The Saylor Series | Episode 2 | The Rise of Man through the Dark and Steel Ages

Link to the audio: https://www.listennotes.com/podcasts/the-what-is-money/the-saylor-series-episode-2-ftSvWp_4gXP/

Robert Breedlove: Hey guys! This is Robert Breedlove, and welcome to Episode 2 of the Saylor Series on the “What is Money?” Show! So in Episode 1, we covered the rise of Man through the Stone and the Iron Ages. So we went into ancient technologies. We talked about fire, missiles, and hydraulics facilitated by water. And now in this episode we’re gonna go a little further in this arc of Man, and we’re gonna go into the Dark Ages. We’re gonna go learn how missing one key step along the path of civilization actually caused us to slide backwards and to regress, and that civilization is not a guarantee! It is something that must be continually pushed forward and maintained across time. We’ll also get into how humanity re-emerged from the Dark Ages, ultimately into the Industrial Age and the Steel Age, which enabled a lot of very important technologies like cities, aviation, and railroads — things of this sort. So we’re going to touch on, again, the benefits that are offered by standardization. Also the benefits of protocol, similar to the ones we talked about in Ancient Roman times earlier, and how the economic benefits of the standardization — one language or one protocol — actually accrete to civilization. So these cost efficiencies accrete to us in the form of being able to satisfy wants faster, cheaper, and better! And that’s actually the force that drives civilization and increases both economic and network density for mankind. [03:06] We’re also gonna talk about how violence and monopolization have shaped the course of history. How violence has been used to extract rents and taxes, how gatekeepers have influenced the course of history, and how monopolies have developed in both a natural and an unnatural way. And we’ll also talk about packaged foods, and how much of an influence that had on civilization, enabling us to store energy in a leak-proof container. And also mankind’s ability to eradicate some infectious diseases was such a huge boon to humanity in terms of increasing life expectancy and quality of life as well. Again, the general aim of this is to construct a solid intellectual foundation on which to understand the profound impact that we believe Bitcoin will have on the world. And you can think about Bitcoin, as Saylor refers to it, as an engineering breakthrough, and that for the first time in history, we have a technology that is able to store the energetic of life force that money represents! Again we can think of money as a claim on all of the sources of energy in the world, whether it’s capital, chemical energy, kinetic energy, food energy — all these types of energy, money acts as kind of a meta-energy. And we’ve never had a monetary technology that was totally leak-proof, and that it did not lose value over time! So hopefully by drawing analogies to these very important innovations across history, you’ll start to have an emerging realization of the real importance and significance of Bitcoin! So with that, let’s jump into Episode 2 and at the end of this I’ll do a little outro to hopefully synthesize some of these ideas. Alright, thanks!

Michael Saylor [05:18]: We have the rise of Man through the Stone Age, and it took quite a long time! But we got here — that’s impressive! We have the Roman rise, and we saw a sophisticated society mastering energy networks, logistics networks, advanced tools, political processes, in order to dominate their sphere of influence. By the age of the Antonines, around Trajan, Hadrian, Marcus Aurelius — this is like 100 years, it’s a golden age of Rome — it’s like 90 A.D. to 180 A.D., the average life expectancy of a Roman is 72! And so you’ve got bathes, you’ve got writing, you’ve got civilization, you’ve got sanitation, you’ve got aqueducts, you’ve got roads — they’ve got stuff pretty well organized in sophisticated machines. And then of course we take a hard left-turn into the Dark Ages and stuff just starts to break down! And it’s a reminder that nothing is certain — if you miss a key insight, you could waste 1,000 years! And stuff could’ve happened a different way — it didn’t. For example, let’s take the printing press: the Chinese developed printing presses way back, 2,000 years ago. They never really thought to commercialize them, and the Chinese alphabet’s a pictographic alphabet, so you would’ve needed 25,000 different type pieces in order to have movable type in a printing press, and so they had the wrong language to develop printing presses! The Romans had the Roman alphabet which is an ideal language because you can actually print anything with just like 26 or 50 pieces of movable type, and they had all the knowledge but for some reason — anybody could’ve figured it out, Robert! —like all you gotta do is walk in your boots through the mud and step on a nice floor and look down, and there’s the idea for a printing press! Tracks in the mud! Right? They had paint, they had dyes, and you know, they’re just oh so close, and then they don’t hit it, and we wait until whatever, 1453 or something for Gutenberg to work this out, and we’re gonna suffer for 1,000 years! It’s amazing to me how certain things can be just right in front of a civilization and they just won’t grab ‘em! Like if you go to St. Peter’s square to the Vatican and you look at that column — it’s now St. Peter’s column but it used to be Trajan’s column. And Trajan’s column was put up to celebrate the triumph of Trajan and his wars. And it’s a bas-relief, a marble relief of the Dacian wars, and it wraps, spirals up the column, has a little staircase in the middle of it, a work of art, and architecture, and at the top, eventually the Roman Catholics put the statue of St. Peter, I guess! And in the ancient Roman times, that had Trajan’s statue on it! And Trajan is standing there in his Imperial robes, and he’s holding his hand up in the air and do you know what he’s holding in his hand?

Robert Breedlove: I don’t know!

Michael Saylor [09:24]: He’s holding the world! And it’s round, Robert! He’s holding the globe in his hand, and this is 100 A.D.! Fast-forward 1,400 years and people think the world is flat! It’s like the Romans knew the world was not flat! And if they hadn’t ripped his statue off the column 1,000 years earlier or whenever they ripped it off and buried it somewhere, they would’ve known the world is round, and it’s so ironic that you could learn and then forget such a basic thing!

Robert Breedlove: So there is the possibility of significant civilizational regression if we ignore those learnings that we’ve accumulated over time.

Michael Saylor [10:20]: Yeah you can go backwards and you think, Well we’ve got it and if we do this we’re gonna leap forward into a new progressive era, but if we kill it at a pivotal point, maybe people forget it ever existed — letting the fire go out! I’ll tell you another one that blows my mind! If you go to the Museum of the Native American Indian in Washington D.C., and you walk around, you see there’s an entire civilization, I mean they’re pretty much hunter-gatherers, and if you want to understand how hunter-gatherers lived, I mean, the American-Indian, the Native Americans, the way they were when Europeans showed up in America is probably your best proxy for what the Paleolithic man was, I guess. But amongst all the artifacts they gathered, you walk around, you eventually find a pottery wheel. And the pottery wheel, it’s a wheel in stone, and it’s got a beautiful piece of pottery, and the sign says, glowingly, Native Americans had very sophisticated pottery and they knew how to mold clay and they used this pottery wheel to do it. And I look at the wheel, and I think, for 5,000 years, nobody in the entire continent thought to take the wheel and turn it this way and roll it? Like, they knew wheel, they knew wheel was useful — I give you the wheel, Robert! But they never invented the wheelbarrow! They never invented the wagon! There’s no rolling stock anywhere in America!

Robert Breedlove: Incredible.

Michael Saylor: And think about the consequences of that insight! How is it possible that not a single person in the entire continent ever thought they might want to turn the wheel this way up? But it’s such a profound idea! And yet you can go 1,000 years and not get that idea!

Robert Breedlove: Do you think there’s any modern examples that jump to mind that something that’s maybe glaring at us in the modern age that we’re ignoring? Or maybe something that maybe we’ve forgotten?

