0:00 Ladies and gentlemen, welcome to another episode of the Hell Money Podcast. I am Casey Rodimore, 0:05 as always, joined by Aaron Redwing, your hosts for a very special episode, 0:10 because today we are joined by the inimitable, legendary, unique Paul Sztorc. How are you, Paul? 0:20 Guys, thanks for having me. 0:21 It's actually really our pleasure. My pleasure, at least. I don't want to speak for Aaron. I 0:25 don't know. Maybe she's over there seething. Well, we already kind of had you as a guest, 0:28 because we had an episode where we had pictures printed out of you and put on the wall. 0:32 Yeah, I remember this. I thought this was the greatest thing ever, with Nassim Taleb, question 0:35 mark. So we met for the first time, I think, at Scaling Bitcoin in Palo Alto many, many, many years 0:44 ago at Stanford. Oh, I don't remember that. Yeah, he's got me with that gotcha, because I thought 0:48 he was going to say Nashville, and I was like, no. And I specifically remember the interaction, 0:52 because I have a bunch of ideas. I'm like a guy who has ideas. Goddamn it, my fucking phone, 0:57 what's going on? Oh, my God. Oh, no. Oh, no. Okay. Whoops. Oh, no. Oh, God. Oh, 1:03 God. It's a fucking mess. Could everybody do a mic check? Yeah, okay. Anyways, we met at Scaling 1:10 Bitcoin in Palo Alto, and I'm an idea haver, and we were talking, and I was having some ideas. 1:15 I'll tell him his ideas suck or something. You know yourself too well. Yeah, I said some idea, 1:20 and you're like, oh, no, that's a terrible idea for reason X, Y, Z. What was the idea? 1:24 I don't remember, but I didn't do anything, because they were bad ideas. 1:26 They never went along. So, in a way, I helped the ordinal filter to the top. 1:30 Yeah, exactly. You helped filter. Yeah, I would have had to go through two or three more bad 1:33 ideas. And then the second idea, you were like, oh, that's a bad idea. The third idea, we were 1:37 like, Casey, this is your worst idea yet, which I found- I have no memory of this, and I really 1:43 usually have a great memory for conversation, I think. And usually he has a terrible memory 1:46 for conversation, so this is a real- Well, I guess this is like a traumatic experience. 1:49 Yeah. No, no, no, no, because I actually think that this made me like a Paul Sztorc fan, 1:55 because you said everything in a very charming way, you know what I mean? 1:58 Oh, that's good. People do give me that. A lot of people say, oh, if you follow Paul on Twitter, 2:03 he comes across as a deranged, bitter person. But then if you meet him, you realize it's all 2:09 like a joke, and it's all sarcastic, and it's very irreverent. 2:12 You're good-spirited. 2:14 This was the advice that I was going to give you. I think you should only post videos of yourself. 2:20 Other people have said that exact thing. 2:22 And there are other people who post videos that shouldn't, they should only tweet, 2:26 but you're in the special category that you should post videos- 2:29 No, I've gotten this exact- 2:30 Yeah, because you are deranged and hostile on Twitter, and you're like, 2:34 let's argue about Drivechain, let's go, motherfuckers. But then you were telling me 2:38 my days were terrible, but you were laughing, and it was like a very funny- 2:41 I wish I knew what they were, so we could have history judge the ideas, 2:44 and see if they actually were terrible. We don't know, he's not telling us, but then he could have 2:49 pulled out the piece of paper, and it's like, oh, you know, 22 million Bitcoin. 2:54 He has a lot of bad ideas, though. 2:56 Yeah, it's true. It's true. 2:58 Occasionally, they hit. 3:01 How do you pronounce your last name? 3:03 Sztorc. 3:04 Sztorc. 3:04 Polish C is a T-S, unless it has the squiggle, in which case it's a C-H. 3:10 I don't really know if my family dropped the squiggle when they kept the original Polish spelling. 3:15 They left the squiggle on Ellis Island. 3:17 It could have. It's possible. 3:20 So then it would be Sztorc. 3:23 More like that, at least. 3:24 It's very hard to pronounce anything in Polish. 3:26 No, yeah, the Polish people, they struggle with it as well. 3:29 We call you Paul Sztorc. 3:32 What's long and hard that a Polish woman gets on her wedding night? 3:37 A last name. 3:37 A new last name, that's right, yeah. 3:41 Anyways, moving on. 3:43 They do a Polish wedding ceremony where one person gets vodka and the other person gets 3:48 clear water, and they mix it up, and then they take a shot, and whoever has the vodka 3:55 wears the pants in the household. It's like the leader of the household. 3:58 But the joke is that they both get vodka. 4:01 I see, yeah, yeah, yeah, yeah. 4:04 Is it true, I've heard a rumor, is it true that you have red bedsheets? 4:10 Why am I doubting this type of thing? 4:13 That is true. 4:14 I changed all the color in my house. 4:18 There's no red in the entire house except for the bedroom. 4:21 That makes you sound like quite a sensual, erotic person, having red bedsheets. 4:28 It's not a good color. 4:29 It takes a lot of attention. 4:32 Right, but why the bedsheets red then, in that case? 4:34 It's just like, how many things do you actually really pick the color for? 4:39 Is that your favorite color? 4:40 No. 4:43 In fact, I have moderate red-green color blindness, so it's not as easy as red. 4:48 So they could be green. 4:50 Interesting. 4:50 Yeah, I mean, I got them at Amazon from the drop-down menu. 4:53 Right. 4:54 But you never know how high the conspiracy goes. 4:56 That's right. 4:58 You were induced to buy them by the lizard people, you know? 5:02 That's definitely possible. 5:03 Now I'm so curious who knew this and told you. 5:07 I can't say anything. 5:08 It's the kind of thing I would do is make a joke about the colors. 5:11 So I would tell it off and joke to someone. 5:13 I'll just try to figure out who it was. 5:15 Yeah, I'll be impressed. 5:16 It's probably like a tab-conf orbit person is my guess. 5:24 Can you tell us about the young Paul Sztorc? 5:29 What kind of young adult were you? 5:32 Can you be more specific? 5:33 No, no, I can't. 5:34 Describe yourself. 5:36 Were you a brooding young man? 5:37 Were you a loquacious young man? 5:39 One interesting thing that happened was in my city that I grew up in, 5:44 some people get the same group of like the way the school districts work. 5:48 Some people have like kindergarten, middle school and high school in the same group. 5:54 But then other people get split off constantly. 5:58 So I was getting more split off. 6:00 So it's kind of difficult because you lose like half of your friends. 6:03 Was that because you were like gifted? 6:05 No, but I was in the gifted program. 6:08 Real gifted or the short bus gifted? 6:10 No, it was the real gifted. 6:12 And you know, they like take all the smart kids away. 6:15 Bust them off. 6:16 Yeah, like hang out with each other, like play chess for a while. 6:21 So I was in that. 6:24 But then the way it works, like you lose some friends. 6:28 And so and then in high school, you kind of like, you know, 6:30 I still had some friends that I had known like one or two since elementary school. 6:35 You that was an interesting like some people had 6:39 like every single person in their elementary school. 6:42 Oh, yeah. 6:43 Still at the high school. 6:45 So then like freshman year, I kind of didn't have high school. 6:49 I didn't really know that many people, but I kind of liked it that way. 6:53 I spent a lot of Warcraft three. 6:54 Yeah, and then at some point I decided that I wanted to become more popular. 6:58 And then by senior year, I was like very popular. 7:01 What was your strategy to get popular? 7:03 Well, you know, throw parties and just buy a lot of, you know, alcohol. 7:07 Yeah, yeah. 7:09 Like a cheat for that. 7:10 But but it was one interesting thing that happened was that 7:15 people formed their little cliques early on and people were very clicky, as you know. 7:20 And then, you know, like all the then people take things for granted 7:24 and there's drama within all the cliques. 7:26 And then they want a new want to bring a new person or they want, you know, 7:31 it's like everyone started to want to do that. 7:33 It kind of at once, like halfway through the plan. 7:36 And you're like the one that's really helped a lot. 7:38 And then, you know, a lot of people kind of become like, 7:40 I don't want to say like Peter Baylis or something, 7:42 but you know, a lot of people. 7:44 I don't know who Peter Baylis is. 7:45 Oh, that's weird. 7:46 I don't either. 7:47 From Game of Thrones? 7:49 Oh, yeah. 7:51 Is he the short one? 7:52 No, that's no. 7:53 That's 8:00 well, this is throwing my brain off a little for analogies that I plan to use, 8:03 but I think all this Game of Thrones analogies lead it. 8:07 Yeah. 8:08 And another thing is I did join a band in junior year. 8:12 So those people are very nice. 8:14 What did you what did you play? 8:15 I played the trombone. 