The Booth Series — Episode 5 — The Digital Age, Energy, and the Environment (transcript)

[00:01:22]

Robert Breedlove: My thought there originally was — to analogize it to Bitcoin — Bitcoin would eliminate the need for most banks, armored cars, etc. in the long run… You may still have bank branches I guess, but I think most of it will be done digitally; it’s a digital native asset. I think banks would only provide maybe custody and maturity matching, in a free market at least.

Jeff Booth: So why do we use that? We use that to trust somebody else. Essentially, the existing system is a ledger that we can trust somebody else. And Bitcoin removes all of that cost as well.

RB: So does this mean populations would move towards low cost energy centers? Kind of like they’re building the bank of the city on top of the Bitcoin mining network… would it change the gravity for cities?

JB: I don’t know. It will in some degree. This paradox really has two different systems competing. In one, you look at Jeffrey West’s Scale, if you look at a city, it’s a network, and the bigger cities have more crime, and it just follows a path of distribution; it’s really interesting. And then, you have to ask: Why did those cities form that way? And those cities formed that way typically over trading lengths.

Commerce, yeah.

Commerce. And as commerce changed, different cities emerged to take advantage of commerce changing. Today we would say steamship lines and containers. And you’d see different cities throughout time emerge mostly out of commerce. Now, what’s happening, take that one step further around energy sources, because now you’re playing… why is it those cities emerge and get better and better, it’s tied to something else we said, it’s actually because that’s where the best people are, and the best information. And the sharpest minds to be able to… So more people flock for more information. Now, as information is distributed around the world, commerce changes around the world differently, and information is free. The very structure of that city may change. And it may change dramatically, because now the structure underneath — it’s information and it’s an information highway — allows you to be anywhere.

Right, right. So then does digital space then absorb a lot of that economic density and we just don’t have dense urban cores anymore?

I don’t know… potentially over time, I don’t think that would happen any real time fast, but if you take away an economic core that it’s not needed anymore… Look at the commercial centers downtown right now in any major city: nobody’s in the buildings! They’re still priced at that high price. If they’re still priced at that high price and business value can’t be there to be able to support that? They’ll die. The free market will change that and it’ll be crushed in price. This is gonna be a long time horizon change, but you could see… the biggest concept here: growth is different; growth of information is free, and growth of information means more and more free, so that structural change to society is more and more deflation against what we’ve known all of our lives. And so what that means for different areas… we’re early in that cycle but a lot’s gonna change.

Yeah, really interesting. So, shifting gears a little bit here, you talked about this concept too — and this one I’m thinking about a lot — I guess I had this intuition that the digital age is really just getting started, as hard as that may be to believe, I think things like Bitcoin are going to radically amplify the growth of the digital economy. I also thought, and this is sort of built on, I guess, the back of something like Google Glass, the thesis behind that is: the more we get the hardware out of the way, the more immersed we will become in the digital experience, if you will. So today, all of our experiences with digital media, they’re mediated through screens, through a laptop or a smartphone mostly. But this concept that you talk about in your book about digital twinning, where you’re actually creating digital avatars of the physical world, so I guess it’s not quite virtual reality but you’re sort of overlaying physical reality with data — relevant data — and I think the example you gave there was LlamaZOO, how they were radically improving a lumbering production process by digitalizing and harvesting this data in real time. My general thesis there is that the world is becoming a video game, and it sounds like this could actually become that! We actually start looking through the world through augmented reality, whether it’s glasses or whatever the piece of hardware is, and we start to see, as we’re trying to error correct or make better decisions relevant to our business, we can actually see the data in front of us, like, How much rent is this piece of property generating? Or, Who are the ledger owners of this piece of property, or whatever it may be, we just get this radically enhanced perspective on the world, I guess, by actually seeing the data that we have to work hard to get to today through laptops and smartphones.

And our biological computer — our brain — won’t be able to handle that. It’s too much information. So if you think about the information — I can’t remember if I used this in my book or I cut this from my book — but if you think about everybody listening to this right now, how much other information is coming into their senses while we’re talking, from the air temperature to everything else around them? And what you focus on — back to what we focus on — we don’t even realize the other stuff going on, because we can only comprehend so much; our brains can’t take in all of that information and make sense of it. So we have a whole bunch of shortcuts in our brains to be able to do that. Some of these ideas for bases of knowledge that we don’t have to question those things again… that’s how we get trapped. So the other thing that’s happening, along with information growing exponentially, is: technology to be able to error correct, when I say AI or, it coming to you in a way that you can comprehend it. Because if we just had all of that information at our fingertips without a way to sort what’s relevant, it would overwhelm us.

Then, I think it was ‘mixed reality’ was the term you were using? How do you see that, what does that look like?

