The Breakdown - How BlackRock Ended Up on Both Sides of the Bailout, Feat. Meltem Demirors

Episode Date: March 26, 2020

The Senate passed $2T in Stimulus. That includes a one time $1,200 check to impacted individuals and….you guessed it, billions and billions for corporate relief. Included in that are hundreds of billions of dollars in corporate bond buying programs. The Federal Reserve has recruited asset management giant BlackRock to administer three of those programs.  Here’s the kicker. As Bloomberg describes it: “under the arrangement [BlackRock] could buy some of its own funds on behalf of the central bank.”  Outrage is running rampant, and to help listeners sort through it, @NLW is joined by Meltem Demirors, Chief Strategy Officer at CoinShares. In this conversation, they discuss: The government mechanics behind the “money printer go brrr” meme  The unfathomable failure of US intelligence in seeing the pandemic coming  The deficit of leadership across the political spectrum  What Blackrock means and why “they’re not even pretending anymore”  Why Twitter memes on their own can’t change the world Why bitcoin can and should be a gateway and tool for evangelizing more systemic change

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to the Breakdown. It is Thursday, March 26th, and last night after a day of debate and consternation and frustration and examination around the $2 trillion stimulus package, it came out that BlackRock was being recruited. to direct part of the bond buying program. So here's the quick take from Bloomberg. As part of its whatever it takes effort to reduce the economic pain from the coronavirus pandemic, the U.S. Federal Reserve enlisted BlackRock Inc. to direct three of its bond buying programs. It's not the first time the government has partnered with the asset management behemoth, which under the arrangement could buy some of its own funds on behalf of the central bank. Now, if this sounds to you

to be completely insane, the conflict of interest to end all conflict of interests, you are not alone. Last night, the CSO of coin shares, Meltem DeMir's, wrote, they're not even pretending anymore. They are paying BlackRock to bail out BlackRock, and they are patting themselves on the back. But hold on, it's going to take us at least four months to print your check and send you your check. Now, there's an interesting phenomenon in daily podcasting during the coronavirus, where at least once a week, you have to have a conversation that's less normal interview and more drink wine and be angry. And so I pinged Meltem right after this comment and she was in the same mood. And so we got on a video chat and started riffing. What follows is on the one hand, basically a session

of Meltem's podcast, what grinds my gears. But on the other hand, a real call to action, I think, for the crypto community to ask, what are we going to do with this moment? We discussed yesterday with Noelle Acheson and Michael Casey of CoinDesk that there is an interesting moment here where for what's likely a very brief window of time, people are having a very different conversation about the nature of money and the nature of the economy. I would argue that it extends as well to the nature of power and institutions and trust. And in this context, Bitcoin is a gateway for a much wider set of conversations. Now, Meltem's main point, her main frustration is that she thinks that all too often right now, we're squandering the opportunity, the attention opportunity that could be

flowing into this. And so this is the real question of this extended conversation is, what are we going to do at this moment? Can we actually transform this into a context for redesigning the world around us in a way that is more equitable in a self-sovereign context, that is more empowering to individuals to have control over their financial lives. It's a big question. It's a big set of questions, but Meltem's in a great voice to have as part of that conversation, so I hope you enjoy this conversation.

Now, two caveats. One, as with all of our long interviews, this is edited extremely lightly to preserve the nature of the conversation. And second, this is a little bit more expletive than our normal interviews, because, again, as I said, this is after a long day of frustration

and many weeks of frustration and involved wine. So I hope that you enjoy the conversation, and I'll be back at the end with a wrap-up. All right, we're here with Meltem. We are having a wine and what is happening session. A wine and rage-fueled evening. Yeah, this is a, I've been doing podcasts all week where, like, today I almost had to stop and, like, break in

because it was such a calm discussion that I was almost losing my mind. One thing that I want to do beforehand, And just because it's really important to me, small businesses around the country are, as everyone knows, going through an incredibly tough time. The godmother of my child, my wife's best friend, has a really awesome boutique in L.A. called Ririku. It's her dream. It's always been her dream to build a store where she can go source the coolest stuff that she can find anywhere. She just got back from a sourcing trip to Morocco, which is like way the wrong time because she really

like pushed the budget to make it happen, but came back with some awesome stuff. So instead of like a normal sponsorship. I'm shouting out Ririku this week. Maltim, I'll share the screen. For those of you who are listening, Meltem and I are doing this view of video because it's going to be more fun to yell together. But I'll put the video up on YouTube as well. And so basically, like I said, Riroku, it's like home goods, vintage finds. She just came back with all these incredible rugs and runners from Morocco. Yeah, it's like rad. She has like the, she's a very like LA clean style and like keep scrolling I'm shopping keeps scrolling okay all right um so yeah you want me that cheeky that cheeky baby rug has my name all over it right so super super rad like my living room rug could use

some work it's like a white fuzzy rug but it this is this is just like the upgraded white fuzzy rug I think it's it's perfect um also you know what podcasting and like videos from home have made me realized I moved in like it over a year ago and I basically took my furniture for my old place, which was way small. I just threw it in here. I finally got a new couch, but like I haven't done anything to my walls. So I have just started like accelerated the process of like actually putting things in my house. Because I feel very self-conscious about the fact that I have their walls.

So actually I bought some canvases and I'm going to make my own art. So hopefully next time I do a video, there will be something on these walls. It'll be terrible, but it'll be amazing. Amazing. Well, I'll pick out something from Riruku that I think is good to get you started. I'll send it over. If anyone who is listening wants to check it out, it's r-I-r-i-k-U.com, and you can use Breakdown 20.

I'll put this on Twitter too, but that is my show for the day. 20% off. Oh, that rugs looking extra good. Is there's the real question. Did I take Bitcoin yet? I don't think. No, but actually, yes, via me, we can do an OTC trade for Bitcoin for this, for sure. So anyways, you know, everyone's going through this.

I know Pomp has put small businesses that are hurting on his POMCast this week. I know other crypto podcasters and I have been talking about trying to just, you know, we don't have much, but we do have some amount of audience and everyone can use whatever they can have right now. But speaking of the little guy and the perpetual stomping thereof, Meltem, what should we start being angry about? Where do we even begin? Okay, look, I've been angry for a long time. And I think at this point, it's not even anger anymore. Okay, here's the biggest problem I see.