8:17 My grandfather played the trombone. 8:19 Yeah, he was a sort of middling Chaucer scholar by day. 8:23 And really liked to play the trombone at night. 8:26 And I think he probably would have been a happier, 8:28 less miserable person if he played the trombone more and studied Chaucer less. 8:32 Was this a Pennsylvania one? 8:34 Yeah, yeah. 8:35 Penn State professor. 8:36 Yeah. 8:37 Right. 8:38 I mean, I don't know. 8:39 I think my childhood was pretty good, honestly. 8:42 Okay. 8:43 What was your first contact with microeconomics? 8:49 That's a good question. 8:50 I feel like in a way I was really interested in it my entire life, 8:55 like sort of consciously or something. 8:57 Because you would play... 8:57 So if you wanted to play a game like Starcraft or Warcraft 3, 9:01 that is like a... 9:02 Or even a game like... 9:04 I had like SimCity 2000 growing up, 9:06 and I had like other games like that, Sim Theme Park. 9:09 So these are inherently like microeconomic games, really. 9:12 You know, like you got to manage the city, 9:14 or you could run out of money play Sim Theme Park 9:17 and start like deleting your stuff. 9:20 You play SimCity 2000, you change the transit budget, 9:24 you click it down a little bit, 9:26 and then they're like the people, the guys look angry. 9:28 Yeah. 9:28 You do this, all the roads like start to fall apart. 9:33 But then we did have... 9:34 The high school had AP econ. 9:37 Oh, that's really cool. 9:37 So you could take it when you were in high school. 9:41 And me and a couple other friends, we really liked it. 9:43 Then I started it in college. 9:45 The college gave you placement and credit. 9:50 I could take intermediate microeconomics 9:52 as a fresh fall semester as a freshman. 9:55 And that was also kind of cool, 9:56 where you're kind of like just thrown into like 9:59 one of the most advanced classes. 10:01 That kind of like sets you on a path maybe 10:05 to like be more determined about it. 10:07 Huh, interesting. 10:08 I had kind of the same experience with programming, 10:10 like a little bit, not totally, 10:12 but like I went to community college, 10:14 and there was this C++ programming class. 10:17 And you were recommended to take the C programming class first. 10:20 And so I just took the C++ programming class. 10:23 And I like had to like bust my ass really hard 10:26 from the beginning. 10:26 And maybe that set me on a sort of more determined path. 10:28 Yeah. 10:29 I do think there is like, 10:30 people have these like forks in the road, 10:32 where you kind of like, you meet something like that, 10:34 and you either say, oh, this isn't for me at all. 10:36 I'm just going to give up on it. 10:37 Yeah. 10:37 Or you're kind of like, oh, I like this, 10:40 and I want to do it. 10:42 I want to do the higher level thing. 10:45 I had a similar experience with the game like situation. 10:48 My own self, and I knew a lot of young women like this, 10:51 got really into Neopets, which had a stock market on it. 10:54 And so like you learned how to like create a stock portfolio 10:58 on Neopets, like at age like eight to 10. 11:01 Yeah. 11:01 I mean, start everyone, start your kids early. 11:03 Give them SimCity or whatever, you know, 11:05 if you want them to actually know about debt 11:07 or what it's like to go into debt. 11:08 Yeah, yeah, yeah, yeah. 11:12 Same theme park. 11:13 This is like the only way, if you just played the game, 11:15 like you just had a lot of fun. 11:16 But if you took out a loan, 11:17 that was like the only way you could like lose. 11:19 And it would just like delete the whole theme park. 11:23 My brother and I, we would have to go back. 11:24 We'd go back to like an earlier stave. 11:26 Yeah. 11:26 But we had saved it after like taking out the loan. 11:30 But it's kind of like, you know, 11:32 a Groundhog Day or that other movie with Tom Cruise, 11:34 where it's like you fight the war every day, 11:36 and you have to like try to pay off the loan in time. 11:39 Yeah, yeah. 11:39 And we were like, we regret ever doing this. 11:42 But there you go. 11:42 Like, you want them to learn when they're like, 11:45 you know, 10 or 12. 11:46 Tiny domino, like theme park delete, 11:49 big domino, like adult credit responsibility. 11:52 Absolutely. 11:53 Yeah. 11:53 And people, the other thing is, 11:55 a lot of stuff is much easier to learn 11:56 when you're young, obviously. 11:58 But it's like, people get older, 12:00 they have like their weird little hangups 12:01 or they're weird, like they've decided, 12:04 it's too late for me, you know? 12:07 They're like, oh, I'm not good with money or something. 12:09 Yeah, they're like, I hate math. 12:11 Yeah. 12:11 And they've just decided that they're that type of person. 12:13 Yeah, yeah. 12:14 It's true. 12:15 It's true. 12:17 Would you say that you're part of any particular 12:21 house of economics, you know, like Slytherin, whatever? 12:24 That's a good question. 12:26 Well, I wrote a huge post, 12:28 and I feel bad because I've never published it, 12:30 but it's like 99% done. 12:33 I wrote it in 2017, 12:35 called Austrian Economics Dash, 12:38 Join It Then Leave. 12:41 Because you should join, 12:43 and then you should get out 12:44 because it is a weird cult, of course. 12:46 But the problem is, 12:48 mainstream economics is also a weird cult. 12:50 And Henry Hazlitt figured it all out with his book, 12:53 Economics in One Lesson. 12:55 He has it right at the beginning. 12:56 He has this little paragraph about, 12:59 well, economics is hard as anything else. 13:02 It's as hard as chemistry or whatever. 13:05 But it has a special problem, 13:09 which is that everyone is pleading, 13:11 especially, he called it the special pleading 13:13 of special interests or something, 13:14 or special pleading of selfish interests. 13:17 But basically, in economics, everyone is thinking, 13:19 oh, if I argue a certain way, 13:23 then I can get more money. 13:24 I can get more status in society. 13:27 So everyone is kind of deranged, 13:28 psychologically deranged themselves. 13:30 You know what I mean? 13:31 Who are the people who are into Austrian economics? 13:33 People who don't want to pay taxes, 13:34 people who are doing okay. 13:36 So it's hard to tell real or just the self-delusion. 13:41 And then the Keynesian people are people 13:43 who work for the government, like West Wing people. 13:45 They love paying taxes for some reason. 13:47 And maybe they get more in taxes than they pay, 13:50 because if they work, a lot of these people, 13:52 if you work for the Fed, 13:53 the other thing is if you work in academia, 13:57 do you want it to be simple, 13:59 or do you want it to involve some crazy econometric model? 14:03 The last thing you want is- 14:04 Yeah, you want the research budget. 14:06 You're like, we have to build a model in Fortran 77. 14:09 It's going to take 40 million lines of code. 14:11 We need $80 million instead of like, 14:14 yeah, I just draw the supply and demand curves 14:17 on the board and call it a day. 14:18 Or like so many things we don't teach to the public. 14:22 I'm just thinking like the profession. 14:24 Like imagine there was a world where everyone, 14:28 you had a chemistry profession, 14:30 and you had like Walter White, 14:31 you had all these people who are great chemists. 14:32 Walter White, that's freaking bad, dude. 14:34 Nobel Prize winner. 14:35 I'm just, you guys are killing me with these. 14:37 I'm trying to come up with cool metaphors. 14:38 You guys are like, I don't know what you're talking about. 14:40 I just love the idea that he's like noteworthy chemist. 14:44 He's like a noted financier Jeffrey Epstein. 14:49 He's like a building, 14:52 it looks like meth, but it's actually close to the wall. 14:56 So I'm talking like you live in a world 14:57 where these people exist, 14:59 and yet the normal person like has never heard 15:02 of like temperature or pressure. 15:05 That's basically the economics world. 15:06 The politicians talking on stage, 15:09 they don't know about efficient markets hypothesis, 15:11 supply and demand. 15:12 Sometimes this happens with friends that I'm talking to 15:16 where they're making some like political point, 15:18 and then I like drill down to the very bottom. 15:22 And then I'm like, oh, they don't think 15:24 that like a payroll tax is borne by the employee. 15:28 They think, well, the employer pays the tax, 15:30 the tax incident. 15:32 So that's, I mean, that is in econ 101. 15:37 But that's not, and the minimum wage is not the best way 15:40 to help the poor remotely. 15:41 So there's many other ways that are better. 