The Saylor Series | Episode 3 | Technology Themes through History — Harder, Smarter, Faster, Stronger

Link to the audio: https://www.listennotes.com/podcasts/the-what-is-money/the-saylor-series-episode-3-rmYfQeNPqgu/

Robert Breedlove: Hey guys! Welcome back to Episode 3 of the “What is Money?” Show here in the Saylor Series! So we’ve covered with Michael Saylor so far the rise of Man through the Stone Ages through the Iron Ages, we went into the Dark Ages, we saw how mankind can have a misstep that causes him to regress 1,000 years, and up into the Steel and Industrial Age. And today we’re gonna go even further into the future, and the arc of all this is we’re seeing how mankind does take these evolutionary steps forward in terms of both his morality and the tools that he conducts his life with. And we see, as Michael says, that natural selection through this process, helps mankind become smarter, faster, stronger. And we’re coming to see that the defensive attributes of technology tend to be more important than offensive attributes over time. This is just leading us deeper into and closer to Bitcoin, which as we’ll talk about later, is the ultimate monetary defensive technology! And in that sense, humans — the reason we’re able to progress in this way and the reason we’re different than any other animal — is because we are actually capable of harnessing and channeling energy across these field lines of our intellect. So we can form these abstract concepts and ideas and then actually energize them by harnessing energy in the natural world. And that’s why in a geopolitical sense, naval power has been the force that governs the world. He who dominates the sea dominates the world! And in that context we’re looking now as we progress into the digital age, as digital space being this new high seas, if you will. So in this episode we’re gonna get into a lot of that and we’re also gonna finish off by talking about an area that Mr. Saylor is an expert in, which is the history of scientific revolutions. And we’re gonna talk about in particular the technology diffusion S-curve, which is when a new idea starts to permeate a society, it starts out relatively slowly, toward this inflection point and becomes rapidly adopted at an accelerating pace, before finally hitting a point of full market penetration, it starts to level out. And this will be important to comprehend in terms of not only all the innovations we’ve seen recently — especially the Internet — but also the path that we’d expect Bitcoin to continue to follow. Finally we’ll touch on war. And how it is an accelerant to innovation. And how it can accelerate us down that path of technology S-curve and leaves us eventually with technologies that would be perceived as miracles to primitive man. As Michael will say later, Sufficiently advanced technologies are indistinguishable from magic! So I hope you’re pumped! We’re still building this big foundation getting into modernity, and this will be one of the final episodes that gets us there! So with that, let’s get into it with Episode 3!

Michael Saylor [06:56]: I remember the name of the Jewish bankers: it’s the Warburgs! If you want a great vignette on why it’s important to have capital that’s mobile, study or just read any history of the Warburgs and what their family went through, and what all the Jewish families went through in the 30’s in Germany. And what the bankers had to do to move capital out of the country, and you get a very poignant punctuated appreciation for the need of having secure capital that you control! So there’s some, I think, general themes of technology throughout history, if you look across all of these. The general theme is: human beings marching toward being harder, smarter, faster, and stronger! And everyone that’s succeeded — every empire, individual, company — they all found a way to be harder, smarter, faster, stronger. George R.R. Martin, he wrote a bunch of books — he’s known for Game of Thrones, but he also wrote a bunch of books on superheroes, or at least he called them wildcards. And it’s about a bunch of superheroes or super-people that have genetic mutations, and they get it from some virus, and it’s a universe full of normal people, and then jokers — people who have been hideously deformed by this virus, and then aces — people that have been given superpower. And he takes a very modern view of it, and he starts to analyze superpowers: a guy figures out he can shoot laser beams out of his hands, another woman can be invisible, or some dude can be a thin man! And he goes, There a lot of these superheroes, but after a while we quickly realized that the most powerful ones were the ones with defensive superpowers. Defensive attributes overcome all of the offensive attributes in a battle! So for example, the guy that’s indestructible with no other superpower, can pick up a machine gun and kill everybody! And you can shoot him a million times, but he’s indestructible! Whereas, the guy with the laser beams jumping out of his hands, he’s just as mortal as you and me! And you hit him with one rock—he goes down and he’s dead! So it’s the impossible-to-kill ones that end up winning all the battles between superheroes in the smackdown, and the ones with the sexy things, or sexy, really cool superpowers — they’re useless! Because the guy that’s got none of those — he just gets a bazooka and he just fires! Or he’s like, I’m indestructible so I’m gonna set off an atomic bomb in the city and kill everybody but myself because I’m indestructible! It’s pretty easy to win the war if you’re indestructible. And it causes you to come to a conclusion about history and who wins in history: unbreakable is better, antifragile is best! So the superhero that’s good is the one that you hit him and you can’t hurt him! But the superheroes that are most frightening are the ones where you shoot him with a laser beam and now they can shoot your laser beams back at you! And you mind-read them and they absorb your mind-reading and they can mind-read you! And you fly at the speed at the sound and now they can fly at the speed of sound! [11:05] Like that character, what is it —

Robert Breedlove: I think it’s Rogue in X-Men?