We have gotten to a point where people just do not care anymore. Okay, so I want to lay out, you know I like my facts, right? So I want to lay out like some really quick facts just to set the tone in the context for what is happening. And I shared this on my Twitter this morning and I'm going to keep trying to share facts because I think it's really important to use this time to educate. Like this may be the one time that people actually care about how money works and like how finance works and they may actually pay attention. So I'm going to try to give people like good compelling facts that make them smarter and help them understand what's happening. That's that's really my role. I'm like, I'm an educator at heart. Okay,

so basically here's how the world works. So if we think of the government as a business, there's a kind of is, right? Government started. The way that governance started is like you had someone, a monarch typically who would oversee an area. And what they would do is they would have income in the form of taxes, they levied on people and stuff they would just take from people, and they would spend that on a bunch of different stuff. Okay. So in the U.S., the government's primary source of income is what, Nathaniel? Taxes. Taxes. That's right. Okay, so the government pays for stuff by collecting taxes. They typically collect, like this year they're going to expecting to collect around $3.7 trillion in taxes, close to $4. Okay.

Who do you think pays the majority of taxes? Do you know? Not big corporations that you would expect. Right. So 75% of taxes come out of your paycheck. Okay, here's how it happens. 50% of tax is individual income tax. So it's income tax that you see coming out of your paycheck,

and it's income tax that you pay at the end of the year. Now, another close to 40% of tax is payroll tax. So you get tax not only once, but you get taxed, twice because out of every paycheck, when you get your little pay stub, or if you're self-employed, you've had the pleasure of paying self-employment tax, which I didn't even know about until the end of 2018, and I was horrified. So you pay Social Security, Medicare, and Medicaid. Okay. So fully 75% of taxes comes out of your paycheck and comes out of what you earn. Corporate income tax accounts for about 10% of tax income, right? Really teeny tiny. The Fed makes

a little bit of money, there's excise taxes, and there's some other things thrown in there. But the majority of how the U.F. government is funded is money from people like you and me. And by the way, the wealthier you are, the less you pay in tax, right? That's a fact. So the tax revenue comes disproportionately from people like you and me, middle class, upper middle class, maybe the lower end of upper class. But if you're really rich, you're not paying, you know, 45% effective tax rate. Definitely not. Okay, now here's what's interesting. The U.S. government, like many of us,

spends more money than it makes. On an annualized basis, the federal deficit or the difference between what we earn and what we spend is usually anywhere from half a trillion to this year in the budget. It's expected to be a full trillion. We've been at this for a while. So our overall federal deficit, the amount of money that the U.S. government owes that it has spent that it doesn't actually have is over $23 trillion. Our annual GDP or gross domestic product, the sum of everything that's produced in the United States in one year, is $22 trillion. So we owe more money than we can ever reasonably expect to make. Then you add in the fact that there are these things called unfunded liabilities. And what an unfunded liability is, so the $23 trillion of deficits that we've accrued

are liabilities that we're aware of. But then there are all these unfunded liabilities in the form of Social Security that needs to be paid. It's been promised to people, but the amount of money in Social Security won't fulfill. Medicare, Medicaid. So all of these benefits that people are relying on in their retirement, that money is not there. So if you add all of that up, that's $120 trillion of unfunded liabilities. If you take $120 trillion and divide it by $4 trillion a year in tax income, that's 30 years. If you take it and you divide it by the number of taxpaying Americans, that's close to $800,000 of taxes per American. The average income in America for an individual is close to $40,000. Okay, so the reason I'm throwing out all of these numbers is not because

this is a math quiz. The reason I'm throwing out all of these numbers is because I want people to understand that the system we live in is fundamentally unsustainable. Now, deficits are not funded by taxes. So this is an important thing to distinguish. The way that governments pay for deficits, if you have debt that's denominated in dollars, and you also own a printing press that prints U.S. dollars, what are you going to do to pay your debts? Nathaniel. I don't know. I can't imagine anything that you would do.

Or is it maybe money printer go bur? Yes. So you own the money printer. You have the exclusive rights to the money printer. You owe a bunch of money that's denominated in the currency you print. So you do what many countries have done. Money printer go and you just spit it out as fast as you can print it. Okay.

So this is where we're at right now. This is what we see happening. This is the state of the world we live in. Okay? So that's kind of just a basic understanding of where we're at. And by the way, none of those numbers include the fuckery that has gone on in the last three weeks, okay? Because I don't even know, like, where that is going to go. So now let's, let's take what's happening in the markets. So we have a bunch of stuff coming together to basically

create a cataclysmic event. Coronavirus, I just read something, I forget what publication, said coronavirus is the biggest failure in American intelligence ever. Bigger than 9-11, bigger than the Gulf War, bigger than Vietnam. The biggest failure in American intelligence was the piss poor response to coronavirus. What do you think? I mean, I think, so I said in our podcast earlier that I don't think there's going to be a single citizen in any republic in the entire world that when this is done thinks more highly of government in general or their government in specific. Like now there may be exceptions where like I'm glad that like the captain of my life raft on the Titanic was doing a little bit better. I think a lot of New Yorkers feel that way about

Cuomo right now, but as a whole, as an institution, as a thing that's supposed to be there, like, even the, unless you are a full, like, non-status, there should be no government person. Even people who are like as close to that while still acknowledging that government is important, where you usually draw the line is there's types of things that only, like, that state power needs to be able to respond to, right? Like Alex Tabarok is a great example of a person like that. He even had a term, I can't remember I should go find it, that he was talking about where the power of the state needs to be able to deploy for things like, you know,

this, whatever power it has. Right. But the fact of the matter is, we've known about this since January. The response that the administration... Arguably longer. This goes back to, so going back to the intelligence apparatus, because this is the piece that I didn't talk about. Their job is to know, like, way more in advance. Like when child... Everything. Like, literally, if you think intelligence didn't know about this for months, you're an idiot. I don't know what else to tell you. This is willful negligence to a degree that is so profoundly disturbing. Okay, I'm going to say something that's not politically correct, but I'm going to go ahead and say it.

