TFTC: A Bitcoin Podcast - #513: How The US Is Losing The Great Digital War with Matthew Pines
Episode Date: June 12, 2024Marty sits down with Matthew Pines to discuss how America is falling behind in the new multi polar world. Matthew on Twitter: https://twitter.com/matthew_pines Bitcoin Policy Institute: https://www.bt...cpolicy.org/ 0:00 - Intro 0:50 - Bitcoin in politics 5:09 - Pitching Bitcoin to policy makers 12:14 - River & Unchained 13:30 - BRICS 24:52 - Is US govt asleep at the wheel? 37:26 - Current system isn’t as permanent as it appears 46:04 - Gradually, Then Suddenly & Zaprite 47:41 - Private sector finding a way out 57:48 - Expecting the big moment tomorrow 1:03:45 - AI 1:15:58 - US needs long term plans 1:29:58 - State/non state power is shifting 1:51:14 - Bitcoin is out best strategic option 1:56:19 - WWIII Shoutout to our sponsors: River Unchained Zaprite Gradually, Then Suddenly TFTC Merch is Available: Shop Now Join the TFTC Movement: Main YT Channel Clips YT Channel Website Twitter Instagram Follow Marty Bent: Twitter Newsletter Podcast
Transcript
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you've had a dynamic where money's become freer than free
If you talk about a Fed just gone nuts, all the central banks going nuts.
So it's all acting like safe haven.
I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins.
In the world of fiat currencies, Bitcoin is the victor.
I mean, that's part of the bull case for Bitcoin.
If you're not paying attention, you probably should be.
You probably should be.
Matthew Pines, long time coming.
I can't believe this is your first time on the show.
It is.
Wow.
I'm glad to be here.
I'm glad you're here.
We have a lot to talk about.
Let's start with the Trump bump.
Is the Trump bump coming?
TBD.
I know that there's a lot of folks working the angles behind the scenes to try to get –
sort of play each political side off of each other,
and it seems like the Trump camp has been a little bit more cooperative
in listening to the digital assets industry.
We'll see.
I know Biden has tried to adjust tact. We'll see if that manifests in a policy stance that will attract similar donations.
But, yeah, it seems like at this point he's going all in.
And I know that whatever our future administration eventually turns into, it seems like a digital assets policy plank that's very positive for the industry is likely coming.
Yeah. Given your experience in D.C. and being around these conversations for years, how would you describe the reaction that you alluded to from the Biden campaign and where we sit now as an industry politically?
It seems that we're definitely entering a phase where the voting block built up of individuals who want to see Bitcoin and broader crypto succeed, have a voice that is being listened to, which I'm not going to lie, is a bit of a shock.
I didn't think it was going to happen this soon, but here we are.
Yeah, I think it's two things.
One is like the price is to first order the political valence of digital assets as a function of the price.
Right. So when when the price is dumping, when it's 15K, 20K, politicians don't care.
Right. It's dead. It's moving on. It's not a very top of the top of the ticket item.
When now it's reaching close to all time highs, that's that draws political attention.
And to to to a certain extent, our political system is driven by money.
Right. It's not really driven by, you know, mass preference.
It's driven by who can help support different electoral slates of candidates.
And I think when the Republican candidate showed a willingness to sort of engage with the crypto community and that resulted in financial commitments, I think the Democrats saw that as a potential strategic disadvantage.
And I think there's some folks in that camp that are much more about, OK, what does it take to win and aren't necessarily aligned with Elizabeth Warren wing sort of crypto army and are trying to, you know, develop new relationships and send maybe backdoor entreaties to the Bitcoin and crypto communities to try to get some of their support.
I'm not sure how successful that's been recently, but I think Trump's sort of hard and explicit endorsement of Bitcoin and digital assets more generally has sort of set the marker, and it remains to be seen if the Democrats are going to ante up.
And I think that's where the dividing line is in terms of the strategist level, in terms of the folks that are running the campaign are just looking at battleground states and it's coming down to a few hundred thousand votes and all the money and all the effort to win a campaign is leveraged on a small number of sort of flips.
And so any advantage or disadvantage really is magnified in importance.
And so this is where I think the broader digital assets industry is now coming to its own as a result of several years of kind of building, you know, progressively stronger political muscles.
You know, I think four years ago, the idea of engaging in politics, especially for like, you know, true Bitcoiners was seen as anathema, right?
Like you're just compromising, you're selling out to the man.
Why are you even getting involved?
Politics is, you know, a grubby business.
Like we should just build and, you know, ignore the politicians.
And I think at least there's certain strains of belief that still hold to that, but I think a larger swath of politically active and engaged Bitcoiners and other folks in the broader industry have realized that it is potentially existential for the industry in the United States.
Not necessarily globally, it's just a matter of whether the U.S. plants a flag in that new territory or whether it cedes ground to others around the world.
yeah i'm not gonna lie i fell into the the former camp at one point i think a combination of you
others at the bitcoin policy institute and in the industry nbk over at coin kite pretty thoroughly
convinced me that you may not care about the politicians but the politicians care about you
it's probably best to engage put your best foot forward because we we actually do have a good
story to tell a good narrative uh i think the idea of bitcoin being this reinvigorating force
within the american economy has a lot of strong legs to it and a lot of validation behind it
up to this point particularly within the energy sector and obviously from the aspect of it being
an asset that can protect you against inflation these are very strong narratives that americans
desperately need at this given point in time.
So I guess, how would you pitch Bitcoin
to politicians as this vehicle
to reinvigorate the American economy?
Why should America want to lead
when it comes to Bitcoin?
Yeah, I mean, I've had the occasion
to provide some white papers
and talking points to some candidates
on both sides of the aisle,
on the Senate side and the White House
to help, at least from my position,
as, you know, someone who looks at geopolitical risk, national security, which has been obviously
a consistent theme, mostly on the negative side and how policymakers have assessed Bitcoin
and digital assets more generally as being a potential risk for national security.
And I have tried to make an argument, I think, you know, reasonably so that, in fact, the
net benefits to U.S. national security and our geopolitical position from Bitcoin are
positive and quite strong if we take advantage of our unique position at the moment.
And so I've articulated that in a number of different forms, long white papers.
I think that the key thrust of my argument has been, one, like the legacy monetary financial
system that we constructed sort of the post-war era and really sort of fine-tuned in the last
50 years, sort of like all sorts of systems, they start off being quite well optimized
for a certain geopolitical status quo,
certain arrangement of trade and financial flows,
and they get sort of optimized for that set of arrangements,
and they accrue lots of power to the system that set them up,
and that's sort of the system that we've been running
for the last 50 years, and it's, I think,
progressively reached a point of diminishing marginal returns
and, in fact, now probably creating increasing marginal costs
on our overall global position and our domestic stability
In the sense that we have essentially sold off our manufacturing base.
We no longer have a defense industrial capacity to credibly deter our great power adversaries.
That's a direct downstream function of the fact that we effectively have to print debt to supply global demand.
That's a result of us running structural trade and capital account deficits.
And our adversaries accumulate dollars and reinvest them historically into our debt.
And that that mechanism, that sort of global dollar recycling is, you know, led to the benefit of our fire sector and our tech sector, but has sort of systematically atrophied sort of the core elements of domestic manufacturing and industrial power that that you really need to have if you get into global conflict.
And so that is that's increasingly seen as a risk, an acute risk in the defense intelligence communities.
But that's that's a hard sort of thing to unwind.
The second is so that's like essentially the legacy system is an acute vulnerability.
And it's growing as a vulnerability in creating acute sort of fragilities in our debt markets that our policymakers essentially have to keep sort of scrambling to contain.
And that distracts our strategic attention.
The second is our adversaries are really not fighting to first order a global physical conflict of those proxy wars.
The main argument is that they're fighting a digital network competition.
And the global economy is effectively a digital set of systems, whether it's the financial systems, the computing systems, other communication systems.
And it's about capturing sort of key nodes in that global system.
And those rapidly changing sort of topology of those global networks is where sort of the front lines of global competition reside.
And so it's not really a matter of physical territory to first order.
It's about capturing sort of strategic advantage over core nodes in an emerging set of digital systems that are now increasingly interlinked between value, energy, and communication.
And those are the systems that are going to, you know, determine who sort of maintains dominance in the next 10, 20 years.
And I think if we just sort of pretend that these changes aren't happening and we sort of just double down on sort of the legacy systems that we've rode to global dominance on, that we're exposing ourselves to an acute risk of being rug pulled strategically in the next five or 10 years.
And that is something that doesn't happen. It's hard to sort of get policymakers to think about those changes because they sort of start in the margins. They seem easy to dismiss. It seemed like, you know, flashes in a pan or sort of somewhat trivial peripheral issues until they're not.
And that is that's, you know, I think the lesson of of of global power politics is that these changes can accrue and get momentum and then they're sort of hard to stop unless you've seen ahead.
So that's what I've talked about in terms of our existing system is leading to and has caused strategic vulnerabilities.
Our adversaries are sort of jumping ahead to try to capture strategic advantage of these emerging digital networks.
And unless we recognize that this is an inflection point and we just double down on our existing systems, which are increasingly fragile and require ever more effort to sustain,
uh we're not in a good position to uh you know counter authoritarian um objectives around the
world so that is that's the way i sort of frame it uh in terms of bitcoin a dollar by stable coins
is essentially helping to buttress uh and transform but in a more gradual form
a global system that is still um open still you know fundamentally liberal is still oriented
towards sort of the core values that america at least um holds up for itself historically in terms
of, you know, freedom, property value, property rights, human rights, et cetera.
So that is, that's kind of the stakes.
And I think we're going to see that unfold in the next few years.
So how we sort of set our political and geopolitical orientation to those emerging systems, whether
we're actively hostile to them and allow folks like the Emirates or the Singaporeans or Hong
Kong to become kind of the dominant nodes in those emerging networks, or whether we retain
our place in those emerging systems and then can compete effectively in a shifting global system.
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looking good and i'm happy that people like you are ringing the alarm bells for this i mean what
were your thoughts on the bricks meeting yesterday there's been a lot of talk i think it's an ex
rumor there was the meme going around over the weekend that the petrodollar contract agreement
expired on june 9th if it wasn't it wasn't re-signed but i don't i did some research
last night didn't look like it existed in the first place sunday was the 50th anniversary of
the petrodollar coming to life but regardless of whether or not that contract exists and whether
or not it was re-upped saudi arabia is officially part of the bricks coalition whatever they're
defining it as. And there was a big meeting yesterday in Russia in which the BRICS countries
talked about areas they want to focus on, everything from global governance to climate
change. And one of the important points that was brought up that is pertinent to this show and
what we do as Bitcoiners is the fact that these countries want to begin settling financial
transactions in their native currencies instead of having to go through the petrodollar system.
yeah i think so the bricks and the whole de-dollarization narrative gets gets muddled
in various ways and sometimes a lot of motivated reasoning behind uh the core geopolitical analysis
and the real politic and the inherent constraints um placed upon those actors in the existing global
system not not to say they have aspirations but i sort of calibrate what's what's plausible what's
what's likely. To first order, the BRICS coalition or aggregation is not a monetary-military
alliance. It's essentially an economic arrangement of collaboration and partnerships at various
stages and various sort of strengths. So in that sense, it's like a G20. So it doesn't
actually commit members to a whole lot of kind of mutual or bilateral commitments, but
it expresses kind of an orientation to certain political values and patterns of trade.
that I think reflect a larger pattern of multipolarity, right?
