The Pomp Podcast - #268: Jeff Booth on Why We Need to Embrace Deflation

Episode Date: April 13, 2020

Jeff Booth is the author of the new book titled The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future.  In this conversation, Anthony and Jeff discuss the difference between inflation and deflation, why technology is inherently deflationary, how easy credit has led to a massive asset bubble, why the world will need to move to a deflationary economy, and how Jeff is currently thinking about the economic crisis we are facing. =============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link http://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. =============================== Ledger hardware wallets empower you to optimally secure, own and control your crypto. Visit ledger.com and give yourself peace of mind by knowing that your cryptocurrencies are safe. ===============================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Jeff Booth is the author of the new book titled The Price of Tomorrow, Why Deflation is the Key to an Abundant Future. In this conversation, we discuss the difference between inflation and deflation, why technology is inherently deflationary, how easy credit has led to a massive asset bubble, why the world will need to move to a deflationary economy, and how Jeff is currently thinking about the economic crisis we are facing. I really enjoyed this conversation, and Jeff did a great job.

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products. Crypto.com, the place where mass adoption is occurring. Our second sponsor is Ledger. They've got all sorts of great custody products. They've pre-recorded an advertisement that I'm going to play right now, and then we'll get into the episode with Jeff. I hope you guys enjoy this one. Digital assets custody can be quite difficult to secure and hard to scale. Firms are often left with a difficult decision, having to choose between security or liquidity. At Ledger, we're obsessed that our clients' businesses succeed. That is why we decided to create a digital asset platform that would enable financial institutions and crypto firms

to manage their funds without compromising on security and liquidity. Firms like Uphold, Bitstamp, Crypto.com, Indax and Dunamu are already using Ledger Vault to operate their business at scale while maintaining the highest standards of security to protect their clients' funds. visit ledger.com slash vault to learn more control scalability agility because security is not enough anthony pompliano is a partner at morgan creek digital all opinions expressed by pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of morgan creek digital or morgan creek capital management you should not treat any opinion expressed by pomp

as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I have Jeff here. We've got a ton to talk about. You recently wrote a book and have a bunch of really cool ideas that I think that people will be interested in learning about. So thanks so much for coming on and doing this. Thanks a lot for having me. Yeah. Let's go right through your background first, because you are not an author by trade. So maybe let's start there and we can then get into some of the ideas.

Yeah. Good call. Yeah, a book is not something I wanted to write. I felt I had to write. So I'm a technology executive, technology co-founder of multiple companies. I've started four companies. One of those companies grew to half a billion dollars in market cap. uh over over the course of 19 years um and and and just a whole bunch of technology boards so sitting at the front seat of what how technology is changing the world very cool um and and the book what was kind of the genesis for why to write the book um i looked i looked forward in what's happening with technology and and how it's bumping up against an existing system that won't work in the future. And I said, and I thought, my kids won't

grow up in the same world I grew up in. The future will not look anything like the past. All of the benefits that were provided to us, I think will be stripped away. And the world will look very different unless we get our heads around what's happening. For sure. And so the book is called the price of tomorrow why deflation is the key to an abundant future let's just start with kind of the one-on-one what is deflation and what is inflation okay so yeah and and again people have an emotional attachment to these they shouldn't right it's just it's this the facts of it inflation is when your money loses value and and assets go up in price as a result right because the purchasing power of your money goes down so goods and services get more expensive

and deflation is the opposite your your purchasing power goes up because goods and services get get less expensive and there's a whole bunch of an emotional context to that that actually has nothing to do with the facts right and so people will just blindly say deflation is bad inflation is good without realizing kind of it with inflation you're actually saying i'm destroying the value of the currency right that's that's what you were trying to so when when a government has an inflationary target what if they said we are going to try to essentially make the currency be worthless or worth less? Would people be on the street rising up? And they might be, right? But I think it's important to detach the emotion from the facts, and then you can debate the facts

and build better systems. So let's talk about inflation first, because that's obviously the system that we live in today, the fiat currencies and kind of the economic model. Help us understand like how exactly does inflation work and then what is the reasoning behind why we have the inflationary model we have like what's the kind of defense of inflation well number one and i just it's provided the world a lot of wealth right it's uh it's we've been in an inflationary environment for a long time our parents grew up in it their parents grew up in it and so on and has provided the world a lot of wealth but in that the assets go up in price so if you borrow today with money or you borrow from the bank today then with inflation