So Microsoft is really deep in here, as are others, but I went to the Redmond facility and walked on Mars, and it’s wild. It feels like an immersive experience. You’re there. You’re walking around… and that’s today — imagine with sensors and everything else, where you can feel, touch things, interact with… this is all coming. So the technology is moving so fast into these domains, again it’s not broadly distributed yet, if you have to wear a big sensor it just doesn’t make sense yet, it’s not intuitive enough right now or hit a cost point that’s gonna be commercially viable… But every year and a half, that computer power doubles and those things get smaller and you’re able to do more with them — at some point, whether that’s a contact lens that you put in, or something else — at some point, that’s going to radically change your interaction with your environment.

Do you see then that… the industry you reference in your book is the travel industry: $8.8 trillion industry representing 320 million jobs… It sounds like, if this tech became that immersive and that cheap and that accessible, the travel industry — especially if there’s a covid-like scare — the travel industry could get crushed.

What it would feel like is the Star Trek Holodeck: if you could actually go somewhere and it felt like that, a real immersive experience… that is a fair ways off. But I’m using examples in this — existing technology moving forward. Not a breakthrough: existing technology moving forward. You could actually kind of experience it… very few people almost, today, and then you project that forward and how much better it’s going to get… I actually hate that I put that in the book, because I love travel! I love travel, it’s one of the things that our family does all the time, we’ve been everywhere, I love travel. But again, a whole bunch of other industries have been broken because the existing incumbents in the industry think it will always look the same. And imagine exploding my travel opportunities that I could go anywhere or feel like I’ve gone anywhere in real time, and now you’ve put not just — that’s one dimension — now you add avatars, other people that are doing the same thing with me at the same time in the experience? We are living in a video game. Now you get to simulation hypothesis and you take us off the deep end… (laughter)

(laughter) Yeah I don’t know enough about that one, but it seems like at a minimum: conferences, that would just become the norm of conferences.

For sure, that will be the norm. I know a bunch of people working on that tech right now, because you can expand that scope a lot.

I’m with you in that I love to travel, and I’ve been afraid of the thought of disrupting leisure travel, that sounds something like I want to do my entire life, but certain types of travel like conferences, I think it’s very disruptable by something like that. You could just jump in the same digital room with everyone and share the ideas and have a little bit of at least simulated personal interaction that sort of gets the job done.

Exactly.

What about additive manufacturing, 3D printing, you went into some of that in your book…

We talked a little about this, where that’s going, the idea in your head, being able to print that in your room, in your house. And it expands the ideas, and then on top of it, those ideas, if you think about information as an idea, it goes through a supply chain of manufacturing to be able to come back to you. And information being an idea that you can print right away, that’s coming. But on top of that, AI is going to be attached to it, and it’s going to have an abundance of better ideas than any human put there that you’re gonna have access to. So the abundance in this — these types of things radically change every industry around.

So if we moved to that, say, 3D printing becomes mainstream, then all of the sudden, China is in jeopardy, I guess? Because we’re no longer, at least largely in many sectors, wouldn’t need mass manufacturing.

So that becomes exactly the point: a lot of their essentially, Hold down my labor rate so I become the world’s manufacturer, and people buy from my factories, that changes radically.

Yeah, and then all that logistics infrastructure — we’re back to the Blockbuster example — we have all this cap.ex. and this logistics infrastructure to get things cheaply produced in China, shipped to the U.S. or wherever, all of that instantly goes from a big asset to a huge liability.

Huge liability, and it happens really quickly. Remember how much, I can’t remember what the numbers are right now, but the amount of airline parts that are currently 3D printed is a huge percentage of airline… Really it started in higher cost industries and it’s scaling lower and lower cost all the time, but this is already commercially available in metal, glass, all sorts of different products. For a stupid example, our wake surf boat has a fin that you can make a bigger wave, and my partner in it digitally printed one, it was an $800 part, he digitally printed the exact same part, just grabbed it off the Internet, because all it is is a piece of information, right? It’s a prototype, and he digitally printed the exact same part for $2.

Wow. Yeah you made that point in your book that it’s actually starting with the high-cost, low-volume parts, so these super customized pieces… but they’re also, not only down from $800 to $2, but also in many cases increasing performance quality, right?

Performance quality, right.

That’s incredible. To tie that all the way back into the theme of the book, that sounds like one of the most deflationary forces ever.

So again, we’ve just explored a couple of industries, and we could go through endless… we could spend time talking about some of these other industries, and some of the ones I’m involved in that intersect — and it’s not just one industry — it’s the knock-on effects of that that we talked about, and it’s the knock-on effects of that, gathering more and more information, and an information system sitting on top of a horizontal technology that is artificial intelligence, that is grabbing that information and doing it better than people… How in the world, if governments are gonna have to print $185 trillion over the last twenty years to stop the natural forces of deflation today, and the consequence of that driving inequality, how are they possibly gonna deal with tomorrow? It’s hopeless. And so we’re there and that’s why — going back to what we started this show with — this is a phase transition. This is a totally different system, and there is nothing in the end, governments can do to stop what’s coming with technology. In fact, a lot of what they’re doing is accelerating technology, because if you’re a technology company, the only way to compete is to drive technology in your business so fast that you remove labor faster, otherwise you’re gonna be a ward of the State.

