Cedric Youngelman | The Bitcoin Matrix Podcast #128: Croesus: We Are So Early. Few.

Link to the YouTube (the timestamps are based on this): https://youtu.be/i3trwGIZx84

Croesus: Hi! My name is Croesus. I have been living a double life: on the surface I have remained Jesse Myers, Stanford MBA and former Bain consultant, but for the last six years my time and intellectual energy has been spent somewhere very different. The journey has taken me down a long and twisting rabbit hole to wrestle with unexpected conflicts between truths we take for granted and realities long forgotten. The rabbit hole was taking an interest in the value proposition of cryptocurrencies — the result was emerging a Bitcoin maximalist. Getting to this destination was a terrible surprise! I never set out to become one of those Bitcoin fanatics — you know the type: once or twice you’ve been stuck in an otherwise pleasant social context half-listening to the zealous ravings of a Bitcoin believer, while primarily looking for a graceful way out. I may have never wanted to be that guy, but my curiosity compelled me to get to the bottom of the promise and potential of cryptocurrencies. For years, my focus was on the exciting innovations after Bitcoin, but certain things didn’t add up. To resolve this dissonance, my path led me deeper — much deeper — into monetary history, decentralized systems, and a study of scarcity. There was no way around it — everything I was finding, all the pieces of the puzzle — they all pointed back to one simple conclusion: Bitcoin is the most important asset of the 21st Century. Without meaning to or wanting to, I had become one of those crazies. For three years now, I’ve existed in this intellectual state known as Bitcoin maximalism. I found myself among a relatively small but passionate cohort of individuals who had each — through their own personal journeys of persistent curiosity and study — reached the same conclusion as me. Our forum is Twitter. Our frontier is Bitcoin. Under a pseudonym to protect my privacy, I contributed what skills I have to illuminate the path for others. Without intending to, I made something of a name for myself as a Bitcoin educator. For some time now I have been stuck, however — I put out content on Twitter for those who were actively searching for knowledge about Bitcoin — it has been deeply rewarding, but has kept me fundamentally constrained to keeping my work disconnected from my real identity. In truth, I’ve been scared to make my views public — believing in Bitcoin means believing that there is something very wrong in the world as we know it. We all sense that, but we also have already decided what we believe is needed to make the world a better place. Bitcoin is a different path which automatically makes it a threat to our preferred panaceas — and well, that is unpopular with everyone! It’s also a path readily championed by scoundrels and scammers, by the disagreeable and despicable, but such is the nature of any frontier where opportunity exists not only for those decent honest folk who dare to seize it, but also for those who are pushed to the fringes of society because they are unsuited for success within the mainstream. Bitcoin is still the Wild West — which is exactly why there is tremendous opportunity for those who take interest in it now rather than in the future when it’s commonplace. I realize in that last statement there is a level of certainty that borders on arrogant delusion, but that’s the matter-of-fact result of digging deep enough for long enough into understanding this strange new asset. Bitcoin is on a deterministic path to become the world’s preferred store of value asset. And fundamentally that means: Bitcoin doesn’t require that you believe in it — it will succeed because of its inherent properties regardless of your opinion of it. If this assertion is true, it puts you, the listener, in a rather uncomfortable predicament: you can either add this warning to your mental list of positive endorsements of Bitcoin that at some threshold of critical mass will spur you to learn more about Bitcoin, however begrudgingly — or, you can dismiss this as delusion without merit, despite the fact that you have been interested enough to listen this far. Since both of these options are unpalatable, I’ll offer a third option: defer judgment. I, Croesus, will be putting out more content exploring all the important aspects of Bitcoin, and you can decide after reading more whether Bitcoin is worth your time, or if this Stanford MBA has lost his mind. This way, there’s only upside: either you learn something potentially important to your financial prosperity, or you get to savor the schadenfreude — win-win.

Cedric Youngelman: Oh wow, thank you for reading that — it was really great to hear it in your own words. For me it really resonates, I think, with my journey. You mentioned a lot of things there. I have a masters in accounting from Virginia, so I take slight offense to Stanford being number one — it might be, but I think Harvard, Yale, and Chicago also might throw their hat in the ring there.

Croesus: They certainly try!

Cedric Youngelman: What I also heard there was frontier and how early we are, and then getting into skepticism there and now maybe something’s wrong in the world when you embark on this Bitcoin journey. And something also similar was when I started the podcast: I was a pseudonymous Twitter handle at that point and I didn’t really think I could run the podcast as a pseudonym, and that was when I decided to put my name to the Twitter handle and do the podcast that way, so I kind of relate to that. And I think privacy is the new celebrity in a lot of ways! You kind of got into it a little bit there, but what was it like revealing your identity and marrying those two worlds?

Croesus [6:34]: Yeah it’s been it’s been interesting, particularly because the people in my professional network — I put this post out on LinkedIn — and almost nobody that I know in real life in my professional network engaged with it. I think a lot of people read it and I think a lot of people probably raised an eyebrow or two, but almost nobody that I actually know engaged with it. But I got a ton of engagement from people I don’t know on LinkedIn who came in with your classic pre-coiner bashing and saltiness towards Bitcoin — with all your classic entry-level FUD — which was pretty funny and eye-opening and a little bit exhausting too! I rolled up my sleeves to wade into battle with the LinkedIn comments, which I don’t really do on Twitter because I’m in the Bitcoin echo chamber and I tend to have a lot of support whenever there are those debates on Twitter. So in terms of the actual LinkedIn coming out, it’s been funny. I still have to post this, but I did get a text the other day from Dan from the Yuppie Elite and it just said: Jesse! I got a 790 on my GMAT! And then he posted the link to the Yuppie Elite article. So he read it and knew it was about him, and I guess I mistakenly undercut him by 10 points — which, for those who are not familiar with the GMAT, a 790 is a nearly impossible score to achieve, because it means that on half the test you got every single thing right even though the test is designed to programmatically throw harder and harder questions at you. So it is quite a feather in the cap to have! So mostly it’s just been kind of interesting how muted the response has been from my professional network, but I’ve already had conversations with people that I would never have reached through just a Twitter pseudonym talking about Bitcoin and the value proposition of Bitcoin, and wealth managers who are interested but don’t know anything. So that’s already been kind of rewarding.

Cedric Youngelman: What has it been like in real life as your Twitter handle? Have you met other Bitcoiners as Croesus? And what was that reveal been like before you revealed it online publicly?

Croesus [9:26]: I’m in the LA area and for a couple years I’ve been going to — Andy Edstrom sometimes has little barbecues where he invites LA-area Bitcoiners, and so I’ve been going to those for some time. And for the most part, especially early on, nobody recognized the Twitter name. But then later on, people started to recognize me when I would introduce myself, including one guy who said that the Yuppie Elite article was one of the main reasons why he broke up with his girlfriend — who had an MBA — and he suddenly couldn’t unsee the difference between why she resisted Bitcoin whereas he was embracing Bitcoin and all of her friends mocked Bitcoin! So that was kind of a strange compliment — a bit of a lovely thing to hear, really, that my article had somehow struck a chord to such an extent that it forced him to dig deeper down the rabbit hole, is what that amounts to. So yeah, only a few people had really known who I was before, and that’s kind of how I wanted it. But I guess now I feel ready to be more public, more out there. I think a big part of it is I’ve just been so immersed in Bitcoin for so long that it’s clear to me now there’s no going back — I’m not going to be taking any strategy position in a Fortune 100 company. That’s not going to happen — I would go crazy! And so: might as well wear my true colors then.

Cedric Youngelman: Sure. And I’m curious then what have you been doing with your time now? I think you run a fund?

Croesus [11:37]: Yeah I run a small Bitcoin fund — it started as an altcoin fund back in 2017 when that was my thesis. And that worked alright in 2017 and then very poorly in 2018 — so I got rocked, and that forced me to go further down the rabbit hole to find out what I was missing, which led to me understanding that Bitcoin is about money and not technology and that, risk-adjusted, it’s the only thing worth holding in the space. And, risk-adjusted, the best asset on the planet! And so that has been a process of me bringing my investors — who were investing in me and my thesis that there would be up and coming digital assets that would chip away at the incumbents — taking them from that mental space and helping them get on board with Bitcoin and Bitcoin-only. And it’s a small fund because they don’t really need me: I’m just holding Bitcoin, really, for them, and I’ve encouraged them to take self-custody, but most of them still want my eyes on the market and to take care of everything. And, really, I’m outsourced conviction in many ways because I’m every month putting out an update that teaches them about Bitcoin and helps them understand — especially in a bear market — why it’s still a good idea to be holding it. So I guess that’s the position I’m in there where I’m adding value in a way that I didn’t set out to, but has still been valuable to my investors.