15:43 If you want to help the poor, then you should do it. 15:45 But the minimum wage is often hijacked by unions or anyone. 15:49 If you can have like a high skilled person 15:51 get $15 an hour for a certain job, 15:54 and you don't want three people to come in, 15:57 you know, getting $4.90 an hour, $4.90. 16:01 So we live in this bizarre, bizarre world. 16:03 Why should you? 16:07 Why should you enter Austrian economics? 16:09 And then why should you leave it? 16:10 Well, because you have to get out of there 16:11 because they're all cults. 16:13 And so actually it's a very good training 16:14 for like the crypto industry, where everything is also called 16:17 and for the same reason, because everyone's a bag holder. 16:20 Do you think that economics is a pseudoscience? 16:24 No, but I think it's haunted by this cult issue. 16:27 It's haunted by many bizarre issues where 16:33 if you allow the cult part to win, 16:35 then it is a pseudoscience. 16:37 And this is a constant danger. 16:38 And you can see that some of the Austrian people 16:40 are in the cult and some of the neoclassical 16:42 and the Keynesian people, they're just in the cult. 16:44 And then there's others like, you know, 16:45 Paul Krugman's column is terrible. 16:47 But when he writes all these other books 16:49 that are like very well respected about exchange rates 16:53 Well-respected good or well-respected bad? 16:55 Well-respected normal econ books. 16:57 So when he addresses, when he has to do peer review 17:01 Keep, if you can keep 17:02 I'm sorry. 17:02 Yeah. 17:02 You don't like a fist away. 17:03 You don't need to throat it. 17:04 When he, it's just depends like the temptation 17:09 to write it, to sneer at everyone via 17:11 Yeah, via your little dunk, your New York Times 17:14 Is enough to destroy the merit of the content. 17:19 Yeah. 17:20 So it's just, if you let that, if you let the temptation win 17:24 then it will become completely fake. 17:26 Yeah. 17:26 Yeah. 17:27 Can I complain, can I complain my pet peeve 17:29 about the Austrian economists? 17:31 Yeah. 17:32 We can go down a little, the article is huge. 17:34 It contains a whole thing of like crazy things 17:36 that they won't stop, you know, talking about 17:39 that are incorrect. 17:40 Maybe mine is pretty mild. 17:41 It's that I think it's a reaction 17:43 to like mainstream economists where they're like 17:46 the Austrians are like, well 17:47 you can't actually go out and measure anything. 17:50 You've got to be in a dark room 17:52 in a sensory deprivation tank. 17:54 And then you do praxeology 17:56 which is just like figuring things out. 17:58 And then you emerge from the sensory deprivation tank 18:01 knowing things about the world. 18:02 And it certainly seems like these kinds of economic 18:05 like get Duncan experiment and are like a good idea, 18:08 you know, and can work. 18:09 And there's merit to that. 18:10 But the world is also really complicated. 18:12 It seems like measuring it sometimes 18:13 would probably be a good idea. 18:15 Well, I mean, you're absolutely correct. 18:17 Like that this is one of the main flaws 18:19 and the over-reliance on praxeology is 18:23 I go into this in enormous detail 18:24 in this giant article, but like, 18:26 That will never be published. 18:28 You know, I think I slowly getting 18:30 I really just got to, maybe I just push it 18:32 because the issue is 18:33 Put draft in red letters over the top. 18:35 I could, because, you know, the issue is 18:37 when you've put out something like this 18:38 everyone will take it as a big challenge. 18:40 I mean, as they should. 18:42 And then you're going to get all this weird, 18:43 you know, attention from people. 18:45 There will be like, whoever, you know, 18:48 like Alan Farrington or whatever, 18:49 or they will want to like do the debate, 18:51 which they should, or even Eric Bosco. 18:54 And those guys are great. 18:55 But Austrian economics is just like 18:58 bad for your mental health. 18:59 Yeah, yeah, yeah. 19:00 But you're right. 19:01 Praxeology was because 19:03 And praxeology is this idea 19:04 that you just need to noodle on things. 19:06 You don't need to look at the world at all. 19:08 Yeah, it doesn't make any sense. 19:09 But it was a reaction to something 19:11 called positivism that was in vogue 19:13 in the 1930s. 19:14 What's positivism? 19:15 It's this positivism is an idea that 19:18 it's an extreme form of empiricism. 19:20 So empiricism was this idea that 19:23 let me just take a step back 19:24 because I don't want everyone to lose their minds. 19:26 And I want to give them the normal 19:27 this is the real way things are. 19:30 I mean, anyone can be wrong, including me. 19:32 But just the real way things are 19:34 is that there was a philosophy 19:36 at a certain point in time 19:38 and it was not good enough. 19:40 So people rejected it. 19:41 So in the Enlightenment 19:42 there was this idea of knowledge 19:43 comes from authority, 19:44 comes from the king, 19:45 or comes from these books, 19:46 comes from priests, 19:47 comes from the Bible. 19:48 The knowledge is coming from 19:49 the authoritative book. 19:51 And then during the scientific revolution, 19:54 people rejected that. 19:55 They said, you know what? 19:55 We contest the theories with experiments. 19:59 But then people got a little carried away 20:00 by the time von Mises had been born. 20:03 And they thought 20:05 I'm talking about when he started to write 20:08 as a serious person 20:09 to reject positivism in the 1930s. 20:12 And at this time, 20:14 positivism was this idea that 20:18 it's difficult to explain 20:19 exactly how it all shook out. 20:21 But basically it was the idea 20:22 that it's experience and experiment 20:25 that justify all knowledge. 20:28 There was an extreme form of empiricism. 20:31 And that was also incorrect. 20:33 And one of the reasons why 20:36 is that you actually cannot experience 20:38 anything directly without 20:40 having a theory attached to it. 20:41 And many times we don't even realize 20:43 we have many of the work. 20:43 We have the optical blind spot. 20:45 We have optical illusions. 20:46 Or you don't even realize 20:48 like your eye doesn't actually see 20:52 like anything it might detect. 20:53 So if you run an experiment 20:55 and you're looking like on your computer 20:56 or you hold the litmus test up, 20:57 you see it's either red or blue. 21:01 You never actually see that. 21:03 The red and blue is like 21:04 different wavelength light 21:06 that crashes into your eye. 21:07 And then your eye produces 21:08 an electrical signal 21:10 that is interpreted by your brain. 21:12 It's a hallucination. 21:13 And so yeah, your brain 21:16 has running like a kind of program 21:18 to generate virtual reality 21:19 that you experience. 21:21 And so that's why you have 21:21 like optical illusions. 21:23 And you can do like a magician's trick 21:24 where your eye can only see 21:27 the part of your eye that can read 21:29 is only the area of your thumb. 21:32 Yeah, the fovea. 21:33 And you actually can't see everything. 21:35 And actually you can't see 21:35 anything else in color. 21:37 But your brain renders it 21:39 like you look around the room 21:41 and your brain like renders 21:42 a room in your mind. 21:43 So you think you can see 21:44 that you're in a room full of color, 21:47 but the part of your eye 21:48 that can detect color 21:49 is only very, very small. 21:50 And your eye will dart around 21:52 and your brain will stitch it 21:53 all together later. 21:54 But that's how a magician 21:55 can do something with one hand. 21:57 You look over there, 21:58 they move their hand 21:59 or what they do like something else. 22:00 You're not looking. 22:01 And then you think, 22:02 how did they, how did they, 22:04 you know, they pick that card 22:06 through the table or something. 22:08 Of course, that's not really what happened, 22:09 but they exploit deficiencies 22:13 in how your brain perceives things. 22:15 So this is a long winded way 22:16 of just saying positivism was wrong 22:18 and he created praxeology 22:20 to put reason back in and say, 22:23 well, if you have an experiment 22:27 and it goes one way, 22:28 there's actually an infinity number 22:30 of ways you could interpret 22:31 the results of the experiment. 22:32 So for example, 22:33 what if you have a thermometer 22:34 and you test two things, 22:35 you heat one like beaker or liquid 22:39 and you heat the other 22:40 and you hold the temperature 22:41 and one says like 95 degrees Fahrenheit. 22:44 The other says, 22:45 like it's like 3 million degrees Fahrenheit. 22:49 You would be like, 22:49 well, this thermometer is broken. 22:52 So that's kind of what 22:55 the praxeology stuff was getting at 22:57 when he was trying to say, 22:58 oh, the minimum wage hurts the poor 23:00 or the minimum wage sets a price ceiling 23:02 and it will cause the stock out or something. 