Right, wow. Another example that comes to mind is, I’ve seen some documentary of the 3D printing of homes… They were starting with more, I guess just kind of standard homes, so they’re producing a lot of standard homes to help people to have shelter, but they were building these things in 24 hours.

Yeah, it’s crazy.

It’s a giant printer that sits on an axis and it was just printing a house from the inside out, in 24 hours!

When we look at some of that… and when you think about that, you think, I would never live in that house, because that’s the first thing that would go through my brain. But then, you don’t realize, Okay, what if there was an earthquake disaster and you had to do something really quick? And what that does to a change in the structure, even in the existing supply chains that typically… the response networks that do that… That’s just the first wave; we always underestimate what that looks like. In fact, housing might be one of the hardest things, if you think about 3D printing… that componentry and what does it look like to actually make a house like we think we want today.

Right.

So, it’s actually, even though it’s advancing really quick, it’s probably one of the laggard industries than some of the others, that then build far enough and then back into something like that.

Right, yeah. But to your point, if it can be done orders of magnitude more cheaply, and in many cases perhaps even more durability or more utility in some of these things, of course, people may think, Oh I would never do that, but it’s almost like thinking twenty years ago, Oh I’d never jump in the back of a car with a stranger that I summoned on my smartphone. But now we all do it. The economics drive the behavior.

There’s the thing: it changes so fast. You know this from Mises and everything else, but most of the things that we think about around our economics equation… we think it’s something else but it’s around an economic equation, and that economic value… Some of the entrepreneurs that I help, or some of the industries that I see, it’s why the timing matters so much in this too. Because if you miss that economic window — we’ll get into this in more detail later — but solar, for a long time, you could do all the things you wanted to by government and people could say, Oh yeah we need solar, we have climate change and everything else, but until the economic calculation changes the equation for businesses to be able to drive that? Nobody drives it. It doesn’t happen, it doesn’t change. But when it changes, it changes everything else.

Yeah, that’s a great point, and I think about the follow-on effects, if 3D printed housing did become mainstream — I know it’s a ways off — but then all the follow-on effects on labor, materials, real estate agents, everything… how many businesses are built around servicing the home, Home Depot… it’s hard to imagine. It so radically changes everything, all because of a technological shift. We used to build them this way, now we build them more cheaply that way.

For some of the entrepreneurs listening to your show, a place where there’s kind of an abundance of opportunity is: if you looked at any industry, a lot of times, it’s designed for the wealthy in the industry. And a lot of the people at the bottom of the pyramid get locked out of that industry. And it consolidates and it consolidates, and all of the innovation goes into that top — Visa and Mastercard are really good examples — top people, banks, the richest people… what does Square do? They go to the bottom of the pyramid and they use technology to drive a different efficiency. Their technology… there’s a good book around it called Innovation Stack, the technology and the design of the business is everything’s designed to be able to reinforce itself and open up the bottom of the opportunity. And same thing with what Amazon did with books: only the top publishers could have got it in the bookstore — what if we opened it up for everybody? So it doesn’t start where all the money is, it starts where very little of the money is, but it opens up a need for somebody that starts the ball rolling.

Interesting. Maybe that’s connected to that wave of centralization and decentralization over time, right, all of the wealth it creates on one side… then there’s more value to be created by disrupting the other side.

And especially with technology, what happens is that people get locked into a system, and they don’t realize — Blockbuster, all of these — they don’t realize that technology now changed the rules that you don’t have to be locked into that system, you can deliver the value a different way and open it up for a whole bunch more people.

Interesting… wow. So yeah that really points to… there’s a great line in your book: The simple power of technology is that it allows for abundance without the same amount of jobs or income, if we let it. It’s the Archimedes Lever right, Give me a lever long enough to move the world… or is it a fulcrum to move it on? and I’ll do it. And technology is that lever. It’s growing longer and longer… So I guess that takes us into energy, then. So we have the lever — technology is the lever — but we still have to apply energy to the lever to move the things to create the outcomes we want, or to satisfy the wants we’re aiming for, and energy is a big business, I think you said 9% of global GDP… This is common Bitcoin FUD which I’m sure we can explode here in a minute, but people want to talk about energy waste or energy consumption being a problem, but it’s actually, that’s what civilization does: civilization advances by harnessing more energy, which, even the term energy consumption, I don’t think the term works because, according to thermodynamics, energy can neither be created nor destroyed. It sounds like we’re destroying energy when we say energy consumption, we’re actually just harnessing it. I think the number was: we expanded worldwide energy use 1400% in the 20th century, so that was all the growth. But now, as we shift towards — we were talking about spacial growth versus temporal growth — it seems like the longer lever of technology can allow us to make better use of that energy. And Bitcoin seems to be a key component of that. It’s a major system for monetizing energy directly, but also creating a global incentive schema that pushes market actors into unused energy sources.

