John, World War III is upon us. Bombs are going off. Most people are unaware. We were just talking about this before we hit record in the land outside of X and the internet. But yeah, crazy weekend. A lot to talk about. And I think it would make sense to start with the war in Iran and spreading throughout the Middle East right now and its implications on the markets that we track and that touch Bitcoin.
So you took some time this weekend to write about fast takeoffs and hard landings for the timestamp.
What are the last 72 hours?
What are the implications of what's happening right now in your mind?
Yeah.
I mean, if anyone's familiar with the great movie Airplane, it increasingly feels over the last year like every week is the wrong week to have stopped sniffing glue like the air traffic controller.
Constantly, constantly feeling that way.
And I see all the people can see that Marty has already migrated to greener pastures to ride out the impending doom that we're all facing now.
So that's probably something I should have done.
But yeah, it's crazy, crazy week among many crazy weeks.
And I think it was just an interesting set of headlines that came across the wire over the course of the week.
and tried to connect them a little bit in the timestamp this week at the risk of sounding
or becoming a little too much like a Charlie Day in front of the Peve Sylvia board.
Feels like there are some noteworthy connections we can highlight.
But yeah, maybe just starting on what everyone's thinking about and talking about this morning
is the U.S. has not declared but declared war on Iran.
And we are currently in the very early stages of some sort of regime change over there.
Um, so not going to comment on, you know, all the, all the fog of war, uh, disqualifications
and, uh, caveats certainly hold, and, you know, not going to comment on how any of it's
going to go or, or reports that we're getting out of there.
But I think like one thing to pull out, maybe as we sit here today that I was trying to
highlight in the timestamp is like, you've quickly, you quickly saw over the course of
this weekend, once we got the announcement on Saturday morning, that this was happening,
you know, a lot of takes on all different parts of the political spectrum. Generally, I would say
pretty universally, this is like not been a popular concept of like, you know, doing this in some,
in some way. I think it's been hard for people to see what America's interest could be here.
And I think that that's all very legitimate. And I'd sympathize with a ton of it. You and I are
both children of the Ron Paul 2012 campaign. So I think we're both very non-indimensionist at heart.
I think one thing, though, just from like a real politic perspective of kind of like trying to figure out like what's going on here and like why this is why this is happening that I haven't seen in a lot of headlines and like mainstream conversation.
You see it a little more on Twitter over the last 24 hours and, you know, certain like an on profile pictures talking about this.
But, you know, the thing that we've been watching here at 1031 for several months is just like the early even a year is the overall trend toward like decoupling relative to primarily China.
Right. And we've talked about this on the show before.
And I think we've tried to ask ourselves with anything that the admin is doing or any kind of geopolitical headlines that maybe don't make a ton of sense in isolation.
Like, how does this potentially relate to an overall broader strategy?
I think there are a lot of people who are still kind of sitting there convinced that, you know, orange man, stupid.
And there's kind of nothing under the hood that could possibly be like justifying what's going on.
And I think that's like kind of a ultimately disastrous way to be thinking if you're trying to allocate capital, if you're trying to be an investor or just protect your wealth.
And I think there are a lot of signs pointing to, you know, everything should kind of be viewed through like an existential lens of trying to decouple from or undermine the influence of China.
Whether you think that's like a good thing or a bad thing, I think that's just like pretty clearly the framing that the admin and the Pentagon are taking right now.
Um, and so I think the thing that we were pointing out in the timestamp over the last few months and in the last, and this past weekend is this looks a lot more than anything else.
Like not, not a war for, you know, freedom and democracy and, you know, protecting our values and projecting them abroad, but it can end around to further pressure at you, the Chinese who are net energy importers from a variety of different sources.
one of which is quite famously Iran. Iran is a sanctioned source. So you like won't find them
on a lot of different tallies of Chinese oil imports, but various different estimates point
to them. I like this one that I found here from Columbia point to them exporting close to one and
a half million barrels per day to China. For context, that is like, I think roughly in line
with the Saudis, maybe a little lower, and then maybe like, you know, a half to two thirds of
what Russia does. And I believe Russia is their China's biggest oil exporter. So to us,
that really is like where the focus should be.