Michael Saylor [12:54]: Robert—the blockchain and Bitcoin is a wheel! I can use this stuff if I turn it this way, you know? They’re not complicated ideas, you know? Pretty good privacy, private key encryption, hashing — no one of them on its own, I mean they’ve all been sitting there and someone says, Well what if I just do that with that and I start this fire. Rub two sticks together, or maybe we just never think to rub two sticks together.

Robert Breedlove: This calls to mind your example of the Roman hierarchy as well that because everyone knew they were being watched, it maximized their accountability and therefore their performance and competence. The Bitcoin network’s sort of the same! All the nodes and miners looking at one another’s activity to make sure everything’s above board all the time! It’s instantly auditing itself constantly in real time!

Michael Saylor [14:02]: And you could say, The Romans were healthy as long as they kept tension and dynamism and this incredible competition in their ecosystem, and when they lost it, they lost their edge. And then when you look at the classic Guns, Germs, and Steel-type narratives like, the Europeans, they got hardened and tougher because they were always fighting with each other and living with your animals made you tougher and having people come through from Asia made you tougher. And as soon as you try to insulate yourself from those stressors and [inaudible] forgets how to do things, or never figures it out!

Robert Breedlove [14:56]: Right! Taleb calls the stressors — [they] are the information! So you’re actually cutting yourself off from the information flow that’s driving your adaptation!

Michael Saylor: So one way or the other we meandered through that, but it strikes me that it didn’t have to last as long as it did! Life expectancy plunges down to 30 years, from 72 years, and a world without technology, if you don’t have aqueducts and sanitation and rules like, Don’t bring your horse into the middle of the village because he’s gonna crap all over everything and you’re going to get sick! In the absence of all those orderly rules, then you have just a degradation of the human condition! And we started to crawl out with the Renaissance, and what’s interesting there I think is if you look at all of the great cities in the world, all the great cities grew as nexus, as the central node of an empire. So Rome was the nexus of an empire. Carthage was the nexus of an empire. When they lose their empire, they collapse! The only way you generate enough money to make a great city, you have to scrape a tax off of all the energy, all the commercial value, in a large place. A fisherman casts a wide net to capture the fish — that’s your empire! The Roman schtick was, Pay us 10% when it comes into Rome and 10% when it goes into the next port and we’ll take 20% or maybe 30% out of the value added or whatever we’re gonna take. If you go into Venice and you look around the grand canal, you see all these palazzos — they’re all just warehouses! I bring a ship into Venice, I off-load my cargo, and then it goes out the back and it gets barged up and down the canal, and it gets transshipped to a new ship. In that world, each ship ran this route: Venice to Alexandria was one trade route, Venice to Rome was another trade route, Venice to Istanbul was another trade route! You’re at the nexus, you’re running these shipping networks, and of course you’ve gotta bribe the guy in Istanbul, or maybe your son marries his daughter, and that’s how you get to come in and out of Istanbul without getting murdered or without getting your stuff stolen. And eventually all the families in Venice intermarry, like I know you, you’re my second-cousin, that’s how we don’t cheat each other! And there’s no way—you can’t solve the traveling salesman problem—there’s no way you can take a ship from Istanbul to Alexandria to Venice to Rome to Ibiza or wherever I would go — Barcelona — because I would basically get overtaxed or extorted in each port unless I actually was friendly! So the way that works is, you have a hub and spoke system, and there’s always one central city, and there’s always one set of families or companies, and they intermarry and they trust each other, and they just agree, I’m gonna buy wheat for a dime in Alexandria, I’m going to bring it to Venice and I’m going to sell it to you for 50 cents, you’re going to take it to Barcelona and sell it for $1, and you’re gonna pay a nickel in tax to the guy on the other end. You’re gonna get your 45 cents, I’m gonna get my 45 cents, those guys get paid $1, those guys get paid a nickel. We can play with, What’s the mark up, right? It might be I buy it for a quarter, sell it for 0.50 and you sell it for 0.75 to the dudes that sell it for $1. But invariably, it’s the people at the center of the network that are actually getting 10, 20, 30, 50% of all the commerce! Which is all the energy! And what’s the definition of a smuggler? Or a pirate? The definition of a smuggler is someone who doesn’t want to give me half their stuff! So, how do I stop that? I have to have a navy that goes to kill them! So you have the Carthaginian navy stopping smuggling so they can tax half the stuff! And that’s why the Romans can’t — Carthago delenda est, right? — Pliny the Elder or Cato, I forget which one, said in every speech he gave in the Senate for 20 years, Carthago delenda est — Carthage must be destroyed! Why? Because two people can’t shake down the same guy of half his stuff — there’s nothing left! If I take half your stuff as a tax, I can’t — it’s like the tax wars! The Carthaginians are taxing the shippers and the Romans want the money! Therefore, the Romans must defeat the Carthaginians! Now the Romans tax you, then they fall, then the Venetians rise! Now the Venetian navy controls the Med. Then you’ve got — you know, you ever go to Venice, there’s this great Renaissance painting, The Battle of Lepanto. And The Battle of Lepanto is when the king of Spain allies with the Pope from Rome, the head of the Roman Catholic Church, and with the Doge of Venice. And those three navies fight the Turks, the invading Muslims from Istanbul — and they beat them! And it’s the triumph of Christendom! But it gets you thinking: why were they all killing each other in the first place over the Med? And you realize it’s because they’re fighting over control of the mercantile network! And then the next interesting observation is, you’ve heard the word Roman Catholic Church, right? You ever hear the phrase, Venetian Catholic?

Robert Breedlove [21:45]: I don’t think so!

Michael Saylor: There was a time when the Venetians terminated the Catholic Church in Venice! The Catholic Church in the entire Venetian empire didn’t terminate with the Pope in Rome. It terminated with the Doge in Venice! And so that means all tithes, all due, goes to Venice and stops! You can’t have an empire, unless the person at the top of the empire is also in control of the religion, because if you don’t control of the religion, then someone else takes half your money, you see? It’s all about energy flow! And the energy is flowing — by the way, the Pontifex Maximus originally refers to the Roman consul, to the head of Rome! Augustus Caesar was the Pontifex Maximus. So the Romans had eventually the high priest. So the Roman consuls were the high priest of Rome for 700 years! If you’re elected the general, you’re also the priest. You run all the religious ceremonies. They didn’t separate those two! So the church and the mercantile empire and the power to tax migrates from Rome to Venice. When did Venice start to decline? When they lost control of the church! At the end of the day, they start sinking, because you can’t afford to maintain those buildings. You can’t afford 100-story buildings in Manhattan unless you’re the center of a financial empire! I have to basically buy your bonds for 68 cents on the dollar and sell them for 82 cents on the dollar and cut the difference. You know there are a lot of securities on Wall Street where there’s only two market makers: there’s the one bank and the other bank and they trade with each other, and if you’re buying, you’re buying at the top of the spread and you’re selling at the bottom of the spread. And the spread is 2%, Robert! So if I turn over $1 Billion worth of bonds, I’m paying $20 Million in commissions, and there’s a monopoly there, and the $20 Million is just flowing into what? It’s flowing into the building! My buddy works for that bank and I work for this bank and we drink together and we just kind of joke about the 200 basis point spread!

Robert Breedlove [24:34]: Interesting! So it’s these groups sort of competing to be the head gatekeeper in a way. But to preserve that gatekeeping, it’s intimately connected to the church — control of religion, I guess you might say. So does this somehow connect the actual connections between money and religion? Even today we have a In God We Trust on the US dollar bills?