So there’s a lot to cover here. Before we do, I want to say this: after laser eyes, which is a fun little thing, but after laser eyes, what I’d love the Bitcoin community to do is drive I’m in Bitcoin because it saves the planet. So the biggest thing that everybody is missing… yes, energy will move more and more… Bitcoin will drive lower cost energy sources. Most of those lower cost energy sources today are renewable. Renewable now is an economic driver, and we’ll explore that a little bit more. But what the world is missing is: growth, in the way that we’ve grown forever, by manipulating money, can’t work in a finite world. So there is no possible way… Today, solar is coming on cheaper than all other sources of energy, and that’s additive to the energy grid, and it reduces prices, not just of energy, but if energy is the #1 input in all other things… So that is additive to the deflationary forces that we’re facing. And that should be a good thing: lower cost energy, lower cost things, lower cost everything else. And that means we don’t need as much labor to have lower costs, as things drive down. Diametrically opposed to that is, I have to make prices go up through money printing. So what that means is, all of the innovation that entrepreneurs are bringing to the market — in solar or renewables or whatever that’s additive to that at a lower cost — monetary policy has to fight and eradicate the gain by printing more money. So an order of magnitude bigger problem for the planet — if climate is as big a deal, and it’s a big deal — an order of magnitude bigger problem is: unless we find a way to work in harmony with where technology and information is taking us, which Bitcoin makes sure we do, it’s a fulcrum function to that… the problem is we have to grow at all costs against that. And that’s a big, big idea. So yes, right now there’s a whole bunch of people in Bitcoin and everything else that are talking about, Okay, it helps in flare gas, it helps move energy to lower cost areas and helps advance solar, these are all true. But the bigger idea is: ask anybody how the existing system, how they’re going to square the existing system has to grow forever and will destabilize money to grow forever, how is that consistent with climate change? It is the problem for climate change.

Yeah, so I don’t know if you’ve read the book Rational Optimist by Matt Ridley, he makes the point in the book that the lap of luxury we all live in today is because we’re able to tap energy sources — hydrocarbons, largely — that gave us this abundantly cheap energy to fuel… the number I think he gave for the average American, it would be the equivalent of having 660 slaves pedal stationary bikes 24/7/365 to generate as much electricity as they consume in their day-to-day habits. So clearly you can’t do that with human or animal power, so we had to tap an energy source, which is hydrocarbons. So harnessing energy at a higher magnitude is civilization in a lot of ways, we need to figure out how to do it. The problem is, we have to do it cleanly, right, we need to push ourselves towards the use of more renewable energies or more clean energy, I guess you could say, and on that point, solar is the ultimate source of energy. I think the numbers in your book were: two hours of sunlight falling on the planet per year, if it was adequately captured, would power all of the world’s energy needs for a year.

Yeah, I forgot what the area covered needed to be, but yes.

Yes. But the point is, it’s incredibly abundant, way more than we need: we just need to figure out how to harness it. And to your point, it’s the cost of energy that’s falling most rapidly, so that would be, that’s where Bitcoin comes into play, it becomes a natural incentive, I guess, to build out that infrastructure, to capture solar energy.

Yeah, and again, in energy, there’s so much to unpack. First, solar and wind are very small parts of the overall energy grid today. But growing really fast. Why are they growing really fast? Because now they’re lower cost. Sometimes so low cost that they’re free already. So what does a utility do with free energy? Because the utility is selling you energy… then it gets to night, so they need to balance peak load and everything else. So Bitcoin could come in and actually help them balance by utilizing more energy when the sun’s out, and balancing that. And that’s actually why it helps that grid expand, but over time, that entire grid will likely look more distributed and regionalized than it looks today because solar allows that, and that interconnection is probably going to look more like a node network than it does today. Where you could even think about plugging into your car to help offset the peak power time — back to your house — but a whole bunch of… I guess, the big change like we talked about… when the big change happens for self-driving cars, the big change here is: solar is already one of the lowest-cost energy sources. And solar, along with battery storage, now means there’s an economic incentive that it expands at the cost of other energy sources. And there’s nothing that can stop that from happening now: it’s going to expand. Energy is 9% of overall GDP and it’s the #1 input in most other things to make them valuable or not valuable to us. So if you have a lower cost energy source, there’s an economic incentive to do that, and that’s driving across the world right now at a faster and faster pace. In fact, the U.S. used that — lower cost energy source — for the whole petrodollar system. Military complex to be able to guarantee lower cost oil because it gave an advantage to their economy. And that’s still happening: China’s trying to play into that because we can’t go all the way to renewables today; there’s still lots to do. But that entire complex, that entire structure of the oil complex driving that value, is going to break on this transition.

That’s a great point. So this calls back to our earlier discussion where the society emerges around the energy network of trade, if you will. When there’s economic density in the city, that’s where society expands, and it’s also true of the energy of hydrocarbons, right, oil, where we have the military industrial complex sort of manifesting around those networks. So do you think… I guess, a lot of the existing infrastructure, then, is hostile towards the development of renewable energies.