Michael Saylor [11:13]: Yeah, or Sylar in Heroes. Maybe Rogue! It’s the one that absorbs your power and plays it back at you! You know, pretty soon it’s like, I am indestructible and I have every other power and you just better get out of the way! And that’s antifragile, right? I’m looking for the fight! I’m looking for people because I’m just gonna absorb their thing! So you see that theme through history: the really successful governments, empires, organizations, they’re continually fighting, they’re continually absorbing — the Romans absorbed the Carthaginian’s navy in 90 days! It’s easier said than done! It wasn’t like some Roman politician said, These are Carthaginian ships — they’re inferior to us. We will invent our own ships! It’s like, Not too proud to copy, not too proud to absorb it! This kind of principle can explain the success the United States in the wars of the last century or more. Why did we win World War I, World War II? Why is America America?There’s two narratives. Well there’s millions of narratives. One is: because we’re more patriotic and we’re righteous and we’re better! The other one is: the Europeans were fighting in Europe and we were fighting in Europe! So we were fighting, they were soft! When you’re dropping bombs in the middle of suburban Germany, you’re attacking the soft underbelly of the citizens in Germany, or the soft underbelly of the citizens in France, or the Battle of Britain. This is the citizen population being ravaged by a war. And that destroyed their economies, right? Destroyed their culture! Same happened in Russia, Italy. It’s happened in China, and the Chinese fought a war in China’s soil. The Japanese fought sort of a portion of a war on their own soil with the atomic warheads. On the other and, the US hadn’t fought a war on US soil since 1865. Okay? So who’s hard? Back to this missile idea, right? If you can throw a missile 3,000 miles and your enemy can throw a missile back 300 miles back at you — it’s pretty simple: I have a rifle, you have a pistol! I stand back 1,000 feet — your pistol’s good for 200 feet! I take 100 shots, eventually 1 hits — you’re a perfect shot, it doesn’t matter! Longer arms! So this idea: art you unbreakable? Or back to terrain: what is the terrain? The geography determines a lot of things! If you take a modern ship: take a modern yacht built in the year 2020, with every piece of modern equipment on it. Now try to sail it to Afghanistan! You probably won’t get there! Something will probably break! Try to sail it to Rome without stopping in a port along the way. You probably won’t make it! Robert, nobody does! They all stop and hide somewhere! It’s really hard to move stuff over the ocean thousands of miles! It’s really hard! Now, why don’t you try to sail an armada of 1,000 ships 3,000 miles in order to invade America? Germans couldn’t sail 13 miles across the Straits of Dover! The Japanese couldn’t cross from Japan to China during the kamikaze, and that’s not very far! It’s really hard! There’s only one guy that ever pulled it off—William the Conqueror in 1066! Nobody else managed to cross 13 miles. That’s your hydraulic moat! It’s really hard! It explains the culture of the U.K. It explains the culture of the United States. It explains a lot of other culture. It explains the balance of power, I think! If you just say, Here’s someone that you couldn’t kill who could kill you! I had the option to fight on your turf, but you would never have the option to fight on my turf. Now, that in and of its way is the reason that security is so incredibly important to the Bitcoin network! What is important is that it not break! If I’m indestructible, I don’t have to be the fastest, the shiniest, the whatever anything! I just have to be indestructible! If I’m indestructible — the indestructible man goes and buys a machine gun and he’s the most powerful superhero in the room, right? The indestructible blockchain goes and buys a digital app, or another crypto network, an off-chain app, or a Lightning, or a Binance, or a Coinbase, or a Square Cash or whatever, and it’s just fine! It’s the most powerful network in the room! [17:29] Because the thing that made it the winner was its indestructibility, its immortality! Not the fact that it could shoot laser beams from its fingers, or it was beautiful, or it could fly with its pretty wings, or it was invisible. All of these other things? Privacy, transactions — all these other things, they’re interesting, but they pale compared to the characteristic of immortality! Being indestructible in the here and now — pretty useful superhero power! Being indestructible and never aging — double useful superpower! And as for the rest, if you’re an open software protocol, someone’s gonna code an extension to your protocol to give you every other cool power that anybody wants! I can find a way to construct every other superpower by hook or crook, and that makes me antifragile and now I’m like the frightening impossible-to-stop superhero!

Robert Breedlove [18:41]: That’s a great analogy! Calls to mind that all saying that, If you wait long enough by the river, you can see the bodies of your enemy float by! It’s like, Because Bitcoin is unchangeable and it’s just a rock-solid, absolute scarce quantity of 21 Million, and that is the primary property in money that matters — I love the analogy that you gave too of, when someone asks you about the EPS of your company, they only care about the fully diluted cap table, right? Who gives a shit if you’ve got 18 outstanding — whatever! Just tell me the fully diluted number! And that’s what Bitcoin is, right? It’s like, you know that it doesn’t matter if there’s only—3 Million have been lost, or 18 Million and a half mined so far and 3 and a half to go — all that really matters is that fully diluted figure of 21 Million! And that the scarcity cannot be compromised, and then that it has enough antifragility on top of that to absorb other market-proven features — that’s all you want in money!