Cedric Youngelman: It sounds they’re in good hands! You’ve been helpful in my journey, your voice — it’s definitely helped chisel my conviction, and I’ve gained a lot of knowledge here from your your work. You have a very interesting blend of work and I see it as almost like three pillars. There’s a lot of good numbers and running the numbers and number crunching and that MBA business score card — this way of looking at a problem, looking at a solution where the value is. And then the cultural cosmic esoteric or even contextual sort of narratives — I think the Why the Yuppie Elite Dismiss Bitcoin article and the Bitcoin and the American West article that I would love to dive into. What I think is fascinating about this piece is, if you grok the value proposition, you still need to contextualize what that value proposition is in today’s world — what are we dealing with here? That’s what I love about Bitcoin in the American West. So I would love to dive into this piece: what was the American West like in the early 1800s? And why was that a pivotal time?

Croesus [15:18]: I think you nailed it in teeing this up that the place where this article came from was myself trying to put into context what Bitcoin compares to in history, where you have a scarce asset, a finite asset that is new, and because new things are inherently undervalued or misunderstood or not properly appreciated when they’re new, it’s not like overnight the mainstream realizes the value of the Internet or the American West. And trying to wrap my head around, What’s a good historical example where we could see the full development of some new frontier? And really that was from the lens of: What does the adoption curve look like? How do you go from nobody being there to it being fully adopted? The Internet is still too young to really have a retrospective like that, and so you have to go further back. What’s an example where there’s a finite resource, a scarce asset, that has gone fully through the adoption curve? And growing up going on road trips through the American West and having this sort of special — it’s a part of me and a part of the American identity that I appreciate — that’s what I started to think about more and more. And thinking about the American West in the 1800s started to reveal more to me about Bitcoin’s future and the realities of Bitcoin’s present than I had expected. The starting point for the American West is that in 1803 the Louisiana Purchase happened. Overnight you go from a Eastern seaboard-based country to a country of twice the land mass — all of a sudden. The people based in the East never even thought about what’s on the other side of the Mississippi! And in fact, when the two diplomats who made the Louisiana Purchase came back, they got criticized because this was going to be a vast expanse worth less than nothing to America — which is of course absurd in hindsight. So 1803, that happens, and suddenly you have this massive new tract of land and it needs to be explored. And so Jefferson, who was president at the time, commissions the Lewis and Clark expedition. And that — over the next couple of years — puts lines on the map where there had literally been nothing before! There was no knowledge of what had just been purchased because white men hadn’t documented it yet. So those first explorers — which I equate in the piece to people like Hal Finney with Bitcoin — were the first people to see like, Okay what is here? What is this? And they go out into the total unknown to determine, What’s here? And, Does it have value? And then they come back to civilization and say, Yep here’s what we found. It’s incredible out there! There’s so much land and wilderness, and this is the tiny bit that we were able to learn and document and put down on maps about what’s out there. And so Hal Finney comes back, and people like Dustin Trammell — who are the very earliest Bitcoiners — come and report to other cypherpunks, really, Hey this is pretty cool! You should probably check it out — there’s something here! Who are those cypherpunks in the American West analogy? Those are the mountain men: fur trappers or whatever far out there professions were possible on the frontier specifically where there was no infrastructure yet, so you had to be entirely self-sufficient on the frontier. So these mountain men — these crazy wild out there people — one of them was nicknamed liver-eating Johnson because he went crazy after his wife died and he killed a bunch of Indians and ate their livers. Like, crazy wild men go out onto the frontier and they make a living by killing beavers and bringing back their pelts. And in the process, they learn about the land and then they set up trading posts for whatever supplies are needed. And suddenly you have the very first infrastructure! So that happens over the 20–30 years following the Lewis and Clark expedition: the mountain men are fanning out and exploring trying to find their frontier, their personal range, their trapping zones, and in the process putting that information down on maps and maybe word of mouth spreading it and setting up trading posts where there’s logical routes through the mountains or whatever. And that gets to a point of sufficient infrastructure that then it becomes possible to traverse the American West. And then it becomes possible to start going from Illinois to Oregon — and what’s in Oregon? There’s a ton of incredible farmland that is not in use! It hasn’t been cultivated by European agriculture. So there’s opportunity there but it’s scary and it’s dangerous because you have to cross this wild land with all of the hazards inherent to it, but some people do. They reach Oregon, and what the very first people there are trying to do is they’re trying to incentivize people to come to Oregon: Come to Oregon, you will be able to build a life here. We need people! If you come to Oregon, we will give you and your wife 640 acres of farmland. So that’s the pledge in 1830 or maybe 1839 — somewhere in there. And so some people do, and a lot of people die on the way because they didn’t make it through the pass or get stuck like the Donner party would do many decades later — but some make it. And then now Oregon’s starting to populate with farmers, and as that’s happening — the more and more farmers start to show up hoping to get 640 acres — Oregon says, Okay now let’s just say 320 acres. And then later they cut it to 160 acres. And then it’s no longer free — you have to buy it from the people who have already made the journey. So right there there’s this incredible little vignette of early adopters getting more of the scarce asset because they were early, because they took greater risk, because there was less competition when they made the journey. And that’s exactly what we’ve seen with Bitcoin particularly in its first six years, let’s say. And now Bitcoin is a little bit more known: it’s not the same level of danger and uncertainty and it doesn’t require quite as much self-sufficiency from an adopter in order for it to be adopted now. You have better infrastructure, better guidance, better knowledge, and there’s a lot more people doing it. So now it’s not so much the Oregon Trail anymore as it is maybe around the time when California was getting populated. And it’s somewhere maybe right before or right after the California Gold Rush. I think that’s where, spiritually, Bitcoin is right now: it has gone from total unknown frontier of digital scarcity — and over the last 13 years it has had the adoption curve of just a few crazy out-there cypherpunks at first — and then them leading the way and building the infrastructure necessary for the first people to buy this asset on an exchange, people who weren’t going to mine but are interested in speculating. And then Mt. Gox turns into the better modern exchanges and there’s more on-ramps and it becomes more socially normalized — but it is still very early! When you look at the numbers — which is my focus in the other pieces — it’s still comically early. But the American West piece sort of creates the historical analog comparison to show we’re really early in how, when any frontier develops, we’re still in those early days. When we think about the American West now from our current standpoint, we think of 1840 as ridiculously early. If you came to Oregon or California in 1840 and you had the intention to get some land and settle down with your family and make that a family legacy for generations to come, those few people who did that — those ranchers are still around, if the family has held it together! Of course a lot of those families haven’t haven’t maintained that continuity, but those are massive success stories: anyone who made that journey that early in 1840 or so. And what follows after 1840 for the American West is the Civil War happens — which coincides with the push to have a transcontinental railroad which is finally completed 1870 or so — and suddenly the West is accessible to anyone! You don’t have to have a covered wagon and take all the massive risk of a three-month journey or six month journey. Now you can do it in relative comfort and cheaper: even though a train ticket is expensive, it’s cheaper than having to commission a wagon train. And in that way suddenly the West is accessible to everyone and the barriers to entry have dropped and anyone can access it. And therefore a lot more people do! They try to Go West, Young Man and make a brighter future for themselves and their families because there’s opportunity in the West. And then into the 20th century the American West rapidly develops to a point where it is now hard to point at anything and say that the West is less developed than the East. So it has caught up, it has been fully built out, the infrastructure has fully caught up to what was the only thing that existed when the Louisiana Purchase happened, and now there’s parity between the West and the East. And so I think that’s where Bitcoin’s future is: as infrastructure continues to improve for Bitcoin and on-ramps get better and barriers to entry decrease and more and more people explore Bitcoin, more and more people report back to their family and friends that here’s a thing you can own that makes sense because of these properties that you didn’t know about, that all leads to more and more adoption, and the normalization of Bitcoin in everyone’s portfolios. Because at the end of the day, it’s savings technology and there’s no other asset on the planet that has true increasing scarcity built into it. So I think the analogy of the American West creates a credible guess about what the future of Bitcoin looks like in terms of its future development and adoption. And if that’s true, then we are still in that opportunity to be pioneers in 1840 getting a disproportionate amount of land just because we were willing to take that risk and make that journey early.

