exactly.

1163
01:13:39,118 --> 01:13:43,518
It wasn't something where we had some, here's some persistent growing business model around this.

1164
01:13:43,737 --> 01:13:52,737
And the question was, and the problem, because it was this natural tragedy of the commons where you have a common resource and some people consume it too much without giving back to it.

1165
01:13:53,718 --> 01:13:59,797
That was always, you needed to donate to open source and people would contribute their work.

1166
01:13:59,877 --> 01:14:00,718
And there was an incentive.

1167
01:14:00,898 --> 01:14:04,977
The incentive as a developer is like, I want to go work in a certain area of software.

1168
01:14:05,218 --> 01:14:07,538
I'm going to start contributing to open source projects.

1169
01:14:07,538 --> 01:14:09,737
in the same way where you're like,

1170
01:14:09,857 --> 01:14:11,578
if I want to be an influencer online,

1171
01:14:11,698 --> 01:14:13,357
I'm going to go give out a bunch of free content

1172
01:14:13,357 --> 01:14:14,538
until I have a million followers,

1173
01:14:14,638 --> 01:14:15,857
then I'll start making money off of it.

1174
01:14:15,857 --> 01:14:15,998
Yeah.

1175
01:14:16,198 --> 01:14:16,877
Kind of like that.

1176
01:14:17,357 --> 01:14:18,618
So that's a good incentive

1177
01:14:18,618 --> 01:14:20,758
that allowed it to be a very large thriving ecosystem,

1178
01:14:20,758 --> 01:14:23,098
but it doesn't mean that there's not an issue

1179
01:14:23,098 --> 01:14:25,317
because code is easier than shit posting,

1180
01:14:25,438 --> 01:14:27,518
you know, pictures of yourself or whatever.

1181
01:14:28,458 --> 01:14:30,297
So it wasn't quite that easy

1182
01:14:30,297 --> 01:14:31,558
because you still have to manage code bases

1183
01:14:31,558 --> 01:14:33,098
and that was kind of the problem.

1184
01:14:33,098 --> 01:14:36,578
But now that the marginal cost of production

1185
01:14:36,578 --> 01:14:39,158
for code has dropped off a cliff.

1186
01:14:39,237 --> 01:14:41,118
It's like, how does that change open source?

1187
01:14:41,377 --> 01:14:42,598
And it changes everything

1188
01:14:42,598 --> 01:14:43,958
because now the labor costs associated

1189
01:14:43,958 --> 01:14:44,958
with it's almost nil.

1190
01:14:45,078 --> 01:14:46,158
And they're creating these own like,

1191
01:14:46,518 --> 01:14:48,038
you know, there's like the agent GitHub now.

1192
01:14:48,777 --> 01:14:51,538
And agents are just kind of interacting around this.

1193
01:14:51,598 --> 01:14:52,578
But I think the reality is,

1194
01:14:52,618 --> 01:14:54,578
is like the majority of software

1195
01:14:54,578 --> 01:14:55,477
is probably just going to be like

1196
01:14:55,477 --> 01:14:56,917
an open source common resource,

1197
01:14:57,018 --> 01:14:58,958
like utility almost for people.

1198
01:14:59,917 --> 01:15:00,317
And-

1199
01:15:00,317 --> 01:15:00,638
Because if not,

1200
01:15:00,678 --> 01:15:02,038
if you have a closed source piece of software

1201
01:15:02,038 --> 01:15:03,638
that is very expensive and very valuable,

1202
01:15:03,837 --> 01:15:04,938
we're going to be,

1203
01:15:05,018 --> 01:15:06,098
if we're not already at the point,

1204
01:15:06,098 --> 01:15:10,058
And we're going to be at the point very soon where you can go to your AI agent, look at this and build at me.

1205
01:15:10,258 --> 01:15:10,538
Totally.

1206
01:15:10,777 --> 01:15:12,837
And it will just spin that up for you in a few hours.

1207
01:15:12,998 --> 01:15:13,138
Totally.

1208
01:15:13,258 --> 01:15:14,538
And like, where's it going to even like that?

1209
01:15:14,638 --> 01:15:16,018
And we think that's going to happen in a year.

1210
01:15:16,158 --> 01:15:16,357
Yeah.

1211
01:15:16,518 --> 01:15:17,518
Where's it going to be at five years?

1212
01:15:17,618 --> 01:15:18,958
We can't even, you know, we don't even know.

1213
01:15:19,337 --> 01:15:19,977
And it's like, cool.

1214
01:15:20,078 --> 01:15:22,357
So like software is just like, software is like air.

1215
01:15:22,618 --> 01:15:22,777
Yeah.

1216
01:15:22,817 --> 01:15:24,417
You know, like that's where we're heading.

1217
01:15:25,417 --> 01:15:32,837
And I think that that's cool because it actually changes the open source community, I think, in a lot of ways for the better.

1218
01:15:33,118 --> 01:15:34,718
We'll see new business models emerge.

1219
01:15:34,718 --> 01:16:01,438
The business models in open source software traditionally were like, you have some sort of like open core or like the core of the software is open. Other people are using that, but then you have extra features or you have like a freemium type model for it, or you have like a managed services. And I think that'll be the big thing is like, cool, there's going to be a ton of open source software up there. You're a business. We'll package it specifically for like your needs around something. Because like for me, I have a million things I have to do every day.

1220
01:16:01,438 --> 01:16:02,438
You just want something to work.