23:04 He's saying like, 23:04 we kind of know 23:06 that if we held up heat to the thing, 23:09 it would get hotter. 23:10 But we also know that it won't, 23:11 it can't get to, 23:12 you know, 3 million degrees 23:13 without the room bursting into flames, 23:15 killing us all. 23:17 So that was kind of what 23:19 he was trying to steer it back. 23:20 Then all these crazy Austrians, 23:22 of course, because it's a cult 23:24 and they just take it and run with it. 23:26 And they say, well, 23:27 and then of course, 23:28 best of all for any cult, 23:30 praxeology says, 23:31 what does it say? 23:32 If you start from a premise that's true, 23:34 then your conclusion is absolutely 23:36 100% has the epistemic status of being, 23:39 the whole column is perfectly true. 23:41 You can never be proven wrong. 23:42 Right. 23:42 Well, you know, that's, 23:43 so then you can see how 23:44 you get to some closed minded people 23:47 who are just like, 23:47 I'm right about everything. 23:50 So then eventually you started to work at Yale. 23:53 Is that right? 23:54 That's true. 23:54 Yeah. 23:54 And you were a research economist at Yale. 23:58 That's right. 23:58 What did you research? 23:59 Were you trying to like, 24:00 grow their endowment or something? 24:01 No, no, no, no. 24:02 I did real, 24:03 I worked for a Bill Nordhaus. 24:04 So this is very funny 24:05 because William Nordhaus 24:06 is the inheritor and coauthor 24:08 of the Samuelson textbook, 24:09 which is the most mainstream textbook ever. 24:12 Yeah. 24:12 And I got the opportunity to work for this guy 24:14 who's very, very, very well respected. 24:16 He became president of the AEA, 24:18 American Economics Association, 24:19 while I was working for him. 24:21 And he won the Nobel prize later. 24:24 And he, but he was working on, 24:25 he worked on actually 24:26 quite a few different things, 24:28 for which he is famous. 24:29 And so my, you know, 24:30 I helped like do, 24:32 you know, supplementary research 24:33 and I did programming, 24:35 like program models and things. 24:37 Is that how you started to do programming? 24:40 No, I was interested in programming 24:42 when I was much younger, 24:44 around like maybe 11 or 12. 24:46 I started with Python, 24:47 just on the home computer. 24:49 Okay. 24:49 So it was way earlier 24:50 and I had never studied it. 24:52 I did not take a single programming class in college, 24:56 although some of them are related. 24:57 Like you have to take, 24:59 statistics, which puts you in contact with R, and you have to take econometrics to major in economics, which puts you in touch with like various other things, SPSS, data, NAS, which have like command line operations. I also had one or two friends who were really interested. Like I had one friend who did a bunch of PHP web stuff. So we had, we had like, he had set stuff up like in middle school, so that we could like play Doom on the school board. And he was like, I want to play Doom on the school board. 25:26 And we would play it on the school computers and like share files, synchronize with his like server and stuff. It was kind of funny. Yeah. So let's see, where are we? 25:35 Yeah, you really have a whole agenda. 25:37 Oh, yeah, yeah, of course. It's Paul. 25:39 He's leading you slowly to some trap. 25:41 Yeah, no, no, there's no trap. There's no trap. Also, I still call you Paul Sztorc. 25:47 No, this is a nickname that I received in like middle school, high school. 25:51 Oh, I thought it was from that podcast. 25:54 They independently came up with it somehow. 25:56 Yeah, it's just floating in the ether. 25:58 All roads lead to Rome, you know. 26:00 But it's difficult to pronounce last name. So this puts people in like a... 26:03 Have you ever considered changing your last name to be more phonetically obvious? 26:06 I have like thought like, or like, I have thought of like, what if I just did something weird like that? But you know, what are you gonna do? Like, that's the kind of thing where you... 26:13 I'm so jerking. What are you gonna do? 26:15 You're sitting on a couch with your friends and you're like, oh, this would be a funny idea. But then, you know, what am I supposed to like decide and then explain this to my family and then go to City Hall or whatever? 26:24 Yeah, right. 26:25 Like this is the kind of thing you would never really do. 26:26 Absolutely. 26:27 Like you and your friends are on a couch and you're like, oh, we'll start a band or something. 26:29 Yeah, Rod Armour. 26:30 Rod Armour. 26:31 What do you think about Nicholas Nassim Taleb? 26:34 Well... 26:35 First, can you describe for the audience Nicholas Nassim Taleb? 26:38 Those at home who may not know. 26:39 Yeah, those who may not know. 26:40 He is an independent statistician. 26:44 He's a flaneur. 26:45 He is a very interesting guy and author. And I would say I really have a lot of respect for him, although it has like, you kind of, some of it does, you kind of see through the magic trick after a while. 27:00 Well, he's pursuing the barbell strategy, which is like 50% of the things he says are really smart. And 50% of the things you say is like dumb as fuck. 27:08 And it's not good because normally I think a reasonable way to interact with someone is to like extend them a little bit of trust for a while. 27:15 And then when they screw one thing up, you're kind of like, well, wait a minute, this person is not really, you know, completely reliable, you know. 27:25 Not a serious thinker necessarily. 27:27 I got to go back in time and tag all those other times and think like, oh, could I really, should I really rely on? 27:33 I think it's good to like say things and people not know if you mean them or not and kind of always keep people guessing and always have plausible deniability. 27:40 He's definitely done a little bit of that. 27:43 I mean, Alan Farrington, I think he wrote the, you know, How to Kick the Addiction, which I was like amazed. 27:48 That was the most amazing piece of writing I've ever seen. 27:50 He wrote like a fake response to Taleb that is like in the style of Taleb. 27:58 He's like Primo, Mansoor, whatever, like blah, blah, blah. 28:01 He's throwing in all these like French, Italian, et cetera, Latin words in his books. 28:07 But yeah, he's a very interesting guy. 28:10 He did do something that was amazing after the financial crisis. 28:15 He presented to Congress about how generalized method of moments, which is this thing in econometrics, we're doing like linear regression. 28:23 Basically, linear regression is like you have these points and you kind of fit a line. 28:26 There's a little more to it than that, but – 28:28 I don't think – I actually don't think so. 28:30 I don't think so. 28:31 Well, for multivariate regression, it's – for multivariate regressions, you've got a bunch of points hovering in space and you fit like a sheet of paper. 28:38 And then you can do it for any dimension. 28:40 You just get the wackiest, most bullshit polynomial you can come up with. 28:43 Yeah. 28:44 You're like, oh, yeah, this is definitely it. 28:45 The nonlinear regression is something that only someone who has carefully studied actually knowledge and like stuff like empiricism and like the arguments of the past, I think only someone like that can safely use. 28:58 They've spent some hours in Plato's cave. 29:00 Yeah. 29:01 You need to study like Karl Popper and whatever and – 29:05 Then you get like a second-degree polynomial. 29:08 They will allow you to use the nonlinear. 29:10 It will give you like the chip or something that allows you to use the nonlinear regression because you're right. 29:16 Plenty of people just say, oh, I want the R squared to be as high as possible. 29:20 I don't – you know, which is like you want to get the thing to fit the points as much as possible. 29:26 And you can get the computer to fit the points perfectly if you just don't care about what you're doing. 29:30 You're going to make a weird shape and it will fit. 29:34 All Loch Ness fucking monster bullshit. 29:37 You know? 29:38 And you can see how not – if you have like height versus weight. 29:41 You have height versus weight and it's like a cloud. 29:44 You have like a line. 29:45 Yeah. 29:46 And you can see how someone – you can see how deranged you – like how disappointed – like if a child of yours comes to you, how disappointed you would be if they're like, oh, I've got an even better line. 29:54 And they just drew like a squiggled line through each point. 29:57 You'd be like, oh, that's nice, son. 30:00 And then you'd be like, we've got to keep him away from economics. 30:04 You've got to get him on the short bus, you know? 30:08 But then there's other things, you know, like experience versus wage that hits diminishing returns. 