Bankless - The Power of Property Rights with Hernando De Soto

Episode Date: November 30, 2023

The first think you need to know about crypto is, "what is money?"  The second is, "what is property?" and that is our topic for today. Joining us is notorious economist Hernando De Soto who is here to give us a masterclass on the world of property right and why we need to tokenize the world. ------ ✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-hernando  ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 ⁠  🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask  ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo  👾GMX | V2 IS NOW LIVE  https://bankless.cc/GMX  💲 USDV | NATIVE OMNICHAIN STABLECOIN https://bankless.cc/usdv   ------ TIMESTAMPS 00:00:00 Intro 00:06:38 Welcome Hernando 00:08:34 History of Property Rights 00:12:31 Property Rights in The US 00:20:27 Value of Property Right Management Systems 00:27:34 The Role of Buerocracy 00:33:09 Advantage of Strong Property Rights 00:40:58 Other Countries Property Rights Systems 00:48:10 Comparing Property Rights Systems 01:00:20 Capitalism 01:07:32 Blockchains and Crypto 01:18:13 Summarizing Blockchain 01:23:54 Dealing With Politics 01:32:30 Closing Thoughts ------ RESOURCES Hernando:  https://twitter.com/HDeSotoPeru  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠ 

You already help title the world. What you're going to do is tokenize it. You're going to take that title, which is not negotiable internationally, and make it negotiably global, because what we've got underneath our earth is only valuable in the measure in which it reaches industrialized countries. Very simple. So what you want to do is not say that you're going to title because then people will get scared to it in there, but what do I know about titling?

It's already titled. What you've got to do is tokenize. Welcome to Bankless, where we explore the frontier of Internet money and Internet. internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. The first thing you need to understand about crypto is what is money. The second thing you need to understand about crypto is what is property. That is the topic today. We have an episode with Hernando DeSoto. He's an economist who helped the world, the entire world, understand the incredible wealth creation power of property rights. And now he wants to recruit

crypto to help tokenize the world. Those are his words. A few takeaways today. Not ours in this one. A few things we talk about today. Number one, what are property rights? How do they unlock wealth? Why do countries with strong property rights systems seem to win while countries without them falter? Number two, what is capitalism? How is it related to property rights? Number three, what does property rights have to do with crypto? Maybe everything, maybe nothing? No. Number three, what does property rights have to do with this crypto thing we're doing. Number four, why Hernado thinks there's a new global race between China and the U.S. to title the world and how crypto might play a part. And number five, Hernando gives his advice for the crypto industry and issues a call. Help tokenize

the world. David, this was an incredible episode. Why was it significant to you? Every once in a while on the bankless program, we come into these episodes that are a huge synthesis of a lot of knowledge that we've explored with different episodes. We did the what is money episode with Lin-Alvin, right? We've done identity episodes with the Ethereum attestation service. This episode is one of those ones like, this is something we've been training for. This is a synthesis of money and settlement assurances and identity and ledgers and governance. All of these ideas come together to form this property rights system. You don't have property rights without many different component technologies that I think we've explored

each individual component on bank list previously pretty thoroughly. But now this is an episode where we're really putting it all together to really show the power that is the system of property rights management and illustrates why crypto as an alternative property rights management, a new property rights management that is more global, more efficient, more accepting, more permissionless is the next step forward for humanity. There are some things that you should know about when we get into this episode with Hernando. Hernando uses you and us a lot in this episode. You is referring to the United States as a whole, you guys. When he says you guys, he's talking about the United States, historically or current us is referring to Peru where Hernando is from or maybe

more broadly southern American countries. He also uses the word subsurface. He's referring to precious metals, industrial metals, mining operations, natural resources that are located below ground and mainly in Peru and Latin American countries because that is a source of a lot of Latin American wealth and property. So I just wanted to add that illustration before we get into the episode with Hernandez. All right, guys, let's get right to the episode with Hernando de Soto, legendary economist. But before we do, we want to thank the sponsors who made this possible, including our number one recommended exchange in a place where I acquire my digital property. Yeah. That's Cracken. Go check him out.

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Start participating in the yield from Treasury-backed stable coins at bankless.com slash usdv. Bankless Nation, I am extremely pleased and honored to present you with Hernando de Soto. He is a prominent Peruvian economist known for his massive contributions to the understanding of this thing. We'll be talking about a little bit today called Property Rights. He wrote a book called The Mystery of Capital, Why Capitalism Triumphs in the West and Fails Everywhere Else. And this presents, this book presents some of the best arguments I've ever read on why property rights are the key to economic prosperity of developed countries, such as many in the West, and also are the major barrier to economic growth in developing nations. Hernando, welcome to Bankless. Thank you very much for having me.

Well, Hernando, we brought you on to Bankless to help us understand Property Rights. from first principles. And just to set this up, there's really two reasons we want to explore this on a technology and crypto, a podcast. And I think the first reason is this. Not enough people understand or appreciate property rights. So property rights are like a coordination technology that I think many people, particularly in the West, they really take for granted. And they also explain, I think this is the court of your argument, they explain a massive portion of our economic progress. So that's the first reason. But the second reason is this. Property rights are actually the entire point of crypto. David and I have argued this before. We've had folks like Mark Andresen, Chris Dixon,

talk about this. In fact, Mark Andreessen was the one that originally pointed us to your book, Hernando. But if you think about crypto, Bitcoin is really a property rights system registry for a money. Not money is called Bitcoin. What is Ethereum? Ethereum is a property rights registry for money as well. It's a ledger for that. And also any other type of digital property. And that's why crypto is valuable in the first place, this internet native bottom-up permissionless property rights system. So I think to frame this out, crypto listener, if you want to understand the potential of crypto, you have to understand property rights first.

That's where we're going to start today's conversation. Hernandez, maybe we could start with our forgotten history. Can you tell us how property rights came to be in the West, how they came to be in maybe even the U.S.? Where this all started, who knows, metaposamia, where the U.S. Civil War, the conquest, etc. What we do know, aside from history, is what we see in places in the world, which are somewhere in terms of economic development, technology, before the times even of Jesus Christ, that exists in the world. You see it in certain tribes in Latin America, you see it in Asia, you see it in Africa. And there isn't one place that you can go to, no matter how primitive it is, or one conquistador, right,

or one invader like Jingis Khan or whatever, that doesn't talk about or just shows to you that he has a right or she has a right to be there and the people that surround him because it's in a record of some sort. If that exists, given the fact that I've traveled 150 countries probably with my colleagues to see this, I have yet to be told. When you, everybody, what they do, and that's the way cultures begin to become civilizations, is you've got to know who is where. You've got to know who has the rights to what, whether they're community rights or whether they're individual rights. As a matter of fact, the interesting thing is when you talk to, you talk to. somebody and said, Mr. Townsend. Why Townsend? Because he lived at the town's end. The Soto means, for example, in Spanish, it's a bush. It means the guy that was close to the

bushes. So obviously, location is a very important thing. And all civilizations begin by eventually creating records that say pick up the fundamental information that is necessary for location and identity. And when people, do that, they end up creating a civilization because the information you want to put in a property title is the one that does allow you to govern in a civilized manner. So in the United States, when you had gotten your independence and you needed to take over territory, take Spaniards out, take Mexicans out, take Frenchmen out, take anybody else out, what you did is you imported Europeans and you told these Europeans.

We have counted them 32 preemption acts. For example, the Little Miami River Preemption Act, the Corn Bill Preemption Act, which was how much corn were you able to plant to improve the land or log cabin act, which was about how many pieces of law, how many logs you have put together to build the cabin, that gave you a right to territory. You had 32 of these things, 32 preemption acts, the last one of them being the Homestead Act. But it was the last. By the time you had the Homestead Act, you had the gold rush. You already had taken over Texas. You knew who owns what in Santa Fe. It's the first thing you did.