That I think that's pretty obvious at this point,
that there is no dominant hegemonic power like the United States
that can just police all the world's hotspots
and sort of enforce a certain system of rules and state behavior
that it was able to kind of do in its hyper-power moment.
That system is gone.
And so we're seeing a sort of this, you know, emerging new pattern.
It hasn't yet set into a new equilibrium.
it's a multipolarity unlike you know the cold war sort of bipolar system or kind of the the short
post-war sort of uh sort of unipolar hegemonic moment which were quasi-stable systems where you
could have kind of two great power systems essentially compete uh for for the world and
kind of divide up and all sort of middle powers had to kind of pick a side um you know most
non-aligned powers you know were kind of on the margins uh in the post-war era the united states
could kind of rule the roost for a short period of time.
Now you're seeing kind of emerging challenger powers
and middle powers and balancing powers
kind of all kind of recalibrate their relationships globally.
And that hasn't taken, you know,
that hasn't resolved itself into a new equilibrium, right?
It's still very much an unsettled state.
And so the BRICS phenomenon, which is, you know,
kind of a misnomer in terms of the membership now,
it kind of spans, you know, many different countries
and many different continents.
And many folks that are members of BRICS
are also strategic partners and allies of the United States, like the UAE and Saudi Arabia.
So there's a lot of folks that are essentially, especially in the Gulf countries and some folks
in South America, that are essentially trying to play both sides, right? As you see essentially
in a multipolar system, it's sort of geopolitical promiscuity, right? Where there isn't just one
major power that you kind of have to pay fealty to. Now there are multiple powers that are all
vying, multiple great powers are all vying for influence and they can sort of, and those middle
powers can sort of uh you know play each side off each other to get benefits for themselves i think
you're seeing folks like the saudis and the emiratis really being successful at that strategy
and so um what that has implications for in terms of the monetary and financial system i think is
very important because um many of those countries want to preserve as much as possible their
strategic uh their strategic autonomy right they want to have um as much um as much sort of
optionality in how they conduct their economic affairs as possible and they recognize there's
of emerging from a legacy system where because it was so uh subject to such hegemonic dominance by
the united states they didn't have that flexibility right so the saudis in the 70s right the main
arrangement there was was pretty clear it was you know we will provide military protection um you'll
buy our arms and weapons you'll um sell your oil for dollars and you'll recycle those dollars back
into our weapons and our debt and you did that for 50 years and we hold those you know we we agreed
to hold your treasury securities in a secret account because for regional sort of politics,
the Saudis didn't want to have it be known that they were funding US, essentially US military.
And that arrangement is now kind of reaching its end point, but it could still sustain under a
different logical basis, especially the relationship between US and the Gulf countries
and the gulf countries and china is like i think the most important kind of prism to see these
these changing dynamics um in particular you know if you look at those those gulf those gulf states
that have uh they're now sitting on you know trillions of dollars of of dollar reserves many
of which have been have been moved into sovereign wealth funds and those sovereign wealth funds have
then been deployed for strategic purposes for those gulf countries to try to um to do a few
things but uh one of the most important things is try to you know transform their domestic petro
state economies into more you know leading-edge technology um uh and emerging energy uh sort of
sort of technology so they are trying to transform their their position in the global uh economic
system from just being a provider of raw commodities to being a kind of a key hub for
you know ai semiconductors telecommunications networks and hubs throughout the region in africa
And so that is their strategic objectives. And so their monetary plans are always going to be sort of downstream of their larger strategic objectives. And so, for example, if they can acquire valuable assets and technologies using dollars, then they'll redeploy those dollars to the AI sort of entry ecosystem.
And they'll try to then use that influence to pull some of that technology and that capital and that talent domestically to build out their own indigenous capacities to sort of reinforce their role as an innovation hub for those technologies.
If China can offer military support, intelligence support, security support, as well as other technologies like Huawei 5G or construction expertise for big megaprojects, then they'll look to recycle those surpluses to the Chinese.
And if the Chinese want to demand payment in yuan for those services, then it's likely that that will happen.
So I think you'll see kind of on the margin a rebalancing away from those petro-states from pure dollar-based recycling into whatever unit of account is necessary to purchase the strategic services and goods from essentially whether it's a U.S. or China tech and industrial ecosystem.
And I think that's what you're probably going to see. It's going to sort of take place on the margins. But for that sort of China shift or China balancing to take place, they kind of need to have new infrastructure, new financial infrastructure kind of created, right? Because this doesn't happen overnight. It's not just a political decision to sort of re-denominate sales.
It usually requires, you know, setting up, you know, financial and institutional infrastructure.
And I think one of the key pieces of infrastructure that's being put in place is, you know, exemplified by Project Enbridge, which is kind of a cross bridge CBDC project sponsored by the BIS.
But essentially, it's essentially a Chinese project with several South Asian states and importantly, now Saudi Arabia and the Emirates.
And so you can imagine if that sort of starts to scale, become like institutional, you know, and state level system to actually hold, you know, lots of transactions, kind of a way to kind of bypass the legacy dollar clearing and settlement system, right?
I think a lot of folks in the Middle East sort of resent the fact that if they want to send a dollar payment, you know, essentially has to go east before it can go, I mean, has to go west before it goes east, right?
It has to essentially be routed through the chips clearing network in New York before it sort of waterfalls through the correspondent sort of banking system to whether it's a bank in Vietnam or a bank in the Philippines, right?
Right. And so I think that that that logic holds, but at the state level where they don't they don't like to be vulnerable to these potential surveillance and choke points powers that the United States has over the dollar financial network via things like OFAC and FinCEN.
So OFAC gives us sort of a choke point capability over the global dollar system and FinCEN gives us sort of a global surveillance capability.
And if you're a middle power, you are trying to remove as much possible elements or points of coercion or exposure you have to another great power.
So you want to have redundancies, right?
You want to have backups.
You want to have alternative sort of clearing and settlement systems so that you can conduct your trade, that you have the strategic autonomy that you desire.
And so I think that's all basically motivating the construction of these alternative digital arrangements at the state level.
And I think it also is going to cascade and you're seeing it be motivated at the individual level, like with dollar based stable coins.
For example, if you're a foreign worker in the Emirates and you're getting paid in dollars or local currency and you want to send that back as a remittance payment to your family in, say, the Philippines or in India.
Well, as with all remittance payments, you're going to be taking a massive hit on all those different fees.
Whereas if you can just send a stablecoin essentially peer-to-peer from your self-hosted wallet to your cousin or your wife's wallet back in the Philippines or in India, well, that has a lot of value to you.
And I think that's an endogenous demand for the populations in those countries as well.
So I think all those trends are sort of pushing in this direction of a proliferation of novel digital financial networks and the sort of legacy correspondent banking system that emerged in the postwar era that sort of has been the mechanism by which the U.S. has kind of projected financial economic dominance, you know, sort of has reached a high watermark, I would say.
It doesn't mean it's going to collapse, but it means that there's now a strong incentive and also just endogenous technological drivers behind the creation of alternative financial systems and networks that the United States either just ignores that those are being created or can help, you know, steer and shape how those get formed and which of those key nodes emerge in those new networks.
perfect layup for my next question which was are we asleep at the wheel because it seems that
a lot of this has been somewhat choreographed and it's almost like the u.s financial system is a
frog slowly boiling in water as other nations begin to form alliances and do things outside
of the purview of the dollar system and i think i was going through your twitter earlier today and
look you can pull it up but you tweeted last year quote tweeting or a quote from the saudi aramco
ceo from march 2021 basically signaling that saudi aramco is really going to lean into supplying
china with energy for the next 50 years and signaling that there's going to be a stronger
relationship between china and saudi aramco specifically but the illusion there is that
saudi saudi arabia the country as well and so it seems like a lot of moves have been made on the
chessboard bitcoiners and other macro analysts have been calling this out for many years the
quote-unquote oil wars or the bricks currency wars whatever you want to name them and at least
from my perspective looking at what the current administration has done over the last four years
it seems like we've been asleep at the wheel and a lot of this has been happening with little to
no pushback. Is that a correct assumption in your view, or is the US government doing something to
position themselves for relative success moving forward? I think we belatedly woke up to the
strategic, um, implications of China's, uh, you know, um, you know, success in both recruiting
and also engaging diplomatically in the region. And, you know, just, you know, I think the biggest
manifestation that was the, before the October 7th, uh, Hamas attacks, uh, you know, China was
very much now like a Middle East player and was basically developing and secured a rapprochement
between Saudi Arabia and Iran.
So it's kind of a historical achievement
where China was now essentially
the diplomatic power broker in the Middle East,
which for the United States' historical standpoint
was kind of like an oh shit moment.
And I think, you know,
there isn't like always an all or nothing thing.
And there's always like countervailing objectives
that say the Saudis have
and playing off the Chinese against the United States
for their own strategic purposes.
obviously china looks to the saudi arabia as a critical provider of their commodities right
that's just like that's like the foundation of their relationship they just rely on those energy
imports um so you know china has also reciprocated by providing um you know ballistic missile support
uh and is willing to accommodate saudi's um you know adventures uh in other parts of the world
you know as part of kind of a like there's there's a certain part of this which is geopolitics
And there's certain parts of a part of this, which is you have to think about the CCP, the ruling families of the Gulf countries as their own sort of like extractive mafia.
Right. And so some parts of these relations are motivated and sort of seen the prism of states with tax bases and populations and big, big bureaucracies.
And some parts of these relations are, you know, essentially motivated as, like, different mafias, like, carving up territory, right, and doing deals to support each other's, you know, criminal endeavors, sort of criminal endeavors.
And I think, you know, to a certain extent, you can see the ruling families of, like, the Emiratis and the Saudis and the CCP essentially as, like, mafia families.
And you have to kind of model that into how you think about how they see the world.
And to a certain extent, look at, because if they're essentially small groups of people that control vast quantities of wealth, they can do things that, you know, don't look like traditional state behavior, right?
They don't look like, you know, setting up military bases.
They don't look like, you know, doing port calls with archive carriers or doing training missions, et cetera, right?
They look like venture capital deals.
They look like, you know, cut out LLCs, putting millions of dollars into Western banks and financial institutions.
And those are for other strategic purposes, whether it's to acquire strategic technologies or investments in different firms, whether it's to influence the political systems in the West, you know, the outright corruption or political donations.
And I think we have sort of discounted the the nature of the sort of Saudi or sort of the Gulf East alignment is essentially if you zoom out, like where the surpluses are, they were essentially in Russia.
