The Pomp Podcast - 295: Balaji Srinivasan On The Argument For Decentralization - Part 1

Episode Date: May 15, 2020

Balaji Srinivasan is an angel investor and entrepreneur. He is formerly the CTO of Coinbase and General Partner at Andreessen Horowitz. He was also the cofounder of Earn.com (acquired by Coinbase), Counsyl (acquired by Myriad), Teleport (acquired by Topia), and Coin Center. In this conversation, we discuss centralization vs decentralization, total state vs market anarchy, land vs cloud, the impending political realignment, failing institutions, and MMT vs Bitcoin. This is Part 1 of the conversation. We will release Part 2 at a later date. ===============================  Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at www.pompletter.com

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. Balaji Srinivasan is an angel investor and entrepreneur. He was formerly the CTO of Coinbase and general partner at Andreessen Horowitz. He was also the co-founder of Earn.com, Council, Teleport, and Coin Center. In this conversation, we discuss centralization versus decentralization, total state versus market anarchy, land versus cloud, the impending political realignment, failing institutions, and MMT versus Bitcoin. This is part one of the conversation, and we will release part two at a later date. I really enjoyed this conversation with Balaji, and I hope you do as well.

Now, before we get into the episode, don't forget that I also write a letter every single day to over 50,000 investors where I break down the complex topics behind business, technology, and finance. You can sign up in the description or go to pompletter.com. I try to break down these topics in easy-to-understand language while sharing opinions on various aspects of each industry. If you want to learn more about business, technology, and finance, it's a no-brainer. pompletter.com. Again, pompletter.com. All right, let's get into this episode with Balaji. I hope you guys enjoy. 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 Balaji here with me. Thank you so much for doing this. I'm super excited to talk to you. Cool. Good to be here. For sure. For those that don't know who you are, you've got a lot of relevant experience. And I know that you are not a fan of credentialism, but maybe just give us a couple of data points just on your background and training so that people can understand the perspective you're coming from.

Sure. So my background, you know, Stanford PhD in electrical engineering, also have an MS in chemical engineering. I taught computer science and stats at Stanford for several years. Started a genomics company, which ended up, I was CTO and co-founder of that, ended up being sold for $375 million. I was an angel investor in Soylent, Superhuman, Lambda School, Cameo, Bitcoin, early in Ethereum, Zcash, other kinds of things. Also, I was a venture capitalist at Anderson Horowitz, multi-billion dollar venture capital firm, helped boot up what became parts of our bio and crypto funds. I taught a MOOC course with 250 000 students worldwide back in 2013 so you know being an educator as well um and uh then

within crypto i did done a bunch of stuff i'm an investor in lots of crypto companies and coins and whatever um but uh most recently i took over one of our portfolio companies long story which i wrote about i turned that around turned into earn.com got that to profitability sold at coinbase was CTO of Coinbase, while at Coinbase did a bunch of stuff. But in particular, a few headlines took Earn and integrated into Coinbase, Coinbase Earn, which has done several hundred million dollars in sales from 2018, 2019. It's on the homepage of Coinbase if you tried it, right? And helped launch USDC, our stable coin, which has done very well, drove all the asset addition and so on there all this is obviously with a team of folks and whatnot um brought on

billions of dollars in assets for custody and basically just did a bunch of stuff there and then since um last june i've finally taken the first time off that i've had in more than 10 years or whatever um and um because that you know i can't like i'm not wired like a normal person to take a vacation um just because there's uh you're either doing something you're not doing it. And if you're not doing it, it's much easier than you don't have. It's like a homework assignment or whatever, when you're a kid and you have something due on a Christmas break. And, you know, so I can never take like a normal vacation, but, um, took time off a first time in a long time and basically just, you know, did math. I do math and I program and I angel invest

and whatnot. Um, and, uh, that brings us to the present day. Um, you know, and, uh, you know, I can take from here. For sure. Before we get into the fun stuff, what's the biggest surprise or learning you've had from taking time off? Like the thing you didn't expect to walk away with or learn during that time? I think I was surprised at how easy it is to, like the time passes fast, actually um you you wouldn't kind of think that um so yeah just it's it's not it's not like a learning or anything like that but rather um unless you go after things with the same discipline that you have when you're an operating executive it's easy to just lose a week lose two weeks or whatever which is fine you don't always have to be super efficient on everything um but that was

just something which I hadn't had time off in such a long time that I hadn't realized that. Yeah, that's awesome. You were one of very few early on that identified the potential issues with the coronavirus and were quite vocal about, hey, this is serious. This may come here. Here's potential implications. And frankly, we all now know many people, one laughed, two literally disagreed publicly. There was articles written kind of the whole nine yards. You've been vindicated kind of in a weird way of nobody wanted this to happen, but at the same time, you were able to kind of warn people, if you will. What is your evaluation as we sit here kind of mid-May of just what's transpired, right? We don't have to go in tons of detail. People obviously know a lot of

this, but just kind of what's your general evaluation of that health crisis? So I've tweeted some of this and i'm writing a bunch of long form stuff which i will which i will drop at some point um but uh act one was and is the virus crisis which is ongoing act two is the financial crash and act three i think is the crisis of our institutions um and i really think that uh we are in for some crazy stuff uh and uh i i you know i think i called some of these aspects actually pretty early on, but I think the new political axis or, you know, whether you want to call it trade-off axis or what have you worldwide is, um, you know, antivirus and pro-freedom. Okay. So those are like, kind of like the two poles, you might call it the total state

versus market anarchy. Okay. And, um, the, so what's, what's kind of going on here. So we're in the middle of this huge political realignment where old issues just don't matter as much and things are rotating and new coalitions are forming, even if there's some old party labels or things like that. And I think you can identify those two camps as centralization versus decentralization, as modern monetary theory versus BTC, as the state versus the network, as, you know, kind of mandatory versus free and, you know, health versus wealth. Okay. It's actually interesting to think of those as kind of opposite poles in the sense that the state is, you know, the actor that is now pushing quarantines and it's, you know, it's

enforcing stay at home orders, you know, masks being mandatory, all the type of stuff. And there's a genuine argument for it in the sense that many predispositions or presuppositions rather that people have about, okay, my neighbor can do their thing and it doesn't matter so long as it doesn't affect me, completely break down in a coronavirus world where if your neighbor is not taking precautions, you very well could get sick. And so you have an interest in their health in a way that you just didn't before. Now, in a sense, arguably that's good because, you know, okay, well, I have an interest in their health. I will help them stay healthier and keep myself healthier at the same time. You can make an argument from a skin of the game or alignment

standpoint that, you know, a community of people who care about each other's health will probably be better. You know, just like, you know, you're part of a fitness club or whatever, you know, and people lift together and that's actually good, right? But let's call this one axis, right? The total state. And that's the lockdown of Wuhan. That is the surveillance of folks with yellow and green and red codes, not just in China, but other places. That's price controls, et cetera. Okay. Now on the other side is market anarchy. And this is essentially the polar opposite of that. And this is, to caricature it in extremists, it is, you know, don't wear a mask, or I should have the choice as to whether to wear a mask. It is, you know, like the laws are necessarily bad, everything the state is doing is wrong, etc.

And, you know, but the good aspect of it is, look, we're going to need to decentralize, we're going to need to encrypt, we're going to need to protect privacy, and we're going to need to have a free market because the state may protect health at the expense of wealth to such an extent that folks are giving silly orders, you know, to seize masks, seize hand sanitizer, to impose price controls, to ban people from selling things at Walmart and Target, to stop Uber Eats from doing things. You know, Elizabeth Warren even proposed like banning M&As or whatever over a certain size. Those things have nothing to do with controlling the virus whatsoever. And of course, printing trillions of dollars, right? And so there's legitimate abuses and failures on the side of the total state that the kind of anarchy poll will correct and push against. And I think either of these two poles is probably bad, but what's, and that probably is bad. What's interesting is how many different permutations and so on there are in the center. It's like a very, you know, there's a number of different combinations and things you can do. Okay. And I'll give some of them.