Michael Saylor [19:45]: Yeah! The mining rate, it’s like a secondary particular effect that happens in the first few years of its evolution, but exponentially it becomes irrelevant. It’s a second order driver. The first order driver is, [Is] the hardness infinitely hard? And then adoption and utility and inflation in the fiat reference frame that it’s operating in. A couple more points that are worth making on technology and human history. Humans triumph throughout history by channeling energy. All of these things come down to: how did I channel energy? So, navy power. The British Navy ruled the sea, the Phoenicians, the Venetians, the Greeks, the Romans. The Americans today control the seas via their aircraft carriers and via naval power. And naval power is just bringing overwhelming stronger force to bear that’s faster, that’s harder, than any other force anywhere on Earth. I park an aircraft carrier somewhere and death rains from above! So we’ve seen all empires are driven by a naval power. In time, we invented airplanes. And then air power became the thing! And air power is again all about death from above: the most powerful navy idea is airplanes flying off an aircraft carrier! First it was the battleship by: show up in your harbor — I blast everything. Then it became air power. And if I could get above you — and we saw this in Kosovo— it is impossible for a modern nation state to function if it does not control its own air space. You saw that in the First Gulf War, the Second Gulf War. The United States, especially the United States air force, could pretty much bomb any country back to the Stone Age in a matter of a week, once you lose your air supremacy, once you lose control of your air space. There’s no hope for you! You can take out every port, every power reactor, every generator, every serious building, they’re all gone. Death from above! There’s nothing you can do! You’re at the bottom of the gravity well. And with technology today, someone can sit out 6 miles up — you can’t shoot down a plane moving at high speeds 6 miles up! You have to fight the gravity well to get there! They’re just working opposite: it’s an energy thing, right? So I’m moving from a lower energy state—I’m on the ground moving enemies around, to a higher energy state — I have a boat, I’m moving heavy masses around, to a higher energy state — I’m above you dropping munitions on you. Then after that, it became nuclear power! You harness nuclear power and that ended World War II pretty definitively in a hurry. Then we go to space satellite power! And then you go up the gravity well some more, and that manifests itself primarily with GPS. If you look at the impact of having a Global Positioning Satellite, that’s what allows me to drop a laser-guided bomb or a drone anywhere on Earth and guide it day or night to anything! And that’s a massive source of American supremacy — controlling those GPS satellites! And you lose them — big problem, too! [23:53] One of my favorite books, and I note it, is The Moon Is a Harsh Mistress. And in it, Robert Heinlein, he writes about a bunch of Loonies—basically Libertarians that live on the moon that believe in making their own way, and their motto is, There ain’t no such thing as a free lunch! Abbreviated to TANSTAAFL, and he introduced that idea. And they take it to the extreme, which is like, You’re air’s not even free on the moon—you pay for everything! You pay for water, you pay for food, you pay for air. Everybody pulls their own weight. No one waits for a bail-out. There’s no bail-out coming from anybody. And they’re not big fans of authority. They don’t like being told what to do! And the plot of the book winds on that they’re being oppressed by Earthlings who are making them work as slaves and they’re taking 90% of their economic productivity and shipping back basically their future to Earth and they’re gradually suffocating and starving them to death. It’s just onerous. Taxation without representation! But onerous. So the Loonies decide to fight back with the help of an A.I. computer. The first A.I. computer I can remember! The name of the computer is Mike, by the way! And their technique is they realize that they’ve gotta catapult, and they start tossing rocks down the gravity well, and they just take a big rock, put it in their catapult, and it doesn’t take that much force to toss it off the moon because they’re low-G, they’re tossing the rock out of a 1/8th G or whatever, and it hits the Earth, goes into a trajectory, and of course this starts picking up speed! And by the time it lands, it’s like an atomic warhead. They just start tossing ’em at random places until the Federation Empire that’s oppressing them decides that maybe it’s had enough! And of course the lesson is: it’s humans channeling energy, but they’re channeling gravitational energy — and a lot of it! And there’s a lot more energy than the stuff that we have! All through human history — since a million years ago to today — it’s really the story of intelligent people looking around for, Where is the energy coming from? And how do I channel it in a network in order to achieve something harder, smarter, faster, stronger?

Robert Breedlove [26:44]: That’s such an interesting point! Back to the terrain of the battle — they’re holding the ultimate high ground being on the moon! Another thing this calls to mind is, I don’t know if you’ve read the book Sovereign Individual?

Michael Saylor: I don’t know if I’ve read it all — I‘ve heard of it.

Robert Breedlove: Yeah written in the late 90’s, and it’s been relatively prescient in a number of domains. They predicted the rise of what they called narrowcasting, as opposed to broadcasting, which we would call social media today. They predicted the rise of anonymous digital cash which would be disruptive to the nation state, which we would think Bitcoin is. And it also predicted the digitization of securities, so other property rights going away from a government function to be provided via software. And one of the things that was interesting there is that they compared digital space to the high seas. Basically saying, The reason why whoever controls the high seas controls the world is because that’s the most frictionless environment! You can move things with the least energy on the seas, once you can conquer them. So whoever controls that domain sort of controls the world. But also — because it’s frictionless — it’s very difficult to project dominion over the high seas. So we don’t have law, really — we have international waters everywhere in the world! And they compare that and analogize it to digital space, where it’s a frictionless space that whoever is dominant there will be dominant in the 21st century, but it will also be very difficult to project dominion. So it will be unregulated, largely! So they’re using that to kind of make the case for digital cash, and the fact that people would be able to escape oppressive regimes. Once you get your capital in the digital space, you’re no longer under the thumb of the government of the local oppressive monopoly. So I just think it’s interesting how it just always comes down to the terrain, right?

Michael Saylor [28:49]: Yeah. And I agree with you on that! I agree that the digital domain has weakened all the geographic terrain constraints. It’s pretty clear that information is flowing across borders and even when people try to stop it, they’re defeated by VPNs and anonymous browsing and other techniques! And we see places where information’s illegal — it’s leaking! Where it’s illegal to move capital — it’s leaking! Where it’s illegal to move information — it’s leaking! Where one person’s sedition is another person’s news, or truth. Depending on who controls the government. And that’s something I wrote about in my book The Mobile Wave. You might be interested to know, I think in 1998, we created a product called Narrowcaster!

Robert Breedlove: Oh really! I didn’t know that!

Michael Saylor: Yeah! And we made a lot of money off it, and it did just that! It actually sent out personalized information. So I was always a big fan of that, so I think it’s interesting the way that’s evolving! Probably the key thing there is: technology is empowering the individual and giving them more sovereignty. And it’s harder and harder in those ways for the government to control what information you get, and then how you manage your assets. But it’s a very twisty, complicated subject, because the government’s getting more power over you in some areas, they get less power over you in other areas, and it’s spinning fast!