Cedric Youngelman: That was a tremendous breakdown of the analogy, and there’s a lot to unpack there. It makes me think of the people who come to Bitcoin and they look at the unit price and they’re like, Fuck! I’m late! And I want to read a little bit from your piece. So this is certainly the most appropriate comparison is these two pieces are the yin and yang of the digital revolution: the Internet is the digitization of information, while Bitcoin is the complementary digitization of value. When we limit our Bitcoin comparisons to the early days of the Internet, we miss out on the insights we might draw about the future trajectory of Bitcoin beyond the stage of development that the Internet has now reached. — That makes me think of Amazon in the early days. And when I would try to express the value of the Internet and this company to people — and a lot of people use this analogy as well: Amazon’s going to eat Barnes & Nobles’s lunch, they’re gonna eat Borders’s lunch. They could have endless inventory and they can ship anywhere in the world and they can compete on convenience and they can eat the book market. And well okay, How big is the book market? And you can get into market cap of Barnes & Nobles and Borders, competitors to Amazon — that painted a huge picture, but that wasn’t even getting at Amazon eating every retail vertical. But even then, I can guarantee Jeff Bezos didn’t see AWS and cloud computing and the things beyond eating up the whole world, but a world that no one knew about yet, because we didn’t have an online world. And your piece goes on to say: In 1787 the United States created the Northwest Territory, establishing the framework for the conquest and settling of the exotic land in the distant West known as Ohio. In 1795 the United States secured right of deposit in New Orleans from Spain, ensuring that American merchants had rights to conduct commerce in and through the vital port of the mouth of the Mississippi that marked the Western edge of the American sphere of influence. So I mean Ohio is is the exotic far off West, no one even cares about any of this land, and we’re not even going to New Orleans to buy any. So that’s kind of interesting! And you go on to mention the similarity to the Internet. And so ARPANET — the earliest colony of what would become the Internet — launched in 1969. By 2008 the Internet had already achieved so much. To most casual observers 40 years into the Internet’s development, the bulk of the Internet had already been created. Since it’s a recent enough history, we can all recall what that time felt on the Internet: we had Google, Amazon, Facebook, iTunes, YouTube — how much more was there to create? But for America in 1802, just like the Internet in 2008, everything was about to change. How’s the Internet? How have you seen that change since 2008?

Croesus [33:39]: Interesting! Well I guess tying that into the analogy of: What did Americans in 1802 think America was? They thought America was this Eastern seaboard set of states — the colonies plus a few, at that point. That was America! That was everything. And then Mexico or Spain had interests further over — but that’s not America, that’s Spain. And who gives a damn? There’s nothing over there! So the mindset of America of an American in 1802 was: this is everything — or maybe you’ll try to go homestead in Ohio. That’s the extent of it for an American in 1802. In that sense, that nobody was prepared for, nobody was anticipating, nobody was looking forward to the Louisiana Purchase — it just happened. Jefferson sent over the diplomats intending to buy New Orleans and the French King was interested in selling the whole thing and the diplomats were forced to go, Uhh okay we weren’t expecting this and we can’t write home because it’ll take too long so yes we’ll do it! So in 1802 nobody was expecting that to happen, and therefore nobody could anticipate the way in which America would change in the next year and then in the following decades. So when Bitcoin happens in 2008–2009 — nobody was expecting that! Nobody was looking forward to it. Maybe some cypherpunks were looking forward to somebody cracking the digital cash problem. But by and large, nobody was looking forward to Iowa being a part of the US and then it happens. And then that sets in motion these incentives that change the country and for the whole next century, America’s identity is intertwined with westward expansion and cowboys and Indians — that’s where that comes from. And that’s part of the American DNA is striking out into the unknown to go and create a better future for yourself and your family — Go West, Young Man. But thinking about it from the perspective of somebody in 1802: it was simply not on the table, in the same way that in 2007, Bitcoin — and how it would change the Internet — was not on the table. And so we’re now living through the ramifications, the playing out of the incentives that Bitcoin set in motion in the same way that Louisiana purchase set in motion these incentives that would play out over the following decades.

Cedric Youngelman: Go West, Young Man! And I think you said in the article, Stay Humble and Stack Sats is the new version of that, the 21st century version of that, the global version. And Go West, Young Man was global — you wrote in the article that people actually came from around the world. I think the Chinese you said called it the Gold Mountain. I want to read a little bit more from your piece: You may have already realized the parallel, but in this analogy, the Louisiana Purchase on July 4th, 1803 can be considered akin to the launch of Bitcoin on January 9th, 2009. While Satoshi’s creation of Bitcoin is far more impressive than Monroe’s lucky acquisition of a vast unknown western region for the United States, they can be thought of as similar forward thinkers who broke the paradigm of what was possible, and opened up a vast new frontierland for others to explore and develop. And you go on to note these wild men contributed first: Jedediah Smith was the first to explore the Sierra Nevada mountains, cross the Mohave, and discover the crucial South Pass — a navigable route through the Continental Divide which would enable the Oregon Trail. In the process, he survived three Native American massacres and one bear mauling. Most early Bitcoiners have survived their share of hacks and attacks, and all have been mauled by a bear or two. You also mentioned a lot of these guys lost family or lost their own lives on the way, that this wasn’t without risk. I see that very huge parallel to Bitcoin versus maybe not losing family in the mortal sense but maybe at the dinner table — a lot of fights over what Bitcoin represents or energy or, You’re crazy!

Croesus [39:24]: I think there are lives lost in Bitcoin too. My conversion from an altcoiner to a Bitcoiner came after I got just absolutely crushed with a steeper drawdown than Bitcoin has seen in its history because I was in the wrong assets, and that tested me in a hell of a way. As an altcoiner, I was paying attention to what some of the other altcoiners that I respected were doing. And in that time, in 2018 into 2019, word got out that some of these guys had killed themselves. There’s a very real human risk in taking the wrong path with digital assets — risking it all, losing it all — and that breaking you as a person. I came through it okay, but some people didn’t. And unfortunately, I think that that’s part of the tremendous hazard and sadness about altcoins and the future of the mainstream’s onboarding to Bitcoin through the way of pain, AKA by going through altcoins first and making very painful, very dramatic financial mistakes, and ending up with a lot less Bitcoin than they would have. That was my journey — if I had not made those mistakes, I would have a lot more Bitcoin than I do. And that’s the reality of these things. So I think that’s part of where the resonance for me personally of the Oregon Trail in particular comes through, because there’s a lot of stories of wagon trains making a fatal mistake trying to reach the promised land of Oregon and they took a shortcut through a pass that ended up damning them. Or they didn’t pack enough supplies and they didn’t make it through a desert. So those examples of people trying to navigate through the perils of the journey from the status quo from fiat world to Bitcoin — and that journey goes through digital assets as a general hyped up world that you have to pick your path through and hope that you can make it intact to Bitcoin, because that is the light at the end of the tunnel, the pot of gold at the end of the rainbow, Oregon at the end of the trail. So those costs, those dangers, are not only financial — and as you said, relationship risks abound here — but there’s also dangers that can break a person if they make the wrong choices on the way to Bitcoin.