You know, they were essentially in petro states and in manufacturing powers, essentially OPEC plus in China.
And so the the way that the U.S. has sort of run the last 50 years is that, you know, we would be the consumer of global goods.
And so therefore, we would essentially stimulate the economies of the global south, these emerging markets that produce raw commodities and then climb the value chain in manufacturing.
And then they would recycle those dollars into our debts in a sort of a controlled, safe fashion where we could sustain the benefits.
I think those emerging powers sort of woke up, though, and they realized they could leverage those dollars to essentially corrupt the imperial core, right?
To sort of insinuate themselves into our into our into our system and to extract strategic benefits for themselves.
And I think that's what you see now. And and I think, though, the Russia, I think, invasion has sort of broken kind of one one aspect of that.
What was more like a quasi like just pretend it's not happening arrangement, because now we had to go out and sanction all the Russian oligarchs.
And that kind of broke sort of an implicit part of the deal. Right.
Was the Russian oligarchs and everyone in the Russian system could get immensely wealthy and they would just recycle their wealth into Manhattan, South Beach, Miami, London Mayfair, you know, real estate, et cetera.
And then Russia invaded and now we have to sanction all of those oligarchs, seize their yachts, seize their property, et cetera.
And I think that signal then was cascaded down through what I call this kind of this state quasi-mafias who were doing the same sort of thing for the past 30 years.
And now they have to look at that arrangement very differently.
And so those Gulf powers, those, you know, Gulf, you know, elite royal families, the Chinese sort of elite families that have, you know, hundreds of billions of dollars in real estate overseas, they have to sort of reassess the risk to those assets and start to find alternatives, right, to protect those assets, right?
And also try to construct alternative financial institutions that they can, that are more safe for them.
So like a great example of this is Switzerland.
So Switzerland has been seen as like this bastion of, you know, financial autonomy and independence and, you know, banking secrecy for 100 plus years.
It's where all, you know, the world's rogues kind of hide their money in Swiss numbered accounts or just gold bullion inside mountains.
And they looked at the Russian invasion, the sanctions, and the Swiss government, you know,
passed changes to the bank secrecy laws that essentially, you know, undid a huge portion
of the secrecy protections.
And then a number of accounts were essentially unmasked and had assets seized.
And that, I think, is like a sense like a shockwave, you know, not at the geopolitical
level to first order, but to like those like networks of mafias that control trillions
of dollars, right, but also happen to be, you know, sort of heads of states or cousins
of the heads of states, right?
And so it does have geopolitical impacts because what it then precipitates is, for example, the emergence of alternative financial centers like Abu Dhabi Global Markets in Abu Dhabi or DAFC in Dubai that are now trying to essentially position themselves as alternative financial centers to absorb some of that scared capital, right?
And so to the extent that this capital starts to flow out of, say, the city of London, flow out of Switzerland, flow out of New York and Miami real estate into Abu Dhabi, into Dubai, into Singapore, into Hong Kong, that is a strategic challenge to sort of the whole global arrangement, right?
Now, Saudi Arabia, so this is where it's like oil matters, but it's like oil is just one input into like, okay, they sell the oil, but then they get a bunch of dollars.
What do they do with those dollars, right?
That actually matters a lot more than just the unit of account they used to sell the commodity itself because it's that capital that is what provides power depending on how it's deployed in the global system.
If it just sits in a treasury account at the Fed, it doesn't give the Saudis a whole lot of power.
It's safe to the extent that they think that it's not going to be blocked or devalued, which is increasingly a new risk they have to price in.
But they also realize that the value of that capital can be deployed much more strategically.
And so this is where you've seen the emergence of sovereign wealth funds like the PIF, like ADQ, like ADIA, like MGX, and also the Chinese have their own sort of sovereign leverage funds to do something similar.
And so the world is now being sort of shaped not just by kind of traditional geopolitical, you know, arrangements or sort of tit for tat kind of traditional diplomatic and military kind of positioning.
But now the sort of networks of immense global capital flows that are controlled by a small number of sort of autocrat sort of elites in the Gulf and in Asia and the West sort of has a strategic vulnerability to that.
Right. Because if you if you talk to any venture capitalist now or private equity firm, what they'll tell you is that like the marginal source of new dollar investment is coming from the Middle East.
It's coming from Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, to a certain extent.
And so, you know, you know, he who writes the checks calls the tune. Right.
So you have like just like shuttle flights of venture capital heads and private equity, you know, honchos just just flying back, back and forth to Riyadh, to Dubai, to Abu Dhabi, essentially begging for money.
Right. Essentially trying to, you know, make themselves friends of the elite sort of families that run those cyber wealth funds.
And if those same venture capital funds are investing in what we would call like deep tech, right, the kind of strategic technologies that we think are going to be necessary to maintain our economic dominance and say aerospace and defense, you know, emerging space economy, AI in particular, but also quantum information systems, synthetic biology.
These are kind of the frontier of strategic technology competition that we sort of currently have a critical lead in.
But those ecosystems are now effectively being penetrated, compromised by Saudi and Emirati money, which is literally looking not just for like ROI, like a traditional venture capital investor would be, but they're looking for strategic advantage.
They want those technologies, you know, produced and they want those champions domestically.
They want to have those sort of innovation clusters within their own jurisdiction.
They want to have the chip fabs.
They want to have the training data centers.
They want to have the AI researchers.
They want to have the synthetic biology labs.
They want to have the space launch and satellite design.
They want to have those technologies and those industries inside their own countries.
And so they're aggressively deploying those capital to capture the strategic frontier
and try to pull, using that influence, pull those industries domestically.
And so that, I think, is where the new battle lines of strategic competition are.
It's not just over kind of who's going to denominate oil or gas in what unit of account, but it's also who's going to dominate these emerging strategic industries.
And the traditional frame has been kind of U.S. versus China.
And the Emiratis and the Saudis have been really clever in positioning themselves in between to sort of play each side off each other and to sort of position themselves as sort of like neutral ground, both for scared capital as well as for these emerging technologies.
We'll see if this gambit plays out sort of in very much the early innings.
But that is, I think, a new dimension of global competition that we're going to see kind of probably become much more important in the next few years.
Yeah, this is the reason I wanted to bring you on, because we had a conversation about this off the record probably about a month ago.
Not at this point, but I can just confirm personally, when you talk about strategically taking advantage of an opportunity, the Middle East, particularly the UAE, Saudis, Qataris, Emiratis in that region, they've really taken advantage.
Because if you look at what's happened domestically here in the U.S. in the venture capital market post-2020, you had insane blow-up in terms of asset bubble blow-up in 2020-21.
And you had a lot of funds raise a lot of money, deploy a lot of capital, and insanely inflated valuations in 2022-2023 with the market downturn.
really put venture capitalists in America in weird positions
because they didn't have any returns to their investors
from their 2020, 2021 vintages.
And the LPs were sitting on the sidelines
seeing that they were extremely overexposed to private equity.
And so they all sat on their hands saying,
not all of them, but a good portion of the capital
that would traditionally write checks into venture capital funds
that said, hey, we're going to take a break here,
wait until our portfolio allocations rebalance
and it makes more sense for us to allocate to private equity.
And you have the Middle East countries swoop in and say,
hey, we've got money.
We can fill those funds up if you need them.
And they have obscene amounts of money.
And I mean, I've seen it in the Bitcoin space as well.
I mean, it's pretty public too.
You just look at the amount of people that are going over to Dubai specifically
to spin up companies and domicile parts of their company in the Middle East and Dubai specifically
and buddy up with the capital allocators there. And it is purely incentive driven where it's like,
hey, we're running a business here where we need to raise and deploy money. We're not able to raise
in the US, so we're going to go to where the money is. And that's how it's played out the last two
years. Yeah, I think you're right. I mean, they have, it's not just the money too. I think in
digital assets, they have really provided kind of a red carpet for businesses, you know, very
light touch regulatory, very fast bureaucratic approvals, very much kind of like a blank slate
that gives them a lot of flexibility to craft sort of innovation friendly legislation that is
like a competitive advantage when you're competing for businesses and and and and startups it's really
attractive kind of value proposition and i think there's like um uh you know a lot of western banks
you know spinning up kind of you know arms or subsidiaries or kind of spinoffs um to basically
do trading activities to do things in general assets industry uh with you know like uh companies
registered in either Abu Dhabi or Dubai, and often they're doing it with partners from
Hong Kong.
And so you're seeing kind of this, it's like the first mover advantage is very strong.
If those companies that have all that legacy experience, often they come from TradFi and
then sort of adapt those skills for whether it's market structure, whether it's certain
certain sorts of setting up of broker-deal arrangements or sort of trading infrastructure
or capabilities that allow them to basically create first-mover advantage in these regulatory
sandboxes that have been established in really the Emirates and in Hong Kong and Singapore
to a certain extent.
And that first-mover advantage could become strategically important in the next few years.
The US is kind of definitely behind the curve when it comes to that.
We have now the ETFs, of course.
We have the legacy Bitcoin mining presence.
We have, I think, a strong foundation, but I think the broader environment is becoming
extremely competitive for where the next tranche of those businesses are going to set up.
I think the larger strategic play for those countries is to try to suck as much talent
and capital into their own jurisdictions as possible.
I know that the DIFC, you know, was created essentially as a clone of the City of London.
I think the lawyer who wrote, who helped them write the kind of like the set up the framework for the DIFC, you know, was like one of the sort of top guys in the City of London, you know, 20 years ago and sort of crafted a, you know, a sort of English law, common law based systems to mirror the City of London.
So that contracts and legal agreements and disputes and arbitration would essentially be sort of mirror images of the city of London system, which if you think about it from like you have this sort of legacy node up here that has all these, you know, connections to it that would normally give it a lot of stickiness in a global system.
Like, you have a node that has a lot of other nodes connected to it.
It's kind of hard for other nodes to kind of, like, defect from that connection, right?
Because there's a lot of, like, sunk cost and sort of inertia and also just, like, embedded legal and historical connections that make it hard to kind of displace that node from its, you know, kind of dominant position.
But if you have like another node, right, say, you know, the DIFC or ADGM node that are basically almost like clones of kind of have the same connection points, have like the same internal structure and sort of legal framework as that node that it's trying to displace, then it's much easier for kind of the legacy connectors to that old node to kind of just like create new connections to that new node.
And the more those connections kind of get duplicated or even just swapped out, you know, the easier it is for that new node to kind of take over the role that that old node used to have.
It's easier now for DIFC to kind of take more and more of what the city of London was doing.
And that's why I think people, you know, look at Dubai and like in England as like these geopolitical actors.
When I sort of think of it as like this sort of nexus or nexi of law, you know, like sort of legal codes, social codes, and capital, and that if there's a convenient marriage of those things that work for the interests of the parties involved, then you actually can have like a quick, a pretty fast transition of the legacy network structure to a new configuration.