Robert Breedlove [30:54]: And you could argue that that trajectory that’s taking us closer to a reflection of natural law, because natural law would say that sovereignty inheres within the individual. Our rights are not given to us from government, they actually inhere naturally within us. So it seems to be that — and it’s complicated because we’ve never seen a world like that, right? Again, we’ve always needed government to sort of keep the peace and enforce contract law and satisfy property rights, but now in the digital age there’s at least the possibility of some of those functions falling to software!

Michael Saylor [31:31]: Yeah it’s more and more things dematerializing to software and they move into cyberspace. It seems like it gets harder for any one government to assert control over the things that take place virtually. So there’s a lot of virtual empowerment going on, but there’s a lot of other things going on too! I guess I would end this section with just a couple of dynamics that I think I’ve seen over and over again with technology. When I was at MIT I studied the history of science and I read about the structure of scientific revolutions and I studied all different types of technology diffusions. And there’s certain things that pop out. A lot of times you’ll see an S-curve where it’ll start slow and it’ll accelerate until it reaches diminishing returns, and then all of a sudden it’s not an interesting technology anymore! You see that a lot! But, one of the lessons of history is: it’s very difficult to figure out when the curve starts, and it’s hard to stop it once it starts, but it’s a lot easier to invest in it and to forecast it once it starts. But before it starts, people will say, Well next year this will commercialize—or in 2, 5, 10 years. You could be off by 2 years, you could be off by 100 years! You remember Google Glass? How big that was gonna be? And how that was a lead balloon, and how many years is it after Google Glass and it’s still not gonna happen next year either! Technology fails until it succeeds — that’s another trend and another theme. So you see over and over again people pick at technologists and they’ll say, Oh it’ll never work! It’ll never work! It’ll never work! In the year 1902, before the Wright brothers flew that next year, if you’d asked the most learned people on Earth, they would’ve given you 100 reasons why airplanes will fly, and they would give you 100 examples of how they didn’t fly, and they would talk you to death. And the thing about these paradigm shifts is, oftentimes it’s not the learned individuals that make the breakthrough! Aircraft weren’t designed by professors of aeronautics and astronautics and engineering and fluid dynamics and mathematicians — they all failed miserably! The Wright brothers were bicycle mechanics! They had a bicycle shop — tinkerers! They’re the ones that ushered in the age! And they did it against all conventional wisdom! And on the other hand, Leonardo da Vinci tried to develop his own flying contraption! Every brilliant person for hundreds of years tried it — failed! All failed! And then some dudes in Dayton, Ohio that have a bicycle shop succeed. It happens like that! The story of John Harrison inventing, discovering a method to determine longitude on the ocean — it’s articulated in the book, Longitude, it’s an amazing story! Everybody knew how to find lattitude, it was easy, it was just like, against the North Star. But longitude’s very hard because the Earth’s spinning all the time and it required massively complicated calculations! They gave it to Newtonian professors at Cambridge and Oxford — the smartest mathematicians and astronomers in the world — no one could figure it out! Finally they posted a £10,000 prize and John Harrison—who was not a mathematician, he’s a clockmaker —figured it out! And the way he figured it out is he made a clock that was accurate, and they put one clock on the ship, and they set it to the Greenwich Observatory, the royal observatory, which is in Greenwich, England. Hence the term, Greenwich Mean Time. Greenwich Mean Time comes because you sail down the Thames past the royal observatory in Greenwich, you set your clock on that, and then you have another clock, and then every day at noon — if you’re in the Caribbean you look up and then you set that clock — and then you just subtract the time on the one from the time from the other, multiply it by 15 degrees and you’ve got your longitude! It was a tinkerer’s solution to a problem everybody else wanted to solve with star charts and tables and complex math! But of course, ships’ captains in the middle of the Caribbean or in a storm, they can’t do complex math! They just wanna stay alive! So you see lots of examples in history where people try to do something and they either accidentally discover it like Penicillin, or a tinkerer discovers it, and not the educated — and then all the professors crap all over it, and they all swear it’ll never work! And the tendency is either to reject it — people don’t like change — or it doesn’t get embraced until everybody dies, or until there’s a war! And war has a way of opening your mind because when someone drops a bomb on your head and you’re burning or screaming, then the pain causes you to take a more open-minded attitude! So a lot of stuff happened after World War II and happens in various wars, and you can trace it through human history! That drives innovation faster! Generational change will drive it faster. People keep trying it, and then just because it’s failed 1,000 times doesn’t mean it won’t succeed, but when it does succeed, then it’s probably unstoppable for a while! And hence, yeah you just get to this phrase, which is kind of punctuation for modern technology: Arthur C. Clark writes, Any sufficiently advanced technology is indistinguishable from magic. And it was a great quote, it’s a quote that I put on the back of my prospectus when my company became public in ’98. I believed it then — we have thousands and thousands of examples of magic things in our lives today! Literally magic things, that are just technical things! It’s always been that way, and to a primitive man, a rifle looks magical! Or an airplane! And now, we’re starting to deal with some software technologies and digital technologies that don’t just look magical to a primitive man, they’re gonna look magical to a modern man! Because they just really are getting pretty magical!