Michael Saylor [25:00]: It takes us to the Reformation! By the way, if you go to Amsterdam, Amsterdam is a city of canals! If you’ve ever seen a distribution center, the trucks come in one side, it goes through a very complicated set of conveyors, and it goes out the other side! These trucks come from the manufacturers, those trucks go to the stores or the locales, and the distribution center is a maze of conveyors. Amsterdam’s that, but it’s that for barges, before we had machines. That’s what Venice is! That’s what they did in every mercantile center. And when you get to Martin Luther’s time, you realize one of the key drivers is there’s no way that we can rise or elevate our civilization if we have to send all of our money to Rome! You see this struggle throughout medieval history — William the Conqueror had that struggle, you see the struggle of the Northern European German nobles, and then of course it punctuates itself with Henry VIII, who eventually forms the Anglican church so he can be the Pontifex Maximus, and if the church terminates with the King of England, they don’t have to ship any money down to Italy, nor do they have to ask permission to change their alliances and get married and do what they will. It’s useful to have God on your side! It’s always been useful! And so that drives a lot of stuff throughout the Renaissance and you can say that Northern Europe broke off from the Roman Catholic Church for religious reasons, or you could say the Northern European powers that be created the religion for political and economic reasons, to break off from the Roman Catholic Church! But either way, it’s kind of a triumph of history that everybody’s forgotten that there used to be lots of — why do they call it Roman Catholic if there weren’t other Catholics? How many different branches of the Catholic church do you think there were? Like, a thousand! They just kind of coalesced over time! But here’s the general principle: everywhere on Earth where you see a big city, it was the center of an empire! Paris, London, Hong Kong, New York, Venice, Rome! Everywhere! And by the way, everywhere where you see a city that’s fallen upon hard times, that’s been destroyed — it’s empire lapsed! Carthage, Troy, right? You could name them on and on and on! Venice—had an empire, lost an empire. And that’s because you can’t physically create this kind of economic density. I mean, you go to Paris and you look at the Cathedral of Notre Dame and you look at how much human effort went into creating Notre Dame — there are people that are selling postcards and bottled water in the shadow of Notre Dame Cathedral making money off of tourists, where the guys inherited the concession from his father’s father’s father’s father, and if you go back 10 generations, the concession was 700 years old! They are living off of the vestiges of an empire long past, and now the question is: what are the empires of the future? Where do they form? And that takes us really to the Steel Age, the 19th century, the robber barons and the like, and you can see — with shipping networks, those canals gave way to free ports and eventually gave way to container ships, and container ships totally remade everything and they shifted power to Singapore and Hong Kong and companies like Maersk. And ultimately it’s a low-energy — it’s a componentized way to move things around! The most efficient to move anything on Earth is modern containers! By the way, the biggest rage and technology in service today is containerized software via Kubernetes and Docker. Which is the same principle as: put all your stuff in the container ship, and then the container goes onto a ship, they get standard loading facilities into a port, they’ve got standard train cars and standard trucks — everything’s standardized! And the cost and the transparency of that was cut maybe by an order of magnitude with that innovation!

Robert Breedlove: Right! Standardization once again! So I do have a question about these empires that we’ve discussed historically: ostensibly the purpose of an empire like this is to basically preserve the walls of the city, protect the peace, honor private property rights within that dominion, enforce contract law, ensure that there’s a non-violent means for dispute resolution such that commerce can be conducted fluidly. And you mentioned the Empires of the future — this is something I think about a lot, is that we’ve always needed this monopolist on violence to sort of honor private property rights within their jurisdiction. But another really interesting aspect of Bitcoin is it’s kind of the first private property right that is agnostic of government completely! You don’t need government to enforce your right to hold private keys! It’s like holding physical gold or any other bearer instrument. So I wonder how much that plays into the relevance of an empire in the historical sense going into the future?

Michael Saylor [31:42]: Yeah a traditional empire is producing security. The #1 export in the United States is security! Like literally, I can live in Miami Beach and I don’t worry about someone shooting me across the intracoastal waterway. And if I was in certain other parts of the world I’d be surrounded by 100 bodyguards — so, security! They have that saying about Genghis Khan, they said, When the Mongols controlled all of Asia, a virgin could’ve ridden from one end of the empire to the other with a pot of gold on her head and not be molested! The Mongols weren’t screwing around either! You intercept their mail, if anything gets stolen, anybody gets hurt, they show up with an army and they murder everybody for 100 miles in every direction, trying to make the point: don’t eff with the system! Now most of these empires they generally provide this kind of security for their citizens, not always for the non-citizens or the aliens or the slaves or the whatever — the underclass. But they do manage to establish them! [32:57] Bitcoin is security, and Bitcoin’s #1 value proposition is security! It’s security of energy. If energy is translated to money and money is translated is translated into Bitcoin and you store it on the Bitcoin network, you’re securitizing your assets in a cloud of — behind a wall of — encrypted energy. And in that regard, it provides an important right and empowerment to the individual! It hasn’t quite addressed the physical security element. When do we actually come up with something that will surround your person with a field of repulsive energy. Your own force field! Then you will have accomplished the same thing in the physical domain that Bitcoin does in the virtual domain. But if I secure your life force — money is energy, is life force, money is power — if I secure your power, that can be converted into physical security either by allowing you to travel away from the [threat]. We have the example — Nazi Germany in the 30's — all the Jews had their money locked up in Germany and so the way the system worked is they operated as bankers and they allowed people to launder their money out of Germany and they would take a hair cut of 10, 20, 30% initially, then 50%, then 70%, then 90%, until pretty soon it was like a 90% hair cut to get your value out, and so consequently, people didn’t want to leave! And so if you don’t have your monetary power or your assets secured virtually, then your physical security is always at risk because you can’t leave nor can you protect yourself, right? You can’t pay for anything to protect yourself, and you can’t get out, or you can’t pay to get out! You would think that probably one of the most useful or one of the most compelling use cases of Bitcoin would be if I’m a refugee trying to flee a war zone. Because it’s either that or gold, and the problem with gold is there’s a lot of people with guns — they’re gonna take it from you! And at least with Bitcoin, you could pay the guy with the gun half the money when you started, and the other half when you got there, and the worst he could do is blow your head off, but he’s not getting the money. Whereas gold, he just blows your head off — takes the gold! So yeah I think it’s second order beneficial to physical security in a lot of different ways and it makes the world better, but it’s first order beneficial to economic security! If we think about the Steel Age, these rail networks are another network to deliver energy faster, stronger, smarter, harder! Of course, at the nexus of every transportation hub, there’s an economic center, so rail heads — if a great city is in a port, it’s at the center of a railroad juncture! And a lot of times at the center of the rail juncture you can tax all the trains! So if goods come from Spain into Paris and they’re going to Germany, the French get to take a tax right there in Paris! The rail heads became a nexus. The other fascinating thing about the railroads is they became really instrumental to logistics, movement of armies, and they drove economic and political power. And one interesting example is Winston Churchill when he was like 25, he wrote a book called the River War, before he was famous for anything in fact! He was quite the adventurer — he went off to fight in the war in the Sudan under Kitchener. And the entire book is about the British working to win a war in the Sudan, and they had to take Khartoum — it’s like going 1,000 miles up the Nile, maybe 1,500 miles up the Nile! — across desert, and why they would even want to do it is an interesting question, but here’s the bottom line: the entire outcome of the war comes down to the question, Can the British build a railroad to Khartoum? And if the British succeed in building a railroad, they win. And if they can’t build a railroad, they can’t provision the army and they can’t move the heavy equipment and they lose the war! The entire war — it’s called the River War — but it ought to be called the Railroad War. It’s just about building a railroad across the desert, and at the end of the day, as soon as the railroad arrived, a bunch of guys with explosives and Gatling guns showed up, they devastated everybody and it was not a fair fight at all! Like Gatling guns versus guys with spears and musket loaders — it’s kind of very unpleasant! And if you read it through the modern view, it doesn’t necessarily leave you a good taste in your mouth! But it’s a reminder that a lot of times, the difference between winning and losing, and living and dying, is via railroads! I think there’s a similar story in the American Civil War, if you look at the way railroads functioned. Even the conquest of the continent, the Union Pacific Railroad! Once the railroad crossed the continent — it’s Manifest Destiny — you think the United States was gonna dominate without that railroad? What is it, 1,000x more expensive to move stuff over land than over water? And Google is very good at saying, We don’t do anything that’s gonna be 10x or 100x better — I mean it’s a Silicon Valley trope. Don’t bother to do it unless you’re gonna break through this 100x! Well all these things were 100x better, but a railroad we take for granted! I give you 5 tons of stuff — carry it from New York to California. Count the amount of energy it’s gonna take you! Now put it on a railroad car — try again! You think that’s not faster? And stronger? 1,000x faster? 1,000x stronger? Something like that! Orders of magnitude. And that takes us to John D. Rockefeller. Before Standard Oil comes along, people are actually hunting whales — they’re getting in wooden ships chasing around in the Indian Ocean to kill a whale, boil down its blubber and make kerosene and burn a lamp! Not a very efficient way to gather energy! So then along comes oil, and oil is 1,000x more efficient way to get energy, and what Standard Oil was, was it was first an energy producer, but it was also an energy storage device! It’s a battery! Because the best way to store energy is put it in a tank! It was also an energy network. Standard Oil, they bought up all the — they didn’t actually buy the fields, they bought the refineries. They refined the oil, they stored the oil, they bought up all the tanker cars, they bought up all the tanker ships, they locked down all of the networks, and they basically had an energy network! They actually had guys driving around with carriages to deliver their energy to every single retail store. They had retail distribution! They would even give away the furnaces to sell the energy! They did a Jeff Bezos thing. You know — Amazon Prime. People think Jeff Bezos invented it? He didn’t invent it! He read the biography of John D. Rockefeller! Rockefeller invented it all! He did it all! He gave away the razors to sell the razor blades, he’s the first guy to realize that you have to form a cartel or you have to form some kind of understanding of scarcity. If there’s no scarcity, there’s so much volatility that the market is chaotically destructive. So you had the world’s first serious energy network there, and it’s such a powerful network that 100 years after Rockefeller’s dead, those companies are still around, worth $1 Trillion! They’re still instrumental!