So lots of many different countries. it's almost like the ideologies that they had almost didn't matter. And now they've just executed in totally different ways. For example, Sweden and New Zealand, you would have clustered them together ideologically before this, but they've taken polar opposite policies, you know, where Sweden has basically taken a let it rip policy and New Zealand has controlled the virus. You know, the US and Australia, you might've clustered them and Australia has contained the virus and the U.S. is, you know, not, right? But then even more than that, you know, to give some sense of where society ends up, you could have a Chinese authoritarian state. You could have a

Taiwanese democratic state that didn't even have a lockdown, but has managed to mostly keep the virus under control, or actually not mostly, seemingly totally. You could have, you know, a New Zealand policy, which is democratic, but also did a lockdown and got the virus under control. You could have Sweden's policy, which had no lockdown and is letting the virus go crazy. Or you could have America's policy, which is a cargo cult half-assed lockdown and then combined with letting the virus go wild. So it's like at least five different combinations, Taiwan, China, New Zealand, the US and Sweden. And then there's a sixth, which I think is emerging in the US, which is the snow crash strategy. And I think this is actually where the US is probably going

to land up, where some combination of Snow Crash and Ready Player One, the state has failed. It is actually not capable of doing the blocking and tackling. If it had any, you know, tricks up its sleeve, we would have seen them already at this point, right? There's no crack military unit. There's no, you know, special forces or, you know, super vaccine. There's nothing like that. There's no Area 51. There's no Manhattan Project. No one's coming to save us. And so once you realize that, that's actually, it's something where it's completely the opposite of the movies, you know, in Contagion or in, you know, any movie, you know, there's a, I mean, that's the biggest thing that Contagion, the movie got wrong, that the CDC was going to be competent, right? And I'm

not saying the CDC is completely incompetent. They've done some things right. You know, some the studies they've done are fine, but they are not actually able to control a disease and they're the center for disease control, right? So where I think we land up is some combination, and I'm not endorsing this by the way, but I think, you know, there's a few possible scenarios where the U.S. lands up. So one is, and these are not mutually exclusive, but let's call it Snow Crash Ready Player One. And then someone else actually said Asimov's like Naked Sun or Solaria is also another run. Right. But let me go through these. So snow crash would basically be where the state can't protect people. You know, for example, Amazon is doing like mass testing of all its employees.

It's developing all of these technologies to essentially turn Amazon's campus into a green zone. And potentially that becomes an export where they can export that to other corporate campuses and other communities. You know, it's like the natural extension of ring and some of other products that they sell, right? Where you basically keep the virus out with multiple layers of defense, everything, you know, the most extreme would be like negative pressure air rooms, but hand sanitizer, gloves, all that type of stuff. Then, you know, so basically what that is, is a corporate individual and community imposed order that controls the virus and keeps it out out of your campus. Uh, but you know, the commons are a tragedy. Okay. Then second is ready player

one, where there's proposals, serious proposals to print $2,000 a month for everybody. If you've seen that, right. And if that proposal goes through, and I think it might, um, you have a scenario where everybody is sitting at home and they're receiving $2,000 a month. And, um, that's, uh, money, which, um, see, the thing is, I think we're going to see both deflation and inflation deflation in the price of all the things that people don't want anymore. Like, uh, like, you know, air travel or, well, actually air travel is tricky. I'll come back to that. Let's say concerts, events, things of that nature, right? People will slash prices to try to bring folks in. Um, but then you'll get price inflation of things people do want like masks, hand sanitizer,

other type of things right and uh once you get soaring prices here's where the crypto stuff comes in or one of the many angles um you have soaring prices for masks for hand sanitizer and uh you know pulse oximeters all the type of stuff to deal with the disease as well as for things like food consumer staples because you've suddenly injected a huge amount of printed money and capacity supply is usually flat or down because people are staying at home, because supply chains have been disrupted, because folks overseas aren't shipping as much stuff and so on. So you have like much more money and flat or down supply. Well, and, you know, you have demand, right? Prices are going to increase, which we've seen, you know, for masks and hand

sanitizers. So then once you have prices soar, many states will impose price controls, which will cause shortages and or they will prevent the sale of some of these things. And eBay and other places have actually already prevented the sale, I believe, of masks and hand sanitizer. And again, I'm using it as a placeholder for a lot of other things that people would buy. At which point, markets go dark and you start to get the crypto economy, things like OpenBazaar and so on become important because you can't buy the stuff on an above ground market, like a mask or whatever is like hard to, hard to buy an N95 mask. Um, and you know, you can make the argument like people shouldn't be able to buy those masks. They should only buy a surgical mask or whatever.

I understand. Right. But the demand will be there that people will want to buy those things and they'll want to buy food and they'll want to buy consumer staples and whatnot. And so, you know, essentially this printed money that they get will be, I think, useful for three things. Uh, you know, one, maybe it'll pay the rent. Maybe there'll be some price control imposed on the rent or something like that. Two, maybe it'll buy food. And three, it'll pay for internet stuff, which is probably the most, you know, like something like Dropbox is probably going to have the least problem when, you know, if there's significant inflation, because their margins, their gross margins are so high that the marginal cost of delivering another, you know, Dropbox thing to

somebody is not that high, right? But then you have this Ready Player One world where people are basically staying home and being paid to play video games or just surf the internet, right? And they just don't go out, but consumption has dropped off a cliff. And then the third model is this naked sun model where, you know, folks go out to rural areas and work remote from there. And they kind of have a natural social distancing built into it. And, you know, they just socialize over the internet for the most part, other than being with, you know, like obviously they're probably with family members. Maybe there's some friends who move out there, but it's like more like a rural life. Like a lot of people used to live in the 1800s in the U S you know, you just relatively

low population density. Um, and you, uh, you know, maybe you put on your VR headset or you, um, you otherwise connect that way, but you have just, you know, greenery and so on around. It's kind of a beautiful landscape. Right. Um, so I'm not saying all of those, I mean, those are not mutually exclusive. All of those could happen at the same time. But we start to get a future that in the US, it looks very different than what is happening in green zones that have managed to keep the virus under control. Well, anyway, let me pause here because that was a long kind of burst, but I want you to get in a word and go ahead. No, I think keep going. The big thing that I would just, if you can clarify, so I think part of what you're talking about is like a decentralized

response and then the state response, right? And those two things are somewhat counterbalanced to each other. But it's not also, I don't believe you think that it's a complete blanket in even a country, right? So right now, I think most people would say, hey, the East has been very, very good from a centralized standpoint. And part of that is because the population buys into those centralized governments. Here in the West, there's a little bit less of that kind of buy-in. And so people are maybe somewhat wary and also kind of have this democratic view of like the government is one voice, but we also have a voice. And so that has been somewhat of a more decentralized response. I've seen you talk a lot though, like it isn't just country by country. You actually

may get a breakdown even further than that at the state, county, maybe even the city level. So kind of keep going on that thread, but just- Totally. Yeah, yeah. Sure. Should I address Yeah. So, so one very important high level thing I think is, uh, so two important high level things in my personal preference stack rank and other people may differ on this, but at least I think I am consistent, uh, you know, or, or, or what I say is consistent given this implicit value set, right. Which is, um, or not even implicit. I've been very explicit about it, which is I would rank, um, like a competent centralized state like Singapore. I think that delivers the best quality of life. I know Singapore is trying to get, you know, Corona under control and so on,

