#547: Balaji Srinivasan on Bitcoin, The Great Awokening, Wolf Warrior Diplomacy, Open-Source Ecology, Reputational Civil War, Creating New Cities, and Options for Becoming a Sane but Sovereign Individual

Tim Ferriss: we have an important preface. An important caveat, an important disclaimer before we get started. And here it is provided from my lovely lawyers. Here we go, I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or in Bitcoin or cryptocurrencies or in anything, none of the information presented today or really any time since you might be listening to this, anytime is intended to form the basis for any offer or recommendation or have any regard to the investment objectives, financial situation or needs of any specific person that includes you. My dear listener. So everything you're going to hear is for informational entertainment purposes only. And with that said please enjoy Yeah, hello boys and girls. Ladies and gentlemen, this is tim Ferriss. Welcome to another episode of the tim Ferriss show. My guest today is a repeat guest. His first episode on the podcast roughly a year ago was one of the most popular of the last year. His name is Balaji S Srinivasan who is biology. Well on twitter you can find them at Biology S. That's B A L A J I. S. He is an angel investor and entrepreneur, formerly the CTO of coin base and general partner at Andreessen Horowitz. He was also the co founder of earn dot com which was acquired by coin based council which was acquired by myriad teleport which was acquired by Topia and coin center. He has been named to the M. I. T. Technology reviews innovators under 35. He's one a Wall Street Journal Innovation award and holds a B. S. M. S. PhD in Electrical engineering and an M. S. And chemical engineering. All from Stanford University. Biology also teaches the occasional class at Stanford, including an online book in 2013, which reached a mere 250,000 plus students worldwide. The mirror is a joke. Obviously that is a large number to learn more about. Apologies. Most recent project. Sign up at 17:29.com. That's 1/729.com. A newsletter that pays you, They're giving out Bitcoin btc each day for completing tasks and tutorials subscribers also receive chapters from Biology's free book, the Network State and I highly encourage you to check out tim dot blog slash B. Two, the letter B. And two for show notes in time stamps for this episode feel free to jump around. It is an extensive and wide ranging and long episode. In the very beginning, we dig into Afghanistan and its importance that lasts for the first, I would say 5 to 6 minutes and feel free. Also, if you want to listen, a dizzy to just listen. Listen, listen. If a subject is not of interest to you, chances are within a few minutes we move on to a new topic and we cover a lot of ground to hear our first conversation. You can check out tim dot blog slash biology. Please enjoy this very, very wide ranging conversation with Balaji s srinivasan. Yeah.

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Balaji Srinivasan: I can run flat out for a half mile

Tim Ferriss: before my hands start shaking. Can I

Balaji Srinivasan: ask you a personal question nowhere to sit in it. What if I did

Tim Ferriss: the album? I'm a

Balaji Srinivasan: cybernetic organism living this year

spk_2: over metal and discovered

Tim Ferriss: I need his paris research

Balaji Srinivasan: goal. No apology.

Tim Ferriss: Welcome back sir. It was good to see you last we spoke. It was Q1 2021. It is now Q. Four 2021 late October.

Tim Ferriss: And I'd like to ask you where should we begin?

Balaji Srinivasan: Well I thought we might begin with some premises, some of which were sort of predictions in the last pod one in particular was I think I had mentioned that COVID-19. I thought of it as a military defeat for the US and the reason I thought of it as such as because Located billions of dollars have been allocated for biodefense over a span of about 20 years since the Anthrax episode in 2001. And during SARS and Ebola, all of these scares happened. And so In the US in 2018 announced they had a national biodefense policy that was supposed to combat man made and natural threats. And so there's an expectation that of the WmDS nuclear biological and chemical that the U. S. Military would have some trick up its sleeve. Just like out of the movies where hard men would come in in America's time of need and step in with some magic thing and that totally didn't happen. And when that didn't happen, that's why I said, you know, Covid 19 was a military defeat. Even if it wasn't being presented that way to the american public, a big piece of the military industrial complex or the military, whatever you wanna call it, it was like cardboard. It was like a potemkin village, kind of just fell over with a push and people kind of argued with me about this and they said, no, no, no. You know, because it was right on the border of what you'd think of as military or not since most of folks who have been talked about publicly where the CDC and the FDA and the civilian agencies, but certainly billions have been allocated for biodefense. It was borderline, you could argue it wasn't military, you could argue I was off base. The military is actually highly competent. But then one thing that happened six months ish later after our podcast was the whole Afghanistan thing. And so now you had something where the military had 20 years and $2 trillion dollars and total air superiority and total surveillance and the local government that they had set up and a military that they had trained, local military, they had trained in hand picked and equipped and even a timeline that they had negotiated with the taliban which had for the most part of their two in terms of its terms, it hadn't like fired on american troops during that process. I think that adhere to its side of it. Those are advantages that you normally don't get in a military conflict folks with that level of vengeance, like a huge handicap in golf and you know that saying right with military things, amateurs talk tactics professionals, talk logistics and the withdrawal should these military is no longer really that amazing at logistics. Also the president and the secretary of state Blinken said something like the collapse won't happen from a friday to monday. It basically did. It was like a monday to a Wednesday or something that I forget the exact dates but it happened just over a few days. And you know, biden says it's not going to be a scene that's like the helicopter evacuation in Vietnam. And there was. And the thing is that I'm not by the way saying it's not a political comment really. It's basically about the decline of state capacity over the last 20 or 30 years. In many ways in 1991 The US was the hyperpower after the collapse of the Soviet Union. It was a hyper powers. The French put it that could win everywhere without fighting. And in many ways the combination administrations over the last 30 ish years have blown maybe the biggest lead in human history now. It rather than winning everywhere without fighting, it fights everywhere without winning. So the Afghanistan thing I think was sort of I hate to call it a vindication because it's a very unfortunate thing, especially for the Afghans are now subject this medieval regime. But I think that that is something which also has important ripple effects kind of flips over a card and you kind of think there's something that's 70% probably and then it goes to 100% probably anything about what the consequences of that are. So that's like one quote prediction or something that came true or piece of a world model that was vindicated.

Balaji Srinivasan: Let me pause there. Get your thoughts.

Tim Ferriss: I have no thoughts to share. Please continue.

Balaji Srinivasan: Okay, okay. All right. So I will just kind of download content and then pause and then you, you know, jump in. Okay.

Tim Ferriss: And you will be met mostly with silence or I'm not familiar if my if my last performance is any indication, but I appreciate the pause is yes. I can also sense around video. I can raise my hand like a student and then request pause, but yes, please proceed.

Balaji Srinivasan: Okay. Okay, great. So one thing that as a meta comment that I want to do is sort of a invite, pauses certainly be enumerate my premises and sort of open source my thinking so that people can understand where I'm coming from and if I open search my premises and my logic comes from those premises and you can at least isolate if you think I'm off base, I mean the wrong of the premises or the logic at least we start to decouple the two. So how do I build my model? Well what's rising? What's up technology which is drones and biomedicine and robotics and ai and and so on. And particularly Cryptocurrency which is the new back end of all of software as it was will come to the technology, Cryptocurrency, China and India tech in Asia are up into the right on many different kinds of drafts. Those are those are words but that captures the phenomenon of literally billions of people every day moving up into the right whether it's global trade or its number of smartphones or it is the number of people do encrypted currencies or the progress of all that is often to the right and then what is falling is the west as a percent of GDP if you make a graph of the U.

Balaji Srinivasan: S. And the U. S. Percent of global GDP that's been dropping basically for the last 40 years. Whereas India and china's share in particular has been rising you know actually as of 2019 Mckinsey had a report on this but ASIA was more than 50% of GDP I believe By 2019 on certainly p. p. p terms and I think it's going to pass for has already passed soon. p. p. p. Is

Tim Ferriss: what pricing power parody who's that stanford

Balaji Srinivasan: purchase power parity. It's basically like purchase power

Tim Ferriss: parity.

Balaji Srinivasan: Yeah that's what I believe it is. It is it's sort of what can the dollar by their what can your renminbi by there in terms of number of Big Macs. They have an adjustment for that because some of the Production costs are less than $10,000 goes a longer way in some of these countries. So Asia isn't really the future, it's present. So what's falling a the West is a percentage of GDP. There's a graph by visual capitalist, the US share of the world economy that shows it in sort of absolute terms. And then you can kind of calculate the 0 to 100% terms. So West percentage of GDP, the U. S. Military strength as we just discussed and that some very important topic to discuss further Internal us cohesion and also just the European percentage of the world. It was much higher in the early 1900s and now it's like on the order of 10% and so just the percentage of the world. And so if the West is declining a percentage of GDP in terms of its relative military strength, in terms of internal cohesion and in terms of just raw percentage of the world, yet all of these institutions that were set up years ago kind of assume Western predominance for example like the United Nations is the US the UK France Russia and china. I know it's only four out of five. So it's a small account but that's 80% Western or at least european. If you think of Russia as a european country, you can argue that whereas there's no India, there's no brasil, there's no Japan and you can argue whether that actually reflects the world as it is, certainly probably India should be there rather than France, you might say India should be there rather than the UK and you should be there rather than France or something like that. Go ahead.

Tim Ferriss: Alright. I raised my hand for those who can't see me, I like this approach. This is a good approach, Professor of Biology. I have a question sir and that that is related to the up into the right with respect to technology and let's just take china as an example but we can grab both china and India

Balaji Srinivasan: because we discuss

Tim Ferriss: India last time as a dark horse of sorts. Yes. And a lot has happened with respect to Cryptocurrency in china since we last recorded also and I'm wondering how that factors in in your mind to the up and to the right with respect to technology and Bitcoin or Cryptocurrency or Blockchain more broadly speaking within china and say India, does it mean that the best entrepreneurs or many of the best entrepreneurs simply get scattered to the wind, to places like Singapore and elsewhere

Balaji Srinivasan: from

Tim Ferriss: china. What are the implications and what are your thoughts overall?

Balaji Srinivasan: So a lot has happened this year in chinese american and indian crypto. So just to discuss that when we were talking a chinese interference with the Bitcoin network was something that was TBD it hasn't actually happened yet with chinese crypto. What we discussed was that they might pursue the state. Chinese state might for example, blocked at the firewall level but allow my continue, which would mean like sort of a peekaboo problem where the chinese chain gets extended, but so is the rest of the world and so on. And that would be bad. But what I also said was that's like in some ways the worst case scenario, it's actually better and perhaps more probable that they would just banned mining entirely or go after that and they're the one state in the world that is ruthless enough and has a low enough disregard for civil liberties and you know, contract law and all of that type of stuff for them to to just be able to do that. And that is what they did, meaning they just went after they said get out of china. And so if you go to Blockchain dot com from charts from slash hash rate and go to the all time chart and look at kind of the period from May to july issue of 2021 you'll see it dropped from about 180 tera. Hashes per second to about 80 to 90 tera. Hashes per second. And what is a, what is the terror hash that's 10 to the 12th. Hashes per second meaning 10 to 12th attempts to solve the inequality that allows you to mine a new block of Bitcoin. So it's kind of a measure of the computational speed of the Bitcoin network and the higher that is the more secure the network because um the harder it is to falsify history,

Tim Ferriss: quick interjection, why did china do this?

Balaji Srinivasan: And

Tim Ferriss: there may be a headline press release equivalent and then there may be some degree of speculation or informed opinion. I would just like to know kind of both.

Balaji Srinivasan: I think the fundamental thing is and we can drill into this china is the exception to the sovereign individual thesis India by the way might be the partial exception but china is the exception to the sovereign individual thesis where they want route over everything if it's not made in china, they look at it with suspicion and it's funny, you know, made in china, it's sort of a play on words if it's not, they look at it with suspicion and that's why actually they were very early on things like the great firewall or social media bands. Many years before politicians were getting deep platform from twitter Z Jinping denied facebook's attempt to come into china and instead basically they set up parallel social networks that could operate within china but which the chinese state had root access to. They've articulated this actually explicitly. It's an interesting concept and I think it's at least they've got some philosophical basis for it, which is the doctrine of internet sovereignty. That's to say if a nation state is allowed to introduce the physical packets crossing its border, then it should be able to introduce any internet packets crossing its border and they're doing like customs for that. That's how they justify the great firewall. By the way. There's actually, there's an article is sort of making the rounds that folks who are listening to this probably should read on wang hu ning. Did you see this article?

Tim Ferriss: I did not. How do you spell that name?

Balaji Srinivasan: W A N G H U N I N G. So the triumphant terror of wang hu ning at palladium ag dot com. And this whole site is actually really good, but was great about this article is first of all reading this year like, okay, the depth of this is just the I. Q level is frankly much higher than what you're accustomed to seeing in mainstream media because it just doesn't come from the same set of trite premises and rehash things that we usually see. So I think it's informative and the whole site is actually really good, but basically what this article is about is a guy wang hu ning who has been there over three chinese administrations, I think jang who's and geez, which is unusual,

Tim Ferriss: meaning he's worked in the government

Balaji Srinivasan: in the government and senior most senior levels, the seven man standing committee and at least what the article says is he's china's top ideological theorist. And to be consistent across those three administrations, it's sort of like being a rough analogy would be like robert Gates, who is sec def under, I believe both. Was he under both Bush and Obama? I think so. Right. Yes, he was appointed under both Bush. About which is unusual. Usually political appointees get fired by the, you know, they're appointed by Republican, the affair, the new regime democrat. Yeah, exactly, and vice versa. So sort of like that and he's been there for a while. The reason I just bring this article up is you can sort of get a sense of how much they have been conscious about the need for state control because they saw the fall of the USSR, they saw the US move in after that they saw that Russia actually didn't do that well, they saw the loss of control. They've always been about control. And what's interesting is there's been a tension between total state control and of course capitalism, which is decentralization of control. And one thing that is true, I think is a constant across these three eras of china. So the mao era was revolutionary communism, then Deng jang and who was internationalist capitalism and now I think it's fair to say under under c Jinping is it's now pretty clear that it's a Nationalist socialism militarism and economics is no longer first it is there, but they're reasserting group control but from the nationalist right rather than the communist left in some ways. And so the reason I think that's important is it's a genuine change in the same way that you can argue the U. S. Had a genuine change in culture over the last seven or eight years, call it the great awakening. Which is what matters. Is this article at Vox kind of dubbed the whole thing and you can sort of see this religious fervor taking over the country. All these graphs up into the right of various words in kind of the same way china for a long time. Had this keep your head down policy where they didn't like a lot of things that West was telling them, but they sort of gritted their teeth and demand the factories and they tolerate the humiliation of having their embassy in belgrade blown up by a stray bomb and just being like oh are bad, you know that type of stuff, they didn't have the power to protest on the world stage. They're just like you know what, just suck it up and we'll just continue trading for a while. But with G that is no longer the case. They are, have you heard this term wolf warrior diplomacy,

Tim Ferriss: Wolf warrior diplomacy? I have not if I'm hearing that correctly.

Balaji Srinivasan: Yeah, both four year.

Tim Ferriss: I like the sound of it but maybe I shouldn't, I'll wait until you define it for me

Balaji Srinivasan: this is not deep china analysis or anything like that. And I basically consider myself I think reasonably informed in china but certainly there's folks who speak fluent chinese it's like a logarithmic scale. There's folks who know 10 X. 100 X. As much as I know in china. So wolf warrior diplomacy would refers to is There's a movie called Wolf Warrior two which was china's number one movie I think in 2017 it's worth watching and the reason is worth watching is it's sort of surreal. It is american filmmaking techniques of the Rambo rocky variety of the mid eighties applied to a masculine chinese speaking hero where the chinese are basically cast in the role of the U. S. A. And the USa is cast in the role of the USSR Yeah so it is kind of like a rotation where you realize what aspects of filmmaking are constant and what are highly variable. Just the number one movie in the world is right now is our time speaking. I do not,

Tim Ferriss: I learn so much when we have our conversations.

Balaji Srinivasan: I yeah so frozen frozen five. No no it's well so that thing it's a it's a battle of lake change in Chinese language movie. Here's the thing it tells you a few things first is china's in person. Movie market is massive and it is able to do number one in the world and I think it just crossed like a billion dollars in box office number two. But the movie depicts is basically the defeat of the U. S. Military in the korean war by the chinese military. So that's where their head is. That they are making massive blockbuster epics with all the Hollywood techniques about the chinese military winning and the americans losing. And moreover where you can get canceled for in china is insufficient nationalism. As somebody once said you know like the west today for an ambitious young person. They would articulate a desire to quote change the world but in china it is served the motherland.

Tim Ferriss: Yeah it's different. It's Tara may I interject for a second, I just want to say that lest listeners get too judgmental about what they're hearing the U. S. Has done what we're describing or I should say us entertainment certainly has done what we're describing for a very very long time. So this isn't unique to china. It just I think indicates it's what is to come right. It's a harbinger and it's also a gauge of public sentiment public sentiment meaning chinese sentiment on a certain level.

Balaji Srinivasan: Yes

Tim Ferriss: and I find that deeply interesting. Also what I find interesting from a entertainment media perspective is as an example I just went to see the new bond. It was my first time in a real movie theater seeing a film since Covid

Balaji Srinivasan: and

Tim Ferriss: there were many different trailers. Most of the movies had at least one chinese lead actor or actress. And that is very deliberate because they need chinese eyes, they need that and so that's another chess piece on the table. It's more like backgammon then chess probably it's not a game of complete information but you get the idea. So I just wanted to just note that because I do think these are trends that are going to become more intensified over time.

Balaji Srinivasan: This is startup analogy. But Microsoft Made I believe $150 million Facebook in 2007 as part of a way to keep it from Google. And they did. So the super high valuation basically playing game of Thrones when Facebook was a still startup that was actually maybe bombers best decision in some ways. But what that did was that thing grew and grew and grew until facebook is now it's not extremely hostile to Microsoft but it is certainly appear to Microsoft. It is up there, it has grown into a redwood tree of its own. It is also like a roughly a trillion dollar company. It's the youngest of the big five google apple amazon Microsoft facebook. And in sort of the same way what the US did was it made a startup investment in china when Nixon went to china because U. S. S. R. Was the number one rival at that time. And they just executed phenomenally well over the last 35-40 years. And now they have the market size the internal market size to be the number one movie market in the world. And they dictate terms now Winners write history, winners film history and they are writing history where there are the winners and they're the good guys. And the thing is the airbrushing is super obvious when it's somebody else's propaganda. For example, you know in this movie which is worth watching by the way, it's hard to kind of see you know you have to get like a streamer out of china or something like that. And by the way, Wolf Warrior

Tim Ferriss: or the other

Balaji Srinivasan: wolf or I think you can just download on Itunes. But the battle of Lake Jiang Jin is not that easy to see right now. One of the things about it is this itself is a change where china used to be super freewheeling on I. P. The new Z. Jinping regime is not free wheeling on I. P. It's hard to get that. It's basically almost as hard as it is to get an american movie on the internet you have to kind of actually try. It's not just widely accessible DVD on the street kind of thing. And some people think this is similar to the whole shang Yang school. Are you familiar with that legalism? No. Okay so again I'm not a student of chinese philosophy and so on. I just I know some but basically there's a philosopher named shang yang who is well known for as an expert of legalism legalism, we would call it super harsh. One of his sayings that if roughly paraphrased if I'm getting this right is if there are harsh punishments, there will be no punishments meaning. If you articulate what the law is and you ruthlessly enforce it, then people won't actually go near the border and so on. And there's like another thing after one year people would not pick up items left lying in the street nor would they take anything that was not their property. The army had grown strong and the feudal lords lived in fear. What is the source of that? Oh that's like from Shang Yang's biography. So the point being is easy Jinping he was working and all this stuff since the beginning but the tipping point only came near the end of his first term sort of like how the great of opening was also happening in the us and just kind of went exponential in 2020 2021 china has changed. It is now a different thing than what you and I grew up with which was the internationalist capitalism of the Deng jiang and hu era hide your strength and bide your time I think was like the official philosophy and make plastic except for the west have them call us uncreative, have them depict us as emasculated on tv just assemble iphones grit our teeth, tolerate the pollution breed the bad air blah blah blah and then work our way up. That's kind of the mentality and now they're standing,

Tim Ferriss: Just add one thing to that which is when I was in Beijing, I lived in Beijing in 1996, I went to two universities there and the most popular book at the time and this is very understandable for a lot of reasons. This is not the fault anyone but the most popular book at the time which was stacked, it was widely counterfeited but also bought legitimately stacked everywhere. You could see it in the streets in front of stores, it was called china can say no, I think it was jungle clich wah boo and it was china can say no and there was this deep sense of I think warranted deep sense of being disrespected on a lot of levels from a geopolitical perspective

Balaji Srinivasan: and

Tim Ferriss: that is not new, that is not new and it's just taken a while for them to play the game so well that they are now in a position to execute extremely well on multiple fronts.

Balaji Srinivasan: That's right now the thing is interesting is if I recall that was modeled on the Japan that can say no, but there is a difference, some people will basically say oh you know people talk about the rise of Japan in the 19 eighties and why won't the rise of china turned out the same way there's a huge difference by the way between china and Japan which is that Japan is literally occupied by the US military, huge difference, huge difference. You just basically wrote Japan's operating system and constitution after World War Two and they have literally a military base there. And I think in a real sense they are a independently operated US subsidiary. The purpose of NATO was keep the americans in the Germans down and the Russians out.

Tim Ferriss: I haven't but I can imagine may I also just pull us back to an initial query for those people who are wondering, well the some of the punch lines are so with respect and then we can come back to all of this. So just bookmark for a sec when we look at the chinese government's decisions with respect to Bitcoin mining and perhaps Cryptocurrency more broadly speaking, what are the sort of first order second order third order effects of that? Some of which may have already been seen, but what has happened and what do you expect will happen as a result of that? And we can look at what that means within china and outside of china or however you want to approach it,

Balaji Srinivasan: what they've done is setting up the decade and maybe the century. I don't think people realize how important some of the stuff is think about, you know, for example their social media ban, how important is that today versus how important was it seemed to be at the time. A huge, huge right that was a branch in history. So basically china wants to maintain route And because they want to maintain route I think they're going to have significant short and perhaps even medium-term advantages. But in the very long run like 2030, 40 years I think the century lines up as centralized china versus a decentralized world or a centralized universal decentralized west. And I actually think India maybe actually a big component of that and that's where I think things landed by like 2040 ish or so. But it's really hard to say because time compresses in the internet era and just to kind of drill into that let me give sort of a sci fi scenario here, this is sci fi scenario, you know like when you do a simulation and it's like okay all the molecules kind of moving this path but they can move in other paths. So I don't assign super high probability this but let's call it a scenario, I don't assign zero probability to it. Chinese control. American anarchy, indian intermediate.

Balaji Srinivasan: So basically coming back to things that we kicked it off with which is the U. S. Military basically just got defeated by covid and in Afghanistan. So obviously the immediate question is will they lose versus china and in particular will they lose? What will happen with Taiwan? Now there's sort of the first order of response which is oh Taiwan in Afghanistan totally different. Taiwan is obviously a first world country and it's an independent nation and has its own just share a military and a long history of operating independently and civil society and blah blah blah. Whereas Afghanistan obviously was that was a fixer upper at best and has a long history of civil war and it was very difficult. So of course they're totally totally different but they're not because there's certain things that are the same and one of the things that is very much shared between the two thing is America's willingness to fight because the withdrawal from Afghanistan was based on a reluctance to pursue quote unquote forever wars. And a thing where the american consensus on the right is isolationist, like why are we helping these folks out by fighting their wars for them? And on the left is also isolationist, which is why are we harming these folks by bombing them? We should pull back while the stance is perhaps different. And I actually I can see reasonable things on both without litigating the percentage on each the some forces withdrawal. And so it is from Taiwan's view questionable as to whether the U. S. Would fight and here's the problem worse get fought when things are questionable. And the shang Yang said is if the punishments are certain there will be no punishments. Wars happen when there's a miscalculation for example, I believe Saddam Hussein invaded kuwait in 90 91 because he thought he had gotten the go ahead from april Glaspie at that time. Who was the U. S. Ambassador basically? It's like you know 1991 the soviet union was falling and so on. New world order. Let me settle scores. There's a transcript, there's different transcripts. One of them was we have no opinion on your arab conflict that you dispute with kuwait. The kuwait issue is not a socialist America secretary direct baker is directly to emphasize this. And so the thing about this is I'm not a scholar of this particular issue and she may have gotten a bum rap on this or what have you but people thought that she had given unclear instructions to Saddam. Now first of all what's interesting is like the U. S. Have basic greenlighted invasion is interesting in its own right right like that it could happen versus not but that's what being leviathan means if you're the guarantee of order, the Soviets allowed the north Koreans to go and invade the south. The north Koreans were looking for the nod to go ahead from their patron to be able to do that. And similarly the U. S. Has actually been working with Iraq during the Iraq Iran war because they were against Iran and they thought Iraq was a good way to put a thumb in the eye of the Iranians who had done the hostage crisis and so that was you've seen the whole video would Saddam shaking hands with Rumsfeld for many years ago. Right?

Tim Ferriss: How does this italian to

Balaji Srinivasan: china coming back at the sec. So the thing is that that kind of uncertainty is what causes worse

Tim Ferriss: or provides fertile ground for worse, depending on how it's planned. Right?

Balaji Srinivasan: Yeah. Because it's not like invincible U. S. Military solid commitment to Taiwan. All right, we're not going to start a fight. It is will they, won't they? You're now decision treating it out. It is uncertain for everybody involved. It's uncertain for Taiwan, it's uncertain for china. You have many scenarios. One scenario which I think is underestimated is china speaks the language, they have lots of people cross border, they have total focus on this. You should pick him once is like so one possibility is they try to force a gun to the head referendum where they try to get kmt the Pan Blue Party to just vote for reunification with china. And that's something where there'd be an obvious gun to the head, but it be like a peaceful anschluss like you know, Germany and Austria, right? Like they vote for it. Another possibility, of course, is an actual military conflict where maybe the U. S. Just doesn't even intervene. Maybe it does and then there's like a shooting war and we don't know what happens after that, but I think it's quite likely that the U. S. Loses now why do I think it's likely the U. S. Loses A couple of books. I'll recommend there's the kill chain by Christian Brose who was formerly very senior on the Senate Armed Services Committee saw the entire $700 billion dollar defense budget including the classified parts. And he has a quote in there which is over the past decade in U. S. War games against china. The United States has a nearly perfect record. We have lost almost every single time. And he says this is well known in the Department of Defense but the american public doesn't know this and Congress doesn't know this. And he actually goes on in the first chapter to outline a scenario where china basically pursues an asymmetric strategy against the U. S. Uses area denial weapons forced the U. S. Navy to be way off shore while it's invading Taiwan and it can't get the reinforcements over there over this huge ocean. They're all blown up and or forced back and basically thinks china would win. So that's a non fiction book. There's also another book that came out this year called 2034 kills anything came out last year, 2034 which is co authored by former U. S. Marine who's you know on the grounds Guy Elliot Ackerman and another guy James Stavridis who I believe was the former NATO commander that also essentially talks about a serious chinese effort on our conflict with china rather in the south china sea where the U. S. Does not definitively when in fact they almost portrayed the U. S. Has this old battleship that's getting its butt kicked by the chinese and it goes to two nuclear very quickly. Okay that's in their scenario, you don't want to spoil it. But India intervenes at the end kind of play mediator in a sense.