And I think that's like the risk that we, like we think the legacy system is really sticky, right?
That the dollar system is just so sticky because it's embedded in this, you know, very complex hierarchical correspondent banking system that's organically evolved over the last 75 years.
And that there's just a lot of embedded stickiness to all those relationships and all those sort of patterns of corporate financial relationships.
I think what you're seeing these emerging isn't like an attempt to replicate, you know, that same kind of messy, organically evolved correspondent banking system.
What you're seeing is an effort to kind of, you know, create like a new sort of from scratch sort of, you know, much more like hub and spoke, but on these digital rails sorts of systems that are much easier to kind of like create because you don't really need to do this whole massive, messy, multi-decade long process of correspondent banks that just were sort of going out into the world and doing resource deals and had to do trade finance.
and the trade finance turned into, you know, more complex kind of dollar finance sort of
instruments and sort of the legacy Western, you know, U.S. capital system kind of built
on top of that organically, you know, these emerging hubs can kind of like come in at
the top and kind of just kind of create much more efficient, you know, kind of one to many
relationships as long as they have like the legal framework there.
And I think that's what you're seeing kind of the play by these Gulf powers in Hong Kong and Singapore to do.
Now, whether, you know, it succeeds to, like, take over, right, or whether they just emerge as, like, you know, alternative, you know, key nodes in a global system that are sort of competing on par with the city of London and, you know, other offshore centers.
But that's, I think, an important feature of their activities that doesn't get a whole lot of attention.
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zap right.com slash tftc 40 off competition's good okay i think it's safe to say that the u.s
both the political and financial perspective has gotten a bit complacent over the last couple
decades and obviously gotten out of control, particularly on the monetary, financial and
debt side of things. And it would make sense that if this hyper interconnected system and some of
the individual participants within that system noticed that the nexus of the system is somewhat
rotting at its core, that they would move to create alternatives to secure their interest
in their financial well-being but you see this as a i'm trying to think of how to phrase this
like is this like this should be expected like this is just the way the world works
um opportunities arise people take advantage of those opportunities it seems that america
um up until recently i think you said belatedly has become aware of these facts happening has
been somewhat sleeping at the wheel but now we're aware of it and i guess that's my question like
what is the reaction and does it even have to be political this is where i'm getting because it
does seem like there's an emergence of actors within the private sector particularly in defense
tech and i would even throw bitcoin into that into the financial side of things that have acutely
recognized these problems and are actively working within the private sector to solve
some of the defense issues that exist and on the bitcoin side the the monetary and financial
problems that exist like do you have hope that the private sector could help navigate our way
out of this yeah i think uh it is one of our sort of historical uh strengths right america's kind of
entrepreneurial spirit our um just our sort of ability to kind of imagine something from scratch
and then create you know global strategic industries right it's been it's been it's been
like an historical trump card for for american power um sort of you know clusters of innovation
that really explore and then conquer kind of new frontiers um and so yeah i i never want to like
you know you know kind of doubt our ability to to kind of come back from from the brink right
and really kind of um marshal our collective energies to to um a strategic purpose um and i
think you're seeing some of that emerge uh again it's sometimes shrouded in a bit of hype um and
kind of the marketing speak by a lot of the the funders involved but i think there's a core
there's a core um trend underway under the umbrella of you know what you might call the
a16z's like american renaissance despite how maybe hollow that is to a certain extent in my view
um given that it's mostly saudi saudi money funding it um but uh but i think in general
Like, there are a lot of, like, 20-somethings in the Gundo Valley, a lot of smart aerospace engineers, folks that now have access to capital from whatever sources to pursue pretty interesting ideas.
And I think you're seeing a convergence of attention given, I think, an alignment of interest now that wasn't really in place a few years ago but is now, I think, pretty firm among certain subsets of, like, the three core power centers of the U.S., right?
Which essentially is Silicon Valley, Wall Street, and D.C., right?
Like those are the three power centers really of the U.S.
And you have Dallas, you know, Houston, you've got the energy nexus there.
But, you know, that's kind of its own OPEC island, right?
They're like a mini U.S., you know, non-OPEC member, right?
But in terms of this phenomenon, you're really seeing is the Silicon Valley kind of tech community,
subsets of that align with subsets of kind of the wall street um community that's you know not
entirely compromised by china and then you have subsets of of dc especially the defense
intelligence community and some of the political um the political players they're also not
compromised by china um uh kind of kind of reach common cause where they recognize that regardless
of who wins in the presidential election this year we're going to have an a pretty old president
that will preside over a very fractious country,
will probably not have a whole lot of political capital
to deploy in a lame duck presidency,
and will preside over a global system
that's increasingly under lots of strain
and aggressive and proactive challenge by adversaries.
And that is an unsettling position
for major captains of big tech
and emerging strategic technology industries.
It's an unsettling position for hedge funds and capital managers that are responsible for trillions of dollars of wealth management.
And it's unsettling for folks in the political defense and intelligence communities that recognize that this next few years is going to be very strategically destabilizing and very challenging to manage and protect U.S. national security interests.
And so that is there's like a sense that there needs to be kind of like, you know, backup plans or there needs to be like, you know, can't just rely on the White House to make good decisions.
Right. And I think that is precipitating actors, you know, on their own in the private sector looking to see how they can, you know, kind of collaborate to protect their own interests.
And I think that's that's a you know, that's an interesting phenomenon. We'll see how well that takes shape.
the one problem with the private sector is, you know, there's not like a natural orienting
function, right? Like they all have their own, you know, narrow competitive interests.
And those have traditionally been, you know, easy to exploit by, you know, powers that just want to,
you know, buy their technology or, you know, somehow diverge the financial interest from
the larger strategic common purposes they might otherwise want to support. And so that's an
interesting new phenomenon. I think you're also seeing, you know, new players in the game, right,
that are now pretty sizable, like, like Anduril and Palantir and SpaceX that have, you know,
serious strategic capabilities.
You know, Starlink, as you know, like was critical to Ukraine's defense.
It's probably going to be critical to maintain communication lines in Taiwan if China ever
got frisky.
It's being seen as U.S. military.
They're creating like a separate constellation just for the U.S. military called Starshield.
It's going to be, you know, highly resilient, capable, sort of low-worth orbit mesh communications
for, you know, a lot of different strategic purposes.
So you can imagine capabilities coming out of these, you know,
relatively new defense companies, right?
Anduril, Palantio for software and AI,
Anduril with, you know, essentially swarm drones
of all different modalities, underwater, surface, airborne, et cetera,
that, you know, now provide capabilities that are sort of, you know,
that are not coming out of, like, the Lockheeds and the Boeings
or the Raytheons, and that could be coming out in scale
in the next few years.
So that's like a new phenomenon
that I think didn't exist before
where you have essentially
these Silicon Valley defense tech primes
that are being led by individuals
that are not from the traditional
defense contracting community, right?
Like Elon and Palmer Luckey and Alex Karp,
the Peter Thiel types.
These guys are not, you know,
your typical, you know, Lockheed executive, right?
And that's a new dynamic that, I mean,
we'll see how that plays out,
But that's and it's potentially different because there's a lot of, you know, like literal chips on the line.
Right. You've got trillions of dollars of Western equity that is now like an inverted pyramid resting on the stability of the Taiwan situation.
And so that's that generates a lot of anxiety. Right.
Among those investors that have, you know, literally trillions of dollars in paper gains on a certain configuration of technology and capital.
That could be vulnerable if one man, President Xi, decides to take a gamble in the next few years.
And so that's an interesting position for the globe to find itself in, where we've never been like richer than we've ever been.
We've never had as much like technological possibilities laying out before us with the explosive growth of AI.
And yet we've never had the sense of such acute vulnerability and fragility.
And I think that that combination is likely to sort of, you know, relate to, you know, different sorts of reactions and arrangements of how you think about securing strategic interests that we haven't seen before.
It could almost go back to like a more kind of pre-Westphalian state of things, right?
Like the concept of Westphalian sovereignty was predicated on kind of a very much like a pure physical geography.
You use standing armies that invade and conquer, you know, subject neighboring populations, extract the resources, et cetera.
The sort of global environment we're seeing right now, you see like a mix of those old traditional like types of wars like in Eastern Europe, which are just, you know, like like land grabs for resources and strategic depth.
But I think globally, the U.S.-China competition is not really a competition about that to first order.
It's a competition over these global networks, right?
global trade, global digital, um, and financial clearing systems, uh, and then these emerging
networks of value and energy, um, that are essentially going to be embedded on, on top
of AI and increasingly Bitcoin as well.
So I think that is, that's a fascinating new development that changes sort of the pattern
of what we think competition will look like.
Um, and it, you know, it's going to unfold, I think in, in ways that we hadn't, we don't
have a whole lot of like historical templates for.
yeah when you frame it as we've never been as wealthy as we are as a society globally
yet probably never as fragile either it just makes my mind go immediately defer me's paradox
we're not going to break the filter like well yeah i mean we're seeing a lot a lot of things
kind of converge in this decade and i don't know if it's just um you know what do you call that uh
uh like parapidolia where you just see patterns where you just you know where it's really just
noise um but if you look at like like you're seeing a rise in in all these different domains
of uh of usually like an obsession over some near future event or precipitating
uh kind of crisis that uh that we're sort of you know we're heading towards and we can't avoid
right and in the traditional geopolitical space you see this as uh china's taiwan invasion that's
like that's like that's like anchoring kind of like inflection almost like event horizon it's
like we're either converging towards it and everything after that will be fundamentally
unknowable and most likely destructive um but like that's like the anchoring point is a china
Taiwan invasion in geopolitics. In the financial space, it's another financial collapse. It's,
you know, runaway, you know, hyperinflation with dollar, sort of dollar debts reaching a critical
inflection point. So there's a strain of folks in sort of the, sort of like the FinTwit space
to look out over the next five or 10 years and see, like, it's a very fragile system. You know,
eventually we'll have to do yield curve control and that will precipitate like a loss of faith
and there'll be capital controls and effectively have to wipe out most treasury debt. And so that's
like the anchoring future event that we're sort of building towards it's a big crisis and everything
after that will be nothing will be the same um and bitcoin is sort of a is like a outgrowth of
that but has its own kind of future event which is yeah like you know some version of either
hyper bitcoinization or some inflection growth of of the price of bitcoin global adoption nation
states competing that there's like going to be some event or some um uh triggering uh phase
transition that after after which everything will be different right um and i see same with with ai
that were you know increasingly serious um prognosticators say that you know at their
current level of of sort of exponential growth about 5x per year or doubling time of about
every six months in terms of like the total amount of compute we're using to train sort
of frontier models that by 2027 2028 we could automate sort of ai researchers and once we
automate our researchers then we maybe hit like this sort of um sort of bootstrapping feedback
loop where you get like an intelligence explosion and you get something past agi and so the same
thing with like the uap conversation we've talked about right there's like a sense that in the next
few years there could be some disclosure of some you know other piece of information that is you
know heretofore not been widely recognized by by most of society that after which everything will
be different so i see like across all these radically different domains there's like a
similar psychological orientation towards a highly disruptive you know phase transition
event crisis in the next few years and i think human beings are very much like prone to like
you know catastrophism prone to like um almost apocalyptic styles of thinking um and it tends
to make the world a bit cleaner to think about because if you think there's just going to be
one big event that you have to prepare for and you have the inside straight for it and that you
You know, after that, one, everything that you've been saying will be proven right, right?