but a Singapore, a Taiwan, a South Korea, and now this gets to my second point, a New Zealand and Australia, right? They have managed to get the virus under control. So it appears, so is Slovakia. I think Estonia has, I think Israel has, right? These are places which, you know, I think will provide, those are like, that's the best answer, like a competent centralized state for something like this. Then a distant second is the decentralized response, the snow crash response, where in the absence of a competent centralized state, if you have an incompetent or even worse, a malicious state, the decentralized response at least allows you, your community, your company to get together, right? If you have a hapless government,

what's happened is the government is now, by not doing a good job of keeping the commons free of this virus, it's like a tax on every transaction that's happening. It's basically like an out of control fire that's burning because the fire department can't put it out. Because the CDC can't control disease, because the FDA hasn't approved tests, we have this viral fire burning that is imposed a tax on every transaction, right? Okay. So then at least allow individuals to put out the fire in their own little zones. That's a decentralized response. And then the worst is like the incompetent or malicious. And, you know, you can always argue which is which, but I do think there's a distinction, you know, malicious is like, you know, North Korea, right? Or something

like that. And, you know, incompetent is simply just much of the US, unfortunately, right? And frankly, the UK, France, Italy, Spain, even Germany, right? Basically Western Europe, the US and Canada have actually had some of the worst responses to this, which I can get into. And, and, and so when you've got an incompetent centralized state, they're doing things like infinite lockdown with no plan. Right. And that's not, that's, that's also, that's stupid, right? Like one way of thinking about it is every country that is doing lockdown, whether they admit it or not, is copying China because China did it first. And it was like, oh, my God, I can't believe they're doing this. And, you know, at first there was a lot of, oh, they would only do this in autocratic and, you know, crazy society, et cetera.

Then people basically ignored the virus while it was spreading through China and then Iran. And it was only when it hit Italy that actually people are like, wow, it could actually hit here, not in a third world country. And I'll come back to that point, by the way. China is not a third world country. I think one of the biggest issues that people in the US, especially I think on the East Coast, had is they still have a time warp model of China from the 70s as a primitive country or, oh, it would only happen over there, blah, blah, blah. And it's simply not, right? It's a very sophisticated place in many ways. And I'm not saying it's all good, but I'm just saying to appreciate that. Anyway, once it hit Italy, and Italy went into lockdown,

then in mid-March, the US copied Italy. And so you're copying a copy without admitting you're copying. And whenever that happens, I mean, you're in tech, right? Like as a product manager, if you're copying a feature from another company without admitting you're copying that feature uh you get like a zune

kind of experience remember the zune versus the ipod right or uh you get like um just i mean early bing bing is actually okay today but like bing versus google you're just just having an ersatz you know version of the same right and uh you know one mental model is you have this um you have this very agile state uh you know that is able to execute this kind of lockdown and then you have this lumbering american you know or westerner who tries to follow the same gymnastics and simply can't do it right and so it might you know when you're talking about like how the chinese executed lockdown or how you know it's being executed in other places um it's not just, oh, everybody go stay at home. It's like a hundred things they were doing. For example,

centralized quarantine, right? They set up these field hospitals, but they built these things in 10 days. And the hospital they built in 10 days wasn't like the thing in the Javits Center. It was a hospital that had negative pressure rooms. I mean, the Javits Center, I mean, look, it's fine that they built it. I'm not taking anything away from it. But the Laishenshan Hospital that was built in China, had negative pressure rooms. It had telemedicine for doctors to come in remotely. It had drone delivery bots. And it was basically set up so that you could remote operate the hospital and the patients weren't, you know, exposing like doctors to the virus because healthcare workers were dying over there, right? You know, it was stuff like, you know, drones with

thermal imaging cameras. It's stuff like, you know, mobile CT scanners that are very high throughput that can just scan a bunch of folks. It was simply a technological feat where all the levers of both technology and policy were applied at the same time. I wrote a blog post on this, by the way, you know, I tweeted it like, you know, a piece of it was, you know, Chinese government's guide to containing the virus. It was like in V7. And again, to be clear, I'm not saying, you know, oh, China is good and moral or anything like that. I am saying that insofar as you're copying a copy, you should at least understand what it is you're copying and what it is you're doing. And what happened was in China, the lockdown was executed. And I've tweeted about this also. You

can see my tweets in March on this. But in China, the lockdown was a top-down thing that was executed by the technocrats running the Chinese state. In the US, lockdown was like a bottom-up cry from Twitter, you know, from like all these academics or engineers or whatever, like Tomas Pollo, like, you know, he wrote a great article, like this hammer and dance. He's like a random guy. Right. And he's fine. He's smart. Right. Like, I'm like, I'm glad he wrote the article and so on, but this is something where it's rear wheel drive. The smart people are not in our present state. You know, these people literally can't divide, you know, like, I don't know if you saw that, that thing where, you know, like everyone, Bloomberg could give everybody a million

dollars in the US. It's true. And Brian Williams nods at this, right? Like, like, you know, and obviously our, our, you know, whether it's the mayor or the governor or the president, like these, these folks are not like, they're not doing a great job. Right. And so you have something where it's not just the idea it's execution right and the idea is oh have people stay at home and then execute all these complicated series of steps to control the virus well uh you know we we simply don't have the talent in our state to to do that um and so uh so that's a huge divergence in a branch point um especially relative to the past because you know 1950 1968 you know the u.s did Apollo. Within living memory, basically about 52 years ago, the US was number one. It could do

things that nobody else could do. It was the best at coordinating huge projects. It could bring men, material, everything together to get things done. What's happened is that the state capacity of the US since basically the Apollo Project has just fallen off a cliff. And the state capacity of China and actually India and other countries has risen over that period. And now there's a crossing point. There's no way that China in 1968 would have out-executed America in 1968. But China 2020 has out-executed America 2020, as has, frankly, Taiwan and New Zealand and Australia and Slovakia and Vietnam and all these other countries. There's a website called endcoronavirus.org front slash countries that goes into this, right? And so it's really important to

recognize that in the same way that it was important for, for example, Steve Ballmer to understand that Google had out-executed them before you can actually, you know, that Apple had out-executed them, right? Like, you know, he was famously in denial about this for a long time, you know, and there'd be this sort of corporate nationalism, you know, that would happen in Microsoft where he'd say, oh, you know, I tell my kids, you don't use an iPhone and you don't use google and it's a great way of of basically blinding yourself to what's happening in the rest of you know the industry again not saying that you copy it directly and naively i am saying that you understand when someone's ahead of you and what they're doing and and you if you decide to

clone it or you build something better fine but don't don't be in denial about it right um another example of this that i tweeted was you know with yeltsin uh you know who in the late 80s came to the u.s right so this was around the time of the thawing of u.s and russian relations right after towards the end of the cold war and uh yeltsin came and he visited and he saw like a nasa control panel or whatever right and you know he was like uh we've got rockets in in the soviet union as well not a big deal whatever right but you know what he was really impressed by what's that it was uh there was a random stop that they made on the trip home to a uh supermarket and when he saw like this randall's supermarket okay randall's was just

the name of the chain um he was awestruck there's a famous photo of him like just holding up his hands in dismay and basically he's like because the thing is that an american supermarket had so much plenty relative to the drab Russian supermarkets. At first, he thought this was some special showroom supermarket and a fake one that he'd been brought to because that's what the Soviet Union did. It faked everything. He's like, this is fake or whatever. Then once he realized it was real, he realized that even the leaders of the Soviet Union, of which he was one, he was a very exceptional person who was allowed during the time of the USSR to travel abroad, not just anywhere, but to America, right? So even the leaders of the Soviet Union had fallen for their