your incomes will rise over time and the money will be worth less right and so you pay that that money back later on with inflation with dollars that are worth less and um and the asset prices rise a good example is is a house my parents bought their first house for i think it was 69 000 um in in the 70s that house is worth 1.5 million today um the debt it was paid back i think they took a 59 000 debt which was a lot to that time and and they paid it back over time as their incomes rose. So that's the world we live in. And it's not bad. Some people win more, right? Debt holders win more and everything else. And it's not bad. But we've got a structural break. And it's not COVID. The structural break is technology that has

changed the rules. Yeah. And so the current economic system we have was really built for the old world, right? And so if it was built for the old world, maybe describe a little bit about your thought process of like that industrial revolution type world is dying. And what I think you're arguing here is the fact that we need a new economic model for the world we're going into, right? It's kind of like we had an old world with an old economic system. That old economic system matched the world we were in. now if the world changes to this technology enabled world now all of a sudden you're arguing that we actually need a new economic model uh for the future correct correct and and if you if you

look at this you can see it everywhere by the way it's uh all of the evidence points to it people are ignoring it because they don't want to believe it um and and so so so so i'll give some proof points in order so probably the best example that everybody has in their hand is their iphone or or smartphone um that phone uh 20 it was only invented 13 not quite 13 years ago right and and look at the phone what's on it today just about all your apps are free right you use google for free ways for free it's all free so you have the power you have the power more than presidents had 20 years ago 30 years ago sitting in the palm of your hands and it's all free it's a you can buy and by the way it's not deflation ad free we don't wait for when when the new iphone comes up

there's a line around the block to buy it even though you can get last year's um for next to nothing on a plan of 20 a month and have everything for free so that technology deflation is a good thing right our google searches are in fact that all of the platform companies from music to google to amazon it's all they're all created actually using that same same example you know technology you're you're an investor in technology i'm very much an investor in technology and and it's a good thing every technology executive i work with is trying to do good in the world and provide more efficiency and better more abundance using technology and that comes at the cost of jobs so that's what's that uh that's what's happening overall and it's accelerating in the world

the only thing masking that is a massive increase in debt and leverage where you're pulling demand forward from the future with debt that you can never pay back in the future and so that massive amount of debt and monetary easing in the last 20 years to get negligible inflation rates is $185 trillion to produce $46 trillion of economic return in GDP. So when debt is growing way faster than GDP, you know something's wrong, right? And here's the thing. This is before COVID. this is before everything i predicted all of these these events before the before they were happening covid accelerates the trend to technology right and it accelerates zoom went from 10 million users to 200 million users in a month how many of those users don't need

the same commercial real estate when they come back out of covid and and so how much changes how fast this changes, how fast robotics is changing, how fast AI is moving. People that aren't close to technology don't realize how fast this is moving. And our old systems weren't built for that technology deflation. Because if you have deflation, debt explodes in real terms. you can never pay it back so if you have if you have effectively economy that's built on massive debt creation and you allow deflation you have to reset the debt and that's a problem that central bankers all over the world are facing they don't know what to do right and because this system and so instead of doing what you instead of facing the facts you keep

papering over the facts and every time you paper over the facts like if you look at the stock market rising because because you're juicing feds the feds taking anything off the balance sheets it's not capitalism you're picking the pockets of this uh of the poor and paying the rich because asset prices go up um and and that leads to division of society revolutions and wars and there's a reset in that event, no matter what. Yeah, I think this is a really important part where basically people don't realize the inflation has an impact on a portion of the population, but it also benefits the other portion, right? I actually recently tweeted and said, every time that more money is printed, the rich people cheer because they know they're going to

get richer, right? Because those asset prices will continue to rise over time. Whereas the bottom, you know 50 or so of americans in some cases the bottom 90 percent they end up getting hurt and they don't even realize it so it's almost like you've got one group that understands the rules of the game and the other that doesn't did you read paul volcker's quote back uh back a number of years ago um he he said we we've convinced we have a bunch of enormously rich people that have convinced themselves they're rich because they're smart and constructive and and it's not that it's because you've rigged the rules of the game and and and and by the way there i understand how hard this is from a banking policy and everything else so let's what to to do

that let's just use a little example and and you and me and our own little economy and it will expand it so let's say you and i went went to school uh together i decided to save money you decided to come out of school and and borrow money um to spend lavishly right you borrowed 500k i didn't i tried to save right and let's call that year 2002 your your economy what it looks like to everybody else around you you buy a house you hire gardeners everything else. If you can't pay back the 500,000, then you have a real problem. But if instead of paying back the 500,000, you borrow another million two years later to be able to do that, and then you buy another house and everything else, you could never pay back the 500,000, but