But it doesn’t matter now: it was hostile, now it realizes, because of the economic value — and again, this is one of those things that’s really important — it doesn’t matter if it was hostile. It changes everything and now there’s an ESG movement, now I have to invest in it because now I risk being a Blockbuster moment if I’m just in coal. Now, if I just bury my head in the sand, it’s over. I can fight that for so long, but the capital cost in every infrastructure for my old business is exploding, and the new business is changing the rules. So because of that economic value, it drives a faster and faster cycle wave into that, and that market will be more decentralized than the previous market was.

Yeah, this is a great point. This was Swanson’s Law with solar, right: the price of solar tends to drop 20% for every doubling in shipped volume. So it’s kind of akin to Moore’s Law, in a way. Then to your point, because sun falls everywhere… it’s very decentralized, let’s say, so you can’t just monopolize an access point to an oil well like you can with terrestrial oil harvesting, which makes the middle east such a contentious territory, there’s just so much oil there. That’s just not the case with solar, so the energy source itself contributes to the decentralizing structure of society, I guess, in many ways. And the other point you made — I guess Bitcoin plays into this as well — the conversions between forms of energy is where we lose a lot of efficiency… Taking oil out of the ground, converting it into gas, shipping it, putting it into a tankard to give to another car, like every time you have to convert the form of energy, you’re losing efficiency in that process, whereas solar is something that’s much more direct.

Essentially, in digging up old animals that died a long time ago, we’re digging up sun that was on our Earth a long time ago.

That’s right, ancient sunlight.

And putting it through a distribution system to burn them in our cars. And that distribution system and everything else, we don’t need to go through that distribution process — similar to what we were talking about the distribution process from the information in your brain to your 3D printer — that entire distribution complex that supports all of that digging up old sunlight, and then burning that sunlight to come back to get a part of the energy from the sun a long time ago? We short circuit. And that seems like, Okay, why didn't’ we do it a long time ago, and why are we just doing it now? It took a long time — sixty years of solar actually being in market at really high cost — to be able to hit a tipping point right now, that it becomes the cheapest energy source. Once it becomes the cheapest energy source, you can’t put that back in the box. Innovation and the drive towards making it better and better just because of capital and the nature of entrepreneurs driving that is gonna drive cheaper energy and better utilization of a different grid structure.

Yeah it’s like what you were talking about in our last session, unleash the entrepreneurs on this… place where there’s margin or profit motive, you can’t stop them.

And so why, if that is lower and lower cost, and it’s good for the climate, why in the world would governments want to print money to stop it?

Yeah, this message really needs to be amplified.

That’s why I said, after laser eyes, let’s try to figure out how to amplify this. We need a meme around this, because I asked… on one of my Twitter responses, because Bill Gates was talking about all the money that needs to go into this right now, and I asked him that question, and I would love an answer! I would love anybody to tell me how what I just said was wrong… Because what the printing of money is doing is it’s destroying that gain to society.

Well it’s hard to think different, right? They’re stuck in a finance paradigm once again. I think about this a lot too: there’s an inverse relationship, then, between distribution cost, say to put whatever the thing is across the network — it could be energy, it could be information — there’s an inverse relationship between the cost to distribute the thing and the proliferation of the network. So we decrease distribution cost, we increase the proliferation of the network, and for energy, that network is civilization. We decrease the cost of energy, we expand the reach of civilization.

Really important idea. And actually you could say energy and information. Whether they’re the same thing… but that concept, when you see the world through energy and information, when you said “living in the Matrix” or we’re living in a video game? We start to see more and more of where we’re going: that’s what it looks like. What that looks like is a very different world than material things, digging up things, and the way that it used to work.

Yeah, and the other point you made in the book was that solar has radically lower cost of maintenance over its useful life, relative to the hydrocarbon infrastructure.

Yeah, you don’t have to add coal to the solar plants each month, you don’t have to dig up coal to be able to make it work. So you design a coal plant then you have to distribute coal to it constantly. Solar farm, you don’t have to add anything to it.

It’s amazing. Yeah, I learned so much about energy in your book. The last quote you just made about seeing the world through information and energy reminds me of the Nikola Tesla quote, which I’ll paraphrase: If you want to understand the secrets of the universe, learn to think in terms of vibration, frequency, energy. Everything is in flux, essentially. We think things are material, fixed reality, and we’re playing with atoms and stuff, but it’s not: matter itself is energy, it’s frozen energy, but it’s all energy.

We’re re-arranging atoms into things. And now we’re going to be doing that differently in an information system.

Yes. It’s as if the idea is the blueprint, and then the casting guy or something for the energy that we cast into it to make the thing, whatever it is.

Have you ever looked at type 1, 2, 3 planets?

Is that the Kardashev Scale? Yeah.

So we’re not even a type 1 civilization yet, and solar… remember this is no additional technology needed, just the existing… but a type 1 planet is when essentially you can use all the energy of your sun. And even solar wouldn’t do that.

Right, you’re using a tiny fraction of it.

Exactly. Because you’d have to cover the earth in solar cells to be able to do that. But you could do it, right now, they’re actually working on it, I saw something last week talking about solar in space beamed down.

