We Study Billionaires - The Investor’s Podcast Network - BTC039: The Bitcoin Adoption Curve w/ Croesus (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the podcast where we're talking about Bitcoin. Today's guest is a friend that has created quite the online impression for his depth of knowledge and written contributions to the Bitcoin community. Like some of the other guests we've had on the show, he wishes to remain anonymous, but online he goes by the handle creases. During the show, we talk about his thoughts on why Bitcoin is difficult for so many people to understand and agree with. We cover his thoughts on the Bitcoin adoption curve compared to other technologies, various, models to understand its value proposition and much, much more. So with that, here's my interview with Creeces. You're listening to Bitcoin Fundamentals by the Investors Podcast Network.

Starting point is 00:00:44 Now for your host, Preston Pish. All right. So like I said in the introduction, I'm here with Cresas. Man, am I excited to have this. I really enjoy following your feed on Twitter and just the articles you write are so thoughtful, so well organized. I think that's, That's the thing I like is the organization and the structure of your writing style and just how you piece things together. So welcome to the show. Thank you. It's great to be here.

Starting point is 00:01:20 That's really kind of you to say about my writing. No, I'm serious. I share anything that I see of yours to see how you're piecing things together. So hey, let's start this off. You wrote an article that was near and dear to me because you know which one I'm talking about. So I just kept talking with close friends, family members, and having been in the space for a while, and having friends that work on Wall Street that were really close to just finance in general, just looked at it for years as just being a speculative mania that has no backing, no nothing.

Starting point is 00:01:57 And it was almost like there was a curse. And this is obviously me who was a bitcoiner. it felt and seemed like there was a curse for if you worked in traditional finance on Wall Street, it was like you weren't allowed to understand it, or that it was a senseless thing to talk about, especially in any type of public kind of way. Like no one took it serious, but they all wanted to talk about it. So you write this article, and the article is called, and we're obviously going to have a link to this in the show notes, and the name of the article is why the yuppie elite dismiss Bitcoin.

Starting point is 00:02:31 What was the impetus for you to write this? Yeah, so I don't know if you had the same experience, but it was sort of a cultural phenomenon in the early pandemic phase where everybody was doing Zoom happy hours on. I had like a Zoom happy hour with my friend group from business school Thursday nights every week. And I was deep down the rabbit hole and excited to try to nudge the conversation towards Bitcoin and why they all needed to. take it seriously and look into it and get a couple coins. And what's the price at this point? Like sub 10,000? Yeah, 6,000, something like that. And invariably with that group, it was always dismissed. Any attempts to try to bring up the topic or take it seriously was dismissed with borderline hostility. Like it was insulting to them that I

Starting point is 00:03:26 would use the group's time to talk about something as ridiculous as Bitcoin. And so that, you know, that festered for for a couple of months there. And then I had a conversation with, with Dan that I write about in the article where I had like a frustrating moment of, of just asking him like, like, what do you think the chances are of this thing going to a million dollars per Bitcoin? And he said, you know, 0.001 percent. I said, well, after thousands of hours of looking into this, I think it's more like 80%. And he said that sounds like it's self-serving belief. And that pissed me off.

Starting point is 00:04:03 I went to my computer and I started banging out this article right on the spot. And the framework that this had been stewing for a while, that I was trying to build on this idea that had gone around in the Bitcoin community of a meme, really, of the bell curve of IQ. And the far right, the super smart folks think Bitcoin. is going to 250K. And on the left, I think it's going to 250K. And the folks in the middle, the quote unquote midwits, think that's impossible. And that was kind of the framework that people pointed towards us like, oh, great, we're getting resistance from the middle or whatever.

Starting point is 00:04:44 But here I was dealing with my super smart MBA friends who were more dismissive than any of my other friend groups. They weren't having it at all. Yeah, they weren't having it at all. Whereas my other friend groups had taken interest, had been open to the possibility that this asset, that sounds kind of out there, might have some merit and might be worth having some of. So these are the people that didn't go to the Ivy League MBA program. Okay. Yeah. So I write about in the article, I have a friend who's a sailboat captain for a living. And I told him, you know, you should probably look into Bitcoin. and he bought some that night. And he's been stacking since. He's a bitcoiner. And he listens to podcasts and has gone down the rabbit hole.