And I think it's all about how the mindset of the average politician in D.C. works, particularly in the current era of politics we're living in and the current sort of administration that we're under. There is only one thing that matters to this administration. The one thing that matters is number go up. The only thing that Donald Trump cares about, the only thing that most politicians care about is number go up. Because as long as the stock market goes up, they are getting reelected. So we have been living in three years of an environment where number go up at all costs, right? Number go up. Now what happens when you hit a scenario where you cannot make number go up? The interest rate is that zero. You can't make credit any cheaper. The interest rate said zero. Okay, we are printing infinite amounts of money. The Fed, Congress has basically said we will print whatever it takes to make number go up.

But number is not going up. And so what we're in now is Trump is literally making press announcements saying, I want people out in the streets by Easter. What he is saying is basically this, and this is a really poor summary of it, but Jesus died for our sins, grandma can die for the Tao. That is basically the callous attitude we're seeing here. And I get it. It's not politically correct. But these people literally care more about the money on the table and stuffing their own fucking pockets full of dollars than they care about the fact that people are dying. I mean, it's completely inconceivable to me.

And look, I'm not an epidemiologist. I'm not even going to get into like the coronavirus facts and like how deadly is it really, how many precautions do we need to take. We are talking about making decisions based on the risk, the information we have. There is a shitload of risk. But these people are so insistent on making the number go up that they will sacrifice anything, including people's lives. It's insane.

I mean, unfortunately, I think this is like what we're watching in a hyper-compressed format is the inevitable end game of a whole lot of larger trends that I think in a lot of ways this administration is just the most pure raw manifestation of that's something that's been happening for a long time, right? Which is the one that you identify absolutely correctly is the idea of scoreboarding, right? Like the idea of the stock market as a political scoreboard, not as an actual thing that is a determinant of value, right? And this is something that's like, this isn't new. Like, you know, people have been looking at the stock market. Hold on. Capitalism isn't real. This isn't capitalism.

Yeah, I mean, this is, this is, that is exactly actually the, the name of Alan Farrington's piece about this the other day. Mark Yusko was on the podcast on Wednesday saying exactly that this is cronyism, not capitalism. I mean, this is like, it's very clear to anyone. It's actually, this is socialism. Socialism is when a group of people appoint themselves leaders, and then they take, from the proletarian. That is socialism. Well, it's even worse. That's socialism, not like the rosy, intellectualized, appealing sounding version. That's socialism as it's actually played out, the version that we all, like, when we are against socialism, that's what we're referring to.

The endless pattern of a system of dependency that is created by rulers to keep people in a situation where they depend on the state such that they can, I mean, listen, fascism and socialism are both two different sides of authoritarianism that are effectively the same, which is creating a dependency on the state, period, right? Like, it's just whichever, like, practically speaking, if you look across history, which version of those you are, which type of authoritarian, is almost entirely based on which people are going to be more culturally receptive to when you create your nice-sounding programs to start with, you know?

And that's the real battle. It's all effectively the same. Well, Berners perfected it, right? when he wrote the book Propaganda, which subsequently he put into practice what he preached in that book with the Nazis in the late 30s, right, when it was still, you know, in the very early stages of that political movement, this is all about propaganda. You see what's happening. You see the market narrative. I think there are few things that have happened that are so brazen that it makes my head spin. And I think Ben Hunt, aka Epsilon Theory, has done a really good job over the last year or so calling it. it out. And I think, you know, what he talks about is like they're not even pretending anymore. Like, it's just insane. So the craziest thing, like every day, I feel like I see three, four, five things that just, it's shocking to me that people were just so fucking brazen at this point. Literally, nobody cares that everybody knows that they're literally the biggest pieces of

human shit. Like, nobody cares. Right. United Airlines CEO. himself, tens of millions of dollars in compensation, then arguing with workers who are on strike, right, then asking for a bailout but refusing to accept any strings attached to the bailout. I cannot make this up, but today I saw the best thing ever slash the most depressing thing ever. Okay. So BlackRock, one of the world's largest asset managers, trillions of dollars of people's retirement assets are under their management, mostly passively managed funds. So ETFs, money market funds, things like this. They have not been doing a really good job managing their risk.

They have a lot of risk exposure and they haven't really managed it. And one thing that people don't appreciate is a lot of ETFs have, so a lot of people think like an ETF, okay, if I buy tech stocks, ETF, it's going to have the things in it and it's going to have, you know, the 10 best tech stocks. No, no, no. What they do is they stuff the portfolio with a bunch of different assets that have varying liquidity profiles. So in times of crisis, it exacerbates the liquidity crunch in some of the market.

of the shit assets they shove into the ETF to juice it into return, right? And so what you end up having is BlackRock is under duress. Now today, the federal government announced that it was introducing a program whereby it would buy back bonds. Guess who they appointed to run that program for them and who they're going to pay money to you to do this on their behalf? Okay, just guess. I'm going to go with BlackRock. Right. So basically what you have is a firm that says, we've an advisory firm over here. They're totally independent guys. Don't worry about it. But what they're going to do is they're going to figure out what to buy back. And by the way, our right arm over here owns a ton of this dog shit.

So we're going to have the left arm buy the dog shit from the right arm with your taxpayer dollars. But don't worry about it. There's no conflict. And by the way, we're also going to charge massive fees. Like my brain exploded and then it exploded again and then it exploded again. And then I thought about the fact that, number one, small businesses can't get loans unless the owners personally guarantee them. Number one. Number two, when it comes to writing the average American checks, right?

So we look at this $2.5 trillion stimulus package. Only about $200 billion is actually going to go directly to taxpayers. And it's not going to get paid out for four months at least. You can literally print cashier's checks. You could send an armored truck to every street corner and hand out money. And it would be more effective than this bullshit. So again, what I think is so disappointing is in a time when people need it most, nobody's doing what's right. Everyone's doing what is politically most advantageous to them and puts the most dollars in their pocket.

And I find it so overwhelmingly just depressing and bleak and upsetting. And it's infuriating. And nobody cares. Like nobody cares outside of the small bubble that you and I live in. and we all talk to each other and we all hang out to each other. Like you and I are sitting here drinking our wine, talking to each other to each other about it right now. Other people literally don't give a fuck.

I was talking to some of my friends last night. They've no idea what's happening. They've no idea why it matters. They could care less. They're like, oh, I'm watching the newest season of like love is blind or whatever dog shit TV show they're watching. And I get it. But like people just simply do not care and I don't know what to do about it.