1221
01:16:02,538 --> 01:16:04,118
I need something to work and not think about.

1222
01:16:04,237 --> 01:16:06,477
I don't have the bandwidth to think about these things.

1223
01:16:06,558 --> 01:16:08,158
There's still going to be people doing that that are going to say,

1224
01:16:08,258 --> 01:16:11,578
like, I don't have the bandwidth to vibe code and fuck around

1225
01:16:11,578 --> 01:16:12,998
with whatever the software is.

1226
01:16:13,118 --> 01:16:14,237
But still, even in that scenario,

1227
01:16:14,237 --> 01:16:15,938
it's going to drive the cost of that software down.

1228
01:16:16,398 --> 01:16:16,658
Totally.

1229
01:16:17,198 --> 01:16:19,977
So it'll be like a lot of like consulting type businesses

1230
01:16:19,977 --> 01:16:22,877
that I think emerge around AI agents that are managing some of this.

1231
01:16:22,917 --> 01:16:25,698
And that'll be the way to monetize open source in a lot of ways.

1232
01:16:27,317 --> 01:16:29,377
So that's pretty cool.

1233
01:16:29,377 --> 01:16:34,138
I think that'll create like, what, and I think, what does that mean for productivity?

1234
01:16:35,438 --> 01:16:41,578
There's a lot of people that have made, before I used to be very pro like intellectual property

1235
01:16:41,578 --> 01:16:47,297
rights before I got involved in this industry. And then I kind of learned about the, you know,

1236
01:16:47,917 --> 01:16:52,317
a lot of the perverse incentives that exist. Like, I think when you think about the idea of like,

1237
01:16:52,337 --> 01:16:55,277
oh, if you create something, you know, the fundamental idea for property rights,

1238
01:16:55,277 --> 01:17:01,618
If you create something and you can't control it, then it's going to kill the incentive to create the thing in the first place.

1239
01:17:02,158 --> 01:17:07,538
We want to protect intellectual IP for people in the U.S. because we want people to create intellectual IP in the U.S.

1240
01:17:08,098 --> 01:17:15,797
And that the reality around how people control, gatekeep, litigate, you know, if you read into like patent trolling,

1241
01:17:15,898 --> 01:17:21,398
all these different like malincentives that come from trying to create protection over something that's hard to protect.

1242
01:17:21,398 --> 01:17:25,877
because what truly is an idea and where truly does it come from?

1243
01:17:25,977 --> 01:17:29,377
It's that gray area that leads to all these problems with intellectual property.

1244
01:17:31,398 --> 01:17:38,277
That is something that I think has created these fundamental issues

1245
01:17:38,277 --> 01:17:43,498
that over the long term have been less than desirable,

1246
01:17:43,498 --> 01:17:45,558
but there's never been an easy answer for it.

1247
01:17:46,377 --> 01:17:48,998
And at least as it relates to software,

1248
01:17:48,998 --> 01:17:53,477
we're going to answer it by kind of just eliminating the other side of the market around

1249
01:17:53,477 --> 01:17:56,797
it and saying, well, you don't really care about those property rights anymore because

1250
01:17:56,797 --> 01:18:03,218
they're not that valuable to you. So that's an interesting trend as to how I think it's really

1251
01:18:03,218 --> 01:18:07,658
going to be impacting our belief in what is a property right. And then there's all these other

1252
01:18:07,658 --> 01:18:11,797
questions around that that start to emerge as well from, well, who owns what from AI?

1253
01:18:13,178 --> 01:18:17,158
What is intellectual property when it's trained on your intellectual property? And I'm producing

1254
01:18:17,158 --> 01:18:22,377
ideas because my AI told it to me and it's just going to be far too much of a great. It's a mess.

1255
01:18:22,498 --> 01:18:29,237
Yeah. Yeah. So I think we agree on like the path. Yeah. Why does the market not agree when you look

1256
01:18:29,237 --> 01:18:35,598
at the price of Bitcoin and it's like $74,000 a month? People, people are so wrong about Bitcoin,

1257
01:18:35,598 --> 01:18:41,857
man. They are so wrong. It is awesome. Like, I love it. I didn't think it would get this low.

1258
01:18:41,857 --> 01:18:49,058
So the market doesn't agree because I think gold sucked a lot of the wind out of the sails.

1259
01:18:50,038 --> 01:18:50,758
I think that-

1260
01:18:50,758 --> 01:18:51,277
And the AI trade.

1261
01:18:51,697 --> 01:18:51,958
Yeah.

1262
01:18:52,018 --> 01:18:52,857
And the AI trade.

1263
01:18:53,158 --> 01:18:54,377
There's a ton of capital.

1264
01:18:54,377 --> 01:18:59,258
What people forget is that Bitcoin is a massive asset.

1265
01:19:00,158 --> 01:19:04,458
The culture of the buyers, I think, is still a very small minority of the world.

1266
01:19:04,458 --> 01:19:28,058
And for that reason, when you think about there's some theoretical base of potential Bitcoin investors that exist today, whether or not they own it, but would be open to owning it. And then they have a set of constraints based around what else they could own. And I think a lot of those investors come from either technology or they were gold bugs.