Tim Ferriss: Just a quick thanks to one of our sponsors and we'll be right back to the show.

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Tim Ferriss: If we have hypothetically centralized china, the centralist world and India is some type of intermediary

Balaji Srinivasan: or

Tim Ferriss: very large and compelling nation state at the very least. Let's just, we're on parody with the china discussion on some level, what has happened in India since we last spoke with respect to crypto.

Balaji Srinivasan: And where

Tim Ferriss: do you think it's going?

Balaji Srinivasan: The good news is that I may have actually influenced this on the margins India had been floating or there's folks in India rather have been floating like a crypto ban in january thereabouts. I wrote three articles on this and the indian crypto community, the web three community really got out there and now near Mamacita Ramen who's the finance Minister of India like the equivalent of the Treasury Secretary. It's actually quite smart and has made good comments on this in public. And, moreover with the deliberation, she said, this is not going to be a ban is going to be regulation of some kind. And over the last nine months indian crypto is just absolutely exploded. There's coin switch slash Uber and a there's a bunch of these exchanges, I won't remember all of them. They've all just gone vertical with the rise of Cryptocurrency this year and there's multiple India crypto unicorns and indians are a huge part of the global crypto community And in the meantime China has basically forced mining outside and it's basically done with their new bill. It's almost like pushing a guy until he's just almost off the cliff. They essentially have in 2017 they pushed pretty hard to stop much retail trading activity happening within china and so hence like finance kind of left the country and will be and okay coin research force overseas but otc was sort of allowed or kind of winked at now they're kind of going after otc, they're going after mining. What does otc

Tim Ferriss: mean in this context over the counter. But what does that mean in this context?

Balaji Srinivasan: One version of trading Cryptocurrency is you go to a website, you click a button, you buy Cryptocurrency, there's a user interface and so on and otc trade is like a big block trade where you call somebody on the phone, you're like, I want to buy a million dollars of Bitcoin and the thing is them as a seller and you as a buyer actually have an incentive, see if they try and sell a million bucks a Bitcoin, They might move the price. You try to buy a million bucks a Bitcoin? You might move the price up and so you both sort of settle on a mid market price and you do the trade real quick because you don't know if you will go up or down so that was kind of allowed but they're cracking down on that too now what they haven't done and you can read this bill, it's posted on their websites. A long thing that bill it's like an announcement rather what they haven't done is haven't criminalized holding. They have

Tim Ferriss: that in english.

Balaji Srinivasan: Yeah it is in chinese

Tim Ferriss: chinese is a little rusty.

Balaji Srinivasan: I heard you say something in chinese just now so I thought it's like you could probably use

Tim Ferriss: google translate possibly to translate the page.

Balaji Srinivasan: Yeah that's what I did and basically the people's bank of china statement on cryptocurrencies posted on the website. It's at and this is super long U. R. L. But you if you google. Yeah it's like notice on further preventing and disposing of the risk of hype and virtual currency trading. That's the english translation via google translate and have a tweet on this but basically they've kind of done everything up to criminalizing holding. So they haven't criminalized holding you can still hold,

Tim Ferriss: let me ask you a dumb question where do you purchase your holdings or is it just pre existing holders of crypto who are now a legacy to in some how how does it work?

Balaji Srinivasan: Yeah, it's kind of like that? It's unclear. One of things about china, you know, a friend of mine over there said it's like in the U. S. There is rule of law where you have written laws and it's supposed to constrain the state and you can kind of operate with those. Whereas there it's often more like guidelines in a negotiation which is actually more like interact with the regulatory state in the US where it's like a moving boundary and they will basically do what they want. It's not something where the laws are meant to be binding on the government in the same way we don't know exactly how it's going to be enforced but it definitely signals a step up. And the way you can see that is actions speak louder than words and that drop in the hash rate is actually a remarkable drop Now importantly, by the way it came all the way, I should say all the way back up but it came back up to like 150 tera hashes. So even the chinese government going after Bitcoin mining, it slowed down transactions a little bit for a few weeks but not really all of it.

Tim Ferriss: How much of that do you attribute to new mining operations elsewhere? Places where you can get cheap energy where they would expect friendlier regulation or lack of regulation versus just the vertical climb of popularity in Bitcoin and Cryptocurrency, what do you attribute that regaining of hash rate?

Balaji Srinivasan: So I don't know the exact breakdown, one could say that there's folks who are looking at this every day, which I haven't been doing for a while. But Bitcoin mining is now actually understood to be something which is a component of the energy grid because in a sense, just like when you say a document, it's both a paper document and it's a digital thing, we use the term interchangeably now. So in a sense, Bitcoin mining is now like a money battery because on the power grid you can't store power that easily. You have to start instantaneously generated as being consumed and every flick of a light switch and so on to serve in this model of this galaxy inn where all these small events, you can't predict whether you're going to flick the light switch on or not, but you can have sort of demand prediction and it kind of goes up and down. You generate the power in proportion to that. The problem is that if you've got source of power that are themselves variable like renewables for example, is the sun shining or not, is a wind blowing or not Now you've got volatility on both sides and it's hard to match that up and Bitcoin mining actually comes in there because it's a load that you can put basically in any location and dial it all the way up And rather than trying to store that energy in a battery, you quote store it as money by mining. Bitcoin and depending on the economics it may be better to do that. And then with that Btc by energy later then to actually store it in a conventional battery.

Tim Ferriss: That's super interesting. Super interesting. Yeah.

Balaji Srinivasan: This is an important thing that is happening now. Actually. Ted Cruz of all people actually give a talk on this. So it's starting to filter out into politicians.

Tim Ferriss: Wait, Ted Cruz gave a talk on this subject.

Balaji Srinivasan: Yes, just a

Tim Ferriss: few weeks, wow, that's unexpected. All right.

Balaji Srinivasan: That's the thing is this is becoming a big thing within natural gas and so on because the flaring problem looks like this dystopian blast of flame into the air when you have a like stranded gas that gets addressed with this.

Tim Ferriss: So was he speaking within the confines of the state of texas or was it more broadly

Balaji Srinivasan: applied? It is much more broadly applied. And this is something which I'm not an expert in this area, but google like Bitcoin, mining, oil and gas and you will be able to read about this. It's not just oil and gas and also renewables essentially your renewable energy source. Bitcoin mining increases the profitability of it because there is always demand for the renewable energy you're generating.

Tim Ferriss: Say that one more time. Please

Balaji Srinivasan: your renewable energy source. Like especially its volatile like solar power or wind. Now there's always a way to make money from it even if there isn't demand on the grid because it's volatile. For example the sun may be shining but nobody's turning on their appliances or the wind may be blowing and nobody's actually consuming the power. But you can use that to mine. Bitcoin.

Tim Ferriss: Yeah that's uh that's very interesting. No I'm just saying it's super super interesting. Yeah

Balaji Srinivasan: powers like instantaneous energy is over time but go ahead.

Tim Ferriss: This is going to be a very stochastic conversation by design and by the nature of it. I think Let me just come back. We may return to this subject but come back to India for a moment. What would be your predictions? May be too strong a word. But what are some plausible things you see happening or developing in India Over the next 3-5 years with respect to Cryptocurrency or Web three Blockchain. All of the above.

Balaji Srinivasan: What's interesting is now that china sort of taken itself out of crypto. It has kind of left the door open for others. The US certainly has a big crypto sector. There's a huge fight within the U. S. On crypto regulation and web three. And and whatnot. And we'll see where that pans out and we'll also see where it pans out in India. It might be better. It might be worse. We will see but basically it is I'm cautiously bullish in both the US and India on Cryptocurrency and I'm cautiously optimistic that both India and china will maintain some degree of stability. And so I'm not saying it's a five year thing but like a 15 year ish kind of thing. 10, 15, 20 years India could be an intermediate between like kind of a coming american anarchy and total chinese control. And let me explain what I mean by this just to go back to that scenario we were talking about and again, sci fi scenario. I'm not saying I put a lot of weight on this, but things possible. So let's say, you know, I had this one liner which is the U. S. Government is sort of lost route control or the system. The future of hard power is CCP and the future of hard money is Btc.

Balaji Srinivasan: This is related to that N Y T C C B B T C triangle that we talked about last time which is Whoa Capital. Communist capital, crypto capital. And just to recap that Communist Capital says you must submit that the Communist Party, they're strong, you're weak, they have power. You don't bow to the government. It's very straightforward, just down the middle like a fullback, whoa. Capital says you must sympathize and that's different. That says it is because you are powerful because you're wide or male or straight or says you have or you're rich or something. You have power and therefore you must sympathize. You must apologize, you must bend your your eyes down, your eyes are downcast, your head is bent but it ends in the same position of submission as Communist capital with a bent head and a dispirited stance. So it's also an ideology of control. It's just a little more subtle rather than saying they are powerful, they say you are powerful. And the trick of it is with the algebra of intersectionality, everybody's in a pressure on some axis. So everybody's either white or male or straight horses or wealthy Dave chappelle. He's an oppressor on some access for example, right? So anybody can be turned into an oppressor in this way. So everybody kind of lives under threat of having their card yanked and instantly turned into impressed because the pressure on some access. So that's how woke capital works. It's more subtle, slightly more subtle and then crypto capital, B. T. C. Is the third point on the triangle. And rather than saying you must submit like Communist capital or you must sympathize like capital. It says you must be sovereign. You must hold your head up, I jaw out and you must not just hold your own private keys ideally you're living off grid with a solar panel and you're growing your own food and you're in a Bitcoin citadel where you're waiting out the mad max and and so on. So all of those are actually like extremely points. You must submit, you must sympathize, you must be sovereign. And the thing is that while each of them is actually bad if you just go totally to that point. But they're also bad if you have the total absence. So for example, obviously you don't want to just completely bow your head to this totalitarian state. You must submit.

Balaji Srinivasan: But the opposite of that where nobody submits is san Francisco where you can walk in and they've legalized crime, anything under 9 50 or something, you can chop it from Walgreens. You go in and help yourself walk out repeat it and that's why like 20 to Walgreens are closing in san Francisco. Did you hear about that?

Tim Ferriss: I did not, but it doesn't surprise me.

Balaji Srinivasan: Yeah, So they basically have legalized crime and then, you know, the city government is denying that this is a real thing. They're like Walgreens published in their sec filing three years ago, they might shut down some stores. Therefore they're just doing this to make more profit, blah blah, right?

Tim Ferriss: And

Balaji Srinivasan: and they're like the rate of crime reported crime has dropped in san Francisco. And this is basically like quoting statistics from the soviet union at this point because you see here

Tim Ferriss: move along folks, crime rate

Balaji Srinivasan: in sf is so high, anybody who's there has seen multiple crimes happening as you walk down the street, there's open air drug deals, there's public defecation, there's people who walk into a store and shoplift something you can just record probably put a camera up there, you'll see a bunch of crimes. The reporting doesn't happen because the prosecution is down to pieces and say, okay, point is if you do not submit, you get san Francisco, then okay, if everything is quote sympathizing, everybody is competing to be a victim all the time. And that's kind of where we are in many ways in american society. But the total opposite of that is also bad because the total denial that any victims exist is the denial of charity and many of our good impulses and that leads you to a society that's Russia in the 90s where 470 years all compassion and charity and goodwill had been sort of milked out of them because communism had said share at gunpoint. So all of that have been linked all sympathy was kind of leeched out and that's what you get there in the total opposite of that. And then sovereignty. Of course, I'm sympathetic to this. But total sovereignty is actually the opposite of, for example, division of labor, which is also capitalist virtue. You're trying to do everything yourself. And total sovereignty is also a position of total distrust of everybody else in society and taken to its limit. And unfortunately, the thing about the Internet is people do take everything to their limit, take to its limit. It's like one person can do everything by themselves, but humans are not just individual animals are also social animals. Now, of course, the total opposite of sovereignty is also bad. That's actually the world capital and communist capital model where they can deplatform you via the corporation or the state at any time since your speech etcetera. So this triangle model is kind of useful because each extreme point of the triangle is bad, but so is the opposite point. And so that's why I think we want to do is carve out a decentralized center that has a healthy optimum between these with the recognition that different people will trace out different optima. For example, the Netherlands is a functional society, but so is Singapore and so is Dubai in its own way and so on. And these have different tradeoffs of submission sympathy and sovereignty. So that was like a political philosophy ish kind of thing for the modern era. I think one new piece of information for me or last 78 months is that the woke capital corner of the triangle and N Y T corner. The reason I say N Y T C C P B T C is in many ways. While CCP is in control of china, it is a state controlled press. It is something where nobody, the press is going to go investigate. Z Jinping over there. In America there is a saying if China's got a state controlled press. America's oppressed controlled state. And when we have seen that is a corporate journalist can get a politician fired but not really vice versa. Yeah. So the order chart is the other way. Who can get who fired, whose whose superior. Now the thing is immediate rebuttal is, well, what do you mean? I can write an article and they may not necessarily get fired and I would agree it's like a stochastic or chart and that's what sort of hides the lines of reporting. But if let's take, I don't know the department the Interior, if the guy from the WSJ and the guy from the Washington post, the guy from the M. I. T who all have the beat that includes Department Interior just started writing negative article after article on the person in that position, they'd eventually get capped almost like a board meeting where it's like a 3 to 0 vote and they get fired.

Tim Ferriss: I just want to share something that came to mind which has been on my mind for a while. And that is the trends in the US I suppose is somewhat obvious are very different from the trends collectively in china in one very important respect many respects, but one really jumps out and that is nationalism is unifying on a lot of levels. But what we're seeing in the US with, as you put it, the great awakening and this is not to point fingers at anyone side necessarily, but much like the nature of warfare is going to change is changing over time and it's going to involve more and more cyber attacks? Non physical attacks. So there will be physical components. I would argue just by watching an audience of say 10-20 million people per month over the last several years that we are in the midst of the beginning of a reputational civil war where the weapons are provided by companies that produce tools for social media and so on. And the attacks may not be those that we would see among different ethnic groups in a case of say ethnic cleansing. But nonetheless the damage is seen reputational e and that it's not just the new york times and a politician. It is like neighbor against neighbor. And I find that absolutely terrifying. But I do think we're in the middle of that when I look at it, the scale and the intensity. It is absolutely a reputational civil war and the weapons, our technological,

Balaji Srinivasan: you can argue that the corporate takeover of the U. S. Actually happened in the 19 seventies when three privately held newspaper corporations. You know, the Washington post is owned by the grams, the new york times owned by the Oxtails burger family and the Wall Street Journal, which is owned by the Bancrofts at the time before their sale to Murdoch. They all went after Nixon with the post certainly leading the way and essentially they got quote, the most powerful man in the world fired. Now, of course you can argue. And I think it's fair to say that Nixon was a crook. He actually did do those things. He hasn't denied doing Watergate or the Berkeley or anything like that. I'm not litigating that part. What I will say is that at the time what he thought was and was certainly talked about was that JFK had done it as well in his race against Nixon in 19 sixties. He just had to do it. And actually there's a book by Seymour Hersh who is a legendary investigative reporter exposed the my lai massacre won the national Book Critics Award. So he has a book called The Dark Side of Camelot. And claims for example that Kennedy Stole the 1960 election would help the mafia and all that sort of stuff. Some of the stuff has kind of filtered out into the public that Kennedy had lots of affairs and all this type of stuff. But the election part is I think the material thing where Nixon thought that Kennedy had gotten away with it and quote stole it fair and square. And Nixon decided not to contest it for the good of the country. And the Nixon kind of did it himself. And then he got tagged for it when no scrutiny was applied, Kennedy point being though that this concept of quote journalists holding politicians accountable means that the U. S. Is a press controlled state. It also means by the way how's that accountability doing if journalists are holding politicians accountable and over the last 30 years the US government has done very poorly who's holding accountable to people who are holding the government accountable if they are actually the most senior management. The board of directors vote who comes in an emergency to remove the ceo namely the president via an impeachment or investigation or something. Well ultimately the board of directors is responsible. So the thing is though that the whole thing is set up to exercise power without responsibility because it's a stochastic chord chart No one reporter thinks of themselves as being like in control of somebody because it's like throwing a stone and somebody who's being stoned. No one stone necessarily kills them. But the fuselage of the hailstorm does. And of course if you're at the Times or the journal or the Washington post back for social media you had pretty big stones that you were tossing. And what's interesting is there is just to be on this topic for a second. There's a concept called Impact Journalism where the whole point is to make an impact like that stone hitting somebody like the impact of a government truncheon hitting your head where the idea is that people will brag this article led to a government investigation. This article led to so and so reforms and what those reforms mean is that the state made something that was previously discretionary now mandatory or forbidden to say a law was passed. Freedom was constrained in the most trivial sense it's like 40 mph and 55 mph speed limit put you in a box on the v axis of velocity. You can't go below that or can't go above that. Freedom is constrained. You were previously discretionary. Now you're in a box, you may argue that box is good or bad, but as every law has passed, you're in a box on more and more and more and more parameters, right? You can only do, you cannot be below this amount, you cannot be above this amount. So it's literally like a like an ideological box. I could constraint. So the thing is that when you are able to quote cause impact in this way you are powerful but because it's stochastic, It's not like you order it and it happens with 100% probability you can deny that that power exists. The whole system is sort of evolved for the deniable exercise of power in many ways the or chart is actually even embedded in the language of the concert. Like Russell conjugation is Eric Weinstein is big on this, you know what that is? I do not

Tim Ferriss: know russell conjugation.

Balaji Srinivasan: So russell conjugation at first it just seems like a funny curiosity, it's by Bertrand, Russell, the concept also known as like a motive conjugation. So it's like I sweat you perspire but she glows.

Tim Ferriss: Okay,

Balaji Srinivasan: so he docks is she leaks. But the new york times investigates.

Tim Ferriss: I got you right,

Balaji Srinivasan: so that is

Tim Ferriss: great. That's a great example actually. That's a really good,

Balaji Srinivasan: it's really, it's a very important experiment and the reason it's important. Yeah, here here's why is when it comes to like quote what journalism is like, what is real journalism? Anybody can go and set up a blog to go and review movies or restaurants pre covid probably easier. But review books or whatever all that stuff, huge portions of a modern newspaper. You can just kind of go and do instead of and do yourself. What is the one thing that you can't do on your own?

Tim Ferriss: I can't think of a lot of things I can't do on my own.

Balaji Srinivasan: But continue, I would argue it is the investigative journalist in part because you can't just go to somebody and like start digging through their garbage, interrogating their friends, acting as essentially a for profit intelligence agency. Because basically what they will do is they will put somebody under surveillance. That's literally what being a quote investigative journalist is, you're putting somebody under surveillance essentially wiretapping them, eavesdropping on them and so on. And it's an extremely hostile thing because the goal often is try to get that person fired to cause harm to them to cause harm to the company and to essentially write up a prosecution and put that in the paper. And that's why they say the court of public opinion. It's basically like an indictment. You know, in fact, we sometimes use the same word like a biting indictment appeared in the paper, but it's stochastic. It's out there and it's deniable as to what happens, you know? Hey, I just put it out there. Arthur Sulzberger used to say our job is to tell the public that the cat is jumping through the window. The public will take care of the cat. It's like a disassembled bomb strategy where you give them all the parts and you emotive lee congregate you russell congregate the whole article such that the reader who's unaware of this is led to a conclusion, but you kind of have no fingerprints on it because you just did it with language.

Tim Ferriss: Yeah, it's semantic like word laundering.

Balaji Srinivasan: Yeah, it's semantic. That's exactly its power laundering. I'll give you some concrete examples of this. Like here's a really good one. There's article in 2012 how Punch protected the Times. You can just google that and it talks about how dual class stock was the savior of the times. And you know, it was, it was something that was really good because they could think about the long term then a few years later In I think 2019 you can't fire Mark, Zuckerberg's kids, kids and this is a denunciation of the same thing. Oh, we are creating a class of royalty that controls our national dialogue without basically just emotive lee congregates it the other way. So dual class is good when the cells burgers do it. And it's bad when Zuckerberg does it.

Tim Ferriss: I would love to if it's okay with you. I'd love to shift gears just a little bit but it's gonna be it'll be tangential. Yes it's still related. So we chatted very briefly about I think a pretty justifiable stance that we are already in the midst not in the middle but in the beginning of what we might call widespread reputational civil war in the US which is just going to intensify and it's gonna get a lot worse once we have ai driving additional misinformation and so on. It's gonna be a hell of a thing which is not that far off I don't think.

Balaji Srinivasan: But where do you see

Tim Ferriss: The us going in the next say 3-5 years if we can constrain a little bit because I know it may be easier to go to say 15 directionally. But if you had to make some educated guesses or wild speculations just based on your reading of the kind of gestalt Next 3-5 years, what do you think plausibly happens in the US.

Balaji Srinivasan: So let me give a scenario and I'm certainly not saying this is desirable. I think this is possible. The scenario is chinese control. American anarchy. So a chinese victory of some kind in the south china sea over Taiwan was a referendum or military victory or something like that. Especially if the U. S. Prints money only to lose because you print a lot of money in a war. Foreign military defeat of that kind would show that the U. S. Is no longer a hyperpower and with that would potentially result in you know that saying fiat currencies backed by men with guns. Yes.

Tim Ferriss: Finally saying I recognize. Yes

Balaji Srinivasan: I did. All right. Yeah. So that's actually Krugman himself said that an interview to joe Weisenthal several years ago fiat money is backed by men with guns. So what happens when those men with guns lose and not in a sort of deniable way to covid or Afghanistan? Like we didn't really try. It was a military thing but to appear competitor. Well there's potentially an economic markdown that happens. I mean Russia's outcome in World War Sean Mcmillan has a book that argues that the Russian revolution, it's called like a new history of the Russian revolution argues that very good book that Russia's most important thing was it was at war during 1917. And that's what allowed Lenin and others to take power. It was a war tending it wasn't just some random proletarian revolution is the chaos of war that led to that. And so foreign military defeat Or even foreign conflict is the kind of thing where it turns things molten things that are bubbling things can flow and move around. And here is a bad scenario the bad scenario is an attempt to repeat executive order 6102. Like the gold seizure? You know what that is.

Tim Ferriss: Well I can kind of read between the lines but why don't you tell me what it is

Balaji Srinivasan: during the rise of the centralized government of the U. S. And I'll come back to this. The concept of peak centralization, Basically one of the things that FDR did was executive order 6102 which seized all the gold in the us and basically like forced it to be kind of exchanged in at a certain price and what not now right now we're seeing insane levels of money printing. And it is certainly possible that at some point in the future They try something like an executive order 6 1 or two. And in fact there's this guy on twitter who you know has moderate following basically is starting to advocate for this type of thing because he had been predicting Bitcoin was gonna go to zero. It's like facebook is a fat, it's a bubble. Oh no it's terribly powerful. It must be stopped. You know it's a flip from this thing is nothing is going to go to 02. We must drive it to zero or we're gonna seize it. So if they try something like that and the reason that might be possible is you print a lot of money to finance this war and now you've got an executive order 61 or two like thinking attempted between seizure. That is the type of thing that could kick off serious civil unrest. It's possible. The reason is if you're trying to seize BtC in a time of rampant inflation, that is no longer something that can be portrayed as being for the good of the population because inflation touches inflation's already pretty high but it touches everybody touches white people, black people, latino people, asian people. It is economics. It's very hard to portray it as some grand historical conflict or something like that. It really is the state versus the people and it's not like the people were printing dollars or managing the economy was supposed to the Fed and the treasury and whatnot. So if inflation is rampant, any traces of BtC that I think could be the match for the next wave of conflict,

Tim Ferriss: just a quick logistics question is additional instruments and abstractions are created E T EFS futures

Balaji Srinivasan: et cetera in a seizure scenario. Would that be

Tim Ferriss: limited to a certain form of BtC or would it apply across all of these different instruments?

Balaji Srinivasan: I don't know. But I think that basically it's a huge difference between physical gold and E. T. F. Yeah. Yeah, exactly. That's right.

Balaji Srinivasan: And custodial Bitcoin, which is like, let's put it as user custodial Bitcoin versus holding coins on an exchange. If you have your coins on your laptop or your device, you're not saying not your keys, not your coins, that is something where they will have to be a serious legal process or even a swat team to try to get them from you. Whereas if they're on an exchange or, but I advise complying with the law at all times, you know, blah blah blah. But this would be something where it would be easier to enforce that law on a giant exchange that has all their coins there.

Tim Ferriss: Yeah, sure. You just, you just log in, you get a notification.

Balaji Srinivasan: Yeah, that's right. So there's a graph that I posted november 17 18 2020 Bitcoin is moving off exchanges prices, moving up ecosystem, building out having this constraint supply the all time high may be just the beginning, which turned out to be true. That was almost exactly a year ago. And there's a graph from glass node Bitcoin colon balance on exchanges all exchanges, which seems to show that coins have been moving off exchanges and there's another graph from Kala moo th L a m u underscore also showing that BtC held on spot exchanges may be following. Now, I haven't dug into this, you know, like you needed like a pro subscription to glass node and so and so forth. But that's an important metric to monitor because coins on exchanges are easier to seize than coins off exchanges

Tim Ferriss: and to come back to something you said. Is that because do you think the main driver there is because people can stake their coins or steak there I suppose. Yeah, coins and get a higher return on decentralized platforms. Is that why you think they're coming off

Balaji Srinivasan: interest is a massively scalable application right to park your money and get money back and defy offers insane interest at very high risk. And just for people who

Tim Ferriss: don't know so defi decentralized finance

Balaji Srinivasan: decentralized finance offers an absolutely insane level of interest. I wouldn't even quote the numbers because any number I quote you can find a higher one if you can take on more risk basically. And what does that risk mean? It means possibly loss of principal like the smart contract could be hacked possibly other kinds of things but you know you can put in a million bucks and get like $100,000 a year or more in interest. The thing is that you can also try and put a million bucks and try to make $10 million to some of these coins will 10 X. So it is absolutely like the upside of crypto. By contrast in banks there are like zero interest rates are like nothing

Tim Ferriss: now just to play the other side nowhere can you make more money and also lose more money if you make poor decisions.