And I think it potentially starts to make a lot more sense,
you know, when you start thinking
through all of these geopolitical games
from the perspective of how does it affect
our positioning vis-a-vis China.
We're sitting here as like two dudes on the internet
who have no actual alpha on what the DODs
or the DOW, excuse me, is thinking you're doing.
But I think like this is a helpful framing
and set of questions that people should be asking
as they look at these headlines
and as they look at the next few weeks,
like what we do or don't do in Iran or other countries, right?
Like certainly, you know, Trump has rattled his saber at Cuba and Colombia and various
others that have maybe had some like Chinese influence in the past.
So to us, that's kind of like the Rosetta Stone for a lot of this to keep in mind going
forward.
Yeah.
And I think having watched what's played out since the national security strategy was set
out at the beginning of November last year and looking at sort of the line of thinking
that you just went down. I think it is pretty descriptive. If you are thinking strategically
from a geopolitical sort of chessboard reordering into this more multipolar world where it's very
much the United States versus China being the dominant power players. And if you're thinking
of an order of operations, what the Trump administration would need to do to effectuate
that national security strategy.
It's basically, it's take away the raw input
of the Chinese economy, which is energy.
And so I think the order of operations
have taken out Maduro,
securing that oil resource
and also blocking China and Russia off from it.
And then feeling comfortable to go into Iran,
which is providing China
with another significant tranche of oil there.
It wouldn't make sense.
Obviously, there's a ton of other theories
which you alluded to.
which probably not productive to go down on this show.
But I think not only is the energy side of things something that, again, if we're looking back,
like seems pretty descriptive, just looking at what's happened over the last three months.
The other side of the coin is AI.
We're in this race.
And I think the saber rattling between the Department of War and Anthropic over the last couple of weeks has been indicative of this sort of national security strategy being implemented as well And so that another big
thing where we have the Department of War basically trying to industrialize this budding
AI industry in the United States as well, which will have some pretty profound implications if
they're able to do that effectively. Yeah, for sure. Anyone who's not familiar with Elbridge
Colby, we should go look up his work. He's, I think, had a role in the first Trump administration
and is now a fairly high-ranking official in, I believe, the DOW somewhere in the Pentagon.
But he wrote a book in like 2019, maybe, called Strategy of Denial, which is basically just kind
of going through, you know, exactly what Marty's outlining, like a way that the U.S. should approach
kind of all foreign policy and geopolitical relationships with an eye toward containing
Chinese influence. And so I think, you know, that's the kind of guy who's sitting there kind
of holding the pin on a lot of this stuff. And you can ask, you know, who has the ultimate influence,
who's ultimately making decisions and kind of pulling the levers. But I think there's a lot of,
frankly, a lot of officials in the admin have been pretty open about what they want to do
and what they're focused on. So I do think going forward, that's going to color how the admin
operates. And I think they see themselves increasingly on like wartime footing because
of guys like that. You saw it this weekend in Iran and then Marty, to your point, like this,
this kerfuffle between the Pentagon and Anthropic over the last couple of weeks
that ultimately ended up as this headline shows with the white house blacklisting Anthropic and
saying that the Pentagon can't use their, their tools and their models anymore. And then Sam
Altman jumped on that immediately and inked a deal for open AI to backfill and provide a lot of that
stuff out of the Pentagon. But I think this is like, this is a really interesting headline to
have happened at the same time, basically as, as the Iran stuff, because again, it's like,
I think all of these things look kind of baffling if, or like way overly aggressive. And again,
I'm not even necessarily saying that there are good things, bad things are a lot of like pros
and cons to all of these decisions and a lot of different value judgments that can be made.
But I think like it's very easy to if you're seeing just one headline after another to think that this all looks very disconnected.
And, you know, like Trump Trump and his people are just kind of flailing around.
And I think this actually aligns really well with what happened in Iran over the weekend.
