The Level Up Experience Podcast | Aleks Svetski | Bitcoin is the Escape Route
Cris Reed: Alright we’re live and with Aleks Svetski, the co-founder at Amber and the host of the Wake Up Podcast. Aleks — appreciate you jumping on, man.
Aleks Svetski: Yo, Cris. Thank you for having me, man.
Cris Reed: Yeah. Really appreciate the time. We always want to make sure that the streams are live. It should be live on YouTube and on LinkedIn. Let’s go ahead and dive right in. Aleks, can you give us a quick background about yourself? We’re gonna talk just a little bit about Bitcoin today. I’ve got a ton of questions—it’s like non-stop, especially over the last 3–4 months — so I’ve been looking forward to the conversation. So a little background and we’ll go from there.
Aleks Svetski: Sweet. Most people these days would know me in and around the Bitcoin space, but prior to Bitcoin—and for most of my life — I was more entrepreneurial in terms of background. So ever since I went to uni — I was really academically strong back at school, and my core subjects of strength were physics, math, chemistry, and all of that. So I ended up doing engineering, but I dropped out of uni because I wanted to make my millions by the time that I was 20 and I put my scholarship money on the stock market — thought I was a genius in 2007 — and I got absolutely raped. And yeah I was right in the thick of the whole GFC [Global Financial Crisis] stuff and that put my life in a completely different track. I dropped out of uni, I had to start some businesses to dig myself out of the hole. And my hole I was in was quite deep — I was about $250,000 in debt by the time I started in my 20’s. And since then my life has been this entrepreneurial journey of starting different businesses, blowing some up, learning what not to do alongside what to do. I was an early gold/silver bug in the 2011–2012 period between what I saw during the GFC and learning about the first rounds of major QE [Quantitative Easing] at the time. It put me down that rabbit hole. Unfortunately, when Bitcoin came across my radar I dismissed it as, “Whatever, Internet funny money — I’ll stick with my gold and silver — my hard money,” to my everlasting dismay, shame, and regret. But hey, after that I built a couple different businesses—some successful, some fucking complete disasters. And it was in 2016 where I got Steve Jobs’ed out of my tech company that I built — the board pushed me out. And it was a mixture of arrogance on my part and stupidity on their part and everything, so they ended up taking over the company and sending it down the toilet because they spent all the money too quickly. But I was probably also a little bit of an immature tech entrepreneur at that stage, so we had our differences. But at the time that was a really painful experience for me, but what was interesting was that it was a catalyst for me to rediscover Bitcoin. And from there, as I looked at Bitcoin I was like, “Holy shit, this thing is still around? What the hell is going on here?” I started digging, and the more I dug, the more I found something that aligned with me, not only philosophically, but morally, idealistically — it aligned with so many of my core values around non-intervention, around voluntaryism, around individual responsibility, individual sovereignty, around the idea of getting the government and all of this shit out of the fucking way. So all of this stuff really, over time, aligned with me, and I very quickly became a Bitcoin maximalist, not through peer-pressure — like, I found my way there, then I found Bitcoin Twitter. And there was a couple articles which sort of put me on the map. I think the two were: (1) I wrote this one called Homo Sapiens, Evolution, Money & Bitcoin, and I made the argument that Bitcoin is an invention started 70,000 years ago. And I took people through an anthropological journey of how human society evolved, and how money was the tool that actually enabled human society to increase in complexity. There was that one (2) and also I wrote Bitcoin (BTC) / Bitcoin Cash (BCH). It was like the definitive guide. For those that know Murad Mahmudov’s work — the Lindy Effect chart and Bitcoin’s evolution as a store of value, medium of exchange, and all of that — so he based that off that article where I created this pyramid of importance with respect to how Bitcoin will evolve in line with how natural systems evolve. That was where I first landed on the map, and alongside that time I had the early ideas for Amber, and here we are a couple years later.
Cris Reed [5:58]: Walk us through real quick what Amber is, when you got started, and where it’s at today?
Aleks Svetski [6:02]: Amber is a really simple idea, which is: a Bitcoin accumulation product. We were the first DCA product in the world. There’s a series of others these days, whether it’s Swan or River and there’s a couple others in Europe. So we were the first ones to build a product that enabled users to effectively accumulate Bitcoin. That was the whole point, is: I wanted to help people buy Bitcoin in a simple and easy fashion. And having learnt through errors over the years — when I think about all the time and energy I wasted trading derivatives and every single financial product you can think of, if all I did was just put ten bucks a week aside into Amazon, I’d be a millionaire. But no — I thought I was a genius, I thought I would outsmart the market, I thought all this fucking bullshit. And maybe, maybe, maybe, maybe, of all the trading I’ve done over the last 10, 12, 13 years, I might be — if I’m lucky — even. Whereas, all I had to do was put ten bucks a week aside. So I wanted to build a product that did that particularly for Bitcoin because I think that the most important thing any individual can do for their future selves and for their kin is to collect Bitcoin. And that’s effectively what the app does. We started it — like I raised capital in 2018, we went right through the bear market and all that sort of shit. It was really difficult. And with all these experiences that I had in the past — one of these guys in the chat mentioned Shark Tank in Australia — and yeah, I was on Shark Tank in a prior business. And it was an interesting experience for me, because at that time I was this young entrepreneur, I learnt the difference between raising capital versus the entertainment value in a show. Like all the stuff that I had said prior to going into the Shark Tank and out of the Shark Tank was actually prerecorded: so they actually coached me on what to day so I looked like an even bigger fucking fool, and — obviously, as the media does very well — I was in there for an hour and twenty minutes and I think they only cut down to 15 minutes and they showed like the most embarrassing parts. So I learnt through the school of hard knocks with all of that stuff. But throughout my life I’ve picked up experience from all of these areas and I think that really helped me carry Amber through the bear market, in particular, because I was raising capital for equity in a real business whilst idiots were raising millions of dollars for fraudulent token sales for fucking toasters on a blockchain, or whatever other ridiculous dumbass ICO there was. And it was hard for us to raise capital—and we raised a fraction of what these ICOs raised by selling our company, whereas these guys didn’t sell anything except the fucking promise of a pipe dream on a white paper. And they raised millions — they are all bankrupt today. We are still here with a product, delivering on what we originally promised. And I think we kind of credit that to all of the trials and tribulations that I’ve been through in the prior chapters of my life. So to answer your original question, where we are now is: we’re fully functional in Australia—we are the easiest way to buy Bitcoin in Australia. Next step for us is to enter the US market, then we’ll look at entering the UK, Europe, and sort of expand our presence out into the world. And the mission is still the same from day dot, which is: to enable the mechanism for people to accumulate Bitcoin in the easiest way possible. And that’s it.