30:14 So you wouldn't want to hit the straight line. 30:16 You would want to have the tapered curve, one curve. 30:18 Right, one curve. 30:19 Yeah. 30:20 But not two curves. 30:21 But then, of course, there are some cases where it's – 30:23 Some cases indeed. 30:24 Yeah, some cases. 30:25 Yeah. 30:26 This is the fucked up thing is that sometimes – 30:27 Right. 30:28 So every – this is exactly right that every single thing has an exception. 30:31 I think – 30:32 Because the real world is the real place. 30:33 Yeah. 30:34 It doesn't reduce itself to one little sentence. 30:35 I think economists should have colored belts like they do in martial arts. 30:39 I agree with that. 30:40 And each additional belt gets you another degree in the polynomial you're allowed to use in your point fitting, you know? 30:47 Absolutely. 30:48 Yeah. 30:49 At people's height over time, you grow when you're young. 30:51 Then you're stable. 30:52 Then it shrinks a little. 30:54 How do you tell that an economist has a sense of humor? 30:57 I don't know. 30:58 They're dead or something? 31:00 They use figures after the decimal point. 31:06 That's kind of funny, right? 31:08 I was going to say I don't get it. 31:10 No, no. 31:11 It's like because everything is so imprecise. 31:13 So if you're like, oh, the GDP is 35.8, then – 31:16 Okay. 31:17 That's – I thought you meant figures like a shape. 31:19 No. 31:20 Like a graph. 31:21 No. 31:22 Like a graphical figure. 31:23 Okay. 31:24 Since that one didn't land, let's do – 31:25 You meant like significant figures. 31:26 Yeah, that's right. 31:27 Yeah, okay. 31:28 Let's go for another – 31:29 Yeah. 31:30 They say they put GDP at like eight decimal points. 31:31 Another economics joke. 31:32 So let's – so, Paul. 31:33 Okay. 31:34 So there's two economists walking the forest, okay, and John and Bob. 31:40 And they walk by a pile of bear shit. 31:44 And John says to Bob, I'll pay you $300 to eat that bear shit. 31:49 And they – Bob is like, well, okay. 31:52 I mean, if economists, they need the money. 31:54 So he eats the bear shit. 31:55 He's a graduate student. 31:57 Two graduate students, yeah. 31:58 So he eats the bear shit and he gets $300 from John. 32:01 And they keep walking, keep walking, keep walking. 32:03 And Bob then sees a pile of bear shit, another pile of bear shit. 32:07 And Bob says to John this time, I'll pay you $300 if you eat this bear shit. 32:13 And John, well, he's a grad student. 32:15 Grants are running out. 32:16 So he does it. 32:17 He takes the money. 32:18 They can afford to pay $300, but they really need the $300. 32:20 Yeah, yeah, yeah. 32:21 I don't know if this story is totally airtight. 32:23 It's airtight. 32:24 And so then he eats the bear shit and he gets $300. 32:27 And they keep walking. 32:28 And then John says to Bob, I can't shake the feeling that we both just ate bear shit 32:35 and we didn't get anything out of it. 32:37 We just have as much money as we had before. 32:39 And Bob says, well, we did grow the GDP by $600. 32:45 I mean, I don't know. 32:46 Is that like a joke? 32:47 It's a joke. 32:48 You're fucking busted by balls over here. 32:51 Come on. 32:52 You know, they wanted the entertainment value of seeing the other person do that. 32:56 It's like they go to Blue Man Group or something. 32:59 They go to the sphere. 33:00 Extra level of analysis where the absurd situation actually makes sense. 33:03 It's quite an important thing because, you know, in the command, the reason, this is 33:07 the other thing, is the Austrians are right about like communism is a huge scam and will 33:11 just kill everyone. 33:12 Yeah. 33:13 So like in those scenarios, you don't have the feedback where each single transaction 33:18 is like actually approved by the buyer. 33:21 Yeah. 33:22 You know, like in capitalism, if you want to sell some hamburgers, people actually have 33:25 to buy. 33:26 Yeah. 33:27 They say, well, I'll actually pay for this hamburger. 33:28 Yeah. 33:29 You don't get the Gestapo forcing the hamburgers down people's throats. 33:31 Forcing you to eat the bear shit. 33:32 Right. 33:33 Yeah, the bear shit. 33:34 Exactly. 33:35 So it is actually an important distinction that in one, both of the two parties consented 33:39 to say, I'll pay 300 for this entertainment value. 33:42 So is there some sort of communist version of this joke where they're forced to eat 33:45 the bear shit? 33:46 Maybe. 33:47 I don't know. 33:48 I know a bunch of communist jokes. 33:49 But so the 300 is the market clearing price. 33:53 No one really knows. 33:54 Yeah. 33:55 It's in there. 33:56 It's the market clearing price. 33:57 No one really knows if it's too high or too low. 33:58 Right. 33:59 Well, they're getting, they also produced important information. 34:00 Information. 34:01 Price discovery. 34:02 So this is why I'm just trying to, I'm just trying to defend GDP a little bit. 34:04 Because GDP is always, people make fun of GDP. 34:06 It's a lie. 34:07 Yeah. 34:08 But you know, hey, the GDP per capita of Haiti is a lot lower than Japan. 34:11 Right. 34:12 Right. 34:13 So, and it's like, oh, we just, people are like, we just, we don't care. 34:15 Because GDP is fake. 34:16 I mean, maybe like Eric Bosco says the same thing. 34:17 He says if two people trade back and forth like a million times, GDP goes up. 34:21 Therefore, that proves GDP is fake. 34:23 Eric Bosco told me that at the same event where I told you three ideas sucked. 34:28 November 2017. 34:30 But, you know, I just disagree that that, you know, that's not fair because each thing 34:38 is a voluntary exchange of the people. 34:40 Agreed. 34:41 Yeah. 34:42 I mean, if two guys just keep trading $300 back and forth and eat bear shit in the woods 34:44 for years, that sounds like a beautiful life for them. 34:47 With a lot of shareholder values being created. 34:49 Well, obviously, as an absurd example, that wouldn't actually happen. 34:52 You never know with some of these grad students. 34:54 But in a sense where they're trading it back and forth, they have, the realistic version 35:00 of that would be, they think, one of them thinks, oh, I need this, you know, shirt or 35:06 something. 35:07 They're like going on a date or something. 35:08 There's only one nice shirt. 35:10 And one of them thinks, oh, I need this shirt. 35:12 And then the person cancels the date or the person doesn't show up or something. 35:15 Then they have new information. 35:16 They sell the shirt back. 35:18 $600. 35:19 The other person who thinks they have a date and then they get more, I think this person 35:23 is stringing their balls along. 35:24 I think you need to workshop this a little bit. 35:25 Okay. 35:26 I know one or two communist jokes. 35:27 Would you like to hear a communist joke? 35:28 Yes. 35:29 Hell yeah. 35:30 Hell yeah. 35:31 Two people are walking down, I'll do a two-person, you know, two people are walking down the 35:32 streets of, you know, I mean, it was St. Petersburg or whatever, but you could say North Korea 35:38 or whatever, Pyongyang or something. 35:40 Yeah. 35:41 They're walking down the streets of Moscow, whatever. 35:44 And one of them says, comrade, do you think we have succeeded in achieving true communism 35:52 here? 35:53 Is this it? 35:54 And the other man responds, oh, hell no. 35:57 Things are going to get a lot worse. 36:00 Okay. 36:01 A communist joke is like food. 36:03 Not everyone gets it. 36:05 Uh-huh. 36:06 That's pretty, yeah. 36:07 Okay. 36:09 Three dogs talking about life in their country, a capitalist dog, socialist dog, and a communist 36:15 dog. 36:16 A capitalist dog says, oh, life's not so bad. 36:19 You know, you bark and you bark and eventually someone comes along and throws you some meat. 36:25 And the socialist dog says, what's meat? 36:28 And the communist dog says, what's bark? 36:32 I don't know if I get that one. 36:35 Because you can't complain in a communist country. 36:44 And then someone sees two people are talking, a Muslim and a Syrian. 36:48 And one of them says, you know what I like about America is I can go right into the Oval 36:51 Office and I can go, I can bang on Donald Trump's desk and I can tell him exactly what 36:57 he's doing wrong to ruin America. 37:02 And the other person says, oh, you know what? 37:04 We have exactly the same thing in Soviet Russia or in North Korea or whatever this fictional 37:08 person is from. 37:09 I can go right into the Kremlin and I can go up to Vladimir Putin's desk and I could 37:15 bang on the table and I can tell him exactly how Donald Trump is ruining America. 37:26 You really came prepared. 37:28 I didn't know that. 37:30 I should have known. 37:31 I should have been like, I should just write a bunch of jokes. 