Starting point is 00:05:33 Because I think a big part of that is that he didn't already have a worldview about finance and investing. So being taught or being introduced to this possibility that there's something new and exciting didn't break his worldview. It was constructive rather than destructive to the existing worldview. that my MBA friends have invested so much of their time and energy to build based on, you know, what they learned in school and what they've learned in their careers and all the hours they've put in grinding for, for companies and finance or, you know, bosses that have a strict worldview based on what they've learned over their 30-year career during this 40-year bull market. The worldview that they've been steeped in and have bought into is at odds with

Starting point is 00:06:24 Bitcoin. And the fundamental thread that I came focused in on in that article is that for my MBA friends, they have high trust in this system. They have bought into the system. They have given themselves to the traditional understanding of finance and what money is and how it works. And they're super smart. And that puts them in this corner on a two by two matrix of smart and trusting of the system that is across from where I find the Bitcoiners reside on that two by two, which is smart, but distrusting of the system. And so they're in these top two corners of this two by two matrix, and they're not seeing the world the same way.

Starting point is 00:07:11 And that's this chasm that you experience when you try to talk to someone with an MBA or someone who works in finance about Bitcoin. Bitcoin, by definition, is at odds with the system they've invested their whole lives into. And it's a non-starter for them. So before reading your article, I would toy with this question so much. How can this person, this person is so smart, I can explain this to them in excruciating detail. And at the end of it, they're just like, yeah, I just don't see that happening. I understand everything you just said.

Starting point is 00:07:43 I just don't see it happening. And when I think about that person and I think about that simple matrix of their trust in the existing system. It nails it every single time. I absolutely love the read. We're obviously going to have a link to it in the show notes so people can read and develop their own opinion on what's happening. But yeah, any other highlights on that article or things that you would maybe adjust or add to it since writing it? I feel like I was in the right zone, in the right place to write that article. And I've been surprised at how much it resonated with, has resonated with other people, people with similar backgrounds. What have any of them come around since then?

Starting point is 00:08:27 Good question. So begrudgingly, half, I'd say, of my MBA friends and my close friend group from business school, I have a Bitcoin position. And I'd say, yeah, they're for the most part whole coiners, just barely got them to that point. What drove it? Is it because they're seeing the squares and the Tesla's and Square was a big one and the expected competitive response from Venmo, I think motivated them to try to get some. And now PayPal. Yeah.

Starting point is 00:09:03 Yeah. But Nydig is a big one for them too, because the extent to which that, it makes it a serious asset class and calls attention to the fact that here you have this company that's facilitating institutions and insurance companies and. pension funds to take positions in Bitcoin. That's what they do. That's their business model. And they're getting engagement from the top tier insurance companies, like the CEO of New York Life, for the first time in that company's 150 plus year history, the sitting CEO of that company has joined an external board, and that is the board of NIDIG. That doesn't happen. And that means something. And then now in the last

Starting point is 00:09:47 week, we have Ray Dalio's CFO leaving to join Nidig, a Bitcoin company. The people who have done their due diligence on Wall Street, the people who have got around to that have taken positions. And that arrow goes in one direction. The more you learn about Bitcoin, the more you add to your allocation. And I think that my business school friends see enough of that happening that they're like, I should probably have a hedge. And I think that's where their heads are at right now. Yeah, a lot of the Nighting stuff is crazy. There was something that I was reading where they were projecting that 300 banks were going to have or enable access for their clients to start buying Bitcoin by the end of this year was the estimate.

Starting point is 00:10:33 So I don't know if you remember last summer, the OCC came out with a guidance letter to banks saying that they were allowed to have cryptocurrency custody products. And that to me was this signal that the banks are actively petitioning to this regulatory body that they want in on this and they want to be able to offer a Bitcoin savings account next to your dollar savings account and collect all the fees that they can collect on that for retail consumers. And so that was nine months ago that that guidance came out. And now the next step of that appears to be happening.