Cedric Youngelman: Yeah I take to heart what you said there tremendously. I think about wrong turns a lot. I think about my own journey: I messed around with shitcoins for a long time. I came for the gains and I almost stayed for the tech, and I really looked deeply into that. Maybe Bitcoin was boomercoin and these other things were faster, cheaper, better, whatever. But I had to do my own research. I’m thankful for that journey. The analogy there would be: I sat in some towns for a while. Do I go to Oregon? Do I go to California? What is the best way for me? At some point I have to choose. Maybe while you’re traveling from Illinois to Denver you don’t have to make that choice yet and you kind of do your research on the way and ask a lot of people questions. And I never take anyone’s opinion but I take what I hear and I think, Does that make sense to me? What can I gleam from that? Other wrong turns I think about are people like Roger Ver or other people who got caught up with Luna, and maybe that led to suicide or something — you went down the wrong cliff on one of these trails. Also people Ross Ulbricht, who thought they could set up a trading post and give people what they wanted, and some sort of gang said, No — not on our turf! And you didn’t know you were going to be ambushed or something like that and you didn’t know what the rules were there. Or maybe the rules didn’t even make sense. So I want to read a little bit more because you mentioned the Oregon Trail. From your article, you wrote: In 1839, a group of 18 men set out from Illinois carrying a large flag with their motto, Oregon Or The Grave. 9 made it to Oregon. It’s not hard to imagine a similar flag flying out of a Bitcoin Maximalist citadel. In 1843 a thousand migrants set out for Oregon in what would be known as The Great Migration of 1843. Those who reached Oregon in 1843 were granted, free of charge, 640 acres of farmland per married couple. This was decreased to 320 acres in 1850 and further restricted to 160 in 1862. You mentioned that earlier before but I wanted to emphasize: you go out to Oregon and you’re like, I’m gonna get less than the people that [came before]? Maybe I’m not even gonna go? Maybe I shouldn’t go? Maybe it’s not worth it now? Or maybe you set out thinking you were gonna get gold, and all you got was some farmland. But over generations, that farmland is incredibly valuable! You go on to write: A greenhorn in digital assets has to navigate the treacherous landscape of cryptocurrency information available online, fending off scammers like Indian braves seeking scalps, and finding the right passage through the Rocky Mountains of shitcoinery. Breaking an axle is akin to losing funds in an exchange hack, dysentery like mismanaging keys, tempting shortcuts through the mountains like leveraged trading on BitMex. The journey to the promised land of financial security and a brighter future is full of dangers, but the promise of a better life beckons the adventurous and the bold. You go on a little bit later: There’s ample acreage of Bitcoin land available because there was not yet much demand competing over available supply, in terms of how early we are. — I really think that resonates in terms of a lot of people’s journey through this. And what I’m trying to get out there is: people shouldn’t be so hard on themselves.

Croesus [46:49]: Yeah! That’s one of the hardest things about coming to Bitcoin. People like to say that you buy Bitcoin at the price you deserve, but I think it’s: you buy Bitcoin when you’re prepared to admit you were wrong about Bitcoin. And that’s just so hard for us to do, particularly when we see these sensational examples of early Bitcoin wealth, and of course you think like, What did they do? They just got lucky! They just plugged in a computer in 2010! They didn’t do anything! And it’s hard to get over that and admit to yourself that it doesn’t matter! They did something! And they did something for Bitcoin when Bitcoin desperately needed adoption. And maybe they got compensated too well for that — fine — but it doesn’t matter. Here in California they had the rancho system, which is a sort of a holdover from when Mexico-controlled California, and that effectively meant that there were 10,000-acre land grants to whoever provided some service to the Mexican government and the Mexican government wanted to thank. So I actually know know a guy who’s a 10th generation descendant of a Mexican lieutenant in the military, I think, who after a decade of service was granted 10,000 acres just outside of Los Angeles, which is worth billions now. And of course it’s been chipped away at over the decades and generations because of all the taxes that come from passing down wealth generation over generation in this country. And so did that guy deserve 10,000 acres of prime Los Angeles-area land just because he served the government in the military for 10 years? Arguably No, but they needed to give it to somebody! And so that happened here — that happened in the American West. And to embrace Bitcoin — to get to Bitcoin — you have to forgive yourself for having been wrong about Bitcoin, for having missed it the first time you heard about it in 2013, the second time you heard about it in 2017 — you missed it! Everybody misses it, and it’s part of the pain and humbling process of coming to Bitcoin for everyone. I heard about it in 2013, if not 2012, thought it was ridiculous, didn’t do anything, regretted it later — so that happens for everyone! And at some point you have to focus not on who are the people that adopted it earliest that you wish you were, but instead focus on how many people are still behind you, because that’s where the numbers are very helpful to realize that there’s only 4 million addresses on-chain on the Bitcoin Network that have 0.1 Bitcoin in them. Which is to say: there’s only 4 million people who have properly secured — at most 4 million people, because there’s a lot of redundant or duplicate addresses — at most there’s 4 million people who have saved $2,000 dollars in Bitcoin in an address they control. In a world with 8 billion people. So 1/2000th of the world has done that, at most! And that means that if this is going to be the preferred store of value asset for the 21st century, for the digital era, for the Internet Revolution that we’re still living through, then the whole world will adopt it, or at least anyone who has money will adopt it. If that’s the whole world, then only 1/2000th of the world has adopted it at that fairly low threshold of $2,000 stored on-chain. So you can focus on the guy that has a billion dollars in Bitcoin because he got in 2010, or you can focus on the fact that right now you can buy one human being’s worth of Bitcoin for about $50 to buy one human being’s worth of Bitcoin. And you could do that every week if you want! That’s how early we are, and focusing on the envy you have for the billionaire from 2010 doesn’t do you any good. If anything, it just helps you to bitterly resist taking the step that’s right in front of you, which is being in the very first slice of adopters in the world, because only 1/2000th of the world has adopted it. And you get to be in the 2/2000ths of the world to adopt it if you take that step now. And it doesn’t do you any good to focus on the guy who has a billion dollars in it from 2010.

Cedric Youngelman: Yeah there’s a lot to unpack there. I want to get to the numbers, but first I want to spend a little time with Dan. I want to round out this analogy about the American West, though. And as we talk about the West getting built out, having parity with the East, we do think there that we’re kind of building the rails for Bitcoin commerce and a Bitcoin standard, big business, even regulations, how to deal with that, politics. And on that whole journey, a lot of people made money setting up camp, picks and shovels — there’s a lot of ways to look at this. But you go on to write: By the middle of the 20th century, the West was just about as developed as the East, despite its 200-year headstart. Today it’s nearly impossible to imagine America as anything short of Sea To Shining Sea — perhaps it was America’s Manifest Destiny from the start. But perhaps it was made so by the bold step of a visionary like James Monroe, who set in motion an inevitable and self-reinforcing chain reaction of individualistic decisions to seek economic opportunity in the West — at first gradually, then suddenly. Similarly, it is only natural to imagine Bitcoin’s current state as its terminal stage of development. However, by recognizing just how early it is in its adoption and ecosystem development, we gain perspective about how much more development remains. It makes me think a little bit about El Salvador there and them almost being Los Angeles in this analogy. And you go on to finish with: Hopefully, through the analogy of the American West, it’s a little easier to conceive of the flywheel of network effects driving increasing adoption and eventually culminating in the Internet’s Manifest Destiny: The Bitcoin Standard. And what I also like about this is that we’re splitting out the Internet and Bitcoin in terms of comparing them to each other, because Bitcoin is built on the Internet, and the Internet continues to advance and so will Bitcoin. So that makes me turn to Dan. We got to know a little bit about Dan here already: he got a 790 on the GMATs — he whooped my ass, that’s a great score as you were mentioning — I mean it’s rigged! It’s a carnival game: each one gets harder and harder, so it is really impressive. But you go on to write though: Exasperated with our conversation, I asked bluntly — and this was early on before he read the article, even a couple years ago — but you asked bluntly: What do you think the probability is that Bitcoin hits $1 million per coin? Without hesitation, my friend replied 0.001%. I laughed and I said, I put it at 80%! I asked: If, after thousands of hours of research on my part, maybe there was some information asymmetry, he quipped: Or maybe self-motivated beliefs. So Dan’s a smart guy! What’s going on here? Why are people like Dan — why are they all so resistant?