1267
01:19:28,058 --> 01:19:33,098
so a lot of them might have moved into gold and a lot of them probably moved into this ai trade we

1268
01:19:33,098 --> 01:19:37,518
see that in broader crypto we're like crypto is basically dying and there's just a bunch of people

1269
01:19:37,518 --> 01:19:42,258
moving into ai from all of that yeah um and because it was never really about the project

1270
01:19:42,258 --> 01:19:46,438
because it was never about the project exactly like it's it's those types of people have been

1271
01:19:46,438 --> 01:19:49,977
in that in the first place they're more like mercenaries for like where is capital today okay

1272
01:19:49,977 --> 01:19:55,118
i'll build stuff in this area yeah and um and back in 2021 it was the most heavily invested

1273
01:19:55,118 --> 01:19:59,237
venture capital industry in the world. So that's where they all showed up. Now they're going to the

1274
01:19:59,237 --> 01:20:04,737
next biggest one. We'll see where they are in another five years. So I think with those two

1275
01:20:04,737 --> 01:20:10,298
variables of AI and gold sucking the wind out of the sails, that's part of it. Uncertainty,

1276
01:20:10,298 --> 01:20:16,837
risk-off asset. There's all these things that we can say. Everybody's been trying to... I said

1277
01:20:16,837 --> 01:20:22,598
this on the last podcast. Everybody's been trying to attribute a narrative. And I think the more

1278
01:20:22,598 --> 01:20:27,658
that this year has unfolded, it's been too hard for people to. And now there's all these

1279
01:20:27,658 --> 01:20:33,817
counter narratives. It's like, Iran war starts, risk off asset, it's going up. And it's such a

1280
01:20:33,817 --> 01:20:38,798
question of scope. And it's just like- I agree that it's way too soon to say that.

1281
01:20:38,958 --> 01:20:43,058
Yeah. And it is like a question of scope, but it has been interesting to see Bitcoin go up when

1282
01:20:43,058 --> 01:20:46,938
everything else has been going down. Totally. And that makes you think,

1283
01:20:46,938 --> 01:20:51,697
it's trading from the capital flows of specific people within this.

1284
01:20:51,697 --> 01:20:58,898
So as the substitute investments change, as more people are kind of like, okay, this AI trade, it's funny.

1285
01:20:59,697 --> 01:21:04,798
Somebody posted this picture of the FTX asset ownership and how much it would be worth.

1286
01:21:04,798 --> 01:21:05,058
I sold that.

1287
01:21:05,138 --> 01:21:05,837
That was insane.

1288
01:21:05,977 --> 01:21:07,917
And they'd have made billions and billions and billions of dollars.

1289
01:21:08,078 --> 01:21:08,298
Yeah.

1290
01:21:08,377 --> 01:21:15,178
So it's just like, what happens when capital allocation and the valuations of these AI companies is based on very extreme expectations?

1291
01:21:15,377 --> 01:21:16,197
Maybe it fulfills it.

1292
01:21:16,618 --> 01:21:17,357
Maybe it's a bubble.

1293
01:21:18,158 --> 01:21:19,058
Where's that capital?

1294
01:21:19,218 --> 01:21:22,977
Where are these technology investors and gold bugs going to be rotating once they feel like

1295
01:21:22,977 --> 01:21:24,178
they're really getting to peak euphoria?

1296
01:21:24,337 --> 01:21:26,218
I think Bitcoin is a very strong answer for that.

1297
01:21:26,857 --> 01:21:30,758
And everything about the thesis for Bitcoin is playing out perfectly.

1298
01:21:31,178 --> 01:21:32,977
I'm not worried about any of that at all.

1299
01:21:33,197 --> 01:21:35,917
Credit's going to be entering the ecosystem much more in the future.

1300
01:21:36,638 --> 01:21:43,317
I think when we get into, from a regulatory standpoint, the amount of institutions under

1301
01:21:43,317 --> 01:21:49,197
of the Trump administration that have been getting, you know, federal charters, et cetera,

1302
01:21:49,197 --> 01:21:51,438
to provide financing to the industry.

1303
01:21:52,558 --> 01:21:56,877
That, well, it's been, I won't say financing, to provide financial services to the industry.

1304
01:21:56,998 --> 01:21:58,178
That's been at historic rates.

1305
01:21:58,857 --> 01:22:01,317
And, you know, we're...

1306
01:22:01,365 --> 01:22:03,045
We expect more of that to happen.

1307
01:22:03,805 --> 01:22:10,225
And that'll change the way that I think the type of credit and the expansion of that credit

1308
01:22:10,225 --> 01:22:12,365
and how it exists within Bitcoin.

1309
01:22:12,365 --> 01:22:17,045
All of these variables and what I said on the last podcast is just Bitcoin is always

1310
01:22:17,045 --> 01:22:21,145
and everywhere a major announcement away from some significant rally.

1311
01:22:21,645 --> 01:22:23,505
More central banks participating.

1312
01:22:24,185 --> 01:22:25,445
What happens as it fractures?

1313
01:22:25,685 --> 01:22:28,325
Some of these, I think it comes from Sovereign's Next.

1314
01:22:28,405 --> 01:22:30,285
I just think we're going to start seeing more and more headlines.