you use some of the million to be able to pay back the house, the interest and some to buy another house and then I as your friend I go and rent one of those houses and you and you believe and everyone looks at you and says wow look at how much success you have right and then you can't keep up to that and you borrow another million but you buy another house and then you think wow I'm going to create a business around this and you employ tons of people and you all that leverage is juicing returns and the asset prices are going up the whole time I'm waiting patiently thinking it's all a house of cards he can't pay for any of it it's all going to come crashing down i'm waiting for the day that uh that it all comes crashing down and i make my fortune with my cash

um when when when the market resets but what happens is i miss under and i misunderstand that um the central banks are part of that game right and the banking system is part of that game and everybody was fooled by all the jobs that that your gardeners your vacations your boats everything else created and everybody copying you doing the same thing and all of that leverage pushed up housing prices and my rents kept going up as well right i'm on the other side and it looked like it was really working and then 2008 it comes and banks stop lending to each other because they can't trust the balance sheets right all over the world the internet connections are global the central bankers think it's only subprime and it explodes everywhere um and and

if they don't save the system we end up with a depression right that's what would it would have happened in in 2008 a global depression um and that would have been really bad um but the cost of saving the system saves you and everybody else who who who leveraged the system and kills me because my cash is destroyed in value it's just a transfer of wealth and it's a map and so we wonder why we have um this insane amount of wealth disparity and it's because we're gaming the system and i guess in that situation then let's go to uh kind of the new economic model right so we're well aware that we're entering a new world a technology enabled world um in that world if we're able to switch from inflation to deflation what does the new world look like so this is

going to break people's brains but but again that's why it's hard to i think you need to detach the emotion from the facts if you actually if you could reset today today like imagine a total reset you had no debt in the world and you could reset you wouldn't need as many jobs right because jobs would fall at the natural rate of technology deflation and things would get lower and lower cost over that course and you also wouldn't need a massive social safety net to be able to protect the people that fell out because the natural course gravity would happen right instead of fighting gravity and pretending you're going to stop it you would allow that to happen and and actually capitalism would work perfectly in that system because the people who wanted to

work more would create all sorts of value and get paid more or the part that the people that fell off the that treadmill because jobs are coming out of society with robotics ai everything else people that follow wouldn't fall fall um and and not be able to feed their families right because their savings would basically be getting uh more valuable exactly and and and and and you exactly you're not you're not distorting capitalism you're not think about this right right now with because all that happened in 2008 forward now is we papered over the problem we created a way bigger problem right and now covid exposed that so the system is so much more fragile now and so you have governments and i talked about this in the book remember i

talked about this in the book before this happened right because it's predictable no matter what there's nothing that there's nothing central governments around the world are going to be able to do to stop technology technological deflation nothing it's a structural it's a structural uh difference and it's it's like i use this example quite often it's like blockbuster um 9 000 stores not seeing netflix because technology was moving so fast and didn't see that the rate of speed of download speed would change their economic model overnight um and instead of buying netflix for 50 million dollars they added candy aisles to their blockbuster stores right and if you if you zoom up to what we're doing what central banks all over the world

are doing we're adding candy aisles to the blockbuster stores right and and think about this so you have you're juicing return because if you actually wrote down the assets and this is an important policy decision too right and so it's not good bad people there's a whole bunch of people in in twitter land and everything else saying all these terrible people um if you're in their shoes and you look out and you see we have a global depression coming or we can try to keep this going this deck chairs on the titanic going you might do the same thing right so the policy response right now is um yeah they're not looking at the second order and third order consequences of the policy decisions they're looking at right now what do i do with facing

this unemployment rate and everything else but by by throwing money so to yesterday the fed announced the 2.3 trillion dollars in essentially junk bonds right um and and that would look like subprime that would have the whole thing would have gone to zero and so the fed took that off the balance sheet of people that are that created the problem and and replaced fresh cap uh fresh cash the result of that means the asset prices don't fall like they need to right so as asset prices are automatically juiced and they they stay high and they'll go higher because you're destroying the currency underneath um and and then and then a whole bunch of people left out of society you have to pay them too to be able to pay for those high asset prices and rent

and and so the amount of wasted money staggering on both sides of this equation and you're driving this divide socialism capitalism and both people are talking about the system the old system and all the solutions on top of it are old solutions on top of it because they don't know that it's a structural change. Yeah, I think part of this is people don't understand how the system works, obviously. But what you're talking about here is in this deflationary environment, there's two things that I think are really important. So the first is this idea that right now we ask American citizens and citizens around the world, be an expert at what you do for a living. So whether you're a teacher, a fireman, investor, you know, whatever it is you