Croesus: Yeah that was the big question for me in early 2020: the lockdowns happened, at least in my social world, suddenly we — for a month or two — everyone was doing Zoom Happy Hours. So at the end of the work week you’d let off some steam by hopping on another video call on Friday night with a couple beers. And that was when I was reaching my peak epiphany in the orange pilling process. Everyone has this period where, when you start to realize how big this thing is, you just want to read everything you can about it and you consume everything that’s out there and it all starts to make sense and you realize that this is going to take over the world. And it’s all you want to think about and talk about and you just want to grab your friends and shake them by the shoulders and say, For the love of God, man! Pay attention to this! I wish I had sooner, and I see you making the same mistakes that I’ve made for years! So that was what was happening on on my Zoom Happy Hours, and I would try to bring up Bitcoin. I would try to talk about this incredible thing I just learned — and nobody wanted to hear about it. Everyone wanted to shut that down hard, and they did it with a certain amount of pleasure. Yeah it’s fun to stomp on Bitcoin and snuff that out because it ends up being sort of an in-group, out-group dynamic of like, We — the people who believe in the system and the dollar — are now pitted against this one person who’s standing up and saying, You guys are missing something! And we’re looking around at each other saying, No we’re not missing anything. So that’s where that dynamic comes from. And I even remember: when I was talking about Bitcoin at one point during the Zoom Happy Hour, two of my friends were texting each other and I could see it happening, and then they — in a coordinated attack — suggested that we play this online game. And they did it together, so it was a hard cut-off of that conversation — there was no question that we were gonna go do that instead. And Dan was one of those two people! So I don’t know why Dan has dug his heels in this much, but that was the question that I was trying to explore in that time period. I was thinking about this: Why are my smart MBA friends not getting Bitcoin? Or don’t even want to think about Bitcoin — they don’t want that worldview to be possible. And I saw this framework about how the people who are into Bitcoin are at the far end of the IQ curve on both sides and the people in the middle are the ones that are resistant — I thought, Yeah there’s something there because it feels right, but it doesn’t account for Dan! And it doesn’t account for any of my MBA friends, because they’re all maxed out on IQ. And when I thought about this for a few months, I realized that in my journey to get to Bitcoin it required me to throw out a lot of my Keynesian economics learning that I got through my Stanford MBA and the best accounting school in the country before that — UT Austin — and I also got in my business classes at USC in undergrad years of Keynesian business learning which, when held up to the simple thesis of Austrian economics and how Bitcoin ties into that, just falls away. It just looks ridiculous when you really let yourself entertain the possibility that the side that you’ve been brought up in is wrong, then suddenly things reconcile and the Austrian economics version of the world makes sense. So it’s this Occam’s razor approach of: Why do I believe these complicated economic Keynesian economic explanations when there are simple explanations about the nature of money on the Austrian economics side? And then I realized that I was brought up to believe in the equivalent to geocentric epicycles, a geocentric model of the universe, which is what was taught a thousand years ago as the model of our solar system, and everything revolves around the Earth, obviously, and how do we explain these weird movements of the planets? Well it’s because they do little circles in their bigger orbits, duh! And that’s such a complicated addition to a model that is hard to rationalize, hard to make that make sense — and then when you apply Occam’s razor of: What if we are looking at it wrong and it’s actually the Sun at the center? And, Oh now suddenly there’s no epicycles needed! There’s a nice clean orbit for all of these planets — yeah that makes a lot more sense! So I realized in my own journey, there was this process of having to realize that what I thought I knew about economics and what I had learned from the best schools in the country was all Keynesian and I hadn’t been allowed to think about Austrian economics as valid. Austrian economics was only the butt of a joke in school. And so that process of realizing that everything that I had been taught was wrong made me lose trust in the system that I’ve been a part of — the system of education, the system of belief in the monetary system, belief in the Fed, belief in the authorities that are controlling our economy. At the highest level they’re supposed to be the smartest, most capable, most accomplished professionals at the helm, and you start to realize that no that doesn’t seem to be the case, actually! These people don’t know economics at all because they believe the Keynesian version, which is what I believed until I now realized that was flawed. That process made me lose trust in the system and moved me from somebody who’s high trust and high IQ to somebody who was low trust in the system but also still high IQ. And I realized that that’s a 2x2 Matrix that explains so much of Bitcoin, of Bitcoin adoption, of Bitcoiners, is that the Bitcoiners — especially the ones you see on Bitcoin Twitter — the common thread is: they’re smart and they also have lost trust in the Fed, in Fiat money, and interestingly it goes well beyond that too because when you start to lose faith in authorities like the Fed, you start to also question things beyond that like, Why is the FDA approving this or that? Why are we told that the food pyramid is the right way to eat? And so on. So the Bitcoiners are smart and distrusting, but my yuppie friends — the MBAs — are smart and still trusting, and I realized that that is the common thread that explains to me why certain people who are very smart just cannot see Bitcoin. And it’s because it’s an attack on their worldview that would require them to go through terrible cognitive dissonance and pain in order to entertain the possibility that this other thing is right and everything that they’ve built their world around, their lives around, is wrong.

Cedric Youngelman: Yeah so much there resonates with me and my own journey there. I think about those Zoom Happy Hours — I hated those! They were great for a week or two. I mean, we were trying, but I think they did lead for me to get more comfortable with podcasting and that format — that was the upside for me. But I do remember the hubris on those calls: I do remember that being the crescendo of my public orange pilling and my own personal frustration with constriction and restriction around me in the world around me. But when it comes to trust in the system and I think about my own journey, I didn’t trust any of the system except for maybe Finance and Accounting, where I spent the most of my time studying. I had studied lots of things — I had a very diverse education, but that’s where I think I felt most strongest and comfortable and kind of grounded. And I questioned the food pyramid — breads on the bottom of this thing, I grew up thinking pizza was the healthiest thing for me! So I had a lot of distrust, but I never heard of Austrian economics — it wasn’t even there to be made fun of. But when I found Bitcoin and I could question Keynesian economics, Finance, and Accounting was when I was ready to throw it all out, because now I wasn’t trying to prove a negative anymore. I had a mathematical concept I could grasp on to and say, I don’t care anymore if you’re right or wrong or if you think I’m right. Now I don’t need to convince the rest of the world anything. Because that was the weird thing: in the fiat system — and I think it only takes a couple of sats to get this mindset — it’s not about 100% Bitcoin but it’s about exiting the system conceptually. Because when you’re in the system you have to solve every problem in the system to live there. You feel like the soil is rotten and you’re gonna farm the soil so you’ve got to make the soil better for everyone and everyone’s gotta cooperate because we’re all working from the same soil as your soil — and then with Bitcoin it’s like, No I could just leave all this behind and go find good soil. And if no one wants to come with me and I’m willing to — but that’s the thing is: there’s some courage, especially if you have a family, in getting people to go with you to the new soil, going on the Oregon Trail. Maybe losing a child on the way, or a cousin or an uncle.

Croesus [1:10:00]: Can you imagine being in Illinois in 1840 and looking around at your wife and kids and saying, We’re gonna go cross the country in a covered wagon because that’s the best path forward? That’s crazy!

Cedric Youngelman: Or leaving the Holocaust, or any of these situations where it’s, Well maybe it won’t get that bad, or, Maybe we could figure it out here, or, Maybe we could survive and thrive here, and, What if it’s not as good over there as we think it’s going to be? Or, What if it’s just as bad there as it is here? And all those unknowns — those are really hard to deal with and tackle. And think about now: you have misinformation and disinformation and over information — then, you had a lot less information! And maybe not enough information or not timely information. Maybe you go on the journey and you make a wrong turn. You read the map wrong or whatever it might be. But there is this trust in the system, and you brought up Murad’s meme of the IQ bell curve. And what I think is interesting about your point there is you have the Bitcoin moonboys on the left who haven’t gone deep enough down the rabbit hole —

Croesus: Or they’re not equipped to understand.

Cedric Youngelman: They’re not equipped, and they think history is going to repeat itself. But I think a lot of people on the right, the Bitcoin maximalists, have done the work — we get conflated and lumped together, and I think a lot of smart people or a lot of people just don’t want to sound like us! They don’t want to sound like going door-to-door being like, Knock-knock — you gotta buy Bitcoin! Bitcoin’s going to save your life! They’re like, If Jesse’s right, I don’t want to sound Jesse! I don’t want to go on a Zoom call on a Friday night and tell people [Buy Bitcoin] — because to them it’s a weird thing, I think, in the sense that they’re like, Why is he telling me about a checking account that’s giving 7.9% interest? Why are you telling me about this meme stock right now? I’m tapped out! Or I do think they’re going, Well Jesse’s been talking about this for a while — so I don’t know, maybe he’s got a bunch of Bitcoin? And if Jesse’s right — I did better on the GMATs — Jesse will always be ahead of me in life.

Croesus: Right, even though I should be ahead of him!

Cedric Youngelman: I should be ahead of him and therefore just emotionally I want Jesse to be wrong!

Croesus: I think that’s the case with a lot of my MBA friends.