So for the folks that are like the China bears that are just like nonstop beating the war drum, you know, they'll be proven right.
For the Bitcoin, you know, kind of bulls would be like, you know, hyper-Bitcoinization, I told you so.
For the pro-UAP disclosure, people would be like, you know what, I told you so.
For the AGI people to be like, yep, it's like we're all going to be uploading our brains to the cloud and we're going to like, you know, dominate the future light cone of human civilization.
And they were the ones kind of at the front, sort of the vanguard for that.
So there's, you know, there's a lot of this sort of thinking I see across all these different domains.
And they all sort of peg their like window for whatever that event is towards like the latter half of this decade.
Right. 2027, 2028, 2029.
Um, and I don't know what to make of that other than just, it's just, maybe it's a feature of,
of our collective, um, thinking now that, that after COVID and Russia, that everything kind of
became very unstable, very unsettled. And we've just been, you know, we're all just now link
looking and whatever our domain of, of interest is looking for like the next, the next big event,
that's going to be like the one we just went through. Right. And, and then we've all been
psychologically conditioned from COVID that maybe some of us didn't feel prepared for it.
then we're like over overreacting and we're like okay we need to prepare for the next big thing
that's going to break the world system right um i tend to i tend to think that all those things
have like a plausibility to them but i also tend to think that the world never just ends or goes
through like a radical just like black hole and you know event horizon like it's always
it always looks like that from from the standpoint of history but when you're going through it it's
just like a messy evolution and it's a transition to some other configuration that makes sense
once you get there and it's never like the end of the world it's never like an apocalypse it's just
different and there's a logic to how you got there that you know from our standpoint now would look
like a radical jump or transition but also humanity's gone through many many of those before
right of various kinds whether it's plagues and you know massive natural disasters world wars
um massive industrial transformations so i think it's not like a new thing um so that's like my
baseline expectation is it'll be just be like the ones we saw before um but it could you know still
be disruptive it's just not going to be you know the end of all things or the you know the the
great redemptive moment for your particular um obsession sorry that's a bit of a rant
no i love that rant it aligns aligns perfectly with the sovereign individual thesis that was
put forth in that book is essentially that we're we've found ourselves at this 500 year
super cycle inflection point and these inflection points are typically extremely chaotic in many
different domains politically monetarily techno technologically um and i think that's what we
have to fall back on and then of course the social media age just accentuates all this
So you can communicate globally instantly and not only communicate but observe and absorb information as it's being put out into the ether – not to the ether but put out into the internet on a second-by-second basis.
Yeah, it's fascinating that, you know, this is the challenge I think the Western liberal democracies are going to face is democracy is sort of easy to, it's easy for a power elite to accept when economic conditions are somewhat stable and positive.
I mean, that sort of is like there's like a social contract. There's like a there's a sort of an implicit trade of sort of freedom of movement, freedom of decisions, freedom of speech, et cetera, that can be accommodated by an economic system allied to a political system that kind of rising tide lifts all boats.
And that was kind of America in the post-war era. We obviously hit some snags in the 70s. But I think overall, we've had this sense that, you know, the arrangement between liberal democracy and now techno capitalism is starting to diverge. Right. And that is a that's a major challenge, because I think you're seeing this kind of manifest in different ways by folks that wouldn't traditionally kind of you wouldn't think would be aligned politically. Right.
Like there's some folks that in sort of like the AGI, like AI lab space, that fundamentally think the risk is so high of like a runaway AI intelligence explosion that we effectively need, you know, what would amount to like maybe benign global totalitarian control over computing, right?
That we need to have on-chip surveillance of every compute load that's run in every data center around the world.
And to do that, we need to have agreements in place with all the major great powers, including China and Russia, as like the overriding, almost like supervening, you know, civilizational prerogative that we need to now surveil all computing in order to prevent the emergence of this, you know, existential intelligence explosion, AGI.
Like, there's serious people who believe this, and they're not necessarily making it their main policy program, but it's sort of in the logical end state, essentially.
They need to then construct and need to lobby for a political arrangement that is effectively digital totalitarianism, right?
There needs to be complete surveillance and control over the computational substrate of civilization that's going to emerge in the next five or ten years.
And it's maybe well-motivated.
It's motivated from probably folks that five, 10 years ago would be like Bernie voters, like very progressives, like very much like anti-Big Wall Street, anti-banks, probably hate, you know, you know, sort of what they see as like sort of neo-fascist sort of MAGAs.
But in their mind, there is this there is this new threat out there that some of them might be creating in their minds, but that it will require a policy framework that is effectively digital totalitarianism.
And of course, China would love to hear that.
Like that's that's music to their ears. Right.
And I think this starts up on the fringes now, but I think people might call me a bit histrionic, but I think this will become one of the defining political debates.
And if downstream, what you just mentioned here is of like social media conversation, broader freedom of speech, the broader sort of, you know, social contract of Western liberal democracies in an era that's defined by intense geopolitical competition between systems, different systems of government and power.
U.S., China particularly, kind of the liberal Oceania versus kind of autocratic Eurasia, as well as different technological systems, right, that are increasingly going to be like a stack of, you know, sort of energy inputs, you know, computing, and then APIs and sort of transaction relationships and increasingly like AI agents and systems of relationships that human beings and their beliefs and transactions are embedded in.
And so you can imagine it's like society in that in that construct, like human society is like a is a relatively thin layer that's embedded in this really complex, geographically mediated energy and computational substrate.
And so the sort of political principles that define, you know, whether you can buy and sell energy, you know, in a free market and whether you can run compute loads without, you know, government surveillance or, you know, like a like a choke point sort of kill switch involved.
Those are me like defining political debates that will inherently determine what sort of space of operating freedom society has. Right. Because it's no longer, oh, can I go plant a garden? That's the space of freedom that I think of like 19th century, you know, Jeffersonian democracy.
Like the space of freedom is, can I say the thing I want to say to someone else on the internet? Can I buy the thing that I want to buy? Can I pay using the thing I want to pay with? Can I consume the amount of energy I want to consume? Can I drive the kind of car that I want to kind of drive where I want to drive it, right?
Like this sort of traditional space of freedom that we have for our daily life will all be essentially digitally mediated.
And so to the extent of those digital systems that we live in and transact through are embodied in essentially a digital totalitarian oriented system or a liberal democratic oriented digital system.
Those are really like the fundamental like choice point for, you know, the Western liberal democracies in the next few years.
Like whether we decide to be China, we need to become like China, just like our version of that kind of techno authoritarian system, or whether we find an alternative model that is still compatible with the technological path we're on, as well as our historical commitments to liberal democracy.
So that is, that's, I think, where the stakes are. And it's not encouraging to me to see, you know, our leading venture capitalists essentially make common cause with, you know, the MBSs of the world, where, you know, I think it was Ben Horowitz from Andreessen Horowitz, who just raised $40 billion from the Saudis to invest in AI.
and the argument he gave was kind of this torture justification and again they're they're very much
on at least nominally on the side of like open sourcing technology open sourcing ai they're
very much against the kind of closed microsoft you know kind of vision where it's like all
proprietary black boxes you have to sort of pay rent to sort of as like serfs on their on their
digital land um their vision is it's like open source competitive free market proliferating
ecosystem which sounds great except you know the nominal justification was for open source was that
we need to create open source you know ai models so that you know governments like like like the
saudis can adapt those models uh for their own political conditions and and he said we don't want
you know mbs to lose power because an ai model you know was proliferated and you know led to
like an unmanageable um spread of you know radical islamic belief inside the kingdom and led to the
the collapse of of of of the ruling elite and so we need as like the west to create these
technologies that help basically keep you know autocrat dictators in power um and that seems a
bit uh you know uh i mean you could you can believe that but i would say argue for that not
just say like i'm for freedom technology therefore we need to have open source ai to keep you know
Mohammed bin Salman, you know, ruler of Saudi Arabia, because he gives us $40 billion, right?
So it seems, it seems a bit, seems a bit self interested. So I think that is, that's, that's
the concerning part is that, you know, if we're facing this choice point between two sort of,
you know, paths in terms of how we build society in these digital systems, or based on these digital
systems, and the money that's being used to fund the development of those digital systems,
essentially coming from autocrats and they those autocrats want to leverage those systems for their
own you know personal economic benefit as well as their political um you know the stability of
their political rule uh well that's not that doesn't mean that that probably is likely mean
we're going to not going to tip into the like the better part of that path right it's that makes it
more likely we're going to tip into this uh more dystopian path um and that's that's a concern uh
And I see this sort of play out on sort of the geopolitical side where, you know, if you read the articles about like the Microsoft G42 deal, G42 is this Emirati AI tech conglomerate, you know, very much like a national champion of the Emirati state.
and you know the like like like the ruling the ruling elite you know we have you know
been aggressively trying to pull them out of china's orbit into into u.s orbit you know
secretary raimondo even said you know that like this microsoft g42 deal was essentially a win
for bringing g42 it kind of into the u.s camp and that you could only be in the china camp or the
u.s camp and that seems like a short-term geopolitical point score at least to a certain
extent maybe there's there's you know caveats to even that um given the nature of the deal um and
how it's sort of phase two you know implementation might might go and the security controls
uh for those for those for those ai um models and everything else but in general though the
relationship that we've the way we frame the relationship is like we need to influence the
emerates to sort of come over to our side meaning the us freedom good liberal democracy side and
away from the China side, the bad digital totalitarians side. But I feel like that's
a pure victory if in doing so, we've effectively had to compromise all of our values along the way,
and we're effectively now committing to an arrangement of technology capital that steers
the path of these digital systems down a path that doesn't respect individual liberty.
Right. And that's that's I think that's a concern. Right. But that's not at the top of the policy space. Right. The policy conversation is just be China. Right. It's just OK. It's just they got to be in our camp versus their camp. It's not like a competition over value systems. It's not a competition over consumptions of a political order in a digital society. It's just, you know, it should be our spyware, not Chinese spyware. It should be our surveillance, not Chinese surveillance. Right.
And it's like, well, that's not exactly a very attractive proposition, you know, to, I think, go out into the world and say, oh, okay, yeah, don't install the Chinese Huawei 5G, you know, with the ZTE surveillance systems built on top of it and the choked pointable, you know, digital yuan and the Enbridge sort of, you know, state to state kind of extraction system for digital clearing.
Just don't do that. That's that's the bad digital totalitarian stack that China is trying to roll out around the world.