do for a professional living, you've got to be a professional, right? You've got to be one of the best. Then we also say, by the way, you can't just make money and hold on to that money because ultimately that money will lose value over time. We're going to incentivize you to either spend it or invest it. And so you can spend it, right? You can be a consumer and consume more. Or we then say to you, you either have to become a professional investor as well, or you're going to have to pay somebody who is a professional to invest the money for you. And so what ends up occurring here is the idea of saving actually isn't nearly as valuable as it should be, right? You're basically saving something that's just leaking through the holes in a bucket to some degree. And so when you move

to a deflationary environment, what you can actually say to somebody is the money that you are paid, if you save it over time, you will become wealthier. You'll be rewarded for having a low time preference and for saving rather than be incentivized to either become a professional investor or pay somebody to invest your capital. And I think that just that alone changes the way that wealth is distributed throughout the world simply by taking the bottom 50% and structurally putting them at an advantage rather than a disadvantage. Yeah, exactly. And capitalism works perfectly in that system right the um the so exactly so today instead of thinking it as money think about it as I put a pizza in the bank right so I can eat and I go back to the and I

and it's in four slices and I can eat for four days um and then I go back to the bank and it's in six slices right um and i can't i'm still hungry right i got um i got my um i got my pizza um but it doesn't feed me the same i got what they they they said but they divided it and it doesn't feed me the same and so if you think about what's happening in our economies right that's what's happening in um in in our economies and so no wonder people are rising up um no wonder they're no wonder the bottom half is looking at at things we didn't see we haven't seen since the 30s right 20s and 30s socialism and how rampant that whole because the system right now doesn't work yeah let's talk about the transition period between the inflation to deflation right so we

kind of understand how the existing system works we understand here's a world that could work better um the transition is i think the part that scares the shit out of most people right they say and it should yeah yeah and so what in your opinion like how does that transition most likely happen um and then what is the good parts of the transition and then what are the there's scary bad parts of it so so a cleansing of the system is required right that cleansing of the system is going to happen one way or the other that's if we keep doing what we're doing um currencies are going to break um because now it's just game theory and global currencies and everybody's printing more so if every currency is printing more you've ruined trust of what a

fundamental unit of value is and and if you can't trust that trade trade collapses and and and so that's not that's this that's a huge problem but that's a small problem the bigger problem of that is politicians get elected with that and and blame other people for creating the problem which creates revolution and war right you can see that in your political in the u.s political cycle today you can see it around the world and it's all caused from the same thing it's it's people want to believe somebody and they'll believe anybody it's and it's easier to say it's his fault rather than take to say it's a structural problem it's easier to blame somebody it's easier to blame china it's easier to blame somebody else and then as that starts to happen and you you you have you

have to create a bigger enemy is effectively what that looks like um and so if you keep doing what we're doing that's what you can expect revolutions and wars to be commonplace um they're really ugly um and and and you'll have politicians that take the the bottom 50 percent and say it's not your fault it's their their fault and when that divide becomes too much those assets will get taken anyways right it won't look so so the the rich in that case are deluding themselves if it can go on because there'll be pitchforks in the street and then that'll move from country to country that's what the existing system looks like um if you allowed inflation to happen if you just said um full stop um and so one argument that's a bad bad outcome right the other argument is

potentially just as bad an outcome and that let deflate let capitalism work and stop propping up banks everything else and let the system fail and reset you would go through a global multi-year depression right and and and there would be a lot of unemployment there would be a lot of problems in that so so because the problem is now so big the solution there isn't i would love to say there's a really easy solution and here's what it is um i can't say that right now and nobody can and the people that are saying that are deluding themselves right they they're not looking at for this from a first principle standpoint or looking at the second order and third order consequences of the decision but those are the facts where we are and so i guess in that environment so if you

go with the first one where there's the wars the revolutions etc it's not so much uh one country versus another it's basically the people versus the establishment right but the problem is it turns into look at the rise of hitler and in the 30s right um it was a friend it was a fringe party that came into power because there were bread lines in the streets right and and that and that happened because u.s called their debt right and and they had to go into this hyperinflation environment to to get out of the debt so they had to print money like crazy to get out of the debt and that forced people in the street with no jobs and they couldn't feed themselves and in that environment people rise up and say it's not your fault it's these people that have

the money it's their fault and when you've done that and that's not a big enough thing to retain power you have to create a bigger enemy outside your country so you're right the first order consequence is rising up in the streets right in inside countries second order consequence is that's not a big enough enemy to retain power and so you have to um it it's such a it's really predictable right we've seen it through throughout history anytime you get into this uh this currency battles this is this is what is likely outcome and it doesn't need to look like that but there needs to be very critical debate on the first principles on what's changed um to be able to avoid that to be able to avoid that outcome and i guess then if you go to the