Cedric Youngelman: I want Jesse to be wrong because he’s not in the In The Know group, as you go on, He’s not following what they’re telling me in the Wall Street Journal or CNN or what the hottest thing is, and Jesse probably hasn’t found the future reserve currency of the world so I’m just gonna go find my own gamble and throw $500 at something and hope I outdo Jesse. That’s a hard thing to break down, and I think the only thing that really gets through there — that breaks through all these paradigms — is the Bitcoin scoreboard, which is the price. And you go on to write though around trust in the system: If this is a reasonable representation of reality, there are a number of insights we might draw from it: Bitcoin maximalism is correlated with intelligence but also with distrust in the system. Someone who is very smart and has a high conviction that the system is broken is more likely to reach Bitcoin maximalism than someone lacking one of these qualities, all else equal. Bitcoin moonism is less sensitive to one’s distrust in the system. If you’re a dumbass, you’re a dumbass, but it probably helps a little bit to be a dumbass and distrust the system. It is easier to reach Bitcoin maximalism if you are already primed for it via a pre-existing distrust of the system. This helps explain the early adoption of cypherpunks, anarchists, and Libertarians, and even the current representational skew towards Trump supporters who share a distrust of the establishment. On the flip side, it is more or less impossible to reach Bitcoin maximalism while retaining any amount of trust in the system. Indeed, this was my experience: to get to maximalism, I had to first grapple with the uncomfortable dissonance of my beliefs and the things that I came face-to-face with as I dug deeper into the rabbit hole, confront them rather than turn back, and ultimately tear down my entire worldview in order to resolve the dissonance and continue deeper down the rabbit hole — fun times. Of greater relevance to our particular focus, however, is the white space in the top-right quadrant, those with high intelligence and trust in the system’s ability to work are very unlikely to subscribe to either Bitcoin maximalism or Bitcoin moonism. You brought up Trump there — I think that was another trigger for a lot of people during around the time of the COVID pandemic. And I think for liberals, conservatives, and Libertarians, I don’t think Bitcoiners were — I don’t want to be associated with anybody! But sometimes that was thrown in my face maybe as an insult, because I think money is sort of considered a Republican or a conservative thing or like, Oh you think if we all just get rich we’re gonna solve our problems! Did you run into any of that?

Croesus [1:15:43]: Not so much in my personal network. I was just trying to wrap my head around why, on Bitcoin Twitter, I was interacting with a clear skew towards Trump. When I was thinking about this, this was Summer 2020, the election was coming up, and Bitcoin Twitter felt like it was 80% Trump support. So: Why? Why was that? Because money is for everyone — you don’t have to be conservative or you don’t have to be a Trump supporter to value Bitcoin or to see its merits, it’s design, and the value of increasing scarcity. You don’t have to subscribe to any political ideology, and yet there was a clear skew! So when I thought about what is it about Trump supporters that enables them to see Bitcoin — or vice versa I guess: what is it about Bitcoiners that makes them interested in Trump? What stood out was that supporting Trump was a shot across the bow of the establishment — aligning yourself with Trump was a populist revolt against the powers that be telling you how you should live your life and to get back in your cubicle and be a good little boy. And so that is a revolt against the status quo, against the establishment, and that means that comes from a place of not trusting that the establishment is in your best interest, listening to them is in your best interest, or following them is in your best interest. So that felt like it fit with this emerging mental model that I was mulling over in Summer 2020, and so that’s why I made sure to include that in the article.

Cedric Youngelman: It’s an interesting perspective point. I like to think of Mark Twain’s quote: If voting mattered, they wouldn’t let you do it. So I think it’s very difficult to revolt by voting, so there’s a little bit of irony there with the most rebellious people in the country thought they were going to get some sort of say by voting or anything like that. I think Trump is its own rabbit hole. I want to turn more towards Bitcoin in terms of: We’re early. There’s a couple ways to look at that: valuation as a percent of its full potential, and adoption as a percent of its full potential. So first in terms of valuation: what do you think — if we’re looking at it like an MBA — what could Bitcoin be worth if the thesis is accurate that it’s going to be the global reserve currency of the world?

Croesus [1:19:14]: Yeah I was trained to do this probably more in management consulting than anywhere else, and I don’t know why people don’t seem to do this with Bitcoin, but my instinct is: I want to take a top-down look immediately to market size — what’s the size of this market? That’s what you do in consulting when you’re trying to understand the potential growth areas for a client: you try to size the market there and see is it worth getting into? Of course this is a different kind of market — this is not an industry where businesses can set up and make profits by selling products and services that people value. Instead, this is the market of store of value assets. So besides this market, what we really have to do is take a look at the total asset landscape in the world, so I went through the exercise of how much value is sitting in these different asset buckets? And it was not an In the weeds interpretation of things — it was it was a top-down, Let’s just get some numbers that feel an order of magnitude right and see what that points to. So when you build that market map of what’s out there, you take stock of bonds, of real estate, of the total value of all the stock markets in the world, then you have to account for collectibles and how much value is stored in art, how much value is stored in gold. And you get a number for all these things: it all adds up to $900 trillion or so of asset value in the world. And $400 trillion of that, give or take — pretty wide margin here, maybe it’s $100T more maybe it’s $100T less — is store of value. Which is to say: that’s all the gold — you put value into gold because you want it to safely propagate through time so that you can use it later. You’re not investing in a startup there and you’re not planning to enjoy your gold — you’re storing it through time. And that’s $10-to-$13 trillion right there. Bonds is a giant bucket: it’s like $250 trillion, and that’s a promise of tying up your money today in order to receive a yield — so extra money, some return on your investment over a set period of time. So you’re tying up that money because you want a modest return on it. And that’s really because you’re storing that value and you want to outpace inflation — that’s why you put your value in bonds. Real estate: a large portion of that is because people need to live in real estate so you’re consuming it, you’re using it, but a good portion of that is because it’s an attractive asset because it has supply dynamics that are better than most assets out there in terms of it being relatively finite. And of course it has its own idiosyncrasies of: you can always build more square footage, you can always turn the jungle into farmland and whatever, but there are people who store value in real estate. So when you add up those pieces of these buckets it’s something like $400 trillion of store of value assets — $400 trillion dollars of asset value that is specifically people storing value in an asset in the hopes that it propagates through time effectively and they can use it later. So that’s your market size and your step one here. And then you have to take stock of: How does Bitcoin fit into this? And that’s dynamic too because what Bitcoin is today is not what it will become because of the halvings, and so it’s kind of a moving target. But you can look at the end-state potential of Bitcoin, and so if you look at the end-state of Bitcoin — so call it 30 years from now, maybe even 50 years from now — how does it fit into this landscape when it reaches its effectively terminal state of development? And then that forces you to take stock of what Bitcoin is: it’s a savings account with perfect property rights that has zero dilution through time because it doesn’t decay, and there’s a finite amount of it which is not true of any other store of value asset out there including real estate, including gold, which they’re always finding and digging up more of. So it has uniquely attractive characteristics, in that sense, as a store of value asset. It also has built into it increasing scarcity over the next 100 years: so every 4 years we have a halving and the amount of Bitcoin being issued every day gets cut in half. And when you take a look at the supply-demand dynamics in that window of time — the month before halving and then the several months following a halving — how does that play out? When you have price equilibrium — because you’ve had the same amount of supply being created every day for the last 4years and that’s been going out into the market meeting demand, and over the those 4 years you’ve found some price level that makes sense — it’s a free market, and supply and demand have found the price where they’re in equilibrium. And then all of a sudden you cut that issuance in half, but demand doesn’t get cut in half, and so: each day, each week, each month that follows, you have just as much demand trying to gobble up Bitcoin that isn’t being produced. So where does it come from? It comes from everyone who’s willing to sell around that price, and you eat through that supply. And as you eat through that supply, suddenly there’s less and less Bitcoin available for sale. Suddenly, the only way to find more supply available for purchases force the price to drift upwards, and that sets in motion a whole flywheel that creates a speculative bubble and ends in the mania of speculators piling in and taking on leverage and overextending, and you of course have a crash on the back side. But after that crash, you stabilize, and there’s your 4-year cycle. So that’s what happens when a halving comes along and disrupts the supply-demand price equilibrium: you set in motion a supply shock that turns into a bubble. And on the back end of that, the price is higher. So you find a new price equilibrium at a higher price, ultimately, after that volatility subsides, and then the next halving comes along and that happens every 4 years for the next hundred years. And yeah the magnitude of impact of that halving will decrease because relative to the amount of existing supply the amount of sats being no longer produced is smaller and smaller, but the psychology is still there: people are still going to get excited about the halving and there still will be some impact to it, and that will help onboard the next incremental slice of adopters who learn about Bitcoin because Bitcoin’s price is running and now they take Bitcoin seriously because they dismissed it the last three times this happened and they’re not going to be fooled this time. And so they pay attention, only to find out that there’s a finite amount of it and it gets more scarce every 4 years and, Holy shit! Maybe I should own some of this! Maybe it’s better than gold where they’re making 2% more of it every year. Maybe it’s better than real estate where I have high carrying costs and maintenance required and legal and regulatory problems and property taxes and it’s not fungible, it’s not liquid, and there’s all these downsides to an asset like that. And Bitcoin is a more perfect store of value asset in comparison. So all that to say: when you take stock of Bitcoin’s properties as a store of value asset in comparison to the existing store of value buckets — we haven’t even talked about bonds but it probably has the least attractive properties in the context of the US has $31 trillion dollars of national debt, $170 trillion dollars of unfunded liabilities which just went up $28 trillion over the last year, and our GDP is $23 trillion. Which is to say that if you tax 100% of US GDP, you still would not have enough government revenue to offset the growth of unfunded liabilities this year. The math is atrocious for fiat money — and that means for bonds, because the only way out is to print more money, and when you print more money, you erode the value proposition of holding bonds because that nominal yield doesn’t keep up with inflation, so why the hell are you holding that? So bonds suck, gold is okay but not great, real estate is okay but not great, and Bitcoin is this incredible near-perfection of what you are looking for in a store of value asset: perfect property rights, and built into it is this increasing scarcity function that will deliver an appreciation in the value of the Bitcoin that you buy today 4 years from now, 8 years from now, 12 years from now — that’s just supply-demand mechanics. So how much of $400 trillion can Bitcoin take? And that’s anybody’s bet. Where is the equilibrium point? If $400 trillion dollars of value is currently stored in various store of value buckets specifically to be a store of value, and then Bitcoin comes along and is a better store of value than any of these buckets, how much of that should migrate into Bitcoin over time? And you could make the argument that it’s on the low end, you can make the argument that it’s on the high end, but I think that it feels right for it to be somewhere like 50%, which would be $200 trillion. And we’re talking full potential for Bitcoin, in my book: so Bitcoin’s full potential is $200 trillion of the world’s $900 trillion in total asset value. And currently it’s $400 billion, so that would be basically a 400x from where it is today — in relative value, importantly, so it’s not just nominal returns, this is relative growth relative to the other asset classes in the world — so potentially the full potential for Bitcoin is I think a 400x of relative growth versus all the other asset classes out there over the next 30, maybe 50 years. That’s the top-down assessment that my management consulting training spurred me to attempt, and the numbers that spat out from that at the end of it were just stupid! It feels silly to even say those numbers, but that’s what the exercise results in.