Cris Reed [9:56]: Yeah it’s interesting: I talk to a lot of people about Bitcoin and I feel like it’s a progression. I think some people may adopt it a little bit quicker than others like personally, but I feel like — just going through my journey — it’s a couple steps. And I’d love to get your thoughts on this. But maybe the first would be speculation, where I see a lot of people looking at Bitcoin as this vehicle to get more fiat. Like, “Hey I’m gonna buy Bitcoin [as a speculative] asset, then I’m gonna wait until it doubles and then just take my fiat out and now I have two times as much fiat.” So I feel like that’s (1) speculation. (2) maybe is like the hedge, or part of a portfolio allocation. And then the third step is (3) your unit of account. And when I tell people that’s how I see Bitcoin, I get a lot of weird looks, like, “What are you even talking about? Unit of account?” Like, when you go through these progressions and you get to the third step, you really stop seeing dollars, you stop seeing fiat, and all you see is sats. And I know some people are like, “Whoa! I’m not level three — I’m just learning,” and all that. But what do you think about that progression? Because — I don’t know about you — but that’s how I’ve looked at it.
Aleks Svetski [11:21]: I think that’s true. There’s two things I’ll mention here: (1) I said to one of the Telegram groups, “My net worth went up today because I measure my net worth in Bitcoin.” So I actually bought more Bitcoin today. And people are like, “My net worth went down today.” No no no — because I’ve actually got more Bitcoin today than I did yesterday, and that’s exactly what I’m measuring. And for me, my net worth has just been consistently going up, because I’m consistently collecting Bitcoin. So I think when you finally get to stage three, the price of Bitcoin doesn’t even mean shit anymore except that whenever you come across some fiat you’re able to convert that fiat into more Bitcoin if the price is lower, which is always a good thing. I actually enjoy it when the price of Bitcoin is lower because I can exchange more of the shit fiat that I have with someone on the other side who’s willing to give me their Bitcoin for this worthless fake government money. So I’m always thankful for that. But to your point about the progression — I think that is quite true. So I’ve got a saying that most people know from my Tweets and podcasts and stuff, which is: “I came for the money, and I stayed for the money.” And what that means is basically what you described. It’s: I came to speculate and make some money, but as I discovered what this is, I realized that, “No — holy shit. The most important thing happening in the world today is the de-monopolization of money, is the ripping out of the hands of any institution, any government, any central bank, any individual, any organization whatsoever, ripping the capacity for any of them or any of us—anyone, anywhere — to print money.” That is the most important thing happening. So it’s the separation of money and state. And for me that’s what’s kept me here, and what’s allowed me to dig deeper into Bitcoin. And out of all the topics that I’m involved in, for those who know my podcasts and stuff — I go into some really crazy topics whether it’s religion and philosophy — I just did one with Jean-François Gariépy who wrote The Revolutionary Phenotype, which is probably the most important work on biology since Dawkin’s Selfish Gene, maybe even since Darwin’s Natural Selection. So it’s like I go into all sorts of stuff, but for me the one all-encompassing topic is Bitcoin. It just keeps sucking me in, because it touches on all of these areas that I’m interested in and that aligns so strongly with the core values that I have as a human being and as a “sovereign individual.” So yeah I think that conversion is important, and I think the journey from coming in and looking at it as a speculative way to make money and then staying in it as, “This is the money that I’ve now adopted and that I’m measuring my productive capacity in,” really depends on what seeds have been planted along the way. So I was lucky enough to have lost everything in the global markets in 2007–2008. I started developing a really healthy distaste for government, for intervention, for QE, and all that sort of stuff at an early age — in my really early 20’s. I started off as an entrepreneur so I became extremely responsible, like I’d never had a paycheck literally until recently—over the last year and a half or two years where Amber started making money I’d actually started drawing a salary — I’d never had a salary in my entire life, ever. Ever, ever, ever, ever. I never knew what a salary felt like, because if I made money — you know, in some businesses I made money, in some businesses I fucking lost everything — so there’s been periods where I was eating cans of tuna and fucking one can of tuna a day for a whole week, there’s been periods where I’ve been doing very well. So I’ve always had this sort of tumultuous existence because I’ve always chosen a path of responsibility. And for me that was a real primer as well about Bitcoin, because I call Bitcoin the Renaissance of Responsibility. We live in a world of complete dependency—dependency on the state, dependency on supply chains, dependency on all sorts of shit — and that creates a very fragile world, and a very fragile existence. Where if something cracks or if something pops, everything else starts to break down. Whereas living a life of responsibility actually gives you true freedom, true choice, true capacity to be sovereign, true capacity to make decisions. And yeah, those early seeds for me I think helped me really adopt and embody the idea of Bitcoin quicker than maybe most. But even irrespective of that, I still had to go through the journey. So thinking of it as a journey is spot-on.