It's it's it's so the way that I described it earlier today is that the saying on the one hand that it's likely that 30 people 30% of the country is going to be out of a job in the next couple weeks or a few months and at the other hand having your answer be this one time $1,200 check is so unfathomably cynical to me that it just it boggles the mind. But policymakers are patting themselves on the back. That's what's so infuriating is that they're like. $1,200 doesn't even pay a quarter of a rent check in New York. It doesn't cover a mortgage. It might cover one max two months of a mortgage in a different part of the country. But that's not enough. So I think Minnesota just went on full lockdown for two weeks, right?

So restaurants are closed in Minnesota. So you're outside, you're outside of a major city and it's real cheap, right? Let's say that your rent is $700. If you have two kids, that $1,200 is one month of rent and food for a week, week and a half if you stretch it. You know what I mean? Like even if you get outside like the bubble, quote unquote, of New York asset prices or real estate prices or anywhere else, it's still not anything meaningful. And what it doesn't take to an account, I had a couple people who bit back on that post and were like, yeah, but unemployment's going longer. And two, it's like you're not calculating the absolute fundamental disruption of one, how many of those restaurants, are going to close forever. Because the average restaurant in America, I think, has something like 17 days worth of cash on hand or something like that. It's really low. It really varies. But look, at the end of the day, like, okay, here we are. You and I are talking about all of these facts, right? And we have facts and we have data and we have statistics and we can throw them out there. And again, my point is not to make this a fact exercise or like a math exercise.

I just want people to understand the magnitude of the problem. And I want people to understand, Look, I was really excited at the start of January at the Democratic primaries because we had six women running, right? We had six women. We had an openly gay candidate. We had an openly leftist candidate, and we had a non-establishment candidate in Andrew Yeang. Three months into the year, we have Joe Biden. There is virtually no difference between Donald Trump and Joe Biden other than their level of charisma. and Joe Biden's just more political about how he fucks people.

There's literally no different. They're fundamentally the same people. They're run in the same circles. They have the same. They're both almost the same age. They're both in their 70s. Like, how did we go from such a promising run to such a disappointing, like, mediocre group of characters?

Well, that's like six podcasts, which we can get into. But, like, isn't it part of the problem is just that it's the same set of incentives? It's that it doesn't matter what side of the aisle on. Your incentives are exactly the same. And this is what we were starting to talk about before we hit the record button. But basically, like, what you have to want to become a politician right now in America? Like, we haven't. So I think narratives and the stories that we tell matter, right?

And the narrative and the story of politics isn't civil service, right? We don't have any conception in America of the civil service story that people used to tell, right? It's the same reason that like we don't hold the military and the type of esteem we should, you know, for what it does, right? Like we don't have that sense of what those things mean anymore. And so when you go in, it's largely and often because you like are, you lust after power, right? And the incentive is for you to retain and gain more power, right? You want to get on this subcommittee chair and you want to get ahead and like advancing your career is an exercise in accumulating power. It turns out that when you accumulate power, it's very easy to start accumulating wealth. designed a system that makes it very easy for those things to flow through one another. But the challenges, in some ways, from a structural standpoint is that how would you get people to participate

in that who don't have an inner motivation or an inner drive for power? Because it seems like such a terrible exercise. So I would argue, having spent a lot of time looking at this generation that you and I are a part of, that the talent is not flowing into politics because people don't want be a part of this bankrupt corrupt system. I think in fact it's only since the one weird fallout of Trump being such a surprise to so many people is that for the first time I did start to see people get off the lines who are like, God, I'm going to hold my nose and do this. Now, and that's not to say that either one, they'll make it in the system or two, that they won't become corrupted by it, but I think that like, frankly, we need a generation of people who hold their nose to get into

politics and then make it better. generation of people who are under the age of 70. Like, hello. So what I think is really interesting about what you just said. So when I think about the world, right, there are three things people want. They want money. If you want money, you go to New York or you used to go to New York. Now it's San Francisco because being a tech founder is the way to make money or being a VC.

They want power. If you want power, you go to D.C. Or you want fame. And if you want fame, you go to LA or you get on social media and become an influencer, right? So there's three things people want. There's power, money, and fame. And then there's a group of people like, I don't know what I want. I want knowledge.

But I also want to live with purpose. And I think that's actually a common character. When people talk about millennials, one of the common characteristics is millennials aren't as motivated by these traditional paths of money, fame, or power. right we're motivated by a sense of alignment a sense of purpose like a more holistic view of how we fit into this world and the impact that our behavior has and our actions have and maybe I'm being overly optimistic but I do think that we view the world through very different lens because we lived through very different times I started my career in the midst of the worst economic crisis in recent history and now I'm living it again in my mid 30s I don't have a

a lot of capital. I'm not the CEO of a global corporation that's getting kicked back from the government. I don't have the privilege of being one of the people who gets given a money printer. And I think there, you know, there are just, there's so many fundamental issues with all of the incentives we've built for people in this country. And I do still believe, like looking at the rest of the world, I do still believe that the United States is a place of tremendous opportunity. I do still believe that there is an amazing amount of creativity and talent and just like hotspot in this in this economy. I think the issue is is that the flow of capital and the way capital cruise has been so

grossly distorted that the only thing that pays literally the only thing that pays is to be an owner and a driver of capital. Labor is no longer productive. Like, you cannot make a living as, you know, a creative. You cannot make a living as a writer. A lot of people joke about that, but I think that's tragic for an independent media. There's so many really important parts of our society

that have just been squeezed out by the financialization of everything. And that financialization has only benefited a very narrow slice of people. So two facts I want to throw out. Three men between them, Warren Buffett, Jeff Bezos, and Mark Zuckerberg own more wealth than 50% of all Americans. So that's one. Two, the second fact I want to throw out is almost 90% of all stocks in the U.S. are owned by 10% of people.

And by the way, this liquidity crunch that's happening, guess who's selling stocks for money? People who don't have a rainy day fund, people who need cash. Guess who has spare cash to buy more stocks? People who have capital, right? So each cycle, each liquidity crunch we go through, just further exacerbates this wealth disparity. And in every epoch of human history, what has happened when disparity of wealth gets too great? What happens? Revolution, man.