Robert Breedlove [42:38]: Yeah! What does that mean? You said that Rockefeller realized that he had to institute a cartel in order to impose scarcity on the market, such to offset volatility? Can you elaborate on that?

Michael Saylor [42:52]: It comes in booms and busts. Like people would — you talk about scarcity. The problem with using a commodity as money is when the price goes up, people produce too much of it! Well so he — it was a very inefficient industry with massive volatility, and so he consolidated it to drop the volatility so that they could standardize every component along the way! So that he could drive to a lower energy level, a more efficient energy system. Ultimately, if you want to look at the human condition — you ever get on one of those rowing machines and you row as hard as you can for an hour, and a kilowatt-hour is hard to come by! You start to think — if I rowed all day long and I was an Olympic-level rower, I think the sum total of my effort is like 29 cents? Like, if you calculate the value of all of your human effort in modern energy cost? A quarter? A nickel — some people couldn’t even do a nickel worth of work, right? And you think about where we got to, and we got through to that by channeling this energy, and it must be 1,000x, 10,000x more energy! In fact just a general theme you see everywhere where there’s an explosion of innovation and an explosion of vitality, somebody tapped into a 1,000x more energy or figured out how to deliver the energy! Oil was originally all about kerosene and lighting, and then heating, and then of course the automobile shot it up by a factor of 10 and that was the killer app! But if you go on to some other industrial-era robber baron networks — here’s an interesting one: Kraft, Hershey’s, and Post Cereal. They’re technology companies! People don’t think of ’em as that! Before they came along, there was no breakfast. People didn’t eat breakfast! Kraft and Post figured out how to box corn flakes, and what they did is they stabilized food energy and put it into a container that didn’t bleed the energy, that didn’t leak energy! If I give you a bottle full of tomato sauce, and I just make it in my kitchen, and you put it in your refrigerator, it will spoil over some period of time. How much? Well, there’s bacteria in it. The origin of branding — the Kraft brand, the Hershey’s brand, or whatever brand — the origin of branding is I make it in a clean room, hermetically sealed. Everybody has to clean up, scrub down, sterilize, get the bacteria off, I have machines to load the can, to seal the can, to seal the bottle. I stamp it with my brand! The #1 value proposition wasn’t, It’s good ketchup! Or it’s good tomatoes or good soup or good whatever! The #1 value proposition is it’s not gonna kill you! You ever actually make some leftovers and leave it in your refrigerator for 2 months and eat it? Here’s a better one: why don’t you make something in your kitchen, and then leave it in your closet for 2 months without a refrigerator, because they didn’t have refrigerators! Frozen food came along later! And Marjorie Merriweather Post became one of the richest women of the century, a) because her father gave her Post Cereal, and they were able to stabilize starch in a box at room temperature, and then b) because she bought the first frozen food company, and she realized the ability to actually freeze food was gonna be a game-changer! And before that, no one had ever frozen food before! You think they’re not technologists? It’s a food energy company!

Robert Breedlove [47:46]: Energy storage technologies!

Michael Saylor: I mean, you need energy in food form, in nutritional form, to not die! If I could store it — now it’s like, it’s very interesting here, right? Can I take electricity from Detroit and deliver it to you in San Francisco today? No! Can I deliver electricity from Detroit to Grand Rapids, Michigan? Yes! When it gets to you, how long can you store it in your battery? It bleeds 2% a month! You’ll probably lose it all in the year. Can I ship food from Detroit to Grand Rapids? Yeah. When it gets there, how long can you store it in your cellar? A day? A week? If the answer’s 2 weeks, there’s no national business there! There’s no national brand! The answer needs to be 3 months or 6 months — now there’s a national brand! Now it matters! So these guys that were launching these businesses, they were really launching clean room manufacturing plants that captured energy or something of value. They were stores of value, Robert! A store of value that would not decay or bleed due to bacterial infestation or spoilage. And because of that, the brand became important, just like the Standard brand was important — the kerosene’s not gonna explode — it’s clean, right? Is the gasoline clean? Is the ketchup clean? You go to Hershey, Pennsylvania, they got a factory — it’s a work of art! It’s more complicated than most computer programs! They wrote a computer program in steel! Like, don’t eff that up, right? There’s no version 2 coming — write your program in an analog computer welded in steel that takes up a football field — that’s what they did! And in one end goes milk and eggs and out the other ends comes boxes of chocolate bars — 50,000 an hour! And it’s not just they come out perfectly uniform, it’s they come out without bacteria in them and you can put them on the shelf and they won’t make your kids sick! And therein is the rise of all of those CPG companies.