We don't really have an alternative model that's right now aligned to our political beliefs, at least our liberal, liberal side of those political beliefs, except for, I would argue, Bitcoin and dollar based stable coins that are sort of in the private, the private sphere where, you know, those are digital systems that I think are much more closely aligned to that, you know, Jeffersonian conception.
Right. And so if there is this, you know, that's why I think Bitcoin is very important.
As these systems start to take shape, you know, the role of Bitcoin, at least to the extent that it can maintain that that orientation is going to be very important in kind of keeping keeping that that that balance between the temptations of digital surveillance and totalitarianism from tipping too far.
Again, another another rant.
i love your rants uh comment and then question comment i think the visualization description
of the substrated layer of energy compute and human social layer is the clearest depiction
of the potential dystopian digital future that lays before us in one path so kudos to that
i think anybody who didn't pay attention during that part go back and listen to it i think it is
in terms of describing the mechanics that would lead to that dystopian future
is the clearest, most succinct description I've ever heard,
on this show at least.
And then question, what would your solution be?
If you had, I know magic wands don't exist,
what would the advice to the people putting forth policy in D.C.,
what advice would you give them?
How would you set up an environment to compete with everything you just described?
Yeah, I think it has to start with good leadership and a clear sense of what the stakes are.
Like, what are we fighting for?
Are we just fighting for Microsoft's market share?
Are we just fighting for kind of short-term, you know, interests of our venture capital and private equity ecosystem?
That seems to be what has led us down sort of a, you know, maybe a dead end strategic straight or strategic road is we haven't clearly articulated what we're fighting for.
And therefore, what is the what is what's acceptable, what's not acceptable. Right.
And what tradeoffs are willing to make right as a society.
And fundamentally, this might be the part that inevitably we're just we're not prepared to to accept certain amounts of costs.
Right. Like we're not prepared to allow we're not prepared to block, say, Saudi and Emirati money into our venture capital system.
Right. Like because our our our major political class relies on the donors from venture capital, private equity businesses.
And we just we just don't have the capacity to say no. Right.
So if I say ignore those political constraints, the political economy of the U.S. system, given how vulnerable it is to, you know, essentially big donor capture, I think the biggest important thing is just to say, like, what are we actually, what's a vision of the future we're trying to build towards, right?
And I think, ironically, our adversaries have done a much better job of laying out, like, long-term strategic plans.
Like, China has a 2035 long-term plan.
Saudi Arabia has Vision 2030.
Emirates has Vision 2031.
They have defined for their country, for their nation, where they want to go in the next 5, 10 years.
Like, this is the strategic, you know, plausible near-term, you know, point that we want to aim for.
This is what this is going to mean.
These are the areas we're going to prioritize. And this is how we're going to do it. Now, in messy democracies that operate in a four year cycle, that's very hard to do. But I think this really comes down to strong leadership. If you come out the gate and you say, yes, there's 500 things on the plate of the president and leadership of the national leadership at any given moment. But here's a national plan for the next 10 years. Here's what we're going to do.
And it isn't going to be the federal government's job to manage all those. It's going to be here's what we think collectively. This is our strategic advantage. This is how we preserve democracy in the next 10 years. And this is the transformations we're going to undergo. We recognize that, you know, all these different aspects of our society are going to be strained by these emerging technologies. But here's a clear vision for what success looks like.
And then you sort of give those marching orders to the political class and say, here's the sets of initiatives that we think are going to marshal collective, like a collective alignment of narrow self-interest, right?
I think it's going to be hard to sort of do that, but I think that's how you would start.
I think the biggest thing, and this is the problem I see with, you know, like these, like any given policy instrument is often, you know, well justified in the moment, like narrowly justified, but it's symptomatic of a surrogate failure, right?
So like the electric vehicle tariffs, right, that we imposed on Chinese EVs and also a whole swath of other sort of Chinese imports.
like i think the argument for them may be sound now but the fact that we have to do them is is
evidence that we strategically failed right like we totally didn't recognize this was gonna be
strategic industry we didn't um we we you know feel like we we could overcome the legacy power
of the big of the big three big four autos and we sort of snubbed snub tesla uh you know from all
from all those, uh, from like the political, uh, sort of, uh, sort of benefits that we gave to
those other, those other, those other autos. Um, so I think that's, but that, that's where we are
now is we have to basically fight these, these rear guard actions. So it's kind of hard to
overcome the weight of those historical failures and just sort of all of a sudden have a magic
bullet, um, to, to clean things up. Uh, I think it's gonna be, it's gonna be, if I had to like
really step back and say, this is like the most important thing to do. Um, I would say, and this
might sound a bit trite but like there are decisions that are going to be made in the next
one to two years maybe maybe soon maybe sooner depending on how quickly these these these
different arrangements come into play um of where the next like 10 where a 10 gigawatt data center
to train um the next frontier model is going to be right uh and so right now we're training um
I think about less than one gigawatt in our biggest ones.
I think the Stargate one with Microsoft is going to be a $100 billion data center in Missouri, I think.
I think it's in Missouri.
But then, so this big question of, like, if it's true that we're going to generate something like AGI,
and I don't mean, like, Terminator, take over the planet, you know, extinguish humanity, like AI.
I just mean like a computational system that can perform, you know, almost every human cognitive task and with robots can perform most human labor tasks in the next three to five years.
If we're going to create that and it seems plausible, maybe not guaranteed that we will, but if it's plausible that someone's going to create that, I think it's very important that that gets created inside the United States and not in the Middle East or not in China.
And that is that's important. And if it does get created in an alternative jurisdiction, then, you know, there's a whole host of other considerations that have to go in behind that, because I think that that is that will that will accrue a huge amount of strategic and economic advantage to the jurisdiction in which that that model is trained and over whose sort of power, you know, and under whose power that that system is being run.
Because if it's aligned to an autocrat system, it's maybe not great.
But if it's aligned to a Democrat liberal system, maybe it's, you know, it's less to get a fighting chance.
So that I think, I mean, it sounds a bit more sci-fi-ish, but I think it won't be so sci-fi in the next year or two.
These sorts of discussions will not, I think, become much more politically salient.
I think they're happening now.
I know that there are folks inside the defense intelligence community that are very, very interested in that set of decisions.
And so, you know, it sounds like a very narrow, very sort of sci-fi thing is like where that 10 gigawatt data center, where those chips are going to be fabbed, where those where the next nuclear power plants are going to be built.
And you look at the Emirates and this is all public now is like the Emirates is freely, you know, they're going and the Emirates is going all in on basically this nexus of AI and nuclear energy.
um and they see it as like this strategic technology unlock that because they have so
much capital they can pour into it they can sort of you know reposition themselves in the global
competition really up level their their status as geopolitical actors um not just petro states but
actually have you know captured and turn them to transform themselves into you know critical nodes
in this emerging technological um sort of network and so that is that's i think going to be the
front lines um and the emirates i think are currently in the lead um decided to try to catch
up but you know if we wake up in 10 years and or less and it turns out that you know the emirates
has managed to basically transform hundreds of billions of dollars of dollar capital into the
construction of new nuclear power plants maybe even getting prototype fusion um built in their
country because they'll cut all that because they'll cut all the red tape uh they've been able
to, you know, induce TSMC to set up next-gen fabs in their country, churning out, you know,
AI-specific chips that are co-located, you know, next to those, you know, fission and
fusion, you know, power plants that are also right next to the big data centers that are
going to house those chips.
Imagine a scenario where those data centers are now hosting AI models that are, you know,
effectively designing the next generation of AI chips because, I mean, I heard someone
from OpenAI said this publicly, that they expect, you know, the models in two years
to be better at designing AI chips than their best AI chip designers now.
So that gives you a position where, you know, a country like the Emirates can basically
design, you know, have AI models that are designing the best AI chips that are then
fabbed in in the emirates that are going into the data centers that are designing the next
generation that are you know etc so you see that feedback loop can can be quite quite powerful um
and that is a decision is probably going to get made soon um in terms of where those deals are
going to get done and who's going to buy uh and where that infrastructure is going to be set up
and for the united states to really get out of its own way um and you know make sure that we're
we're the place where you were where we build those systems i mean it's going to require a
pretty dramatic transformation of our political system um because you know our grid probably
can't take that amount of growth we don't have the bureaucratic and political um will right now
to like cut all the red tape fast track approvals of nuclear power um etc to sort of keep up with
the that growth uh and so yeah it's like there's sort of a an energy and jurisdictional gradient
that is pulling a lot of these emerging critical technologies
into the Middle East, into the Emirates and the Saudis in particular.
And it's concerning to me that that could be a backdoor also for China, right?
Because right now, the Emirates is playing nice with the U.S.,
being very friendly, because they need to basically get this marriage done
to be able to secure this access to these research technologies.
Once they have it, though, once they've got this infrastructure built
the next five or 10 years, I mean, there's nothing that, you know, that makes it likely
that that strategic alignment to the U.S. is going to endure.
I don't see why it would.
And instead, they've just basically harvested, you know, a lot of the gains they needed in
the short term to position themselves.
And then they could, you know, parlay that back to the Chinese for whatever, you know,
inducements or deals that the Chinese would offer them.
So, yeah, that's, I think, where if there's a new great game happening, the new digital great game, we need to recognize that we're playing that new digital great game, not try to score like short term political points for our political aspirations.
If you're, say, Secretary Raimondo and you want to have like a big win, but think about the long game.
Think about what the second and third order effects are of these arrangements are going to are going to mean for U.S. strategic positioning in these critical technologies.
and learn to, you know, take short-term trade-offs
to mitigate those long-term costs.
And I don't see that happening now.
So the first thing is just don't make dumb decisions.
Don't make the short-term kind of trade-off.
Easier said than done, as I think everyone knows.
That's the first step is just think long-term.
I think that's the lesson of Bitcoin is, like, long-term thinking.
long you know have have have don't have uh short time preference um you usually make better
strategic decisions uh uh if you just have that simple premise um but i think everything in our
current political context and the the exigencies of the geopolitical um contest sort of force our
attentions very narrowly on just winning every tactical battle and mitigating a political enemy
that might be trying to exploit the moment.
And that's led us down this road
where now we're having to sort of play on the back foot
in many ways.
Lovely.
Yeah, it's not great.
Especially when you consider
of the hyper polarized political situation here in the united states and it's not encouraging that
we have an election upcoming between two 80 plus year olds one of which is completely dementia
ridden um yeah and then you got me you got me somewhat speechless here as i'm as i'm processing
no i mean this is this is why it is kind of a danger zone for the next four years um
you know it's like we kind of have to like any we kind of have to get our get our ish together
pretty soon um and with all that being said like what i just mentioned like it seems like it has
to be driven by the private sector like people in the private sector you said that leader that
vision that needs to be put forth i think american citizens need to recognize again
the hyper polarized atmosphere that exists in dc right now
work to not be put into the frame that they want to put you in which is blue versus red
always hate the other because that's the other thing domestically like at the social layer people
is so distracted by bullshit and it's really trying to figure out like how to shake people
out of that framing and that polarization and recognize hey we've got some big problems ahead
of us that need to be solved and I think we do need the private sector to lead the way leaders
in the private sector to come out and put these narratives forward and it's funny going back to
like silicon valley um environment it's like the big one of the big headlines the last couple weeks
is like david sacks chamath hosting a fundraising event for trump in san francisco and it seems that
even some of the people who would be deemed to be um competent private sector actors are still
convinced that you need to play this political game who knows maybe trump gets in in this time
around. He's got a vendetta and is on the war path to completely hollow out the swamp, if you will,
based on his first term. I'm not going to hold my breath for that. But I guess if you're going
to go the political route, that's what you have to hope will happen is something like that. But
outside of that, it's going to be dependent on the private sector, in my opinion.