[END]

Commentary:

Robert Breedlove [39:20]: Alright guys! So that was Episode 3 of the Saylor Series. I hope you enjoyed that! We continue our progress towards modernity, and laying this really solid intellectual foundation through the lens of technology, anthropology, civilizational development, military — all of these aspects that lead us to the importance of Bitcoin as money! And as I said in the intro, I like to think of this whole arc as an evolutionary process. I actually consider that evolution is the inorganic form of innovation, or you could say that innovation is the organic form of evolution. So they’re both about colliding ideas together and with reality, to test which ideas, strategies, and approaches work best. Which offer the highest utility to the organism or human being that’s set an intention and an aim. It’s through this iterative process—as Saylor says it makes us harder, faster, and stronger. And I think what’s starting to shape up here as I think you’ll see is that the defensive attributes tend to be even more important than offensive attributes. So if you have an ability to defend yourself say behind a wall of water — you’re in the United States, we’re defended on both sides by large walls of water in the Atlantic and the Pacific Ocean, we have this natural defensive advantage! So it’s really difficult to invade us without having long-ranging weapons when we dominate the naval territory already. We are the dominant naval force because of our access to the oceans and our protection from hostile powers. And I liked the analogy that Saylor gave when he talked about the George R.R. Martin superheroes — I think they were called the Aces. It wasn’t the superhero with the best offensive capability — the laser beams out of the eyes or whatever — that became dominant, it was actually the one that was indestructible! Because he could essentially subject himself to any situation and survive! Which reminded me of that saying which I think is from Sun Tzu — it might be from Lao Tzu — If you wait long enough by the river, you live to see the bodies of your enemies float by. So it’s this point that, if you are optimized for survivability, that tends to make you dominant competitor over time, right? Time is on your side! Whereas time would be a raid against all of your competitors. And as time being the ultimate judge of all things, it’s probably the defining competitive competency you could have, is just really high resiliency or robustness, or ideally even, antifragility, where you’re actually improving from the hostility you face in the world! And advancing through adversity! So I thought that was interesting and clearly plays really well into the Bitcoin narrative. We were looking at how the terrain had shaped battles throughout history and why America fighting in Europe in say World War II was much different than war taking place on American soil. We were fighting and attacking the soft underbelly as Saylor called it, but we weren’t exposed to that same level attack ourselves! Well with the small exception of Pearl Harbor. And that’s why the nation that controls the sea controls the world, because that is the terrain that it’s the hardest to project power and dominion across, so whoever is dominant there just runs things! You can move energy around the world much more quickly and bring to force to bear much more quickly anywhere in the world. And so when you look at Bitcoin through that lens, it’s like it’s already the longest and most rigid chain, so it has already become dominant! If you look at digital space and compare it to the ocean, Bitcoin has dominated digital space for monetary networks! It’s impossible to compete with it as money, because it’s already perfected all the properties that make money money, and it’s done so in this digital terrain that all other competitors would be competing for! Which is: it’s a very low friction domain, so you can move things at the speed of light in the digital space. And you can defend things with cryptography at very low cost! You can basically erect these impenetrable walls of encrypted energy at relatively low cost. So Bitcoin has just optimized for that! It gives us a way to store the vital life energy that is money behind a wall that basically cannot be breached! I like that military analogy pointing to it as a very fundamental breakthrough. And the other thing there — we didn’t talk about this in this episode — that I think about, is: it sort of balances this antifragility or robustness with also a degree of adaptivity. So even though Bitcoin is the longest chain and the most rigid, it has these unbendable rules that favors its holders, it also still maintains this ability to adopt new features that are beneficial to it! And one of my favorite authors and good friend, Brandon Quittem, he’s written about this! In Mycelial space this is called Horizontal gene transfer. So when a Mycelium — which is the underground informational network of a fungus, like a mushroom — when it encounters a threat in the environment, it can actually code new enzymes and proteins and defense mechanisms against that threat at one particular spot. These Mycelial mats can be tens of, hundreds of square miles in size! But if it encounters a threat, it creates a formula to neutralize it, and even any one spot of that Mycelial mat, it can incorporate those lessons into the entire organism! So it’s actually learning from interaction with its competitors at the edges, but then incorporating all of its lessons into the entire organism! Which is something that Bitcoin is capable of doing! So it’s kind of a tangent but pretty interesting stuff in regards to Bitcoin! And then, as we said earlier, what distinguishes us as human is that we have this unique ability — I think Saylor described it earlier — we’re the only animal that plays with fire. So we have this special ability to mold our behavior in a way that allows us to harness energy and then we can channel it. We can create these abstractions of thought and speech in the ideological space, and then we can use that energy to energize these formulas that we’ve created. And that’s what makes us human! That’s what we do! When you look at anything — you look at a table or a house or a computer, all of these things began as ideas that we then funneled energy into. We harnessed energy in the natural world whether its hydrocarbons or fire — which was kind of the Stone Age energy network — solar radiation, whatever it may be! And we channel that energy into the manifestation of these ideas. And that’s what helps us become more productive and enjoy a higher quality of life over time. It’s such a radical new way to look at humanity, it really makes you appreciate being human! I think too, we were talking about the naval power and how that’s shaped us throughout history. Naval power was the predominant aspect of what determined which nation is in geopolitical control, but what I think — and I got this from I book I read called The Next 100 Years — that predicted that in the 21st century it would actually no longer be control of the seas that mattered so much, but it would come to be control of space. And you see that somewhat in US military dominance today in that we control the seas actually with our aircraft carriers, which essentially means we can control the air space of nations. Again back to fighting the battle on the terrain that favors you most: by going into the sky—again this very frictionless space of air — we’re also able to take advantage of the gravity well that is the