Robert Breedlove [50:27]: I love the perspective you have on all investment being an investment in technology! Because that is what we are doing, right? We are making tools, protocols, technologies, that basically improve our productivity, and that’s how we advance is these layers of innovation on top of one another, such that basically every business is a technology business! I think that’s a very unique insight I have never heard before! And I think the other thing is, the interesting connection between this hyper-sanitation — so really make sure there’s no bacteria or anything that could cause harm to the user of energy — which would be the eater of the food, how the hyper-sanitation’s connected to the preservation of the food, or the energy store. And that seems to somehow kind of mirror Bitcoin in a way! That it’s got a hyper-sanitary ledger, right? There’s never any errors in the blockchain whatsoever, such that it preserves its sanctity maximally across time. Like it’s the best preservation technology of value because there’s no detritus in it!

Michael Saylor [51:41]: It’s the best branded asset in the history of the world! Maybe it’s the first time someone came up with a way to cryptographically brand a security! Which is an interesting idea! Now with regard to businesses, I would say that all of the great businesses, the growth companies, were all technology companies—in their time. And eventually, almost by definition, they stop growing when they’re no longer cutting edge technology companies, right? There are other businesses that are more like rent-seeking businesses, or they’re concessions. The guy that sells bottled water in the shadow of the Notre Dame Cathedral, that’s a business — it relies upon political largesse, maybe there’s a real estate business, right? I own that real estate, and then I sell you water or lemonade on that real estate. There are those kind of businesses. But the growth companies — Standard Oil was a growth company, U.S. Steel, Boeing, IBM — in that period when they’re growing, they’re a technology company. And that means that all growth stocks are technology companies by definition! You can buy another stock that’s not a growth company or a non-tech company, but it’s probably not a growth stock! In order to grow a non-technology company, you could then make the assertion that you’re gonna need to do financial engineering, like roll-ups — like I’m gonna buy every McDonald’s or every restaurant across the country with debt, maybe that’s a way to grow it! Or you need a concession from a regulator! It’s now illegal for you — I’m the only person that can operate airports in the United States! You can grow that way. I need a concession, a political concession, and I suppose there’s a place for innovative marketing, but I’m not — if there’s not a compelling technology breakthrough, I’m just not a big fan of the marketing thing, you know? Except for, if the marketing breakthrough comes about due to technology, for example, I created a company that got famous because I’m famous on Twitter and YouTube — that’s not a bad idea! I’m the best marketer on the new media — maybe that can work. But at the end of the day, those are not gonna be $1 Trillion — you know, in their day, if the dollar’s debased by a factor of 100, at least, well John D. Rockefeller was worth $300-$400 Million in his money! Multiply it by 100, you know? Multiply it by 200! He got to be worth $1 Billion I think! So he probably was worth $200–250 Billion in his money, and that was in a day where you didn’t have access to all the deflationary tech services that are effectively free! So relatively speaking they had extraordinary power, but they were all technology capitalists. It’s important at this point for us to just look at the impact steel and aluminum through this entire era. [55:43] Carnegie created an empire based on steel, and Andrew Mellon’s empire was substantially based on aluminum and aluminum alcoa. Steel is an elemental force for the civil engineering industry, and aluminum became that elemental force for aviation! Without steel, really there is no modern city! You build a building in wood, it’s 2 stories. Build a building in bricks or masonry, it’s 5 stories max. In order to create New York or London or any great city, you need steel and you need of course, an elevator! Straightforward things, but of the two of them, steel is the harder development. The elevator you can probably figure out — it’s a counter-weight on a pulley. Whereas steel is iron laced with carbon, and it’s really hard! How hard? Think about how complicated it is in order to refine steel and shape steel when it’s molten, and it melts through just about anything you might put it in, or on! If you read any books on steel like American Steel I think by Richard Preston about Nucor, they talk about steel refinery blow-outs! If you actually have an accident in a steel refinery and if the molten steel falls on the concrete, there’s water vapor in the concrete! So molten steel superheats the water vapor, and what happens when water vapor gets hot, or water gets hot? It expands! Explodes! Molten steel on concrete turns the entire refinery into a bomb, and it blows up, and it kills everybody for 100 meters in every direction! So technology, or not technology? Harder technology — everybody thinks they’re in a technology business today. Nobody deals with technology that’s as dangerous and as tricky as what Carnegie and those early steel refineries were dealing with! Or the DuPonts handling nitroglycerin! Like, what do you think happens when you mishandle nitroglycerin? [58:31] When you mishandle crypto, you lose some money. When you mishandle nitroglycerin, everything gets blown up — again, for half a mile in every direction! And aluminum, again, not so easy either! So these are really difficult technologies, but really elemental, because the difference between steel and no steel is, do you build a 100-story skyscraper? I guess you could say, you might do something with iron, but iron’s just got problems! Steel is the perfect material for civil engineering! It’s cheap, it’s got extraordinary tensile strength, if you paint it or protect it from corrosion, it will last forever! Literally forever, Robert! In fact, if you build a steel ship and you punch a hole in it, you can weld the hold with another piece of steel, and the weld will be stronger than the original cold-rolled steel. It’s that strong! So in the world of strong — this is the strongest of strong materials! It’s strong, it’s cheap, Carnegie figured it out — they built every bridge with it! No steel — no bridges! No bridges — no Manhattan! Think about what happens if you blow up the bridges in Manhattan? Everybody would starve to death! You can’t even get the food in fast enough! And of course, you can’t hold the skyscrapers. So all modern civil engineering is based on steel. So then along comes aviation, and they try to build a plane with steel — what happens? You ever see a steel airplane?

Robert Breedlove: No!

Michael Saylor [1:00:16]: It’s the perfect material! It’s cheap, it’s indestructible—why not build an airplane with steel?

Robert Breedlove: Too damn heavy!

Michael Saylor: Just one little nuance! Just one little problem! But the fact that it’s better than aluminum in every way, shape — aluminum’s 20x more expensive than steel, you know? And it flexes, and it’s difficult to work — it doesn’t matter! Steel doesn’t fly! Iron doesn’t fly! Wood flies. Canvas flies. Fabric flies. But you try to find a metal which is stable, that’s going to be a structurally sound metal for aviation, and aluminum’s the one! No aluminum — no aviation! Nothing! Nothing! You’re talking about balloons, right? Or maybe you’ve got the right flyer! But it’s an elemental force, and on that element, you make that breakthrough, then you have a $1 Trillion industry based on that breakthrough — how do you work it, how do you create it, how do you use it!

Robert Breedlove [1:01:44]: It’s so interesting that these raw material breakthroughs then have so many follow-on consequences. Like first and second order consequences, and to the point that you were saying: no steel — no city! No aluminum — no aircraft! And then we have to think about how much commerce is actually conducted through the city and through the aircraft! I mean it’s foundational to global civilization as we know it!