Cris Reed [16:49]: Yeah and also too I think it’s a blessing if you had money in the market in ‘08 — I really believe that. Pretty similar to what you were mentioning, my story is: my step-dad made me open up a ROTH IRA retirement account when I was 18 and then just a few years later, half of it’s gone, down 50% because of the GFC, right? But that’s when you learn your lessons. Because it forced me to ask, “Why is this happening? What is going on?” as you were mentioning. I was trying to find some meaning. The unfortunate side of it is I heard about Bitcoin in like 2012–2013, but I feel like the very first time you hear about it — and a lot of people say this — people ignore it, typically. Like the very first time. Unless maybe [you were] a cryptographer or you really understood the technology inside and out initially. So for me my cousin told me about it in 2012–2013 and I’m like, “I don’t know about that.” Then 2016, being around the financial markets I’ve always been fascinated with charting and things like that, and you see an asset that’s hit the high of like $1,200 and then it consolidated for three years and all of a sudden it’s re-testing those $1,200 highs from 2013 in 2017. You know, the ETF talk and all that, so it was very interesting just from a charting perspective, like, “Wow! This asset consolidated for three years and now it’s re-testing those highs.” That was just interesting. So that’s when I started following it more price action-wise — but then still ignoring it! And then I didn’t even have any amount in it that was significant until China banned exchanges, and then it crashed from like $4,800 to $3,500 that night. I’ll never forget that night. I’m like, “Well it’s down 30%, I guess there’s no”— those corrections! It was like the fourth correction during that cycle. But even then in 2017 as I mentioned earlier it was more speculation. It wasn’t until 2018–2019, like when you really dig deep, that’s what really pulled me down the progression even more to see it as not just a hedge, but a portfolio allocation. And then I feel like the kicker — I read the Bitcoin Standard — and then there’s just so much great content that’s been put out over the last 2–3 years especially. But obviously 2020 happened and then we had the capitulation. And I think 2020 in March — I’d love to hear your take too — but the lowest buy I got in March of 2020 was at $4,500. I’ll never forget that night. I’ll never forget it. Because it was like one of those moments like—you’re on the edge: if you didn’t quite believe in Bitcoin you probably got out because you panicked. Or you were fine because you knew what asset you had. So I didn’t bottom-tick at all — I didn’t get to $3,900 — I wish. But it was that conviction, and anything that you’re putting value into, your conviction’s gonna get tested.
Aleks Svetski [19:37]: Yeah. So two things in there: I think you mentioned, “If you’re a cryptographer or an engineer you understand the technology and are likely to get it.” I actually would push back on that. I think that those people are the least likely to get it and that those people are most likely to become shitcoiners and create their own chain and end up doing that. I think to really appreciate Bitcoin — and me and Giacomo Zucco talked about this on Episode 25 of the Wake Up Podcast — but we discussed it on there and he put together a model, like a Venn Diagram, which is: you need to understand technology well enough, you need to understand ethics, morality, Libertarianism and that stuff well enough, and then you need to understand economics and monetary history well enough. And somewhere where those three disciplines overlap, there’s a Venn Diagram and it’s in the middle where you’re a Bitcoiner. And when any two of those overlap you’re either a goldbug, a shitcoiner, something else — whatever. But I think that the Bitcoiner in the Venn Diagram is really rare and it requires quite a broad, general understanding of a series of topics, and that’s why I think that the greatest thinkers in this space — the people like your Breedloves and your Saifedeans and your Michael Goldsteins and your Pierre Rochards and all of that —it’s because they’re broadly capable enough to cross a bunch of different disciplines, and they found the essence of all of those. And that’s what Bitcoin seems to reward — not the techies, not just the pure monetary guys — because there’s so many Austrian economists and Libertarians. Like for the life of me, I don’t understand how the fuck they don’t get Bitcoin. Like I call them the battered women of politics. Because — Libertarians, especially — it always cracks me up: they’re always talking about how dumb the state is, like the state needs to get out of the way, and all this sort of stuff, but they don’t do anything about it! Like here’s Bitcoin as a tool to enable the dream that Libertarians have always had — but they don’t fucking adopt it! Like, it’s insane! So that’s one thing I just wanted to put forward there. Your other question about the conviction in March — so I actually remember March quite distinctly. I was in Berlin, I had been kicked out of my Airbnb because some cranky fucking old bag of a neighbor got annoyed because apparently my speaker was too loud and the Airbnb host kicked me out of the apartment the night before, so I had to check out that day. And as I’m checking out — I’m sort of in this foreign country, I was supposed to fly out but my flight got cancelled because all the Corona bullshit happened — it was just this tumultuous thing. And that morning, like Bitcoin’s fucking crashing and I’m sitting there outside in the foyer of this old-ass