1315
01:22:30,285 --> 01:22:36,625
pretty simple thesis. World's fracturing. People want to own commodities. Bitcoin's LeBron James

1316
01:22:36,625 --> 01:22:42,285
in high school of commodities. And it's the only one that you can permissionlessly send with final

1317
01:22:42,285 --> 01:22:47,705
settlement in the world. Look what's happening with trade routes and settlement as we start to

1318
01:22:47,705 --> 01:22:53,145
compete against the Eastern economies. Bitcoin just makes absolute perfect sense. The only thing

1319
01:22:53,145 --> 01:22:57,945
it's limited by is the depth of liquidity in its capital market. If I go try to liquidate $100

1320
01:22:57,945 --> 01:23:02,265
billion tomorrow in Bitcoin, it's going to drastically move the market. That's not how

1321
01:23:02,265 --> 01:23:05,985
it exists within gold. Gold, you could go liquidate 100 billion in gold and you're not going to move

1322
01:23:05,985 --> 01:23:10,325
the market that much because it's the deepest, most liquid commodity asset in the world.

1323
01:23:11,065 --> 01:23:14,525
Bitcoin's getting there. Best problem to have. That's what you're investing in is,

1324
01:23:14,725 --> 01:23:18,705
will this thing that's better than gold for every other respect of its monetary characteristics

1325
01:23:18,705 --> 01:23:24,865
get as big as gold? That's your bet. That's an easy, easy bet to make. I think that's the best

1326
01:23:24,865 --> 01:23:29,105
risk-adjusted bet you can be making right now. Do you think the gold trade starts rolling over

1327
01:23:29,105 --> 01:23:34,125
into Bitcoin at some point? I find it funny that Bitcoin has been anti-gold during this,

1328
01:23:34,205 --> 01:23:36,225
right? I think it's cool because I think it's the world waking up-

1329
01:23:36,225 --> 01:23:37,205
Gold is sweet. Gold is sweet.

1330
01:23:37,405 --> 01:23:43,705
This is the world waking up to needing a non-government-issued money. And that's where

1331
01:23:43,705 --> 01:23:47,465
Bitcoin is going to fit perfectly. But do you think at some point people think the gold trade

1332
01:23:47,465 --> 01:23:51,425
might be running out of steam for now and start moving money into Bitcoin?

1333
01:23:51,425 --> 01:23:57,745
yes totally i think there's a large percentage of those people i think you know gold is kind of like

1334
01:23:57,745 --> 01:24:03,025
the uh the the blue chip you know first mover on all of it and there's going to be a bunch of people

1335
01:24:03,025 --> 01:24:08,945
that start to think like okay gold has now risen they're going to look at historical charts under

1336
01:24:08,945 --> 01:24:16,705
prior regimes of gold rallies and say gold has now risen to become um this is like a fourth standard

1337
01:24:16,705 --> 01:24:21,745
deviation outcome with how much it's it's rose proportionally over the past few years and then

1338
01:24:21,745 --> 01:24:26,385
they're gonna be like okay not the worst time to take money off the table you're gonna have your

1339
01:24:26,385 --> 01:24:31,345
like you know diehards that are diehard gold bugs and they're gonna say no why i'm gonna still be

1340
01:24:31,345 --> 01:24:37,025
right weimar yeah exactly and like and they're just gonna hold it but i mean even if it's like

1341
01:24:37,025 --> 01:24:43,665
if let's say gold doubles over the next two years now we're talking about a 60 trillion dollar asset

1342
01:24:43,665 --> 01:24:51,825
that's massive what if one percent of that you know moves into bitcoin that's 600 billion

1343
01:24:51,825 --> 01:24:55,485
on a two trillion dollar asset that's massive what if 10 of that moves into bitcoin

1344
01:24:55,485 --> 01:25:02,325
um that's six trillion that's three times the current size of the bitcoin or that's sorry

1345
01:25:02,325 --> 01:25:06,805
bitcoin's at a trillion right now i'm forgetting 1.3 or something yeah that's how cheap it is

1346
01:25:06,805 --> 01:25:11,605
it's at 1.3 so it's like six times the current size of bitcoin's market cap and it doesn't mean

1347
01:25:11,605 --> 01:25:16,065
a six times increase because it's all marginal right exactly and it's marginal so who knows how

1348
01:25:16,065 --> 01:25:19,665
high it could go because what if people really just don't like to sell bitcoin a lot of people

1349
01:25:19,665 --> 01:25:27,485
really don't um so i i look at these numbers that's just that's the gold market let's look at

1350
01:25:27,485 --> 01:25:32,925
like sovereign wealth you know let's look at the size of like private capital assets like oh you go

1351
01:25:32,925 --> 01:25:37,825
talk to all these ras around the world right now in the u.s i go to these meetings all the time you

1352
01:25:37,825 --> 01:25:43,705
talk to these people. And all I do is sit there and, you know, just orange bill these guys. Um,

1353
01:25:44,205 --> 01:25:48,585
it's always like Socratic seminar is what I have with them, where I just start asking them

1354
01:25:48,585 --> 01:25:52,605
questions and point out contradictions and their beliefs against Bitcoin. That's the best way I

1355
01:25:52,605 --> 01:25:58,305
think to get people open-minded about it. Um, and you do that enough and just literally none of them

1356
01:25:58,305 --> 01:26:03,205
understand this and they get there. I mean, I was just this past weekend with a few finance people

1357
01:26:03,205 --> 01:26:10,465
and they just started like trying to drill me and after an hour they're like oh like i you know light

1358
01:26:10,465 --> 01:26:15,185
bulbs around a room and and it's just everywhere still i see it all the time on the ground if

1359
01:26:15,185 --> 01:26:19,585
you know what i'm looking at as representative of it there's a reason that such a few percentage of

1360
01:26:19,585 --> 01:26:27,005
portfolios are still in it um the pools of capital and that are you know 20 trillion or whatever