Balaji Srinivasan: Exactly crypto it's like the UNIX of money. You can room dash R. F. Your entire fortune or move millions with a keystroke. Do you know room dash R. F.

Tim Ferriss: I don't but I love that I almost want you not to explain it because like five people in my audience will find that amazing and the rest won't get it. But I mean I can sort of intuit what that means. But why don't you why don't you spell it out for me?

Balaji Srinivasan: Room dash R is it's like a it's like a UNIX man, which means remove everything, dash, recursive, dash force so you do it at the top of your directory hierarchy, dash R means descendant everything. Dash force means don't ask me any questions and you know, people are used to doing this when they want to just nuke a directory but if you do it in the wrong spot, you're like, oh my God, I deleted my entire files, are there? Right. Oops. Yeah. Modern systems will kind of detect what node you're in and may not actually allow you to do that, but that's what being a quote power user means. The computer will do what you tell it to do, not necessarily what you actually wanted it to do. That's what a bug is. You've instructed the computer to do something. There's an error in your logic, you didn't think through a scenario, didn't think through an input and it does, we're told to do what you wanted to do. But this is like a super important thing in terms of Cryptocurrency because it solves the principal asian problem and replaces it with your ability to debug. Do you know what I mean by that should talk about the first thing

Tim Ferriss: he said, the principal asian.

Balaji Srinivasan: Principal Agent, I'm kidding.

Tim Ferriss: I just I wanted to know who this principal agent asian is. Yes. Principal agent problem. No, I don't know what that means. Please continue.

Balaji Srinivasan: So this was like back in transit human. I understood the full scope of this, I was like holy cow. And the reason is whenever you have a principal and an agent for example you have a venture capitalist, the principal and they fund the Ceo whose their agent or you are the principal and you hire a plumber, who is your agent to fix something or you hire a banker to go and sell something for you. The problem is that in the two by two matrix of you win, you lose, they win, they lose. All four outcomes are possible. In particular, it is possible for you to lose and them to win. For example, they take a commission without delivering you returns on your portfolio. And in fact the principal agent problem is a fundamental thing of every single relationship on an order chart. Manager, Engineer, Ceo Manager VC Ceo every single edge there has a two by two matrix of who can win and who can lose. Now the key is to try to diagonal eyes this as much as possible. Such that the win win and lose lose you both win the most together and you both lose the most together. There isn't any temptation for one party to defect off diagonal and win at the other guys expense.

Tim Ferriss: Yeah. Yeah, I read your terms and conditions carefully.

Balaji Srinivasan: That's right. And the thing is that this becomes more complicated when you have just two people, it's a two by two. When you have three people it's a two by two by two because there's eight outcomes. Win lose, times win lose, teams win lose. It's a Cartesian product when you have n people it's two by two by two to the end power. It's like this hyper cube as it gets very complicated. So it starts to happen in large organizations is that some subset of people picks the strategy Where they win and everybody else loses. For example, 51% can vote themselves the money of the other 49%,, that's a straight win, lose zero. Some kind of dynamic. Now the way that startups avoid this is with equity. If you've heard the term like aligning incentives, it actually comes from like math where it's like a diagonal alignment pointing through this hyper cube of incentives, where the key thing to do is especially to start up 51% could vote themselves other 49% money. In theory, if everybody, you know, is a shareholder vote, everybody's equal. But there isn't any money to distribute all the money comes in the exit. So internal politics are limited because internal resources are limited in a small company And so what you do there is rather than encourage people to compute every possible strategy in this giant two by two by two by two hyper cube. Instead, you say the win win win win win win win quadrant where all any of us went together in an exit, you know, an acquisition an I. P. O. We don't have to do out the math that pays off the most and every other off diagonal thing where some coalition wins while the other group loses is suboptimal. Okay, now here's the thing. The principal agent problem comes from the fact that when you've got to human beings, their interests never fully coincide. There's a situation where one can die, another can live or vice versa. You know, trolley problem type things push hard enough and there's often a divergence in incentives. Not so for robots, not so for programs, not so for intelligent agents

Tim Ferriss: and you're going to tie this into

Balaji Srinivasan: crypto crypto. Yes, yes. Because with Cryptocurrency a program can now trade on your behalf. You can rather than hiring a banker to go and trade for you, you can write a program that will trade for you while you sleep on. Cryptocurrency exchanges and especially decentralized exchanges worldwide, that program that you write to trade, especially the reason I say decentralized exchanges worldwide is that is truly just pack it to pack it. That's full internet. There may not even be a sign of process that is fully on chain. So that is something where just like you go from a telephone number to an I.

Balaji Srinivasan: P. Address. You know telephone number is a human associated thing. But an I. P. Address is a machine associated thing. Any machine can call any other machine via an I. P. Address. That's what I. P. Address really is you go from a human bank account to a Cryptocurrency address.

Balaji Srinivasan: And you remove the human association and now a program can hold money, make money, lose money fully autonomously. So now rather than hiring the banker, you write the program, there's no more principal agent problem because the program has no mind of its own. It's only the mind that you give it. This is super important because as trust in society decreases it is harder and harder to maintain a scaled organization of human beings. Because there's more and more divergence. It's an individual era. Everybody is going in this direction. Why are you the boss? I should be the boss. In fact. Both equality and freedom. While in some ways they're often made and typical to each other where they're actually also similar in other respect. Which is if we are all equal, totally equal. If you ain't the boss of me, you know, I have total freedom, Then there's zero Hierarchy. All flattened out. It is basically anarchic. And in that situation everybody feels that everybody's interests diverge. So I'm, you know, every man for themselves now in that situation it's hard to maintain a civilized society. So I think the answer is going to be robotics. Cryptocurrency. How do those things relate? Well, when you give a robot instructions to go and unpack a box, it just doesn't, there is no divergence between the capitalist and the worker, the capitalist is the worker management becomes automation. There's a great book, factory physics ever heard of this book. I have not. It's way harder to build an assembly line than to work on an assembly line factory physics. A good book. Also Eliyahu, gold rods book. The goal is quite good. He kind of managed to wrap a it's kind of funny, it's like it's almost like a fictional story around operations research type stuff. It's executed better than it sounds okay. It's like

Tim Ferriss: making who, who moved my cheese

Balaji Srinivasan: for operations research finance. That's right, That's right, That's right. So both of these are good books. Factory is like it's like a textbook that it takes a very quantitative approach to cycle times and other parameters within a factory setting. But the main thing that you take away from that is. And so, you know, I designed a robotic genome sequencing assembly line like 10 years ago as part of my first company And this is something where you realize whoa it's actually way harder to build an assembly line than to run it. It's like the difference between writing a program and running a program because every box there, it's actually very similar to architect in like a data analysis pipeline which more of your viewers will have done because something has to flow out from this and into something else and has to be the right format. It has to process only this many units at a given time. You need to use buffers and queues to get rid of it and so on. And in many ways by the way that data analysis pipeline thing now integrates with the offline physical stuff where you'll do some physical process, you need to wait for a computation online and then the physical process Kicks off so 10 years ago I was kind of merging robotics and ai and cues and all this type of stuff. You know what it's like tech people, you'll you'll mess around the palm pilot years before people are using an iphone or you will be in World War craft before people are doing VR or everybody's on twitter before the people on twitter. Right. So I kind of saw this firsthand and one of the biggest things was what you want to do from any process like that is that eliminate as much human error as possible and eliminate as much human error as possible. Means as limiting as many humans from the process as possible. It's an error to have humans if you want to eliminate human error. Okay. And if you can reduce it to just bugs in your code, that's way better because you can see that on screen. It's super consistent. At least the error is made in the same way every time. Just to give an example if somebody rotates a so called 96 well, plate, Okay. An eight by 12 plate. If they just rotate it wrong, if they're cranking through high volume and there's rotated wrong, which is easy to do. I mean they've got kind of markers on it but you know, people are people can screw up. There's 96 samples that are off 96 patients get the wrong report.

Tim Ferriss: Wait 96 patients of what type? What is the plate have to do with patients.

Balaji Srinivasan: So visualize like a plastic tray with indentations in it to contain liquid. And so those indentations are like really small, basically eyedropper scale invitations. If you google like 96 well plate, you'll see, go to google images. You'll see like a visual of this, right? So each cell there is often like a patient sample. So you might have 96 samples from 96 different patients in this place And then you're putting various reagents in there and putting it through this process. And if you rotate it wrong, everybody gets the wrong result like 20 three

Tim Ferriss: you're saying right. I understand you're saying they are matched incorrectly. Is that what you mean?

Balaji Srinivasan: Yeah. Yeah exactly right. So they had like a sample swap error back in 2010 where a bunch of people got the wrong ancestry results. They were oh you know they thought they were this ancestry, there were another ancestry. They thought oh my God and my an illegitimate child. So the downstream consequences of this like very human error are something that the error was to include a human. And so what is going to happen is Cryptocurrency means that you don't have to hire a banker. You can write an intelligent agents. Trade for you, robotics means you don't have to hire a worker. You can program a robot. Management literally becomes automation. So rather than writing out instructions and setting up the assembly line and positioning workers there and calculating cycle times and so and so forth. You As the manager for many people. By the way management is uh it's not tangible and that's why they devalue it. The way the labor theory of values is talked about the Marxist theory of value starts with a visual the factory floor. You have these workers who are working and it's like oh we oh we oh and you have this evil fat cat boss with a cigar who's got his feet up on the desk and it's just basically cracking the whip on these who are workers. And of course it seems like this did exist In late 1800s America. And I'm not arguing that unethical bosses didn't exist. But the fundamental premise of this is the workers are doing all the work and this fat cat is just sitting there and contributing nothing and so on and so forth. And part of that is because capital and management are kind of intangible and it's often denied that they create any value. But now, what is actually possible is a totally different model where it doesn't start at the factory floor and said, you start, let's say in an academic lecture hall and now you say, okay, let's say it's physics. What percentage of people are able to comprehend the material and what percentage of people could write the textbook and then what percent of people could rewrite the textbook. And it is on that small minority of people that we depend for refrigeration and flight and fiber optics and so on. It's the opposite rather than this small set of fat cats who exploits this giant pyramid with all these workers at the bottom. It's like an inverse pyramid theory where the vast, vast majority of people depend upon this small, small group of technologists to create all the stuff that they don't understand how to operate that maintains modern civilization. The funny thing is that your engineering grad students often has both of these mental models in their head at the same time and it just depends on whether they're thinking of themselves as a poor exploited worker or a sophisticated engineering character. And what I'd argue is that in the 20th century, the reason that the labor theory of value preponderant ID is that there was leverage to large groups of workers. They could do a strike because of mass production. You needed workers to operate a factory. So there was leverage there. And, you know, of course, what happened was they in the soviet union, they pushed everybody into a lose lose scenario where, yeah, there was a strike, but it wasn't a win lose scenario where the workers win and the bosses lose. It was a lose lose scenario where after enough strikes, you got communism where nobody could strike. You know, you have the white sea labor canal, you have the gulag, you had basically communism is this giant slave labor country, this prison state where you couldn't escape. They would shoot you if you try to get over the Berlin wall, for example. Right, So actually, the leverage existed between workers and capitalists in a certain way. Now, it's a different kind of thing now with the dock worker shortages, with the truck driver shortages, there's a huge incentive for automation for robotics and people are just doing if you've heard this thing, the great resignation, it's happening across many different social classes, with labor shortages of a different kind. It's on strike. It's a resignation. Okay, well I can't get somebody at this price. Fine. Let me figure out how to automate this with robots. And now and here's the critical thing. It is not intangible anymore. Management is not intangible. It's not just instructions that the boss is giving to the workers and he puts his feet up on a desk. It is literally code and get up these lines of code that say move this arm here are positioned here, calculate the degrees of freedom. Here it is math, it is computer science. It is now tangible because it is code and now you're not giving instructions to a worker. You're giving instructions to a robot, a computer, an agent.

Tim Ferriss: All right, this is actually a perfect segue to what I was going to lead into And I'm just going to talk for a little bit to set the stage beginning probably just before our last conversation in Q1 of this year. And certainly with increasing depth over the last six months, I've been spending a lot of my time in what we might consider a web. Three more immersed

Balaji Srinivasan: in Blockchain and

Tim Ferriss: cryptocurrencies and FTS, etcetera. So many of the things that I had read about have become less theoretical for me

Balaji Srinivasan: and

Tim Ferriss: there are things that I've been able to explore and thankfully not experienced in some of the negative cases that have have led me to all sorts of Realisations. So for instance, one is if you just read crypto twitter, at least some of the people on crypto twitter, which I would suggest no one do if that is your sole source of information. But some interesting discussions nonetheless, there are some techno idealists or techno optimists who sort of paint this decentralized future that is just utopian in almost every respect. But there are risks in bad code, right? Smart contract risk. And there are insurance companies nexus mutual and many others of different types that try to provide ways for people to protect themselves against the downside of certain types of smart contract risk. We talked about the pseudonymous economy last time whereby people would use alter egos of different types that didn't change constantly, but rather a crude, some type of reputational value. This is another thing that I've seen most acutely for myself within defi and N.

Tim Ferriss: F. T. S, specifically within N. F. T. S.

Tim Ferriss: People who are collecting high value or what are currently high value J. Pegs in essence, right? But pieces of artwork that are non fungible uh, and people now have hundreds of millions of dollars worth of these pieces of artwork in some instances and very few people, if anyone knows their real names, I've had this experience for the first time where I've even met some of these people in person and tried to make small talk, we chatted about this before we started recording and I'm like, oh, hey, where are you flying in from? And they're like yeah I'm not gonna answer that. I was like wow okay this is this is a different different conversation than I'm accustomed to. But there's also some degree of counter party risk. When you're dealing with pseudonymous identities, let's just say where you don't yet have established some reliability scorer outside of a verified account and check mark on twitter, which can also be faked. That can also be sort of hacked in some respects. So here's my overarching question and I'm going to lead into it. So I'm sure you've heard this line, you know, trusted third parties or security holes. So on paper I'm like that makes sense. But when you start to really wade into say, N. F. T. Is just as an example and people say you need to be your own bank. There's a lot of responsibility and logistics that goes into being your own bank in the same way that if you for instance, want to or imagine living in this kind of utopian decentralized world where there's a degree, I'm not saying this is you, but a degree of anarchy. And we saw this during riots in the last year or two in places like Portland in many cities around the world, you quickly end up in a state that is not unlike what we saw during Hurricane Katrina where these atrocities being committed left and right because there's no law enforcement. So then that leads to questions of do you want to be your own law enforcement? I've seen how much fraud there is and sophisticated social engineering goes into some shadowy corners of the world of N. F. T. S say with people posing as a customer support and discords and then taking snapshots of people QR codes and so on. I mean there's there's a level of kind of sophistication that I hadn't personally been exposed to because I'm shielded by my you can I'm sure pick this apartment, I'm shielded on some level from certain trusted third parties, right? I do not have the obligation to act as my own bouncer and security guard and banker. So I'm wondering if you'd like to comment on any of this because I have realized that for me personally being Jason bourne in my physical and digital life on every level is a scale and scope of responsibility that I don't really want. Even though I have some, I have firearms training, I have some technical ability. I have an incredibly good network. I could actually organize my life around some of some of those sort of pillars of self sufficiency, but I'm not convinced I totally want to and I'll tie this in also, you know, you were talking about Singapore before we started recording and you said it's for centralized it delivers, right? So I'm just wondering for muggles who might be listening and I would include myself in that group where we're like, you know what I'm not ready to be the lone ranger on the frontier of complete decentralization for all of the perceived risks that at least I see once you start to weight into it, where's the Goldilocks point? And how do you decide that for yourself?

Balaji Srinivasan: I thought about this a lot from many different angles and let me at least give you my thinking on it and shoot at it or or agree as you want. This kind of relates the thing I was talking about earlier with communist capital, capital, crypto, capital, submission sympathy. You know, you must submit, you must sympathize, you must be sovereign. And that last point of the triangle, you must be sovereign as you are discovering is actually not. That's why I said it's an extreme point. It is too hard for pretty much anybody to not just hold their own currency but grow their own food and get their own water and so on and so forth. Humans are individuals, but there are also social animals and you make some compromises. Now the stuff I just discussed on robotics actually reduces The necessary scale of societies. In theory you could have and this is where I think we end up in 2050 or 2040, maybe even sooner you could go back to the future and have robotic farms, robotic Antarctic farms where if you're looking at the automation of agriculture, it's getting there. It's really improving dramatically ai for picking things and so on And you kind of give you instructions to your robotic field hands. Cause then you go truly full stack your quote off the grid. But you have maybe a modern life now, of course you need enough land, you're still gonna have trade, you're not going to grow every crop there, but you might be able to do okay. So I do think that there's an eventual thing. I don't know what the minimum scale society is. I think it's smaller than 300 million. Might be smaller than a million. Might be. Even a few 1000 people could operate something decent. There's actually to make that more explicit. There's, you know, the project, Open source ecology.

Tim Ferriss: I don't recognize the words, I can imagine, but why don't you describe it?

Balaji Srinivasan: Yes, it's a little different than what people think when they hear the word ecology. It's basically a kit of 30 open source machines that if you build them from scratch, you could rebuild civilization. The global village construction set. Okay. Open. So it's like how do I get running water and how do I get this? It's all the things that civilization depends on and but it's machines that you can build yourself. And there's also a couple of other books like this is a book called The Knowledge by I think Louis Darnell, which I think is really good and you know how to rebuild our world from scratch kind of the post apocalyptic thing.

Tim Ferriss: That's what the knowledge is about.

Balaji Srinivasan: Yeah, the knowledge colon how to rebuild our world from scratch. Um and then there's another book which is how to invent everything, a survival guide for the stranded time traveler. And those books I think are quite good. Okay, those two as well as like open source ecology because it addresses some of what you're talking about, which is how would somebody start from scratch and do this? We don't know how to do it. And in some ways what's happening is there's a cycle of centralization, decentralization that just happens. For example, in china, it's like there's the warring states period and then the whole thing is unified and then it breaks up again, it's unified. And we see this in the computer student, totally different context, which is you have mainframes, then you have personal computers, oh, and then you have cloud and then you have Cryptocurrency and smart phones. It kind of goes back and forth like this. The thing about this is when, you know, system is centralized, people chief at the control and they want sovereignty, they want power, they push on it, then they managed to break it up and then it's all decentralized, it's chaos and now what is scarce is leadership? They're like, oh let's put it back together and so on and seen from one vantage point, this just looks like a cycle. You just keep coming back where you came from. You go from anarchy back to tyranny to an architect right? But seen from another standpoint it's like a helix. It's a cycle in the xy plane. But we are making progress in sort of this ascending cycle over many generations. Now I'll put an asterisk on that too, which is I don't believe that progress is necessarily guaranteed. In fact there's a couple of good podcasts or shows like the fall of civilizations podcast or you know, Osama burger actually has some good stuff on this where he talks about Gobekli Tepe, which is like the oldest human civilization. It appears looking at some of the civilisational records that humans may have like gotten pretty advanced and then just kind of totally collapsed and we've done that a few times in human history.

Tim Ferriss: So you're saying you believe in Atlantis.

Balaji Srinivasan: Well I'm not getting I'm kidding. Okay, so like Gobekli Tepe for example, it's this site that's kind of like Stonehenge except way older than Stonehenge found in what is today modern Turkey. That pushed way back our dates of when civilization started. Okay, So it might be like, you know, playing a video game where you get to level 15 and then you die Get Hello 27, then you die and this just might be the most advanced human civilization we've built to date but it could just collapse and we might come back, I mean happened to the dinosaurs. They got hit by a meteor.

Tim Ferriss: Yeah, what's happened to, I mean, there's some pretty bizarre archaeological records and really interesting carbon dating done in south America also, that would point to advanced civilisational collapse of different types.

Balaji Srinivasan: That's right. And so the thing is that when you say progress is possible, but it's not guaranteed. For example, think about Christianity and the roman empire like Christianity in some sense was no offense to your listeners have nothing against it. But it was like the original communism at the time of the roman empire, it tore down the roman empire. It said slaves are good and sooner a rich man go through the eye of a needle than get to heaven and basically it de legitimated the roman empire and eventually it fell at least the Western Empire. And that was something you got the dark ages for a while until the sort of fusion emerged. On the other side, you had the german ization of Christianity, you know, had for example, why do you have ST Nicholas and santa claus and snow next to a scene of Bethlehem and the manger in the desert. Those are two totally different cultures. Thousands of miles apart. What's happened is copy pasting one story next to another, like horizontal gene transfer in organisms. The meme replicates, even if the substance has changed quite a bit. So what happened was eventually after the dark ages, you've got the thing that was a contradiction in terms or oxymoron before the christian king, not the roman empire. The holy roman empire, of course it wasn't continuous with nothing but conceptually and you kind of have that rapprochement, but there was a dark ages like a collapse of civilization in between and so bad ideas or let's call it, it's a bad idea. Let's call it a certain ideas can collapse civilization that has happened okay. And yeah, we've recovered, but it's not necessarily guarantee if we've collapsed, this is guaranteed to be recovered. The dinosaurs didn't of course, while some

Tim Ferriss: ideas are even generated or myths to collapse civilizations.

Balaji Srinivasan: Yeah. So right, so, so this gets to something which I think of as a very important part of the future political axis, which is, you can say it is, you know, democrat republican, you can say it's centralization, decentralization, but I think and even more important access in the medium to long term is going to be trans humanism versus anarcho primitivism and we kind of talked about some of this before, I think, do we? Yeah, let's reiterate it.

Tim Ferriss: And then I just want to make sure I bookmark that I want to come back to how do you find this sweet spot on the spectrum because one concern I have is that the decentralized tools, given the literacy required and the precautionary measures and tech savvy required will forever remain or for a long time. Maybe not forever, but for a long time remain. The tools of 0.5% of a given population or maybe a few percent of a given population unless there are UI has slapped on top, which will ostensibly just create again trusted third parties. So it seems sort of antithetical, but I don't want you to lose your train of thought, but I want to make sure that we come back to that.

Balaji Srinivasan: So let me quickly do an entrepreneurs and transforms it. Let me come back to your point. So the quick thing on that is an archipelago is um says we're not living in nature, were far away from it. We're having all these plastics, we're having all of this pollution. That's why maybe in, you know there's there's a like a right of center version of that which is like our testosterone count is down. Which it is actually. That's not like a conspiracy theory. It's actually like a scientific fact is like way lower than it used to be for adult men. All that is down. And so there's some aspect, you know, where this is now neutral were diabetic were eating all these grains, it's all bad. Instead we need to kind of reject modern civilization in part or full like the unibomber thesis and just go back to the land and of course the problem with this is I think that's a romanticized version of what going back to land is. I don't care if some people want to go and do an Amish thing and live on their own or snapshot some point in time they want to tear down industrial civilization consciously, the trans humanist thing is the opposite, which says what makes us human is technology, you know, Richard Wrangham is book how cooking made us human head of that.

Tim Ferriss: I have. Yeah,

Balaji Srinivasan: okay,

Tim Ferriss: so finally one book

Balaji Srinivasan: I've heard of so Rams book is I've also read

Tim Ferriss: and here's the who just

Balaji Srinivasan: uh my

Tim Ferriss: just my level of reading continue

Balaji Srinivasan: your chinese is way better than mine and we have a non over actually phenomenal. I mean I learned from from, you know, like tools of science is amazing but cooking made us human essentially says that technology is actually part of humanity in the sense that we sort of outsource our metabolism to cooking and therefore could evolve in a different way. That's probably also true for clothes and other things. You know, there's this book, the naked ape which is kind of also about that and the idea is that you know, we are a technological species. Technology is not some anti human thing, it is humanity. It is a difference between us versus animals and so our destiny is to get to the stars. Let's do this. Let's become transcendent beings like one with the machine brain machine interface. This vessel is just what we are today. But our ancestors, ancestors if we really want to make our ancestors proud. They were single celled organisms or like non human creatures. So whatever is in front will be to us as we are to them. And so that's like the trans humanism thing. And what's funny is both of these in their extreme form are like off putting to some people were like why can't we just like stick where we are? But the nature of things is that those people who have ideological zeal, we'll start pulling the train in one direction versus another. It's very hard to kind of keep something just stable in one state. You have to end technology and communications right now, coming back to your point basically, what do you do in all these institutions collapse because most people cannot be that sovereign because it's like an overnight plunge into re founding everything. It is not simply be your own bank. It's maybe be your own food supply. And there's certain things that are sitting on your desk that cost you $10, but you would never be able to build them or it's very, very expensive to build it from scratch. Like uh I don't know. Look at like a USB cable.

Tim Ferriss: Well, how how am I going to build this? I'm holding up a ballpoint pen.

Balaji Srinivasan: Yeah, of course. That's a famous thing. You know, No one can build a pencil. The first unit rolling off the assembly line is wildly expensive. Then the one million or billion thing is super cheap. But getting to that point of technology from just a grass field and sand is super hard.

Tim Ferriss: Yeah, it's gonna be hard to do from your intentional community in the jungles of

Balaji Srinivasan: costa rica. That's right. But all the supply chain stuff is going to start forcing a greater degree of auto archy if we're lucky it is just a gradual ramping up. If unlucky it is too fast and you don't have time to adapt. It's like the difference in like working out gradually versus go put up 300 break your elbow. Whatever the point is, what I think happens is unbundling and re bundling one of Mark Anderson's collaborators a long time ago ahead. This throw off line which I love because it's so funny but it's also true is only ways to make money and business are bundling and unbundling and this gets back to the spiral thing I was talking about. For example, you take the songs off of a cd, you unbundle them into Mp three's, then you re bundle them into Spotify playlists or you take the articles out of a newspaper and you put them into individual U. R. L. S. And then you re bundle them into twitter feeds

Tim Ferriss: or a subscription right

Balaji Srinivasan: or subscription. That's right and you take the countries that we have today, the people no longer feel a loyalty to, you're unbundling them into the coming american anarchy and then you're going to re bundle them on the other side into groups that do have something in common and that will be probably a really messy global process when this pax Americana falls. One analogy is the 30 years war in some ways, By the way, that's actually quite analogous to what we're going through. Do you know about what happened then?