And it's the first thing the Spaniards did in Latin America. And it's the first thing that Jingis Khan did when he swept through Asia. Wow. Okay. So property rights is the underpinning for, I guess, a civilization. and economic prosperity. I'm wondering if we could get into you actually the story of how the U.S. developed its property rights system because in your book and from everything you've talked about, Hernando, I get the feeling it wasn't overnight. It wasn't just somebody kind of snapped their

fingers. George Washington said, you know, and on the fifth day, let there be property rights, and there was property rights. The picture you paint in your book is much more of an evolutionary process, a series of, you know, bills, maybe a series of laws. ultimately get enshrined in a legal system. Can you talk about the messy process of setting up a property rights system in a country like the U.S.? Well, you're right to say that it was messy, but it was messy everywhere you go and you don't have settlers. From what little I know about the United States, never having lived in the United States, but seeing it from the documents that interested me to test theories, presumptions, or do away with myths, was that you had

populations that were in their majority hunters and gatherers. That's what your indigenous people were. And then at the beginning, some white folks that came from Europe bought rights to these, but using the common law, which is everybody had that was a respected judge. Captain Smith managed to make a good relationship with Pocahontas. You gathered a social contract. And you decided that areas that they moved beyond you would give them money and you would give them title to it. Right. Then the French were interested in sovereignty, which is, I don't care who owns what. This belongs to France, the nation state.

All right. And so what they did is they said, what we're going to do is give the Indian or the original native population the rights, since they're not aware of a property right because they moved around the right to govern the vertical principle of sovereignty. You know, but you two can become a nation state. So the Mohicans could become a nation state. The Iroquois could become a nation state. That allowed them to organize an army. That allowed them to start driving the Brits out. Then the Brits had to make a decision of how they were going to counter these enormous armies that the French had that were full of Mohicans and other people coming in to edge them out of

the northeast of North America. And so the Brits decided that they, too, their Indians, were going to have rights. And they declared no, from what I understand, the common law titles that judges had awarded... George Washington and Benjamin Franklin and Jefferson for their land and said America belongs to its indigenous people. So the whites didn't like it. And so they went out to recuperate their land and also went around telling the Indians, your Indians, that they were nations as well. And there was no more of these property rights, what they were going to have from now on, were going to be sovereign nations. So they, from my point of view, say in terms of left versus right, they converted your tribes into communist, while they, the white, remained capitalists in the sense of private property.

Afterwards, everybody was sorry about that, of course, so you decided to take it away from them. Now, so the way it always starts is the messy sort of stuff. And then gradually, as you decided to go from shining sea to shining sea, through manifest death, You imported even more Europeans and moved westward all the way up until California with the gold rush and it was rough going. I mean, there's a lot of spaghetti western showing how everybody shot each other, but eventually you settled down the way I read about it or what I've seen from people who look at record keeping.

You eventually registered different claims for which, by the way, since you have a lot of had no expertise in recording property like the Mediterranean, you imported Chileans and Peruvians to do that sort of a job. And by the time you got to the 19th century, you had already became a titled nation. And you had different types of titles. And as opposed to other countries, because it seems that Americans don't like the idea of central authority, you sort of brought the whole thing together with some kind of spontaneous consultation, but you do have a system that diverges from city to city, from state to state, from area to area, which is why you have an industry that thrives in the United States, which we don't in the rest of the world,

called title insurance. And title insurance, you can say, my God, why you don't get rid of it? Well, because title insurance, you know, like Americans, you always find a way to get another drip out of the orange juice. And it gives you the right not only to buy and sell something, but if there's been a mistake, you got insurance. So the result, anyhow, one way or another, as opposed to the French and say the Germans who have central registries like the rest of the world, most of the surface of the world is today titled and everybody is mostly in records. The problem is that there is no central records for developing countries,

what people now call the global south, right, especially for the poorer part of their population. But let me tell you, there isn't one tribe that you go to, there isn't one settlement that you visit from Mozambique to South, Africa to the Maghreb, Egypt, that doesn't have some kind of a record. And therefore, one of the things we try and do is find, what do they all have in common so that one day we have a sort of a mankind record and we can avoid wars. Because if you think about wars and we're seeing that

they're surging everywhere in the world now, or at least in different continents, it's always about territory. And part of territory has to do with sovereignty. I'm a Ukrainian, for example, and part of territory has to do with, I own it personally, and that's what we call property. I think bankless listeners can really start to pierce through a lot of these stories and get some of the contours, Hernandez, that we talk about a lot on bankless, which is the evolution of asset ownership, the evolution of identity, the evolution of sovereignty as it relates to human organization. The crypto industry is illustrated as we're speed running, the history. history of money and finance. But I think sometime in 2020, we learned that we're also speed running

the history of human coordination. And a lot of it has to do with the process of learning how to organize who owns what. Starting with land, when you say the word that the land across the world is titled, I hear that we are creating organizational systems that is decreeing, accounting for property, property rights, starting with land and then also other things as well. And when you started, when you first started this episode, we talked about, you talked about how we don't really know where, like, property rights started. You can see it start in Africa. You can see it start in Asia. You can see it start differently, separately, independently in Europe. And this is also a similar story, Hernando, that we talk about on bank lists about where money comes from. It actually

kind of just starts in pockets all over the world a little bit more emergently. And then it comes together as technology does over time as cultures come come together. And I think one of my favorite stories about where money comes from is the first time there was ever writing. Writing was invented. It was as a ledger determining who in a tribe owned what assets, owned what money. And so this ledger, which is this like bureaucratic tool, was one of the first tools that we used. to create writing, which was the accounting of who owned money. And I think land was the next one right after that. But I want to talk about, I want to ask you about the motivation for the development of this

technology that is ledger systems or property right management systems. What's so valuable about a property rights management system? What's so valuable about like a title? Why do humans seek these things? What does it unlock for humans? Why is it good for us? Well, it's about identity. It's about information.

What's the only thing that doesn't move around you is land? It's a demarcation point. It starts somewhere. It begins somewhere. I mean, right now I ask my colleague Gustavo, because I had it lying around, and I hadn't thought about it before, but here is, for example, my hometown Aurekipa.

We're back now in about 1860, and here is the currency we used. Now, Aikipa is a small town here of Peru, and this is issued by the Bank of Aurequipa, which 40 years before belonged to Spain, but it issued its own money and it was private. I mean, central banking came afterwards. So obviously, you know, when we invented, you know, paper money or we minted money, that allowed you to capture a certain amount of value.

What was the first thing that Alexander the Great did when he invaded someplace and took over? He would take whatever metal was used to value transactions. He would melt it and then mint it with his name and stuff. So obviously, writing it up, minting it, represented, it forms of value. Sometimes they refer to very concrete things like my home, my house, my land, an animal. And that was it. But let me tell you, when we went to, for example, Tanzania brought in by the president

just about some 20, 30 years ago, and we set up the system, which, by the way, won a prize that the United Nations three times successfully for being the best organizational system that at those times the United Nations had produced to show that there was nothing wrong in doing this, we went out and filmed everything we could. That included cattle. And we asked them to show us one cow in the whole country

where it was full of about 16,000 communities, tribal communities, and there wasn't one that didn't brand its animals. So even animals held the titles on their back sides. So obviously we have even at the most, shall we say, primitive or initial levels of gathering, people put labels on things. And that explains signs and explains symbols. And then obviously over time, we started learning to put some kind of a value over them. But the reason I'm telling you these things, and I think it's important that you draw on them,

is that if you start talking about history, you know, we're talking about things that happened 2,000, 4,000 years ago. And so then you start talking to historians and you get a bloody nose because some guys say it's always communal, somebody says it was always individual. There's plenty of incipient civilizations in the world, enough of them to go out and simply ask them what they're doing. And they all have simples that refer to ideas.

identity and for different purposes. In other words, it's not always about identity, about I am so-and-so. And second step, I own that. But it's also about permissions. I mean, when you take an ATM, when you go to an ATM and you put in a card, it's an identity card, right? But what does that identity card do? Why should I need it? I've got a driver's license in the United States.