own propaganda about how, you know, the capitalist West was behind and so on and so forth. And the leaders of the Soviet Union didn't have the quality of the supermarket experience that a random working person in Texas would have had, right? And so he said, you know, look, if people at home knew about this, there'd be a revolution, right? And so, you know, this is something where it's so, so, so important to not have excessively nationalistic or corporate nationalism or whatever nationalist blinders on. I'll give a third example. Do you know what the Meiji revolution was? I do not. Okay. So that's how Japan modernized. In the mid 1800s, they'd been an isolated society for a long time. And to shorten a longer story, in the mid 1800s,

they came into contact with, um, you know, the West, right. And, you know, these, these boats arrived and opened up Japan as a market and so on. It's famous kind of story. And the Japanese realized they were behind, you know, they had been isolated for so long. And, you know, here were these Westerners with all of this technology that, you know, was like just a level of magic, almost like, like a UFO landing level, level thing. Right. Um, but they were very pragmatic and very smart. And they said, look, we're going to, we are going to change our national slogans, right? And, you know, gosh, I'm going to find the term for this. Hold on. There's a, there is a, yes. They, they changed the slogan. So it was, the new slogan was enrich the country,

strengthen the military. But the, hold on, I want to find the, they have different slogans for different eras. Let's see if I can find it. It was, it's sort of like a mission statement, but for the country. Right. Um, I, I think it was something like, uh, expel the barbarians and revere the emperor. Right. And, uh, uh, one second. And then, um, and then the new one was like enrich, I'm probably butchering this, but the new one was, um, enrich the country, strengthen the military. So point being that going from expel the barbarians

and revere the emperor to, uh, you know, enrich the country, strengthen the military. That's, that's actually very different, right? The first is, um, you know, a slogan, which is about stasis, right? Expel the barbarians, revere the emperor, right? And the second is a slogan, which is about growth, right? Um, you know, enrich the country, you know, strengthen the military. and uh that's that's a radical shift actually right it's a change in mission statement and so um and so japan modernized and they became you know that's why uh they you know they're the first um you know non-white country to actually beat a european power that was actually a very big deal uh the russo-japanese war in the early 1900s right um which was the first time that a

non-white country had beaten a white country you know or european majority i already want to call it um in a war and it was a huge thing for like colonialism to uh it was one of the big things that helped um colonize people realize they could win right and i you know like that gets to all kinds of historical stuff but my main main point on this was uh whether it was sethia turning around Microsoft, whether it was Yeltsin looking and seeing how behind Russia was, whether it was the Japanese going and doing the Meiji, you know, restoration. This was something where folks who were smart realized they were behind. And rather than get all outraged about someone pointing that out, they're like, okay, we're behind. How do we get ahead? Right. And this actually brings us to

China, which is 1978 when Deng Xiaoping took over China. It was very difficult, by the way, for him to take over China. That's a whole story. Most Americans, it's actually kind of interesting to me. This is actually one of the more important things to know, like how did China become rich? How did India become rich? Just like you'd read a Harvard Business School case study on Netflix, right? Or Amazon. How do these countries turn around? You read about how companies turn around. How do you turn around a country? That's even harder, right? Much harder. And I think there's a lot of lessons for business and management and so on. Even if, again, I'm sure they'll do the comments, oh my God, China's evil. Okay, got it, right? Fine. I may agree with you

on many of these premises. Just like the Soviet Union was evil in many ways, and yet we can discuss it in a dispassionate way that, you know, like they did do Sputnik, right? And that was something that helped put out the space race and so on. And so, you know, we can kind of separate those, those two bits, right? Okay. Coming back to Deng Xiaoping for a second. He also turned around the country, right? So it's a fourth example of these turnarounds, right? Satya turning around Microsoft, you know, Russia, at least partially turning themselves around. I mean, they had a horrible go of it in the 90s with the transition to capitalism. But former Soviet Union countries like Estonia did extremely well. Poland has done well, and so on. So on net, it's probably,

not probably, it is a win. And certainly Japan did well. Okay, so how did Deng Xiaoping turn around China? Well, he had a few things which have become slogans now. You know, the famous one, you know, black cat, white cat, doesn't matter if it catches mice. Another one was, let some people get rich first, which basically said, look, I know that we're going to go from everybody equally poor to some degree of quote, you know, income and wealth inequality, but that's okay. So long as you realize you'll get, you know, wealthier later. And these are very compact slogans, right? Let some get rich first doesn't mean you'll never get rich. It just says by injecting the word first, it's like, okay, fine. They go first, I'll go second, but it's fine. Right.

Later, there's another slogan that the Chinese have, which is the backwards will be beaten. Okay. That's very important where, you know, there's a guy called Scholar Stage on Twitter. I may be butchering that, but he has a good article on this, but the backwards will be beaten basically means that, you know, China, you know, it's a proud country. And during, you know, the opium wars and, you know, during the, how the Japanese invaded them during World War II, you know, they were, they were brought low, right, by folks outside with superior technology. And so China itself has a balance between rationalism and nationalism, right? So, and these are intention, okay? Okay. So nationalism is, you know, like be proud. China is the best, you know, et cetera. And rationalism says, hey, we may not be the best in something. What are we not the best in? Let's learn about that. Those are intention. Okay. And, you know, when you combine them, you have something where you can both advance science and, you know, strengthen the military and the country and so on and so forth. You know, another place that rationalism and nationalism are intention

that you're actually very familiar with? Where? Crypto. Because every crypto tribe, there's the nationalism of boosting my coin and there's the rationalism of the technology and the science and the features of other coins that might be worth adopting or thinking about

or looking at, you know, obvious example being, let's say privacy, right? You know, anybody in Bitcoin should know about Zcash and zero knowledge. And that's just important, right? That makes Bitcoin better, right? And if you're in the mode of, oh, everything's a shit coin or whatever, that's just excessive nationalism, right? And not enough rationalism. Now, with that said, something I have learned over the last six, seven years is there's more value to nationalism than you might think uh you know because you can um the the tribalism of crypto is in a sense an

extension of mac versus pc or you know emacs versus vi there's something about it where it's not just a technology but a community and it's a sunk cost and there's something where a community gains value from expanding because if you have a billion people using iOS, it's better for you as an iOS user than if there's only a million people, right? Which is kind of why this technology evangelism takes place on a, I'm not saying it's like always that quote self-interested or whatever, but it's, it's, I think it's one of the reasons, right? And that reaches its apotheosis or maybe not, maybe it's not Zenith yet. Maybe there's, there's more forums yet, right? With, with crypto where there's a financial incentive to bring other people into your coin, et cetera, right?

So that irrational nationalism is actually helpful to fight off price drops, right? To say, this is the best. I don't care what it says on the screen. I don't care what you say. I'm going to close my ears. Never going to sell, et cetera. It's actually kind of good to have some of those folks in the community, but not too many because if there's too many, then you can't improve or react to anything.

you'll never admit flaws of any kind. Right. So, uh, all right, let me pause there. Cause that's, that's like a lot of history, a lot of stuff. Yeah. So I want to go back to the China thing in a second, but staying on this nationalism versus rationalism, uh, it sounds like what you're saying is if you have nationalism without the rationalism, it's almost like everyone feels like, Hey, we're in this together, but we're all the poor people in China back in the day, right? Like there's no ability to actually, um, improve or change or recognize what needs to be done. It's just, we all bought into this blind belief. Yeah. It gets even worse than that though, because, um, it, it turns into, uh, there's no growth, right? The rationalism is what provides

a growth. The nationalism is what provides a tribalism. And in the absence of any growth, people fight over a zero sum pie because it doesn't just stay as nationalism. It becomes nationalist socialism where, you know, right. Like, like those tribes, you know, one way of putting it is, you know, you see this dynamic on Twitter, whatever ideology somebody may claim to have on Twitter, it becomes Twitterism where the most extreme version of that ideology is selected for likes and clicks and so on. And the folks who promulgate that are reinforced in that by other people's social reinforcement. And it just like is this feedback loop that is kind of a radicalizing sort of thing, right? You see this all the time. And no matter what your ideology is, whether it's

tolerance, well, you get F you, right? Whether it's a non-aggression principle, it ends in F you, right? These things, well, that's interesting. Non-aggression is F you. Now, of course, people say oh well that's just violence or whatever but no it actually means civilization as well you know like you know there's there's a the point of the non-aggression principle is not to go around saying f you to everybody the point is to maintain a civilized society and you know like it's it's something where uh like civilization is good even if people take it for granted right and um so so oh gosh i lost my train of thought um so let's bring that up let's keep going down that path of, um, how does that apply to China? Which I think part of what you're pulling.