building trying to get WiFi at the door because the cleaner’s in there, he’s like, “Look, you can’t stay in here, you gotta get out.” And I’m sitting there trying to like buy fucking Bitcoin. And at the same time—like, one of the things I do is I never sell my Bitcoin, so I always just draw a little bit of US Dollars against it through Unchained Capital. So at that time, my fucking loan went into margin so I almost got liquidated — I almost lost a bunch of my Bitcoin through Unchained. So I’m sitting there like trying to buy more Bitcoin and at the same time move Bitcoin from my Ledger and my Trezor to get it over to Unchained to like consolidate the loan and all this sort of shit, but I don’t have Internet access and the staff’s telling me to get out of the fucking apartment. And like it was just this chaos, absolute chaos of a day—and dude, I got within sixty seconds of losing half of my Bitcoin and being liquidated that day, because I had to go drive to the shopping center somewhere to get Internet access to move every last bit of Bitcoin I had from my Ledgers, from my Trezors, from my different exchanges that I had just bought, getting money shuffled and all this sort of stuff. And I just fucking made it. And luckily on that day, I ended up with more Bitcoin than I had, but I came that close to basically losing most of my stack. Just because like— it was just an awkward day! If it had happened one day earlier, I would have been at home with WiFi and I would’ve been able to deal with all of that stuff. But it was just a classic — one of the Aleks Svetski stories of shit hitting the fan. But yeah I mean — that, for me — I was like a pig in shit in the sense that I couldn’t believe people were just dumping this thing! I was like, “What the fuck is wrong with everyone?” I wish I had more cash, basically. I just wish I had more cash that day.
Cris Reed [24:38]: Yeah I’ll be honest too, I wish I was more liquid at the time. Like you just said, the way that things just lined up I was just not as liquid as I wanted to be. Like I got some $4,500 but obviously I wanted more and more. But I think a lot of people were just in a crunch. Just the way it ended up working out — and everyone personally is in a different situation. But yeah, for those that may not know, Bitcoin within two days went from $9,000 to $3,900 back in mid-March. I know in like Clubhouse rooms, people ask me, “Well, [look at] what happened to Bitcoin in March.” But really every asset in the world got crushed because it was a flock from assets into the Dollar. The Dollar was the only thing that spiked. And it was people getting margin called and everything else, and not having enough collateral to post and things like that. So then if you look at the DXY chart, the Dollar spiked and then really has been in a down-trend ever since March. But that’s essentially what happened. It wasn’t so much a fundamental thing that people were selling their QQQ or selling their SPY or selling their Bitcoin, it was literally like they had to sell for collateralization and things like that — it was just a cascade effect.
Aleks Svetski [25:57]: Well that’s the fragility of global markets at the moment, is that everything is so extended. So I would argue that there was some fundamental stuff there, which is people actually freaked out about what the fuck did the virus mean, and what the hell do these lockdowns mean? So everyone shit their pants but the markets collectively overreacted because everything is stretched so finely that everyone basically got margin called across almost every single asset. And it precipitated into one of the most major flash crashes we’ve ever seen. Like, that was insane!
Cris Reed [26:39]: Yeah. I want to go deeper into a couple other things. I do want to grab some questions [from the chat], guys. So Lance, thank you so much for jumping in with a question. So Aleks, “Do you see institutional investors in Australia coming into your platform as a hedge or portfolio allocation?” You’re already shaking your head, no.
Aleks Svetski [26:55]: No we’re a retail product, man. We’re not gonna service — those guys have multiple other options. Like we’re here to help the little guy set up whether it’s with PayID or with direct debit or EFT or credit card or Apple Pay or debit card or whatever — we just want to make acquiring and accumulating Bitcoin simple for everyday people. But absolutely no interest in servicing the institutions.
Cris Reed [27:22]: Yeah and to that point, I’ve also referenced Bitcoin as a savings technology, and I’m sure I saw that from Pierre Rochard or someone else writing. But if you look at it more like people look at a mindset of a 401k, kind of a set it and forget it —like I had a conversation, somebody took me out to lunch earlier today and they were asking, “How do you see Bitcoin?” And initially I’m like, “Hey look, just see it as just a savings technology.” Like I put a lot of my value — and I don’t mind saying it—75% of my net worth is. The other 25% is a lot of like my personal home that I haven’t been able to get equity out of, right? So I’ve done it over the last especially two years, because it’s my value, and no one can do anything to it! And that’s what I was telling him today, like, “No one can inflate on it.” No one can inflate my value away when I have it in cold storage. You can’t do anything to me—to my sats. Like, I dictate if my sats go up or down based on my decision, not nine people making a decision to inflate away my value. So ultimately that’s like the crux as to why over the years I went from speculation to the unit of account. That really seeped into my brain last year.