I got a national identity in Peru. or probably most other places in the world. But essentially, your ATM cart is an identity so that you could get a permit to do something. So by recording things, you get ownership, by recording things you transfer value. And the third thing that I was just talking about, you get the permit to withdraw money

or you get the permit to enter a house. So everything that moves values one way or another always seems to come with a representative. probably Bertrand Russell and Wittgenstein would have called that microfax, that the world is composed of micro facts, which Bertrand Russell calls little splashes of color, and then what you do, eventually somebody comes and brings the whole together and forms a big image of everything. But all things are made of little pieces of information. And I would say that's essentially what crypto does or what little I know about it or what identity or property does.

It's in formation. And in terms of economics, the advantage of that information is that it tells the banker, it tells whoever is going to loan. It tells anybody who's going to be credit. You know, credit comes from, I believe in you, right? That you are you and you've got something to lose. But if you are you and you got nothing to lose, then how am I going to get paid back? Or why should you be marrying my daughter?

Hernando, you talked about a different number of mechanisms about all around symbols, right? Like an old king would melt down metal and then stamp it with his symbol of authenticity. Or some company would have a brand and they would be. brand cattle with their symbol of ownership or like a land title is has some sort of stamp on it or symbol of legitimacy coming from it by some issuer of sorts to me a lot of this has like valence with bureaucracy or just like you know a management system and sovereignty of course is also like a nation state topic as well as like a nation state has legitimacy and you've also invoked this idea of common law these

These are all like bureaucratic or legal systems to process information, as you say it. Can you talk about this process? Why is this process of what I call bureaucracy, what we might call legal systems? Why is this component of property rights important? What does it do? Well, because all of these symbols, as I mentioned before, are spread out. and going back to Bertrand Russell, the famous British philosopher, and it's talked about little splashes of color,

what builds up to being something trustworthy is not just one single quantity of information. You've got to bring a bowl, a bunch of things together. So, for example, when we've titled Latin America, Africa, the Middle East, and Asia, first thing you want is to say is what's the local arrangement because enforcement will take place locally and you will find out that they trade locally using a certain type of documentation. And then once that's done, you want to know if they don't pay up, for example, what's government going to do about it? And so then you want to know if government has actually recognized that.

And nearly all governments have done that when they conquered. When Peru was conquered, for example, we found that by going into churches, since the first thing the Spaniards want to do is avoid disorder among a population, a huge population that they had conquered. They set up records in churches. That was the ideal place where you recorded deaths and you record all sorts of, records all sorts of things. And nobody wrote about it, but we started picking up these old papers. and we had to decide what we were going to do with that kind of knowledge, but it was interesting because the first group of documents put together by a string that was about 500 years old said Don Diego Kaki, a pure indigenous Peruvian,

part of, shall we say, the Inca civilization, hereby dies, and he leaves behind for his children 90 mule trains, wine distillery in the port of Kayao. This is 30 years after Francisco Pizarro and Hernando de Soto, supposedly my ancestor of land. And then they say,

and owns three galleons that do trade with Panama where you cross the isthm of Panama and then you go all the way to Europe. In other words, the Inks took only 30 years to adapt to the Western recording system. Before that, they had their own recording system, which is called the Kippu, which is a system of knots on strings,

which some Peruvians say, of course, is the origin of blockchain. Because we, like, you use, they use the string. But what I'm trying to tell you with that is if you really want to find out where Diego Kaki got his stuff today, or his family, and you really want to get,

the root of title all the way down, you will need all of these different symbols. And then, therefore, when you award property, it's the result of various affidavits, testimonies, comparisons of information, track records, debt records. In other words, if you go through all the stages that are necessary for a right to mine gold in Peru before it reaches Wall Street so that an American company can use that to create an international public offering, you'll need a whole bunch of documents. One is not only enough. You need to criss-crow things.

A whole series of assurances, a whole series of what we call, what we use, the best word we found is assertions, assertions of one sort of another. somebody ends up putting a seal on them and guaranteeing this. It's not just one person saying, you know, David owns this, and you can trust me, right, because I was in the Marines or I went to Harvard. Not enough. You got to criss-cross all sorts of information. And it gets more complicated when you go internationally.

The countries who end up dominating symbols, which is what, for example, President, the French President de Gaulle didn't like about the United States and post-second World War is that he said these Americans, if you now use the dollar as a point of reference for everything, the gold, the gold exchange standard, they know how to take advantage of everything because they've captured the symbol of value, the number one symbol of value. And what the Chinese are trying to take away from you now, the global south is the right to a monopoly to that symbol. So there isn't just the dollar because you can manipulate the dollar one way or another. Like you can manipulate gold too. I mean, whatever you use, you're helping somebody out. If you use gold,

you help us Peruvians out. But you also help the bowers in South Africa. And you also help Putin, which are major producers of gold. So coming to an agreement on what is valid or not is not only a question of knowing who owns what, where, but also what are the political interests behind it. So it's a complex business. This is, it's just such a fascinating discussion, Hernandez, and I think listeners are beginning to get a picture of property rights, what they're useful for, and how they're secured. And really, like, if I were to distill what I've heard so far, you know, property rights are kind of secured and settled by a legal framework that recognizes and enforces all of the rights. And oftentimes that those rights are settled in court systems.

And they're enforced, or maybe using your word, which I really like, asserted by government, by the power of governments. And they're recorded using symbols. in these ledgers that are often maintained by bureaucracies. That's kind of the mystery of what a property rights system actually is. And I want to hone in and circle on what it unlocks because this was a key insight that I took away from your book that I didn't have previously in all your talks and thinking around this is the difference between a country that has unlocked its capital using property rights and emerging country that doesn't have a good property rights system. So I think you call a lot of developing countries that don't have property rights system.

they have maybe these informal economies that sort of aren't written down, aren't settled in court systems, don't have all of the benefits of a strong property rights system. And you call a lot of the capital in those economies dead capital. And to me that implies, like, they haven't quite been unlocked. And I think that is part of the value proposition of property rights, right? So many listeners will maybe have a title on a piece of property or piece of land, maybe a mortgage. And one of the things they can do once they have that title is they can actually take a loan against that mortgage, against that capital. And so they're able to unlock this asset in an entirely new way. I'm wondering if you could talk about the advantages that economies have and countries

have when they have a mature, strong property rights system versus maybe some developing countries that don't have that and this ability to unlock capital. What does that exactly mean? So also to make this colorful and maybe somewhat extravagant to tell you that one wonders, if property is not the source of money, not the other way around. So the way I understand it is that 5% of the money of the United States is issued by the Fed. 95% is not issued by the Fed. It's issued by banks against documentation. And you've got a whole process, remember, I've never lived in the United States,

You've got a whole process that has to do to avoid fraud. I mean, your acts of 1933 and 1934, your securities acts that have been imitated all over the world and have, of course, been improved over time are essentially called anti-fraud acts. And the reason they're anti-fraud acts is because people put together information according to procedures accepted by the banking or the capital formation community. And then eventually, when they're all put together in the right kind of file, they go to the window of a bank and say, this is it. And if the bank says, uh-huh, I've got here my list of to-dos and don't, and yes, this is value.