Okay. Wait, let me finish. I just, I just remember. So, so the thing is that, um, all of these ideologies have become Twitterism and Twitterism becomes zero sum because once you have tribalistically managed to shoo off everybody, shoo off all growth, shoo off anybody that wants to improve it and so on, then you fight among other people for who is the most tolerant of them all who is the maximalist of the max you know like this this kind of stupid thing right like in this in this very closed loop of people where you try and find some flaw that this person had and then just attack them right you know and uh and that's actually the trap that you know china was certainly stuck in for many many years right uh purge after purge after purge internal

political rivalries and so on and so forth. So that's where you get tribalism without the growth mentality. And then, you know, the flip side of it is you can also have excessive rationalism, right? Excessive rationalism, I think, is less pathological than excessive nationalism, but it basically results in you having, you know, a bunch of science and a bunch of engineering and a bunch of cool stuff, but, you know, somebody will come and take away all your toys it's like it's like in civilization you know the airplay the game of course yeah so civilization the game um if you put all your money into technology and commerce and uh and nothing else the guy next door with one spearman can just come in and take all your stuff right so if you

if you go excessively rationalist you do not survive either right so so clearly there's some kind of balance here. And I think that that trade-off is something that we're going to need to negotiate as a society because it's a real adaptation. And unfortunately, I feel we're moving in the wrong direction on it where people are becoming more irrationally nationalistic just at a time when it's actually more important to be open-minded. yeah so on this piece i guess part of this is uh is that balance right when you talk about negotiating the balance is that driven from the state level or is that something that's more bottoms up and driven by the people and who they elect into office and kind of the people actually

end up controlling that in some way it's it's all of the above i mean in the sense of um you know the state just as one example right um world war ii the uh the state uh had women go off to war and or not to actually fight but to like they were um working in factories and so on and then afterwards there was a new normal and women were working more more frequently right so something where a centralized thing came in from above changed behavior and preferences and then even when that force was removed there was still a permanent delta right there's still a change so that was something where top down and bottom up like you know even when top down left bottom up retained some imprint of the top down force and then kind of went on its own right um and so so

i don't think it's you know it's just one example like you know tariffs matter right like you know the the trade policy really matters immigration policy matters those are things that are set you know, somewhat top down and, um, we should say somewhat cause obviously outcry matters and so on as well. But, uh, you know, those definitely influence what is feasible bottom up. Right. So I wouldn't, I wouldn't be able to divide it necessarily, but what I would say is, um, certainly in, if you feel you're in a technology space, right. Um, it, it behooves you to look at every green zone that's out there and understand what they're doing right uh and then also think through okay what's going to happen in red zones uh and so just let me define terminology here

because i'm just using it for my twitter or whatever but uh a green zone is basically a place that's gotten the virus under control and in um you know you can be more precise and say It's a region with comprehensive testing that has no new cases in, let's say, you know, two weeks or four weeks, right? Some time period. And the reason both those are important, a region, so a spatial region with comprehensive testing. So, because if you're not testing, then I don't believe you're a green zone, right? And no new cases, meaning you have extended a streak, right? You've been just sampling and what have you, and you really have quelled a virus, right?

Okay. and a red zone is everywhere else right both the places without testing because you don't know if the virus is there uh and certain the places that have testing and that have let it go vertical so one of my theses is that green zones will actually in general be able to sort of let up on the the state will be there but in general they're going to have better health better wealth and less of a state presence. Okay. The reason being because, um, you've, you've sort of managed to keep society like, like wobbling on a new normal, right. Rather than just have it crash, right. Conversely in a red zone, I think you're going to get huge strain pressures, um, where

you get a series of things where viral destruction leads to economic destruction, leads to viral destruction leads to like, they actually, you know, stack on top of each other. Right. So for example, right. You have the serious virus. Okay. Then folks, you know, they do lockdown or, you know, a cargo cult lockdown. Okay. Then they all get mad, uh, understandably because people are going bankrupt and so on. They come out and some of them, unfortunately are like, Oh, the virus isn't a big deal or, you know, just the flu bro or whatever. right don't wear masks boom that leads to another level of viral destruction right oh actually yeah it may not kill you but it might significantly diminish lung function for the rest of your life

or for weeks or months who knows right and who knows the percentage on that yeah we don't have good morbidity stats we have good mortality stats or i should say okay mortality stats like we know case fatality rate and and so on we don't yet know like what percentage of normal people um you know have eight-week convalescences or who have permanently decreased lung function we don't know the long-term effects of this thing right so so folks who just rushed out there oh actually bam they just walk right into this virus which is going crazy by the way in 50 states uh and then then that leads to yet another pullback where demand goes back and you know like people go back at home and so on and that leads to more unemployment and more unhappy people um

and and that kind of stuff stacks now you don't have the money to go and pay for you know like masks or hand sanitizer so people get the virus more you know that that type of stuff right so you can have this really negative feedback loop uh actually not a negative feedback loop it's a positive feedback loop in the sense of amplifying it right um that leads to uh more unrest potentially um and uh you know so iran actually had some civil unrest and whatnot, right? And I mean, the biggest thing is Americans should understand that it can happen here. I mean, just as one example, Michigan, evidently, do you see this thing? I did see it. And I think that actually, Michigan was real guns. And I don't

know if you saw Raleigh, North Carolina, where I grew up, there was people who walked around with fake guns. So they literally took like a piece of wood and made it look like a 50 caliber. they had a inner tube that they made look like an at4 you know rocket launcher and they were basically doing a play on michigan was real we're pissed off we're not going to go walk around with the at4 for real but like here's our almost social unrest display uh it's very interesting to see um that happening in multiple locations exactly and so so i mean look it's uh this whole situation is bad on like a number of different levels um but it's uh it's something where you're getting more sci-fi movie almost every day right um and

the problem is that um you know there's at least two analogies for what the virus is doing and let's talk about some of the crypto implications of it. Uh, one analogy is to analogize it to an invasion. Okay. So people have talked about this. They're like, Oh, is this a recession or depression? And that's because, um, you know, those are, those are the things that come to mind as, uh, is this like the 2008 crisis or not? Cause everybody lived through that. It's a reference point. Right. Um, but I think that a better analogy, I mean, this is not fundamentally an economic event it's not fundamentally a political event it's it's a biological event it's a physical event right and it's like imagine this thing floating in space and then you project

it down into the xy plane okay it's basically like uh red dawn i don't know if you ever saw the movie where they're sitting right they look out the window and all of a sudden they're getting invaded people are parachuting into the the parking lot right it's just it's not people it's a biological incident. That's exactly, I think it's, so with the very, very important caveat, just because I know some of those little mystery owners, I'm not saying it's a bioweapon or anything like that. Okay. I'm not. Okay. It's a naturally occurring virus, probably with everything we know. It's possible it could have escaped from the lab or whatever. People have talked about that. I think that's a possibility, but you know, like there's no evidence indicates