1361
01:26:27,005 --> 01:26:32,525
that's in private assets and like 100 trillion that's in like more like global like or sorry uh

1362
01:26:32,525 --> 01:26:36,125
private wealth like that is

1363
01:26:36,125 --> 01:26:53,482
these numbers are so large They not worth talking about It really why I don spend much time thinking about the precision around them I just know there a bunch of massive numbers out there Um so many of them don get Bitcoin yet And the ones that probably do get Bitcoin haven allocated everything just because it a bit too

1364
01:26:53,482 --> 01:26:59,302
small for a lot of what that allocation would be. All it takes is, you know, another rally like we

1365
01:26:59,302 --> 01:27:04,262
see. And then, you know, once Bitcoin gets into the five to trillion market cap range, that's when

1366
01:27:04,262 --> 01:27:09,002
it starts to become okay. A lot larger organizations can take pretty large positions in it without

1367
01:27:09,002 --> 01:27:16,322
moving the market. That's when it starts to catalyze more towards a larger asset. That

1368
01:27:16,322 --> 01:27:20,542
could be the suddenly moment. Yeah. So you think this is like golden opportunity, excuse

1369
01:27:20,542 --> 01:27:25,342
the pun to buy Bitcoin where it, like when I look at the price of Bitcoin right now,

1370
01:27:25,342 --> 01:27:31,942
I'm like, this is as good value as it's crazy. Like 70 K doesn't seem expensive anymore. I

1371
01:27:31,942 --> 01:27:36,002
look at this now is like, this is cheap Bitcoin. It's awesome. It's awesome. Yeah. It's such

1372
01:27:36,002 --> 01:27:42,102
it's such a good time to be getting in. And I can't, when you, if you try to take, it's just

1373
01:27:42,102 --> 01:27:49,642
like, okay, let's not be ideologues here. Let's assess what could destroy Bitcoin. What would be

1374
01:27:49,642 --> 01:27:53,222
fundamentally against its structural narrative? What are the things that could like, you know,

1375
01:27:53,262 --> 01:27:58,462
kill off any of this thesis? And that would either be it not working the way that it used to,

1376
01:27:58,542 --> 01:28:04,822
or some sort of new, better thing emerging. Crypto spent, you know, however many, over a

1377
01:28:04,822 --> 01:28:08,422
decade trying to say that they could do that they can't do that hundreds of thousands of attempts

1378
01:28:08,422 --> 01:28:15,622
yeah um you know billions and billions of dollars in funding dead uh wrong because people think it's

1379
01:28:15,622 --> 01:28:20,902
facebook and myspace wrong you know bitcoin is a protocol at the beginning with the first mover

1380
01:28:20,902 --> 01:28:25,462
advantage it can't be replicated once people finally get around to that is when they understand

1381
01:28:25,462 --> 01:28:33,862
how to look at this industry and now that we're in this position it's like um you know with the

1382
01:28:33,862 --> 01:28:39,322
competition, you know, piece pretty much being gone. Um, and then it just like, okay, well,

1383
01:28:39,322 --> 01:28:42,962
what's, what's something that could destroy how it works. I do believe it is pretty prevalent

1384
01:28:42,962 --> 01:28:46,962
within the investment community on the quantum narrative. A hundred percent. Um, I, I was

1385
01:28:46,962 --> 01:28:52,682
skeptical of it at first, simply because I wasn't spending a ton of time talking with people at

1386
01:28:52,682 --> 01:28:56,302
that point. I think we should be clear that this is the narrative is prevalent, not the threat is

1387
01:28:56,302 --> 01:29:01,122
narrative is prevalent. Yeah. Uh, yeah. Sorry to the Bitcoin or commenters in this episode that

1388
01:29:01,122 --> 01:29:05,562
are going to go off if i say that but but the reality is is like for me talking to people in

1389
01:29:05,562 --> 01:29:12,802
trad fi um you know i i i was just on a few calls over the past week where you know like how it works

1390
01:29:12,802 --> 01:29:15,942
is like investors will look at me as like an expert and they'll want to like talk with me like

1391
01:29:15,942 --> 01:29:20,782
what do you think about this in bitcoin what do you think about that in bitcoin um quantum something

1392
01:29:20,782 --> 01:29:27,182
that people ask yeah quantum something that is it's prevalent not just in bitcoin it's prevalent

1393
01:29:27,182 --> 01:29:31,982
outside of this is being driven by the likes of the chmats and who won't shut up about the quantum

1394
01:29:31,982 --> 01:29:35,702
yeah and then they and then yeah you have these big voices for all these like trad fi people that

1395
01:29:35,702 --> 01:29:40,022
like listen to the all-in podcast and whatnot and they ask all the same questions that those guys

1396
01:29:40,022 --> 01:29:44,322
talk about and then those guys just talk about things that pump their bags yeah it's awesome

1397
01:29:44,322 --> 01:29:48,822
they are like puppeteering a bunch of large people in capital like yeah it's large capital

1398
01:29:48,822 --> 01:29:55,242
pools that they puppeteer with their narratives and um and i think that uh yeah i mean there's

1399
01:29:55,242 --> 01:29:59,642
there's much more intelligent people. We, we, we wrote in our annual report, a section on quantum

1400
01:29:59,642 --> 01:30:04,202
that got a ton of attention from Tradify people. So what is your take on that? Cause like for me,

1401
01:30:04,202 --> 01:30:09,602
I've done a couple of shows on it. Um, I'm skeptical that the threat is even real in the

1402
01:30:09,602 --> 01:30:15,362
next, you know, short period of time at some point potentially. Um, but if that threat ever

1403
01:30:15,362 --> 01:30:18,502
comes into existence, we're going to have plenty of warning and there's things we can do to

1404
01:30:18,502 --> 01:30:23,242
mitigate it. But like, what's your take on it? The, the threat is just people are comparing what

1405
01:30:23,242 --> 01:30:25,682
they call on quantum Nevin's law to Moore's law.