Yeah, I think people always, you know, Trump is just one manifestation of this recurring
american belief that it's just one great name will come in and fix all of our problems
and that's fundamentally like it's a symptom of broader laziness that like oh i just donate some
money or i go to a rally and therefore like the bad people are going to lose right from my
standpoint and it's it's much more nuanced much more like like institutions don't get built by
one person right they can be destroyed by one person but like the work of creative you know
progressive in like the neutral progressive sense is is creating new institutions is is actually
working collaboratively in a peer-to-peer manner to um create something new right it isn't just a
destructive oh i'm gonna like you know get revenge on my political enemies or i'm gonna like you know
clear out the clear out the the bs in dc etc right the typical kind of um conceits on the campaign
trail it's much more difficult it's much more looks like what bitcoin is which is like a a
peer-to-peer system is sort of a novel institution that isn't led by one man isn't subject to one
man's you know foibles or obsessions it is is a is a collective project that is aligned with you
know individual incentives um sort of engineered from the beginning to maximize kind of collective
um collective consensus but uh doesn't require kind of a traditional democratic agreement just
but helps sort of form an anchor point for individual action that in the aggregate, I think, looks like a novel form of an institution, right?
I mean, all institutions, all human institutions are essentially social fictions, you know, patterns of collective belief that are sustained and accrete, you know, reality over time.
and those are then you know uh formalized or codified whether it's in technical code
physical infrastructure capital investments and then patterns of belief that uh sort of
reinforce each other over time that's like all the human civilization is right um uh and i think
that's an important um you know proof of what bitcoin has done is it sort of turned from what
was just like a project into like a novel human institution um that has global scale but that
is sort of orthogonal to the traditional sort of human and political institutions that we're used
to interacting with. So I think there is a model there that can be looked to as an example of how
to, you know, go back to like the early era of when de Tocqueville was touring America, he sort
of was remarking on how sort of the civic fabric of American society was really stitched together
by different uh you know smaller scale you know sort of individual social groups right whether
it was church functions or uh sort of civil sort of civil civil groups of various kinds um
you know different neighborhood societies you know in the modern era it's like kids soccer teams and
uh and uh and sort of uh the school board etc um and i think that is that's where like small d
democracy like thrives and it's like it's messy but i think that's the part that makes america
like uh endure through you know all sorts of political volatility at the national level
is because people have a sense of trust and fealty to their to their neighbors and their
and their and their local groups um the dangerous thing that i i see is like when you nationalize
everything down to the local level right like the thing that i think is very dangerous and toxic
about American politics now is that everything is now sort of infected by the national political
discourse, right? Like you can't, the reason why, I mean, again, like it's a podcast, right? But I
think that the all in guys, again, they're a bunch of, you know, sort of rich elites that dump their
bags like Solana on people, right? So I wouldn't necessarily say they're moral, they're of moral
pure hearts. And I think their alignment behind Trump may be one politically motivated, but also
just motivated self-interest right like he'll hook up them tax breaks and you know whatever um
but i think it also uh it reflects the sense that they also disagree with each other politically
but they're friends and i think that's an important difference uh that's like hard to
hard to maintain in a current political context where everyone has to pick a tribe um and that
can even like cleave down to your neighbors right uh i think that's very unhealthy for democracy to
be, to be, uh, polarized, um, you know, down to like that atomic, that atomic level. Uh, so yeah,
I don't have a cure for that. Um, I, I do think though that like, because people are just don't
want to play the game anymore, they're sort of trying to find alternative channels for
collective action. And if you're a technologist that involves thinking about hard problems to
build and it sort of doesn't necessarily require, you know, getting a thumbs up from your political
team right um and and that's that's encouraging right it's like that's that's what i think um a
lot of the sort of uh american renaissance you know uh non-trademarked version manifests uh as
um and yeah i think that's like that's one one plank of hope uh for the us like we do have like
people that will just go out and just do stuff um together and you know that stuff turns out to be
quite important uh and it's like okay well you know i i don't i don't necessarily want to count
us out because that's the one thing china really doesn't have um you know they all respond to top
down political mandate to a certain extent i mean there's a lot of very smart very capable
entrepreneurs and they've invested a lot in these technology ecosystems and these industries just
have a scale and efficiency that you know is quite quite impressive and if not intimidating from u.s
strategic perspective um but in terms of getting like the right mix of entrepreneurial talent
and idea generation to actually build something novel and have like kind of
fertile ground to to go out and do the thing the u.s still is the only place that you can really
um really do that um and so as long as we kind of have that and sort of expand that
I think we'll keep winning or we'll win more than we're losing, I would say.
But yeah, it's going to be a challenge, right?
So when you say the private sector, I think this is the interesting phenomenon that is
also changing, right?
Because there's the small private sector, like folks like you, right?
Entrepreneurs building a business, sort of carving out a niche on their own.
But there's also a new type of private sector actor or maybe a new flavor of an old type
private sector actor that is taking shape in these um these new markets that have traditionally been
uh you know state dominated right and and i think what you can look at the world you know i i'm my
my view of the world system right now isn't necessarily one you know dominated by just
states going at like you know interacting with each other in a traditional kind of
realist um framework of you know states competing over resources and prestige etc
What you see now, you essentially have private companies, multinationals that don't have like a national identity.
They don't have like they have headquarters in one place, you know, for tax purposes.
They have different headquarters, you know, different sort of R&D centers, staffing centers.
Like they've distributed their operations across the world to optimize for the local talent, the local jurisdictions, the tax benefits, et cetera.
right and so when you see a company you're like oh google or you know microsoft or you know apple
it's like well what is that like those are like novel entities that are like super national in
scale that they don't necessarily have like loyalty or strategic alignment to any one country right
they kind of they kind of play across many different countries and actually i was at an
event last year where the director of national intelligence avril haines was was remarking on
this in a very, say, just disjointed fashion when she was describing how the intelligence community
is having a difficult time adjusting to this new sort of pattern, which is they have to think about
the plans and capabilities of non-state actors at the same level that they have to think about the
plans and capabilities of state actors, like the traditional function of an intelligence service is
to, you know, study your adversaries, study other countries, figure out what they're planning to do
and, you know, what they can do, their military capabilities, economic capabilities, et cetera.
And now she was saying they have, you know, entities now in the global stage that rival
states in terms of their geopolitical importance and their power. And that changes how the private
sector can truly change things. So you can have individuals now in positions of, you know,
corporate leadership that are functioning almost as like quasi-sovereigns, right? Like Elon is a
great example of this um and there's going to be and i think you're seeing this take place in
in these emerging technology sectors like ai and space in particular where you know the u.s
government either in the case of ai kind of um lost the ball uh you know at least on domestic rnd
uh or at least sorry national rnd and these labs just kind of figured out lightning in the bottle
with transformer architecture and figured out scaling laws in 2017 and then 2020 kind of hit
an inflection point. And now they're trying to catch up. But in space, you know, space has been
a pretty much a state dominated frontier since the, you know, since the Cold War, right? It was
just US and Soviets, and then the Chinese and a handful of other countries, you know, throwing
up some satellites. And now is like an intense commercial imperative to like, develop, you know,
all different parts of the space economy. And so you're having private sector actors now develop
capabilities that you know just a few years ago were seen as like strategic capabilities in space
um but are just being driven by the private market incentives and i think that what that's
going to mean is that in a few years uh well it could go in a number of different it could go in
a number of different ways but it means a sort of division of power between the state and non-state
is is is is shifting pretty dramatically um and this you know traditional legacy dominating
state bureaucracies like the u.s defense departments and intelligence communities
are having a hard time adapting to that new regime um and it's it's hard enough for them
for example with like space like there's a lot of companies now that are developing like on orbit
servicing um sort of mini satellites that can sort of go up to another satellite repair it you know
potentially, you know, refuel it, swap out a module that's been designed to be swapped in.
That activity of, like, on-orbit servicing is, like, identical to what U.S., China, and Russia
have been developing as, like, anti-satellite destructive capabilities, where you send a
little follower satellite up to an adversary satellite, you either get close to it enough
to fry it, or you engage with it, and you sort of push it up to, you know, a bad orbit.
And so it's really messing with our whole concept of strategic deterrence and defense
in space, where private sector actors have these capabilities now that we used to think
of as our most highly classified strategic capabilities, and you're seeing that now proliferate
in all sorts of different domains.
And that makes it, in general, much harder, and in my sense, much more unstable, because
don't have like emerging norms that sort of define what sorts of behavior is safe or not safe. And
you have a competitive race to kind of get advantage over one another. And the thing about
the private sector, commercial sector is like, well, everyone will say, yeah, one team, one fight,
America, great, thumbs up. At the end of the day, like they're commercially motivated, right? They
want to maximize profit, right? So they want to beat their competitors, not necessarily beat China.
If China's a competitor, they want to beat China. But that's a different thing, right? And so that's going to be an interesting balancing act to try to play the next few years, which is to what extent people aren't just like paying lip service to this idea of, you know, deep tech for America.
You know, that sounds great when you're a small startup and you want to get the defense innovation unit to fund you. You want to get that small business grant. You want to get the venture capitalist who's aligned with the defense intelligence communities to give you the seed round, right?
But as you build a product that has to scale, become commercially viable, right, those people that invest the money, especially the venture capitalists, many of whom might be Saudi, you know, LPs or Emirati LPs, right, they may have other interests in mind.
And so that's where I think if I'm someone in the private sector, I want to be clear eyed about how changing incentives can dilute that like original strategic purpose.
And the United States, in many of these different areas, is trying its best to, like, you know, align these companies to its strategic purposes.
But they are sort of outside of its control in many ways.
Like, Microsoft is like, you know, it's almost like its own non-state digital sovereign, right?
It's kind of like bullying the government, like the U.S. government around in many ways.