it's a bioweapon okay with that said uh the entire u.s military and nato were basically imaginal line do you know what that is right yeah so good yep well so you know in france after world war one they're like oh we're gonna build a system of fortification so the next time the germans come with their trench warfare we'll be ready for them and the germans just completely invalidated that where the nazi blitzkrieg just went around you know and it was like a classic example of fighting the last war, and then the French just got defeated, right? And, you know, the US military and NATO have been MIA in the pandemic, right? And by the way, you know, people say, oh, you know, Asia had SARS, and they were ready, and we weren't. I'm like, the US had an anthrax scare

in 2001, right? Number one. Number two is, you know, there was Ebola in 2014, right? And number three, there were actually written pandemic plans, like Bush had something on this, you know, DARPA bad stuff. There's all this stuff that's written down that's supposed to be like a biodefense program or whatever. It's just, they can't execute on it, right? They're literally incapable of doing it. So the, every rogue state, every terrorist, frankly, every state in the world has seen that, uh, you know, all the defenses of the U S right. You know, you have the Atlantic and the Pacific, you have all these aircraft carriers and nuclear missiles and so on, all the soldiers everything basically just completely invalidated by the virus well here's

one um kind of analogy that i've thought through so that i don't know if you know this i was in the army for six and a half years and so oh really okay relatively intimate with uh both the um the expertise and the incompetence that goes on within those ranks just like any organization i'm not beating up on the military by that i'm just saying that just yeah go ahead yeah well so so here here's one way to think about this, right, is one of the most successful ways to attack the U.S. military over the last, call it decade or so, has been actually to either use embedded soldiers. So like in Afghanistan, for example, U.S. and Afghan soldiers go out on a mission, all of a sudden the Afghan soldiers, which are deemed friendly, turn and shoot a U.S. soldier, right? Kind of a blue

on blue type incident, but yes, they have a different uniform. They're just our ally. The second thing would be something like a fort hood shooting where literally it's somebody in a u.s uniform radicalized yeah it was just radicalized and shoots yeah then if you go to um like the aircraft carrier where i think it was a general or a colonel or whatever right so the virus extends that because you basically are capturing somebody and turning a soldier into a threat by basically yeah and so we saw this on and kind of steroids if um earlier uh just a couple weeks ago there was a um i'll call him the captain of the ship i don't remember his exact name yeah He wrote the letter and he said, look, I'm basically stuck on an aircraft carrier with a bunch of soldiers and every single one of them is now a weapon against each other because they're just infecting each other and I don't have the tools to handle this.

Basically, let me become not ready for war. Let me actually destabilize my ship so that I can protect my soldiers and we can preserve our readiness in the future. And I think that that is something just people didn't understand, people didn't think about. and when then when you see it happen you're like whoa that could decimate an entire military force it could decimate a lot of different uh functions a french a french aircraft carrier got taken down right um and you know like basically there's there's a sense i mean you know world war one started with cavalry do you know that right like actually you're an army guy you know more military history than i do for sure but um a lot of people don't know this that's actually you know it

started with horses and horse charges and ended with you know the first mechanized warfare right But I have a feeling that, you know, COVID-19 may make the era of infantry and even human staffed, you know, boats and so on go away. And it'll just all be a robot war. It's all drones, all drone ships, all drone everything. And it won't be human staff. Go ahead. Yeah. And I think part of this, this fits into the larger narrative, just like the virus has just served as an accelerant, right?

And obviously, you know, if you had talked to people a year ago and said, Hey, in the future, are we going to have more foot soldiers or more drones right on the battlefield? Most people would say, Hey, it's going to get more automated, it's going to get more kind of autonomous and all that stuff. Now, all of a sudden, it becomes, well, not only is that technology one component of it, but we actually may be rendered not as effective if there's things like this out there, right? I mean, you know, any sort of military unit that spends lots of time together. That's like the exact opposite thing you want to be doing for, you know, some sort of viral outbreak. Exactly. That's right. And especially given a few things. First is, I mean, it's actually a pretty serious virus for at least some fraction of healthy people. Okay. We don't know the exact percentage, but for example, I posted that thing with that 45-year-old former football player, right? Or Mara Gay in the New York Times has written about her story, right? You know, Kat Gleason is an entrepreneur, very fit. Alyssa Schvinsky, you know, Lauren Sugarman. Like, these are folks who, you know, they've all tweeted about it and what have you. There's plenty more who, you know, I can't even talk about, but I've talked to a lot of COVID-19 patients because, you know, in tech, you know, there's a saying, right? You look at your dashboards and you talk to customers, right? There's a quantitative and the qualitative.

And, you know, people will often, I think, have a middle brow dismissal of talking to customers or talking to patients. They'll be like, oh, that's anecdotal. That's, you know, N equals one. Oh, you know, blah, blah. And what they don't understand is every data collection starts, or not every, many data collection efforts start with a conversation like that. For example, you're looking at your dashboards and you talk to a customer and they say, oh, I wasn't able to log in. You're like, oh, no, really? And then you go and you instrument that and you find 10% of your customers can't log in on mobile Safari or whatever, right? And you're like, oh my God, you were just blind to that. You were data blind because you didn't have the metric and you didn't have the metric because you hadn't talked to customers. The analog of that today is folks are looking at lethality stats, case fatality rates, and they're

seeing correctly, and this is important, 92% of deaths are for people over age 50 and 75% of hospitalizations are for people over age 50. And I've quoted those stats a lot and it's important to know those things, but the wrong conclusion is, okay, then that means, you know, I'm 30. So I've got nothing to worry about. Right. Yeah. You may not die. Right. That's true. But, uh, and so relative to death, everything is mild. Okay. However, um, relative to a cup of coffee in person, you may not want to risk, you know, a 10 week sickness and permanently decrease lung function right so so like it's where you set that bar and the problem is people are comparing it to death and they're thinking oh it's not a big deal of course sure you know

few things are a big deal relative to death right go ahead you're gonna say well i was just gonna ask so part of this i think in the thing that i personally struggle with the most and i think other people that i talk with uh there's this element of like how accurate is the data right And I got the whole conversation with, I don't think it is a fair question or a fair expectation to have 100% accuracy in the data in the middle of kind of the firestorm, right? It's kind of like you're at war. And if you said to somebody, how many bullets you got left? Maybe somebody knows, but most people say, well, I got less than I had when I started, right? And they can kind of directionally.

And so I think that for this, how many people- I can give you a good answer. I can give you my answer on that. Okay. I just want to understand how important you think exact accuracy versus directional accuracy is during this. It does depend. If you're talking about the dosing of a drug, sometimes it actually can be sensitive. In general, I think directional is a way to go because we're in fog of war

kind of situation. With that said, there's some very high signal events. Wuhan happened, Italy happened. NYC happened. These are well documented. Basically, in late January and early February when I was fighting off the first just the flu folks, I would basically make the following point, which was December 1st, Wuhan was normal city. By January 23rd, hospitals were overflowing uh and the the city was shut down by the chinese government like you know you had like uh you you basically had the thing brought to a halt right like the sickness brought the city to a halt that's not like a flu situation right and then the same thing what's that 53 days yeah exactly 53 days less than two months you had a city basically brought to its knees right

and um you know that is that was that's not that is simply i mean every every single person in that city, there'd been the flu coming through before, right? So the flu thing, by the way, is it's one of these mind viruses that I think will end up killing, or what it does is it increases the number of people killed by Corona because it disables the behavioral immune system. It's kind of like, you know, this thing has a stealth mode to it where because the symptoms it produces are variable. Not everybody melts down in a pool of blood like Ebola, right? Like Ebola, everyone's like, okay, that's going to kill me. And you take extreme precaution on it, right? You know, or, or like, you know, something like 9-11, right? Like it was very obvious that