Violent overthrow. There's violent, then there's nonviolent. But I think, like, I think a good way to characterize it is we have an exit and voice, right? Like, we've been trying to use voice. People are screaming. I think more people need to scream. But now it's time to act. So when are the pitchforks coming out?

Have you had the conversation with friends who don't at all come from like the Bitcoin or world where you try to be like, no, listen, the problem isn't exactly as clear as just like rich people or poor people or student loans or anything like that, you know, kind of like again, the popular narratives from the left wing of the Democratic Party, for example, that ran earlier this year, but has to do with, like, the fundamental structure of the way that asset price, basically, like, trying to actually dig into the specifics of how asset prices have created a never-ending flywheel where the rich get richer. And it's like, but it's like more complicated than just like student loan forgiveness, you know, and these like, and not that those

things are wrong, but like. Yeah, but everyone seems to think like, oh, if my student loans got forgiven, then my life would be made. No, it wouldn't because you still wouldn't buy stocks. You spend your money on some stupid thing, right? Because we don't teach people how to think for themselves. We don't teach people how money works. Like we teach people to write cursive and we have a home-mat classes. We should be teaching people how to balance a checkbook. Like what concerns me the most is there is zero financial literacy.

There's zero understanding of how the economy works. There's just people just do not care. And it just infuriates me. It makes me sad. The reason I'm so outspoken is I'm just, trying to get people to care about something that I care about a lot, but it's really hard to do because just nobody cares. And even when they do care, the answer is, well, what do I do with this information? And by the way, Bitcoin is not the solution to the problem. The answer is not,

hey, spend all of your money on this asset that I own a lot of so that the price will go up. That is also not the answer. That is a fucked up answer. That is also not the answer. telling someone to buy Bitcoin and telling them that's the solution to their problem is a terrible answer. It's a terribly incomplete answer. It's a it's a it's I would argue that it is a it's almost a dereliction of the duty of Bitcoin in some ways. Like part of like what I want to do with this podcast is I genuinely believe that for for so many people that I've met, Bitcoin becomes a gateway drug to think about systems, to think about complexity, to understand how things work. And That doesn't mean that they go off and get, like, they outgrow Bitcoin in any stretch of the imagination.

It has, in fact, most people's appreciation of it. At levels of depth, right? There's, you don't see this chart anymore, but I want to draw up for it. Give me a second. Okay. There's this amazing chart that would like make their rounds back in like 2016. When there were a bunch of new people, right, it was like eternal September. Okay, hold on.

So there's this chart, right, where you have T on the X axis and then, perception of knowledge on the y-axis right so basically this is the chart so this is time and this is your perception of what you know so you start out and you're like i don't know anything about bitcoin and then you learn and you learn and then maybe like a year or 18 months in you're like i know everything about bitcoin i'm the most amazing bitcoiner there is look at me blah blah blah blah look at all the stuff i know and then as time goes on you move down this curve and you realize that actually you still know nothing because there are just infinite levels of complexity, knowledge, thinking, because the implications are so profound, so many different levels, and there's so many different wrinkles to this.

So I'm like over here somewhere where I'm like, I don't understand, I don't know, and I will never know everything, and I accept that. But I think a lot of people right now are in this phase, right? And they're the people who are like shouting on the internet, and they're also infuriating because nothing they're doing is actually helpful. It's nice to look like a bunch of fucking idiots. Well, I think the reality is that there's, the internet rewards you for acting at that top part of a curve. So for those of you who are listening, who are not watching, it is your standard kind of distribution curve where it goes up and then it comes down in a relatively equal pattern.

And the point of this analogy is to say, like, you start and you're like, holy crap, I know so much now. And then the further on your learning journey you get, you realize that actually, you know, there's so much, there's so infinitely more to know than you can possibly come in that you start to appreciate how much. more there is to have. So it's really, the key thing is the perception of knowledge. It's not actual knowledge. It's a perception of knowledge, right? And called humility, also. Yeah. And I think, though, that like one of the things that's really tough is that social media, like, let's go back to scoreboard. So you mentioned Ben Hunt earlier. I had him on the show a couple of weeks ago, and we talked, his first article about coronavirus was called Body Count. And it was about, it was an analogy popped to his mind when he was starting to watch Wuhan report numbers. They had done

the same thing, the Chinese government, the CCP had done the same thing that the U.S. did in Vietnam, where they picked this number and that became the scorecard. So in Vietnam, it was how many dead, right? U.S. dead versus Vietnamese dead. That was the scoreboard. And so they executed the strategy. The tail started to wag the dog, the narrative tale started to wag the tactical dog by having like, okay, well, let's go raid this village because then we can up the body count, right? That's our scoreboard to the American people, not tactically, strategically, whether we're winning the war. He basically made that same announcement. He basically made that same as it related to the number of infected and dead in the virus.

And by the way, we still are obsessed with these numbers, right? We're looking, I mean, I think that there's something about the human brain, too. We look for these simplifications, right? But the- Right, because the- Full narratives are compelling, they make you feel safe, right? There's a difference between causation and correlation, and I think our innate instinct is to assign meaning to things

to things which are effectively meaningless, which I think is just this really interesting. It's like, why do people flock to religion, right? It's because people need to feel like their structure, like there's order. I view this fetish with the number as the same desire, right? People need structure, people need order, because the reality is we live in a very complicated world.