Insofar as I think it tells you like the the U.S. is very clearly intent on both asserting more control in but also expanding for better or worse.
I think the definition of what it means, what their sphere of influence means, right? So as
you would expect to see that too, again, not justifying one way or the other, but you would
expect to see that too, if you came to the conclusion that the admin effectively believes
it's at war, right? If you go back and look at things that have happened in the US in World War
One, World War Two, with the government effectively like requisitioning private assets and taking over
whole industries and redirecting them, redirecting their production to one thing or another that was
needed for the quote unquote national interest. Um, you know, uh, we have a long history of
the government deciding like when, when things hit the fan, when things get really hairy,
the rules kind of change. You can, you can like that or not. You can say that that's net good or
not for, you know, per capita kind of everyone's economic wellbeing, but we've seen enough examples
both in the U S and just like general history going back thousands of years that when push
comes to shove, the sovereign kind of reasserts itself. Um, and so, you know, my, my subtitle for
the email this week was, was sovereign is he who decides the model weights? Cause it's the,
the essence of this fight is can anthropic tell the government our models will do thus and such,
but not this and that thing, right? Like can, can, can the models be flexible enough for the,
you know, the Pentagon to, to use them as they see fit, right. To deal with national security
threats. Um, and so that's like, it brings up a question of like, who has sovereignty over these
things? Like, this is what the AI maxis are telling you, what anthropics telling you, what
Sam Allman's telling you is like, these are basically super weapons or they're kind of
moving in the direction of becoming that. So it's like, who actually gets to decide like what they
can and can't do in different situations. And I think the, the Pentagon making this huge stink
in this whole, like, you know, press release war that went back and forth and ultimately
blacklisting anthropic is like, you know, just another kind of data point to put on the pile that
the government right now is, is acting like a world war II type government, right? It's not,
you know, yeah, 19, eight post 1989 post fall Berlin wall, like, or, you know, 1990s, like
golden era, golden era, the unipolar moment situation. It's, it's moving much more back into
kind of a wartime footing, both domestically and abroad. And, you know, all that is to,
all that is to say all that points to like certain implications for the way that i think you you want
to handle your personal allocations or if you're an institution like institutional allocations i
think it says many things about where the world's going financially over the next 10 years that it
would be kind of unwise to ignore or write off on the basis that like you know trump is crazy and two
years will be out anyway yeah i think it would be completely nuts to do that and i think you did a
a really good job of distilling and aligning all these disparate things that, to your point,
like you said earlier, many people would see them as random and very extreme.
But I think if you take a step back, look at it from a 30,000-foot view, it looks like
what we've been talking about for months, not only on the show, but in the newsletter.
It seems like we are on wartime footing and have been for some time again, going back to
the National Security Strategy document from last November.
I think it made that document made it abundantly clear how the Trump administration is thinking,
and they're moving rather quickly.
And again, not a judgment whether this is good or bad,
but I think it's undeniably impressive how quickly they're moving at some of this stuff.
And to your point, whether or not they ultimately, the decisions they make end up being for the benefit of the American people in the world at large,
in the long run, is yet to be determined.
We're still in the fog of war.
But I think one thing is clear, they may have an agenda, and they're trying to execute on it.
at the very least.
And I think, going back to something else you said, which is we are both sort of anti-interventionist
accolades of the Ron Paul 2012 era.
And that's, I mean, if we are on wartime footing, I'm just having pattern recognition
going off in my head right now, particularly focusing in on the saber rattling between
Anthropoc and the Department of War.
I mean, I could see this being the Patriot Act moment of this era, which somebody lifts
that. And I think the ramifications of the Patriot Act are abundantly clear now, over 20 years since
it was enacted, that it was a terrible precedent to scent and has erected this dragnet surveillance
system on US citizens in the world at large. And I think if we're going to do a AI Patriot Act
this time around the implications are going to be an order of magnitude worse for individual And to that point I think that why we have a hard focus here at 1031 on freedom tech
And Bitcoin is a freedom technology, a freedom protocol.