things got blown up. It was very visible, right? It's very tangible. This is invisible and it's highly variable and you're basing everything. I mean, you're not getting close to a Corona patient, right you know probably right you're at least not intentionally so everything is like at a distance and what i've realized is that if you don't trust you know experts or the press and you know what there's unfortunately a lot of good reasons not to trust them because they've messed up a lot yet on their hand they're not you know even if they i mean this is you know i tweeted this our day. But basically, expert, I mean, it's so obvious, right? But I'll just say this. It's like, you know, Democrats need to learn that experts aren't always right. Republicans need to learn

that experts aren't always wrong. Libertarians need to learn that a state can succeed and progressives need to learn that a state can fail. And those are all like almost tautologically obvious kind of things. Yet, I think given some of the responses to that, it pokes directly at a few blind spots there, right? Because once you move from the Manichean ideological zero or 100 aspect, right? You say, yeah, okay, CDC did screw up, WHO did screw up, but they don't, they're not everything they publish is wrong. You have to be able to read it critically. And then that, now here's the rub. The rub is most people cannot do technical diligence. If they can't do technical diligence, they can only do social diligence. And so they can only

like trust something uncritically or say it's all fake. So what's happened is because our institute, and so one of the issues also is just as our institutions have become more noticeably unreliable, they've thumped their chest harder to say how they are the truth. Great example, the New York Times literally runs an ad campaign about how it's the truth. When it published a bunch of bad reporting on Corona early on, like including things that said, oh, it's all xenophobic and what have you, right? And then, you know, like it actually had some just the flu journalism in there. And then, you know, two months, three months later, it's saying it's not just the flu. Well, who would have given them that idea, right? You know, like Fox did and Recode did and BuzzFeed

did and Washington Post perspectives did and Wire did and so on. Who would have given that idea, right? And so the issue is that there'll be a real tragedy, which is folks who reasonably do not trust these institutions will find that they're not always wrong. So yeah, and then press on this component of it, right? Because you mentioned earlier, like the people in Michigan who show up with, you know, with guns and are basically saying, look, we don't want to agree to the lockdown. And there's this underlying sentiment in the United States specifically around freedom, the constitution just don't tell me what to do right uh and that to me kind of feels like it bleeds into this idea of uh the countries that are the governments there uh they're not always

wrong but there is a uh some you know sense of distrust or uh if everything goes to shit i'm going to take my personal freedom and i can you know go solve my own problem and i think you're seeing some of the extreme examples of that when people show up in michigan etc but at what point do we get where that becomes not the extreme and starts to seep into the mainstream mentality, and it leads to the ultimate failure of an institution, right? Or actually, it's not just the WHO being wrong. Sometimes people just point and say, they're always wrong. We no longer trust them. Unfortunately, it's already there where like this QAnon stuff and, you know, plandemic and what have you i mean that's some true crazy stuff right and uh and

you know it's not even um it's it's no longer rational it's like arguing with like a religion or something because folks they don't they don't they're not arguing in the way that i would talk to a scientist which is here's x here's y if a then b you know that kind of thing they're just they're just on another planet. Right. And, um, the, the problem is, uh, people, people don't understand how much stuff is running, like, you know, to, to just keep society going. Right. And, um, if you, if you break all of that, you're taking it for granted, right.

these armed protesters and so on, like, look, I understand that they're mad about the lockdowns and so on. I think that they're not really, but let's talk about that just for a second. Okay. Just because it's, it's been turned into this binary thing and it's much more complicated than that. Okay. First, the best outcome would be like a New Zealand or Australia or Taiwan, you know, which is a democratic country that managed to control the virus. That's going to have healthier people and wealthier people in the long run, okay? So it shows that A, it's possible, B, it was achievable, and C, it was achievable without becoming a police state and so on. Very, very important to know that that was possible, okay? All right. So that was possible,

but the U.S. hasn't achieved it. So what does that mean? Okay. So when you've got an out-of-control virus and it's a serious virus. Let's take that as a premise because there's folks who want to say it's just the flu or whatever. Leave that aside for now. You've got an out-of-control serious virus. That means, so if we give the analogy of an invasion, I'm going to give a different analogy, which is the power going out. Our society is explicitly premised on power, water, roads, and increasingly internet. And if the power goes out, you don't expect a restaurant to be able to serve the same number of customers. The oven doesn't work, for example. The lights don't go on, all the type of stuff. If the water goes out, you don't expect them to

serve customers. You expect the state, the utility to fix that. And then if it can't, And you realize, okay, I need to get a generator. I need to get like a water purifier. And those, by the way, are inefficient, you know, when they're not done centrally. A lot of the stuff is much, much, much more efficient when it's done centrally. From a power standpoint, from a cost standpoint, having 10,000 generators is just, you know, those things aren't as good, right? Solar panels are different. I can come back to that, but let's just say in general. Plus a pin in the neck, right? It's something where it's a tax, not just on your money, but it's on your time to not be able to plug something in and have it go on. Okay.

So these are utilities that we're explicitly premised on, but we are implicitly premised on the absence of serious infectious disease in the public square. Okay. I want to linger on this point. we are taking, or we, until COVID-19 took for granted the public health triumphs of the 20th century. So I tweeted this, you know, but basically there's a review from 1976 of the conquest of infectious diseases, like a bicentennial summary, right? And it talked about all the measures and

talking an enormous, it was, it was thought of at that time in 1976 as a massive social and technological achievement on par with like getting to the moon was controlling you know cholera malaria tuberculosis all these infectious diseases in in the united states uh and and this is before they had pcr they didn't have pcr testing they didn't have much of the technology we have today they did a lot of it with um you know draining of swamps and you know like sanitation uh certainly vaccines and whatnot, but basically they took the problem seriously and they executed on it and they went and eradicated or controlled a lot of these diseases. And what's happened is over the last 50 years, people have just sort of forgotten that that was ever a thing. And so that's how we

have society or many, many businesses are premised on the presence of this utility, which is public health, for example, conferences or concerts, or, you know, frankly, any large crowd of any kind, rallies, right. Or public, public transit, you know, restaurants, bars, all of these things with gatherings of large crowds are implicitly premised on the public health being, being present. So like the power going out, you can think of the health going out. So what happens If the health has gone out, just like it would be kind of crazy to say to a restaurant, power through and just serve your customers if the oven doesn't work. Well, if the health has gone out and the restaurant opens back up, a bunch of things happen. First, some significant fraction

of customers stay home. Second, there's new costs that are imposed on the restaurant. I don't know if you saw California's reopening guidelines for restaurants, but they basically expect like Joe's diner to implement biodefense mode. Okay. All right. So if Joe's diner, go ahead. I was going to say that sounds very reasonable, right? Exactly. The state has failed. So it's a snow crash thing. All right. So number one, many customers will stay home, right? Number two, new costs are imposed on a place, which is at its lowest point financially. It's just been two months out of revenue. It's like sucking wind, business is down, and now the state expects it to basically build a clean

room around a dining table. Number three, workers will get sick because the virus is uncontrolled. You have much more in the way of random outages. Number four, you have PR and liability risk. The moment that your restaurant or whatever is marked a hotspot, Because, you know, there's a report, a news report of someone getting it, boom, business vanishes again, right? To show that that's not an exaggeration in South Korea, 2,000 bars were shut down after one guy, you know, walked through five, did you see that? I did not. okay yeah so after south korea opened up okay because they've gotten the virus under control one covet 19 guy walked into a bar and uh and he went to a few bar hop for a night and managed to infect like all in the order of 40 to 70 people the exact number still being