planet. So we can drop bombs at a very low cost. For a plane to release a bomb is essentially no cost once it’s up there, but it brings us gigantic force to bear on its terrestrial targets! And that’s why it’s in that sense we can consider today being this extension of naval power. It has the highest optionality. It has the greatest, most degrees of freedom both offensively and defensively. It’s really hard to shoot down one of these aircrafts moving at supersonic speed, which gives it a lot of defensive capability, but it also can bring a lot of force to bear really quickly by dropping bombs or shooting missiles. And all of this is facilitated by control of that frictionless space in the sea, which is the aircraft carrier, which itself is very hard to attack because it’s thousands of miles out to sea, it’s just flying these planes in! So that’s why the aircraft carrier today is the dominant military technology. But I think as we get further into the 21st century, if you go even another layer higher say into low-Earth orbit, you can get into a territory that has even more offensive and defensive optionality, and it’s just way harder to attack! It’s literally in orbit! And in the book I referred to, The Next 100 Years, I think they were called ion cannons. So the thought was, whichever country came to get these ion cannons into orbit first would have a power that’s even superordinate to what we consider aircraft carriers to be today. So the space — if you want to call it space, it’s kind of just Earth orbit — is the next frontier for military dominance. I think that will be really interesting to see shake out as we look at the development of history through this lens going forward. And Saylor brought up that book The Moon is a Harsh Mistress that really brought this point home to me, because there were these rebels on the Moon, and they were tired of being tyrannized by Earthlings, so they basically took advantage of their ultimate high ground and just started throwing rocks at Earth! And because it was at the bottom of that gravity well, the Earthlings were forced to capitulate eventually and give into their demands! So it just keeps going back to this principle of holding high ground, holding the best terrain in any confrontation. [51:35] Like the moon, digital space, it is the ultimate high ground! It enables us, even as an individual today with Bitcoin, you can safeguard Billions of dollars of capital, which is life force, by memorizing a 12-word seed phrase. You can move it around the world at the speed of light permissionlessly at virtually zero cost! If you’re talking about moving $1 Billion worth of Bitcoin you can probably move it for from $5-$20. You try to move that same $1 Billion across space in a fiat currency system, you’re gonna spend a lot of time navigating regulations of both the regime you’re sending from and the regime you’re sending to, you’re gonna pay a lot of bank fees, you’re gonna be answering a lot of questions, you’re gonna be probably paying a lot of taxes as well. The number one export of empires is being security! They gatecheck all these movements of value across their domain. And so these rights and abilities that were reserved for the nation states in eras past — where they could move goods and capital — if they’re dominant militarily they could do so pretty much without permission, they could do whatever they want! That same capability is now being delivered to the individual via software! So it’s this radical new worldview that’s shaking out where, because we don’t need an empire to honor — at least the property rights of money with Bitcoin — as far as we can see today, maybe other property rights will follow as well in time. But that is a big slice out of a pie! We also don’t need the nation states to honor the property rights of money, that entire function of trust and security has fallen to distributed software! And it’s hard to even fathom how big of a game changer that really is! And when I think about that a little more, it’s just that these digital high seas, they’re weakening the geographic constraints to being. All of a sudden, you’re not as beholden to the local monopolies and systems, because you can now participate in this global network that has many more degrees of freedom and a much lower need for permissions. You don’t need to check as many boxes and satisfy as many bureaucrats interacting with the digital domain. It really is this much more of a pure free market environment, where the best ideas win if you’re able to serve your customer! By whatever means necessary you can earn a living! My mind goes back to a story of girls in the Middle East that are actually prohibited from holding bank accounts! It’s illegal for women to hold bank accounts in certain countries, so this contributes to their disenfranchisement, because they can’t even earn a living in the home. So women not only are perceived as second-class citizens but in many ways are second-class citizens because they can’t hold a bank account, they can’t contribute to the livelihood of their home, so they’re just forced to stay home and work and do as their told, while the men go out and make a living! But with Bitcoin, some of the women at least were able to find jobs online! Whether it’s copy-editing or anything you could do that was informational. Any job that you could conduct online, which is more and more jobs as we become more advanced. And they were able to be paid and remunerated in Bitcoin! So all of a sudden they just leapfrogged this entire restrictive system that would really prevent them from even increasing their own condition in life. They cannot improve their own conditions because they’re trapped in this cage, but all of a sudden Bitcoin gave them this exit option to just go out into the world and earn a living based on their own skills! So that’s just one example of how the geographic constraints are weakened. And I think we’ll see many more of those coming out. Another thing that comes to mind here is: I’ve analogized Amazon in the past. Amazon came to be a dominant monopoly in the world because they essentially out-competed four digital distribution networks, which are a naturally scarce service for the world. You only need — it has a huge network effect, so there’s big economies of scale and a big advantage to being bigger in that space. And Amazon was able to bootstrap itself in a way by leveraging two things, two benefits of being digital and not being a brick and mortar. Firstly, they were able to offer low prices to their customer because they had lower costs of fulfillment. They didn’t have brick and mortar stores. For a while they were skirting sales tax, so they would distribute from a state that had low to no sales tax, and they were selling it to other states without being deemed for sales tax. So they’re taking advantage of this digital space. And then Two, because in a bookstore you can only fit so many titles. Maybe you can fit only a quarter million books in a store, but the advantage to being online in an online store is that you have literally limitless selection! Anything that is available on Earth, you can sell in your store! So I think that’s one of the reasons Bezos zeroed in on books — Amazon started out as an online book store — is because that is a product where that advantage is super favorable! There are millions of books written, the selection is just endless! They’re a totally non-fungible thing. Every book is different. And I think Bezos started there and used that as his pressure point, because