Wow. Wireless…

Yeah, so that’s technology that’s available now, not scaled out and everything else, but this stuff is all coming. But a type 1 planet, all the energy that falls on the earth from the sun… sorry, type 2 is all the [?] from their nearby star and type 1 is all the [?] that falls on the earth from the nearby star.

That is the point, energy harnessing is civilization: the more energy we can tap into, the more wants we can satisfy more cheaply, the more population we can support, etc. That’s a great way to look at it. Something I’ve been thinking about as well… we talked about cost of production declining leads to network proliferation. The book The Sovereign Individual goes into that as well, basically in the digital economy, by decreasing the cost of information distribution and transaction cost… centralized entities that we’ve come to think are the norm, like large centralized governments, large centralized firms, they become less useful, because if you think about the purpose of a firm, it’s like a nexus of contracts, essentially, to overcome the cost of information. But if those costs decline, then the purpose of the firm is largely dissipated. I started writing a blog series about this, it’s called Sovereignism. I’m just thinking out loud here… Communism, we have this command and control economy where it’s the ultimate central planner, right, there’s no price signal at all in the economy, there’s just a group of guys that tell you how much things cost, which completely handicaps the intelligence and adaptivity of the free market. So in, say, the USSR, Soviet communism competing with something like U.S. capitalism — which was not pure capitalism but much more free market — so that model, capitalism, socioeconomic organization was more energy efficient than communism, so what I’m trying to write about, and I’m calling it Sovereignism but what it is is really just purified capitalism, it’s like get the central planning out of money and let the free market do it’s thing. The hypothesis is that that would be much more energy efficient than capitalism, 20th century capitalism. So what I’m getting at here is, How in the world can I quantify that? Is there some proxy measure to say: Here’s why capitalism outcompeted communism because it was better at this metric. Is there a metric like that?

So I think it’s about error correction. I think it’s about more opportunities, so information, you have more information — we’ll talk about this a little later in AI — but the printing press distributed more information, and it wasn’t just a one-way distribution. It wasn’t, Here’s all the knowledge you have to learn. It was a two-way distribution; people could contribute to information. And as people contributed more information, instead of just heard from the church or state, what spot they should have in life… As they contributed, civilization got smarter and smarter. Scientific Method, Renaissance, smarter and smarter. And you’re adding more information to the system, and as you add information there’s a whole bunch of bad information just like today, but there’s these sparks of really great ideas that take humanity to the next level. So if you have central planning in anything, essentially, I make all decisions, then I don’t have all the information. It’s a bottleneck. Our businesses have been designed around… all a business is is a collection of people — hopefully aligned on a big idea — and the more aligned, the less bottlenecks, the more alignment around the vision and what to do, it’s planning at a business. And so it’s really important, in that, to set up a structure in a business that allows learning at scale, instead of a top-down Here’s what to do.

Right.

A lot of the businesses today that are moving so fast, or startups that kind of catch fire, they have in their DNA a curiosity and a learning that can drive the best ideas and drop the bad ones. The whole agile process and technology is around that. So you can error correct faster and move forward. Large companies get caught into an organizational structure that prohibits that learning rate. Whether it’s a large company like Kodak kind of getting annihilated, they don’t see what could happen out of that learning rate; they stayed into their existing structure. And the same thing, if you just keep on playing any organization of people, right up to government, it looks the same way. It’s just a collection of people, but if you centrally plan and I know better than the market, there’s no chance you could know better than the market.

By definition, you never can. Yeah that makes sense to me, the siloing of information… if the central plan is not in error in the beginning, it will be at some point, but it has no means of course correcting, because it’s not getting any signal back from the market until it just collapses.

And there’s too many data points. So today, a lot of people that listen to this say, Well it’s working for China, but they don’t know it’s not, the only reason it looks like it’s working for China is because China has expanded its debt faster than any country in history. And so the China miracle is more of a debt miracle they got together, and that debt miracle was created out of the U.S. needing a production base, it was a codependency at first, it worked really well, and now you’ve hit a tipping point. But if you looked at that in a narrow window, in the narrow window of overall time you would say it works.

Alright, that makes sense to me, the informational aspect of that, I think I get a handle on that… There’s as metric you used in your book called the Levelized Cost of Energy — LCoE — which is essentially a universal metric for comparing the costs of energy across different sources. That’s what I’m… is there an LCoE that you can apply to something like communism vs. capitalism?

I think these are frameworks or ideas that we get comfortable with, and they have different meaning to each of us, right? So today, my idea of a free market is going to be totally different than someone else’s idea of a free market, or my idea of capitalism because of how I grew up is going to be a totally different idea. Because the complexity of that word and what that means… so is it a free market except for banking? And is it a free market except for when the banks should fail and then you give the bank more money so it’s not really a free market? And then anybody close to the bank it’s not a free market for, but everybody else it’s a free market? If somebody else fails, they fail? So where’s the line, and what does that look like? So these words, these complex words or ideas, have been so brutalized by central planning, by I can overcome the system, I can overcome the information, essentially, I’m gonna make a better decision for all of you. So it becomes really mothering, and it takes away from the free market.