They put it in their, they put it in their ledger or in their accountancy books as a, as capital. that is to say as an asset. That allows you to go to another second window of the bank and in due time say, I've got an asset there, issue the money I need to be able to pay this or buy that. So what forms money is the fact that somebody has, whether you know it or not,

determined that the papers that you've put together are value. And it's not your central goal. government five, they set the rules. Basically, what the money you get or whatever form it takes, and it might never come out in the form of cash. It just comes in the form of the you have a right to do this or you have a right to do that is the result of paper systems and symbols which allow you to use a symbol for value, which is called the dollar, right, or the French franc or a currency or whatever it is. That's one example. The other example would be, and I'm trying, I may be going over the edge, but this is the way I see it, south from darkest Peru, is the following thing. The Chinese

are coming now to Latin America and Africa and edging you out, especially regarding mining and energy resources. They're really pushing you out. But why are they doing it? It is because they have found a way of recording their own values and recording that of ours in Latin America, shall we say, and in Africa in such a way that against them, they're

buying up the subsurface of the earth. So whether one realizes it or not, the Chinese issue that you've got a rivalry with them all over the world is kind of blockchainish. I mean, the Chinese, I mean,

they haven't come in with weapons, there are no military bases of China. What they've come in is with the kind of paper that allows them to buy our subsurface where we, for example, between Chile and Peru, own 38% or export 38% of the copper you need to break the chokehold that Russia has over you. Because Europe or the West in its war in Ukraine,

depends essentially on fossil fuels that come from Russia. Oil, coal, gas, right? And if you want to move to clean energy, that isn't going to go through tubes because it's aolic,

that is to say, wind, it's hydraulic, it's nuclear. And all of three energy that are clean travel through copper, and we got most of it. And the Chinese have been able to create a system that symbolizes value that allows them now to own more copper in Peru, supposedly were your backyard of the United States, and they're converting it into their front garden. So what I'm trying to tell you is that the logic behind ownership

and its relationship to money and the purchase of real things is a whole art that is now also very much in the books of different civilizations that are surging throughout the world, including the one that's fast growing, which is China. And it's not because of their military power. It's because they've got more than one bag of tricks than meets the eye. It's so fascinating to frame the sort of, you know, the China versus U.S. political power dominance as a race to export their property rights system to the world, a race to export their symbols, I guess, and to become the dominant symbol across the world. And that's really the story, I think, that many in the West have forgotten that underpins a lot of, you know, the success

that countries like the United States have had. They've been able to export this property right system to much of the world. But now there's a new contender on the scene. I want to talk about, you know, China and blockchain and that sort of thing, and relative to the, you know, U.S. in a minute. But first, one thing to unpack here as we're talking about countries that don't have a strong property rights system and developing countries, we might call them, with all of this dead capital. Can I just ask a simple question, Hernando, what is stopping countries from just putting a good property rights system in place? I mean, your book and a lot of your writings, you've talked about the value of this for a long time. And I'm sure many smart people in developing

countries know that the value is in property rights system. They're looking at a successful economies throughout history and they sort of see it. It's property rights. It's, you know, capitalism, some of these ingredients. What's stopping countries from just putting a property rights system in place? Well, the first thing is, I would suppose, what Milton Friedman called the triangle of the status quo. Okay. If you've learned to do things, things one way, your way. It becomes part of your culture. You're proud of it. You're also do it even abstractly. You don't have to think about it. And then somebody comes around like say with blockchain or whatever comes to. Look, this is different. People are resistance to change.

And so you'll see that the Europeans come around and decide that, okay, they're going to have just one common currency, when all of a sudden they're threatened by the yen or the yuan or they're threatened by the dollar. But it takes usually a dramatic moment to make a change in your life. Give you an idea, because I found this out, I'm not academic, but I found this out since I had to solve problems back home. When I started finding out, you know, the Germans have Roman law like we do in Latin America, like most of the world, statutory law.

when did they set up their groom book system, which is their centralized property system? And that was when Napoleon in 1806 defeated them. I mean, he really rushed them off the map. And the reason for that was that during the before the French Revolution, also with Louis XIV, but during the French Revolution and Napoleonic Times, they had done what the French called the Registre Fonseer, the registry. of homes and therefore all their armies had titles to property and they believed strongly in the French Republic. While in the case of Prussia, which was that part of Germany at the time,

the farmers refused to go and join the forces of Prussia's leader because they hadn't been awarded title to land and it's a long time they were fed up with the feudal system which allowed the feudal lords to tax them so once they were defeated by napoleon whose big who's big political argument to europe as he moved towards moscow was property rights he just called them something different the rights of the people or whatever but was property rights obliged germans then to go out and title their own, they title their own people so that they could beat back Napoleon's army

in the Congress of Vienna finally, you know, get the French out of the way, lock them up, lock up Napoleon in the island of Elba, all those things. So what I'm saying, what I'm saying is take something dramatic to do that. So for example, if I was told, what is the issue of having, why don't they have records of property in the areas of Israel and Palestine, etc., I've been saying that this is

something they should settle. It identifies people, right? But I think that what will do it at the end is that nobody knows where the rockets were coming out from Palestine. If you had a property rights system, you would know where they came from. So property rights become an important issue when you find out that it's not just a fact that you've got a beautiful house or you've got nice trees in front of it and your kids are growing. But when you realize that without it, you are continually threatened. But the lack of identity really hit you. And then, you know, who, which Russians have the right to be in the Ukraine, which of them do not? Possibly if they had a good property rights system, they could have sorted that out before

without having to resort to finding out whether it's Russia that runs the place or the Ukraine. I might be oversimplifying it, but property rights is essentially not so much the right. It is the information. And why is sovereignty not a substitute to that? Because sovereignty is, you might call it not really a right. It's might. It comes from the top down, while property right comes from a consensus at the bottom, which is that's the right thing to do versus the wrong thing to do.

I really love this articulation of different property rights systems and their effectiveness for more or less doing their job. Like not all property rights systems are the same. Some do their jobs better than others. And I think maybe one of the ways to articulate why the United States became the epicenter of capitalism is because our legal system and our court system, and the system of legitimacy was able to go down the long tail of assets in turning that into legal property that, like you said, we can then take to the bank and access the capital that is

inside of that property. And I think maybe if we compared that to other property rights systems in corrupt nations, accessing the long tail of property and accessing the capital in that property is not easy or perhaps even possible due to an inferior nature of that property rights system. And something I would also say about like the traditional nation state legal property rights systems, the ones that, you know, we have in the United States also exists in any European country, in any country whatsoever, is that it's actually fragmented. Like our United States property rights systems is actually incompatible with Mexico's just next door. And so there has to be some sort of cross-system communication there, of which there can be, but it's still

a boundary that must be traversed. And so this is, I think, why me and Ryan are so interested in a digital property rights system because it's not fragmented. It can access a global, become a global system, although there are obstacles in order to get there. But Hernander, I want to ask about just like, there's this word in traditional finance called securitization. where if I have some sort of asset, I can go to a bank and say, hey, I have this asset. Can you help me turn it into, I have this piece of property. I have this thing that I own. Can you help me turn it into a financial asset? And that's the process of securitization, unlocking this asset that I have that exists in the traditional world. And maybe we can vet the American

property rights system and say that it's good because the system of property rights can securitize a lot of property in the world and turn it into assets. And that's why the American financial system is so dominant. Where if I would go into the third world, a developing country, with that same piece of property that I own, and I would take it to that financial system and ask them to turn it into an asset, a financial asset. They might not have the system in place in order to do that. And so capital stays locked. Can you just talk about the technology and how some property rights systems are better than others at doing this job? Or do you just agree at all with like this articulation of the efficacy of property rights systems and the capital that it unlocks?

Well, a question, a question always comes into mind if the people that, uh, question, uh, the people that run the system are the best people to change the system. First of all, because of the old habits. But what you want to do is identify who has an interest in changing the system. I would not spend too much time, you know, finding how you can do security. For example, in the case of my country, Peru, or the, you know, we're supposed to in Latin America actually be the biggest center of, the biggest center in, for natural products.

I mean, we will be the biggest one in the course of the next 10, 20 years, you know, our metals, our minerals, our agriculture, because we're hardly, we've hardly developed that. So the question here is, to answer your question, what creates this, what creates this need for security, is not necessarily, you're not necessarily going to find it in the financial sector itself. You may have to find outside.