Yeah, no, I mean, everyone is trying to, like, we are all constantly trying to make sense of everything around us. I mean, like, you just, the, the, greatest works of literature and philosophy and history are all about ultimately trying to find meaning and chaos and make sense of it all, you know? Or on the other hand, rejecting the ability to even do so and appreciating just what is in front of you. Like, right, there's all these different places that people land. But on the way, we do tend to start to fetishize

these different goals. Let's switch topics actually. There's something else. I just realized, actually, as you were talking, that theoretically this started as like an episode of the breakdown, sort of, but really actually it just is an episode of what grinds my gears where I'm standing in for Jill in terms of just pure frustration and wine. So I'm down for that though. Hold on, hold on. Let's flip it. Okay. So I am optimistic about this as well. And I think what's really cool, I shouldn't say cool. That's the wrong word choice. I think what's really interesting about what's happening right now. People actually care. So the reason I'm obsessed with a meme, money printer go, number one, it's a great meme. But also, it is a viral meme that is about

senior age and the debasement of money. Like there are a bunch of people on the internet talking about learning about understanding, complaining about the money supply and why that matters to the long-term viability of the U.S. economy. That's never happened before. People can't watch sports. There's no new TV content being produced. So at some point, people need something to do. And the only thing that's really happening right now is the market. And so you see people starting to actually participate and get educated. And mainstream media is talking about finance topics. So I think it's an opportunity. I'm interested to see if the opportunity gets take it, a capitalized on or gets squandered. But like, this is the moment as a Bitcoiner for the last

seven years. Like, this is the moment we've been training for. I listen, I completely agree. So there's a, there's a famous phrase attributed to H.L. Mencken that no one ever went broke, underestimating the intelligence of the American people. But I would flip that on its head. And I would say that no one ever changed anything, uh, betting against the ability for people to learn, grow, develop, you know, it's much less catchy. But I think that we do ourselves a great disservice by assuming that people can't learn that they don't want to have conversations. Now, we've structured a world right now in which you are incentivized for quick hit soundbite scoreboard stuff that eliminates nuance. But anytime you get in conversations with people, no one on the planet has their most fulfilling conversation be the one where they drop a sound bite bomb and then get high five from their friends.

They're all things where they're challenged, they're pushed. But look, but here's the thing. The day-to-day sort of like barrage of distraction you're presented with has basically been removed, right? It's like you took an entire world of people and you just pulled the plug. And what I think's been really interesting is when you're sitting here at home, right, I wake up in the morning at like 536 and I lay there for like a start. solid 30 minutes to an hour. And I don't want to go on the internet because it's all the same

shit and like I can do that later. I don't really have a lot of pressing stuff to do because businesses aren't like running at the same pace. You know, I'm just, I don't have anywhere to be. I don't feel urgency. So I lay there and I think. And throughout my day, there are these blocks of time that used to be filled with activities and bustle and busyness. and now the busyness is gone. And we are forced to confront ourselves, like our true selves. And I think that is a really incredible thing. Like this is a moment.

I don't know if you ever read anything about collective consciousness or this idea of a hive mind, but I definitely believe it. I believe that like we are all connected by energy and that your energy and the way you interact with people can change the way other people feel, which is why I'm so animated and like, I can literally see when I'm around people. It's like a battery and it charges them up, right?

And then I have to go back in my closet for like a day and recharge. But we have this amazing moment where we're actually thinking about what we really care about, what's in our hearts. We're forced to confront our reality, the way we live, and we are asking ourselves hard questions. We're connecting with each other. We're talking to each other. We're having these conversations.

I think that is a really beautiful moment. And the question is like, what are we going to do with this moment that has been given to us? What will we do with it? So you have to read. If you haven't read it yet, it's called, there's an essay called The Busy Trap by Tim Kreider from 2012. And it is so beyond good. It's in the New York Times and it's not paywalled. But it's summed up in this quote, there's this Thomas Pinchon quote, idle dreaming is often the essence of what we do.

But he says it so perfectly. he says, idleness is, this is Tim Kreider now, idleness is not just a vacation, an indulgence or a vice. It is as indispensable to the brain as vitamin D is to the body.

And deprived of it, we suffer a mental affliction as disfiguring as rickets. The space and quiet that idleness provides is a necessary condition for standing back from life and seeing it whole,

for making unexpected connections and waiting for the wild summer lightning strikes of inspiration. It is paradoxically necessary to getting any work done. This, I read this shit and it hit me like a bolt of lightning. I was in the middle of being in San Francisco inside.

I think I had just started to advise a startup that was going through Y Combinator, the same class as Coinbase at that time, which then sucked me in like a black hole and destroyed my life voluntarily through entirely my own fault for like four years before escaping the other side. But I remember reading this and being like, you're right and I'm still going to do the opposite. But I'm going to remember this until I'm ready for its message in a weird way. But I think that you're right.

I think that these are, one thing that I will say is I studied history in school. I've always been obsessed with history. Let me be very clear. This is an historic moment. This is not some small blip. This is not something that's going to be written off as just some crazy thing that happened. This is one of those before and after type events. And now a lot of the things that will come after will have been brewing for a very long time. On Friday, actually, I have Peter Zahann who wrote Disunited Nations coming on to talk about how this is accelerating forces, geopolitical forces that he's been observing for years, right? So it's not that there's fundamentally new things, but when you have one of

these liminal moments, right, these moments of transition, everything happens in these in-between moments, right? There's another one of my favorite theories from history is Stephen Jay Gould, who's an evolutionary biologist from Harvard, he had a theory called punctuated equilibrium. And basically, he said, or up until him, the post kind of Darwin era, everyone assumed that evolution was this kind of steady up into the right exercise. What he showed is that if you look back at the fossil record, there are these really long periods exactly of nothing really happening. And then these huge jumps up, we are absolutely in a punctuated equilibrium moment. And to me, in some ways, the question is, it is a little bit how we got here, but it's a lot about what the hell are we going to do with it because it is happening. The rodeo is on and we're all on the call.

So here's my challenge to all of the bitcoinsers out there, right? Stop saying stupid fucking shit and start thinking critically about what do you want to do with this moment. Here's the thing that people don't understand. People are smarter than you give them credit for. And if you tell someone the solution to this, situation where in right now is for them to buy Bitcoin, they're going to dismiss you. It'll get you a lot of likes from the same people who live in the same echo chamber as you, but it doesn't actually create any sort of shared energy. It doesn't actually move anything forward other than your own feeling of self-importance. And I think in our community, we have a big problem with people patting themselves on the back for doing absolutely nothing of value. And the question is, How are we going to use this moment to drive the conversation forward in a meaningful way that actually helps us get to the things we care about? What are the things we care about?

Self-sovereignty, financial freedom, financial permissiveness, the end of draconian authoritarian regimes that are implemented through policy controls and monetary controls. The things we care about, the things I came here for seven years ago were these things. and everyone is too busy jerking off Wall Street and trying to get hedge fund managers to invest in their crypto fund or trying to get money managers to buy Bitcoin that we have forgotten what we showed up for. I didn't show up to build the next, you know, J.P. Morgan. I did not show up to build the next Goldman Sachs. I showed up seven years ago to build something different. And I think that's been the greatest failure of this industry and the greatest disappointment. But we have an opportunity at a moment here to do something different. And I just, again, everything you put out there, like take a moment to just think, is this actually driving the ball forward?