1406
01:30:25,862 --> 01:30:26,042
Yep.

1407
01:30:26,282 --> 01:30:28,062
And explain what that is for people.

1408
01:30:28,142 --> 01:30:28,282
Yeah.

1409
01:30:28,322 --> 01:30:32,222
So like Moore's law was just this belief that we're going to, you know, getting an exponentially

1410
01:30:32,222 --> 01:30:36,002
greater degree of efficiency in computing hardware over time.

1411
01:30:36,402 --> 01:30:38,142
But it wasn't, it wasn't a belief.

1412
01:30:38,142 --> 01:30:40,122
It was an observed historical reality.

1413
01:30:40,402 --> 01:30:40,622
Yep.

1414
01:30:41,202 --> 01:30:46,722
Where 256 bit became 128, became 64, became 32, et cetera.

1415
01:30:46,882 --> 01:30:51,802
And we kind of like witnessed that efficiency stemming from lithography within semiconductors.

1416
01:30:51,802 --> 01:30:58,942
and so that's cool um and then people are like nevin's law is that quantum is going to follow

1417
01:30:58,942 --> 01:31:02,942
the same rate of efficiency being found and one's an observation one's a projection

1418
01:31:02,942 --> 01:31:11,742
right one's an observation one is yeah it like it's a projection and it's a it's like a narrative

1419
01:31:11,742 --> 01:31:17,802
you know um but all like i guess we'll put that aside but nonetheless like there there's kind of

1420
01:31:17,802 --> 01:31:21,602
a false comparison i think that's being made within how the expectations of growth are going

1421
01:31:21,602 --> 01:31:35,840
to be happening within quantum And I think that with that there these degrees there there drivers that they look at to say that drivers are not the same thing as outcomes

1422
01:31:35,840 --> 01:31:40,520
You know, I can look at things and I can say they're, they're, they're very like deterministic

1423
01:31:40,520 --> 01:31:42,560
relationships in the world that we can look at.

1424
01:31:42,560 --> 01:31:50,700
And I can say that like, you know, if I drink 50 beers, I'm going to be in a hospital, you

1425
01:31:50,700 --> 01:31:54,260
know, like we know that's a pretty deterministic outcome for the most part within the small

1426
01:31:54,260 --> 01:31:59,940
margin of error. Um, and then there's very, like, there's some relationships that we aren't

1427
01:31:59,940 --> 01:32:05,060
sure what that relationship is. And I think when we were looking at, um, these relationships

1428
01:32:05,060 --> 01:32:10,1000
of quantum bits of qubits, um, and then the different types, those are kind of the drivers

1429
01:32:10,1000 --> 01:32:17,660
that people are saying represent what is the ability of a quantum computer to conduct factorization

1430
01:32:17,660 --> 01:32:22,520
and factorization is the output. That's what's scary. That's what could undermine cryptography.

1431
01:32:23,240 --> 01:32:31,680
So people are saying if the rate of creation in qubits, specifically logical qubits gets high

1432
01:32:31,680 --> 01:32:36,080
enough that factorization will be large. And I don't think we've gotten very high in terms of

1433
01:32:36,080 --> 01:32:40,720
logical, but we have in physical. And I think it's like, so physical qubits are growing,

1434
01:32:40,720 --> 01:32:46,040
then eventually logical qubits are going to grow. And then eventually we're going to get

1435
01:32:46,040 --> 01:32:48,380
to some sort of larger degree of factorization,

1436
01:32:48,460 --> 01:32:49,380
but there's one more variable.

1437
01:32:49,1000 --> 01:32:53,720
And the other variable is the rate of error

1438
01:32:53,720 --> 01:32:56,740
as you scale a quantum computer's factorization.

1439
01:32:57,400 --> 01:32:58,860
And that's something where

1440
01:32:58,860 --> 01:33:03,060
there could be a very big fundamental issue

1441
01:33:03,060 --> 01:33:04,660
if we can't get that figured out.

1442
01:33:04,660 --> 01:33:05,600
Because it basically means

1443
01:33:05,600 --> 01:33:09,100
that as you conduct higher volume

1444
01:33:09,100 --> 01:33:11,740
over time of a quantum's calculation,

1445
01:33:12,320 --> 01:33:15,720
that the error rates will increase almost...

1446
01:33:15,720 --> 01:33:18,620
I won't say exponentially, but the error rate increases over time.

1447
01:33:18,680 --> 01:33:22,240
So like the more you want to go after bigger numbers, the greater your degree of error.

1448
01:33:22,340 --> 01:33:24,180
It's the opposite of what you want.

1449
01:33:25,120 --> 01:33:31,020
And so with that problem, it's like I think the statistical relationship would be like heteroscedasticity.

1450
01:33:31,100 --> 01:33:33,560
It gets more variable over time and continues to spread.