But as it pertains to AI, I think that's one thing that we're pretty passionate about is
ensuring that individuals have the ability to interact with these large language models
in a way that is private, sovereign, and done in a way where the model provider cannot spy
on you, which is expressed via our investment in Maple AI.
So yeah, I just wanted to throw that out there.
I can see AI Patriot Act becoming a thing in the next nine months if this stuff escalates
even further.
Yeah.
Unfortunately, I think that's probably some version of it.
So everyone should kind of watch out for that, do the best they can to kind of position against
it. Um, but it, it's definitely, you know, it goes back to the theme of just like, um,
once this stuff starts being treated rightly or wrongly, like, you know, nuclear launch codes,
it, the implications radically change for both individuals and, you know, what individuals can
do and what companies can do. And, you know, I think in that world, it's also very, it's good
to think about having assets as well at your disposal, a use having a, you know, sovereign AI
stack, but also in that world, having assets at your disposal that have a minimal, uh,
calculate risk and can be used as permissionlessly, uh, as possible, ideally on a, on a global,
on a globally liquid basis.
So I think all of this just kind of comes back to reinforcing as well.
You know, I don't think there could be a better time to be investing the space we're investing
in and focusing on what we're focusing on.
I don't think you could imagine price action aside, like trends that are fundamentally more
favorable to and more in line with the thesis that animated Bitcoin's creation in the first place in
2008 and that animates everyone who's using it today. So, you know, this is a Bitcoin show.
This is primarily a Bitcoin oriented fund, Bitcoin, AI energy, whatever, Freedom Tech,
everyone kind of think about that. But there are a lot of upshot that is all these trends that
you're seeing that we're throwing out there right now, I think have meaningful implications for
kind of everything that we're doing day to day. Yeah. And I think this is a good segue into the
the Bitcoin price action Saturday into Sunday.
I mean, probably over the last few months, I think, again,
if you were taking a 30,000-foot view as an institutional allocator
and looking at everything that's been playing out since Trump 2 started,
and again, specifically since the national security strategy doc
was published last November, it's been pretty clear
that we've been building up towards this type of conflict.
Again, it's clear in retrospect now that it's actually happened,
But I think maybe the Bitcoin price action since late October, early November has probably
been signaling that, again, Bitcoin as this liquidity alarm bell down, fell 50% between
early November and early February.
And then when bombs started flying on Saturday, the price fell $3,000, I believe, but then
quickly, quickly recovered.
And so I think the Bitcoin price action over the weekend was actually shockingly strong.
And again, still in the midst of the fog of war.
It's not to say that it will not go lower from here, but I thought the price held up pretty well.
All things considered, maybe the market.
Recognizing that we're getting into an accelerationist point in the geopolitical realm where having exposure to a neutral sound money protocol for the digital age makes a lot more sense.
Yeah, I mean, it's, you know, again, way too early to call.
And we're sitting here right now.
I just checked we're above 69,000.
And so let's see if we can kind of break above the 70K, you know, 60, 70K band that we've been in.
But it's exactly the kind of like price action that you would want to see for kind of hammering on a bottom, right?
Like usually the simple rule of thumb is like stuff going up that stops going up even on the basis of good news.
Like is, you know, finding a local top and probably going to retrace and, you know, on the converse and stuff that is getting hit with more and more and more bad news and kind of just isn't going anywhere.
tells you like a lot of the natural sellers have been exhausted and it's trying to find a bottom.
So, you know, we don't call tops or bottoms on this show. Very much learned my lesson on that.
But certainly that would, you know, point you in the direction of getting getting closer to the end.
And to your point as well on Bitcoin as kind of this liquidity alarm bell or this like macro alarm bell.
It does thus far kind of remind me of early 25. Right. With we had, if you remember, we basically topped locally at Trump's inauguration.
And then it was like down only for three months, kind of on like no obvious news.
And eventually the stock market kind of caught up too.
But then it was finally the stock market really had its big puke on Liberation Day with the
tariff announcement and Bitcoin basically went nowhere and then started to outperform
everything more quickly and recover more quickly.