Tim Ferriss: I do not. I would love to know, tell me

Balaji Srinivasan: sir, the printing press, this tweet actually on this printing press plus martin Luther led to the reformation, led to the counter reformation, Led to the religious wars, the 30 years war led to eventually the peace of Westphalia and the nation state and the internet plus Satoshi Nakamoto led to the decentralization by analysis, the reformation led to the counter decentralization lead to potentially the coin wars, the american anarchy and then question mark, question mark, and the network states. Let me explain what that means. By the time of martin Luther, the catholic church had become this ossified centralized power and had for example, the thing called indulgences where you could go and sin and you just go and pay some money and be like, yeah, the church to be like, no biggie, okay, you have to pass, Yeah, it's a hall pass. Exactly, right.

Tim Ferriss: You can

Balaji Srinivasan: argue, it's similar and you know, I know it's a little bit of poke, but like a carbon credit go and sin with carbon and then by a credit, right? You might argue that's a good thing or a bad thing, but it's, it's analogous,

Tim Ferriss: got to make those fuckers more expensive, got to make them work. But anyway,

Balaji Srinivasan: an even better example is like T. S. A pre where like everybody's a center, everybody's a potential terrorist, but pay this money, you could be an express lane like, huh? It doesn't strike anybody as right, You know, it's like this weird thing where the issue is safety, why can you pay for or at least it arouses question marks.

Tim Ferriss: So two things now, I'm just going to bring us back to your tweet. The other thing I'll say for folks is if you want to learn a bit more about martin Luther and many of the things that followed, there's an incredible podcast episode takes a little while to get warmed up called Prophets of Doom, which is on hardcore history by dan Carlin. It was the first episode I ever listened to of his which got me hooked,

Balaji Srinivasan: fascinating.

Tim Ferriss: Listen, so I recommend that folks and back to our regularly scheduled.

Balaji Srinivasan: Apologies sir, please continue. Great. Also, there's a good thing on this called the Bitcoin reformation with Tour de Meester, T U U R D E M E S T R. That kind of goes through some similar ideas, basically like analogizing Bitcoin to martin Luther. So maybe look at both of those together and then, you know, the historical version and some of the parallels, but briefly martin Luther Because at the time of the printing press, he didn't just nail his 95 theses to willingen in, I think 1517, he basically, you know, people were able to copy his arguments and for the first time, people had heard these sort of deconstructing arguments that said the catholic church is a scam, you should have a personal relationship with God, doesn't matter what the church says, etcetera, etcetera. And so yeah, that was a religious argument, but it was also an argument over power and who should hold power. And for a long time when I was a kid, I don't understand why are people arguing about the body of christ? Like away for it seemed like the weirdest kind of thing to argue about and fight and kill about. I just didn't understand this. Now, I understand that a lot of those things were sort of proxies for who has power does the church have power? Did these new guys have power? And so what happened was the reformation was like this thing basically a decentralization of power away from the church. And the counter reformation took a little while to get underway, but this was the catholic church saying not so fast and basically thought there's some reforms, there's also some combat and these were the wars of religion, you know, do you go with the centralized church or the decentralized protestant movement, protestant versus catholic And eventually after 30 years of war, very bloody war, people were like, Okay, you know, we're going to come up with essentially a live and let live philosophy, the peace of Westphalia where we're within nation states and you have the monopoly of violence within that and a transnational religion doesn't have influence within this geography. So that's to say the catholic church doesn't have influence here. And it was like, okay, we're both pretty bloody, let's settle this. And I think that's way out of living memory that is many generations go. But you know, sometimes people seem to need one thing that's funny is a lot of things kind, of you can argue that happen in like 70, 80 year cycles because things drop out of living memory and then certain aspects repeat. So things people have sort of forgotten how bad war is in some ways. So they're kind of harping it and maybe they'll make it into a real thing. This is actually Fukuyama mentioned this, that his end of history thing actually depression comment that people on some level are wired to struggle. And if they don't have struggle, they will re event struggle that will struggle against order and prosperity to kind of make it hard, manufacturer struggle. Yeah, exactly,

Tim Ferriss: that's right. And that's Francis

Balaji Srinivasan: Francis fukuyama Yeah. Let me actually find the exact quote on a second

Tim Ferriss: and while you're looking for that, then I want to come back to the Bitcoin or Cryptocurrency comparison and the part that I stumbled over when you were reading the tweet initially was the, I want to say the great re centralization or something like that and I just wasn't sure what that was

Balaji Srinivasan: so centralization, decentralization. Re centralization is like entity unbundle ng re bundling like cDS individual mp three's playlists. It is newspapers, individual articles, twitter feeds, It is countries, anarchy, new countries, new cities.

Tim Ferriss: What is that in Cryptocurrency the re centralization.

Balaji Srinivasan: So it is for example in exchange it's happening in many different scales but one of them is store your money in a bank. Okay, pull it all out and then you've got Bitcoin on your computer, store your money in exchange. Okay, pull that out and then put it on a dex partially. Each step here actually gives you a decentralized exchange, decentralized exchange. And there's ways of kind of doing this where you have less risk than on a centralized exchange. For example, it's an atomic trade, it's on the decks like a flash loan and then you're getting it back in the next transaction, there's various ways of doing this where a centralized exchange improves your control over a bank and a decentralized exchange improves your control over centralized exchange. Even if there's parts of it, it seems like you're reinventing the wheel. The wheel was reinvented. In fact there's this great graphic that shows an original stone wheel and then like a chariot wheel then like a modern michelin tire, we do need to reinvent the wheel and we have reinvented the wheel, we just need to be conscious of when we're doing it. So the way I kind of think about this I just finished that reformation analogy by the way, just like there was the catholic church and then there's the reformation which is a decentralizing event and then there was this huge fight with the counter reformation and then eventually a truce where president basically one relative to the previous era but Catholicism did not die out. It's still a big thing. Similarly, I think you can think of the era we're in as the decentralization and now the counter decentralization. So just like the printing press and martin Luther kicked off the reformation, The internet and Cryptocurrency have kicked off the decentralization. And what does the counter decentralization looks like? It looks like deplatforming from social media platforms, it looks like one banking, it looks like the chinese surveillance state. It looks like basically exercising route control. It's basically a route versus routers. So do you have root over this computer system and you're exercising route control or do you have this decentralized set of routers that are just routing packets back and forth? And the counter decentralization I believe is going to succeed in China and fail in the US and what I mean by that is I think China because they have very ruthlessly competent managers.

Balaji Srinivasan: It is actually a good video by Eric X. Li from 2013 which it doesn't hold up in every respect today because there's certain claims he makes that for example, that position ping will step down and that they've figured out political succession because the shipping repealed that or whatever. Those are things where he says that the Mao era is continuous with the Deng era when really Deng was really a coup against Mao's successor, it was a total shift in direction Stalin Mao intended. So those two parts, maybe he just has to say that for domestic consumption or have you, so you have to take with a grain of salt. But the rest of it is actually very interesting where at least gives the 2013 chinese vantage point on their system, Why do they actually have these ruthlessly competent managers? Because the way that the CCP works is yes, there isn't voting. If people want to exercise political power, they join the party sort of similar to how in the US, yes, you can vote, but if you really want to be politically powerful, you want to run for mayor or something like that. That means joining a party. So sort of like that, of course not the same, but roughly analogous. Those people who are quote politically ambitious, join the Communist Party and they might start as running some small, really tiny town of 100 people and then they level up and they go to something of 10,000 or 100,000 people or a million and then eventually 10 million each level becomes more and more competitive and they have surveys they do of the populace And they do like 360 reviews where they're looking at your peers or running other cities and they're looking at your spirit reports. It's like a promotion and a corporation and so of course there's patronage and there's connections and so on that go into it. But it's like a giant corporation where they're looking very much at metrics. And did you build this many toilets? Did you hit your numbers from above? Did you manage the population's discontent? Is this region? Does it have higher dissatisfaction than other parts of china and so on and so forth? So corporation is not a democracy, but it is responsive to its customers in a certain way. And the chinese government was always kind of conscious of losing the mandate of heaven and having too much dissatisfaction so that all these polls and so on. Try to keep ahead of public sentiment, solve these kinds of problems and so on. Again, I'm not saying they're good. I'm saying that this is how they selected for competent leadership that we have a lot of engineers in their ranks and that's why they built a great fire and other things because they have guys who are basically selected as capital allocators managers. So because of that because they set the great firewall because they banned social media because they've done other things. I think china is going to when the counter decentralization where you know, people thought that their bands on the internet and the controls. Internet wouldn't work. They kind of did. They basically just had their walled garden where they have root access and Z Jinping can basically push a button and anybody can be disappeared. There's like super famous actresses that just got disappeared. Now that's, as I said, ruthlessly common because that's kind of a scary thing to be under. You don't really, You don't have any recourse. There's no civil liberties, there's no human rights and yeah, it's true that over the last 40 years they've delivered a lot of benefits to their population. There's this huge group that's being pulled out of poverty, but that level of absolute power can also go south. But the point is that I think they will succeed. They have succeeded arguably in the counter decentralization. By contrast in the U. S. The U. S. Establishment is by turns apathetic. It's either apathy or panic. For example, on Covid. Oh, it's not a big deal. Oh for example, these tech journalists wrote this article. No handshakes. Please trying to make fun of anybody for taking precautions. Trying to shame, taking precautions. Folks wrote about, oh these bubble boys are so concerned about this. Making fun of this early on in Covid and then they switched completely to panic later and never acknowledged that they had all this false reporting misleading reporting. You know, they accused people of being racist for saying, hey maybe we should have the chinatown parade after With the Wuhan coronavirus on the loose after Wuhan itself, it canceled its own parades. This is like January February 2020. So what happened was they were at first apathetic, this is not gonna be a big deal. Nobody should do anything. Then they're panicking. Oh my God. Uh and so that kind of mode is very common. The us establishment is not selected for folks who look ahead. It's selected for actors propagandists. It's not selected for capital allocators. Just a couple examples of Lorena Gonzalez, this legislator in California thought that relatively junior guy at founders fund was a billionaire or brian Williams. And uh remember the new york Times editorial board thought that if you divide a Bloomberg's fortune By three million Americans, all of them would get like a ton of money and obviously they wouldn't. So you actually select for folks who are verbally good but enumerate and that's very different from the chinese system selects for and that results in folks who are not like vcs or technologists are not like calculating ahead or doing contingency planning or saying neither apathy nor panic. We can have a technical plan to potentially succeed if we do X, Y and Z. So what that results in is a US establishment that's always behind the eight ball. Lehman is a surprise bears a surprise. Covid is a surprise trump is a surprise. Afghanistan is a surprise. Everything is surprise and then they react in this very reactive way. Facebook is a surprise and why is the surprise? Because facebook's a fad, facebook's a bubble. These tech journalists, for example, in 2013, even there's this article, why facebook will never make a significant profit or famous article amazon dot bomb, okay? Or another, you know, N. Y. T. Classic google's toughest searches for a business model and it's it's something where, you know, this goes back so far in some ways, basically these guys are they're so used to inheriting something that they could never have built. They sit upon this us establishment that they don't understand what it is to build something and they don't think anybody can build something. And so for their dismissive of the stuff until it gets so big that it can't be denied. And then they react in the super panicked way.

Tim Ferriss: So let's extend that to current and near term crypto and you can take that in any direction you want. It could be Btc ether otherwise, in the U. S. Is there going to be a rash

Balaji Srinivasan: regulatory whiplash

Tim Ferriss: because we've already seen cease and desist letters

Balaji Srinivasan: and so on to defy companies and there's a lot of scrutiny for lending

Tim Ferriss: products. Where do you foresee that Going?

Balaji Srinivasan: But I will say one thing which is Once you do get in the mode of trying to react to this stuff. That's all that point. 01% traction. You're thinking like an angel investor because it's like when you start looking at that dashboard and you no longer set your filter, it's something that's at 50% of the population traction or even 10%. You know when you go to point oh 1% and a tiny percent of the population using it. The number of things you're looking at explodes and you need to have a really good detector for what will be important but won't be and it's going to be erroneous at times and it needs to be quantity because you put in 50 K. Into this and 50 million to this. And so it's hard but that's actually what capital allocation involves, especially in the modern era is figuring out what's going to get big and getting ahead of it. So to your question, what is going to happen with sort of the regulatory states collision with crypto? There's various scenarios but I think on balance they're going to lose. And let me explain what I mean by that.

Balaji Srinivasan: They

Tim Ferriss: mean in the U. S. Government,

Balaji Srinivasan: the federal government is federal government and why do I say that? Well, the short version is the U. S. Government is losing control over both domestic and international affairs and so states and cities within the U. S. Will take positions at variance with the feds because cryptocurrencies coming so valuable to them that they'll have the equivalent of Sanctuary States and Sanctuary cities for crypto. Crypto entrepreneurs will write model legislation that will be adopted by places like texas and Wyoming and colorado and florida and other kinds of things that for example, prevent Bitcoin seizures in law before the thing happens that give this already there by the way, in some ways like Wyoming's tao law is quite advanced. Miami has accepted some city coins and texas is big and Bitcoin mining is already happening. But the next level of that is doing the same thing that they're already doing versus the Feds which is openly defying them and saying actually we're doing state nullification And just to give you some recent examples of this, the federal government is losing control of events. I just made like a little list of this the other day, but both domestic and international affairs, inflation, Afghanistan, china on Taiwan France, on the august thing. El Salvador and Bitcoin 17 states by the way opposed this idea that the FBI should be sent to school board meetings in 17 states sort of letter on education texas has taken a different policy on, on vaccine mandates and abortion Germany went its own way on North stream to florida is pushing back on this financial surveillance things saying that they are not going to abide by the federal government edict on this. So you're seeing significant energy at the state level within empire and then also outside from places like El Salvador or Switzerland that are just taking policies that are at variance with what the US government's position is now, this is quite different from 10 or 15 or 20 years ago when under Obama for example, there was a lot of kicking in doors in europe, going after swiss bank accounts or sanctioning everybody on the planet or invading everybody for democracy, like under Bush. So abroad there are a lot of muscles being thrown on and then domestically, basically the Feds would would step in and force states to do something. But over the last few decades, what we've seen, our sanctuary cities for immigration, we've seen states have different gun laws have seen states have different marijuana laws. We're seeing a larger and larger divergence states, for example, had different gay marriage laws than the Feds for a long time. We're seeing a larger and larger divergence. States are becoming genuinely differentiated from each other and from the federal government and that's happening within and then countries abroad are also taking a different route. So France. For example, you know, now they're going hard on nuclear, which is definitely not a priority of my knowledge, at least the current of men Germany is trading with Russia. That's not something the government wants them to do. India's trading with Russia on like some missile stuff that's again something the U. S. Government threatened sanctions on. So countries are doing things that the U. S. Government doesn't want them to do and states within the US are doing things, the federal government doesn't want them to do so because they're losing control over world events. The whole pax Americana is based on The repeal of the 10th amendment at home and regulatory harmonization abroad. So you know, FDR effectively repealed the 10th amendment where everything that wasn't officially the federal government was left to the states. But a very broad interpretation of the interstate commerce clause said that everything is interstate commerce. So the states actually don't have any rights. We're going to re interpret as a federal government having power of everything and therefore you get these alphabet soup of agencies, FDA and SCC and all these things kind of rosa, the FDR and then abroad go ahead.

Balaji Srinivasan: You

Tim Ferriss: know, I was, I was just like the alphabet soup mentioned shows you my level of humor sophistication. But if I could interject for one second if you had to live in the United States, where would you live and why

Balaji Srinivasan: texas or florida.

Tim Ferriss: Okay. Why?

Balaji Srinivasan: Probably florida why? Because those are becoming like freedom states. I think Wyoming is also good. I think colorado under Jared police is really good. You're basically seeing the pro freedom Jared polis a democrat by the way. He's a tech founder. He understands

Tim Ferriss: that was Blue Mountain right way back in the day. Didn't didn't you have Blue Mountain the gift card company way back in the early days. I could have sworn that's right.

Balaji Srinivasan: Yeah he

Tim Ferriss: was he was a few years ahead of me at Princeton and did very well.

Balaji Srinivasan: Super smart guy. I think he actually is like involved techstars and so on. So it's something where in some ways sort of the center and south of the country are going to diverge from the west Coast and the Northeast, I think, you know, roughly speaking, but that's not straight democrat Republican, that is more decentralization vs centralization. And so I think that those states, it's really like a search engine. Right? One thing I've wanted for a long time actually, I wrote about this like 89 years ago, but I think that the next political model is what I call a crowd choice where you have a search engine where the rose or jurisdictions and the columns are policies sort of like nomad list dot com, but it's basically a bunch of attributes and then you just put in your preference and you sort and filter. But then the next step is to group with a bunch of your friends and have you all put in your preference vector and then it finds a jurisdiction that is closest to your collective preferences.

Tim Ferriss: Let me ask you just before we I want to not lose that. But with florida and texas, when we're talking about freedom, what does your hierarchy of freedoms look like because there are also a lot of people listening just to act as a proxy for the listener and say, well, you may have greater say financial freedom because a state might act like a crypto safe haven of some type. But there may be sacrifices that you make and sort of tacitly endorse

Balaji Srinivasan: in several studies, reproductive freedom.

Tim Ferriss: Exactly. How do you, how do you think about the how to stack rank

Balaji Srinivasan: those things? The first thing I would say is as a pragmatist being in the U. S. And the U. S. Is and means you're sort of de facto funding all the wars, the U. S. Wages around the world and so on. So people are implicitly already making moral trade offs of some kind when you point that out that sometimes takes the heat down because the new thing is different from the thing that it's already baked. The moral compromise have already made implicitly you buy stuff and you don't know where that supply chain comes from. Maybe there's something that you would disagree with that. So people make these compromises all the time. And fundamentally I think it is, it's a vector. Policy is not a scalar. It's a vector. It's a set of decisions. You know, a tax rate of X and 01 as to whether drones are legal and this is your reproductive freedom. Social abortion policy. And this is your, this policy. And you know, there's, there's an aspect of the gospels non dispute tandem. I can afford.

Tim Ferriss: You ask. I don't know what that means.

Balaji Srinivasan: Oh,

Tim Ferriss: sounds like some latin though. If I'm not

Balaji Srinivasan: probably mispronounced, but just a business dispute tandem is in matters of taste there can be no disputes. So there's aspects of this that our preferences rather than absolutes. I might say thou shalt not kill but I can't say thou shalt like the color green, that's a preference. So some of these things and crucially by the way I think there are multiple Optima this, by the way, I was coming up with sort of a name for how I think about you know my philosophy or something,

Tim Ferriss: could you define Optima please?

Balaji Srinivasan: Sure. Yes. So imagine looking down at a bit of hilly terrain and a local Optima is the peak of one of those hills and a global Optima is the highest peak of the highest hill. Got it. So if your goal was to ascend to the highest height, you might ascend to the top of one of the hills. But really what you want is the global Optima in this case, which is the top of the highest hill. However, it could be the case that you could have multiple hills all in the same region that are basically of the same height. Got it. If for example you thought of your kind of latitude and launched you there as I don't know, let's say your percent of time spent remote and your I don't know your equity compensation versus cash percentage in a company culture. These are like sliders that you could set to like zero and 100 both of them. And if you replace that hill analogy with latitude and longitude with these 20 and 100 sliders, you can imagine different kinds of companies that have different combinations. They're both equally successful in market cap on the Z axis, but that had different policy combinations,

Tim Ferriss: yep. How does that apply to two states similarly,

Balaji Srinivasan: how would you look very similarly?

Balaji Srinivasan: That's right because I think right now we sort of think of companies currencies, cities, countries, communities as being different things but they're all going to become the same thing essentially the projection of a social network or rather companies become like apps effectively on this will sound like tech babble. Okay, but a Blockchain is property rights, identity, historical records, marriage and birth certificates. All the type of stuff of society can run a ton of stuff that it currently does at city hall on a Blockchain. Its property rights. It is who has admission to what building, who owns what property, what sale occurred at what time, who paid, who dispute resolution. A lot of that stuff goes on chain and then a lot of companies but off from that and use that as an application point. So all of these things basically set around companies, currency, cities, countries, communities all settle around jeans that is like the software stack for running a community and you know an analogy to this is before the internet, books and movies and music and songs, television, telephone calls. Those are all different. And then after the internet they turn into packets and all kind of mixed together. And so the normal thing that a macro economists will say is you'll say something like governments, aren't households? Have you heard that before?

Tim Ferriss: Nope, I have not.

Balaji Srinivasan: It was a quote actually. Think it was Tyler Cowen quoted it. Thing is john Lanchester in the something review of books. Gosh, hold on, let me find it january 2013. Richard Feynman was once asked what he would pass on if the whole edifice of modern scientific knowledge has been lost and all he could give to posterity was a single sentence. What axiom would convey the max amount of scientific information. The fewest possible words, his candidate was all things are made of atoms in a similar spirit. If the whole ramshackle structure of contemporary macroeconomics vanished into thin air, the field had to reconstruct from scratch the sentence which packs as much of the discipline. It's a few as possible words might be quote governments are not households. The reason this is really important is this is why people will argue that what I'm talking about for companies doesn't apply to cities or countries because they're fundamentally different governments around households and there's a whole discipline, a macro that has arisen around this. However, I argue that actually in many ways american and western macro economics is in its own way as pseudoscientific as soviet economics was there's a whole discipline by the way of soviet economics marks economics that had all these equations and so on. And there's some aspects of it that are still useful, like Cantor's work on mary's Cantor, Cantor, vich on linear programming and optimal allocation, you know, so some of it is okay, but a lot of it was basically essentially just a recapitulation of Marxist premises. And when they say governments are not households and they say that recapitulates the whole field, What they really mean is that the government has guns and households do not and therefore the government can seize money and course people to do things and households cannot do this. So everything which assumes some ability to redistribution some ability to print some ability to this assumes that that is a hidden assumption. The bullet point at the end of Q e d is a bullet. And the assumption is of course, of course, as opposed to physics where it's, the analogy gives us to physics and atoms, the human element isn't there? So once you say governments are not households and you think of it from a different angle of governments have guns? Yes, it is true, they are different. But I do think that in the medium term future because of exit because of global mobility. I mean we have this tension now, you know, I talked about exit a lot even before the coronavirus as the most important, right? But post corona post lockdown, people prize it way more when it's taken away, you prize it more. You prize free migration, you prize ability to leave. And we're seeing a great migration in the US. So the great resignation, the great migration remote work all this and lock down all this stuff has made people both more aware of, you know, how important the policy is of the state that they're in and we're able to move and you know, by the everybody doesn't have to move. Only a small percentage of the world moved to the US and look at what a big deal that was on the margins. Some degree of mobility can cause massive change. This is also why everybody doesn't necessarily need to hold their coins. The fact that some people can is enormous leverage on the system. It's just like, you know, steve bomber back when this apocryphal story. But when an executive left from Microsoft, google supposedly like threw a chair, shoved a chair or something like that, everybody didn't need to leave google enough people need to leave that he's like, okay, this is real google is a real competitor. And eventually that led to him stepping down and Cynthia taking over. So the thing is that the great resignation, the great migration remote lockdown, all of these things mean much more exit when there's much more exit, when you can hold your coins on your person when you're renting rather than buying when you're basically running light and your stuff is in N. F. T. S. Rather than real estate. And when all of the stuff when your books are in kindle when your mail is in gmail or ideally you know in some kind of decentralized versus centralized service when you don't have obligate ties to the land then the state has less leverage. And so because of that over time it moves for example to like a subscription model

Tim Ferriss: when you say it, you mean residency in a given place.

Balaji Srinivasan: Yeah like Swiss Cantons have something like this where you pay X. Dollars per year and that satisfies your obligation to them to live there. And I think the future business model of government is a subscription and be inflation. What that means is there's a SAS type service that you subscribe to and that gives you access to all this government stuff like a V. Zero that is like saying pass in Singapore for example Estonia something called X road. And the thing about this is it actually isn't just a revenue model for them. It's also actually a crime and punishment model where right now we think of digital deplatforming as completely lawless and policing as forceful and inhumane. But it may turn out that in the future if your punishment is being the platform for something but it's written in law beforehand it's not some arbitrary thing that's being made up, it's like seven day suspension in order for doing this and it's

Tim Ferriss: like having your driver's license

Balaji Srinivasan: revoked for infractions. Yeah, exactly. And so the thing about this is I'm not saying that's good necessarily, but it is more humane than jailing somebody arguably. And again I'm not also say I'm not so unrealistic as to think that physical punishment is never necessary or anything like that. Not at all. But I do think that having levels of steps are valuable where you don't have to escalate it all the way you can have a deterrent, which is you know, a slap, you know, digital slap or digital suspension versus all the way to the gun. The gun is a really serious thing. So basically when you have these subscription states, you pay and you have effectively access to this service and doors open and literally physically open like you know the key unlocks it. It's basically digital border control in the sense of why do you have access to the state because you've paid in, you have a subscription, you have an identity unifies passport, driver's license, all of this stuff. Now, immediately people say, oh my God, that gives the route operator of the state enormous control and it does. So that's why you have to preserve the right to exit, you have to preserve Bitcoin, you have to preserve Cryptocurrency and then there's boundary cases where if you went and killed somebody which you then have the right to exit right after that probably not. And so there's some social smart contract that you sign upon physically entering or virtually entering this jurisdiction just like terms of service on the website. But it's more serious and you might require like a Cryptocurrency deposit for example, rather than just a click through if I have read this. And so it's almost like posting bail or posting a bond to enter the jurisdiction and if you we're hosting a deposit with rent and if you exit without doing this and that is forfeit and that is significant enough for example, to deter petty crimes and whatnot. So that's like the subscription aspect and the inflation aspect is I think as I said on Bundling and Bundling Bitcoin is necessary as a corrective to 20th century fiat. But there's another way of thinking about fiat, which was actually a useful thing for me to conceptualize, You know, Chesterton's fence, you know, the concept,

Tim Ferriss: I do not.

Balaji Srinivasan: So there's a fence sitting out there and someone says, I don't know this fence is here, I'm going to tear it down. He's like, well if you know why that fence is there, then maybe I'll let you tear it down because it might be there for a good reason. There's a second version of this which says often there's a structure that exists and the reasons that people give for its existence are not the actual reasons for example religious taboos on preparing milk and meat a certain way trey for Haram. The theory is that that was related to in a desert environment, food would spoil and these taboos would roughly keep people safe even if they we're kind of religious as opposed to scientific, they sort of help people stay away from impure food. And so people thought you were struck down by God if you violated them, but it's really a bacteria or something you had. So the practice kept you safe. So even if the active ingredient wasn't well understood. So one thing about fiat currency that I observed the other day,

Tim Ferriss: but hold on, hold on a second pause there. So you said they believe something where they believe the justification for something. I think you, there's sort of an inaccurate assessment of the history of something. So that is true. You take that to be true or untrue what you just said about the religious sometimes true food taboos. Okay,

Balaji Srinivasan: got it. Sometimes. Like I haven't run the study myself to see if these written religious practices actually ended up in food purification. There's certainly things where there's tribes that have had a potion preparation processes that include a genuine active ingredient, that pharmaceutical companies have been extracted and put into a pill. Yeah, there's often an active ingredient in some folk practice that we don't yet know how it works. For example. One thing is sort of interesting is like acupuncture and bio electricity, bio electricity is actually like a real thing. It's not really talked about but evidently has implications for wound healing and so on and maybe acupuncture is tapping into that. This guy. He's got a great Tiktok.