Is this actually making progress? Is this actually contributing to something positive? I think in some ways, too, it's like there's another piece of this, which is like, I ask myself this all the time. And so the answer is yes and sometimes the answer is no. Like I have to confront my own truth that sometimes I'm full of shit. Well, I also think, too, that this is not binary in the sense of like, do this, don't do that. It's more like what I would say is that there are a huge number of Bitcoiners who actually have figured out the tools that like social media and particular Twitter has a very specific reward structure.

And there are a lot of folks out there who have figured out how to like win that scoreboard. in terms of the points, but you can deploy that against different things. You can deploy that against anti-surveillance measures, right? Like that same thing where you know exactly the way to word that tweet, that it's going to blow up and you know, like, people know, sometimes you do a tweet where you just goes surprise viral. I would say more often than not, you know what your likely banned to hit is, right? Because you've figured it out. And this is not you, Melton, this is the royal you. Like, you said deploy that, deploy that energy, right?

I'm also guilty of this, right? there are times that I look at something and I'm like, I really care about this. I want people to pay attention. How do I maximize the probability of people paying attention? I don't know. Where do we take all of this? Well, I think one is recognizing that this is a moment of opportunity, right? Like as the world starts to get reconstructed, one of two things, like when when things get broken down, power swings in to fill the gap really, really aggressively. And you're going to see that in ways that are very scary for the things that a lot of the people in the space, regardless of their political affiliation share, right?

Like one of the things that I love about Bitcoin is that you have like, like, left libertarians and right libertarians and like, but where everyone kind of meets is not just libertarianism, but just the idea of the empowerment of people, a sense of justice, a sense of voluntarily contributing to make a world better rather than waiting for someone else to do it. We're like, we're trying to create a world. What my focus has been is like, how do I invest? in and promote and advocate for and just sort of drive forward this idea that we are building tools for their evolution.

They can be used in different ways. But at the end of the day, this is about helping people take back their self-sovereignty and building systems that give people choice and give people rights. I mean, like, so here's an interesting prompt. How do we invite people in more? Like how do we create more doors that people can walk through, right? Because ultimately like, you know, the old phrase, you can lead a horse to water, but you can't make him drink. It's true. But there's more people who are ready to drink right now than ever before. Yeah. We give them something better than buy Bitcoin. Like if I have $50,000 of student debt, I'm living paycheck to paycheck and I just lost my job. The rallying cry of buy Bitcoin or Bitcoin fixes this doesn't do shit for me. And I may be interested in Bitcoin. I may be excited about it. But the idea of, of spending money to buy an asset is not a tangible rallying cry. And that's kind of always been the issue with Bitcoins.

Like what is the means of participating in Bitcoin other than being a core developer or other than holding Bitcoin or other than advocating for Bitcoin and being part of crypto Twitter? So I think we need to find ways for people to participate. And I think the ways for people to participate is to care about privacy.

The problem is that caring about privacy and giving people tools to preserve their privacy not profitable. Right? And so there is this interesting thing. Like what I always think about is the idea of category creation, right? So the way new business models get built, right? When Facebook started building Facebook, social media wasn't a thing. The business model they were building didn't really exist. Maybe MySpace had built it. There were earlier iterations than MySpace, but like the category didn't really exist. So we have this unique challenge where there are new products and services we're trying to build and get out into the market that don't exist yet. The issue is that

In order to create a category, you have to do a number of different things. Number one, you have to educate. Number two, you have to advocate. Number three, you have to build tools and on ramps. And number four, you then have to build a business that can sustain all of those activities. And the issue is, like, a lot of the things that we're trying to do in the crypto space are fundamentally new, particularly in a world where monetization is driven by advertising, right, and selling people's information, which is antithetical to how Bitcoin function, what this community

is about. So I think the biggest challenge for a long time has been, how do we have. we find business models that are profitable that also allow businesses to engage in category creation and basically fund these new categories and to do that for long enough for these things to come into fruition and for them to become part of people's behavioral pattern and part of how we function as a culture and a society. And there hasn't really been like a driving catalyst to accelerate that. And so I think the biggest question is like how do we get capital more people than just Wall Street to care about crypto and blockchain. And then how do we actually build tools that solve problems for people

other than just saying, hey, buy this asset? I don't have the answers, but I think privacy is a starting point. I think self-sovereignty is a starting point. And I think finding ways to help people participate in these networks, maybe as a starting point. But I don't know the answer. But I also don't think telling people buy Bitcoin is a compelling call to action. Yeah, I also would say too, just to kind of really enforce that last point, like, memes that serve as a rallying cry for a community to stay in touch with itself and feel like empowered are fine. It's just what I hear you saying is like there has to be more too, guys, you know? Because to your point, like, people are not dumb. Do you know it's an alliance that I think there's a unique opportunity for?

if you look at the last couple years up until coronavirus, and this is something that I actually think is pretty unique about coronavirus, this crisis specifically, there was this weird intergenerational war almost by default based on politics and economic structure. And so if you look at Brexit, if you look at Trump coming in, this was a, you could map those political decisions on the basis of age group, like really, really, like profoundly and clearly, right? And this is historically true, like the older you get, the more conservative that you get,

but these are really profound and very clear examples of this. You also have this interesting, by default, almost generational economic competition, where the people who can afford assets that have had their values continue to go up by more of those assets, they're largely older. And so the younger class can't participate in that, right? So you can be a millennia with a really well-paying job, but there's no fucking way you're buying a house, especially when you're competing with a million boomers who are buying their second house, right?