second option which is let the system fail right let the bad companies get flushed out etc is the argument that they won't do that because of the short-term pain that is the that's that's that's the argument the the the short-term pain name a politician that does the long-term good right the the it's it's really difficult to to to to play a long-term bet against how much short-term pain so that's that's actually what and i know you're a fan of bitcoin i am as well um i hope i don't need it right i really hope i don't need it but but all of the data is supporting that i'm going to right because if i need it what that means is currencies have failed everywhere and it becomes a new standard and we have a harsh reset and it

explodes in value yes it creates a lot of wealth for people that know that early that are the tons of wealth but the reset is so severe in the world that it also creates staggering pain right yeah And I guess as part of that, is Bitcoin the only answer? Or is there something like gold, right, that's just kind of more sound money? Or maybe there's something else? Like, what do you think the potential solutions or options are? So as a policy response right now, and I'm involved in this in Canada, but you saw the same thing Tim Cook said,

the best policy response right now would be, where are the jobs in the future going to be if you if you're an individual country or state or anything else where are the jobs going to be um and and double down there instead of propping up the the existing system right make a huge bet on where the jobs are going to be in the future that bet is technology right and and so technology is going to accelerate from here and that is where the jobs are going to be but it won't create enough jobs to replace the one that is they're destroying that's kind of the point so if you're playing game theory and doing what you could do for an in one economy double triple quadruple down on technology because you built it's a it's

the new they used to build roads right the roads are now technology lands right the the backbone of our world is a technology landscape and that's where and that's where the investment should be going for the countries that do that they'll come out stronger right but if every country does that which is likely it's pretty predictable if a bunch of countries did that and everybody's competing for the same scarce technology jobs and it's going to you're going to have depletion anyways like no matter what um so from a so that would be the policy response that could that could actually probably make at least the money that you

spend make a bigger difference to your economy and then you wouldn't naturally prop up prices that should fall and it would transition slowly

with the amount of debt in the world the amount of debt in any economy you're going to still have to reset that debt at some point and and that that reset a lot of people are going to be wiped out right a lot of people that think debt can debt can be paid forever by increasing more debt more debt more debt those people are going to be wiped out what happens to uh governments meaning uh the national debt and things like that where it's not on the individual level or kind of the the individual corporate level it's actually

on a more macro scale something like the u.s government's debt well that's a that is the same thing it's so that's why i say the game right now is in currencies right and so so it's moved from the debt went from technology companies dot-com boom to housing to asset bubble after asset bubble after asset bubble and it and that wasn't enough and each time you needed more debt to replace the problem created before because the structure has changed right and now it's just moved to currencies so that's actually why bitcoin is a logical progression because what is a currency right all it like it's a piece of paper with faces on it it's uh um and if if if pump you um you lend me a whole bunch of money right and i can't pay you back but i have a little magic printing machine

that i can change the the nominal value of that currency and pretend to pay you back you probably wouldn't do that again you probably wouldn't lend me again right and so that's what's happening in governments all over the world you're starting to get to you're starting to get that critical point where how many zeros can you add to this thing and still trust the foundation of currency and you can't yeah i recently wrote something where i basically said uh the magician has been exposed right and it's this idea of like the entire economy is built on the fact that 50 percent or more of uh the participants in the economy don't understand how money works because if they did right so henry ford but if they understood how it worked they'd be you know

revolting in the streets by tomorrow right and so i think what is happening right now and i'm still kind of thinking through it so don't hold me exactly to this but it feels like the federal Reserve is having to explain the magic trick to the national audience. And what's interesting to me is you've got, you know, 16 million Americans, give or take, who have lost their job in the last three weeks. Add that up with the 5.8 million that were already previously unemployed. So you got about 21, 22 million Americans that are sitting at home, no jobs, should be in the labor force. There's no sports on television, right? And so all they can do is they can basically play on social media, they can watch Netflix, or they can pay attention to COVID-19 and economic news, right?

And you're probably busy as a result. Yeah, and it's just not that much going on, right? And so this is kind of like prime time television is what's going on in the economy and with the virus. And so right at that moment, when everyone's paying attention, and also everyone's fearful, you then get the Federal Reserve saying, we have unlimited money, we can just print the money, right? We're going to print 2 trillion here, 2 trillion here, here's another trillion, etc. And what I think happens is all of a sudden you're giving a crash course in what money is and how it works to the bottom 50% that you never wanted to understand how money works, right? You were counting on them not to know it, but now you've revealed the magic trick to them. And so the question that I think will come out of this is something like, wait a second, you can make as much money as you want out of thin air.