Aleks Svetski [28:37]: Yeah, I couldn’t agree more. Like, all of these things that we’ve sort of created over the last 3, 4, 5, 6, decades are basically mechanisms for people desperately trying to figure out a way to preserve wealth for the future, because savings don’t exist anymore. You can’t save! Like, the entire system is deranged, and it rewards two things: consumption and blind chase for yield in a desperate bid to preserve and somehow generate wealth quicker than what you’re losing it as in cash. So it’s like, it is so fundamentally wasteful, it is stupid, it is a gross misallocation of assets. And it really dawned on me a couple of years ago sitting at a cafe with my mum: she’s been working all her life and particularly over the last 5-6 years she saved up something like $50,000 or whatever it was, and she’s sitting there saying, “What do I do with my money? I don’t know anything about the markets, your brother,”—like my brother’s a trader and fucking — I call him a gambler. He’s an idiot. You know, he’s saying oh, I should give him the money and he should trade it. The issue is: the last time I gave him the money he lost it all. And she’s like, “I don’t want to leave it in the bank because I’m not earning anything.” And I’m sitting there thinking like, “Fucking hell.” Imagine working your ass off for years — like your entire life — and not knowing what the fuck to do with your money because it’s just gonna like melt. It is criminal — and that’s what pisses me off — it’s like: Bitcoin does away with all of the crap that we’ve sort of built around superannuation or 401ks or these fucking ETFs and blind chasing yield and all this crap. It does away with all of that. All of it, all of it, all of it, all of it — because it’s unnecessary. It’s not needed for society to function. What’s needed for society to function, and what’s the very foundation of civilization, is the capacity for an individual to perform work and to save. And then, in the future, use those savings for something that they want to acquire or to invest in. Simple as that. And we don’t have the savings function in society today, and as a result, we are blind fucking consumers, we are investing in shit that doesn’t matter, we’re creating bubbles across every single asset class, and we’re wondering why the the world is so fucked up at the moment. So I think Bitcoin does away with all that stupidity and I just find that extraordinarily powerful and extraordinarily interesting.
Cris Reed [31:21]: Yeah I think about Thiers’ law a lot, about kind of what’s happening. It’s this slowly, then suddenly — obviously is the name of the Bitcoin space. So for someone that may not know, Thiers’ law is this good money driving out bad money concept, and I think about that a lot. It’s happening slowly, obviously—well it depends who you ask what slowly is, I guess — but suddenly, people are going to want a better money. As everything like you said—that sums it up, and I just feel it’s just who gets the information first. I know it sounds silly, maybe. It’s just how I look at it—it’s the information asymmetry as to what Bitcoin is. And you look at history: whoever adopts the most sound money first, wins.
Aleks Svetski [32:10]: Well money represents the productive capacity of a society. Simple as that. So like we perform work, we trade our two scarce resources — our time and our energy — for something that we can measure it in. So we need to measure the productive capacity of each human being. And we do that with this technology called money. And money is a meta-idea that has existed since the beginning of time, like I’ve discussed it in the article that I wrote a couple years ago. So of course the more the tool or the object or the technology we use maps to the meta-idea of money, the more functional society is, and the more society can actually build real wealth. And this is something—like I always use the example of the Spaniards in the 1300s, the 1400s, the 1500s. So these guys — even on a gold standard — they conflated the idea of money with the idea of gold. And what they did is they actually hyperinflated themselves on a gold standard. They went and they dug up all the fucking gold from South America and whatever else they did, they brought it all back to Spain, they increased their supply of gold, and they crashed their own fucking economy because they conflated gold with money. It doesn’t matter how much [you have] of the object you create as money — if you’re not increasing the productive capacity of society, you don’t have more wealth! Wealth is something that we create through work. And therein lies one of the things that modern economists, modern economics — all this sort of shit — just doesn’t seem to understand. And it really is a 101 concept, is: you create wealth not by fucking printing it, but by doing some sort of work and adding some sort of valuable input into society. And Bitcoin is the apex money, the apex technology, that can map as closely as possible to money, because it is fixed, because it’s open in nature, because it is voluntary in nature. And like you said, good money pushes out bad — and for those who want to know it’s called Gresham’s Law — and I kind of call it more than just Gresham’s Law, I call it economic Darwinism. And I always use the example when I’m on Clubhouse to chat, which is: if you’re gonna work for a week at a cafe or whatever you’re gonna do — you’re gonna work at your job for a week — and at the end of the week, the employer turns around and says, “Yep. I’m gonna pay you in salt.” Or in toilet paper, or in glasses or something. And you’re like, “Fuck off! Give me the money! I want the money!” And the reason you want the money is: you demand the most salable good — the one that is the most capable of storing value in a stable manner, the one that is able to be exchanged easily, the one that you can measure other goods and services in and [tie to] the unit of account function. Nothing can compete with Bitcoin’s capacity to perform those three functions of money, because nothing scores a 10/10 across all of the attributes of money: divisibility, portability, recognizability, fungibility, scarcity, impossibility to forge. Nothing competes with Bitcoin on those attributes, and therefore in its ability to perform the functions of money. So what is going to happen over time — and it’s not a matter of if, it’s a complete matter of when — is who is going to decide to demand Bitcoin for their time, their energy, their services, and the products first. And I wrote an article about this mid-last year called Bitcoin and Lockdowns, where I put forward a model for understanding hyperbitcoinization and what the trend will look like, and it’s a necessity curve. So on one side you’ve got curiosity, and then on the other side you’ve got pain. And somewhere on the spectrum of curiosity to pain, people adopt Bitcoin. Now if you’re more curious, you’re gonna get into Bitcoin because you want to. If you’re more ignorant, you’re gonna get into Bitcoin because you have to, because some sort of painful situation emerges that pushes you into it. Either way, you’re gonna get there. So the only choice is not, “Are you gonna use Bitcoin,” — because you will — whether you like it or not, you’re gonna have to. The only choice is: when and on what terms are you gonna use Bitcoin? So yes, information asymmetry has something to do with it, but also so does where you are, the life you’ve grown up in, how much personal responsibility you take, what your personal ideologies are, how your value hierarchy is — and all that stuff really matters, because if it maps closely to Bitcoin then hey—you’re gonna adopt Bitcoin before the other clown who believes in money printing and socialism or wealth distribution, all that sort of stuff. They’re never gonna get fucking Bitcoin so they’ll probably be the last to come onboard. So I know there’s a lot there, I don’t know if there’s any threads you want to pull on, but yeah it’s gonna happen whether like it or not.