You've seen things like that too.
And, you know, 2022, late 22, kind of the FTX blow up.
Like we went down like a little bit after getting killed all year and then quickly started
like finding a bottom and moving higher.
And despite that being like an extinction level event for crypto.
So yeah, those are the kinds of things that I think you'd be looking for to see if maybe some of the near-term natural selling is exhausted.
And we'll see.
But another interesting data point as it relates to kind of like macro trends and Bitcoin price action is if you throw up the chart of the 10-year this morning, again, it's way too early to call.
But as it relates to what the market may or may not be processing and thinking through, this is a really interesting reaction out of the 10-year.
You know, we went down into the weekend, which is to say, you know, bonds are catching a bid, likely as people were getting more in a position for something to happen in Iran over the weekend.
But as of this morning, we've ripped much higher.
Granted, we're still, you know, we were at 4-2, 4-3 a few weeks ago.
So it's kind of been a steady downtrend up until this morning.
But it's interesting that you see kind of this rip this morning on the, you know, the confirmation of bad news and frankly, even like maybe worse news.
I think Google might have been positioned for, you know, Trump is out there saying like, this could go on for four weeks or longer, and there could be some real American casualties. So I hope that doesn't happen. But then you're also getting, you know, oil price spiked significantly, there's been potential, like potential closure of the street form moves, you know, attacks on some ships there. So like, that could be very meaningful to oil price. And I think all that flows back into, you know, Treasury is not behaving as a safe haven asset this morning, but rather kind of repricing in potential like shock from energy prices, which
is really not good for fixed income, especially fixed income of a very over-indebted, you know,
sovereign that now wants to radically escalate its military spending as well, right? So if all
that is the case and all that's playing out, the 10 years moving like this, like there's kind of
ultimately, if this continues very, very early, like this could, you know, retrace. So let's not
get ahead of ourselves. But like, if something like this were to continue and you still wanted
to go do regime change in Iran and do everything else that Trump's study wants to do, there is
ultimately one solution to this.
Right.
And it's, you know, getting my more accommodative fed chair to do your bidding and do what's
necessary to kind of keep this contained Cause this can go to like four and a half five plus right Like quickly Otherwise things really start to get very hairy across various elements of what trump trying to figure out
right now so if that's the if that's all the case again you know this is like our 14-step logic but
that gets you back to a world where you definitely want to own some bitcoin right so again it's it's
monday morning way too early to call but those are trends that i think are worth watching over
over the next week or two?
How does the 10-year react to all this?
And is Bitcoin able to start finding some outperformance relative to other assets?
Yeah.
It's, I'm sorry, I've got a bit of echo, but it was crazy to see the 10-year react like
this.
And again, I mean, don't have to imbue my sort of political bias and perspective on war.
But I think any, I mean, yeah, Secretary of the Department of War, Hegseth, come out this morning saying this isn't regime change.
Don't worry.
This is very different, very calculated.
And again, too early to tell, yet to be determined.
But I mean, just the pattern recognition and the cynic in me as somebody who grew up with Middle Eastern wars that the U.S. embarked on.
I'm not going to hold my breath for this to be a quick in and out.
Um, but other stuff happened as it pertains to the markets that we play in.
And I think it will be remiss of us not to bring it up.
And I think we should end it with just a little five minute conversation on this.
But the news out of block last week, Jack Dorsey basically coming out and announcing
that they were they they are laying off 40% of their workforce, dropping their head count
from above 10,000 to below 6,000, citing the acceleration of the productivity of
AI tools that they've been leveraging internally. And I think this was the first big sort of AI
layoff headline that we've seen from a prominent tech company, Jack Dorsey, one of the most
prominent tech founders of our time, basically pulling the Band-Aid off early and saying, hey,
the AI tools are at a point where we can, what we believe is to safely reduce headcount,
to run more efficiently and increase our profit margins.
A lot of commentary on this over the weekend.