Michael Saylor [1:02:12]: And they all kind of come down to networks that move energy around! Standard Oil was an energy network! The railroads are energy networks! By the way, no railroad — no tanker car with energy on it, right? The railroad is the energy network moving the oil around! The airplanes — another energy network — moving high frequency cargo around, and information around. And each one of them build on another one. And then the food networks. The result of all of them is, there are large corporations and huge opportunities for wealth creation, if you get to the node of the network! One last point on the Steel Age before we move on that’s worth noting is: average life expectancy at 1900 is 50 in America! It was 70 under the Romans, it was 30 in the Dark Ages, it might have been 32–33 in the Revolutionary War in the US. We crawl back up to 50, and then by 1950, it’s 70! And so probably the most rapid expansion in the quality of life in thousands of years is in this 50 years from 1900–1950, because of the conquest of infectious diseases! And that’s all really a function of discovering the science of microbes and sterilization — understanding that you need to be sterile. And then the second is antibiotics. And those two things together were extraordinary! Antibiotics alone and Penicillin is responsible for the defeat of Tuberculosis, and Tuberculosis killed a billion people! The White Plague! When you caught Tuberculosis it was a death sentence! I think it killed Chopin — it killed all sorts of people! A billion people — more than any war! [1:04:27] And of course, in this particular case, if you look at history books on the 20th century, they give it like 2 paragraphs! If you were weighting the text based on the significance of what happened, something like half of all the history of the 20th century ought to be just about Penicillin, antibiotics, and sterilization — half! And everything else can be the other half! But in fact it’s not even 0.01%. The only measurable mortality rate in the 20th century is the flu epidemic around 1920 where you could see a blip. You can’t see an impact on the average life expectancy of any other event — including all the wars — World War I doesn’t register, World War II doesn’t register. It’s kind of like, the impact of technology, of modern medicine and antibiotics and networks and cheap energy and sterilization and sanitation and running water. The impact of that so dwarfs every political thing that took place in the century that what you really got is I think it’s just a small blip in 1920. And that was like, different estimates: 100 million people died, people say as much as 10–20% of the population died in that 1–2 year time frame, and they’re still debating what that is, but it’s the only event you can see on the chart, and all of the activities of all the politicians and all the ideologies and everything we fought over, turned out to be not as relevant as defeating Tuberculosis!

Robert Breedlove [1:06:33]: And it was derived from a Mycelium? Is that correct? It was left in a sink overnight accidentally, something to that effect?

Michael Saylor: Yeah! And it’s an accident! We get it from a fungus and it’s accidental! And powerful! I dunno. I guess your takeaway from that is what people do? There’s stuff, and don’t try to channel people in any particular direction too much, because nature’s a bit more complicated!

Robert Breedlove [1:07:17]: I think Taleb makes the point that the vast majority of our innovation occurs through trial and error. This tinkering impulse that people naturally have, versus this image of the inventor alone in a room laboring for 20 years straight and all of a sudden he has a breakthrough. It’s more like people working and tinkering all over the world and communicating that lead to these breakthroughs!

Michael Saylor [1:07:44]: Yeah half of science is accidental! And half the stuff gets discovered but the issue is no one decides to commercialize it or they don’t engineer it into the solution. There’s William Gibson’s phrase, The future is already with us, it’s just not evenly distributed!

Robert Breedlove: Exactly!

[END]