Why do I pay you taxes if you can just create the money anyways, right? And you start to get more of these like populist type questions where people start to just say, this doesn't make sense to me. Right. And I think that's kind of step one of many, many steps that eventually end up in social unrest. But, you know, it's not immediate. But I do think that it all starts with kind of revealing the magic trick and having to do it on a national stage and transparent because you're trying to solve the short term problems. yeah and I don't know I don't know even so if you looked at primetime tv do you think do you think anybody really understands the magic trick I don't think that there's any explanation of it what I think ends up happening is people see wait a minute where two trillion dollars come from right and they're almost like it's like being the difference between going to a college and sitting there and somebody's saying okay pull out the textbook and we're going to teach you you know line by line exactly how this is theoretically supposed to work versus somebody says hey you

want to be a fireman run into that fire right and either you figure out how to fight the fire or you die and over time what ends up happening is the people who just learn by doing that's essentially what's happening here right as you're learning by seeing it actually happen and so not everyone gets educated but I think more people are educated watching this than probably you know previously by just going to school or something like that maybe and that's why it shows like what you do is so important right now um because because it breaks through the uh it breaks through the clutter that people are people are talking about and and and and and give some light to some of the first principles what's really happening behind the magic curtain yeah what do you think

the uh the tv covers that we're seeing right now good bad uh everywhere in between i try not to i try not to tune in and watch because because i find i find it's all done for soundbites and for um and and and it's short term and everything else i i don't think the right solution i don't think the right thing to do in in in is say what would you have us do right and and still make the wrong decision right so so so i i understand the problem right i totally understand the problem i understand where governments have created so much money and they'd kick the can down the road remember nasim talib's uh um nasim table's uh quote that sometimes preventing the forest fire um creates a bigger fire on the horizon because the you don't clear the bush and the dead bush

so the next fire is way bigger that's what we're doing right and so so that is not solving a problem that is making future generations pay for a problem that is exponentially bigger so what you have right now and actually if you looked at the numbers it's it's such it's crazy you have technology moving exponentially right and and you know this but technology runs on Moore's law which is an exponential pattern and and even if Moore's law ends in a number of cycles quantum computers the digitization ai is moving so fast you could assume we're going to have an exponential pattern in technology for a long time to come why that matters a lot i use this to quote before if you fold a piece of paper 50 times on itself um at fold 50 i've asked this to tens of

thousands of people and most people would say uh it'll fold 50 it'll be two inches thick at fold 50 if you could you can only fold it seven times on itself but at fold 50 the piece of paper would be from here to the sun and and what you just did with your face is i've seen that tens of thousands of times and it's not a it's not that it's just an exponential pattern it's not i'm smarter the first time i saw that i thought there's no way it goes to the sun i had to google to see it all human beings miss exponential patterns we're bad at it everybody otherwise you'd have way more guesses that went to the sun right so so and if you looked at the data so we all are bad at exponential patterns but we have an exponential pattern underneath technology

that's that's that's doubling at that rate and we're looking backwards in time of technology and making predictions on a linear scale looking forwards and what's happening right now in technology we're in this the steep steps right so name a technology company or an technology industry and what ends up happening in the early folds you have this hype cycle they call it the gartner hype cycle right give this hype cycle because people overestimate the impact the benefit um and and they and it rise tons of money goes into that and then it collapses but it keeps doubling and so what ends up happening is on the first fold of the piece of paper it looks like nothing and so tell somebody tells you it's going to on the second fold

it's going to be great second fold it looks like nothing we're on fold 33 right now if you take those analogs together full 34 doubles the last 50 years and and and if you now compare that to the debt creation it's a mirror image the amount of debt to try to pretend we live in the old world is rising exactly lockstep to to the amount of technology deflation that's happening and if you if you add in the unfunded liabilities social social safety net pensions everything else in the black pool everything else you would see it really clearly um and and if that wasn't bad enough right so to prove the point that the old system won't work anymore that's looking backwards looking forwards that's that's kind of what i put in the book and a lot

of people are talking about right now this was perfectly predictable right perfectly predictable because the amount of debt needed right now to to keep to pretend we still live in the old world is so crazy it's so much more than even the wildest predictions on twitter are saying and so at some point that breaks yeah do you think that there's a world where they recognize this and they just let it break they let the defaults happen and they let the cleansing or is it just it's impossible for them to do that because of the game theory now we're now we're playing with uh probabilities so it's hard to say these the the next number of years is going to look very different um uh it's going to break

anyways no matter what um it do if if if there was a global coordinated effort to say we're going to write off some of this a whole pile of this debt write it to zero a whole bunch of people fail and we're going to have a new standard like bretton woods um where we can trust money again globally bitcoin wouldn't survive in that you could create a digital bitcoin that was backed by all currencies that could actually replace trust. That would be, and by the way, I'm personally long on Bitcoin, so that might not be a good thing for that value, right?