Tim Ferriss: Are you on Tiktok?

Balaji Srinivasan: No, but educational Tiktok um what's his name? NASDAQ NES J A Q has a great video on by electricity and like limb regeneration with citations and visuals and and so on. So sometimes there's stuff and it works and we don't know why it works and in fact maybe our reasoning for why it works is wrong. People actually still disagree in some ways on how lift works for an airplane. Of course with physics there's there's things like this. So the two business models of states in the future will be I think rather than course it will be subscription, inflation subscription. We just described inflation data is this Bitcoin is short term volatile but shows immense long term appreciation. The US dollar is actually the opposite, it is short term, relatively stable. Forget about inflation for now I'll come back to that. It is short term relatively stable but over the long term you can see it has had a huge drop in purchasing power. Now right now this is talked about in a moral way and I understand why because essentially the quote fiat engineers don't really acknowledge this as a trade off or even recognize it as such. It gets back to this thing of like the religious taboo but if you think about it from an engineering mindset, most people hold a portfolio. They don't hold 100% Btc and 100 or 200%. Some people 100% usd but you don't usually hold 100% Btc, you hold some Btc and some usd. Why? Because some of this is stable on a daily basis and the rest is appreciating over time. Now here's the concept what if those are just opposite engineering tradeoffs that say the long term depreciation of fiat provides effectively the funds to stabilize it in the short term. And just to think about that from an equation standpoint. If you were to do it like an order book is

Tim Ferriss: uh probably not what I have in my imagination. So why don't you tell me?

Balaji Srinivasan: Okay, so this was something actually which I didn't know before I got into Cryptocurrency and I think, I mean the number of people who know this is is probably increased by 100 or 1000 X over the last 10 years.

Balaji Srinivasan: And it's very important because it describes how supply and demand and prices really interact, prices don't come from storks they come from this and where does it come from. Okay, so let me explain then I'll come all the way back up. So you go to the store and you buy, I don't know a gallon of milk that's gonna cost you don't know how much it is today, let's say it's Five bucks, okay, maybe $10 with all the inflation, but $5. So fine. You're a price taker. If instead you go to the store and you say I want all your milk, I want 200 individual one gallon bottles, I'll pay five bucks per, you can do that. But now if you want yet more milk, you need to go to the next door. David inventory of 30 Gallon bottles, but it's 5:50. And as you start buying out inventory here, word gets around and people start hiking the price because they know you're going to walk in and clear them out of all of this liquidity of milk. And that is a difference between having a small enough demand that you don't really affect the price and having a large enough demand that you actually move the market. And one way of thinking about it is these are like bids that are placed on either side. One store has placed a sell order of 200 gallons of milk at $5 and the next door has placed a sell order of 30 gallons of milk at 550 and all of these add up to be all of what is for sale and there might be a ton, there might be Thousands of gallons if somebody really wants to pay $20 a gallon, there's like thousands of gallons that become profitable to produce at that level at that price. And then conversely demand is sort of lowest at $5 whether it be a ton of demand, there might be lots of people who would buy a gallon of milk for a dollar. So you can visualize this sort of V. Shaped thing where the current market clearing price is five bucks, but if a lot of people suddenly by and clear out the supply then the next available unit might be at like eight bucks or 10 bucks. And conversely if there's a huge amount of supply and there isn't demand in the market clearing price drops from like $5 like four or $3. Okay with me so far I am so that is called an order book and that is actually how prices are born, prices literally come from the interaction of supply and demand. So all kinds of people are being trained as true capitalist because they're actually seeing the root acts to the system, how prices are set between supply, demand, supply and demand are now like computable, visible tangible.

Balaji Srinivasan: This has huge implications for lots of things because those order books are going to come to everything as we crypto if I the whole world, it's not just BtC USD that has an order book where you're buying units of BtC for blocks of USD or vice versa. It's not just either USd, it's not just every coin versus every coin, it's every asset versus every asset. This is what I call the defi. Matrix a digital wallet doesn't just hold Bitcoin it can eventually hold everything you know fiat currencies, ethereum tokens, N. F. T. Is whatever and so it's got billions of rows but doesn't just hold everything everything trades against everything

Tim Ferriss: just to interject for a second. I mean a very concrete I feel like N. F. T. S. And expensive or not expensive J. Bags are sort of the Will be an on ramp. It's like a gateway drug for a lot of people into crypto and Web three and so on and you can see just for people who want to look for articles on this and certainly you can see it yourself. But if you compare traditional art to say open sea and collectibles or an F. D. Artwork on open sea Price discovery

Balaji Srinivasan: and

Tim Ferriss: the sort of transparency of order book that you're talking about is right there and then their analytics being built on top of these market places. I want to give one example of what's already happening for folks.

Balaji Srinivasan: Exactly. Right so essentially order books mean price discovery all kinds of things suddenly become liquid and price herbal things we could never price before like a minute of your time as a jpeg megabyte on your hard drive all that type stuff becomes price bubble and just related. I'm going to talk about the T. Five Matrix come back up to the order book, come back up to smart fiat then back up to subscription inflation then back up to the re bundling after the american anarchy. What does the T. Five matrix digital wallets mean? You can hold every asset in your computer not just Bitcoin not just theory. Um But fiat currencies like CBD CS. When central bank digital currencies come out every stock, every bond, every N. F. T. Every video game potion. You have a billion items in your digital wallet. Those billion items you can just hold them you trade them against the billion items. You have this gigantic table and every existing exchange today crypto exchange, stock exchange, foreign exchange foreign currency exchange. All of them can be considered sub matrices of these like a crypto exchanges fiat currencies and crypto currencies versus each other. A stock exchanges, stocks and fiat currencies, foreign exchanges currencies versus currencies. All those are just sub matrices of this massive defy Matrix and some of them are actually exchanges and some of them are so called automated market makers. Where you've got some rare piece of art and you've got rather like some infrequently traded token and you've got another infrequently trade token. This will give you some conversion to them at some price. It might be a high price being good directly between them. The defi matrix means everything is just getting re priced all the time. Every asset competes against every other asset. People don't understand how big a deal this is. It's kind of like

Tim Ferriss: it's a huge deal, huge huge deal. Yeah Even for a Luddite like me, it's a fucky huge deal. Once you really start to look at it it's huge, enormous.

Balaji Srinivasan: It is the internet of wealth, internet of money and it's going to be similar. It's like every newspaper went online and then google news came online and index them and suddenly every newspaper is competing against every other newspaper. And so what that meant was that now all the ones that were just reprinting ap stories were no longer competitive and so lots of weak newspapers that weren't adding that much value died. And so in the same way when every asset is competing against every other asset that is like extreme capitalism, there's no geographical advantage anymore. Not just competing but

Tim Ferriss: also you can sort of cross collateralize and do all sorts of wacky not wacky but new things that are going to

Balaji Srinivasan: upend a lot

Tim Ferriss: of our current thinking around how capital flows.

Balaji Srinivasan: That's right. And one of the big ones is it's actually a second attack on fiat currency. The first attack is that Bitcoin appreciates and Bitcoin can't be seized and so on. Like all the stuff we've done our last last 10 years. The second attack, what do they call it when you sell a company where you go I. P. O. They call it a liquidity event because cash is universal barter and you can exchange it for other things. Whereas you can exchange stock directly, the defi matrix changes that everything is always liquid all the time. So at some price you can get a quote for something so long as it's not like banned by the state. And if you can get a quote for something, do you need to actually converted into cash? You can just do it instantaneously. You can liquidate as necessary and in fact you want to hold minimum necessary cash and have everything else is cash doesn't appreciate. In fact cash depreciates. And so now liquidity is itself a second hole access where it reduces the amount of wealth held in fiat currencies. The T. Five matrix is this very very big thing.

Balaji Srinivasan: It will be to this decade. What the social graph was the previous one. And you might say well why don't countries? Hispanic. Well the thing is that coercion only works within your borders and large countries can try it. But small countries like Switzerland or Singapore or Dubai or Sonja will see an opportunity here two level up their fiat currencies recognizing that they no longer have a geographical advantage. Just like local newspapers no longer have the geographic advantage. They just put in this global competition, recognizing no longer geographic advantage. They might add privacy features. They might add transparent management of reserves. They might add Bitcoin backing suddenly currencies are competing with each other in a way they never have before on features and not simply like monetary policy and so on. Central bankers become metallic and zuko the smart ones at least the ones who don't just like the newspaper guys that they don't mgm I you've heard that one

Tim Ferriss: not gonna not gonna

Balaji Srinivasan: make it. Exactly, I'm not gonna

Tim Ferriss: probably nothing.

Balaji Srinivasan: Yeah,

Tim Ferriss: probably nothing. Exactly.

Balaji Srinivasan: This is something that the remote economy has done is it has put Miami in direct competition with san Francisco and poorly managed cities. Right? This was recently reported, I don't know how true it is, but the mayor of SF told the mayor of Miami, hey, stop taking my people, he's like, I love you. But know That is awesome. And the reason that is awesome is removing from the Tired two Party system to the wired EN City system from two parties to 20 or 30 or 50 or 100 cities competing for you means that internal disputes are less an inter city competition is more, which is healthier. Arguably you can, you can say that gets bad when it goes to interstate violence, but it is good when it is economic competition because that is, you know, this marquis of Queensbury rules and make your city better and make it greener and make it cleaner and make it healthier and have a better life for people. And you'll attract good residents. So coming back up. So the defi matrix was every asset against every other asset, all assets. Trade against all other assets in the defi economy. Just like all cities trade against all the cities in the remote economy, by the way, Those are related because municipal bonds and municipal equity like city coins are like municipal equity, you know, the equivalent municipal bonds in a sense, or like the next version. All of those will also trade. And so you'll have the price of a city, Every ideology, everything will have a price which roughly reflects people's measure of belief in it. Are there more buy orders? Are people long on the city? Do they think it's going to improve in 10 years? Is the next Shanghai or is it the next Detroit sell, sell, sell sell that's reflected in real estate values currently today. But it's kind of opaque that all becomes reits that are on chain. And so the price of the city goes up and down. And in fact, that is actually probably gonna be the determinant of your re election. Did you boost the reach of the city or not? That's actually quantitative and numerical and empirical. It cuts through the Bs. Did you deliver shared prosperity for your residents or not basically. Did more people want to buy into the city by a subscription by a piece of the digital read versus not. Let me talk about the read for a second, you know, real estate investment trust. One thing I've thought a lot about is there's an interesting way to sort of cut the Gordian knot of Nimby nimby and

Tim Ferriss: what the hell is Nimby N. B. I was like, I got Gordian knot, but what is the hell is New B. And B.

Balaji Srinivasan: Nimby N. B. I'm a little surprised you've heard this one because it's a big thing in cities and probably in Austin, but nimby is not in my backyard, you can't build in my backyard. And then um B is a more recent movement that's like, yes, in my backyard, we need to build housing. You know, housing scarcity is bad and essentially this is like this interest city kind of thing. Now what leads to this dispute is that the nimbys have their own houses and their property values go up if they can constrain supply while demand remains constant. A lot of stuff they did in san Francisco restricting housing construction because the shadows and some sort of I think is short sighted because by driving away demand, it's something where the long term it's Detroit defying the city. You know tech is leaving not even that long term. It's happened, especially with such

Tim Ferriss: a limited inventory. I mean especially for a city of

Balaji Srinivasan: that size, right? Yeah. The rebuttal to this is, oh that place sucks. It's too crowded and the food sucks. That seems like a contradiction. I'm butchering that, you know the proverb, nobody wants to go there, it's too crowded. But there's a truth to that, which is why did friends do not make it, it couldn't handle the traffic. So people went elsewhere, Nobody goes there anymore. It was too crowded, meaning it fell over, it couldn't handle the load, it couldn't scale and therefore it lost. So yeah, the demand goes up and then it crashes down to nothing. So nobody goes there anymore. It's too crowded. Is not always a fallacy. Sometimes the real thing, it means that thing couldn't scale. The point is that with an M. B. M. B. And hear me out because I'm going to say something that will sound totally shocking or whatever. Okay, maybe,

Tim Ferriss: thank God this was this was the whole conversation was just so timid. Please continue.

Balaji Srinivasan: Okay, so maybe the problem is actually that direct ownership of non fungible property leads people to only have an interest in their local house, but not a shared interest in the city or community or town as a whole. And if you can separate out the utility of living in the house from the value proposition of selling the house. And actually easy Jinping of all people was like houses should be for living in non speculation. The more that people move into the digital realm, the more they start thinking about things in terms of investments and so on. Just like you can split out for example of corporate stock, you can split the voting shares versus the economics and you can like sell the vote independently in some context. Can we split out the utility from the appreciation and one model is you buy a big plot of land, like a burning man style thing in the middle of nowhere and you set up a read on it and basically every square, you know, I don't know, maybe every square meter or something like that is like a share in the read because it's all equal at the beginning. You might say the city center is somewhat more valuable than the outside. When somebody goes and lives there, they do not own their home instead, they own shares in the reit. And so as the city expands, if they're asked to literally like demolish their home and like move to maybe a bigger home, but something differently, they have an interest in the city as a whole, they have an economic interest in the city's whole, not just their individual home, you know what I'm saying?

Tim Ferriss: I do. And I was thinking, you know, in addition to the read, I can't remember the terminology used, but like the municipal bonds, the city tokens, I'm not sure the proper phrasing. But if your taxes or your sass fee that you paid to a given city or state went into a city or state based token insufficient quantity and you have to figure out what the sufficient quantity is to properly incentivize someone who's resourced at X level or Y level or Z level that would also sort of a line.

Balaji Srinivasan: So it's interesting. You could kind of go back to have you heard of George's um

Tim Ferriss: Mhm. I haven't, it sounds like it has something to do with George though.

Balaji Srinivasan: Yeah, so well yeah, so Henry George, this was this concept which is, is obscure, that this one is a pretty obscure I guess, but it's things might come back to the future. So George is um is the idea that the one thing that governments really do own is land. That's the arbitrary thing and that all revenues should come from that. And it's interesting because kind of outside of left and right, the premises, everything else's value added by humans. But land is the thing that was arbitrarily sort of stolen or controlled or whatever by a government. And so land is the ledger that states have access to and more generally land plus natural resource rights. And the thing about this is you can imagine people talk about gold backed currency, You can imagine land backed city coins where the city is reorganized as a reit, this might have to be done from scratch by the way because legacy cities might not be able to do this reform basically like land reform under communism, you know, in a sense collectivization except its capitalization ideally you would be opt in

Tim Ferriss: sounds tricky.

Balaji Srinivasan: Sounds tricky. Yeah, so like doing with the legacy City, I don't have a good answer for it, but let's say you go and buy land in the middle of nowhere and there's a ton of middle of nowhere by the way, America is still a big country Russia's big. Canada's big. There's actually lots of wide open piece of land and what you do is because it's the internet, you do a drone overflight of it. You recruit people to crowdfund this territory and they have to buy in and hold the city coin that's like the right to build on this number of shares like square meters or whatever the territory they have to commit to. Some holding period. They can't just by and then leave and speculators commitment to actually build into it. And then you have something where at the beginning is another thing,

Tim Ferriss: just a quick side note that's another thing I learned about since kind of wading into the waters of Web three wash trading and all that kind of yeah. Anyway we don't have to go down that rabbit hole. But yes, so to prevent people from flipping, there's a holding period. Mhm.

Balaji Srinivasan: It's essentially something where it's again unbundling and re bundling where in a sense markets say, hey screw loyalty. It's an economic transaction and these sort of rediscovered loyalty or patriotism or loyalty cards or frequent flyer miles or holding periods, whatever you wanna call it, loyalty is valuable because loyalty produces collective goods that an individual can't necessarily have on their own. Other people's loyalty to something is valuable to you because you know it'll be stable and will be there when you come back.

Tim Ferriss: We should take a second just for people. So hold ling total H. O. D. L. I've read a number of different explanations for this one is hold on for dear life, another one is hold but it was a typo and therefore

Balaji Srinivasan: that's what, that's what it is. Yeah, that's what it was basically. It was a typo, there's a guy who's drunk and you posted, I'm not smart enough to do the trades, I'm just holding you know

Tim Ferriss: and off it went,

Balaji Srinivasan: have you heard the term backronym?

Tim Ferriss: I have not heard the term backronym.

Balaji Srinivasan: A backronym is a reverse engineered acronym. So hold on for dear life is like a reverse engineered acronym

Tim Ferriss: like that. I like that. That's clever.

Balaji Srinivasan: Yeah. They often just for like you know bills coming out of D. C. Like the patriot act or something. It's like abbreviation or whatever or the cares act. So basically, and by the on the topic of like loyalty and so on. This is actually a deep point because my friend and you know somebody who, I agree on some things just kind of things. No smith had this tweet about how when the police were basically quasi abolished in san Francisco, you have organized crime looting the stores and actually the working class employees at these stores are being victimized by essentially a mafia criminal class because the police have left, it's not like some jean valjean going and stealing a loaf of bread. It's a guy who's just like methodically loading stuff into the car and then going and fencing it on amazon or ebay. Very different kind of thing. It's genuine crime organized and willful crime.

Tim Ferriss: Yeah, totally different. And people can look back at the Loma Prieta Loma Prieta earthquake and what happened during that period of time

Balaji Srinivasan: in san Francisco, same story after the Loma Prieta earthquake that happened

Tim Ferriss: well after the Loma Prieta earthquake, people overestimate the amount of infrastructure mobile infrastructure that is available in a given city rights in san Francisco to disaster response training with the it's called note note northern California emergency response team training with the Fire department and believe the police department is also involved and they just kind of suspect out how long you could expect to go without services if certain capacities went down like water or electric and during the Loma Prieta which is also called I believe the World series earthquake because it was caught on camera during the world series. People were, well I shouldn't say people, criminals were greasing the hills at Dolores park and just Carjacking car after car after car after car which is sort of like just a reminder of some of the possible harsh realities that

Balaji Srinivasan: await you if you have

Tim Ferriss: no available

Balaji Srinivasan: law enforcement or infrastructure. So so let's get to decentralize defense in a bit after the american anarchy but

Tim Ferriss: we still don't know how inflation

Balaji Srinivasan: fits in dollars. Yeah. Okay. Okay okay so the thing about this is abolish the police abolish the economy or at least the physical economy and the reason is in the digital world and everything that you can map digital, you can protect it with the cryptography. But the physical world still requires physical violence. It may eventually move to robots like drone enforcement of law or something like that. That would actually mean laws, code really is law, but at least for a while it is going to be physical police and and so on. But we're starting to see robot cops like robot dogs and stuff walking around the cops. And so we were like in The one of this era, the old .1, but abolish the police abolished economy means if you don't have police then people are just going to steal if they're just gonna steal. There's no property rights and there's no stores and all the Walgreens leave and whatnot. But it's actually also deeper than that which is, you know, unless there's some prestige or praise because you know, the police, the military do risk their lives for relatively low pay actually. I mean, I know policemen are sometimes well paid nowadays, but in general and you can argue this point, of course, you know, lots of people who get mad about this, but in general, you know, at least for service, the risk of death is actually non trivial. And so the price often can offset that. But what does is the patriotism and the feeling of serving your country and serving your collective and whatnot. When that loyalty and patriotism is no longer there. When that center doesn't hold, when people don't believe in it, it's not like the economics can just continue or at least they can't continue very easily because the guys who will step up to essentially collectively defend property and going back to the earlier thing, you know, it's when there's uncertainty that war happens, it's when there's uncertainty that crime happens, if there are strong punishment, there will be no punishments. The Xiangyang concept. It's like the variable reward, the variable punishment that kind of like, you know, should I make a break for it? Should I go for it? If it's certain, then people typically won't do it. It's like a very swift and certain deterrent. If it's worth the risk, it might be worth the risk what you don't want to be able to start calculating whether that kind of crime pays once they start calculating it than it's bad. You've got a destabilization because more people do it and that overwhelms even more limited resources and you start moving to a new equilibrium of a mafia state, which is like Russia in the nineties, which unfortunately I think is similar to what the coming american anarchy might be. So just talking about this coming back. So the defi Matrixes all versus all all assets versus all the order book tells you how prices are determined and you know when I mentioned that future states will have subscription versus inflation, all currencies are going to compete against all other assets and cities will also be able to issue their currencies alongside states issuing a currency will become a new business model. It already has been. And the currencies of companies and cities and countries and communities will trade alongside digital currencies in one gigantic thing.

Tim Ferriss: The currencies almost like tokens become and we have to be careful here with, I mean who knows how it will get resolved but sort of unregulated securities but you're sure they're sort of interchangeable in this hypothetical example. Right.

Balaji Srinivasan: Yeah. On that topic, by the way, I do not believe tokens are securities anymore than I believe Youtube is television and the thing is youtube was not regulated like television, you don't need a tv license, you don't need a broadcast license. Skype or telephony to go and place a WhatsApp call. That's not regulated like a T and T email is not regulated like the post office because we didn't take these super old things and apply them to the internet. And the same way going inciting 100 year old statutes or stuff from like the 19 thirties in the 2020 or 20 thirties is simply in a posit larry page of the saying any law that's more than 50 years old just has to be re examined, probably can't be right. I mean it's before the internet paraphrase larry page. So I think these laws will get re examined. I think the but the Soviets called the correlation of forces is against them but so far as they are in effect are being interpreted that way of course be compliant etcetera etcetera. With that said not every country is America and in fact actually I started something the other day where it's actually more and more common now for crypto projects to ban americans from buying into them. You may have seen some of these things right? They literally I. P. Ban americans and the thing is

Tim Ferriss: like a lot of swiss banks. Yeah exactly idee banning instead of I. P. Banning.

Balaji Srinivasan: That's right. This you should expect more and more of where the US throwing its weight around with sanctions and threats and so on. Is suddenly starting to realize that it's back lashing on them because the expectation is oh so you want the american market well you need to comply with us and now entrepreneurs realized I don't need the U. S. Market twin. So no thank you very much. I'm just gonna block americans. This already happened in new york with a bit license where it basically meant that any crypto innovation it was I mean in a sense it was good because it just ensured that we move the future of finance out of Wall Street.

Tim Ferriss: Now could you describe what bit license was and then what

Balaji Srinivasan: happened. Yeah is a set of onerous regulations on Cryptocurrency companies where it was just basically passed so that somebody could have a career achievement and it was something where you just have to fill out enormous amounts of paperwork and was uncertain the timeline and the cost. I mean your company right, you can't start up, can't wait years for a possible license before it operates. So what happened was new york overestimated their leverage. And they're like, we're new york, what are you gonna do where the center of the world, you can make it here, you can make it anywhere. Actually no I can make it elsewhere. And new york is last on the list. And so rather than putting them at the front, it was too onerous, it was too high a form to fill out too high a price imposed for that first customer because that's what regulation is. It's the price of your first customer or another way of putting it. Your first customer is the state that grants you the license to operate and have access to the market now as the relative share of that market declines as the rest of the world becomes bigger. As a percent of GDP that new york controls or financial GDP, whatever you wanna call it, finance market, that new york controls drops suddenly it's leverage drops off a cliff. But its regulators haven't caught up and they still think that they have that leverage when you just I. P. Ban all new york people and just have them last and maybe you do that feature three years in. So ensures new york is at the back of the information.

Tim Ferriss: So startups just move

Balaji Srinivasan: started just move but they also I. P. Band and so this is a new thing because the US is supposed to be at the front of things and what not. Well that's happening in

Tim Ferriss: asia pacific right? And in the sense that entrepreneurs are sort of leaving the gravitational pole of china to have their physical base elsewhere.

Balaji Srinivasan: Yes absolutely. So both china and the US are driving away their best actually all three corners of that triangle.

Balaji Srinivasan: N. Y. T CCP in Btc their fundamental weaknesses are they're driving away some of the best N. Y. T. For example is piling up the mid wits but it's losing Mark Anderson and Glenn Greenwald CCP. It's certainly got a bunch of nationalist zombies. I mean some of them are actually pretty smart but they're losing the next Jack Ma and me antoine Ceo and by dan Ceo and so on they decapitated all of their major tech companies and they don't make the pretenses about it. Like when N. Y. T. Did that to Uber there's this whole because it's decentralized because it's stochastic because the press can't just fire somebody like say Jinping can just basically order and fire somebody it had to be like 1000 articles and this whole process to decapitate them and replace. Travis with a guy who I like, but who was formerly on the mighty editorial board who is acceptable to M I. T. So the journals effectively went and decapitated a tech company. They're trying to do that to facebook now. But because there's still some pretense of rule of law and some pretense of due process and free speech, it can't just be like they do in china where they just chop and gone, but it certainly is doing something where it's alienating many of the best from the N. Y. T corner, just as CCP is alienating many of the best from the CCP corner of the triangle. Actually, even the Btc corner, the triangle maximal is um which is like the extreme version is alienating people like metallic or zuko or the salon a founders or anybody who wants to innovate on so called L one, they're kind of being pushed away from from that corner. So those three corners are kind of pushing what I think of as a decentralized center. You know, it is the folks who no longer believe in N. Y. T. The folks who are Leaving CCP, that folks who want to do L1 innovation besides BTC, they may be Btc and they may respect Btc and use it and hold it, but they're not manana mists that is to say there, you know, like there's monotheism monotheism only one god, it was also monasticism, only one government, The government can do everything. You know there's this ad from 10 years ago government is the thing we all belong to where people replace Gov. Gov is like the strong man up there is like rather than the guy with the beard it becomes like the U. S. Government, the U. S. Military is really strong and it's benevolent, it can kill your enemies and it can redistribute the money and take care of the poor. And then the third version of that is Montana MSM which is not replacing G. O. D. With Gov.

Balaji Srinivasan: But Gov with BtC where it's like there's certain people who believe the government can do anything. It's sort of a joke. Bitcoin fixes this and I do believe by the way the Bitcoin fixes a lot of things but it doesn't fix everything. And When you project so much onto it it actually becomes unrealistic again to be clear, relative to most people, I'm probably down near that corner but it's like a log scale, you know there's people who are 10 x. 100 x.