Commentary

Robert Breedlove [1:08:08]: Alright guys, Episode 2! So good! We’re making progress, we’ve now seen Man rise through Stone Age, Iron Age, regressed into the Dark Ages, and then finally progress into the Steel Age. And this leads us into the Industrial Revolution, to where we are today, which is the Information Age! So I really appreciated Saylor’s perspectives on this! I thought it was interesting that we take so much for granted today! We really think that all of these modern miracles generated by markets are a given, but if we look at the Dark Ages and realize that one key misstep can send us sliding back thousands of years, I think it’s a great lesson to deeply absorb! And realize that none of this is promised! And he made the point clear with the boot print, right? The idea of the printing press was evident to anyone who had ever seen a footprint or a boot print, yet for some reason it took us a really long time to commercialize it and realize its revolutionary potential! [1:09:26] Also when he pointed to Trajan, the guy from 100 A.D., the statue of Trajan of holding the globe, this spherical world in his hand in 100 A.D., yet fast forward to 1,400 A.D. and there’s people in Europe pre-Columbus that still think the world is flat! It’s so interesting to me that these ideas — as power as they are — they can be missed! We can hurt ourselves by not paying attention. And not just at an individual level, but really at a civilizational level. Saylor might call that the fire of truth — when you let the fire of truth be extinguished, society can regress into falsehood. The other interesting point was the Native Americans with the pottery wheel. They had this device for who knows how many hundreds of years, but no one had figured out to turn it on its side. You realize all of the mechanical potential of the wheel! The wheelbarrow, the wagon, even things like the train. They all use the wheel to overcome frictions for terrestrial motion. And I thought that was an interesting example of how some of our most important innovations can just be hidden in plain sight, frankly! And this points towards Bitcoin for me in that so many people know there’s something wrong in the world. They sense there’s something really deeply wrong in the world today, but very few people understand how broken the money is, and how much that contributes to the socioeconomic problems we’re seeing in the world over! So in that way I kind of think the problem and the solution are hidden in plain sight, so to speak! In that we need to fix the money to fix many problems in the world. And we got into the discussion about smugglers. So the definition of a smuggler, which sounds like a criminal actor, is really just someone trying to protect their self-interest! They’re someone that wants to conduct commerce through a port and not give away half of their stuff, as Saylor said! And that’s actually where we get the term free port. The term free port means that you can dock there without having half your stuff or a percentage of your stuff get confiscated. And that leads us to the really important role that gatekeepers have played throughout history. Whatever local monopoly on violence existed, they always wielded that monopoly to extract value or rents or tax from those conducting business and creating economic surplus in their guarded territory. That’s been kind of the name of the game throughout human history, and that’s why we have the two adages: Death and Taxes. Anywhere you go to conduct business, you’re gonna get taxed, and we’re all mortal, we all die. So governments have always used the weapon of the law as an instrument of plunder. It’s how they generate revenue, is maximally extracting wealth from those that do business in their territory, but it’s a parasitic relationship, and if you look in the domain of biology, parasites actually don’t tax their hosts to tax, that would actually be counter to their own self-interest! They want to extract maximum value, but in a way that maintains the host’s longevity. So it’s kind of like establishing monopoly profits in the economics sense. There’s a very particular point on the price curve where the monopolist sets their price to optimize their own profits, which isn’t enough profits to kill the consumer and force them not to be able to pay for it, and it’s not a low price like we’ve seen in free market competition, but it’s right at this peak point! Which I thought was pretty interesting that we were able to see governments in that light! And that’s why history has this distinct pattern of might is right. Like, people have been competing to be the head gatekeeper, and this can be governmental, this can be religious, because it gives them the path of least resistance if you will for extracting value and becoming wealthy. And indeed these were the first people to become wealthy in the world were people that were able to specialize in violence, or just specialize in religion to establish monopolies on local commerce or local police systems. And that points to the intimate relationship between government and religion and you know the defining feature of Western civilization today is the separation of church and state. That was how we have secular society, was a decoupling of those two institutions. And if we look at say a modern city like New York, I thought the point was great that those skyscrapers are constructed from the value that is extracted by financial intermediaries. Saylor gave the example of two bond traders in adjacent buildings driving most of the volume in a market, and they both get to scrape their vig, their 1–2%. It reminds me of the hotels in Vegas, the old joke is like the buildings aren’t built by winning gamblers! The nature of being an intermediary is that you get to extract perpetual profits basically, from anyone doing business within your network! And that’s what money is, right? It’s a network of trust, and that’s why the state has always fought to control and monopolize it because it gives them essentially unlimited power and wealth to be able to confiscate that from the entirety of their citizens. [1:16:04] That’s what tax is, that’s what a rent is — not a rent like you pay monthly for your apartment, but rent in the economic sense is it is the intermediary or group preserving peace in that area — they get to siphon value off of it for the privilege of protection. And it’s not necessarily a bad thing! The problem with it is when it’s priced at a non-consensual rate. When you have to pay 40% taxes to the government and you don’t have any bargaining power in that relationship, that’s the problem. That’s when you go away from free market competition and towards monopolization. And that’s what creates so many problems in the world! And then when we shifted the discussion and started looking at standardized containers, we talked about that standardized container that unites at the back of a semi-truck or that now ship across the ocean. When we started talking about the value again there of standardization — which we touched on a lot of this in Episode 1, when we looked at ancient Romans — when we are able to compress, I guess you could say that protocols and standardization compress confusion, because there’s less optionality, so everyone knows the language. Everyone knows exactly what to expect, so you’re able to execute actions very quickly and efficiently. And this creates a lot of economic surplus, right? This frees up a lot of time and resources, which are harnessed as well. They can be reallocated to other things! So that is how we collapse fixed cost, is by standardization! And we’ll talk about this more in a bit that the pattern I see emerging is that at the beginning of an industry, it’s almost as if — if there’s not a natural monopoly, there’s typically attempted to be imposed a legal monopoly, and this can have some short-run benefit because it establishes standards, but it’s at the long run detrimental to the market because again the monopolist is essentially extracting wealth from other market participants. So when we looked at empires, I love how Saylor painted that the #1 export of an empire is security! That’s what the US is today — we’re the imperialist that runs the world, we export security. If you look at a map of how many US military bases there are worldwide, we’re basically everywhere except Russia and China! And it’s interesting to me how Bitcoin fits into that picture, because Bitcoin’s #1 value proposition is security! It’s security of your time and energy in a medium that cannot be compromised! As Saylor described that it’s like a technology — Bitcoin — for securitizing your time and energy behind an impenetrable wall of encrypted energy. So it’s a very unique tool in that for the first time in history we have a place to put our life force or our wealth that is independent of any political happenings in the world! It’s an apolitical money, which is very essential to its value proposition! [1:19:51] Although Bitcoin clearly has a huge relationship with security, it clearly hasn’t solved physical security — Bitcoin’s not a force field or anything like that — it does have some interesting potential implications in that because it’s programmatic, you could program a payment to be issued to a gatekeeper, half before you pass the gate (whatever the gate may be whether this is a border or anything that a gatekeeper does) and then program such that they receive half the payment after so it can actually reduce the incentives to violence, and increase the incentives to cooperation! So it will be interesting to see how Bitcoin fits into the empires of the future. And then we went into the Steel Age, which steel is just a fascinating thing! It’s this raw material for building these networks in a really permanent fashion! Again if we looked at what people are — people are, as I say in some of my writing — we’re the networked species! We dominate the planet with our wits! Because of our ability to abstract, to tell stories like money, like nation states, like human rights, and that entire thesis is encapsulated really well in the book Sapiens if you haven’t read that! And our ability to abstract these stories, orient ourselves around them and then communicate about them very precisely and very quickly! That’s what lets us function almost as a single, harmonious organism, which you could say the world economy is! We’re communicating with words and prices and shifting the allocation of resources to the highest and best use, at least in a purely free market — central banking clearly distorts a lot of that! And in that context, steel was critical to building out kinetic networks. The railroad, the ability to move people and military assets 1,000x or 10,000x more cheaply across land! Saylor was making the point that wars were won and lost based on the successful construction of railroads. And this drove an interconnectivity of people and cities across land. So it’s one of these primordial networks for civilization. And behind that were the roads built by the Romans! And that took us to John D. Rockefeller and Standard Oil. I thought the point was great about [white 1:22:58], again before we figured out how to harness oil — oil being this compressed energy source from ancient sunlight. Sunlight that’s fallen on the Earth for tens of thousands or millions of years and has been compressed into its subterranean layers that we’re then able to harness to radically increase our productivity as we’ve seen in the Industrial Age. Before that, before we figured out oil, we’re literally going to sea hunting whales, harpooning whales, to harvest their blubber for candlelight! So the productivity — and I’ve seen the math on this before, I can’t quote it exactly — but the amount of energy necessarily to produce a single lumen, which would be a unit of light radiance going from needing to hunt whales to produce candles to harnessing oil — again it was orders of magnitude more cheap to be able to create light! Oil basically was this, like fire almost, this primary energy network that we were able to tap and just radically accelerate how quickly the economy producing wealth and new things and new innovations! So again if we consider that we’re channeling energy across our intellect to create new useful things, it’s as if our intellect hit this new really potent source of energy when we figured out oil! And Rockefeller, he captured the entire value strain. He built out the logistics network, he had the train cars, the container ships, the trucks. Saylor made the point he was giving away the furnaces away for free so he had the freemium model — he was giving away the furnaces to sell the oil, so to speak. And he originated this cartel model of owning the whole supply chain, so he could standardize the industry which I thought was super interesting! Because again we’re back to standardization where a monopolist can come in and lay out this singular unitary plan to mute the volatility, to mute the competition, which is long term bad, but short term sort of a benefit in that now that monopolist gets to set standards. He can create standards that everyone else will be forced to operate on — if done correctly — forever! He almost gets to be the incipient of the path dependence of the network that he’s creating. And so the thing that comes to mind is monopolies serving