For example, you have a war with Japan, right? Starts in the 1930s, Pearl Harbor and all of that. Then at that time, Japan has a gross national product per capita that is to say the individual wealth of each Japanese is one half of that of a Peruvian or a Brazilian, which is a reason why we have large parts of our population have a Japanese origin. That means they were poor and we were relatively rich compared to them, so we know something about it. But nevertheless, their ability to marshal assets were such that they created an important Air Force. and airplane carriers and armies and that and they went all the way up to Pearl Harbor

and they took up a whole swath of the Asian continent all the way to Indonesia from North Korea to Indonesia. Now, in comes MacArthur, right? And in 1944, he sets up a commission in Honolulu, the last three years and says, okay, we're going to win that war, but how do we win the peace? And he says, we got to give property titles to the people below, because they keep on fighting for the sovereignty of Japan. And when you fight for sovereignty, Dad, I want to die for my country. But nobody says, Dad, I want to die for 353 Sewer Street. You buy it,

you sell it, you're renting. So he had that plan in mind, went into Japan, and found out that within the feudal system, all the records were there, not saying that Dave, Ryan, myself, and Gustavo owned piece of property, but that within that feudal system, we had our space between the stone and this other tree. So what he did is he encouraged the local technocracy, well, MacArthur became the emperor of Japan, to actually go out and title. all of that. And they did it. And 30 years later, Japan's GNP per capita was 15 times that of Peru's, and it was the fastest growing nation in the world. So here you will not find it in financial books. I haven't. Nor the Japanese, they'd been flattened by two atomic bombs. They don't like to write

about that part of their history, and U.S. military secrecy smudges, plus you delegated the whole process to a Japanese signocracy. So it never got really written up. What I'm trying to say is that securitization came to Japan and created one of the biggest capital markets, not because the economists started up, who said that most of the, what you need to know about economics, which is a discipline, is written up in economic books,

who said that growth is something that only grows out of money or things that are measurable. So think about it that way and think also about this other thing. If China's buying up the world from under your feet, right, from Africa to South America, with their currency and with their guarantees, it means they've cut on to what MacArthur actually discovered for Japan. And what they're doing it is they're using it not to empower the farmers, right? But they're using it to empower the Peruvian farmers or Brazilian farmers, but to empower themselves.

In parallel, the United States over the last 30 or 40 years, using something called the Washington Consensus, which is let's bring capitalism to the rest of the world, among other things, dedicated a few nickels and dimes to titling the whole place. We know it because we were funded by them. And so the surface of Africa, of the Middle East, the surface of Latin America, is all now titled and recorded. And they're on the superficial part, the surface, right, is on the superficial part of the globe. So before you can get to the mineral rights that the Chinese are buying, you've got to be able to dig through the property superficial rights which the United States did the titling of. So what you should be doing now, if MacArthur were alive, is gathering those farmers to say, get into the game.

How much are you being paid for what the Chinese are getting from the subsurface? And I have found that when I talk in the United States about that issue and where value is, I get much more substance out of a U.S. military than I get out of a U.S. banker. Because I'm not too sure that what we call value is the exclusive domain of economists and especially money people because they're thriving on a system that exists today. In other words, what happens, and it's all over the place to give you an idea that I'm not against bankers or anything, there's a difference between knowing how and knowing why. When my ancestors, mainly the Spaniards and your ancestors, wherever they came from, Germany, etc., cross the ocean,

they used compasses, right? Compenses is what you call it, right, to see what's north, right? They had no idea why they pointed north. We've been using it for 1,600 years. We just know it points north, and it locates it. It's only 1,600 years later that we found out that it's the North Pole as it gyrates. In other words, what we human beings know how to do, and this answers the previous question, is that we know how to do things before we know why we do things.

Where's that smart? So what's occurring now, as far as I'm concerned, with everything that is virtual, the kind of domain that you work in, is that everybody in your domain and in banking knows how, but don't know why. And the advantage we South Americans and Chinese have is we desperately need to know why because we can't start the how before the why comes into place. so we're bound to displace you for at least a short amount of time until you catch on. And you do what MacArthur did, which is hire us to help you figure out why you're so successful. I'm saying this, of course, in a provocative manner. But there's some truth to that. Metamask portfolio is your one-stop shop to navigate the world of Defi. And now bridging seamlessly across networks doesn't have to be so daunting anymore.

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it was always meant to be. Secure, fast, cheap, and friction-free. Visit arbitram.io and get your journey started in one of the largest Ethereum communities. No, I think there's a lot of truth of that. And I think we have, maybe for a while kind of the U.S. actually knew why, but we've just forgotten because it's been generations ago. I mean, when we talk to traditional finance people about money and just that concept of like what is actually money, we find, Hernando, that they don't have a compelling answer for us. They don't actually know what money is. They may not even be aware of the fact that, you know, 5% of all what the U.S. calls money is just that base money, that M0. and the other 95% is created by these systems of contract. So when you ask what is money, a banker won't be able to answer that question.

But I think your framing of this is very fascinating. The best property rights system wins. Essentially, China, U.S., it's in a race to title the world. And maybe blockchain is also part of that race to title the world. Maybe that's what we're kind of witnessing here. But I want to ask a question about the U.S. right now. And it's, you know, forgetting of the why, if that makes sense. Can you talk about what we talked about property rights, what that means, but I want to just relate that to the word capital or capitalism.

And maybe you can explain this to us because I think the term capitalism has now garnered some unsavory connotations in places in the West and maybe, you know, in the United States. There's often this trope of like late stage capitalism, right? capitalism is bad. I'm wondering if you could give us your framing of what capital actually is. How does it relate to property of rights? What are the goods and bads of capitalism? Well, capitalism, of course, it means different things to different people. Among other things, it means something different to somebody who's poor and has no capital, whatever that is, versus somebody who's rich and has a lot of capital. It's a friendly word in the second case. It's an unfriendly word in the first case.

That's number one. If you go to the origins, it doesn't really help much. There's all sorts of interpretations. One is that it had to do with head of cattle. Capital comes from the Latin word capital. And the amount of headed capital that you had, this is a head of cows and bulls indicated your relative wealth. and they reproduced by themselves.

It was value that did not perish and that continually multiplied. And you could use them, the hoofs for chewing gum, the horns for making knives and the hides and, you know, and the milk and all of that. The original productive asset, I guess. Correct. And then there's one probably that is probably the most sophisticated of them all that. I think Smart said somewhere, but I'm not too sure. Much more sophisticated. He said because it's an.

abstraction. How do you explain an abstraction? Has anybody ever touched capital? Have you ever smelled capital? Have you ever seen capital? No. So you need it's in the head, Capita, right? Capital. And then if somebody says, all right, that looks like a lot of philosophy, you can back and say, well, how about energy? Have you ever seen energy? Have you ever touched energy? Have you ever smelt energy. Now, what it does is it lays a conceptual framework that lies you to see something that does exist, measure it, and harness it like a lake in the high mountains of Peru, the water drops, right, gravitational value, then it turns turbines around, and that's mechanical value, then kinetic energy, blah, until you get electricity. And you're not able to charge it anywhere in

particularly because water falling, I mean, it's great for a honeymoon or a visit, a touristic visit. But it's only at the end when it goes to the wires that you can catch it, which is why the Chinese are buying it at the end, where you can actually catch the value. Now, the idea, the, this race, this race, the title in, excuse me, the reason that it's got such a, a bad name is because it hasn't, many people do not see this having been distributed in a justified manner. And that's why even the Chinese president Xi Jinping of China does not talk about Chinese capitalism. He talks about the modernization of Marxism. So they're trying to get away from the word capital. They don't like to be called, you know, Chinese capitalism. So

I think that that's basically the reason. Why does the United States, why do Western countries do it bigger, and people unfortunately confuse it with money. But if we could bring it down, and that's what I like very much about the blockchain aspect of it and the desire Web 3 to democratize information, is to understand that a lot of abstract things do have a value, But it shouldn't be, I got a better education.