1451
01:33:34,240 --> 01:33:38,540
And I think that that problem is something that would certainly need to be solved.

1452
01:33:38,540 --> 01:33:44,500
It really makes the argument that even if we do see all this qubit productivity, if they can't solve this,

1453
01:33:44,500 --> 01:33:50,400
This could be, you know, devastating to the future productivity of quantum in terms of factorization.

1454
01:33:50,840 --> 01:33:53,040
So then the question is, well, where are we today?

1455
01:33:54,540 --> 01:33:57,420
Today, quantum computers can't factor above like 21.

1456
01:33:57,780 --> 01:33:58,880
Do you know the crazy thing about that?

1457
01:33:58,960 --> 01:33:59,780
Do you know when they did that?

1458
01:33:59,980 --> 01:34:00,220
Hmm.

1459
01:34:00,320 --> 01:34:00,680
2012.

1460
01:34:01,600 --> 01:34:02,040
Oh, okay.

1461
01:34:02,060 --> 01:34:02,980
I did not know that.

1462
01:34:02,980 --> 01:34:06,900
So they factored 21 in 2012 and they've not improved since then.

1463
01:34:07,160 --> 01:34:07,300
Right.

1464
01:34:07,420 --> 01:34:09,340
So that's output, right?

1465
01:34:09,500 --> 01:34:10,820
Like that's okay.

1466
01:34:10,940 --> 01:34:11,620
If that was 20.

1467
01:34:11,620 --> 01:34:15,260
and there's some like weird nuance in that where they factored larger numbers but they were like

1468
01:34:15,260 --> 01:34:21,760
basically told the solution so people put higher numbers on that but there's not actually it doing

1469
01:34:21,760 --> 01:34:25,920
it from start to finish i think with them saying being told the solution that was actually with a

1470
01:34:25,920 --> 01:34:30,060
much larger number that it quote-unquote factored yeah so like that was being used to say like no

1471
01:34:30,060 --> 01:34:34,160
they've actually broken the digital signatures of some like very low grade old forms of

1472
01:34:34,160 --> 01:34:38,940
cryptography whatever that number required to factor was i can't recall actually true but in

1473
01:34:38,940 --> 01:34:43,580
the reality behind it was, is like, okay, well, classical computers are actually much better at

1474
01:34:43,580 --> 01:34:47,760
all these other things than quantum computers. So we can kind of set up a lot of the variables

1475
01:34:47,760 --> 01:34:53,700
of the problems using these computers. And then given those things being done by classical computers

1476
01:34:53,700 --> 01:35:00,620
and we feed them into a quantum computer, um, that got to this, uh, uh, factorization that

1477
01:35:00,620 --> 01:35:04,240
broke this cryptographic signature, but it was kind of like giving it the answers in advance,

1478
01:35:04,240 --> 01:35:10,840
basically. So I don't know enough to like a pine on every detail about that, but I do know that

1479
01:35:10,840 --> 01:35:15,840
nobody takes that seriously. And the reality is, is like the hard number I didn't know is in 2012,

1480
01:35:16,020 --> 01:35:20,740
but like, I mean, that's what AI told me. I think that's right. So like, but the point is, is like

1481
01:35:20,740 --> 01:35:27,860
the outputs of it are low. So if, you know, if you're telling me like you're, you know,

1482
01:35:27,860 --> 01:35:34,360
some sort of like genius CEO and I should partner with you. And then, you know, I talk to you and

1483
01:35:34,360 --> 01:35:38,580
you don't know the first thing about how to strategize about a business, then I'm not going

1484
01:35:38,580 --> 01:35:42,500
to take you that seriously. If you tell me, well, I've been reading a lot of books or I've been

1485
01:35:42,500 --> 01:35:47,060
getting a lot of experience and all these things. I'm like, that's great. You know, talk to me when

1486
01:35:47,060 --> 01:35:50,760
you have a little bit more experience and strategy, and then I'll see what the outcome is.

1487
01:35:52,440 --> 01:35:57,500
That's something that that's kind of how I view a lot of this. Is it like, I get the argument of

1488
01:35:57,500 --> 01:36:01,720
the purveyors who are like, this is a legitimate concern. This is something that we should be

1489
01:36:01,720 --> 01:36:19,237
talking about and getting into Completely agree Let do that But I think when we get to not only here where we at with the risk today the expectations for how that could evolve and what the potential solutions are for it and how we can plan around that as it specifically relates to Bitcoin

1490
01:36:21,037 --> 01:36:26,717
I'm not particularly concerned. The biggest concern about Bitcoin not adjusting to quantum

1491
01:36:26,717 --> 01:36:33,017
security isn't really that we can't adjust it to a form of quantum security. It's that the form

1492
01:36:33,017 --> 01:36:37,937
that we adjusted to could be premature if we do it too quickly. And that's a major issue.

1493
01:36:38,277 --> 01:36:42,637
And that's what's hard with the narrative as well. If people are unsure about Bitcoin because

1494
01:36:42,637 --> 01:36:45,697
of the quantum threat and they ask a Bitcoin and the answer is very nuanced, it's like, well,

1495
01:36:45,937 --> 01:36:50,117
maybe these things exist in the future. If they do, we have mitigating solutions,

1496
01:36:50,377 --> 01:36:54,017
but we don't know what they are yet because between now and then they might get much better.