37:35 Those are old communists. 37:37 Those are bangers. 37:38 Those are classics. 37:39 I don't think I know any communist jokes. 37:41 Now you do. 37:42 Yeah, now I do. 37:43 Yeah, you've got a few now. 37:44 How did you get into Bitcoin? 37:46 Well, I read the Wired article about Silk Road. 37:50 Oh, interesting. 37:51 When was that? 37:52 That article came out in 2011. 37:55 But at the time, I thought this is the stupidest fucking thing I've ever heard in my entire 38:00 life. 38:01 Why did you think it was stupid? 38:02 Well, I'm a huge believer in network effects and I knew a lot about econ and I'm not saying 38:07 that that is. 38:08 I don't understand why more people, I don't know why we don't have more economist people 38:12 in Bitcoin because actually I think the more you know about econ, the more likely you would 38:16 be to be a Bitcoiner, but that's a separate, we'll come back to that. 38:20 But I thought, I was a huge believer in network effects and I also a huge believer in microeconomics 38:26 and I knew about, there's like this divide the dollar game about coalitions that just 38:31 keep falling apart, which is basically live by the sword, die by the sword. 38:34 Or it later became live by the fork, die by the fork with like the hard forks. 38:37 You like Bitcoin Cash and you have Bitcoin SV and you have Bitcoin Gold or whatever. 38:41 So a coalition falls apart unless people stay in. 38:44 So I thought these crazy libertarians, even though I was a libertarian, you know, I still 38:49 am, but I was like, you know, libertarians are so stupid sometimes. 38:53 So I was like, these crazy libertarians are like inventing their own currency and I got 38:57 emails, the Free State Project also is emailing me about it and they were like, come to New 39:02 Hampshire and you can get like 10 free Bitcoins. 39:05 And I was like, I got to unsubscribe. 39:06 I literally thought like, I think I may have unsubscribed to the Free State Project over 39:10 the Bitcoin email. 39:11 And those are Roger Ver's Bitcoin he was just giving away, 10. 39:14 And I was like, these stupid libertarians creating their own currency now. 39:17 Like, this is so shameful. 39:19 The stigma, the stigma of like, because money is very social. 39:23 And also people always love to create their own currency in these really stupid ways, 39:27 like the babysitter dollars or like the local currency or whatever. 39:30 Everybody wants to do it and it's so pointless most of the time. 39:33 It has this subversiveness to it that is very upsetting to people, kind of as it should 39:39 be. 39:40 If you think about it, you have some old people who have worked for a while and they've saved 39:43 some cash and a younger person comes along and says, you know what, I'm not going to 39:47 honor this. 39:48 This arrangement that touches all parts of society, you know, from the old to the young 39:54 to the wealthy and to the poor. 39:56 And you're just like, I'm not going to do that because I've got everything figured out 40:00 at the age of, you know, whatever, 18 and I'm just going to do my own currency. 40:04 And then obviously the problem is all the reasons for switching from, you know, the 40:10 U.S. dollar to new currency A, those all apply double for switching again from A to B and 40:16 et cetera. 40:17 It's like when they had the Brexit referendum and then they wanted to have like another 40:20 referendum and to ignore the first one. 40:23 It's like, oh my God, like that, talk about horrible game theory. 40:25 It's like now everyone's going to be saying the second one. 40:28 People are going to be saying, well, that one wasn't real. 40:30 And then why did you even do this in the first place? 40:32 Crazy, crazy British people. 40:33 Yeah. 40:36 But the British political system usually works very well, but they interacted. 40:39 The referendum was this very rare thing they threw in. 40:42 Yeah, it screwed everything up. 40:43 It's also pretty crazy to me that a referendum like that is like based on such a low percentage 40:47 like 51 percent. 40:48 Like, shouldn't if you're going to do something crazy, shouldn't you at least get like 60 40:51 percent, 70 percent? 40:52 This is a very important question which we can get into, but it is it's like a very different. 40:58 But actually the issue is you have these veto points. 41:02 So what happens if you have more than the threshold is higher than 51? 41:06 You have toxic limbo. 41:08 And this actually happened in Bitcoin with the 9 percent SegWit2x blockade guy, the Viya 41:13 BTC guy leaving Scaling 3. 41:15 This program in Scaling 3 didn't have a lot to do with scaling. 41:18 And one of the miners just left, started signaling for Bitcoin Unlimited with 9 percent. 41:23 He was Viya BTC, which now has 20 something percent. 41:28 Meanwhile, the developers were coding SegWit and they wanted to release it. 41:33 It was sort of late. 41:35 You know, there was no, you know, with programming, everything takes much longer than you think, 41:39 of course. 41:40 But because of the timeline, people had thought it would be done by April 2016, but it wasn't 41:46 shipped until the hackathon after Scaling 3 in October. 41:50 So they were finishing it up. 41:52 Historically, stuff had used BIP-9 to activate, which is 95 percent hash rate threshold. 41:57 So this is an example of what you wanted. 42:00 It's 95 percent. 42:02 The problem is it creates toxic limbo. 42:04 So this nine person person got like left the coalition like the normal and they ran Bitcoin 42:11 Unlimited, which was not going to signal for SegWit because it's a completely different 42:15 software. 42:17 But now you have a very difficult situation because you've got maybe like let's say it's 42:24 a split 81 or excuse me, 91 to 9. 42:29 Now the 91, no one knows. 42:31 First of all, one issue with this is no one now knows exactly who to blame because you 42:35 could say, well, we're going to blame this nine percent for doing the wrong thing. 42:39 But each of the people in the 91 percent, there could be many other coalitions of 12 42:47 percent or so that now say, well, you're going to give them. 42:51 OK, we'll give something to the nine percent in return for peeling four percent off. 42:55 Then we'll get up to 95. 42:57 You say we'll get four percent of the people out of the BTC in return for some concession. 43:07 But this is this you've just like welcome to hell, because now everyone with four percent 43:12 is going to be thinking, where's my concession? 43:14 And nothing will ever get done. 43:16 And no one will know like what to do about the situation, because now you have an endlessly 43:21 rotating pie chart like kaleidoscope of these four percents that will appear. 43:26 Once you get, you could get up to an expected 95 percent, which is what you had at the very 43:31 beginning. 43:32 But then a new person can always just say, oh, I've got nine percent or I've got 15 percent 43:37 and I'm just going to run Bitcoin Unlimited until I get what I want. 43:41 And so it's actually when you have a collective action problem, you are not blessing. 43:47 You are not endorsing a choice. 43:49 You're not choosing a politician or a party or a referendum outcome. 43:53 You're actually disqualifying. 43:55 You're crossing off the list until there's one left. 43:58 And that is why it's really forty nine point nine. 44:01 If you can't beat that, you are deleted from the list. 44:06 Which is my point of view, although this is actually hotly debated in political science. 44:09 But this is my view is that this is where and this is a Joseph Schumpeter view. 44:12 Also, he's sometimes considered an Austrian economist. 44:15 I think no one really knows exactly where to put him. 44:17 I mean, that's the other thing about Joseph Schumpeter. 44:20 Very enigmatic. 44:22 One other thing I wrote about my giant Austrian economics article is that that you haven't 44:27 published. 44:28 I haven't published, but one day will. 44:29 Is that the Austrian school is not actually consistent. 44:33 You have Hayek and you have Rothbard and they are complete opposites. 44:37 You sound a little bit like Rothbard. 44:39 And you think so? 44:40 Yeah, a little bit, a little bit. 44:41 But I have a similar writing style to Von Mises, where I just break stuff into like 44:45 endless, like I have a huge structure, like parts, like a part a part one. 44:50 I like Rothbard, but only because I think he's very, very funny when he speaks live, 44:54 when he speaks extemporaneously. 44:55 He's very funny. 44:56 Yeah, he certainly is funny. 44:57 So wait. 44:58 So there's a lot about the government trying to. 45:02 I think Rothbard will probably go down in history for thousands of years as the, if 45:07 the government tries to break up a monopoly, it often completely like doubles the monopoly, 45:12 like it doesn't work at all. 45:14 Yeah, yeah, yeah. 45:15 Totally right about that. 45:16 Well, usually they just entrench the monopoly. 