Knowledge is good because for the sake of knowledge, and then you quote St. Augustine and you quote Plato, et cetera, but actually show that information, right, is a crucial part of the whole thing. And that strangely and interestingly enough now, the countries that are growing the fastest in the world happen to be communist countries. I mean, it's that bad. And they're doing it not by distributing, more to the private sector, but by hoarding more in favor of state power, right? So this is a good

time. This is a good time for anyone who wants to change things. And what I surmise from your question, but it only comes to mind right now, it might be the moment not to go out and fight and defend words. I'm for capitalism. Look, if it's a bad word in Latin America and you're coming to my country, Latin America. You say, I'm all for capitalism. It's a mistake to keep on capitalism. It's a mistake. It's as if the word dumb,

I'm called Mr. Dumb, and that means nothing in Spanish. But I go to the stage, I'm called Mr. Dumb. You want to change your name. So I think, so I think, frankly, the real problem is the tendency of certain people,

like me, like democracy, and we like property rights and we like freedom. We get really angry if the Chinese or the Russians or whoever it is use those three words. Well, you know, they call them those free, Democratic republics and all that. Well, the time has come to find another word. I mean, don't fight for a word. It's fascinating, Hernando, in that we were talking this whole conversation about symbols and words are just another symbol, aren't they?

And, you know, they can be imbued with all sorts of. of a different power. I want to run this by you as we talk about maybe blockchains and crypto and why we're so excited about it and part of the genesis for this entire conversation. I just want to run by from us absorbing your learnings and then being in kind of the crypto space what we actually see in this technology. And I want you to tell us if it makes sense or not. So here's what we see in blockchains, Hernando. We see a public decentralized. property right system that anybody with an internet connection can use. So it's completely borderless. You don't have to win kind of the genetic lottery of being born in a country with a good

property rights system. If you have access to the internet, you get this, right, by default. It is the global permissionless, non-geographic property rights system. And so that means anyone in the world, if you're using a property right system like Bitcoin, for example, if you're using that blockchain, anyone can own Bitcoin as property. And they have to, and they have to, have custody of their own keys, they don't have to go through a third party or a centralized intermediary, or on a public blockchain like Ethereum, anyone can register new property. So they can mint a token. What is a token?

It's just a symbolic representation of property, or it could be actual digital property on chain. Or we have these things called NFTs that are similar. These are specific types of non-fungible tokens. So think of that in the real world as like a house or something. And then what we can do is we can take loans. out against this property on the blockchain, we call this decentralized finance. We have this whole cottage industry of like collateralized loans that are collateralized or backed by digital

property. And it's all public. So like what we see in blockchain and crypto and technologies like Bitcoin and Ethereum is just one giant asset registry system for the world. And what we further see, Hernando, is that this is all public goods functionality that nation states provide. and used to be the sole providers for, the only game in town. And now what we think we're doing is we are separating property rights from the state. The first concept of crypto is let's separate money from state, and we'll call that Bitcoin. That's cool. But to your point earlier, money is just a subset of property.

Now we can separate all property from the state and maybe rebuild this thing from the ground up. And the last point I'll make here is something you alluded to. You were talking about, you know, might versus consensus, basically. might is the power of the nation state. It is the kind of the violence. It is the sovereignty aspect of it. But consensus is more bottom up in property rights. And it's no mistake, Hernandez, that we call our entire blockchain systems. It rests on consensus technology. It's like bottom up, decentralized from the ground up. And so we think we're able to launch this entire property rights system for the world without violence, without might, with it being completely opt in.

So that is why we are doing this podcast. That is why we are are so excited about this technology. And you know much more about property rights and capital and all of these things and unlocking the potential of economies than us because you've been studying this for your entire life, it sounds like. What do you think of this take? Are we just starry-eyed dreamers or do you think this is actually realistic? Do you see any value in these blockchains that we're creating here?

Oh, of course there's enormous value because it's set up to, as you say, capture values that are part of the social contract. You decide how you're going to name it, how you're going to put it, you've got these NFTs. There's an enormous amount of flexibility. The question again here is, I would say how you sell it. First of all, let me tell you that I don't study it. I'm not a professor at university.

I just go out and title and change government systems throughout the world. And I never use the word blockchain. And I rarely use the word property or the word capital because it's a bad word. I don't use Mr. Dumb. I do not use that. You use the word title intentionally? No, I can use title.

I can use, depending what, you know, it depends what it means locally, you know. Sweetie Pie might mean something in one place, and in the other case it's ridiculing you because you're too effeminate or whatever. It means different things in different places. Do you want to adapt the vocabulary to the local stuff, right? If I'm writing a book that's going to be published in the,

United States, of course, property rights right up front. Americans like property rights. But I would use different things. So look, let me tell you what I would do. What comes to mind, of course, because this hasn't been planned. I would say that the first thing is that when you start talking about blockchain, people think Bitcoin, right? And then Bitcoin goes up and it goes down and it goes up and it goes down. And then the whole, the whole economic community that doesn't like this says money was there to give you standards of stability. This is. This This is instability. I mean, this is a crap game.

This is going to gambling. So what you want to do maybe is start off with an example of how it helps something else. So what naturally I would do because that's what I would try and do is the following thing. Sorry, because I live from use, from day to day. I would come in and say, tell the United States government that is being outspent and outcapitalized by China. All right, we go back to that, but that's what I've been looking into lately. They have spent on buying mines and natural resources in the last year three times, or let's say they've invested three times more capital in various forms than the amount of money that you've disbursed for help for supporting the Ukraine against Russia. three times more. So anybody comes around and says that China is a poorer country. Yes, they got

less money than you do, but they got more capital. In other words, they know how to gather value and get to someplace. Doesn't necessarily mean that they can use that money to buy other things, but they know how to invest in infrastructure and things that potentially have a value because they know how to pin a value on things in the future that you don't have. All right? They've learned something. All right. Now, if you say, ah, you know, De Soto should be, is probably a Marxist, but I said, no, I'm a practically a Jeffersonian. But the first person to talk about the fact that money could have a fictitious, capital could be fictitious or could be real, was not Marx. Was Jefferson, 1819, when Marx was only one year old. He said this country's going to the dogs because where

bankers are allowed to throw all sorts of paper on the market and they're screwing the rest of us up. And I dread what's happening to America. 1819, he was no longer president of the United States. Marx took it up later, first thing. Second thing, now 100 or 200 years later, income Marxists, because Chinese are Marxists in a more healthy sense of the word, are going into your backyard, buying the subsoil, right? And basically, they've specialized in taking government's sovereign paper

and using it to acquire the subsurface because the subsurface all over the world belongs to government. Even in the United States, you'll say, no, it belongs to private property. B.S. does not. It belongs to government. The moment you drill a hole in America

and you own the subsurface government will be all over you. One way or other, it's where the strategic goods are and it's always been that way for the last 2,400 years. Now, here's what I would do. if I were in the situation of a blockchainer. I would say put me to the test. All right.

The test is the following thing. We, the United States, with nickels and dimes, have helped title, it's a revolution. Nobody's seen, but you've done it over the, since the last 40 years. That was behind MacArthur's plans for Asia. That was a fulcrum of General George Marshall's plans for Europe. I have a feeling that U.S. military, no more than U.S. politicians. they actually wanted to enforce markets and property. And you actually spent because it takes a little money to title it.

It's all titled. All right. Now, what I would do then at that moment is show how all of these surface titles, right, that poor farmers own in Latin America, if I put them inside the blockchain system, right, and symbolize them and can connect them to the capital markets of the United States, which is not where you issue, not only issue money, it's where all the people that you have are experts at assigning value to things.