Which infantilizes citizens, right? When you have this dependency on the nanny nation state, you’re not being responsible.

I think, and some of the things I’d love to discuss in this series at some point… We’re gonna move to a Bitcoin standard or something like that, I’m pretty convinced. But how do you do that in a way that you could allow for the rest of society to come with you? I think that’s actually the most important thing that we could talk about. If we can start talking about that… that path, until you actually figure out what that path could look like or start to show that path, it’s really hard for people to leave their existing world. It’s really hard to get a movement… whether it happens anyways, but if it happens anyways without some sort of path? It’s gonna be really disruptive, for a whole bunch of Bitcoiners too.

I agree completely. It feels sort of incumbent upon us to try and do some shepherding here in painting the vision of a broader, better tomorrow on a Bitcoin standard. That’s largely what I’m making an effort to do here, in exploring my own thoughts about what it looks like, and hopefully sharing with others… But I don’t know, I agree with you, but it’s also like, it’s gonna happen no matter what… it’s like we do our best until it happens, but then it happens, and I don’t know how far we’re gonna get.

But again, would you say — what I’m going to say is going to be controversial in the Bitcoin community — but if a government, let’s just say you had a choice, we all had a choice and there’s a whole bunch of sovereign states that we could choose to raise our families in, and those sovereign states are going to be competing for money, and a lot of people in Bitcoin will have that money. So they’re gonna be competing for that, and then they’re also going to be saying, How do we provide roads, bridges, infrastructure, medical, and a society that other people can thrive in too as we do this? What’s your answer?

What does a government do? I would imagine they would start collecting taxes on Bitcoin, and holding Bitcoin, and mining Bitcoin…

I think that would happen probably prior to that, but at some point, there probably has to be some sort of tax base to be able to do the shared services that people want. And there has to be some sort of belief in a structure that allows that to happen for providing for people who do not have. There has to be something, otherwise society kind of breaks down. There has to be a shared belief system, and this is a good thing. And as that happens, I would suspect that that regulatory environment… there will be some areas that do that way better than others, and attract more talent as a result. So that’s kind of how I think about those regulatory environments and what does that look like and where do you want to be, not just from a regulatory environment but what looks great for your family, friends, everything else, lifestyle, what does that look like.

Yeah, I feel like the other big change there would be: not one size fits all, right, governments would be negotiating independently with citizens, basically: here’s what we’re willing to offer, here’s our standard rate, if you’re gonna bring this much economic activity maybe we concede on the rate a little bit — it would actually be a business negotiation!

It might be hard to do that as a business independently, it’s probably too hard to do that as a business independently, maybe …

Depending on the nature of your business too, right, I’m thinking more digital native businesses where you have a lot of optionality on what jurisdiction you domicile in…

Estonia today has a digital nomad type of citizenship taking advantage of that.

Yeah, it’s interesting to think about… I think the main, big point here though is that decreasing cost of energy — let’s just focus on that metric — decreasing the levelized cost of energy, the LCoE, the more we can decrease that, the more we can increase or accommodate the proliferation of civilization actually.

On a caveat that you do not print against it.

… that you do not… yes. Because then you’re decreasing it technically right?

You’re increasing everything else to offset that decrease.

So to allow innovation to naturally decrease the levelized cost of electricity, and have the civilization running on a monetary standard that shared those benefits with the monetary system…

So to me, that’s a big idea that there’s not enough people in Bitcoin talking about. The big idea is: Bitcoin forces that to happen. Nothing else does, because the existing system is going to keep printing to stop it, and Bitcoin forces that transition…

… from both sides, right, it’s incentivizing you to decrease levelized cost of electricity to compete in Bitcoin mining, and it’s also an absolutely inflexible supply that’s rendering all the value from that decrease.

… that forces that deflationary, that abundance gained from technology, to society abroad. That’s the point, the biggest point… first point everybody should make is that one: Tell me how any other system that does that can work.

It generates economic surplus and distributes it.

Every other system, if you try to create an inflationary system against that, the only way you’re successful is by pushing up prices and consolidating power to the state. And against that, so you’re concentrating power versus distributing it — I’m not just saying energy, but they go hand in hand — you’re concentrating all decisions into an entity which typically gets controlled by the biggest thug eventually. Or you’re using Bitcoin and energy moves and everything else moves lower cut… It’s a forcing function to allow deflation to broadly be shared.

It’s beautiful. Bitcoin is literally power to the people.

It really is; it’s that big an idea. It’s interesting that the people most hurt by the inflationary policies are the people most hurt by the climate change activist who believe in the inflationary policies? Go hand in hand, when it’s the opposite side of this that actually saves both.

Yeah, it’s a great point. We’re not gonna get out of this with legislation or carbon tax credits: it needs to be an actual free market incentive that, again, the greatest force for problem solving in the world are entrepreneurs. Bitcoin is unleashing that entrepreneurial force on solving this problem we call climate change.