Starting point is 00:11:17 It's rolling out to retail banking customers. I want to talk about another article that you published. And this was called, Am I Too Late for Bitcoin? There are tons of people that are out there that are looking at Bitcoin that don't know anything about finance in general. And they're looking at it and saying, well, I clearly can't buy that. that. And they're saying, I miss that boat, but Doge coin is 30 cents. So I should probably buy a little bit of Doge. Talk to us about your article and then frame this up for that person who's saying that to themselves right now.

Starting point is 00:11:55 So I spent my 20s as a management consultant. And what I was trained to do when approaching problems is to kick the tires, look at it from different angles, and run some numbers for yourself. to size things. And so that was my instinct when I went down the Bitcoin rabbit hole. And one of the exercises I went through was trying to figure out where we were in terms of the tech adoption curve. So if I believe that Bitcoin is the best savings vehicle in the history of the world because of its monetary properties, which we can get into, and we should get into. But if it is the best savings technology, the best vehicle for savings out there today, then is a tech-enabled disruption of how savings is done.

Starting point is 00:12:47 Then you'd expect it to follow the classic tech adoption curve that we see with the internet or with television when it first came out or with social media and any new product. in that S curve that starts off slow and then speeds up once you hit the middle of the bell curve of technology adopters and then tails off at a plateau. So in that S curve, where are we? And to figure that out, you have to take stock of what's the total number of people who will eventually adopt this technology. And to do that, if it is the best savings technology, then anybody who has wealth to save is your target market. And there are 2.2 billion people in the world with $10,000 or more of net worth. So those are the people that Bitcoin is

Starting point is 00:13:38 targeting. And then at the same time, we can also look at, we can look at on-chain data to see how many addresses have a meaningful amount of Bitcoin in them. This is a thing that people get caught up on where it's hard to draw a line about what constitutes meaningful adoption of Bitcoin. I've heard numbers like, you know, there are 180 million people who have some amount of cryptocurrency. But that includes, that includes everybody, any tiny fractional amount that somebody forgot about plaything money, that, you know, $5 here in Dogecorn. And I wouldn't call that meaningful adoption. Today, Newsweek said there's 46 million Americans with, I forget if they said Bitcoin or crypto, but it's a big number. It's, I think it's, it's not representative of, of

Starting point is 00:14:28 I think that constitutes Americans that have thrown 20 bucks at Bitcoin in Robin Hood, you know, and they don't, they haven't adopted it as an actual savings vehicle. So what would be like a reasonable threshold for a meaningful amount of savings in Bitcoin? And I just called it 0.1 Bitcoin, which is now $5,000. And so that's a meaningful amount of savings. Anything more than that is certainly meaningful. And there, you can see on chain, there are three million addresses with 0.1 Bitcoin in them. And of course, it's not quite apples to apples because a person can have multiple addresses above that threshold.

Starting point is 00:15:09 But the bigger issue is that a lot of people just leave their Bitcoin on exchanges. So how many people are leaving a meaningful amount of Bitcoin on exchanges and not taking self-custody? Probably a lot. Let's call it, let's round that $3 million up to $10. million. So if we have 10 million meaningful adopters of Bitcoin, and there's 2.2 billion that will eventually adopt this savings technology, that puts us at half a percent penetration, half a percent into the technology S curve. That's really early. The innovators stage in the classic bell curve, you've got your innovators, your early adopters, than your mainstream. The innovators is the first two and a half percent, I think. So for two percent,

Starting point is 00:15:55 early stages of the innovator stage still. It's crazy early. We're talking standard deviations. What would that be at the bell curve? In your article, you were saying that it was around 2.6 standard deviations on the left side of the bell curve. It's crazy. Yeah, crazy early. That's if you're 2.6 standard deviations from the mean in anything, you're doing great. Or you're doing really poorly, one or the other. Yeah. So it's crazy early still. And the other way to look at that is by assessing how cheap it is to get one human's worth of Bitcoin still. And the way to run those numbers is Bitcoin is for the whole world. And there's only going to be 21 million of them ever. So 8 billion in population, 21 million divided by 8 billion,