Like, I'm trying to move to Rinebeck, man. It's killing me. New Yorkers got to get out of fucking Rinebeck so I can buy a house there. But even New Yorkers, like the only reason I can actually pour a house in New York is because I took an asymmetric risk reward bet. And it's exactly. I'm entirely joking. But this is the, there's a generational thing where like because of the way, like, when

you're diversifying your portfolio, just by virtue of being older, like you buy real estate and stuff. And so, but that creates a. a challenge for younger people who are trying to come into that market, right? This is all inflated by the way that money is cheap. That's the whole kind of conversation that we started with. So, long, short, we had this like almost definitional. It wasn't like anyone declared war on a different generation, but in terms of like self-interest and there's just clearly diametrically opposed, we've had this moment now where somehow, some way, we are debating whether to let people of a certain

age demographic fucking die on the basis of it being economically infeasible or difficult. And what it's creating actually is there is more, let me put it this way, I have spent more time with more people talking about, thinking about their families, their grandparents, like what these people actually mean in their lives than ever before. Like if you want to talk about like moments of opportunity, these are people who are, I think all of us, especially Bitcoiners, have at least one set of relatives who their whole plan is based on a presumption of the stock market returning 7% forever for the rest of their life.

And we're sitting here being like, that can't possibly be. Those are moments of opportunity. I don't have a good answer for the last part, which is like, what's the flywheel that makes this profitable that allows it to expand? That's the real difficult part. But when it comes to the conversations that go beyond buy Bitcoin, diversify into Bitcoin, This is a moment to actually start to have those conversations about the structure of society. There's the opportunity, basically, I guess, I'm what I'm saying, is for an intergenerational

alliance between the subset of millennials who actually think that their parents and grandparents are worth looking out for and being partners with again. You know, like that has given in the context for that. What I'm talking about here is respecting and giving credence to what people who have lived through different parts of history can teach us, right? I think one of the things that happens in crypto is a lot of intellectual hubris, where people take on this, this aura of sort of intellectual superiority just because they learned about Bitcoin two years before other people did. That doesn't mean anything. And actually in the crypto ecosystem, we're repeating a lot of the same mistakes of like 1980s and 1990s finance. So I don't think what we're doing is really that impressive.

I see a lot of dumb shit happen on a daily basis. I'm like, this is idiotic. And if we had only just talked to some people who've done this before, we would have come up with something different and something better. What's really fun, so in my family, I have a brother who's two years older than me, and I have parents who are in their early 60s. And we have a family chat and we talk to each other every day. But like, I talk to my parents all the time and they teach me valuable things and they tell me valuable things. Like, I have a lot of friends who are in their 40s and 50s and they have things to teach me. and they have things to share with me that I don't have.

So I think it's like in our industry, it's like how do we, we don't need to reject everything. We don't need to reinvent the wheel. There are certain things we want to break, but actually incorporating what we've learned from prior cycles is the best way to advance forward because everything is built on its predecessor, right? We stand on the shoulders of what has come before and so on and so forth. Like you can't jump from one system to another without any sort of transition. stage. And that stage could take 10 years. It could take 20 years. It could take 50 years. But in that

process, you have to build a bridge between the people who built the system that we're living in now, who can help us understand how to build the system we want to live in in the future. Nathaniel, you're on mute. I was muted. We're also going to need alliances. Like if we want actual systemic change, you can't do that from one small corner of the world. What you can do, what we've seen over and over and over again throughout history is that you can start in one small corner of the world and then apostles bring your message everywhere, right? Yeah. I love you, but I have to go do something now that...

Like, be a human and an adult and not think about... Well, you witnessed me shoveling homemade tacos into my face before this. I'm actually working on a really cool content series about the future of capital markets. that's basically translating some of the cool stuff happening in crypto, where we're disintermediating the different layers of a brokerage firm and how that all works. I'm pretty excited about it's like the first long-form thematic content series I've done in a while, and so I have to go finish making the video that we're going to release tomorrow. That's awesome.

Well, let me know before this will go out in the afternoon tomorrow, so I'll make sure it's all plugged in depending on when that's released. well, thanks for hanging out taking the time before that. I appreciate your rant. I appreciate your caring. I appreciate your caring enough to be frustrated. I think... Let's figure out where to put it, right?

Like, what do we channel this rage into? I know. And I think that we're all trying to figure that out too, you know? And I think that being honest about not knowing exactly where, but knowing we want to do something with it is really important, you know? And I will say, too, my one moment of optimism that I have is that like, you know, we complained about certain things that we don't like in this industry, but like, goddamn, pound for pound, average person, even who's squawking on Twitter in this industry

versus any other that I've been a part of, like the potentiality there is so differentiated, right? Like, the opportunity is... Like, I will say this about the crypto community. We are giving bunch of people. We are, like, there is an openness here. People are willing to talk to each other. like I DM with people all day, talk to random people on telegram. Like people are very quick to iterate, throw random stuff out. The energy is palpable. It's amazing.

The question is how do we use that energy to actually potentiate tangible change? That's what we need to figure out next. All right. That's our mission. Ready break. We need an inside woman or inside man. We need a group of people who are willing to go into the belly of the beast. We're going to find out who those people are very soon.

Oh my God, I know. We need some candidates. I'm into it. All right. Pellie Lafleur, though. Oh, God. I was like, well, we don't want to talk for another 20 minutes. I'm not even going to bring that up. Jesus. Swing and a miss. All right, guys.

Thanks for hanging out. Thanks, Melton. Bye. Bye. I think the most important part of this conversation to me in some ways was the idea that we need not to underestimate people's capacity to learn and understand what's going around them. Just because the world that we live in and the context that we live in has lulled so many of us into kind of casual acceptance of the way things are doesn't mean that people aren't smart enough if you take the time to engage and to understand their context to want something more,

to want something better, and to be willing to work for it, right? I think there is a moment here that is open to change, but it's going to go fast and into that vacuum will flood all sorts of types of power, including most of importantly, the type of power that is trying to preserve itself. Power adapts to new changing circumstances extremely quickly. It leverages every resource at its disposal to ensure that if the nature of power changes, it is still the set of institutions or the power broker on top. We can't let that happen, or at least we shouldn't just let that happen. So I hope that you're on this journey with me to at least have the conversation about how we might build something

different. Thanks for listening. We'll be back tomorrow with an extremely exciting interview. It's one of probably the most excited I've ever been for an interview. It's all about the larger global geopolitical context in which this is happening and what the world might look like from a large-scale political and inter-nation economic perspective when the coronavirus crisis has passed. So stick around for that. I'll be here tomorrow with that. Thanks for listening again and I'll catch you soon. Peace.