this function perhaps of muting volatility in the early stages of an industry’s development to establish standards which then commoditizes the space and — assuming you can remove that monopoly after its served its function setting the standards — then you let free market competition take hold on those standards, and it’s more beneficial! Versus, if you just set out in the beginning with pure free market competition, then it’s hard to get the industry to interoperate well because of the lack of standards! So it’s a bit of a mind-twist for me, but the old comes to mind, If you want to go fast go alone, if you want to go far, go together. It’s as if a monopolistic single unitary plan enables you to go fast, enables you to build out an industry really quickly, even in the Information Age today — I think we’re very early — and we’re seeing the monopolists take a big lead, right? Facebook, Amazon, Netflix, Google. But over time I would suspect that the standards that they’ve been setting will start to be opened up to more free market competition, and we’ll see the de-monopolization of this space and with that the declining cost, which then, again, frees up all this economic abundance that Man can allocate towards the next wave of innovation! So it’s a lot to think about there, but it seems like there’s some natural interplay between monopolistic and free market competition! And Rockefeller figuring out standardizing oil led to Henry Ford’s production of the automobile. And the automobile as Saylor said was the killer app of oil. When we think about the automobile it’s like, What was invented? We think it’s just this vehicle of getting us from A to B, but it enabled, all of a sudden, the density of the city, the economic network density of the city to be a reality, because then people could commute into the city and commute out! It created a lot of the pollution we see in the world today. It changed people’s self-identity, right? The car is an avatar of who we are! People often use automobiles today as kind of a status symbol. So it’s just a total game-changer. The automobile is again one of those innovations that sort of sprung out from the mastering of the oil energy network. I thought it was interesting too how Rockefeller was basically the most wealthy guy in history. Saylor made the point that he was worth over $200 Billion of today’s dollars, but Rockefeller died in 1937. The refrigerator wasn’t even commercialized until early 1920s. So this is a guy — the richest guy in the world — didn’t even have a refrigerator! So if you today have a refrigerator, you in some ways are more wealthy than John D. Rockefeller was! [1:29:16] You know, a little less than a hundred years ago. And that I think is just a testament to the abundance created by free markets, right? Every living generation — assuming we’re optimizing for productivity improvement — is head and shoulders above the prior generation, even the richest of the prior generation! And then we got into a discussion about Kraft, Hershey’s, and Post foods — I never thought about this before! That the business they were in was actually selling stabilized energy! Like, food is inherently unstable, it doesn’t keep well, especially before the invention of the refrigerator, and these innovators figured out basically how to stabilize food energy at room temperature! And the value proposition they were selling was that their food doesn’t kill you! Which I thought was just great! It’s like, again they were technologists! We think of it as food, today it’s no big deal — we go to the grocery and we buy boxes or cans or bottles of whatever we want — but this was a major breakthrough for supporting larger populations like we have in the world today! It reminds me of the certification function on coinage and bills too, because Saylor made the point — I’ve never thought of a brand like this — that the brand was, This food won’t kill you! Just like a gold coin stamped by a government or a private certification business was saying, This is 1 ounce of gold! Or this is 10 ounces of silver! Or whatever it was. So it’s a trust thing! You learn to trust the brand to represent what it says it is! And then also in food, frozen food was a total game-changer, like the fact that we could suck all the entropy out of food and keep it for extremely long periods of time, just allowed us to accumulate this savings of food! We all take it for granted today, but a freezer and a refrigerator? We should just stop in awe of our freezer and refrigerator every day and just think about how amazing it is that we figured out a way to suck the entropy out of food and store food energy over extremely long periods of time! In that context in a monetary sense, we could say that fiat currency is a high-entropy storage device. It leaks a lot! It suffers from spoilage over time, whereas Bitcoin could be considered the deep freeze, the absolute zero of storing monetary energy! It sucks all the entropy out of it, and you know that you’ll own a guaranteed fraction of the money supply for all time! So that analogy was interesting to me as well. I liked how he talked about food factories being — again they were technologists — they were computer programs written in steel! So one end of this program you put eggs and flour and milk or whatever it is and at the other end of this steel computer program it outputs cookies! That you can then box, wrap in plastic, put it on the shelf and they last for a year or whatever the number is! This is a totally new and unique way to look at food, and consumer packaged goods in general! And in that way they were stores of value, right? Food, this CPG industry was in the business of storing value! They’re storing food energy as value and selling it, and they were able to accomplish that through hyper-sanitation. So they’re removing all of the detritus and any uncleanliness from the food packaging process, and in doing so they’re able to output a product that was guaranteed to last for a fixed amount of time! And the analogy there to Bitcoin being this hyper-sanitized ledger, right? All of the nodes are all checking, and the miners are all checking one another’s work to make sure it’s being done consistent with the rules of the protocol, which are 100% open and transparent to everyone! And that’s what makes it this ultimate preservation device of monetary energy! So just mind-blowing comparisons between consumer food products and Bitcoin! And in that way, Saylor hit this on the head, I saw the brand, the concept of a brand, in a new way. I used to think a brand was just a company’s logo and reputation, but to his point, the brand was the certification saying, This product is what it says it is — you can trust the reputation of this group! Particularly, this food won’t kill you! Something that’s pretty important! Something that you’re gonna eat and put into your body, you can reliably trust this brand that it won’t kill you! The producers are trading on their own reputation, if you will. I thought he just hit the button right on the head when he said, In that sense Bitcoin is the best branded asset in history, because Bitcoin does do exactly what it says it will do! Nothing less, nothing more! And there’s no element of human corruption that can change that! You could install a new CEO of Kraft foods and he could say, To hell with the customer! I’m gonna start putting rat poison in my cheese crackers or whatever, right? He can do some outlandish stuff to ruin the reputation of the business! But Bitcoin is this leaderless institution that just runs the rules of the protocol and it doesn’t change, it doesn’t bend! So that was just mind-blowing to me, and something that I’ll be thinking about for a really long time! Then we got into steel, with Andrew Carnegie mastering this ultimate raw material for civil engineering. Saylor made the point: steel was cheap, high tensile strength, if you paint it it basically lasts forever, so it’s non-corrosive as long as you seal it off from air and water, and if you damage it and decide to repair it with a weld, the welding is actually stronger than the original weld itself! So again, another one of these fundamental breakthroughs in raw materials that supported higher civilizational advance! Then we talked about aviation. Clearly steel was good for a lot of things but no good for aviation because it was too heavy so we had to figure out aluminum. My epiphany here was that so much was riding on these raw material breakthroughs! We’re discovering new foundation elements to society, and there’s a lot of upstream consequences that we can’t even imagine! When someone figured out steel, who knew we were to figure out cities and then figure out aluminum, aviation, and then say fiber optics encircling the planet, the Internet, YouTube! It’s just these layers of innovation and from the point of innovation it’s impossible frankly to see where it’s going to go, so it unlocks all this potential human ingenuity to discover all these other things with kind of a cascading effect! So no steel — no city! No aluminum — no aviation! Just those two! We’ll just stop there! If we had not city, and we had no aviation, how much of the world would we not have today? I mean of you have flown? How many of you have lived in a city? It’s really hard to fathom how much just these two raw material breakthroughs have changed our lives! In my mind, it all comes down to increasing the energetic or network density, so we’re increasing the possibility of exchange. We increased the cost of—the economic and population density of a city increases exchange within that city, so it’s pumping out more ideas and innovations. And there’s great books on this. I think it’s called The Serendipity of the City, where it talks about this relationship between the population density, and innovation. The more population density there is, the more innovation tends to come out of it! Then in aviation’s sense, it’s about overcoming the frictions to free exchange. Most people more than 200 years ago would really never leave say a 30-mile radius of where they’re born, give or take. Maybe those numbers are wrong but you get the point: the world has opened up as a result of aviation! I mean you can go anywhere in the world now within a day! Anywhere in the world. It used to take settlers in the US, what, 3–4 months to cross the continent, if you didn’t die from disease or whatever! Again it just points towards the importance of free exchange and how these raw material breakthroughs support more network density which accelerates free exchange even more and leads to more and more breakthroughs in a cascading fashion! And the analogy I like there is that Bitcoin kind of is like financial steel, right? It’s just the best tool for the job, and it just works! It doesn’t bend, it doesn’t break, it just is an absolutely perfected monetary technology, and it’s steel but it also has wings — you can just send it anywhere, you can store it in your mind or in a computer anywhere. So it has all this flexibility too. It could be programmed to do different things, and you can build different features and modules on top of the protocol and you can build higher layer protocols. It’s just one of those type of breakthroughs, a raw material/network breakthrough. So just a lot to think about there. Finally we talked about the conquest of infectious diseases which clearly we haven’t conquered all of them but we’ve done a lot. Saylor made the point that these breakthroughs are the best amplifiers of life expectancy ever! Curing Tuberculosis, which killed a billion people, that had an immediate impact on the life expectancy curve, which World War I and World War II were just a blip. So it makes the point that technology is increasingly more of a variable on our progress. It’s almost like technology is becoming exponentially more important to us as we innovate further! Which gets us into the Information Age. The wars which are more of like political actions — these matter much less in the long scheme of human history. But, there’s a distortion in the history books, right? If you go to read history, you’re gonna read 99 pages about World War I and World War II — maybe 9,900 pages — for every page you read about Tuberculosis. So there’s this asymmetry in terms of how important the breakthrough is, versus how much is written about, which I thought was fascinating! And Penicillin, that breakthrough that increased our life expectancy so much, it was accidental! Again as Taleb would say, tinkering is an antifragile process. So the more entropy or uncertainty or randomness we can introduce to the process, the more breakthroughs we have — that can be accidental at times! Penicillin was a Mycelium or a fungus left in a sink overnight, and something grew on it, someone tested it, someone figured out, Holy crap! Holy cow! This thing cures disease, an infection! And it just radically changed the world, right? One of the most important discoveries in the history of Man — from an accident! So I think it just points to what we need to optimize society for, which is: free exchange and experimentation — that’s how we create the wealth in the world, that’s how we solve problems, that’s how we increase life expectancy! So that was a killer episode! I hope you guys enjoyed it as much as I did! And we’ll see you back soon for Episode 3!