Tim Ferriss: So what are we missing for the Matrix? Because I definitely want to ask you some additional questions

Balaji Srinivasan: so I'll just come back up those six points. So defy Matrix. Oliver saw all currencies trade against all other currencies. The order book is each cell in the T. Five Matrix how that price is determined. How does this relate to the concept of future business models of governments. So subscription and inflation basically you pay you know for the subscription to have like this effectively digital passport, wallet, driver's license, currency of the city, log in, property rights, marriage certificate, birth certificate, death and all that stuff. The inflation comes from the smart version of fiat says hey Bitcoin is volatile today but appreciating over time. Fiat is flat today but depreciating over time. And the reason is the reason it's flat today is sort of seizing some of the money a little bit to maintain its price stability against a bunch of goods. And this is where all the pieces together. So essentially if you were to design not a fiat coin but a flat coin where it's not the dollar, the Renminbi, it is a new digital asset whose property is that unlike the inflating dollar, it is flat against the number of chairs or bottles of milk or things like that. A flat coin would try to be as flat as possible in a time of money driven inflation in order for that to work you need some reserve of that flat coin let's say there's 10 goods that you're monitoring the price of flat coin versus chairs. The price versus milk. The price versus tomatoes, whatever those are 10 order books with buy and sell demand. Like we talked about in order to maintain it to be flat, you need to keep the price within that v just like not moving too much and that means some amount of money so you can place buy and sell orders to stabilize it when other people are selling and buying now that will deplete that amount of money over time. And where do you replenish it from?

Tim Ferriss: Let me ask a dumb question when you say so you can place buy and sell orders to maintain the flatness of the flag coin. Who is

Balaji Srinivasan: you in this case? It's basically the manager of that flat coin. It is the city or the government or the entire I see you're saying basically it's a new central banker

Tim Ferriss: right? Exactly. It's like this

Balaji Srinivasan: it's like the central bank you know Greenspan is constantly plunge protection team and the thing about it and this is crucial you might say well we didn't just invent the new boss same as the old boss. So how come you're saying central bankers? That's why like I mentioned the helix like the spiral unbundling and re bundling just like you go from CDS to Mp three S to playlists here you go from unconstrained fiat where you have no alternatives and it is just being printed and seizing everybody's money silently to Bitcoin which checks that. And now to a checked fiat where if they print too much or inflate too much and they're doing too much more than is necessary to achieve short term monetary stability. You exit two B. D. C. In the same way that with a company if it issues too many shares and dilutes everybody down you're like no thank you very much and you liquidate cash. Bitcoin 100 billion valuation market cap bigger 100 billion is an industry. Bitcoin at a trillion is a government. Bitcoin at 10 trillion or maybe 100 trillion. Someone that range is a world government just not the one that anybody imagined essentially you know there's this vision of a world government that was like this sort of communist socialist world government thing that everybody would be a brotherhood of man. And there's sort of a libertarian thing of F. That F. The U. N. We wanted. And then Bitcoin is actually like a libertarian issue world government which constrains every state in the sense that they can't spend more than they have because their users will go to the T. Five matrix and cash out the currency for Btc Btc is like the 00 of the T. Five matrix. Most people don't think about this but gold is when people thought OK, Bitcoin would achieve convergence with Golden has done that by the way it's around a trillion. It's like the same order of magnitude as golden girls like to and Bitcoin is like one or two it's like 1.2. So because like 1.2 trill and I think gold last look was like two trails. So the same order of magnitude Bitcoin is now hit gold, interesting goal today is a shadow of what gold was Gold was the thing that kings wanted that. It was the thing that constrained all states, it had its flaws because spain could mine gold out of the new world and basically causes huge inflation shock of gold coming back. So it wasn't like a constant in the same way. But Bitcoin is digital gold as the world economy is re centered around it. That's not a trillion dollar thing. That's like $100 trillion thing. That's like the thing that everybody cares about. It's a very, very different matter. So that is how basically future government. So our subscription and inflation which is roughly similar to a SAS companies, saS subscription and its equity. Those are the new business models of governments, right, subscription inflation. They're non coercive because it's not profitable to be coercive, sending swat teams around cost money and so instead what you want to do is have somebody hit a key and enter your society enforcing compliance is costly drones and so on may change this. And so that is actually I think a trend for like 2040 20 late 20 thirties, the state drones, I don't just mean aerial drones. I mean like autonomous robotics of all kinds walking robots, driving robots, all that stuff as we mentioned earlier that solves the principal asian problem. You don't need to have people fold into you. The robot will do exactly what you say. So like an individual can exert much more control if they've got a robot fleet. So coming back up, this is how I see us re bundling eventually after the coming american anarchy and why do I say american anarchy? If you recall we talked about the decentralization of the counter decentralization and why I thought the counter decentralization would succeed in china because they have highly competent management, the ruthlessly competent, but they're selected for capital allocators. People can get ahead of the curve. Engineers folks who basically have the great firewall and block social media before anybody in the west realize how significant that stuff is going to be. I mean they had seen the arab spring in china, they knew what it could be, but they acted early and now today what you have is the same writers who celebrated free speech at that time are now you're turning on it and basically arguing only media corporations should be considered true and they're, they're trying to jam the jack in the box but it's already kind of sprung out because they're very real weird looking in the west. I think the counter decentralization will fail because these guys are really looking because it got too big because also they're not selected for engineering competence. How many people in congress can even name what a firewall is, how many of them could define what a private key is. They're selected for being lawyers and actually also actors and you know why I say actors. This is actually a bigger thing that I realized, Hollywood explains more of America than I had realized essentially, everybody who is an influencer is like a celebrity and politicians are reading lions given to them and when there's less and less and less connection with the real world, when it's more and more just rhetoric to win elections and celebrity influencing online, they basically become like actors reading scripts and there's no follow through, there's no follow up. Of course this trend has been going on for a while. You know, obviously Reagan was an actor and have been famous actors on the basis of name recognition, but now just the concept of acting, you know, Brendan McKay is also written about this how you know, the current admit is kind of like a, and it has been for a while trump as well. It's not a partisan thing. It's like a hologram, it's like an order that people are going through the motions and acting. But something very different is bubbling elsewhere. It's like CCP and Btc and these things that are not part of the movie. So the thing is with SAN Francisco in 2019, I actually had this post that I think holds up fairly well, you know, I said, this is like about six months, seven months right before Covid 19 and I said SAN Francisco has like june 19 to 2019. SaN Francisco has 30,000 car break ins a year, The streets are filthy and a health hazard is extraordinarily expensive yet fees and prices rise in tandem. This is a bubble which will burst when the right alternative finally appears just like taxi medallions. And I said san Francisco can be compared to a terrible product with great legacy distribution. Users hate it and want to leave just like they want to leave oracle or something like that. But network effects keep people in for a while at least as extractive brands continue to soar when the true alternative finally arrives, exit will be rapid.

Tim Ferriss: When was that?

Balaji Srinivasan: That was June 18, 2019.

Tim Ferriss: Good timing,

Balaji Srinivasan: Good timing. Right? So I was like you know this feels like a rubber band tension which is getting you know too strong. And what was funny by the way it was paul, Graham's response which I actually think also held up well which I only actually saw much later paul said in response, this seems unlikely historically. It's been common for hubs of certain industries to draw people despite high cost and low quality of life when the decline, it's always due to some external force E. G the whole country does not simply an alternate appearing. And there's a guy replied to both is that looks like both tweets held up from october 2020 one.

Tim Ferriss: It's pretty

Balaji Srinivasan: isn't that good,

Tim Ferriss: it's good,

Balaji Srinivasan: it's good and and so essentially you know there's a there's a recent post that I actually like a lot. Have you heard of the concept of 10 sec gritty

Tim Ferriss: I have actually, that's a nice boost to my confidence. Yes. So, uh, I'm familiar. I

Balaji Srinivasan: have not heard that until

Tim Ferriss: 10 security within the context of Buckminster Fuller and different design principles.

Balaji Srinivasan: Yeah. And so this is something where I had probably seen it, but I was not actually aware of the word, you know, until a few days ago and sincerity is I think an excellent visual metaphors. He I had thought of things, a lot of things implicitly in terms of that in terms of like rubber band tensions and like force diagrams and like there's a rubber band tension in sf between how horrible the city was, which was pushing people out feces and prices rising in tandem just being attacked on the street in the super expensive city, you know, no public transport and it's like, you know, unsafe for women and cry all this stuff right? Yet on the other hand, you had all these tech jobs and all this stuff keeping people in the valuations of these companies kept going up. So the money was available to compensate for this stuff Uber this year and expensive apartment or whatever. So there's just like this crazy thing happening where money is being pumped in from the cloud and just incinerated by the city and you know, it's $12 billion 13.7 now, it's like probably the worst managed, you can't even call a first world city really anymore that doesn't even apply. It's a descending world city. Did I tell you about that? I don't use the term developed world in developing world anymore. It's just all ascending world and declining world and that's a declining world city.

Tim Ferriss: That makes sense to me. Let me say one thing just real quick on 10 sec gritty. So it's a it's a combination of tension and integrity. Here's the definition the characteristic property of a stable three dimensional structure consisting of members under tension that are contiguous and members under compression that are not. So you can find this on Wikipedia. There are also a somatic or physiological examples of this at least. Certainly some people would posit that fascia and some of the internal structures of the body. One could make an argument would also fall under the under this this principle or definition of integrity.

Balaji Srinivasan: Yes. And there's this good post. You know, there's a blogger I hadn't heard before but it's a analysis. P A N A L. Y. S. I. S dot substack dot com from CHP from such y dash wars dash charts. So attend security model of international relations. And I thought this is really well done because this is kind of how I modeled things in my head. It was great to see a visual metaphor for it and relate to stuff. I already know like force diagrams and stuff where in this post you can see for example the U. K. And Germany you know they both align because they have democratic ideals and they have auto and meat trade and they're part of the NATO alliance. But what pushes them apart language and they have differing regulations? Right? So there's both pull and push. And the thing is that whenever you have that like rubber band tension but integrity is a better model because it's not just like one force at a time it's many different forces. This thing can kind of withstand some push and pull and whatnot. But if something just goes really strong or really weak. So the whole structure goes ka chunk because there's things that are connecting to other things. And so what happened with san Francisco was I could tell that these forces were like in like extreme tension but I felt that it would collapse. I didn't realize that was gonna be covid of course you know six months before Covid. But I did know that it wasn't going to persist. And just what happened was these forces were there and then one of them just suddenly went to zero because everybody went remote since you don't have to be in the city at all. And all the culture change at once it was a crowd exit was a collective exit a cultural convention changed. Which said if you're serious you're not in person before. If you're serious about a deal you were in person. But now if you're serious about your health, you are not in person. And so now there's an excuse in a sense, not just an excuse, but you can turn down every plane flight, you can turn down every in person conference. They must offer remote option. It's actually really important now. So the thing is that That's why COVID-19 is a permanent shock whenever you take a bunch of people who were at the zero point on an axis and then you spread them out where like some of them are 100% remote. Even in the removal of that force post vaccination, it doesn't all come back. It's like history says

Tim Ferriss: absolutely, there's a lot of durability and we could just look at examples of how many zoom invites I get even though we could just do telephone and walk around even though people are now re engaging with one another. And also there's something to be said for the proof of concept that we witnessed for mobility and relocations during covid. So people proved to themselves and their pure groups proved to them that it was possible to not just trial other locations while working but insist on being relocated or else you're going to take a different job and those kind of macro trends feed on each other in Austin is a great example when you have zero friends in Austin moving to Austin Is a harder decision than if you have five and once you have 50 friends in Austin, it becomes quite easy. And I think we see that along a number of different directions.

Balaji Srinivasan: That's right. And now the new thing is those 50 friends can all move together. Yeah. So I wrote an article at 1729 dot com Francis Miami, which actually cites articles from 2013 that I think predict this in some detail. I gave this talk Silicon Valley's ultimate exit and I follow up essay called software is reorganizing the world that talk about how software is enabling these mass migrations. And that's fundamentally the resolution to our current dis aligned world.

Balaji Srinivasan: What you really want is not a 51% democracy. You want 100% democracy. That is you don't want a situation where it's the absolute minimum necessary consent where it's the Fosbury flop. Like we talked about before, We're just barely clearing the bar and you have 51% of people vote and 49% of people are unhappy. Those 49% will comply in the most grudging way possible and your majority is very Contingent and could drop with one bad headline or event what happens is low levels of consent. The 51% may feel like they want to impose their will on the 49% via coercion and that's actually bad because it's easy to coerce when it's like .1% of the society. When it's like some random murderer You're going to get 99.99% of society agreeing that cores of forces legitimate against him When it's 51 versus 49%,, Not only is coercion much much, much harder to do by orders of magnitude because the ratio of 99.992.01 is much greater than the ratio of 51-49. Now this coercion much, much, much harder. It is also not obvious that it's going to be something that even maintain your majority because even the application of coercion reduces your majority. So instead what you want is to resolve this right, you're not going to resolve that by just voting more. It's going to be resolved by some combination of either coercion or migration. And when I say why coercion, well one side coerces the other into just completely agreeing with them, they basically win a civil war.

Balaji Srinivasan: That's what happened with the Russian reds versus the Russian whites after the Russian civil war. But there was in the U. S. And the Cold Civil War. There was an article on this in 2018 that actually was artie by both the Jack Dorsey and Evan Williams. And it was your whole intimacy, get the exact, there's an article from early 2018, so almost four years ago. Now the great lesson of California in America's new civil war, why there's no bipartisan way forward at this juncture in our history. one side must win. And, you know, the people writing this, you know, Roy take Sarah is a co author, you know, the emerging democrat majority. And essentially they say, remember the great lesson in California, the harbinger of America's political future and realized today such bipartisan cooperation simply can't get done. And essentially what they're basically saying is California is a one party democrat state and that's what you want for the country. So then the natural continuum more progressive to more moderate solutions and got worked out within the context of the only remaining functioning party. So essentially they're just saying just win. And now, of course, it is a question mark as to whether you actually quote, want democracy, if you want your party to win every single election, if you don't even want the other party to exist and consider them illegitimate, then that's actually not really in a democracy anymore. Or if it is, it is something that's actually more similar, if it's a one party rule, it's similar more similar to a Communist Party where it's just a smoke filled room where the primary is not really the general election, general election, just a formality in the primaries, a real election. So you could argue it still democracy if the primary is an open primary. But the thing about this is Evan Jack basically artie this, then endorse the percentage said, interesting take, but it definitely got a fair amount of attention and this is what I mean about one path forward when you have massive disagreement like that is just one party just courses the other of course includes a lot of stuff. It could mean physical force but it can also mean what we've seen, which is Deplatforming on banking etc. In fact, one way of thinking about this sort of cold civil war is 1861, If you look at the map prior to 1861, the blue and the gray were geographically separated and of course they were ideologically separated. But the victory condition was obvious like the north invades the south territory, ideological and geographical victory coincide. But today, if you look at a map of the US blue and red there at the county level, they're all mixed between themselves and there's nothing to invade. There's nothing in physical space that you can invade. They're all mixed. But there's an article from 2017 that gives a visual from cdr dot org. Its title is study Breitbart led right wing ecosystem altered broader media agenda. But the main thing about this is the graphs that are mid screen on this. I have no opinion on the article itself, but the graphs are in the middle show here, I just paste in the link for you as you can see them. Okay. The graphs, the middle show that even if the blue and the red are on top of each other in physical space, they are completely disjointed in digital space. Yeah, that's okay. You see that?

Tim Ferriss: I do, yeah.

Balaji Srinivasan: So that is where the war is being waged and here's the thing if victory in the physical realm is invading somebody's territory, victory in the digital realm is invading their mind. Victory here looks like blue blotting out red or red blotting out blue. And now we can actually look back in the last several years with a completely new lens, which is not the marketplace of ideas, but the battlefield of eight years. And now we understand the plat forming on banking, canceling etcetera. Not as disputes within a free society, but as digital warfare where you're trying to take out their tanks, their battleships, etcetera, their big guns on the other side by having them wink out of the digital space so they can't recruit more soldiers, energize them, et cetera. Now this is a war that was fought with words and with keystrokes and with economics, it's not guns and shells though it did bleed over to the real world during the riots, in the capital and so on. The physicality of this is secondary, but it's not non existent. So this, I think is actually not the coming conflict though. This conflict is democrat republican. I think the coming conflict rotates it by x degrees or in a different plane.

Balaji Srinivasan: The coming conflict is going to be centralization versus decentralization. Where it's going to be basically like fiat versus Bitcoin, I think that's that's quite likely to come. And so a lot of people switch sides, there's going to be people who are, let's say super patriot republicans who will side with the government, my country, right or wrong, like the guys who were in the Russian military, who stayed in the soviet military, it doesn't kind of matter. And then there's folks who will switch to the or take the d central aside and that's actually many of the tech ceos, Jack Dorsey is a Bitcoin, maximalist, zuk is now doing a theory on with facebook and so on. Many of those are going to go on the crypto side. So I think Bitcoin itself will be like the main flashpoint, the conflict in crypto is sort of Bitcoin is different from crypto because maximalist wanted to be different, that is to say whether you think of them, it's kind of like it's Taiwan part of china or is his own country. If you're the chinese government, Taiwan is part of china and if not it's it's own country now in reverse, if you're a maximalist, Bitcoin is its own thing and all crypto is just scams etcetera, etcetera. Whereas if you are in crypto or in web three actually, Bitcoin is great, but it does one thing which is digital gold and then we need that we also need private cash and we need programmable currency and needs more contracts, we know this stuff for what it's worth. I had this a couple of tweets on this, but basically Satoshi, it wasn't a troll. He didn't start fights on the internet. He spoke to Zuko, who was the founder of Z Cash. He endorsed the idea of name klein in general. I think he was about his attitude only different from some of his self styled disciples as a mythical jesus was from the spanish inquisitors. So I definitely wouldn't call myself a maximalist. However, and moreover, I would also say if you look at Satoshi is writings, you know, Hal Finney, your head of Hal Finney who is basically like the

Tim Ferriss: I have heard that name, but I can't place it

Balaji Srinivasan: is the first named person to engage with Bitcoin. The first person to engage with Bitcoin publicly other than Satoshi replied on the original email. Some people think he was Satoshi and used his name to boost it certainly fits, but he passed away from a gender disease however, he throws his body so maybe we can revive him at some point. But here's the thing, Hal Finney and Satoshi had discussion and Finney said, Satoshi, are you endorsing the idea that additional block chains each create their own flavor of coins, which would trade with Bitcoins on exchanges. So she said right domain objects France's domain coins. Question mark could represent the right to own a domain for a year. So Satoshi Nakamoto did entertain the concept of issuing other digital currencies domain coins. so that might seem like totally obvious to you or me. Whereas I or you might think of Satoshi as uh like a Newton and Bitcoin white paper is like principia mathematica like a feat of science or a feat of engineering. A lot of maximus think of it more as like a religious text. And to be fair you can argue it's got aspects of because it's not simply an engineering innovation, it has implications for how one lives and that basically debt is bad and inflation is bad and equity is good and capitalism is that there's a lot of principles that are bound up in it. Freedom, pseudonym Itty lots of different principles, the network society, all those things are bound up in it. Even the genesis block has this concept of the bank bailouts being bad.

Balaji Srinivasan: So it does have something which is more than just you know, F equals M. A. And so I understand where that comes from. And basically in many ways I think this will be seen as something like the bible or the Koran or the communist manifesto or the american declaration. We're still close to this event but the Bitcoin wiper, the invention of Bitcoin is going to be something that just like there's sunnis and Shiites Protestants and Catholics, there's all these different schools of thought and there's maximalist and there's a theory of people and there's CBD CSR this weird kind of thing like the counter reformation Catholicism adopted some aspects of what processing was criticizing them for. CBc's are the state, the central state adopting some aspects of digital currency christmas for all of these things come out of this.

Tim Ferriss: Hold on, may I interrupt,

Balaji Srinivasan: here's here's what here's what is okay, she says

Tim Ferriss: It was 60/62. I'm going to give you a six to give 60 seconds.

Balaji Srinivasan: Here's what I'm saying. I'm saying that the past iteration of this Cold Civil Wars democrat Republican think of that as World War now there's like a rotation of it which is like World War Two. That may not be the best analogy because there's most of the same groups who fought at the same time, we might come up with a better one which is like World War One and the Cold War or World War two in the Cold War where the U. S. And the U. S. Are on the same side than on different sides. But the point is that Dawson's democrat republican, the next one is decentralized versus centralist and Bitcoin maximus on one side and woke capital on the other. And then there's folks who are in the middle and like crypto sort of in the middle Web three is in the middle. But I think it's more on the D central aside and then you'll have folks who are republican types who are also more in the middle but they're going to be more on like the stateside. So that's I think what the coming Accesses which the rotation of the current axis and that leads to I think significant civil conflict because they're kind of irreconcilable. But I do think the decentralized version will win. But now let me give the mic to you and I'll come back and explain why All right, we

Tim Ferriss: may end up hitting pause on that and coming back to in another conversation, I want to say a few things that I'm going to segue to some rapid fire questions. We'll see how successful I am. But a couple of things I'll say number one is that for people who are interested in how humans make meaning and create myth spread myth. You can substitute ideology for myth. That makes you sound smarter. That's fine. I would suggest they read or reread dune. So I'm rereading Dune. I've read it before by frank Herbert and it is incredibly sophisticated and nuanced with respect to

Balaji Srinivasan: the adult

Tim Ferriss: as an adult. Oh, absolutely. As basically meme warfare and the use of not just myth, but the human proclivity almost necessity for myth. Whether that myth is something called my country or whether it is a religious doctrine and this, we can get into separately. We talked about it a bit in the first episode, but I would suggest people reread doing which I'm doing right now because I'm about to see the movie and I want to make sure my memory is fresh, but the whole idea of the lineage of the Bene Gesserit is really worth looking at very, very, very closely also really talks about in a sense, decentralized guerilla warfare on multiple fronts. It's a sucking fantastic book. So everybody should read that and a bit of trivia because I imagine a lot of people listening will be if not crypto native crypto curious. So the word, the word and the name Nakamoto is in japanese, japanese a lot better than mandarin but is center origin would be one way to translate that Nakamoto and the the character for naka is the same character different reading as the song of jungles of china, Middle Kingdom. Although I think the better way to translate that is center Kingdom and I just wanted to drop a little bit of trivia for any language nerds out there. But Nakamoto is a really, it's a great last name for Satoshi Nakamoto. Alright, my questions. First one very important. Have you always said RTD instead of retweeted

Balaji Srinivasan: I guess. I don't know. I mean I think I might use them interchangeably. Is this like an accent thing?

Tim Ferriss: No, no, no, I just, I just like it. I've never heard that verbally before. So I like that. All right. So you said I'm not a Bitcoin maximus but I want to ask you a question I'll preface it with saying people listening this is not investment advice informational purposes only it's a way for me to better understand and share your thinking, apology if you were starting from scratch, had no holdings in crypto but could only bet in one place, Btc

Balaji Srinivasan: versus

Tim Ferriss: Ethan versus other.

Tim Ferriss: You only get to pick one, which would you choose and why Btc Btc why?

Balaji Srinivasan: And the reason is everything else is a technology company. Whereas Bitcoin has become almost like an element like gold. That's to say the fact that Bitcoin not only is the first but it has the disappeared founder. It has because there's a disappeared founder, it fits a certain kind of mentality where because there's no leader, you don't feel like you're submitting to somebody, you don't feel like you're submitting to somebody by buying gold Satoshi is who you make them out to be. This is not how I think about money typically, but if you look on any dollar bill, there's weird incantations, there's like a pyramid with like eyes on it and so on Most forms of bills they have the most famous people in the country on them. The branding exercise is actually pretty important on this stuff. And the thing is that you can separate out the economic, the ideological and the technological as I said, it's a log scale. Most people would consider me from the outside very similar to Bitcoin maximus, but I'll give you two thoughts on that. So first is on the economics. Yes. If I can only buy one thing you just buy Bitcoin because Nothing competes with it. It is possible by the way now to be clear. Do I think it's 100% chance to discuss. No I think it's possible that there is some remaining security issue. Associate with the code. But what's interesting is you know square is now doing something decentralizing mining. And the fact that mining is being driven out of China is actually good because I don't think any other state has the state capacity to do what china did and the ruthlessness. It's unlikely that there's gonna be a technical attack on Bitcoin. The only thing that's gonna happen going forward is potentially a regulatory or software attack. But outside of that it's community is so strong that can probably repair on that regulatory tax are also less likely to kill it because the U. S. Is losing control of the world. If Germany Defies on North Stream two and if sanctions don't affect Germany anymore and doesn't affect India. If El Salvador can go Bitcoin. Some states will have Bitcoin be legal as well as within the U. S. So the federal government doesn't have the veto. So finally really the technical attack is there some possibility of some zero day that can like inflate a lot of coins and be hard to patch. That's possible. It is still something where there's like one client that is very popular one. Bitcoin client. It's not a multi client thing. So that's the main weakness right now. Is it possible there's some supply chain attack where some libraries included and hasn't been audited sufficiently. Yes. Also quantum cryptography that's kind of an unknown. But is it possible that say quantum decryption becomes something that is out there before quantum encryption. Quantum decryption is highly centralized and some governments can do it or some centralized actually can do it but quantum encryption is not something everybody has access to. Those are all possibilities. But the risk factor is relatively low. So that's on the economics on the ideological kind of the way I think about it is if you go item by item probably I agree with maximum so many things I understand where they're coming from. Exit the fed check, stop the bailouts, check, return to sound money check, build a voluntary society check and the welfare warfare state check. Bitcoin is a global reserve currency check. Bitcoin has an apocalypse technological breakthrough check but Bitcoin is only digital asset ever and everything else is evil. That's where they lose me. And that's X. And buy Bitcoin sell maximal ism is the economic slash ideological thing because I'm not a monotheists I'm you might say for my cultural background or something like that India's polytheistic it's plastic. It's pluralist. I believe in the value of mutability but I also believe in the value of program ability and I think it's good that those are two separate things. It's highly immutable like Bitcoin or gold. It's not going to be highly mutable and program all those are too valuable things but they're too almost necessarily separate things. So the thing about it is that's that's on the ideology. Again though, the reason I think maximalist are going to have amazing traction or huge traction over the coming years. I think Bitcoin maxim is, in a sense, the most important political movement in the world that people don't understand about today because essentially their argument is it's all a scam that is to say the Fed is a scam. But actually all the printed money means many of the corporations are scam. The censorship is a scam. Lots of things that the state is saying are false. Everybody who's rich, they're all cantilever chairs because if you're that term the cancel an effect that is

Tim Ferriss: do not

Balaji Srinivasan: the canceling effect is some people get the printed money first so it's not uniform in terms of application of society. There's some truth to that that's bidding up assets that is causing something where it's like dunking on MARS actually I think MARS has lower gravity than the U. S. It's like space jam

Tim Ferriss: dunking on the moon. Yeah

Balaji Srinivasan: Dunking on the moon. That's right actually Mars 38% of gravity. So yeah, basically dunking in a lower gravity environment, you might still need to be athletic but less. So that's sort of what it's like doing tech or VC in this highly inflationary environment at least for now. It's possible that all games are just wiped out because things go totally vertical that that's what happened in Weimar. Everybody thought they were. Have you read when money dies?