he could leverage not only the sales tax and lack of brick and mortar as we mentioned earlier, but he could also leverage the limitless selection capability of an Internet-based bookstore to really just dethrone a lot of competition. So he could offer it at lower prices and he could offer it at wider selection! So super interesting there! And he was smart enough to leverage the advantages of the digital business model in a really pressure-point focused way! And when I look at tech and Bitcoin through that lens, I see — and Saylor alluded to this as well — the overall trend is that distributed software and encryption is very empowering to the individual! So these things that we used to need large entities to satisfy, because there are a lot of fixed costs that you had to incur to deliver these functions, whether it was a bookstore or whether it was a bank custodying your gold — all of a sudden we could do these things via software at very low fixed cost! It can be replicated at near zero variable cost! So once it’s up and running you can basically do it anywhere net of the actual physical distribution fees! Assuming there are some, right? If it’s software there’s basically no distribution fee either. That’s what the Apple App Store is. And so, it’s interesting to see how that — I’m thinking about this a lot. It’s like, Okay, we needed empires and large entities in the past to provide security, to create this intersubjective fabric of trust in the world so that we could interoperate, but now a lot of these human-based politicized or politicizable institutions are now going into trust-minimized software! Where it’s like, Here are the rules, you can’t bend them or break them! And Bitcoin is just the greatest expression of that! Amazon and stuff like that they still have a political dimension because they’re traditional organizations. They’re essentially under control. But something like Bitcoin is just a pure instance of that: it’s just pure unbendable, unbreakable rules that help you channel energy across time and space, and satisfy wants more efficiently! I think too — and this gets a bit into the Sovereign Individual thesis — we didn’t get into this a lot in the interview but, as people wake up to this truth that we have this ultimate savings technology in cyberspace or this non-state central bank, whatever we want to call it, it’s a medium for permissionlessly storing your wealth in a way to no one can compromise! And you don’t need any government to then acknowledge or honor the property rights you have in Bitcoin. You’ve converted property rights to information! Owning is now knowing! With the increasing incentives to exit inflationary currency — again the book The Sovereign Individual goes really deep into this, but — the numbers are roughly: for every $10,000 you can reduce your tax liability, assuming you can compound that capital at an average return rate of 10%, you’re talking about tens of millions of dollars over the average earner’s lifetime. It becomes at least a multi-million dollar and in many cases tens of millions of dollars decision of holding your money in an inflationary fiat versus holding your money in non-inflationary Bitcoin. So I think as the market wakes up to this and starts to do the calculus, I think you’re just gonna see this overwhelming demand for security from distributed tech — with such secure money as in Bitcoin — and it’s just gonna pull demand out of these anachronistic security models like the nation state and banks and all these other politicized institutions! And you know — wow! It’s just a lot to even think about! It’s hard to even fathom where that goes! The Sovereign Individual predicted social media, they predicted Bitcoin. Another thing they predicted was the actual digitization of security — so other property rights getting eaten by software. And my general thought there is that the government’s not gonna let go of any of this willingly. It’s not like the government ever acknowledged and accepted Bitcoin! Bitcoin just grew up in the wild somewhat flying under the radar long enough to establish itself as something that’s really difficult to take down now. Today I think we’re at $350 Billion market cap of Bitcoin, so it’s a really entrenched monetary network at this point, and it’s exhibited a lot of antifragility! I think as — my theory would be — as Bitcoin continues to ascend and demonetize inflationary government business models, that some of these functions that governments have bureaucratized will just start to fall to free market competitors. There’s just gonna come a point where governments no longer solve enough to keep — one example I like that I heard from Saifedean is — there’s a national train agency in Lebanon, and he made the point that there hasn’t been a track of railroad in Lebanon for 50 years. It’s that old saying that, There’s nothing more permanent than a temporary government solution! So we have all these layers of unnecessary bureaucratic buildup across the world in all the countries! Because they’re not accountable to their PnL! There’s no free market competition keeping them honest! So they get away with these asinine models where they have a train committee but no trains! So I think as those useless or worthless or unaccountable institutions start to shrivel up and die because there’s no funding for them, that you’ll see whatever functions that they provided or were intended to provide start to fall into the free market — I think software is just eating that up! So that is a lot to think about, and it’s something to keep your eye on! I also liked how Saylor dove into this diffusion of technology which is really just another way of saying the diffusion of ideas. And it follows the S-curve. This is—I think it’s The History of Scientific Revolutions — and it talks about this S-curve where there’s a beginning or there’s innovators that adopt it first, and then it hits an inflection point say around 13.5% market penetration, and the innovation starts becoming adopted at a super accelerated rate! So the curve just goes vertical for a while until it’s suffused and saturated the market sufficiently where it starts to level off and you have the laggards sort of adopting it late. And when we look at Bitcoin through that lens, we’re very early in the flat part of the curve. We’re far below 13.5% total adoption! We’re probably more in the range of 1–3% as we sit here in late 2020. And Saylor just makes this great point that those curves are impossible to predict! You never know when it’s going to work! The idea can exist for hundreds of years before it ever gets commercialized! You think back to the Native Americans that had the pottery wheel, but never figured out to turn it on its side and use it as a wagon wheel! The idea was there but no one had harnessed it or commercialized it! But his point is that once it does become commercialized it hits a certain critical mass that it’s very clear to see that you can invest in it now — like we’re almost right before it hits that vertical point and reaches just huge gains as the rest of the world wakes up to the importance and utility of the innovation! And I thought that was great. The other thing — in his book The Virtual Wave, which I read preparing for this — he laid out in 2010 saying Facebook, Apple, Amazon, Netflix, Google — buy these, hold — they’re gonna eat everything! Don’t diversify! Here’s why — going into the network effects and all of this history of scientific revolutions and paradigm shifts. He saw that! And he’s now proclaiming Bitcoin