Cris Reed [37:42]: Yeah and it’s something that I get a lot as I’m trying to orange pill people—my buddies, especially—I’ve been going hard for the last three years at poker games and stuff like that or whatever, and they’ve always given me the weird looks in ’18, ’19, and it’s just funny how they don’t come calling or come asking until it’s over $20k. I just laugh — humans are very interesting about when people get interested in things. So I know that’s a whole rabbit hole for you and I totally get that. But it’s funny how it is. So one of the things that comes up is, “Well Cris, how is it a store of value when it’s so volatile?” And I go down talking about price discovery and things like that, but no — I’m actually trying to learn better how to explain to someone when they ask me that. So what’s your explanation?
Aleks Svetski [38:35]: I use the pizza analogy. If you take a pizza and you start chopping it into parts, you’re not creating more pizza. So if you have a slice of pizza and that is your proportion of the entire pizza — and there’s no way to create another pizza — your proportion of the pizza always stays the same. And that is the definition of the store of value: it’s the inability to change the proportion that any person owns of the whole. That is actually the definition of store of value. Price has nothing to do with store of value. It never has, it never will. So store of value is about proportionality to the whole. And this is where I think people miss out on understanding why Bitcoin is a store of value! So when you have 1 Bitcoin, you always have 1/21,000,000th of the entire supply. That is fixed, unchangeable, incorruptible — whereas if you have the Dollar, you have no fucking clue how much of the total you have. So therein lies the store of value position for Bitcoin, is: it is a perfect store of value, because you know your proportion in relation to the whole. The price of Bitcoin has got nothing to do with Bitcoin’s store of value. It’s only got something to do with people’s relative perception of how they individually and subjectively value Bitcoin. And that has nothing to do with store of value. That’s just like my perception on water versus maybe your perception on beer. They’re two different things: you might like to drink beer, I might like to drink water. That’s perfectly normal. So that’s how I would describe it.
Cris Reed [40:35]: Yeah it’s interesting just trying to sit down and talk with someone that’s fairly new, kind of walking through. Obviously it’s a process. Like people obviously want things — just like society — as a consumer mindset, they want it [snapping fingers] like that, they want the answer. Everyone has their own process into how they understand what Bitcoin is. Back to the volatility thing—I think if people would change their framework and instead of looking at Bitcoin like BTC/USD where they’re seeing these hyperbolic moves over time to the upside over the last eleven years, if you look at it upside-down the Dollar is crashing. If you completely inverse it, because visuals are powerful, and if you flip it around and then you say, “Wow, the Dollar is crashing against this asset.” And everything is crashing against Bitcoin. So if people that are doing charts just flip the script on what you’re looking at — and it’s interesting how minds can play tricks on you in how like even minds see risk when something’s going up. Like one of the hardest things to do is add to your winners because it’s a psychological FOMO to get out to lock in something. For example, angel investors tend to typically have clauses to add on to companies as their valuation gets bigger. Like they’re adding to their winners — VCs and whatnot downstream. So I think changing perspective — usdsat.com, you can see it priced in sats. And [the Dollar] is just absolutely crashing. So yeah the volatility is obviously a question that comes up a lot of times and like you said it’s perspective.
Aleks Svetski [42:42]: I would also add like the volatility question is just one of — I’m asking people like, “Okay, so how would you propose a new money goes from nobody to everybody holding it?” And if they go down the path of saying, “Well maybe we should just set the value.” Well then we’re back at fiat money. An organic money has to grow, and in order to get from nothing to something that requires growth. And show me one thing on the planet in the real world, in the fucking imaginary world, wherever, that grows in a straight line — nothing, zero — it doesn’t happen. Whenever I think of the volatility question when people talk about volatility — first of all, Bitcoin itself is not volatile. Bitcoin is the most stable network on the planet. The only thing that is volatile is people’s subjective perception all around the world. And how many people are having deep conversations like this where they’re trying to understand money, where they’re trying to understand how society evolves — there’s fucking barely anyone. So realistically, how many people really get Bitcoin? It’s only a few. So that means most people are just out there fucking gambling. So as a result, of course there is gonna be fluctuations and subjective valuations, because all the market represents is a conglomeration of different people’s perception of what this thing it valued to them subjectively. And that’s all the market is showing. And all we’re seeing in the rising relative price of Bitcoin is a growing proportion of individuals who understand that they will not swap their Bitcoin for any other inferior form of money. And as a result, there is less available for other people to buy or other people to gamble with, and it’s just the good old investing 101 or economics 101 supply/demand equation. And once you’ve been around for a while these things just start to seem so simple. Like fuck, it’s just funny watching people.