You see, the Chinese have a technocracy that has formulas of all sorts for assigning value to purchase it because they don't necessarily use prices. They don't believe in that. The Marxist believes in other structural cost phenomenon for establishing value. Well, you believe in it.

prices. So you say, now what would happen if I take the right of Peruvian farmers to authorize the extraction of uranium, lithium, copper, which we've got much more than all of you, and which you need for whatever you're going to do in the future, rare earth, and put it on the market. Now you've got an argument because what you're doing is, one, you're helping the poor, second, you're fighting for the interests of your nation, and it's easy to understand. locally, quinoa, which we Peruvians have most of in the world, right? Kinawa, coca leaves, which we Peruvians have most of in the world, is worthless in this country. It catches its value in the United States and in Western markets.

So if you can illustrate how you can take, and it's peanuts what is required, how you can take this and introduce it into your capital markets, and then at that moment you will at that moment be able to forget this idea of capitalism. What you will be doing is putting into value what the majority of the poor of the world own, which is they've covered it. Let me explain. Maybe this requires another explanation. In the last 40 years, tremendous things have happened outside the United States.

there's been decolonization. The French left, the Germans left, the Russians lost their colony. As a matter of the Soviet Union collapse. Mass migrations. You see that in films all the time. Mass migration. Squatting, invasions, this, that and the other. Eventually, what all governments have to do with your help, right, with your help,

is allow developing countries to master the situation by setting up local titling. systems. Now, none of these guys who in the United States did titling systems necessarily understood capitalism. They probably didn't like capitalism. Okay, if you're a peace corps fellow in the United States, from what I know, capitalism is a bad word. All right, but yet they titled and made these little people capitalists potentially. So what you've got to do is get on that bandwagon. And the moment that you do that, of course, then you will be able to, uh, you will be able to, uh, to illustrate much better what blockchain means. One of the obstacles for this is, of course,

your big problem in the United States, referring to my part of the world, right? As you America first did, as you become more isolationist, you want to industrialize yourself, okay, very good. But one of the problems that you don't understand is we're not like the United States and the rest of the world. We are not like you. When you own a home in the United States, right?

you are like I'm talking about films of my day James Dean right you make a hole on their surface and the oil that comes out is yours right or at least you got a preferred right to it all right what you don't realize that's the only country in the world that that happens the subsoil does not belong in the rest of the world

to the private owner but the reason you do get James Dean's is because what you've got is the door to the subsurface and that oil and that gold and that uranium is worth nothing if it doesn't cross the surface. And that's how that surface has value. So I'm making this more long than it.

Get a good cause. Not something that relates you to instability. Not something that relates you to gaming. Wow. You know, I see my kids shooting each other on the screen. Not something that makes you rich one day and poor the other. Get it to something that brings peace to the world. something that brings development to the world and then find another name for yourself.

I think, Fernando, what I'm hearing you say is find something, find some utility out of these blockchain systems that we have that makes us legitimate, legitimize ourselves to the world. Well, yes, it's an application. It's a little bit like nuclear. You have nuclear power. If all you dedicate your nuclear power to is blowing up people, it's not going to be very popular. But if you say it helps you generate energy, save the lives of children in hospital, et cetera,

you know, it's like everything. Friedrich von Haig said, what's the knife? You can use the knife to kill somebody, or you can use the knife to do all sorts of wonderful things. The problem that you've probably got is that it's only being used for Bitcoin. Why go to the monetary field? Because that, I mean, forget about, forget about

what can I say about early Catholic or I'm Catholic or Muslim philosophy I mean that's vague enough get into something concrete so get into something to greet that everybody will understand I mean you might even bring a revolution to China

because you can tell the farmers who don't have a property right that they should also have a right to those that you really force them around I mean this is it and I think if I were to kind of summarize your advice and it's excellent advice for us and I almost want to kind of recruit you to help us do some of this but but if I were to summarize this advice what you're saying hernando is bitcoin and the speculative assets that's a massive distraction we have to reframe this and make the u.s understand that this is a race

to title the world and what they want to do is title the world faster than china does and if you if you partner with blockchain if you adopt blockchain technologies the win for the u.s is that it can out-compete China to help title the world. And by the way, this is the American way because it's, you know, bottom up, it's a technology of freedom, it's opt-in, it's not a centralized database, it's not controlled. But let me maybe get you to comment on two of the other enemies that we sort of face of this type of message, because we've tried. And again, it's a matter of like, you know, they're not listening to us yet. One is the enemy of hubris, and the second is the enemy of incumbents. The enemy of hubris is basically America's on top, okay? And so many, I think,

in the U.S. government believe that. So if you talk to our chairman, Gary Gensler, of the Securities Exchange Commission, the SEC, he says crypto is useless. We got securities, you know, correct in the Securities Act of 1933. And you can see that because we have developed billions and hundreds of billions and trillions of dollars in capital markets. So we already know. We already know how to do this, we don't need crypto. There's a hubris aspect to this. The U.S. already has it right. And the second is this incumbents aspect to it. So the beneficiaries of the existing system, you know, call it like some of the bankers, for instance, just all sorts of different beneficiaries of the existing system. They don't want change, Hernando. Okay. And so they don't like this either.

And these are kind of the dual objections that we're really facing when we talk to, you know, talk to those in power and those in politics in the U.S. about this. And this is why the current government administration in the U.S. is basically crypto hostile. So I'm wondering if you could help with that. How do we deal with the hubris? How do we deal with the incumbent advantage and the vested interests that, you know, dictate our politics? Well, to tell the truth, I'm doing something now in the course of the last two years in my, shall we say,

line of business, which is putting property rights, modernizing government in different parts of the world, I work with about 30 heads of state. The way I would sort of go about it is this, all right? Remember what I said before. We in Peru have probably the biggest amount of electric metals, right, copper, tin, gold, silver, and together with Argentine now, the lithium that allows you to store

and transport clean energy, right? You do that and you might win your war in Ukraine. You do that and you might empower people. Now, who decides that? All right, not me. I can mobilize people. I know how to get votes. I can mobilize people. But I'm not the person. that needs the stuff, it's people who, at a level of very simple people who own the surface of the earth, from Zulus in Africa, right, to Berbers in North Africa, to Mongolians, I'm a good friend of the president of Mongolia, to Peruvians, they know that. So what did I decide to do? I got all these people together, right, that own the surface of the mining corridor of Peru, where you've got the biggest sources,

reserves of copper in the world. All right? And it goes from Apulima to Kusko to Ariquipa. That's the mining corridor. They're outweighing the sticks, and that's where the Chinese are coming in to drill it out. And I said, why don't you do the following thing? Why don't you tell your story to the Americans?

Tell the story to the Americans. Tell it to the armed forces. That's what you really want is to be given a title. and remind them that that's what they did to win the war in Japan. Remind them that that's what they did to win the war against Russia, because they actually did it. There is military history. So what I did is I put them all together,

and of the known available reserves of electric, let's call them electric metals in Peru, these are about $2.5 trillion, ready to go, all right? I managed to get the owners of the surface of one trillion of these people that are surrounded by Chinese and are fighting the Chinese and won an alternative. Competition, which is only natural. That's them. And then I said, now let's go to the United States.

I've got appointments. I can get an appointment with Senator Ted Cruz, old friend. I can get an appointment with Senator Chris Dodd, President Biden's. best friend and who's also a friend of mine. And we can sit there, and I also know Henry Kisser, let's talk to them. And I also know, I don't know, but I admire the Southern Commands of General, who's a woman, by the way, called Laura Richardson. And let's tell them what you know. So it's not just me, an interesting opinion. These are guys who lead millions of people and own this stuff and can shut down what you can't do,

which is they can shut down a Chinese plant. You can't. They can. That was four months ago. I couldn't get the visas to travel into the United States. Really? Why? I couldn't.