to be a similar pattern of proliferation! It has reached this critical mass! We’re north of $100 Billion market cap! The race has been won, almost, for digital money, and now it’s just a question of how big does digital money become relative to everything else, relative to analog money? If you’re keen to believe the advantages that digital tech has over analog tech, I mean clearly I’m a Bitcoin bull, I would say it eats all of ‘em! It offers so much more utility to the users, and it’s so much more energy efficient! It’s as if: you don’t adopt it — you just get left behind! So there’s this Darwinian propulsion to adopt the hardest money and we can’t get any harder than Bitcoin! It’s 21 Million fixed and forever! And then he brought up too that these things seem crazy at first, like when the Wright brothers finally flew, had their first maiden voyage and figured out how to fly, he made the point that anyone you interviewed up until that time — you could have interviewed the smartest people in the world, they would tell you flat out it’s not possible, mankind will never fly, it just can’t be done! Until it’s done, right? Until a tinkerer figures it out in their garage! Which points to — it’s the tinkerers and not the theoreticians that bring about breakthrough! I feel like some people think that there are geniuses sitting inside of Harvard writing out a bunch of complex formulas that figure out this practical mechanical innovation in the world, and that’s just largely not the case! It’s entrepreneurs putting their skin in the game, failing, failing forward, learning from their mistakes, facing the unknown, adapting to the unknown, trying new things, and then all of a sudden there’s a breakthrough! All of a sudden, the plane flies, the Wright brothers are sky-bound! So that’s what drives humanity forward! It’s this relentless impulse to tinker and play with things, not the intellectuals sitting in their ivory towers theorizing. And he brought up too that John Harrison — no one could figure out longitude! It was easy to figure out lattitude, but no one could figure out longitude. And how did they solve it? They put a reward in the paper! It was a £10,000 reward: anyone that could solve this, how to calculate longitude, we’ll give you a financial reward! So what did they do? They went to the free market! They incentivized the collective intelligence of humanity—as best they could — through the newspaper at the time, and this guy John Harrison the clock maker comes out of the woodwork and figures out, Hey! I can solve this spatial problem which is the calculation of longitude at sea, with a temporal answer! He’s a clock maker, right? So he makes this super-precise clock, which is just kind of out of the blue! Like, had he been a theoretician, he would’ve just sat there and tried to figure out how to calculate space and observational things, but this guy took a 180 and he solved a spatial problem with a temporal solution. And that’s the kind of problem-solving you get out of the free market that you just won’t get out of legislated innovation or think tanks or things like this! So the point there I think is: you can’t push water! Innovation is something that emerges naturally through us — our creative impulse! You can’t force it! You can’t yell at your garden to grow faster, right? It needs to go through its own natural process of discovery to get the best ideas to the surface! And the only thing we can hope to do in our socioeconomic systems is to incentivize that, right? They gave, they put a reward in the paper for this! That’s what the free market is! Just go into the world: you have the liberty to do pretty much anything you want as long as you don’t hurt anyone, kill anyone, or steal from anyone — these are the actual pillars of free market capitalism! And make bets! Invest your time, energy, and capital onto things you think — onto solving problems you think the market wants solved! And you think you have a unique way to do it! And by betting against one another, we develop better, faster, and cheaper ways of doing things! We incentivize this ideation process that rewards humanity forever in the form of innovation! And I like to say there that it’s the tinkering entrepreneurs — there’s nothing more problematic to problems than tinkering entrepreneurs! If we want to solve problems, we need to harness our collective ingenuity, and we do that through free market capitalism and tinkering, not through legislation! Finally, we got into war. We talked about it as an accelerant to innovation. My thought there is pretty simple. It’s just that: war pushes you into a domain of high uncertainty where the relevance of everything becomes accentuated, because you don’t know what’s gonna happen next, you don’t know maybe how much food you need to save, or money, or what kind of money, or weapons, or where you need to be — everything becomes much more relevant when you’re in unexplored territory, so to speak. And that — and they say, Necessity is the mother of all invention — it’s like, all of a sudden, you’re pushed by your survival instinct to necessarily figure out all your now very relevant surroundings very quickly. So it accelerates that S-curve adoption, or it accelerates these ideas that may have been idle for some time! All of a sudden there’s a big impetus to figure it out. And that’s what’s going on right now in 2020. We have a war on cash, we have a war on COVID, everyone’s strapped into seclusion, a lot of people are out of work, inflation is right around the corner, so everyone’s been pushed to figure things out and I love that Saylor paints that picture of the war on COVID being an accelerant to Bitcoin and to digital technologies more generally! And finally, I love this quote that he references from Arthur C. Clarke that, Any sufficiently advanced technology is indistinguishable from magic! All of these modern miracles that we take for granted, they’re all generated from free markets, and if you pull a primitive man out of the Stone Age and brought him here into 2020, he would just be flabbergasted! All of this stuff just looks like magic: this camera, this laptop. And that’s why Bitcoin is so misunderstood — consider the joke, right? Magic Internet Money! It’s disparaged like that! But what I think it actually is is that it is this radically more innovative and advanced technology that people are just trying to get their head around! And also there in the long run and the great promise of it is to help us make even more magic in the free market! To create even more advanced technologies by eliminating the barriers to trade! Again, tinkerers operating freely in the open marketplace is where we discover all the new and useful things that make life easier and better! And we’ve honored that paradigm to some extent — especially in Western civilization — but we’ve erected these artificial barriers to it with fiat currency and central banking and overly complex tax codes, convoluted laws — all these things are frictions to free trade! So Bitcoin by defunding these inefficient institutions, it’s eroding these barriers to free trade, and therefore bolstering the innovation generated by free markets! So in that sense I think Bitcoin not only is a magic internet money, but it’s going to make the world much more magical in the long run! I hope you guys enjoyed that! That was Episode 3 with Michael Saylor. We’ve probably got 10 episodes total, so we’ll be back soon with the next one. Until then, take care!

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store