But I don't think that that could happen in today's trust environment. Yeah, it's almost like the things that they would need to do in order to be successful, there's just no way they'll do it because it would involve such incredible global coordination among countries that just don't get along in a world that the the the lack of trust is actually coming from the same

thing that we talked about before the lack of trust when every country needs to manipulate their currency to drive the global jobs agenda right then there's a total lack of lack of trust in uh in in currencies and to try to come back together and say we're going to fix that globally right now, I don't think there's a chance. And that would play into why I'm really long on Bitcoin, because it's going to happen no matter what. Yeah, it almost feels like there's this element of you get one of two options, right, to solve the problem. The first option would be global coordination, where everyone trusts each other, we come together, we create a new standard, you write off the old debt, and we move forward under Bretton Woods 2, right, or whatever you

want to call it. But that involves complete trust of everyone at the table to kind of coordinate and agree together. The other option is trust no one, right? Which essentially is what Bitcoin is. And the trust no one option means there's going to be no one in control, there's going to be no one in charge. And you actually don't need to trust anyone else because you have the full transparency to verify, you know, kind of blocks, etc. And so you either get 100% trust, or you get 100 you know no trust and i think you're probably in the same camp as i have like i just don't see the world where everyone comes together and coordinates and therefore that would suggest then you end up in a world where trust no one ends up being the dominant kind of approach

yeah and if you play that play that forward so game theory predicts or that um the sum of everyone is better when people cooperate right um but what ends up happening is everyone coordinating cooperating creates an incentive for somebody to cheat right and so as and so if you look at that through uh through bretton woods or anything else even paid changing the gold reserve off the so everyone cooperated world's in a great place um and and then u.s can't pay vietnam wars and everything else off the gold standard and causing people not to cooperate as much for a while that fiat currency backed all other world currencies or 80 percent of world currencies and it looked like it was going but you started

manipulating at which point every other currency has to manipulate too one has to manipulate to drive their job zero does every other currency so and that problem gets bigger and bigger and bigger so if you look through game theory what ends up happening is um you have you have cooperation and then then no cooperation and then cooperation again and no cooperation the lens of the world um it's a simple example would be driving in the carpool lane right if everybody if the carpool in is only used for people who carpool it works really well for people who carpool if a lot of people cheat then incentive accrues to those people who cheat and then if nobody catches those people that cheat everybody cheats then there's no carpool advantage right so so looking

through this whole thing through that through that lens and countries and currencies and everything else is a really important thing but i would totally agree with you i cannot see um it's a it's a small possibility but it's uh it's improbable that governments today this far away from from cooperation could come together and cooperate on a global scale that needs to happen to be able to prevent kind of a reset yeah so it's a pretty crazy world we're living in what's the one thing that would change your mind like is there something that could happen that change your mind about needing to move into the deflationary world i don't think so i i so so um if technology is deflationary and that's not and when i say if it is clearly deflationary right um

it's that's not a guess it's a fact and if technology is moving into every industry then then there's no possible way that we can run an inflationary world anymore without jerry rigging a system and that's what we're seeing right it's it's that's why i say it's way more important let's just talk about let's just talk about the changes that are that have happened and rebuild a society that works better for everybody using what's what the facts are clearly pointing out yeah it's it's a really interesting thing because i think that there's the structural uh challenges right obviously which you've outlaid in terms of where we are why it's unsustainable uh and then it's very clear as to where we need to go the big question mark i think

is that transition period right yeah agreed yeah and and on the transition period um i just don't see one where out where there's no social unrest right i don't see like an orderly transition um and that's the part that i think a lot of people are just like how do we do that uh and the answer is they keep coming to make them uncomfortable yeah so and i think that's but that is the truth right so so if but if deflation is is is is in our future if what i say if i what what i said have people look deeper read the book you could debate that fact and everything else and and prove me wrong on that i can't see any um any uh world where that isn't isn't true but i'm happy to debate that to pay that back the other thing is it's just starting it's going to get way worse