45:18 Yeah, absolutely. 45:19 Like explicitly. 45:20 Regulatory capture. 45:21 So wait. 45:22 So, okay. 45:23 So you, this, you got this, this email kindly offering you 10 Bitcoin. 45:25 Yeah. 45:26 And I was like, fuck those guys. 45:27 So stupid. 45:28 Yeah. 45:29 And then what happened later? 45:30 Eventually the Silk Road article, I had read that, that later. 45:33 Cause you're just like, how did you get into it? 45:35 So I had like, as you heard about it and hated it, but then I got back into it with the Silk 45:39 Road article writing about, because one of the things that I was like interested in, 45:44 and this was in the Steam Teller's book also about like how like someone who's like a drug 45:47 addict, it suddenly gains like tons of IQ points. 45:50 You know? 45:51 What the fuck are you talking about, Paul? 45:53 I'm going to explain it in a moment. 45:54 Because Silk Road sold people addictive drugs. 45:58 And so like when people need the next fix, they go from being like kind of unremarkable 46:01 to suddenly becoming like super, super clever. 46:03 Yeah. 46:04 They figure it out. 46:05 They're like, we'll figure it out. 46:06 Oh, I need to get this money sometime soon. 46:08 And they suddenly, they're so motivated that they, they can like, they become like hard 46:13 working and stuff. 46:14 You know, they get it together in order to get this thing that they really want. 46:18 And so I was thinking like, well, you know, these people who are buying drugs on this 46:24 site, it must work because they would try to like, you know, hack the site more or less. 46:28 Maybe not, maybe not computer science hack, but they would be trying to get money out 46:32 of the, trying to get extra drugs out of this website. 46:34 It's like a drug website. 46:37 And so I kind of thought, well, it must work. 46:40 And then I also thought it already is being used. 46:44 This is an irony. 46:45 This is one of the many things that has flipped from then until now. 46:49 I thought it is already being used by real people like in commerce is already being used 46:58 to like, like regular people are not investing in it. 47:03 They are actually using it. 47:04 They purchased the coin so that they can make this Silk Road transaction. 47:10 The merchant sells the good for this and then they dispense with the coin. 47:14 They swap the coin back to fiat currency. 47:18 So I thought I'm too late, actually. 47:21 I actually missed the boat on Bitcoin. 47:23 This was back in like 2012 or something. 47:26 But that was how I first got interested in it. 47:29 And I joined, you join the forum and you think, oh, this is actually a way more serious project. 47:33 People think you learn about the history of the cypherpunks. 47:37 I learned about more like how mining worked because one, as you know, as I mentioned, 47:41 one of the things that I was annoyed about is if we launch this and it's a great success, 47:45 someone will just copy it later to the altcoin. 47:48 And then you'll just have this endless copying and there will be no moral glue that holds 47:52 the coalition together. 47:54 But actually when I heard about mining, I kind of finally got an idea about why that 47:57 would not be true because mining was a way of delaying for at least the first four years 48:05 so that still half of the coins would have yet to be mined. 48:10 So actually everyone, it was programmed into Bitcoin that everyone, no matter how much 48:16 adoption there was, if you were in the first four years, you were by definition early. 48:23 And so that helped me think, oh, the coalition will probably hold together long enough to 48:26 attract this critical mass. 48:28 And then this was the original Bitcoin maximus point of view was that once Bitcoin has reached 48:34 a critical size, it is the altcoins that will have these live by the fork, die by the fork 48:39 issue, which of course they absolutely did. 48:41 You had Litecoin, but then you had Feathercoin, you had Dustcoin, you have whatever. 48:45 You have Ethereum, but then you have Solana, you have whatever. 48:48 So they have to fight amongst themselves. 48:51 Although there's obviously tons of nuance and detail to all that. 48:54 Fuck that shit. 48:55 Ethereum is the opposition party, so it's like the number two. 48:58 So it has a special point as the number one out of all the runners up. 49:03 So it has its own special advantage. 49:08 Are there any ideas, projects, or posts of yours that are totally unknown, but that you 49:16 would rank among your best work? 49:19 I did write 46 pages about fraud proofs, and no one cares. 49:24 But in the thing I write about... 49:26 Did you write, is this post 99% finished? 49:28 No, it's actually been posted in like 2016. 49:30 And the irony is I think it will be the only use for the Lightning Network in like 20 years. 49:35 Interesting. 49:36 Can you spin that out? 49:37 What do you mean? 49:38 Because the fraud proofs was an idea about knowing that a block is invalid without downloading the whole chain. 49:46 And Satoshi described this in the white paper a little bit. 49:48 And then Eric Lombroso and, you know, Luke Dashjr. were talking a long time ago on the block size, where they said, well, if we had fraud proofs, we could just have the block size be like unlimited, or we could make the block size much higher. 49:57 Oh, because... 49:58 So it was actually a huge idea. The concept was big. So I'm not saying that my thing was... But yeah, I've never gotten any correspondence or any comments about this 46 pages. 50:07 No correspondence, no emails. 50:09 And yeah, like whatever, you know. 50:13 And I thought that was very interesting. But it speaks to like how no one really cared about, you know, scaling Bitcoin. 50:20 Obviously, no one did. As you must know, there's like people represent themselves a certain way. And then like the reality is like very different, of course. 50:32 Even in Bitcoin, but just like the rubric of a lot of this is just people want to make money. That could be number go up Bitcoin, but that could also be, you know, buy my book, or that could be buy my podcast. 50:43 Or that could be like, you know, the grant, like you get like the OpenStats grant, or you get Foundry, gives one Bitcoin to someone. 50:52 You subscribe to the How Money podcast and you get weekly Twitter tweets. 50:55 And I've got to say, obviously, I'm pro-capitalism and I'm pro that people should pay for things. 51:01 That's not what makes it... I'm not sure what makes it so like inauthentic. 51:10 I think it's partly because we inherently recognize that this is a network effect project and we actually all have to... we have the moral glue holding it together, which is like partly Bitcoin maximalism and partly, you know, just... 51:21 We want, you know, strength in numbers and, you know, that money doesn't... the whole point of money is that it's not barter. 51:28 So you have barter is like, oh, we're all like swapping like, oh, one hamburger for one back massage or something. 51:35 And it's like, that's... 51:36 Like you do. 51:38 And right, so that doesn't work. 51:39 The money is inherently something that is, you know, recognizability is one of the properties of money. 51:47 So it's inherently social, it's inherently psychological. 51:49 Recognizability is a good one, because that's not usually listed in the top, you know, durability... 51:53 Even though it's on Aristotle's list, but everyone forgets about it. 51:56 Interesting. Are there any other ones that people forget about? Properties of money? 51:59 Divisibility, durability, scarcity, recognizability. 52:05 The recognizability is interesting because you kind of almost see the full note as something that it says, oh, you're actually getting real Bitcoin or not. 52:11 It does like the essay of like the gold. 52:14 Scarcity, divisibility, portability. 52:17 Portability, yeah. 52:18 Bitcoin, very portable. 52:19 Very portable. 52:22 Yeah. I don't know. What were there? I think there are five. Did we name them all? 52:25 No. 52:26 Got close. 52:27 Yeah. 52:28 If we forgot any, then I guess they can't be that important. 52:30 No, they don't matter. 52:31 Exactly. 52:32 What have you been most wrong about? 52:35 Well, okay, I think the sidechains thing I was most wrong about in general, because I always assumed that the sidechain idea was so good that no one would even bother doing altcoin. 52:44 So I was like so far theoretical equilibrium down the road that I was just like... 52:47 Oh, I think this is actually like a failure mode in your thinking sometimes. 52:50 Right. 52:51 You're like game-theorying things out, like 85 positions, and then you're like, oh, that's definitely it. 52:56 Right, exactly. 