1497
01:36:54,157 --> 01:36:58,817
So we can't say definitively what the answer is. And then it's like, yeah, but this guy over here

1498
01:36:58,817 --> 01:37:02,597
said quantum is going to break Bitcoin. It's like, that's an easy narrative. Whereas the nuanced

1499
01:37:02,597 --> 01:37:07,477
narrative is like, we will be okay. We just can't tell you exactly what the answer is today.

1500
01:37:07,897 --> 01:37:12,037
Totally. Yeah, exactly. We don't know what would be the most efficient because there's a fundamental

1501
01:37:12,037 --> 01:37:18,517
trade-off. If we have current signature schemes that exist within Bitcoin, if we implement a

1502
01:37:18,517 --> 01:37:27,297
quantum resistant signature scheme, then that is a much less efficient scheme. So it's more data

1503
01:37:27,297 --> 01:37:32,497
intensive. And because we have fixed block size for good reason, it's going to fill more blocks.

1504
01:37:32,597 --> 01:37:39,537
which means that the throughput of the Bitcoin L1 is going to be less. And that trade-off,

1505
01:37:39,837 --> 01:37:43,657
if we were to wait, let's say, let's assume a scenario where quantum isn't a problem for the

1506
01:37:43,657 --> 01:37:51,417
next 30 years. And maybe 10 years from now, we say, okay, quantum resistant signature schemes

1507
01:37:51,417 --> 01:37:55,797
are some sort of mathematical breakthrough. They're so hyper-efficient. It makes zero sense.

1508
01:37:55,897 --> 01:37:58,677
They're just as efficient in the prior signature schemes. Let's not wait. Let's just do it now.

1509
01:37:58,677 --> 01:38:01,457
Let's not wait. Let's do it now. That's something that'll get through consensus.

1510
01:38:01,457 --> 01:38:19,077
Like that's something where people are like, duh, no brainer. The big risk is what does Bitcoin consensus look like in a decade? That's the other side of that argument. Because we don't know. Bitcoin consensus is a empirically observed experiment that we're all trying to decipher right now.

1511
01:38:19,077 --> 01:38:32,737
So we don't know what that would be, but the belief is that simply it should work in a way to where if all the interests are pretty aligned or the vast majority of interests are aligned on something and it has no cost, then it should exist.

1512
01:38:33,017 --> 01:38:34,897
And that'll be pretty simple when it's not debatable.

1513
01:38:35,637 --> 01:38:37,557
And we're simply just not there yet.

1514
01:38:37,677 --> 01:38:46,257
If there was a very legitimate threat of quantum computers within the next year or so, we have backup plans to protect coins and things like that.

1515
01:38:46,257 --> 01:38:56,877
If you read the report from Chaincode Labs, they kind of break down two different time horizons of next two years plan and then next seven years plan for the long-term solution around signatures.

1516
01:38:57,417 --> 01:38:58,537
And I think that's fair.

1517
01:38:58,677 --> 01:39:03,437
And I think it's legitimate to look at and to check out BIP 360 and some of the stuff they're working on.

1518
01:39:05,397 --> 01:39:11,157
But it's just not the most – it's totally overblown.

1519
01:39:11,157 --> 01:39:22,937
And I think in the investment community, if you're trying to like look at the what could destroy Bitcoin tomorrow, that this isn't the primary concern to be thinking about.

1520
01:39:23,457 --> 01:39:26,657
I think it's FUD doesn't go away.

1521
01:39:26,917 --> 01:39:27,697
It just changes.

1522
01:39:28,117 --> 01:39:28,737
FUD doesn't go away.

1523
01:39:28,777 --> 01:39:29,397
It just changes.

1524
01:39:29,637 --> 01:39:34,577
But to be fair, I will say with quantum, there have been a decent amount of changes in quantum.

1525
01:39:34,837 --> 01:39:38,017
Like I do understand kind of why it's coming back.

1526
01:39:38,017 --> 01:39:43,197
the problem with it that we put in our annual report is just like we kind of fudded ourselves

1527
01:39:43,197 --> 01:39:49,057
normally fud is something that's created the mass media and then we have to respond to it as a

1528
01:39:49,057 --> 01:39:55,217
community whereas this is something we kind of created that got into the mass media that we now

1529
01:39:55,217 --> 01:39:59,837
have to go respond to as a community so we're kind of i feel like we have good responses the big

1530
01:39:59,837 --> 01:40:04,537
question then is like what happens to the funds do we freeze all of bitcoin and that there's no

1531
01:40:04,537 --> 01:40:09,337
easy answer to and i mean i don't think we change anything i you can't you can't freeze all funds

1532
01:40:09,337 --> 01:40:13,077
in my opinion totally i don't think you can but i'm not saying that that that still isn't an easy

1533
01:40:13,077 --> 01:40:17,017
answer you know but i mean the truth is there'll be a chain split and you'll get to hold both

1534
01:40:17,017 --> 01:40:22,917
right that's true yeah anyway eric we've gone for ages there this was awesome how long did we go

1535
01:40:22,917 --> 01:40:27,337
i don't know like i think that was nearly two hours hell yeah let's go that was good we gotta

1536
01:40:27,337 --> 01:40:31,157
go play ping pong yeah let's go play some i gotta bet that danny's gonna lose some ping pong to my

1537
01:40:31,157 --> 01:40:36,037
analyst and, uh, um, there's no chance. I can't wait to make some money. All right. Thank you,

1538
01:40:36,037 --> 01:40:36,657
man. Let's go. Thanks.