Tim Ferriss: I have not.

Balaji Srinivasan: Okay, that's that's a good book that actually joe Colangelo had a good clip from. I'll just kind of read that clip. This is by Adam Ferguson had a great quote currently reading when money dies, the history of hyperinflation Weimar Germany, one of the wildest aspect I never knew was that early on, people all thought they were getting rich, they were selling hard assets, what they thought were insanely high prices and marks and so essentially because the printed money flowed to some first rather than others, there's this candle on effect and my banker congratulated, here's some quotes. My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me. It already amounts to millions, speculation on the stock exchange is spread to all ranks the population and shares rise like air balloons limitless heights. The value of my industrial investments is rising to extent, which seems to be incomprehensible and all this makes me uneasy. This thing is something of course, then the hyperinflation comes because everybody's rich, they all spent and all the prices on the rise because more money is chasing fewer goods in the U. S. It's nonlinear. Actually, 11 aspect of it that I hadn't fully understood is the printed money is in some ways contributing to the great resignation? So for whatever reason you're having strikes, you're having people who are not working as truck drivers or working as dockworkers anymore. Maybe more power to them. They've gotten this printed money. But what that does actually, it non linearly depressive supply not just of labor but of goods because the ports aren't being unpacked. That's why the administration is talking about bringing the National Guard to like go and man the docks. But that concept is it's not more money chasing the same goods. It's more money chasing fewer supply of both goods and services, less labor and less stuff because people are not being paid to unload things or build things. So I think there's a nonlinear inflation effect that might be coming.

Tim Ferriss: Oh yeah. Well you can look at, you know, lumber and a number of other things that I think are a byproduct of multiple factors.

Balaji Srinivasan: It's by part of multiple factors, lumber in particular. I think it like went up and then it crashed and overall inflation is definitely here. It's now no longer being denied as some conspiracy theory. No longer seeing its transitory they're meeting. It's bad.

Balaji Srinivasan: Oh I'm confused as to why it happened eventually. They're going to say it's good because it's wiping out all of the fortunes. It's like a jubilee, all your debts are gone. Why are you mad about it? And then they might move to seizures unfortunately. And so I'm saying this in a chipper tone. But let me give some good aspect of this. one of my macro thesis we've kind of talked about before is that peak centralization was 1951 telephone company, A T and T and two superpowers the US and USSR and three Tv stations, abc, cbs and NBC. And so we're kind of running history in reverse at least in the west. And I have this essay on this at Santonja dot substack dot com. You gave this very flattering title to it, which I would not have chosen. But if you google s o T o N Y E biologist in boston, you'll see it

Tim Ferriss: and we'll put it in the show notes as well.

Balaji Srinivasan: Put in the show notes. Right? This goes into more detail, but basically if you go backwards from 1950 to 80 90 the western frontier closes. But you go forward from 1952 1991 the internet frontier reopens and you can actually map these things backwards in time. You get the spanish flu forwards, you get covid 19 backwards, you get the robber barons forwards. The tech billionaires backwards. You get the private banking era forwards, you get the crypto era backwards, you get the cross of gold speech by William Jennings bryan today forwards, you get digital gold backwards, you have right and left fighting in the streets and today you have right and left fighting in the streets backwards. you get weimar Germany today we have like Weimar America where it's about the inflation and the cultural stuff that was very common. If you see like Babylon Berlin to have similarities to modern America. There's this book called Voluptuous Panic that kind of documents what Weimar Germany was like similar to America today culturally as well, it's not just the when money dies gives the economic aspect voluptuous panic where Babylon Berlin will give like the cultural aspects similar. You also have the conflict between the state and capitalism where the centralized states, you know, FDR was doing the brain trust is packing the courts national industrial recovery act. He was doing the the entire alphabet soup was set up at that time. And of course the gold seizure. And you also have something if you go even further back in time sort of antebellum polarization. The thing is the attentive listener will say, well you just mix things from like the 1920s with the 1800s and so on and I say yes, but that's because it's sort of ABCD. But it's not exactly D C B A. It's not exactly happening in exactly the same reverse order. I think the common symptom is this centralized fist clenching in 1950 is now losing control. And so similar events are recurring in a different order because centralized control is dropping off for example, that centralized control allowed for public health and also censorship. That's why the spanish flu, I'm not sure if it was solved but you just didn't hear about it because censorship is actually effective. That was part of the arc up of the centralized state. And now we have the ark down of the decentralized states, there's neither effective censorship nor effective public health. And so you have like this total catastrophe or at least perceived catastrophe around covid 19. And the way I think about it is it wasn't the spanish flu, fortunately it wasn't 100 million debt, but it's going to be on the order of 10 million dead. So it's pretty severe. We're lucky that it wasn't spanish flu. It might who knows could mutate. And the thing about this is when you have this worldview at least in the west and I'll come back to china a lot of these things are happening, but we're seeing the alternative outcome. So for example, you're getting the cross of Gold speech and he's like, you know, we will not be tortured over is like impaled crucified, I think on a cross of gold and now we're getting digital gold, People want gold back to the populist movement is not against goldens for it. So you're seeing a lot of these things happening in reverse. Not the frontier closing, but the frontier opening. And one of them that I think is pretty important is the stuff that FDR had the brain trust of the brains on his side. And so executive order 6102, the seizure they were able to implement it. But I think if they try it this time it's not going to work because history is running in reverse and the I. Q. Is not part of the state

Tim Ferriss: media interrupted.

Balaji Srinivasan: Could we pause

Tim Ferriss: that and leave the audience wanting more on this particular thread? And may I ask a number of new questions?

Balaji Srinivasan: Sure, but let me say one last thing and then let's go to that. Okay, now I'm going to say something that sounds sci fi basically the modern US, the whole thing is the entire mythology is beating the nazis and beating the confederates. So beating the ethno nationalist abroad and the secessionists or what have you at home. And what may happen over the next 10 to 15 years is the regime may lose to the international abroad, namely CCP and they be lose to the maximalist at home and sessions at home. And the breakup may happen. And the difference is of course that the chinese communists are non white and they're communists, they're not white nazis. So they're different ethno nationalists. It's different enough and the secessionists or whatever you want to call them this time are absolutely not for slavery there for freedom. In fact, you could argue their anti slavery activists because they don't want to submit. So I think that it's quite possible that we see the reverse outcome of a lot of things And then at that point we want to do is if the CCP wins and if we have american anarchy, we need to figure out some way to rebuild civilization regard civilization because in that world the thing is anything good can massively over correct. You have to have some limiting principle because otherwise too much is not enough. This is why I would not call myself a maximalist. I call myself an optimal ist. That is to say I want to figure out what the optimum is across many variables and set an explicit objective function rather than simply maximize something where too much is never enough. You maximize um just leads, you can call it fundamentalism, you can call it extreme. It just leads to a certain variety there. And again, I'm not trying to beat anybody up on this, I'm just trying to say that. Yeah, okay, retire the current system whatever you do or I do, it seems destined for that retirement. We have to think about what the next system looks like after. How do we ensure that we don't have crypto anarchy in the crypt of civilization? Yes, I think that the Chinese are going to rise. But what does an unchecked China look like the us unchecked after 1991 behaved quite badly in some ways. You know, all the invasions, the unchecked china might be quite mean. And so how do we defend civil liberties, how do we defend privacy, how do we defend civilization in this environment where we have sort of a reverse outcome. I know that's provocative call that a sci fi scenario

Tim Ferriss: you are once again outlasting me and the battery in my headset. And I know I can't change my audio source with the software. You think so I may lose audio altogether. So I want to ask a couple of remaining questions. I'm going to just throw a number of them out there at once because I think this will make the most sense. And then you can pick and choose which you want to go after. Here's some of them. If you had to be bullish on one US based big tech company, which would you choose? And then if you're still doing angel investing or if you were doing angel investing, which categories or areas would you find most interesting? And then any Predictions for the next 12 months or are there any things you're preparing for in the next 12 months with contingency plans of different types of

Balaji Srinivasan: either one. The one thing I want to say is before we get into that, just on the topic of secession for a second, just to make sure I clarify what my position is, I believe in volunteerism. And so I think rather than fighting over land, I have zero interest in doing that personally and said, I think you should try to crowdfund territory in no man's land. So nobody else has a claim on it. And you've got it fair and square and it's in the middle of nowhere, like basically the equivalent of burning man because fighting is stupid and there's plenty of territory out there and I'd rather build it from scratch without a fight. So I would not call myself a secessionist. I do think that if you look at some of the conversation around national divorce that is happening on both sides, that is happening in Ny Mag published something on this a few years ago, which is american breakup. I think maybe it's time for America to split up. Sarah Silverman has talked about this and folks on the right have talked about so called national divorce. So it's definitely in the air. And one last thing I'll say is that all of the stuff the language is super important because session of course sounds bad but independent sounds good. It gets back to the concept of russell conjugation. The american revolution was secession of the colonies from the british, but that was independence from the american perspective. So this also gets said earlier concept of our winners writing history. So the adjectives I chose where as neutral as possible. I want to be clear that I don't support any kind of physical conflict. You know, peace loving and I want to basically like by territory outside of this. However, what I want or what you want, there's some forces that might be greater than us. So in this sci fi scenario, this is how I sort of see the harry seldon like psycho history happening.

Tim Ferriss: Clarification accepted. Thank you.

Balaji Srinivasan: And you know, psycho history is, it's like the prediction of the future. This is scenario analysis. So why is that scenario analysis important? Well, I signed some probability that scenario, there's also other possible scenarios. Another possible scenario is, it's just a lot of disagreement and just a lot of migration and yelling online for many, many years. And then it's something like what happened with the soviet union where it does break up, but it breaks up in almost basically peaceful slash bloodless way and that's like a good outcome. And I think that's likely that might be the most likely it's much better than civil conflict. And there's things like with interstate unions, for example, where maybe that's what happens.

Balaji Srinivasan: But we'll see obviously hope for the best plan for the worst to your points on this actually relates to Big Tech co's and bullish and bearish and whatnot the US big tech companies that are the most bullish on, I don't think actually, I don't know if I actually hold any shares in these companies, I might in some like entity of an entity but it's certainly not to my knowledge a large holding, I'm actually most bullish on twitter slash square and facebook and the reason is twitter slash where the reason to put them is they're going to become probably merged into something like Square's Bitcoin support and the fact that Jack is ceo of both, of course they're two separate entities but he can figure it out and probably offer Bitcoin payments on twitter for many things and basically built like a Bitcoin ethereum into twitter, what do you mean by that? Like a Bitcoin ethereum meaning it's like a lot of functionality or copied functionality of ethereum like root stock sort of I think cloned the ethereum e v m so you might have a lot of functionality ethereum or salon or some of these other chains but that is sort of Bitcoin backed and there's different ways of doing that, there could be basically essentially a centralized version that has like a minimal decentralized component which is one way of doing it and you just like load Bitcoin onto it and the rest of the centralized, there's ways of doing with zero knowledge, there's a number of different engineering trade offs that could be made but essentially I think that's one direction like twitter slash square facebook because Zuck is also founder and you know, he's just, I do respect him, I really do and the reason I do is The number of hits that he's taken over the years to start is like a 21 year old kid in his dorm to build what he's built and from that to this three billion person network, I mean a lesser founder would have backed down after the mistake on libra but libra and the DM and now he's doing Novy which actually is a much better chance of working because it's natively crypto. I did actually say this at the time that what they should have done to start with Bitcoin and threw in payments and what's happened to Remittance corridors rather than doing this. I think there might be some public record of it. But I definitely definitely talked about it rather than doing a new coin start with existing ones build up experience on that rather than doing labor and that wasn't the first shot. But you know what that looks like what they're doing now in Novy and very very few people would have had the conviction To persist with something in the face of that level of resistance. I'm talking congressional hearings. Most people would have quail, same with all the negative press, same with the Oculus bet that's $2 billion dollars for something where they had to go through multiple iterations to get the product to work. But now you know they're going to re brand the company around the metaverse or Instagram. I made this comment basically Instagram was not an easy call this something where it's being retrospectively litigated because it's worth a lot but just a bullet point. This instagram raise that 500 million valuation the day before Zack offered a billion for the company. One billion was like 25% of their cash in hand about like four billion times. There's actually a lot of money. It was weeks before the facebook I. P. O. The board wasn't consulted, they were just informed and instagram had no revenue.

Tim Ferriss: Yeah that's not that's not an easy call,

Balaji Srinivasan: that's not an easy call that you know. And in fact Jon Stewart mocked at the time he's like a billion dollars for instagram. The only thing that's worth that is something that instantly gets me a gram of cocaine right? Everybody mocked it, made fun of it. They said oh this is such a bubble purchase. They're so stupid. It engaged through the I. P. O. Potentially. I mean there were so many aspects to that where that was a highly highly non consensus call that has now been turned into always an obvious by and the thing about this the problem is that people who are wrong will not admit they are wrong. The only way to show that you were not two X. Writer than somebody but 10,000 X brighter than somebody else is an investment where your 10,000 x rider 10,000 X more correct. And by the way this is very common Google's toughest searches for a business model or the internet is not going to be a thing. So many articles on the early internet were like this or of course Bitcoin is going to zero or Covid 19 is not going to be a thing. These journos are not off By like 50%. You can't just read their article and think you're being sophisticated by discounting it. Their mental model. The world is often off by 10,000 or 100,000 x.

Tim Ferriss: Now in fairness, just to set a counterpoint, there are some journalists who are incredibly prescient, there are good and bad and ugly within the world of journalism,

Balaji Srinivasan: just to be fair. Sure, sure, but many of them are becoming Vcs and angel investors, we're going to subject

Tim Ferriss: a lot of them are defecting because the ecosystem is just full of vitriol. It's like everyone's pissing in the pool. So a lot of people are getting out of the pool.

Balaji Srinivasan: Yeah, because the thing is what I'm talking about is really, I should preface it with the corporate journalist, the one who is employed by a legacy media corporations and that legacy media corporation will Sulzberger's company. The new york times will literally run billboards advertising itself as the truth. Fox will run billboards. Advertising itself is fair and balanced. The Washington post will literally equate itself to democracy itself. Now, facebook doesn't do that. You know, tech company has the balls to do that. Say that you're equivalent to truth or fairness or democracy itself. But yet that's a for profit corporation that has the arrogance or the lack of self awareness something to come out and say, I determine what is true for the world. I am the paper of record. I am the first draft of history. Whoa. You know like the monopoly of truth is upstream of the monopoly of violence. The monopoly of truth. You say that WMds are in rock and then people go and invade you say that somebody is guilty, you prosecute them in the court of public opinion and they get prosecuted. And so that's a super important power that some privately held media corporation shouldn't have. And so what's happening now fortunately is that power is being decentralized first and the most important way which is on Shane truth. Cryptographic truth, not argument from authority but argument from cryptography not quite, but BDC step power is being taken away. And what's funny is as you know, I'm not the kind of person who thinks white is an insult but these folks are. And for some rich white nepotistic like salzburger to be determining what is true for the whole world is simply not applicable. One might even say it's quote white privilege. And so instead what we should have is something that is a global decentralized network where people of every group including of course white americans can participate and determine what is true through a mathematical process that starts with figuring out who has what. Bitcoin and then it goes to who has what asset and then it goes to who made what assertion and that's like the ledger of record concept that we talked about before. So there's a root and branch thing where corporate journalism has also lost that they don't understand it just like CCP is hard power and btc is hard money cryptography is hard truth and corporate journalism has actually lost control over hard truth. Just give you one example of this from earlier this year, metallic veteran made a large donation to India for Covid and you know how people knew that it was real. Look at the Blockchain, they looked at the Blockchain. That was ground truth. That's really important because what is the other thing that you tend to do nowadays? You know, you will if something is real. Let me see if it's on twitter. Did that guy actually say that? And the thing is that's actually not perfect nowadays because twitter d platforms, a lot of people so their record is gone or you know last year twitter was hacked if you remember that in Bezos and other people were posting things. So while it's imperfect in the not too distant future, there's things like D. So there's various kinds of decentralized social networks out there capsule all these things that are coming or out there in the not too distant future. That back end is also on chain. So to show that somebody said something you won't link to twitter, you link to the crypto twitter version, the on chain record that shows they posted this or said this and because it's protected by proof of work or similar consensus algorithm. You can compute how much money would be required to falsify that, how much computation, how much energy would have to go into falsify that. That is really interesting because you also have multiple confirmations. It's not just one source. The thing is I don't care if something has 1000 retweets. What I care about is if it has two or three independent confirmations from economically disciplined actors. This is the same as academia by the way, everybody's optimizing citations where you actually want to optimize is independent replication, that's what true sciences, it's not peer review, it is physical test, this leads to kind of worldview stuff. What am I interested in? So the reason I was interested in I said twitter square and face because they're still founder lead because their founder lead, they're getting into respectively. Bitcoin and web three, whereas Google for example, I respect some there it's very hard to run an organization like the one that he does but with the big exception of ai under Deepmind thanks to Deepmind acquisition, google really hasn't innovated that much. There were some promising things like trying to integrate robotics that was taken down by scandal but basically conceptually technologically economically it was sound kind of put that all under one roof and actually advance the state of the art of robotics. They had boston dynamics, they acquired all these companies are going to get them all together. Unfortunately scandal took that down. They had all these messaging apps basically there's kind of been adrift they've kind of got too much money and they don't have enough focus or what have you is all the same big company stuff that remember I said before about how if there's a lot of money within a company, people can do the off diagonal, they can loot they form these coalitions, the win loss and loss win as opposed to everybody wins. So that's definitely happening there. And just to show why I'm not bullish on them. I mean it's 2021, you know, they don't have, you know, it's a core thing for search that they would have had seven years ago if probably Larry page is still in charge

Tim Ferriss: and do not.

Balaji Srinivasan: What is that? Block explorers? Why don't they have Blockchain dot info And either scan those are people don't get this. But block explorers are actually the stealth threat to search. That is to say we're not used to thinking of them as a threat to search because financial data of the Blockchain type being indexed on a website like Blockchain dot com or either scan where you're looking through smart contracts and so on. That seems like categorically distinct from text and media information that's on the internet that you go through web search. But guess what? The internet of money and the internet of information eventually merged together because with something like disco with what was called the cloud body. So if you go to their block Explorer you can see that every post and like and so on his own chain and that shows that actually more than just financial data can be represented on chain. Social data can as well. Social data can pretty much everything else can because social networks include media and all this other type of stuff so it's all going to go on chain eventually and some of the zero knowledge stuff like what's darker has done is solving some scalability issues so it all goes on chain that actually is a threat not just google but also facebook and twitter because indexing the web is hard indexing social media companies databases even harder because it's closed in corporate but indexing a public Blockchain is easier than both. Just to give one example with indexing the web you have to go and have a crawler that has to guess went to re crawl one of a million sites. When is it going to refresh? You don't know, they're not going to pin you, you have to guess and have to spend, you have to a whole siskel model on this kind of thing that's just like one piece of the whole web crawling problem with a Blockchain, it's the opposite every update is pushed to you, you just subscribe to it and just get a block push to you and then you? Re in exit so like enormous parts of like the entire infrastructure are solved by different abstractions that take millions of lines of code and reduce it to nothing. And then the question is, can block chains themselves scale and why did people put everything on chain? Well it would seem insane in 1990 to say you're going to stream movies over the Internet. That was crazy and people thought it wouldn't scale but it did. And one of the other reasons, by the way they were going to get block chains as a backend for everything. Do you know who sucks at information security?

Tim Ferriss: Think of a lot of people, but what is your answer?

Balaji Srinivasan: Government 90 developers, you know who's actually awesome at security.

Tim Ferriss: Tell me apology.

Balaji Srinivasan: No, I'm okay, whatever, but crypto developers. Yeah, so most people don't understand this, right? There's a website called R E K T dot news and essentially documents every major hack in crypto.

Tim Ferriss: It's like the fund company of

Balaji Srinivasan: crypto. Yeah, so millions of dollars gets stolen. But here's the thing that's why people like, what are you talking about crypto? It's secure. There's all these hacks, here's the thing we're churning out the equivalent of combat veterans. This is a live fire environment because see the thing is in web to your systems can get hacked without you knowing about them. Someone can just get onto your computer and they'll just hang out there slurp up information sit there and the reason is it's not a negotiable instrument, the data in your database. They don't know what the prices on the open market. They might want to sit there and slurp it more information. They might want to escalate their privileges and so on and so forth. If however there are Cryptocurrency, private keys in every directory. You've now given that attacker an incentive To just take the money right now because who knows? You might move it in 10 minutes so that suddenly makes intrusions tangible. You might still have a politically or ideologically motivated attacker, but once intrusions become tangible and you can see the damage that is done. It's like capture the flag on everything in security. One of the hardest things about computer security is it's like, oh my data was hacked. All right. Guess that happened again. There's this website called, have I been postponed? Where you can type in your email address and find how many different hacks you were subject to? Go ahead.

Tim Ferriss: I'm just wondering who owns that site. Just interviewed

Balaji Srinivasan: this guy. It's a good guy. Troy Troy, I forget his last name, but he's a good guy. He's like a security guy who's legit. But but yeah, it's a good question. Right? So but have I been postponed? Like the thing is companies now subscribe to have I been prone to run their users emails through to make sure that they're not reusing a password that was already hacked. Uh huh. Now think about what's going on there that's like like a shared database between companies that they're using? So like your log in to excite depends on your log into Y and Z and W. Site. That's kind of like the concept of the post. Yes. You made in the Blockchain on how elections are a primitive for shared state between companies where I can write to it and read from it in such a way that I can't interfere with your reads and writes. But the point is that kind of gives a shadow of like what a shared log and kind of system looks like. The point is this the current hacks of crypto things obscure the fact that in web two you can set security zero and just focus on utility because if you have utility you have customers and if you don't have utility you don't But security is sort of orthogonal to that at least at the beginning in Web three. That's not the case if you don't do an audit of your contract. If you don't think about formal verification, if you don't use a type safe language. If you don't really think through all of your error modes and maybe use audited contracts and be extremely defensive in what you're doing, your contract gets hacked on the first day. So minimum necessary security is much higher. It is a requirement for making money and they sweat it. People sweat it for real. Like they know that one compromise, you lose the money and people do die in the digital realm and best practices come about a new tooling is coming about.

Tim Ferriss: What do you mean by people die? You mean initiatives, projects companies

Balaji Srinivasan: yes exactly in virtual war in this virtual cyber war companies do die, they get all their fun sack, they're dead right reputation killed. So the thing about this is when people look at ransom where and so on ransomware is actually you know how that works right like basically there's a security hole, undetected security hole on something like an epic software and then there's a thing that appears when it says pay me some Bitcoin or pay me some Manero in order to unlock your computer now if this is not yet feasible but it's going to happen. Do you know where that would be actually extremely hard to do would be to run that ranch somewhere on the Bitcoin ethereum Blockchain itself. Why? Because if they could have hacked it they could have awarded themselves a billion dollars in need somebody else to do it. So the thing is that block chains will become by dint of their built in bug bounty by dint of the fact that they're not just open source but open state the most secure backend platforms in the world

Tim Ferriss: don't you think that's also going to be a Cambrian explosion of social engineering. I mean I would imagine that all sorts of sort of kevin Mitnick, the art of deception type social engineering will explode to sort of not skirt but on some level circumvent very tight technological precautions and we're seeing that in discords certainly. I mean I have to imagine this is happening. Although I haven't read any accounts. But one of the crazy things in the N. F. T. World is if someone gets hacked because they accidentally give someone a QR code or God forbid there pass phrase

Balaji Srinivasan: they can see exactly

Tim Ferriss: where their

Balaji Srinivasan: stolen stuff is right? They can look at

Tim Ferriss: a an unidentified wallet holding their stuff and watch someone selling their stuff. It might not be plausible or sensible now but at some point in the future I could foresee they're being greater value of some N. F. T. S to the person who had them stolen then the person who did the

Balaji Srinivasan: stealing in which case you would have

Tim Ferriss: sort of ransom like circumstances. I don't know

Balaji Srinivasan: every crime we can possibly think of will happen in that sense. It might already have James Dunlop has this get up of like I think. Bitcoin physical attacks. So physical plus virtual we combine social engineering.

Balaji Srinivasan: But I think in some ways there's good and bad, the bad is with the state receding with decentralization, winning the american anarchy that may follow remember the thing we're talking about 10 security and the rubber band. So right now we're in this weird phase of anarcho tyranny where there's a crazy guy who is smashing windows or pooping on the street in san Francisco that's the anarchy. But the tyranny is that the Uber driver who parks next to him gets a $200 ticket For being on the wrong side of the road. So the guy who smashed the window of the car, nothing happens to them. The poor working class guy who parks inside of road gets whatever $100 ticket. So it's a combination of anarchy and tyranny that I think is. So the new information to me over the last eight or nine months is I think that the tyranny doesn't have enough state capacity to sustain for long and that's different than the soviet Ernie, That's different than the 20th century. Top down states. What I've sort of realized is if in the 20th century the big problem was tyranny because you had sort of left authoritarian authoritarian extremists and what was precious was freedom and equality in the sense of being treated as an equal member of society rather than the equal protection under law, all that stuff in this century, I think after that rubber band snap happens, which I think is gonna happen and the tyranny vanishes and we just have anarchy, What is scarce is not freedom but leadership that say in a time of tyranny, what scarce freedom in a time of anarchy but scarce, his leadership And what happens I think is like Russia in the 90s, this book, I think like

Tim Ferriss: may posit something while you're looking for that and that is I would imagine human nature being, human nature doesn't seem to have changed all that much over the last few millennia. That if we have say decentralized social networks, while it may be true that no central authority can d platform you, you will have Lord of the flies dynamics whereby someone accrues incredible reputation slash power societal sway and can effectively force exile by just causing so much vitriol and acid to be thrown at any individual player. So in the sense that

Balaji Srinivasan: I expect that we'll see deplatforming by other means than some central. Yes. So well order, I think what happens is you get re centralization. So yes I do agree with that. For example what's happened in the US is if china has centralized censorship by the state in the U. S. Because the First Amendment prevents that you have decentralized censorship by corporations where it's technically compatible with the First Amendment but it's spiritually not compatible. And then the response that is the third Order, which is decentralized censorship resistance. See because the sort of Western form of censorship is this retrofit. It's not like the chinese where they set out and they're like you know, we're going to take the hit, we're gonna take the pr hit. The reputational hit. Whatever international hit just going to censor because this was a retrofit on the system it is retrofitting this tyranny on the top of a previously free system when twitter was you know, the free speech wing of the free speech party, you know, it started out with that is a bad fit and there's still enough people with living memory of what that freedom looks like. It is now becoming apparent. Which was not to me I think a year ago that the state capacity for really exercising that in a coordinated way is not there. That's to say if the chinese state general like lawful evil versus chaotic evil are

Tim Ferriss: from dungeons and

Balaji Srinivasan: dragons from dungeon and dragons.