52:57 But that's kind of an Austrian view. You just logic, logic, logic, logic, and then you get to some premise, and all the steps are kind of supportable, but it's like... 53:06 I kind of noticed this in your post about deflation, where you posted about how Bitcoin would be deflationary, and then you said that any non-deflationary coin would be replaced by a deflationary coin. 53:21 Right. You're right about this. To me, it's just like a graph on a page. 53:26 But then you said, oh, Satoshi must have known this, so Satoshi did this, programmed the coin to be deflationary, because he knew that a non-deflationary coin... 53:34 This is my view, but I might be wrong about that. 53:36 Well, the thing that I think you may be wrong about is like, well, maybe Satoshi just programmed it for other idiosyncratic reasons, or just happened to make it... 53:45 Yeah, he could have wanted to fit it all in like a certain like... 53:48 Yeah, like a U64. 53:49 Yeah. 53:50 Yeah, but not overflow U64, you know what I mean? 53:52 But I do think it's such a serious choice to make, like it affects the future of the system. 53:56 Yeah. 53:57 And he cared so much. He did care about equilibrium in other ways, so he knew the way mining resets, difficulty retargets. 54:04 To me, that reminds me of the zero-profit conditions in economics. 54:07 What's a zero-profit condition? 54:08 Like you cannot make... 54:09 Oh, yeah, eventually you're going to get competition. 54:13 If you take into account the risk of capital and the opportunity cost of everything, then everyone makes a zero-profit. 54:20 They just make like the rate, the growth rate. 54:23 So then... 54:24 But let's talk about how weirdly theoretical that is. 54:26 Yeah. 54:27 But that's like a core theorem in economics or something. 54:30 So then the sidechain thing, but like what... 54:33 Yeah, I can elaborate on the sidechain. 54:35 With Drivechain and stuff, I just thought only something that pays the miners will survive as an L2. 54:43 I had this thought back like in 2014, 2015. 54:46 And I still think I'm right about this, but there has been no... 54:49 No one has caught up to this idea yet. 54:52 So your answer for what you're most wrong about is something you still think you're right about? 54:55 Well, yeah. 54:56 So that's not... 54:57 But it's still... 54:58 I mean, I was absolutely wrong about like that would happen. 55:01 The trajectory is not matched at all. 55:03 I just assume that everyone would just not even want it. 55:05 Because how can you have... 55:06 Don't people want to make tokens and enrich themselves? 55:08 Isn't that why people mostly make these altcoins? 55:10 I think that... 55:11 Well, that is true. 55:12 But you would think if that was really the only reason, they would not have the status that they do have, I think. 55:20 So because... 55:21 But then people, like they create them. 55:24 They create tokens, which they use to both enrich themselves. 55:27 And the sort of like gambling casino kind of thing that people also get into. 55:31 They pay for marketing. 55:32 Yeah. 55:33 But I mean it's that the users are getting something out of it, which is the users are able to like gamble on. 55:38 Maybe they'll get rich on some like altcoin. 55:41 People do like gambling, of course, right? 55:42 This casino. 55:43 Yeah. 55:44 Wow. 55:45 And the people love gambling even though it has negative expected value. 55:47 There's a lot of degen gambling. 55:48 There's a lot of... 55:49 Like the sports betting with the apps has shown that if you... 55:54 And poker, you know, like online poker. 55:56 That has shown that if you bring gambling to people, many of them will enjoy it. 56:02 Many in a perfectly safe and reasonable way and others like in a deranged way. 56:08 So that is, I think, part of the value proposition of the altcoins and, you know, other type, you know, BRC20, whatever. 56:18 Like that type of thing. 56:19 And even before that, we had MasterCoin. 56:21 We had like Omnicoin. 56:22 We had all this crazy stuff. 56:23 We had colored... 56:24 Before ordinals, there were colored coins from like 2012 or something. 56:29 And it's kind of mysterious to me. 56:30 It's always mysterious to me. 56:31 Why did ordinals take off and those things didn't? 56:34 I completely agree that it's an interesting question because there's very similar ideas like in different eras. 56:42 And for some reason, some of them hit their time and others do not. 56:46 And I don't really know why. 56:47 But I do think part of it is that the audience gets bored with the current thing. 56:52 And then... 56:53 So ordinals had the advantage of... 56:55 There was a very, very boring period right before. 56:58 It was really, really, really boring. 57:00 And so then people are finally doing something. 57:03 And I think that was part of it. 57:06 So you have the ordinals and then you have like... 57:08 Are people using the ordinals for like gambling? 57:10 Are they using them for weird tax evasion schemes? 57:13 Probably all of the above. 57:15 And then with the altcoins, there is a dimension with some of the altcoins, such as Ethereum, 57:21 that they aim to replace Bitcoin and take the number one spot and become 300 trillion. 57:26 So that you are, in a sense, betting on... 57:28 Just think of like... 57:29 What if it's a 1000th of 1% of 300 trillion? 57:33 Because if you beat Bitcoin, then, of course, the coast is... 57:36 It's not necessarily clear, but the way is paved, at least, to... 57:40 Okay, you flip Bitcoin and now you can flip fiat or whatever. 57:44 Because you could do it now. 57:45 So that is one element of giving a lot of these projects value. 57:50 You do have people like Monero, who took over the Silk Road use case, like the Darknet use case. 57:57 So we have this combination of real use cases taking over the entire planet. 58:04 But yeah, I thought Bitcoin would do sidechains. 58:06 I thought everyone would drop... 58:07 These are many things that I was wrong about with sidechains. 58:09 I thought no one would really bother with altcoins. 58:11 And that the whole community would prefer sidechains as a solution to the scaling war and all these other things. 58:17 I always just thought... 58:18 And I kind of have thought that continuously for like 10 years. 58:21 So in a way, I've been like very, very, very wrong about that. 58:24 But I still think eventually... 58:26 The end game is that you have all these fees up for grabs. 58:30 And if the miners don't get them, if they go to some other L2, if they go to a roll-up sequencer, this will just create this conflict between the two. 58:37 This is not going to be in equilibrium at all. 58:39 Foundry will start Foundry LSP or Foundry roll-up to get this money back. 58:46 Because the money is a huge amount of money. 58:47 Because there's all these trillions of transactions per year. 58:51 And if you take 10 cents of that, that's hundreds of billions of dollars per year. 58:54 Way more than... 58:55 Tell me what you think about this. 58:56 But maybe one thing that's missing from that perspective is just... 58:59 It turned out that it's extremely difficult to build a good sidechain. 59:03 Like Blockstream was nearly... 59:06 Let me just say. 59:07 Blockstream was like nearly... 59:08 Basically founded to build a sidechain. 59:10 And then like kind of the best they could do was Liquid, which is this weird, you know, HSM-based... 59:16 But why do you think that is? 59:18 Because I think it's very hard to build a sidechain. 59:20 I think the two-way peg is very, very difficult. 59:22 But you know, I wrote about it on Bitcoin Talk in 2014. 59:25 And then the Drivechain blog post in 2015. 59:27 I'm not saying that people have to adopt this idea. 59:29 This whole Drivechain thing, man. 59:30 I don't know, man. 59:31 I don't know about Drivechain. 59:32 Just like Drivechain seems like it's very... 59:35 I don't know if I would put Drivechain in the things that have been definitely shown to work. 59:39 You know what I mean? 59:41 Well, that's true. 59:42 But we haven't exactly tried yet. 59:45 True Drivechain has never been tried. 59:47 Well, where would you say it has been tried? 59:49 Or even fake Drivechain? 59:50 No, I'm joking. 59:51 True Communism has never been tried. 59:53 Yeah, I know the joke. 59:55 But I mean like... 59:56 But how does it apply? 59:57 Because in the real world, there's many fake communists or whatever. 1:00:00 Yeah. 1:00:01 They say they're fake. 1:00:02 You got Bernie Sanders in the real world. 1:00:04 We got to get into Drivechain, Paul. 1:00:05 We got to... 1:00:06 Two hours later. 1:00:08 Alright, we got to fucking go, Paul. 1:00:10 Thanks for being on. 1:00:11 Let's do it. 1:00:12 Yeah. 1:00:13 Alright. 1:00:14 See you next time.