Cedric Youngelman: I love it! I think the numbers kind of sound grounded to me and pretty realistic. None of this is financial advice, but it’s to frame up how early we are if you understand this thesis and you buy in. But to outline that: gold I think is actually somewhere between $10-$20 trillion. So Bitcoin is — we’re talking about a 20–25x from here just to match that, and I think it’s 10x better than gold. But maybe that’s not the most accurate way to look at it, because I think you said in the article: Gold is the only pure store of value asset, and it’s not above $20 trillion, so we have no precedent, no knowledge or experience with an asset above that as a store of value.

Croesus [1:33:47]: Interestingly though I think Peter Thiel put together a slide earlier this year that I saw where he — I forget the exact date I think it was 1981 I’m not sure — let’s say it was: in 1981, the total value of all the gold in the world was $1.5 trillion and the total value of equities was $1.5 trillion. So at that point in time — not that long ago — there was parity between these two asset classes. And now gold is $10 trillion and equities is $100 trillion.

Cedric Youngelman: What the fuck happened in 1971? It’s been juiced — it’s on steroids. I think all these asset classes — whether we want to call it store of value — I think they’ve definitely been monetized!

Croesus [1:34:41]: Yes! Except gold because it’s not in the interest of [fiat currencies] —

Cedric Youngelman: That’s been demonetized and defanged. But let’s say 19 million Bitcoin have been excavated or digitally mined — but 3–4 million have been lost — so at the end of this I think we’ll have about 15–16 million. And I think around $10 million per Bitcoin, easy, over a long period of time — some long enough time frame I think that’s a very realistic floor. And there’s your $160 trillion. So I think these numbers just back of the envelope really resonate and makes sense. But I really want to get into this: We are so early! What I say to people though is: because if I’m talking about a $200 trillion dollar asset class — well if I’m only 50% right? $100 trillion. If I’m 10% right we’re talking about $10 trillion we’re still talking about a 20x. And if I’m 1% right you’re still looking at 2x. But if I’m completely wrong I tell people, especially with my friends and loved ones: do a little bit of work and come save me. But if I’m anywhere near right from 1%-100% right, you owe it to yourself! But we’re so early, and you try to break through there. So where are we in terms of adoption?

Croesus [1:36:16]: So I tee’d up earlier how there’s 4 million accounts with 0.1 Bitcoin in them on-chain — and that’s up from 3 million when I first started talking about this 2 years ago! So, recently I realized that, Oh it’s suddenly gone up 33% in an 18-month period — that’s pretty good proof of adoption, really. And a big question mark is: How many people have Bitcoin stored on an exchange? It’s probably a lot — I think the exchanges themselves would have a good estimate, but a lot of those people are tied in with altcoins and haven’t found Bitcoin as a savings vehicle yet, so do you even count them as adopters? It’s up to you how you want to cut it, but I guess for ease there: in the past I rounded up 3 million to 10 million — this time we’ll round Up 4 million to 10 million. Say there’s 10 million people who understand Bitcoin and are using it as a savings vehicle. And obviously there’s 8 billion people in the world, but not everybody has money and so the potential adopters are people who have money to save — that’s just the truth of it. And you can say that yes the rest of the world will use it, but I think for Bitcoin’s core use case which is a store of value — a savings vehicle, really — you’re only looking at the people who have money. And I have to refresh my memory on this, but I believe there’s 2.2 billion people on Earth who have $10,000 or more of net worth. So there’s your group of people who have any meaningful amount of money to store. And so 10 million out of 2 billion is half a percent. So we’re currently at half a percent penetration of adoption of Bitcoin as a savings vehicle among people who have an interest in savings, in savings technology, or should have an interest in how they’re storing their money. So right there — that’s way earlier than you would have thought, right? Because Bitcoin’s been around, there’s these big numbers attached to it, oh it got all the way to $70,000 — that’s a 5-digit number right there that’s really big! But then you realize that, based on the numbers on-chain — it’s right there, anybody can check it — there’s only 4 million people, rounded up to 10 for exchanges. That’s only half a percent of the world. And when you think about the classic tech adoption curve: a technology is adopted by society in a bell curve fashion, so mainstream people will adopt a new technology around the same time, whether that’s TVs or radios in the past or the Internet — the Internet was around for quite a few years, as we talked about, and then all of a sudden in the late 90’s it exploded because it finally reached some use case critical mass, some level of penetration into suburbia and the professional world that everyone was talking about it, buzzing about how cool it is that you can send e-mail on America Online. And then — boom — overnight it felt like adoption happened! But all that was just the mainstream arriving, and it felt a giant chunk all at once. So in that bell curve, the classic framework for thinking about this is: you have your innovators, your early adopters, your early majority or a late majority, and then your laggards. And so obviously your innovators would be your first people to try out this technology. Almost like your Google Glass wearers 10 years ago — that’s what I think of when I think of people who are willing to try something that’s not ready for the mainstream yet because they are excited enough about technology or have a painful enough pain point that it pushes them to go through the trouble of setting up something that might be hard to set up still because the rest of the world hasn’t adopted it and hasn’t made the onboarding process very clear. So that innovators group is 2.5% typically, and so if that’s 2.5% but we’re only 0.5% into this adoption curve, then we’re 1/5th of the way into the very first group of adopters in the bell curve! And that’s just what the numbers say. So even though it feels late for Bitcoin — it feels like you missed the boat, it feels like everyone has been talking about Bitcoin for a decade now, so everyone who was ever going to adopt it has already adopted it, clearly — and yet these numbers say that almost nobody has adopted it. And the truth is that almost nobody understands Bitcoin for what it really is and what it can do for them, which is as a savings vehicle that has this built-in increasing scarcity that you can rely on to better fight your financial position over time and makes it a better savings vehicle than any other store of value buckets out there. And so just the American West which set in motion individual decisions based on the incentives inherent to a frontier, there is incentive for people to adopt now ahead of the mainstream, and that’s playing out all over the country, all over the world every day, every month: some people are finding Bitcoin. And people don’t unfind Bitcoin. And so I guess to that point: you can think you have found Bitcoin then stray from that path because you didn’t really understand Bitcoin — that does happen too. But once you really understand how Bitcoin can fit into your world, you want to stack sats. And that doesn’t un-happen. And so just like America Online in the 90’s, we’re going to reach more and more people, and then it’s going to feel like everything was happening at once, even though that’s just the nature of a technology adoption bell curve which turns into an S-curve of total adoption. And we’re still in the first fifth of the first group of that bell curve. That just shows you: it’s just another way to kick the tires and find out, Actually the numbers are saying it’s still earlier than it feels. It doesn’t feel early but the numbers say it and the numbers don’t lie because they’re on-chain there.