determined um 1900 people had to be test and traced and 2000 bars were shut down one guy one guy yep one guy right now i'm not i'm not saying it's his fault or anything like that he didn't know i think he was asymptomatic or what have you right but um this gives a sense of how uh the when the health has gone out a significant part of the economy is no longer economically feasible to the same extent right anything based on you go ahead so so and and the lockdown doesn't doesn't fix it is my point right unless you control the virus you have less customers because people will social distance. You have like biodefense mode that you need to implement. If you don't implement it, then workers will get sick and people who come will get sick

and there's constant PR and liability risk. So what do I think actually happens? What I think happens is many restaurants will essentially just take restaurants for a second. I'll go to other kinds of businesses. They will have to upload themselves and cloudify themselves. What do I mean by that? So the restaurant will shut down, the smart restaurant will shut down its physical facility, citing force majeure, do cloudkitchens.com to set up a new backend, which is headless. And that can be, by the way, out in the middle of nowhere. It doesn't have to be a plum location. You don't care about your tables. You don't care about your chairs, your decor. Number three, your storefront becomes purely digital. You're in an app. And number four, you basically are

now just delivery only. Okay. So you've digitized yourself. You've, you've become headless. You cut off the front, right? The restaurant itself is shut down. By the way, this is another very important aspect. You could end the lockdowns. Well, that actually takes away leverage from businesses in an important way because now it's no longer an atypical time. If it's no longer atypical time, they have to pay all their rent and other kinds of things, but now they're at 25% of revenue, right? So you've pushed them into this weird intermediate state, which is also kind of likely to kill them. And the fundamental thing I think is the end of the lockdowns folks, look, I understand where they're coming from. A lot of folks, I mean, I've never been blase. If you look

at my feed, even back to early March, when people were talking about shutting down South by Southwest and so on, right? It almost made me like throw up to think about, okay, you know, these people worked so hard on this for a whole year. I know how hard it is to organize something. And then people say, oh, just shut down your conference. Well, that's going to, you know, that's something where those guys are just taking it on the chin for a public good. You know, maybe the state could reimburse them or something. I was thinking, you know, but now it's so widespread, you multiply that by a million. That's what's happening in America, right? So I totally understand where the end lockdowns folks are coming from the issue is that even though you might risk it for to go

back to work for your job you're not going to risk it to um just go and like get a drink at the bar or if you do you may not you may not do so forever right so let's talk mmt btc right uh you know it's funny. I, last year or for a while, I've basically been talking about how the title fight of the 2020s will be MMT versus BTC. And, um, I think that's coming even faster than I expected, uh, where we're definitely, you know, whether you call it MMT or not, we are definitely in the time of the unlimited government. Right. And, you know, that's the opposite by the way of limited government is unlimited government. So you have a government that has no limits on, you know, it can put people under house arrest effectively with lockdowns. It can change prices. It can, you know, shut down

your business. It can ban flights. Uh, it can print money. It's basically a wartime kind of government, right? The unlimited government. And, uh, the thing about MMT is it doesn't make any sense in my view, if you, uh, like in, in, in logical terms. Okay. Um, and just to articulate what it is for those folks who don't know what it is. Modern monetary theory, or MMT, is there's the observation that the state can print money, and that's often accompanied by the recommendation that the state should print money, okay? And it should print money to pay for everything, and that there's no constraint on the state doing this, right? And, you know, essentially, like, if they're pressed on, oh, won't it cause inflation,

they say, well, don't worry. If inflation happens and prices start going up, we'll just raise taxes to pull the money we just printed back out of the economy, right? Now, just to show that I'm not making this up, there's a video that you might be able to link or what have you by, gosh, it's, I tweeted it a while back, but it essentially shows the MMT folks treating the economy as like a tank of water and they pump in water and they pull it out with taxes and so on. And this is a very naive view for many, many reasons. One of which is in a time of inflation, if you try to increase taxes, well, people, you know, they've already got lower

consumption and they're going to resist that. Number two is the economy is not a tank of water. It's adversarial, right? Like people will respond to incentives. And one of the things they'll do is they'll move their money into BTC or other cryptocurrencies and so on and get out of the tank where, you know, you're printing all this money. And so MMT, you know, it can't be really understood in terms of what its people say, but it can be understood from a different sense, which is, I have a gun, right? MMT is the language of the state, the total state, the unlimited state, which says the state can increase taxes to 99% and expropriate everything you have, right? Because that's what that means. Like print all the money means dilute you down

to zero. It's like being able to print trillions of shares on the cap table or what have you, right? And so it means that I can print all this money and because it's currency within this realm, I can seize any asset of anybody and do so in a quiet and stealth way, right? Because you don't see your percentage of market cap, right? Now, one thing I want to be clear about, it's not as simple as just straight inflation because there's huge deflation occurring in the economy as well. So we're probably going to get something where it's like pandemic deflation, as I mentioned, of all the things people don't want, like concerts go to zero in terms of price or drop substantially all the things they do want, rise in price. Okay. So, so in one corner is MMT,

this language of the total state. And the other corner is BTC, which is, you know, maybe the leader of the free world. Right. And I think that's a provocative statement, but, you know, the U S itself is sort of absent globally from the pandemic crisis. You know, it doesn't stand for freedom or rather maybe it does, but it's not like, you know, usually when there's like a flood in some country you have marines land and they you know hug babies and pose for a photo op and you know it's good stuff right you know like they're moving sandbags you probably did some of those missions or whatever um and uh and the u.s is completely absent from the global stage on this they're not defending other countries because they've

been invaded themselves right and uh so who's the leader of the free world i think it's going to be bitcoin all right bitcoin is the leader of the free world go ahead what you're kind of talking about here is mmt is a complete state initiated process you devalue the currency you get people addicted to the state being the savior and having to drive all of the value and literally uh it's like a child and a mother right the mother has to take care of the child or the child doesn't kind of thrive bitcoin is uh some weird way 180 degree difference and it is coming at it from in one area you can print as much as you want in this one you can print zero right it is completely decentralized that's right and so i think a lot of people are wondering okay i buy the argument

that those two worlds are going to coexist for some period of time can they coexist forever or do they meet in kind of that boxing match in the middle and one has to knock the other out so i think that where they so the analogy i would give is i think btc ultimately wins um but it's going to be a giant fight between i mean like you know think about facebook before 2016 and then facebook afterwards afterwards everybody's like oh my god this thing is actually extremely powerful and and you know all these attacks were launched it's still standing but it took more fire at that time than it ever had before once bitcoin hits a hundred thousand i don't know when i mean frankly it could happen in a week from now it could happen a year from

now it could happen in five years from now or whatever right but eventually it will once it hits like a hundred thousand and you know bitcoin being what it is it could happen in a day after being nothing for a long time um uh when it does and i have no doubt that it will eventually simply because so much money is being printed. When it does, then you're going to get another level of state interest in it in all senses of the term. Some states will actually adopt it as like a gold like thing. Other states will try to stamp it out, you know. But as long as some states adopt it and the internet doesn't go down, Bitcoin will win. And that's it, folks. That was part one of the Conversation with Balaji. We'll be releasing part two shortly. I hope you come back and listen to

that one. All right, guys, I really appreciate you listening to that episode. I loved it. Hopefully you found it valuable. Before I let you go, don't forget to go and subscribe on your favorite podcast channel to this podcast. Leave a review, leave five stars, help me get more people listening to all this great information. If you also want, we publish these on YouTube in video format. You can just search my name Anthony Pompliano on YouTube and find the channel subscribe there I hope you guys are enjoying all this I'm loving making it and so we will see you on the next episode