Starting point is 00:16:46 you get, I think it's like it rounds to 250,000 sats. So 0.0025 Bitcoin. That is currently what you can buy for $150. If Bitcoin becomes the preferred store of value asset for the digital future, which we think it's on track to become, then one human's worth of it can be secured. by anybody for $150 today, which means it's so early that you could feasibly set up a dollar cost averaging plan for yourself to stack one human's worth of Bitcoin every month or even every week if you wanted to still. That's how early it is. Talk to us about the evaluation process that you use. I really like how you laid this out. In your article, you go into a lot of the adoption process. you say that there's two different ways to kind of like really know where we're at. The one was the adoption process, which you just described there. And then you also get into this valuation process

Starting point is 00:17:52 and you go through all these different stores of value and kind of the total addressable market from a market cap size. Yeah. So this was part of the consultants approach to to sizing this problem. I went through and I tried to find good solid numbers for all of the different store value buckets that exist in the world. And humans have found a variety of assets that are in differing ways scarce. And because of their scarcity, they are good stores of value because they're assets that other people desire and there's a limited amount of them, whether that is real estate or equities. And the tricky thing about equities is that it is scarce. You know, you can create a new company and that company has new shares and and all that. But what is scarce

Starting point is 00:18:48 is the ownership percentage of a certain market, you know, that portion of the economy. That's scarce. So owning equities is scarce. Owning art is scarce. Collectibles, some of them have value and retain value over time. And all of those. buckets add up to something like $400 trillion. Oh, and of course, the massive bucket of bonds. And there's 200 plus trillion in bonds and like 20 trillion in negative yielding bonds, which means that whoever is holding those bonds has no better idea or plan of what else to hold. And that's the only reason they're willing to take that hit, basically. And so ostensibly, as people learn about the properties of Bitcoin and how it's increasing

Starting point is 00:19:37 scarcity over time, causes its value to increase over time, there will be an exodus, a shift away from holding assets like negative yielding bonds or even low yielding bonds, which is the rest of the $200 trillion, and towards shifting from those assets and into something that appreciates reliably, predictably over time because of its monetary properties that are built into it. And so I went through that exercise of trying to assess what's like a reasonable amount of this store value bucket that Bitcoin with its superior store of value properties could reasonably capture. Summing those up, 30% here, 50% there, 10% here, I got to a number of 200 trillion. We which would mean capturing about half of the store of value total market in the world.

Starting point is 00:20:32 And that isn't even addressing the currency value, which I think there's $100 trillion in currency in the world, like N3 level currency. And Bitcoin would capture a large portion, if not the bulk of that as well. So yeah, you get to a $200 trillion total, you know, full potential with Bitcoin in today's dollars. And of course, those nominal values will balloon as. inflation drives money printing and money printing and drives inflation. And that comes out to $10 million per Bitcoin. As we know, the buying power today. You're right. That number,

Starting point is 00:21:10 I still feel uncomfortable talking about that number. I think most people do. Yeah. It's hard to take that seriously because that sounds like wishful thinking. It sounds like the thing that I am excited about is going to take over the world. And that sounds a little delusional. But that's That's the result of kicking the tires on this thing for thousands of hours and running the numbers. You see Michael Saylor throwing around the same numbers. That doesn't make it right. I'm just saying that there's other people that aren't looking at maybe your math and they're coming up with very similar figures. And to be fair, like a year ago when I was talking to my MBA friends and our Zoom happy hours saying that this thing's going to 100,000 next year.

Starting point is 00:21:55 You were nuts. That was laughable. Right. Yeah. Yeah, it's wild. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world,

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Starting point is 00:26:33 and what it means for human progress. And part of that is to take stock of what we are living through right now in human history. It's a very special and crazy time because we are living through the digital revolution. And for the most part, we think of that as the internet, right? That's what comes to mind. And what is the internet? The internet is the digitization of information and information exchange. And so that meant we took the default of how we exchange and access information went from physical with libraries and magazine subscriptions and newspapers to digital with the internet. And that process has been going on for the last 20 plus years.