Cedric Youngelman: What I think about a lot in this cycle here — because this reminds me a lot of how I felt in 2018–2019 — but it’s this opportunity to marry your conviction to the bottom of this bear cycle. And I think about stacking sats almost as a part-time job where you could drive an Uber, you could make a little money, but right now you can buy satoshis with cash as if you were in the airport buying Yen or anything else. It’s not often you have to go buy dollars somewhere with something — you have to usually sell something and it’s hard to sustain that: you’re gonna run out of baseball cards, you’re gonna run out of chairs. So it’s really important to do the work now. I think this is the time to recognize that or value what you have and to see the opportunity at hand. I’d love to ask you though how big of an opportunity you think this is? Not just in terms of Bitcoin cycles but in terms of the printing press or the Internet? Because right now I love this idea that you could buy a whole human’s worth of — and I say that not that any human is worth more than another human — but someone’s lifetime of work: you can buy that now for $50! I really get off on the idea: if I could buy a million satoshis for $200, I really when I could do it for less than a hundred.

Croesus [1:46:45]: Yeah I agree and when you think about it in the historical context of how big this is — it is a printing press moment. I was having a conversation about this recently where — what did the printing press do? It enabled the Protestant Reformation because it enabled the dissemination of information by thinkers that were prepared to challenge the hegemony and the autocracy of the Catholic Church, which was these singular, ultimate power in Europe increasingly over the centuries that preceded the Protestant Reformation. And the printing press made it possible for people to spread information and think about how the Catholic Church may or may not have strayed from the original intentions of Jesus. And so that set in motion the chipping away of the power of the Catholic Church. And then it simultaneously helped set up — so that was the first wave of this intellectually driven, information driven revolution of challenging power — and the next wave would then come with the Enlightenment. And so you go from questioning the absolute authority of religion to then questioning the absolute authority of kings in the Enlightenment. And now you’re starting to think about how science can supplant the role of kingly decree in terms of guiding your civilization. And that culminated in the American Revolution, really, that Enlightenment thinking was crystallized best, I’d say, by the American Revolution. And the spirit and ethos of that was obviously to say that individuals have the power, that individuals should be the driving force and should have the freedom to define their own lives and not have to listen to what a king says they have to do. So there have been these waves of information and information dissemination enabling individuals to assert greater freedom for themselves: freedom from religion or from religious authority, freedom from monarch authority. And then Bitcoin comes along and is a continuation of that spirit, in my mind, where it is an assertion that individuals should have autonomy with their money. So it is a proclamation like the Declaration of Independence and like the 95 Theses that Martin Luther pinned up on a church door: that we have rights and we cast off the expectation that we must follow what is decreed by governmental authority about what money we can use and how it will be structured, and instead we choose to go a different path and place our trust in money that is based on math and decentralization. So this is the next step of the American Revolution which is itself the next step of the Protestant Reformation which is this long lineage of Western Civilization and using technology to assert individual rights. And when you put it in that context, it is the most beautiful movement of our time and the most important movement of our time.

Cedric Youngelman: I hear you and I appreciate those words. I’ve enjoyed this conversation immensely, Croesus. This has been great. It’s really lived up to everything I thought it would be. I only have one and a half questions for you: I mean I have so many questions I’d love to have you back actually to pick your brain about more things, but to round it out for this evening: I wonder if you and Dan’s friendship is going to survive Dan reading the article? And if you could orange pill anyone in the world almost by decree, King Croesus, who would it be?

Croesus [1:52:23]: Yeah interesting. I think that Dan and my friendship has a history of repartee and trying to wittily trap each other in gotchas, so this is par for the course for us. And I think it’ll be interesting when he does come to Bitcoin and what that will look like. In terms of who I would orange pill? I guess I haven’t thought about this in a long time but back then my answer was Xi Jinping. And I think that’s still the right answer in the spirit of Bitcoin is for enemies. And the game theory of Bitcoin would be best served by the West’s greatest threat trying to hoard sats, because if you can’t stop that, then your game theoretic best response is to hoard sats yourself. And so I think that that individual would have the greatest impact, but it’s also probably one of the less likely people to embrace Bitcoin because Bitcoin enables freedom — that is not really the MO of that country.

Cedric Youngelman: I think that’s a really great answer. I love the Machiavellian answer. I would only try to one-up you there with maybe then how about Klaus Schwab?

Croesus [1:54:18]: Yeah great point. If he does have as much puppet master power as it seems like he might.

Cedric Youngelman: Maybe he has Bitcoin already, but I meant orange pill in terms of maybe his public persona. I took the opposite side of it: I love and hate this question — I love it, it’s gossipy, it’s fun, it’s titillating. I hate it because no one individual should matter, and no one should be put on a pedestal. But I thought deeply about this from my conversation with Big Sean Harris and I came up with Michael Jordan because I think he’s sort of the Mickey Mouse of today. What I mean by that is he’s benign. He’s Teflon. He’s not associated with a good or bad thing from either camper or any side, and that might pierce through. And I think also celebrities and athletes: they get paid a lot of money and they have a short career so they want to store it or save it, but they just carry a lot of weight with society, culturally.

Croesus [1:55:34]: Yeah but he probably wouldn’t be that person because of his neutrality on all things —

Cedric Youngelman: Yes you would say: Republicans buy ETH, too.

Croesus: Yes I was just gonna reference that!

Cedric Youngelman: So I’ll cheat a little bit here: have you gotten to meet the GigaChad, Saylor?

Croesus [1:55:59]: Yes I did recently at a cocktail party in LA hosted by Swan — it was pretty cool. And when I was introduced to him as Croesus, he gave a little double-take — it took him a half second and then he was, Oh! You’re the man! Which stunned me because I wasn’t expecting him to know who I was. And I was like, Oh no no — you’re obviously the man! What are you talking about? And then he was pretty complimentary about my efforts to write and put out educational content, because I think he really is motivated by trying to help the world see the value of Bitcoin for their financial security and future. So yeah it was a surreal experience and helped cement my belief that Saylor is motivated by Bitcoin education.

Cedric Youngelman: Yeah I mean he’s got hope.com and the Saylor Academy. I’ll tease a little bit: we’ve lined up an interview with Michael Saylor so that’s gonna hopefully go down next week and we’ll see where that goes. But yeah I mean I think he’s definitely put out some of the most interesting thought-provoking Tweets in the space and when he speaks on it, and I can’t wait to get into it more with him. Croesus, that’s a great story but this has been a an incredibly dope chat.

Croesus: Yeah this has been really fun. I love your approach of digging into the writing. I haven’t read a lot of that stuff in years and so it was a cool experience for me to get into my work and try to remember where that came from and what I was thinking about at the time.

Cedric Youngelman: Yeah I love digging deep and I love digging deep into your work. I remember reading it when it came out it really spoke to me — I’m someone who went to a highly ranked school and took a lot of this education in, but see the world through — or can and try to put myself in a lot of different situations — but I’ve seen it through that lens for sure. And when you came out with that piece it really explained a lot about a little friction I was running up against and what maybe my own biases have been or had been. So I really appreciate it. And then just the other work as we got into especially the American West — I mean it’s just the frontier. I think about maybe pre-American Revolution, some cats sitting in a bar in New York City ranting and raving about putting an end to what’s happening to them! And we could look at that story from different angles, but there had to be saloons and salons where people were talking about these things and conversing and exchanging ideas, and I think we’re in those times now. And your Twitter persona was always very interesting because you were pseudonymous. What I love about that is it just it puts the ideas out there. There’s a lot of courage to that. I think it’s really hard to get your ideas across as a pseudonymous persona because it’s hard to break through the noise. And if you can do that without the other things that give some people an advantage to getting a point across. Those are the exchanges and the battles I want to be in, so you’re on the front lines of this whole thing. Thank you so much it’s been so dope.

Croesus: Likewise. Yeah it’s been awesome.