Cris Reed [45:09]: Yeah, that was a good point. I did want to add to that. If you’re talking to a portfolio manager or if someone is looking at it through a finance lens — look I get trolled by a lot of people on LinkedIn. These fiat-pushers man, they’re pretty good. There’s some interesting people. But when I bring up that Bitcoin has the highest Sharpe ratio — risk-adjusted returns — over any 5-year period, they have nothing to day. Because they have all these metrics they want to throw at you. But you say, “Hey, risk-adjusted, any 5-year period — it has the highest risk-adjusted return, it has the highest Sharpe ratio compared to any other asset class in the world.” Real-estate, gold — it’s the highest. So the risk that you are taking to get the gains from that asset — it’s the best ratio out there, right? But you don’t hear that very much! It just fascinates me that you don’t hear that. But for the risk you’re taking, you have the [best] upside. When someone says like asymmetric upside or asymmetric return, that’s what people are talking about.
Aleks Svetski [46:38]: Yeah. I used that a lot back in the day. These days I guess for me where I’m at on my journey — when you get to stage three progress that you’re talking about — what you’re describing there [with] risk-adjusted returns and all that stuff is basically the stage two. It’s the hedge, right? You’re adding that to your portfolio. It’s definitely on that path. I mean it’s a good argument for getting people to get some skin in the game, and I think that’s a very valid point, but once you get some skin in the game you quickly start to realize — assuming you continue digging and trying to understand Bitcoin — you quickly realize that even that doesn’t matter, the allocation. You start to measure your entire portfolio in Bitcoin. So when it sort of becomes the unit of account everything else sort of starts to become obsolete. One person I called out in 2019 and just watched everyone sort of kissed his asshole was Raoul Pal. I can’t stand that idiot. I honestly cannot stand him — I’ve never been able to stand him, long before he started talking about Bitcoin. He’s just one of those clowns who failed at Goldman Sachs, like you have to be really dumb to fail at Goldman Sachs. He then went on to run a service to tell people about the markets — and he’s been wrong for fucking 10 years about how everything is gonna crash. He was wrong even in March after the crash, he’s like, “Ah yeah, this is never gonna come back — nothing is ever gonna go up again.” He was wrong again. The guy is wrong about everything. And he’s a perfect example of someone who just doesn’t get Bitcoin. So he kind of came at it from that angle of allocating some of your portfolio to it and all that sort of stuff, but clearly because he doesn’t understand Bitcoin, because he doesn’t know how to think about Bitcoin as a money — despite having access to some of the best minds in the world about it — he’s gone and assumed that it’s just another asset in the basket. So henceforth, maybe I should also put my money into Ethereum and oh I’m warming up to Ripple, and how about fucking Dentacoin or Dogecoin or whatever other bullshit he’s gonna think about. So I think that’s a good entrypoint — allocating some of your holdings to Bitcoin — but if you sort of stay stuck there, you are 100% prone to end up adding pointless fucking garbage into your portfolio because you think there’s some sort of gain to be made by “diversifying in crypto.” And I think each one has their dangers: speculation has a danger, the second part has a danger, but there’s freedom and liberation in getting to the point where you understand Bitcoin as the unit of account, at which point all the other stuff starts to become irrelevant.
Cris Reed [49:42]: Yeah. And then obviously with what Tesla did — $1.5 billion on the balance sheet — I think there’s 38 companies now with Bitcoin on their balance sheet in some form. But that number is gonna go up. It could be 100–200 this year, I have no idea. I tell people that and they’re like, “What are you talking about?” and it just cracks me up. But that’s just gonna continue to happen because they have to. It’s not even so much they want to, it’s that they’ve been forced to. And the other number I wanted to bring up too is there’s $20 trillion in negative yielding bonds, and my brain can’t understand that. That that’s an actual number. And right now Bitcoin’s market cap is like $900 billion, but there’s $20 trillion in negative-yielding bonds. Where essentially — layman’s explanation — I give the bank money, the bank gives me back less. It makes no sense to me! But it’s because of the money printing, because it’s being stuffed into bonds, and it drives the yields. So it’s just wild what’s going on, and some of the numbers — it’s really incomprehensible.
Aleks Svetski [50:53]: Modern economics have no relationship to reality. The whole thing’s a fucking fairy-tale, and everything is just literally made up. Like, what relationship does a negative interest rate have with reality? You can’t have a negative time preference, it doesn’t exist in reality. So all of this shit’s just made up, and people are sort of telling me that, “Aw yeah, Bitcoin got [inaudible 51:19],”—it’s like, no no no, the framework and the paradigm you’re living in is literally just a fucking fairy-tale of people just making stuff up, and nothing makes sense anymore.
Cris Reed [51:33]: So I had a question for you: what’s the biggest change Bitcoin had made you? What’s the biggest change that Bitcoin has brought to your life? Because we talked about that progression and everything you went through, but what’s the biggest change? I’ve asked a few people but I’ve meant to ask this more. Like what has changed the most in your life because of Bitcoin?