Well, the reply to that, of course, is that many Peruvians, if you're rich, you want to have a house in Miami. You've got enough of those. And then the other ones are people from Salisavador to whatever it is want a job. and you're building a wall and I can understand that there's too many migrants but you should be able to distinguish

the difference between these guys who don't want to live in the United States. It's we're talking about 11 liters. I couldn't do it. Now, the reply to that is that what I think has got to be done is get to, remember what Bertram Russell talked about, little patches of color.

Okay, you got one patch of color. patch of color. I got another patch of color. So what you blockchain guys have got to do, you crypto guys who got to do who have got the money and we've got the people, is put it together. And so let's not go to the United States, let's not get the visas. Who did you call? Andrewson, Mr. Anderson, Mark Anderson, Horowitz, all these guys, get them on a plane, come down here. Three photographers, Forbes, Fortune, Wall Street Journal, whatever you want to. Bring them down here. Let's get photographed. That'll get a message across. Because right now when President Biden has sent a budget to help Israel, okay,

another budget to continue helping Ukraine, your senators are standing up and saying that's a lot of money. This is nothing. All we're asking, telling them is we're going to use a blockchain system that gets them close to Wall Street. Your market will decide whether you want those minerals or not, but of course you want them. But you see what's happened is that, I repeat, it's a mistake to think that financial people know the origins of finance. Remember how that comes to right away. It comes to that. I mean, General Douglas MacArthur, I don't think he fully understood what was proper.

He just simply knew that it worked. He won. As a matter of case, his objective. wasn't to get the economy going. His objective was to destroy the feudal system of Japan, which, because it wasn't working, had forced the establishment of Japan to say the problem that we have is not distributing land to our farmers. We just don't have enough land. I mean, Japan is a little place. Let's go out and conquer the rest of Asia. All right. So he knew that what he did that that was a false argument because it was the feudal class that didn't want to share.

Right. But that was the cause of Japanese feudalism vertically integrated going out and causing war all over the place. And why? Because the Japanese government of then had decided that the other way to not only get land, but to discipline those rambunctious farmers was to, put them in uniform and make them fight for their country. Patriotism was something good. So he said, I got to get rid of that.

His job wasn't, his objective was economic. His objective was to empower the little people so that Japan would never resuscitate. Fascism wouldn't come back and he needed to create a bulwark against communism as your ally, Chiang Kai Czech was being defeated by the communist Mount de Tom. All right. So there are many things that have a solution, but you got to get out of your just traditional financial field. You got to get into things that people did. Like when there was stomach medicine and somebody added sugar to it and converted stomach medicine into Coca-Cola,

things have functions. And one of the functions is not money. One of the functions is to make people wealthy. And then somebody will connect those. not very fast, but start talking not necessarily only to financial community because you're talking to the same lodge. Hernando, this has been an absolutely fantastic conversation. And I think we heard at the end of this conversation kind of a call to the crypto community,

basically. And so you've made a compelling case today that property rights are the most important, like, are the hallmark of all economic progress. And we are now really in a race to title the world. And there are really two options of this, and crypto maybe presents a third. The first is the U.S. can help title the world. The second is China can title the world, or the third is maybe blockchain. And so I think this is a call to the crypto community and those listening.

Basically, we talk so much about these things we call, you know, tokenized assets and real world assets. And mainly we're talking about, you know, things that we know from our existing legal system, bonds and things like this, and even stable coins. And certainly that's a part of it. But what about going down to Peru, for instance, and bringing real world assets of Peruvian mining companies and facilities on chain? How can we help some of these emerging economies? How can we help title the rest of the world and show the U.S. what this looks like and make our mark? I think rather than getting obsessed this next cycle with the next NFT that is pumping and the next speculative asset of Bitcoin, I think this is a compelling call from you, Hernando.

So I appreciate this, and we certainly learned a lot. Is there anything else you would leave us with as we depart here? Sure. I think we're on the right track here. I would just simply say that you already titled, help title the world. What you're going to do is tokenize it. You're going to take that title, which is not negotiable, which is not negotiable internationally,

and make it negotiably global. what we've got underneath our earth is only valuable in the measure in which it reaches industrialized countries. Very simple. So what you want to do is not say that you're going to title because then people will get scared and say, but what do I know about titling? It's already titled. What you've got to do is tokenize. And the guys who know how to do it are your digital guys.

That's the first kind of thing. The second thing is not only don't expect your financiers not to understand this first shot. They'll get into it once they see that there's a value. and that they can make money. Nor can you think of asking your miners to understand it, because they're already around. But your miners, what they know is how to dig stuff out of the ground. They're engineers, they're foremen.

What you want to do is take your argument to your opinion community, the news, those that have opinions that have criteria and to politicians, because they're the ones that have the most to gain. from this. You want to get people who want to stop, you know, spending trillions of billions, rather of dollars on foreign wars when you can win them by just simply tokenizing the property rights. In other words, don't forget, a property right that I can only use to sell to my neighbors or in Peru. And I've got, you know, Peru's got a whole bunch of quinoa. Peru's got all the varieties of potatoes that you want, et cetera.

But they're valueless here. You want to bring them to where they have value. So you want to bring in the people who see that value immediately. And those are your political representative, those concerned with the budget. And those concern and what's great is you're going to tell me, well, when do we do this? Well, I can tell you the time. I don't need to know America for that. The time is this.

election time and you're right in the middle of it. Because the first thing politician want to do is get elected, right? And your politics today are pretty fierce. So you want the Republicans to come and say, I started the Washington Consensus. And you want to have the Peace Corps people say, no, you didn't. I did starting the titling and all that. Get those guys, those are the guys who move opinion. All right.

And they will, and then the PR guys of the mining. companies will understand what's behind it. But for the moment, the guys in the mining companies just simply don't even understand the value of the property. They delegate that to the Peruvian partner, to the Brazilian partner. I think what you want to do is say to blockchain, say to your financiers, we've got a great product here, but we've been using it to do things, right, that don't inspire confidence. We can inspire confidence here, number one. Number two, get the guys who think big.

They get the guys that can think outside the box. As a fantastic way to end this, Hernando. And I think your message is show us a path to tokenize the world, a call for crypto to unlock capital, unlock economic prosperity. And I think it's no coincidence that the person, I think that most understands, which is you from everything I've read and has awoken the world to the value of property rights. you've caught on to crypto, which is somewhat fascinating and I think consequential because you're looking at property rights from first principles.

And so you see the value of blockchain. You see the merits of tokens. And that is a tell in and of itself. So, Hernando, I want to thank you so much for spending some time with David and myself and the crypto community today. This has been one of my favorite conversations. Before you sign me off, just one last thing that occurred to me now. We had a funny letter that came in about three months ago,

a company that said, I don't know, it's true or not, that said they worked for Elon Musk, and would we be interested in helping him title asteroids? That's pretty far away. We can help him title and own the minerals that we have in Peru without taking a rocket ship. I mean, there are one other characteristics to us of the United States is all these guys who got very rich

and not content with that, they also want to save the world. That's your key. There we go. Let's title the world first before we go. Title the solar system. No, we've titled the world. That's stupid. No, we've titled the world.

I love that you are the one using tokenized, not me, because that is the word we often use. Hernando, thank you so much for joining us. Thank you for the opportunity. Bankless Nation. I'll include some links for you below. The first is a link to the mystery of capital. That is Hernandez's book, which is absolutely foundational. want to understand this in more detail. Another is a podcast episode that we did called

reinventing the internet where it's actually the Genesis Mark and Dresen actually referred us to Hernandez's work and talks a little bit about it there. Got to end with this. Of course, risk and disclaimers, none of this has been financial advice. It never is on bankless. Neither was it political advice, although Hernando does have some fantastic advice for the U.S. and its adoption of tokenization technology moving forward. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the banklist. journey. Thanks a lot.