It's like it has pretty predatory practices, even on the U.S. government.
um and and the u.s government is like trying to find ways of corralling it trying to try to bring
it to heel in many ways and it's resisting it uh and you're seeing that dynamic play out which is
like it's it's a challenge to kind of traditional notions of western sovereignty um and uh but yeah
it's it's we're in a fascinating new era like for example microsoft at the start of the ukraine war
basically took uh all of ukraine's government data and and and moved it to um cloud servers
based in the uk on their azure cloud and so they've effectively like teleported the ukrainian
government uh like put it you know and like digital government in exile essentially teleported
to to um to uh to great britain for safety right so it wouldn't be blown up by a cruise missile
etc and that's like a fundamental change in how we think about sovereignty right like the ukrainian
government um to the extent like what is the government right the government has to like has
all the data on its citizens has all the tax information provides social services you know
disability payments has like you know registration for this for for um for the draft yada yada well
if all those systems and services are now essentially hosted by a private company outside
of your territory like okay like sovereignty is not a binary but like it's a it's on a spectrum
Like that element of your sovereignty has now essentially been sort of eroded. Right. And you're seeing this great game play out like the G42 Microsoft deal case study in Kenya. They did a $1 billion investment in Kenya with G42 to basically build a big data center, fiber optic connections, AI training, et cetera, is all going to be connected like a hydroelectric plant for power, green energy, et cetera.
But the key condition of the deal was essentially like the Kenyan government would move all of its, you know, data and services to that data center.
And then they would also encourage maybe Coerce, who knows, like much of the private sector, big, big companies in Kenya to also host their services and their data on that same cloud infrastructure.
So if you think about it from like a colonization, digital colonization perspective, it's like right now Kenya has their own different disaggregated networks, on-premise servers, et cetera.
And, okay, the big Microsoft data center is coming in and it's just like sucking in all these different locally disaggregated nodes and are now connected to their one supernode.
And then that supernode or that local, say, like national node is connected to their supernode in the Emirates.
and the Emirates has a strategic relationship with Kenya
and that's how Microsoft kind of got in.
So the Microsoft G42 deal helped Microsoft
kind of get into Kenya and work with G42
to set up this big data center build out.
And that's, I think, the new pattern you're seeing.
It's sort of invisible.
It's like digital sovereignty,
but with a colonial twist,
like a sort of a neo-feudal sort of techno twist, right?
Where now it's like, okay,
whose whose digital land are you effectively paying uh are you living on and who are you
paying rent to right and and it used to be individuals and companies and now it's governments
right and at each and so that's i think we're seeing this tension now it's like governments
are now waking up to the fact that their their existence as sovereign entities is now effectively
mediated and dependent on these big technological these big tech giants right and that's an uneasy
relationship between a traditional source of like national authority and power and now this
emergent private sector you know authority and power and the biggest difference is those private
sector you know powers don't necessarily have the same interests as the national authorities do
right so microsoft you know they want america to to to succeed i'm sure i'm sure brad smith's a
great great guy very patriotic american but his job is to like get microsoft data centers you know
in more places around the world. And, you know, if he has to tell the story, that's good for
America, then he'll tell that story. But fundamentally, his first order is to get
more Microsoft data centers. And if that means working with the Emirates and G42 to put those
data centers in Kenya, then that's what he's going to do. And so that's the pattern you're
seeing now is like this kind of digital colonial, you could call it colonialism, right? It's not
necessarily a bad thing for the countries involved. Like they're getting, you know,
much more services. They're getting access to frontier AI models. But there's an implicit
trade between the inherent sovereignty that was embedded in this disaggregated network of data
centers and on-prem services that were maybe less efficient. But now they're now going to be
dependent on a foreign service provider, a global cloud service provider, for their basic economic
and governance functions. And that leads to a lot of economic benefits, I'm sure, and efficiencies
at scale, but it also implies a trade-off of, of, of, of sovereignty. I mean, you're seeing this
kind of like lip service being paid to digital sovereignty where they have to like put, put,
you know, rules around our data has to remain, you know, remain in the, in the country and you
can't train any other models on it, et cetera, et cetera. I suspect those will be, um, I'm sure
those would be, those would be loopholes found in all of that. Uh, cause the imperative for these
big tech conglomerates to basically suck up as much data as possible around the world to train
you know the biggest models uh will will override sort of the national imperatives to
to protect their their citizens and companies data but that's gonna be the battle lines this
sort of digital sovereignty uh as a new play on whether it's digital individual sovereignty or
digital national sovereignty um and how much of this is you know that the power uh you know
accrues to the sort of the top of that pyramid whoever controls those the fundamental substrate
or whether it sort of has some countervailing force
that keeps it somewhat disaggregated and decentralized.
Damn.
It's a brave new world.
Again, going back to the sovereign,
I mean, the sovereign individual predicted all of this.
But yeah, I think it's important to fall back
to what you were describing earlier,
which is recognize that we're in this extremely chaotic
transitionary period
and try not to become overwhelmed
for the individuals listening out of this take care of what you can take care of control what
you can control i think bringing this back to the american perspective moving forward and
tying bitcoin into it that's i actually after almost two hours talking about this have become
more thoroughly convinced that bitcoin is probably the most strategic tool that we can use
at this current moment because of the properties that it enables and the power that it gives
individuals and companies and states and federal government to a certain extent if it decides to
leverage it but the fact that americans on a per capita basis own the most bitcoin and so if you're
looking at the landscape that you've described over the last two hours and you're trying to
think strategically okay we've got a daunting task ahead of us what is one of the low-hanging
fruits that we can take advantage of it's let's not give up the bitcoin advantage that we have
right now the americans own the most bitcoin we have the most companies being domiciled here that
are enabling the bitcoin economy and all the tools that are being built on the top of the
protocol layer and so considering the fact that we've seeded ground in terms of energy
manufacturing base and defense tech to a certain degree uh all right what are the strategic assets
that do exist within our borders and that we should covet and work to enhance and to me bitcoin
seems like the only logical conclusion of the lowest hanging fruit yeah i mean i was i explained
this to someone as like just in the pure like hedge hedge scenario right like if there's a
scenario the next five years where bitcoin monetizes to parity with gold um how is the way
how how should you position now the united states to maximize the benefits of that development and
minimize the risks. Right. Because if you imagine a counterfactual where Americans don't hold a
large amount of Bitcoin, where Bitcoin miners are not, you know, in significant presence in the
United States and that transition happens, then that benefit will accrue to what are likely going
to be authoritarian inclined adversaries or sort of middle powers. And it will just strengthen their
power relative to us. Whereas if that transition happens and Bitcoin monetizes to the level of
gold and maybe at the expense of gold well our adversaries have really doubled down on gold
right you know the bricks essentially like russia's stockpiling gold china's been stockpiling gold
um you know the the traditional kind of standby safe haven asset for a large portion of the global
south and eurasia has been gold right so if their kind of backup plan and in a increasingly
contested you know if not outright um global conflict uh environment is just hedged with gold
and our sole back our sole plan essentially just is to double down on the treasury security market
right that seems like a strategic um mistake i mean yeah do what you can to like extract as much
free free uh free value out of out of the essentially uh um you know uh willingness
of people to hold treasury securities uh over the next five or ten years like do that sure
people willing to you know hold long-term bonds like you know they make their own decisions like
that's fine. So plan to extract as much wealth out of those people as possible, right? Put those
people in the treasury market killing pen for the next 10 years. But then what's your backup plan if
people decide to really flip? And Bitcoin is, I think, a perfect hedge for that because it's one
that we have right now, disproportionate share of Bitcoin to the world. So if it were to monetize
to the level of gold or at the expense of gold, we would send a gain disproportionately relative
to our adversaries um so that just seems like a pretty basic thing it doesn't even require the
federal government to own bitcoin um it just requires you know keeping and having incentive
and having policies that don't um scare bitcoin away from the united states that don't uh push
the bitcoin into uh into the emirates into hong kong into singapore uh etc um and that's you know
that seems like a basic sound policies like you want americans and american businesses to benefit
relative to um to our adversaries and so um that's that's like a pretty i don't know i see like zero
downside to that to that to that plan uh and uh yeah so we'll see what happens but that seems to
be the straightforward um you know strategic uh orientation at this point as the great michael
goldstein once said the only winning move is to play and i'm hopeful i think people are starting
we got to this um i'm hopeful got a long long road ahead of us we are 15 minutes over our lot
of time and i was 15 minutes late due to putting up some terrible twos downstairs um and i'm going
to respect your time matthew this is i can't believe it took us this long hopefully this is
the first of many conversations thank you for all the work that you do to educate people about this
and position Bitcoin as an important strategic asset
in the minds of people on Capitol Hill.
And I always feel smarter coming away from conversations with you.
So selfishly, I'd like to thank you for your time
to help illuminate the landscape of what's going on
in the geopolitical world and in the private sector globally as well.
Because I think it is undeniable that we're in this.
insanely chaotic inflection point and i think you bring a lot of clarity to what's happening
between the different variables that are moving on the chessboard
doing my best it's a messy place
you don't seem too enthused to be doing your best
is it it's it's funny it's like my my the demand for my skills goes up just before we hit world
three and then i basically become completely uh useless i have no zero marketable skills at that
point so i'll i guess i'll ride that escalator up and then take the elevator down yeah then you
just fall back to goats and other stuff that's when you just go by a farm and just chill and
yeah i have to get my hands dirty at that point so tbd yeah i think you have uh marketable skills
beyond uh beyond the lead up to world war three hopefully we don't get there it seems like hey
maybe that's like the last question let me keep it short yes or no answer has world wars restarted
already yes uh i think it's a short answer yeah i think if i would define yeah i say that the
shorter way to say it is that great power war is too expensive to fight on a world war but we're
still fighting world war we're just fighting it in sort of the boundaries of great power
sovereignty so what we're fighting it is in space we're fighting it in cyberspace we're fighting it
um underwater you know fiber cables and pipelines um we're fighting it in weak states in africa
south america we're fighting it in proxy states you know in a hot war in ukraine but also in the
middle east and across the eurasian periphery including in the border between india pakistan
it's out trying to see with the philippines obviously taiwan strait and north korean
peninsula so i think that arc of instability um both geographically around the eurasian
in Prinsula and then in space and undersea and in the Arctic are active zones of great power
conflict. Like cyberspace is a conflict zone. Space is a conflict zone. We are blowing things
up and cutting cables undersea. We're supporting proxy wars and, you know, killing soldiers with,
you know, missiles and arms provided by either side. We haven't yet gotten to the point where
great powers themselves are engaged in open conflict, um, you know, with traditional military
forces, but we're sort of just below that threshold. Um, so the question is whether we
stay below that threshold, uh, or whether an accident or a strategic miscalculation tips us
over. Um, I don't, you know, I don't, I don't think anyone can predict, uh, you know, you can
have proxy wars, you can have that sort of state of kind of cold war with, um, sort of, you know,
kinetic conflicts procking up you can have that sustained for for quite a long time um uh like we
saw that during the early part of the cold war with russia um this one's a bit more complicated
and takes it to become many different players so it's probably a lot more unstable than that than
that dynamic was um so yeah i i think of no other way to conflict that it is a world war in the
sense that it's a conflict over it's a competitive global scale um it's just not great powers you
know launching missiles directly at each other um but we are you know doing lots of other stuff
just below the threshold all right world war three started freaks we'll end on that peace and love