Aleks Svetski [52:02]: There’s so many things, man. It’s propelled me to once again become like a lifelong learner. I think I had this epiphany the other week when I was preparing for the podcast with Jean-François Gariépy the biologist. And I was like, “Fuck me!” I was sitting there studying his book and learning about the phenotypes and how DNA emerged from RNA and all this sort of stuff and I’m like, I’m doing this study of my own volition whereas back when I was a teenager I would have had to trot it at school to learn this shit. So I think much like the Renaissance 500–600 years ago, there was this sort of inspired class of people who were driven to learn about the world cross-contextually across so many different disciplines. So for me I think one of the things that Bitcoin has inspired me to do is really become a broad lifelong learner. My level of curiosity across different subjects has gone through the roof. I think that’s probably one big thing. Another big thing is it’s made me a lot more frugal and a lot more discerning when it comes to spending of any sort. It’s made me realize the futility of trying in any capacity as a central institution or anything to govern human action and human behavior which is effectively economic action. So there’s sort of three high-level things. And maybe a fourth thing is a realization that the current paradigm that we’re living in with respect to how human beings are governed and all of that, is what I like to call an overlord-subject relationship, whereas the mechanism that drives humanity forward is actually a customer-service provider relationship, because that is additive in terms of its effect. Whereas the overlord-subject relationship is reductive, because the overload is always sort of stealing. And I think things like democracy and all these sorts of ideas, all these politics of turn the world — civilization emerged through the capacity of individuals to trade amongst each other and add wealth and make it cumulative — all these institutions of governance that have emerged have basically been these parasites that have sucked value out of the value creation chain amongst human beings. And for me it’s just really unveiled the fallacy around any form of governance, any form of control by human beings where moral hazard and no skin in the game exists — which is basically all the kind of regimes we’re living under today, which are all self-funded by the capacity for a government or institution to print its own money and tax the populous. Alongside all those other things — like I said: being a learner, being more discerning about my spending, and just understanding the world in a more holistic, principled way. I think that’s the impact Bitcoin has had on me.
Cris Reed [55:29]: Yeah I think bottom line for me it’s: the sooner you adopt a sound money, the sooner you’re free. That’s just how I’ve seen it just in my personal journey the past 2–3 years. And then it frees you to not have to be on the rat race that everyone talks about. Everyone talks about the rat race and trying to keep up and debt and half of America can’t afford a $500 emergency and things like that. But it’s because they are on a fiat standard — there’s other reasons — but if you are under a fiat standard, if you’re under an unsound money, it’s chasing after inflation. Inflation is not 4%, it’s 10%, probably. It might be 15% asset inflation. So you’re just chasing and chasing and it’s the rat race, and people have been saying it’s been a rat race for years, but some don’t know the answer.
Aleks Svetski [56:28]: Yeah. The reality is probably it’s a rat race on quicksand. And that’s why everyone is losing!
Cris Reed [56:40]: Right, because they’re nominating their value in an unsound inflated money. In the end, I mean that’s just how I look at it. And some people might take a soundbite I just did and say, “ Oh well if you just invest in Bitcoin then you’ll be rich tomorrow.” I didn’t say that. I didn’t say that. When you adopt a sound money over time, you’re gonna be in a better spot.
Aleks Svetski [57:07]: Yeah. When people ask me, “How does Bitcoin fix the world in terms of poverty and people that don’t get a change to get ahead and everything?” I’m like: look, the only way for a human being to move forward is to build wealth. And the only way to build wealth is to trade something of value for money and be able to save for the future. If you can’t save, you cannot build wealth, and you can never ever ever get out of the rat race. And that’s what Bitcoin fixes. Is: Bitcoin allows us to once again build wealth as individuals because we can save. Saving comes before investing. You can’t invest without having some mechanism for saving. And by fixing that, Bitcoin actually gives people the chance — should they want it — to get out of the rat race. Without Bitcoin, you will never get out of the rat race. I mean some few of us might be able to add so much value — and that’s fine, that’s great. But by and large, most people just can’t. They will be forever indebted and they’re forever running a rat race in quicksand that they can’t get out of. So what we need to do is fix the ability and the capacity for individuals to save, because when individuals can save, they can actually have a future. Without the ability to save, you can’t do shit. And that’s how Bitcoin fixes poverty, that’s how Bitcoin gives people in worse areas a chance to get ahead. Like, imagine being in Venezuela and doing the best work of your life — producing something really good — and at the end of the week what you earn is fucking worth 80% less. Why even try? Like, why even try? It doesn’t work. Like, you have to be able to save in order to get ahead. And there’s no point in even fucking trying if you can’t get ahead. And by fixing that, I think Bitcoin’s second, third, and subsequent-order effects fix a lot of other things in society.
Cris Reed [59:14]: Well hey we’re up against the clock and Aleks I appreciate you sharing your experience. I do want to give you a quick moment: how can people get connected to you and to learn more about Amber?
Aleks Svetski [59:23]: Sweet. So the easiest thing is I’ve got all my links on Twitter but if you check out my Twitter @GhostofSvetski. Or just search into Google and all that stuff will pop up. My Twitter persona is a little bit more vicious if that’s the appropriate word to use. There’s less characters and less time for me to explain my position and I just beat the hell out of people. But if you want to sort of see the more well-thought out version there’s the Wake Up Podcast that I run, there is my blog as well svetski.medium.blog. And yeah, and these days I’m trying to get on Clubhouse as much as possible to have these discussions with people on there.
Cris Reed [1:00:18]: Yeah Clubhouse has been great. That’s how actually we met on some panels and stuff so Clubhouse is awesome. If you want to learn more about just Bitcoin knowledge and people sharing experiences as well — and then I did read your article back in November from Bitcoin Magazine Because Bitcoin Is A Necessity, Its Economy Will Be Circular so I appreciate the content you put out. Aleks appreciate your time, appreciate you man. I’d love to do it again.
Aleks Svetski: Thank you, Cris, and thank you to everyone listening. I really appreciate it guys.