the technology um if you think about think about how many people that are working from home now will stay working from home right think about what that looks like think about the acceleration to digital that's happening right now out of covid and and how that accelerates uh retail store closures how that accelerates um a whole pile of industries commercial real estate that might not be made to price where it is because it's not needed as much um so it's so it's it's all over place in every part of society but if that's a fact and i think it's a pretty clear fact then then let's talk about what the solution looks like in that because if you need to protect people's wages and though and you don't need to juice those people's wages

to protect um a staggering amount of debt that you created in the first place right if if if you don't need to pay them more just keep up with the treadmill that you put them on in the first place right wouldn't that be a good thing so so next next year instead of your your mars bar costing nine to a dollar it costs 90 cents and the year after that 80 cents and everything else and you're falling isn't that a good thing for society um there's there's this misconception about economics and people put their head in the sand with economics because they think it's too complicated and here's the thing a lot of that economists make it too complicated trying to explain things that just clearly aren't there um and and and and that

scares people from asking the the first principle type of type of questions economics isn't about value it's about scarcity right the air you breathe is the most important thing in your life right now you don't pay for it right you pay for it if you go diving underwater where air is scarce you pay you might pay for it in in in vegas where if it's uh if there's lots of smoke in the air or air is polluted but you don't pay for your error because it's abundant and free and you can't create economic models about where there's abundance technology creates abundance everyone right and and so so and that's a good thing for society we should allow we should we should be celebrating yeah it's this crazy thing where um there's a separation between what sounds

uh to be the right saying kind of prudent thing and the thing that everyone's drunk and addicted to right and that's ultimately what it ends up coming down to yeah yeah that's you you you said it perfectly it's it's a hit of cocaine right and you need a bigger hit every time to think eventually the patient dies yeah before we wrap up uh i always do rapid fire questions what uh what's your most controversial thought in either technology or uh or finance yeah controversial and finances is this one that in technology AI is going to effectively the speed and rate of growth of growth of AI and AI is going to be smarter than all of us or creative or everything else it's logical a pattern every single job

is a function of intelligence so how could you get more jobs if you if AI is going to be smarter than all of us how long does that take low case the uh the top researchers are saying five years i think it's going to be longer than 40 years but that whole trend across that landscape is all going to be deflationary right because it's going to be more and more and more the entire entire time exponentially more the entire time but say it's 100 years it doesn't matter right the time frame so if that if that is going to happen which it's going to happen um then uh then uh then then we have to rebuild society to to afford anyways yeah what's the uh the best book you've ever read other than your own obviously

um i love thinking fast and thinking slow um just because it it forces you to i made a whole bunch of mistakes in reading the book where they take you through and and it forces you to realize to ask questions that you might not have asked yourself before and kind of find blind blind spots in your own critical thinking yeah this uh daniel pink i believe right daniel kahneman daniel kahneman okay got it uh very cool uh believer in aliens yes no no so it would say do i believe in in another maybe do i believe in in life in other worlds yes i guess so yeah it'd be hard to say on on how many worlds does to say no what is the logic for believing that there is other life i'm with you i just wonder what the logic is the amount of the amount

of the amount of planets and solar and stars in our solar system it's just illogical to think that there isn't life somewhere else yeah when you first said aliens i was thinking about people visiting the earth yeah well so uh i've asked this question to you know 260 270 people whatever it's been now and uh over 95 percent of people say yes you know i believe in something being out there etc which is a much higher percentage than i would have guessed before i started to ask everyone that question yeah you you ask a whole bunch of people that uh look at probability distributions and and uh and if you looked at the probabilities with that many planets it'd be impossible to say no exactly what um what one question do you have for me to uh to finish up

um more of not a question more of a statement uh keep doing what you're doing like this it's it means a lot right now it's really really important work um and i didn't write the book i don't need i don't need a book sale to for so i didn't write the book for any reason to so but somebody like you with your what you're doing makes a huge difference to it can make a huge difference to what's happening so thanks yeah i appreciate that as i tell people uh what started out as me doing a bunch of learning has now turned into uh there's a sense of responsibility to some degree right to kind of continue to share what uh what i think and uh and i'm learning so it's uh it's a weird world we're living in because i don't think i ever expected to to be in this

position but uh here we are as i'm sure you didn't expect to write a book at some point right exactly exactly absolutely all right well guys i hope that you guys enjoyed this um please go get the book the price of tomorrow why deflation is the key to the abundant future um obviously there's a number of really important ideas in there and uh i think that jeff's done a great job so i appreciate you jumping on here and i'll have to do it again as uh as that world becomes more of a reality Awesome. Thanks. Thank you for watching.