Basically, people saying that Block's headcount became too bloated during COVID,
where they tripled their headcount rather quickly,
and said they're using AI productivity gains as an excuse to cut back a bloated headcount
that was driven by mistakes made during the COVID era from a managerial perspective.
I think it's a combination of both.
I think they certainly were bloated, probably did overhire during COVID.
But I think it would be idiotic to believe that they aren't leveraging these AI tools to their advantage.
And as somebody who knows Jack, knows many people within the block organization, and having talked to them over the last year, it's become pretty clear that they are leveraging these tools internally.
And if you just look at the pace with which the block family companies have been shipping over the last year, it has certainly increased.
And so I think there's a case to be made on both sides of the argument.
They probably had a bloated headcount and needed to cut it, but they're also probably
experiencing insane productivity gains from these AI tools.
Yeah, for sure.
I think that's all right.
I could assign that.
I think it's probably reasonable to say it's a combination of those two things.
But even if, you know, if even just a material portion of the cut is entirely related to AI
tools, like that is, that's very meaningful.
And I think the most interesting thing is like the stock price reaction, right? It was, you know, up 25% immediately. I don't know what the follow through has been like. I haven't checked this morning, but, you know, it closed like I believe well up 15% on the day or more. And I think that's, you know, every company is a unique case and not, not every situation is going to pour it over to the next one, you know, one to one, but that you have to think gives some CEOs with more bloated org structures ideas. Right.
and everyone ultimately is incentivized to,
yeah, I mean, you've got the,
you just pulled up the data center chart here.
This is a chart from ZeroHead
showing the data center construction spending.
I believe this is on like an annualized rolling
like last 12 months basis.
But in any case, it's now officially overtaken
a new office spending on construction of new offices.
And so, I mean, here's another data point
kind of in that same direction
that this trend is only continuing and accelerating.
And this, for better or worse,
AI tools, AI productivity is going to eat a greater and greater share of spend on the corporate level.
And data center construction is eating greater and greater share of total construction spend.
So things are moving in this one direction.
CEOs are increasingly going to get ideas from case studies like what happened with Jack, what happened with Block.
And that's going to have implications for hiring in the U.S., right?
And worldwide, it's going to have implications for potentially unemployment rate, at least on a short-term basis.
Um, we didn't even get to the, the Citrine AI apocalypse report.
Um, we don't have time for that, but you know, that was, uh, before all the Iran stuff,
that was the big headline, the big reason the world was going to end.
So if you haven't read that, I would go, uh, take a minute to read it, but it's all of
a piece where, you know, these things are happening faster than your average, you know,
white collar worker is, is fully appreciating.
And, you know, that's going to create, uh, some level of disruption, even if not society
ending disruption, but some kind of, you know, ripples will come out of that that will likely
engender some degree of policy response, which has a lot of, again, implications for all the
things we talk about here. Yeah. And just to wrap up here, to tie it to Bitcoin too, I think
these gross profit per employee numbers, pre and post layoffs are impressive. And I saw a chart,
I don't think we have it here, but they're, the layoffs quickly vaulted blocks, first profit per
employee up to NVIDIA levels. So from that perspective, they are probably one of the best
companies, at least publicly traded. Obviously, we know Tether is probably the best edit in the world.
They're still private right now, but with these layoffs, it seems like gross profit per person
within block is going to skyrocket. And the point to bring this up is, I think,
part of our thesis here at 1031 and part of why we're investing at this intersection of Bitcoin
AI and energy is because if you're going to have the productivity gains afforded to via this AI
sort of renaissance or this AI revolution that we're seeing, it makes sense that if you're going
to be able to be much more profitable with a lower headcount, the Bitcoin treasury thesis becomes
stronger because you're going to want to shovel those profits into a hard asset like Bitcoin,
a monetary asset like Bitcoin. And so I think the era of low headcount, high productivity,
high profit margin is upon us. And if we are entering that era, you are going to want to pair
those productivity gains with a sound digital money, Bitcoin.
Couldn't have said it better myself.
We'll be back next week.