Tim Ferriss: I do, you should probably describe what they mean. But yes,

Balaji Srinivasan: lawful evil is methodical, careful evil and in some ways I think it's a caricature to say this in some ways, but in some ways the chinese state, you can think of it as lawful evil when they set out to censor you or dr every switch is flipped every, you know, the guys all fan out like Bitcoin mining band boom, they actually just go and execute on it like ruthlessly like a corporation. The top guy gives the order and they all go into it. If you watch like the chinese military parades under c Jinping, they don't even salute the seven person CCP standing committee more. It's not a salute of an oligarchy. It's a salute of one guy and that one guy gives an order and all these guys go through like a little like robotic like this, that's the whole point of the military parade by the way, is to show that in peace time if they can do this in wartime, there is completely coordinated ballet of violence basically. That's the whole point of military parade. They're like lawful evil. Whereas the american state in many ways is chaotic evil Afghanistan just like this total catastrophe and we have stores being burned down and people storming the capitol and states doing this and money being printed and look, they're butterfly. You know, I'm on twitter yelling at this person and there's no coordination of any kind. There's no strategy. This august thing is a great example. Did you follow this at all? I did not by the way as a sidelight, some people be like, oh, why did these crypto grows tech pros like, you know, getting into foreign policy or politics. On the other hand, they also say, why don't these tech bro's encrypted rose? Why don't they learn some history and humanities? Like, you know, these are mutually contradictory criticisms of course, right? But my response to that is twofold first is as I mentioned before, just like after the 2008 crisis, it was obvious that the Federal Reserve, the bankers didn't have it under control. In fact Bernanke in 2000 and four had given the speech at Jackson hole. Wyoming, I believe on the great moderation on how macroeconomic volatility had been solved. And they had it all under control and no big deal, meaning no more depression is nothing of course a few years later financial crisis happened. So they obviously didn't know what they were doing, even if they had control of the system. Hence Fintech. Hence crypto because of that distrust. And now what we're seeing in 2021 if it wasn't apparent before, but it's really apparent now is that the foreign policy establishment of the U. S. The national security, the military establishment didn't just blow Covid, they blew Afghanistan despite $2 trillion 20 years. They basically blew the largest lead in human history, arguably over the last 30 years. An empire, its absolute zenith is now losing too the taliban. And by the way, it's not even like Vietnam, you know why the Vietnam defeat was actually more excusable because they had a superpower sponsor. The Soviets were on the other side, the chinese were on the other side supplying arms. Those were serious states who's backing the taliban china isn't putting in weapons to my knowledge, Russia isn't maybe Pakistan, it's not like Vietnam. It's actually much worse than that as a defeat. The point is just like the bankers obviously didn't know what they were doing. So time for other people to come in new fresh blood. If you take a look at my fellow tech bro's in finance and VR palantir and Andrew teel and palmer, Luckey waltzed in with no background and advance. The state of the art of the intelligence and military communities that kind of shows a shade I think of what is possible if we do decide to get involved in this. And obviously in Cryptocurrency guys like metallic people who are running these coins are running economies, they are running monetary policies of large countries. It is a step up from simply running a company. You're running a community, You have to think about things you can't control people's actions, you can nudge maybe by pushing through an update but even that update maybe pushed back on it is actually like the executive, legislative and judiciary, the president and the lawyer, congressman who edit text and then the judiciary that enforces it, that fallible and highly unreliable and irregular judiciary rather than that you have the executive of the Ceo or the founder, you have the legislative which are the coders that proposed the edits and changes and you have the judiciary or the nodes that interpret the code but do so in an extremely faithful way in a sense, it's a violation of equal protection. Every time somebody with the same facts walks into a Wyoming court and gets different justice for example, than a Milwaukee court or Minnesota court, whatever right? Like every time that happens on something that's supposed to be uniform, the same input should give the same output, that's what rule of law should mean. And I'm not saying I'm not beating up just using Wyoming Minnesota as an example. I'm not being up any particular state. I'm saying that the concept of a judge changing their decision making based on anything other than the raw inputs judicial discretion in many ways is actually often bad because you have things where people start going jurisdiction shopping, not because the law is different, which is fine, but because the judge likes this or likes that and has a certain attitude towards this, it's like there's an apocryphal is really study where people get lighter sentences after the judges have eaten something and their blood sugar is up so they're more merciful. That's bad. And said you should have this alternative. So my point is though that founders are now getting into the rule of law currency with palantir and Andrew into military and foreign policy stuff. That is preface is kind of why we're starting to think about all of this stuff. Another preface and the preface preface, we'll actually talk about France, august and come back to that. So with France Aucas that is this like amazing thing that shows, you know, talk about like chaotic evil. They don't know what they're doing. So here is kind of the sequence of events basically after the whole Afghanistan withdrawal thing where it was just so televised, everybody saw the images of this catastrophe and it wasn't just obviously people within the U.

Balaji Srinivasan: S. Who saw all american partner saw it and they're like whoa that military that we saw in Hollywood beating up aliens and so on is unable to manage the withdrawal without any gunfire? Taliban was even shooting at them. I do support. I think that withdrawal overall probably was a good idea in the sense of or at least necessary. It's complicated but the execution was catastrophic. That's kind of conventional wisdom. It is. However, the second word, consequences I think are important one is that the admin wanted I believe turned the page on this from a pr standpoint and that's why this august announcement was teed up. And the thing about it is it's very unusual. You know, when is the last time you've seen the president and the Prime Minister of the UK and the Prime Minister of Australia in a simulcast.

Tim Ferriss: Can't remember,

Balaji Srinivasan: can't remember right. The thing is it could have been something that was like signed to some deal of like a million things that happen in government that are not a prime time announcement. This was intentionally the goal was, hey, turn the page. Yeah, I know you thought we screwed up in Afghanistan but we're pivoting to Asia was totally serious about it. Ha ha china. Right. And so the problem is though that it actually revealed a bunch of issues first is the fact that is Australia, the UK and the US. Well, there's something called the Five Eyes and that is Australia U. K. U. S. New Zealand Canada. So there's this Canadian newspaper said, What is it? three eyes now because why were the other two excluded? Well, new Zealand because they don't have some nuclear, there's something about nuclear. Subs can't operate in their territory or their maritime region in Canada because evidently there's such wimps militarily, they don't have anything. But the thing about that is it showed to the external world, something they've never seen before, which is internal division among the five eyes number one, similarly the quad, which was this much ballyhooed thing of India japan Australia and the U. S. Which actually did make some sense in the sense of India Japan are I think serious countries versus china. If you wanted to make an alliance, that that would make sense. India and Japan were left out of this. And the U. K, which is on the other side of the world was brought in now who has more concerned with china than India and Japan which are real countries that border them, they're not going anywhere. The UK doesn't really have an empire anymore. It doesn't really have stuff in the pacific Hong kong went away. So what the heck? It also just like it showed the five eyes are really the three eyes that showed internal division in the quad, indian, Japan made polite murmurings in public. But within India, within Japan, if you read the newspapers are there like WTF and then France itself because they had this sub deal with Australia that evidently by all reports wasn't going that great. It was taking a long time etcetera. But Australia had recommitted to their relationship now, all the stuff is being aired in the public because here's what happened France got annoyed and France isn't just France France is basically one half of the EU with Germany. And so I got the EU to denounce this and they pulled their ambassadors and part of it is that their pride was wounded because they actually have islands in the pacific. They have actually a significant I think million plus population of actual french citizens in the pacific near Australia more than the UK does. They still think of themselves because they're on the U. N. Security Council is like a great power. And now they were just sort of lied to backhand or that's how they think about it. Even if they were screwing up on the sub aspect. But the thing about it is they got really mad pull their ambassador that you and the U. S. Are now actually largely split on china because I said Francis and just France France's Eu and even if I think that you is declining and Britain will break off has broken off from it of course. But Scotland might break off from Britain and Catalonia. And the vice grab countries they may all break off from the U. Still that you is like a thing, even if it's declining. And so that you is now kind of split and they're like, you know what you ask, you want to go and do your thing on china and we'll do our own thing. South china morning post had actually something on this. And then what did Australia get? Australia got subs? But you know the fine print is you know the first nuclear submarine that Australia builds going up here to date. They've got us, what is that? 20 years, 20 years. So the thing is this is not a serious thing. It reminds me of the San Francisco $300 million Collison has a website called fast. I'll give you the exact U. R. L. It is Patrick collison dot com front slash fast. And he shows that stuff in the past was built way faster. Uh

Tim Ferriss: He gave an example of a nuclear reactor.

Balaji Srinivasan: Yeah, exactly. The first nuclear submarine was built faster in like a few years relative to this one which will take 20. So how is that possible? The first sub that's built 40 years ago as fashion. This one or like the Empire State Building. We started and finished in 410 days. The Eiffel Tower was built in two years and two months. This type of stuff. I think about this is, we know that it is physically possible To do that today because China does it China built a hospital in 10 days. During covid there's videos you can see of them building like a subway station in nine hours or a building in like 10 days. And then of course what people say is oh and this is coke by the way they'll be like oh that's all you know chinese construction, it socks, it's just gonna fall down this plastic crap. We have like good stuff. And like have you seen the Millennium tower in SF have you seen the SF transit center in SF? Those are also cracking and going to fall over. Even N. Y. T. Actually did a thing on how SF isn't actually earthquake proofed and all the building codes don't mean anything. So I like the U. S. Is getting like high quality structures for all of that money and time and moreover, even if even if you granted and people have seen the photo of like a building in china filler even if like some tiny tiny percentage of the time. You have some structural issue when you go from many years To be able to build a hospital in 10 days or being able to build a subway station nine hours, it's like 100 or 1000 X. Like the amount of money you save is so dramatic that you can slash rents and crucially also enable military victories because the military is about the physical world. And if china as a subroutine can contemplate building a hospital in 10 days. They can also contemplate building a blockade Or a bridge or something else in the physical world and if the US can only build a sub in 20 years it's like an older man whose bones don't heal as fast anymore. Who can't do the things that they used to do anymore and yet still think of themselves. That's a dangerous part if you're 80 and you think of yourself as 20. Okay young at heart is one thing but going and trying to knock out 300 for reps you might hurt yourself if you're trying to bench that much after not doing something in a while and you might never be able to get there again under as that as that man you might need your son to be able to do it. That might be the last time you bench that amount of weight. So it might need a new nation to be able to do these things like a rebirth of some kind. So going a little further with china the august thing that just made them mad. It didn't give any results. The U. S. Is acting china is taking actions because do you see this like recent hypersonic missile launch? I

Tim Ferriss: did actually see the news. I haven't read the coverage but

Balaji Srinivasan: have no worries. The U. S. Government is on it. That

Tim Ferriss: was basically a fuck you very much show of power

Balaji Srinivasan: response. Yeah and you can argue you can argue why are we hearing about this stuff? You can argue oh the military industrial complex is leaking it to get more money for hypersonic weapons. Oh the military industrial complex you know wants us to know I think we're losing to china so therefore we'll buy more weapons. That may be true. But it's actually also true that the U. S. Is weaker militarily than china in the south china sea. One specific issue that china cares about which is Taiwan. It may be possible for someone to have an interest in it. But also being true. It was like we welcome the competition. This is what was it? I'm like uh you welcome the competition when it comes to you don't welcome military competition. That is exactly the kind of competition you do not welcome. You welcome economic competition. That that might be fine. I mean you don't really welcome that but okay you can tolerate it. The thing is that it's a generalization but a lot of change. People have said Chinese culture generally trust actions over words and Western political culture today at least is 100% verbal. It's just all signifying and hashtags and so on on Twitter and like almost zero offline accountability for actually doing anything. Tech culture I would say is something of a hybrid at least you know the pre-20 tech culture you might call it crypto culture or web three culture now where absolutely there's a story that you're telling in a slide deck. But the numbers really really really matter especially once numbers exist. Once you're at series A. Or series B. Or beyond another investment of money doesn't come that easily. It requires you to actually deliver results. It's not simply like an election and investment is much more diligence on it. And the thing is that what happened was this august thing made china mad without getting any results. Now I saw this joke hypersonic missile as well, which is a separate thing. But you know the U. S. Government is on it. They just banned gifted and talented education in new york. Take that china right. That's going to crank out tons of people who understand how to fly something past mach five and know how to deal with ultralight materials like that. Look at that what a chess move, right? And by the way, it's not like the federal government doesn't care about education. They do. They're actually saying the FBI to stop people from protesting school boards but not to stop them from like banning gifted and talented and right. And then of course India was in Japan, why aren't we part of this quad discussion India also is kind of having it a little bit both ways where there also is part of something called the Ceo job that is

Tim Ferriss: and do not, it's

Balaji Srinivasan: the shanghai cooperation organization. It's sort of like the, it's a little bit like a NATO ish you thing that most people in the west don't know about but it's pretty important becoming more important as china Russia Iran just became a member Kazakhstan Like the central asian countries and actually India and Pakistan were admitted at the same time. Which made me kind of quizzical because first India being in anything with Pakistan other than like the U. N. Is pretty unusual. And second India and china being clear as unusual but India seems to be taking a balancing role. It's almost the opposite of its Cold War role where it was closer to the soviet union than it was to the U. S. But it wasn't in the soviet camp it wasn't like fielding troops of the Warsaw pact this time it is closer to the U. S. And the west than it is to china but it's not going to be like the U. K. Which is like America's poodle as people would say. You know after the Tony blair thing. So it's going to actually take its own independent things. So sc oh people believe maybe that's just a way for India to kind of hedge a little bit. But being in both the quad and the S. C. O. Meeting is kind of it's like you know you're both the knicks and the Lakers or whatever and then of course Taiwan saw this and was like oh boy because china got more annoyed. So the point is why do I go into this example in detail. This is just pure chaotic evil or at least just chaotic. You know even if not evil it's something that pissed off the french piste off the chinese show that the three eyes and the quad were internally disa lined piste off the you and split them versus china basically did it all for a photo op after another military disaster. And essentially achieve the exact opposite of what they even wanted to achieve, which is pure optical thing. And there's no military gain whatsoever. And this is being done at the most senior levels. There's a choice to do this at the leadership of these three countries. This is just one event. But as you can see it had ripple effects and so on. But it's like the anti alliance, it like broke apart alliances rather than putting them together. So because of this This is that's like at the foreign level and domestic, you can give similar examples. For example like 17 states are now protesting this thing of you know, sending the FBI to local school boards to be mad about protests and you know, so the rubber band snapped that I think is gonna happen is that that control of the U. S. The federal government over locals and internationals is just going to contract until only those jurisdictions that elected the current president, listen to the federal government and those that didn't just nullify everything and just take it to court and don't abide by it. And then the question is how does that actually play out? Is that purely legal? Is there like National Guard stuff involved? Who's actually, if anybody is prepared to actually shoot somebody over this and I don't know, it's hard to say, but I can see the conflict kind of brewing. All right, so that was lawful evil. Yes.

Tim Ferriss: So let me, let me get on that topic. Let me hop in. I don't know, but we're at five hours plus now. So I think I would like to bring this to a close if I may the and we can also continue offline a lot of these subjects, but I'll skip the angel investing or the hypothetical angel investing unless there's a fast answer for it.

Balaji Srinivasan: I'll give you my fast answer on it. Right?

Balaji Srinivasan: So my fast answer is I'm broadly interested in obviously crypto obviously startup cities and network states, which I've talked about, but if I was going to cut into areas, I'd say crypto info, bio, robo, astro and actually politico So crypto is obvious info actually, I think that thanks to wokeness basically, media corporations have abandoned many niches. Sports Illustrated's not Sports illustrated. Teen vogue is not teen vogue. In fact, if you took these articles, they basically all sound like the same. I can't even type stuff and if you just strip the branding and you just had a, I try to distinguish it. I'm not sure you could because they're essentially all like on twitter and there are part of the same sort of conformist group now though with sub stack and with ghost and with decentralized media like mirror, I'm small investor, Mirror what you're seeing is independence have the means to go and effectively start throwing media company. But they also have an incentive to give a different message than the mainstream. So you're seeing matt Iglesias and Glen Greenwald and today Baby and barry Weiss and jesse single. And so this huge like you drain of some of the best writers from these old outlets, leaving them only with those who are incapable of writing originally enough to become founders. For example, in academia several years ago there was a new level above professor and that was founder or investor because you can scrape for like whatever $100,000 grant from some stupid bureaucratic committee or you can make $100 million company exit it and then you're basically able to investigate whatever the heck you want for the rest of your life. You can build a lab out of spare parts or you can build the future that you want. Like you know, veggie Pond for example, left stanford and you know during the bio fund, I recruited him to a sixties friend of mine. So the level above professors, Founder the level above Journal corporate Journal is now founder. And so info is very interesting because all these niches are going to be recolonized by independence. That started from the beginning with a better brand because they've been abandoned the sports illustrated, the teen vogue etcetera. So media, I'm actually much more interested in and I think you can make a profit in it. Like the athletic for example shows you can, it's just that you can't say the same thing as everybody else. You need to have the people who are independently minded. That's like the new thesis, the new wrinkle. I also actually think that India could become a media superpower and I know I say that and immediately people think, oh, what do you mean Bollywood Bollywood is gonna become really popular. I'm not so sure about look, Bollywood is fine. But what I mean by that is a lot of animation is done in India. Like if you look at the end of tenant, a lot of the visual effects were done there. A lot of computer graphics. There's something called Saga South asian journalist association. Obviously there's body was a lot of talent exists there And the same way that china ascended the ladder for making plastic stuff and iphones to doing first party stuff like drones with the GI or reach at. I think if china is a tech and manufacturing superpower, I think India becomes a tech and media super power and can potentially be like the bright sun to the west black mirror because Western media is sort of declining in revenue with technology. That's why they have this black mirror attitude towards it. Oh everything is so bad. Whereas India is ascending the technology, all this stuff has just gotten better over their lifespan smartphones coincided with a huge improvement in living standards rather to collapse in their old media model. And so India I think is very underrated in terms of where that replacement media is going to come from. All the folks have just mentioned single and barry. I like all of them, but they're like defectors from the old, I think we're also gonna get a lot of fresh blood from overseas and genuinely internationalized media because it shouldn't just be a bunch of Brando's in new york. It should be globally representative and you know, people should be able to tell their own stories without being intermediate by some new york media corporation. Right? So okay, so that's info then that's media, but it's also movies and our stuff. So I mentioned crypto info bio. So telemedicine is now legal in the US. Thanks to actually some of the things pastor and Kobe Bryant and legal is doctors can do telemedicine across state lines. That opens up the market in a big way and it is possible now to use that to unlock medical tourism and start actually unlocking fee for service medicine, which is actually way better than insurance. Like in general. You only want insurance for catastrophic things. You don't want it for routine things. You don't pull out your car insurance to pay for gas or a floor mat. It's only for like emergency things And same with health care. You're you're basically to lose money on everything other than emergency insurance. So it's telemedicine, it's medical tourism but it's also quantified self it's all the true trans humanism which is a brain machine interface and genetic engineering and all that stuff. And then with robo I think that's also underestimated was being done on the industrial side of things. This robotic agriculture, manufacturing, farming, retail supply chain. All of the recent supply chain stress I think is going to cause an acceleration of that. And it's also actually the way to erode china's manufacturing advantage in the medium to long term. Just like everybody has a smartphone. You have a bunch of robots that start making things for you. And I think one thing I linked was $100 robot arms. You can start learning this at home and just learning how you know a six degree of freedom arm works and grasping and all this stuff build your own robot overlord. Astro. I think that's actually you know it's funny right? Astro. I think that's that's coming down way and cost such as SpaceX. There's a whole industry is building out there and then politico is kind of the startup cities and network states and the media encrypted stuff. But what does the next post war order looks like. And I think it looks like national stacks and neutral protocols. So neutral protocols of the crypto stuff. The national stacks are not just an american internet of facebook and twitter and instagram and so on. Not just a chinese internet of Wechat and bytedance but a indian internet and a Brazilian and a Russian and a japanese. And this piece of this already like Korea has neighbor and Russia's Yandex but going further with that and having kind of equivalence national equivalents so that local leaders are going to basically demand this so they can't get the platform. And it might be that you know, some countries have the scale to do it themselves like the U. S. And china probably India or Russia. Others might be in groups like it might be a bunch of spanish speaking countries that do it together. But national stacks I think will be important. And in collaboration with neutral protocols that's sort of like domestic travel versus foreign travel. Domestic transaction communication versus foreign. So the type of stuff I'm thinking about in terms of angel investments and the thing that's there that you know I could probably talk more about is a trans human and stuff. But that's under bio it's very important that reversing aging that's bionics that's brain machine, interface limb regeneration and bio electricity. I think that is if in the 20 tens what was underrated? Where crypto in china I think in the 2020's what's underrated are India and trans humanism. It'll be more obvious by the end of the decade but that's kind of how I think about things

Tim Ferriss: I have offline we can talk about some scientific studies that you may be interested in supporting. So we should talk about that Lest We forget 1729. Do you want to tell us what the latest and greatest is with respect to 17

Balaji Srinivasan: 29 I've been kind of running it in like alpha ish or last few months not posting that much recently has been kind of working on some new stuff. But on november 1st I'm gonna be announcing a lecture series with like weekly VR lectures and having them recorded. So if you can't attend and the goal is to basically build a community and audience in VR and start putting out the Polished versions of what I've been working on. And so just you know, go to my Twitter and you'll see the announce over there or subscribe at 70:29.com. Perfect,

Tim Ferriss: beautiful. And for those who don't know just briefly the origin story 17 29.

Balaji Srinivasan: Oh sure. So it refers to the it's sort of like the E equals M. C. Squared of India just like E equals M C squared. Came from Einstein genius Western physicist 70 train comes from Ramanujan whose uh genius indian mathematician and what it represents is the first number that's the sum of two cubes in two different ways. It's one Q plus 12 cube and it's also nine Q plus 10 cube and it's famous because when Ramanujan was very ill on his deathbed mathematician was a friend was trying to cheer him up. And he came by and he said hey you know this taxi that I came in on was as a very boring license plate at 17 29 and rajan said oh no you know it's actually very interesting number. It is you know the sum of two cubes in two different ways and so it's something that everybody can understand you know you know cubes and sums are. But it also illustrates that reminded him was on you know a first name basis with every number and it has a couple of other kind of things which is it's both indian and international and spending a lot of time in India now but it's also universal sort of like google was both an american company and global company. It's also something that has a number theoretic connotation because rajan studied prime numbers and number theory and that underpins cryptography and crypto which is also something I think about. So that's just kind of a fun thing. It's

Tim Ferriss: nice tie. And so 17:29.com people can check that out. They can follow you on Twitter at

Balaji Srinivasan: biology. S remember correctly B as in boy is an alpha. Ellison lambda is an alpha J's enjoy guys in India. S as in sam c can't nail them. I'm not sure that was all the call signs. I should have said like bravo. Foxtrot

Tim Ferriss: or something I usually just make it up as I go. If I need to spell it out in that double way apology. Once again, I don't know how you sustain this level of output. It is remarkable and I appreciate you taking so much time on the other side of the planet too, have a very wide range in conversation. So thank you very much. Is there anything else that you would like to add

Balaji Srinivasan: in

Tim Ferriss: brief or requests that you'd like to make the audience? Anything at all? Before we close out

Balaji Srinivasan: this conversation? I think that was great. I think that I'd like to see you all in VR So come by.

Tim Ferriss: That's right, that's Right.

Balaji Srinivasan: Lots

Tim Ferriss: of exciting things ahead. Well, thank you. Biology for everybody listening. We will have copious, copious show notes that we'll need a small stadium of my own full of show notes experts to help assemble everything, but we will have list to all of the books and people and so on mentioned in this episode, you can find that at tim dot blog slash podcast and I will probably create a short redirect. So you just go to tim dot blog slash B two B as in bravo number two. And that stands for biology. Second episode of course. So tim dot blog slash B two will take you to all of the show notes and until next time. Thank you for tuning in. Be safe out there in. Hey guys, this is tim again, just one more thing before you take off and that is five bullet friday. Would you enjoy getting a short email for me every friday that provides a little fun before the weekend? Between 1.5 and two million people subscribe to my free newsletter. My super short newsletter called five bullet friday, Easy to sign up, easy to cancel. It is basically a half page that I send out every friday to share the coolest things I've found or discovered or have started exploring over that week. It's kind of like my diary of cool things. It often in includes articles and reading books, I'm reading albums, perhaps gadgets, gizmos, all sorts of tech tricks and so on. They get sent to me by my friends, including a lot of podcast guests and these strange esoteric things end up in my field and then I test them and then I share them with you. So if that sounds fun again, it's very short, a little tiny bite of goodness before you head off for the weekend. Something to think about. If you'd like to try it out, just go to tim dot blog slash friday, Type that into your browser tim dot blog slash friday, drop in your email and you'll get the very next one. Thanks for listening. This episode is brought to you by Block five. Block 5 is building a bridge between cryptocurrencies and traditional financial and wealth management products. They're creating innovative products to advance the digital asset ecosystem for both individual and institutional investors and its platform now manages more than 12 billion in assets. Full disclosure. I became excited enough about this company that I ended up becoming an investor. Moving on Block Fi that's B L O C K F. I offers a wide spectrum of services and I'll mention just a few here.

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Balaji Srinivasan: that's you guys.

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