Right. And you could say… go back and let’s just drive into that question a little bit more. If you were in the climate change debate, you would say, in the capitalist system you would say, Okay you need these checks and balances, because the entrepreneur will win for themselves, and the externalities to our environment, they won’t capture, and it’ll get worse and worse for the environment, and everyone else will have to pay the externalities while they create the gain. And there’s actually an argument that that’s true. But today, the externalities on solar are positive, because the price is now lower and it’s clean energy.

Yes, and, there’s second order externalities too, which you point to in the book. We get cheapening energy driving an increased proliferation of civilization, but it also makes things, like the desalination of water economically feasible. We can already desalinate ocean water today to make it potable drinking water, it’s just a very energy-intensive process, which is why we don’t do it at scale, and you can also, the same type of technology that desalinates water, we could use to strip carbon out of the atmosphere. It’s a process.

All of these things are energy problems, and solving energy solves those problems too. And the irony about that water problem is that most of the really tough areas to live, refugees, food crises, everything else, that put pressure on other systems that don’t have that? If you said migrants from Africa to Europe and everything else, escape famine a whole bunch of things caused by the same thing. And now you have energy where the sun’s shining all the time. It’s free. To be able to change that economic value, both of water, sun, energy, everything else, and it changes agriculture, it changes a whole bunch of other stuff as a result of that calculation.

That’s incredible, honestly, I think this is why… without looking at other domains, just staying in energy, this is why people in the Bitcoin community are so hyped about the meme Bitcoin fixes this. We have Bitcoin serving as a global bounding program to make energy cheaper, and then as a totally, perfectly inelastic supply of money, it’s sharing those gains evenly across its network…

Not just energy, now everything…

Yes, all technological advances, all productivity gains…

Yes, the entrepreneur still wins more; if you deliver value to society, you still win, just like in a free market system you’d win more, if you deliver more value, you gain more.

You have this option to also not expose yourself to the vicissitudes of the market, and instead just hold the money and benefit from it too, right? If you’re an older guy going into retirement or something. And then the last piece is this: when we get cheaper energy, of the technologies that already exist, these are already viable technologies — ocean desalinization and decarbonization of the atmosphere — become economically feasible. So all of a sudden we get all of these tools to clean up the damage that has been done. If it just did that and we stopped there and said nothing else about Bitcoin, it’s like, Oh my goodness, this is one of the most profound innovations of all time!

And it is one of the most profound innovations of all time. It’s not that there haven’t been others but… Innovation works in idea, idea, put these things together, next step, and humanity advances by those giant steps. Bitcoin is one of those steps allowing an advancement of humanity to sdifferent degree, on a different platform that we’re not used to. And to me, it’s not scary — these things need to be worked out — but it’s actually the most human thing we could do.

I completely agree. We’re getting back to the principles of the free market…

And not concentrating power into certain individuals’ hands; we’re sharing that broadly.

Yeah, which is, I would argue, the best side of human nature is that: when we’re functioning cooperatively towards solving bigger problems that we face across time, right? Energy is the bottom of that, basically. Wow… I really enjoyed the discussion on that, that was really good. This connection, again, that you alluded to earlier, where it’s geopolitical power and energy… they’re kind of a reflection of one another, it’s whatever entities controlling the energy networks are benefiting from them, they have political power in the world.

And that political power is actually breaking down right now because of the same thing. Or it will break down, it’s not quite breaking down yet, but this path to abundant energy changes them.

Yeah, so renewables, accelerating technological innovation, all of these things break down those power structures.

We’ve lived in a world forever looking through it where we needed to control natural resources and energy, and countries were invaded, or puppet leaders or anything else, to be able to control an energy or natural resources, and that is changing. Natural resources are still important, they’re still critical natural resources in this whole infrastructure, even to make solar panels… but a bunch of the things the entire industrial complex and war machine went to war over to be able to control these is changing.

Yeah, I agree completely. So what, I mean, this is such a complex domain, I feel like we’ve touched on something here that, to your point, we need to meme this into reality, because it’s complex to understand the relationship of Bitcoin to the environmental side of the world… What is the elevator pitch? What would you say to your standard environmentalist that’s saying Poo poo Bitcoin…

I would ask them to explain how an existing system that promotes inflation, that prints money and has to grow forever, is in line with saving the planet.

Bingo. That’s it.

Because it’s illogical. It’s impossible to obtain.

Yeah, assuming they understand that it’s debt based on…

Yeah, so just think about it: I’m going to grow forever, I have to grow forever, more and more stuff forever on an ever increasing rate, and to get that growth I’m going to distort money forever — have anybody tell you how that’s consistent with how that can work on a finite planet with climate change. And then, if you connect it after that, the dot to the technology is driving lower costs, it’s exactly the opposite side of that scale, so you have to print more money to offset it… So every single dollar that you’re printing to be able to, say, save the climate? You’re making the whole thing worse.

Wow. Brilliant. Inflation is irreconcilable with environmental conservation.

It’s irreconcilable; it’s impossible.