Starting point is 00:27:24 And we're far up the S curve on that process. We're arguably coming towards the plateau of that process. The world's information has been digitized for the most part at this point. But it hasn't been possible to digitize value. Because on the internet, everything can be. be copied. And you can't do that with value because then it loses its value. Then it can be stolen. And that's what Bitcoin represents is this invention of digital scarcity, the invention of a system that allows for value to not be copied, be impossible to copy in the digital realm.

Starting point is 00:28:06 And that is this parallel stream to the internet and TCPIP and the protocols of the internet. enabling information exchange through that ecosystem. And now we have a new protocol, a new set of rules for the secure storage and exchange of value in the digital space. And what we are watching with Bitcoin is this bootstrapping from nothingness into the digital store of the world, a digital value protocol of the world. And that means a second internet of sorts, that this is the internet of value to complement the existing internet of information.

Starting point is 00:28:54 And that S curve, we're still at the very beginning stages, right? So I think that it's something that we don't talk enough about, this zoomed out view of what is happening in the world right now and what Bitcoin means in terms of this grand sweeping reality of in our lifetimes going from. physical value, which is what the world has known for all of human history, to digital value, in the same way that the Internet took us from physical information to digital information over the course of a few decades. You know, you have a chart that is really cool that shows the application layer that's being

Starting point is 00:29:35 built on top of the existing protocols of the Internet today. And then how that's going to potentially look in the future and how this value layer. is going to work itself into the protocol stack. Can you kind of describe what's going on there for folks that might not be intimately familiar with how the internet works and what this all means for businesses, incentive structures moving forward? I have an interest in what that might mean for like social media. What are some of your thoughts on that? Yeah. So how does the internet work? It is not the most technical person, but I have the high level grasp of this. There are series of protocols like TCPIP, which is just rules for how servers can exchange packets of

Starting point is 00:30:19 information and have that be represented as meaningful through browsers and whatever other portals. That's how the internet is constructed. But that base layer, that protocol layer, cannot be owned because it's just code. It's just rules for how to exchange information. There's no ownership layer at the protocol layer. But what you can, can own are the businesses that are built on top of those protocols. So Amazon, Netflix, Facebook, these entities, these businesses that are fundamentally built on top of those protocols. And their whole business model is based on being internet businesses. And you can own, you can own those individual pieces, those parts of the internet economy, but you can't own

Starting point is 00:31:10 the internet itself. And so the best you can do is that you can't. If you're a VC, you can invest in the next wave of a bunch of different promising internet companies and hope that one of them becomes a big win and a big part of the next generation of the internet. Similarly, if you're investing in equities, you can own an index like the NASDAQ. That can be your portfolio and how you get exposure to the overall internet. But in doing that, you're owning small pieces of a bunch of the different businesses built on top of the protocol. And that's very different from how Bitcoin is designed because by definition, this is a value protocol.

Starting point is 00:31:52 There's a value layer that someone has to own. It's required for this thing to work. So this protocol, the Bitcoin network, which is a set of rules for how the nodes and users on the Bitcoin network can send and receive and store their Bitcoin. And you can't own that. You can't own the network itself, but there's a unit, a unit of account, a transactional unit, the symbol of who owns what on this network, which you can own. And in this case, that means that means that you can take an ownership slice of the overall pie, the whole internet of value,

Starting point is 00:32:34 simply by owning a piece of the underlying unit that makes the whole thing run. And so what we're starting to see on top of this protocol are the businesses that are growing and popping up. And the ecosystem that's developing of for-profit businesses built on top of this ecosystem, on top of this protocol. So that includes exchanges like Coinbase that is based on making a business out of running on, getting a cut of transactions happening on the Bitcoin network and other networks too. And then also includes. companies like Fold or Strike, which are this newer generation of consumer-facing, user-empowering Bitcoin services that are using the protocol underneath it to create some new product

Starting point is 00:33:26 that has real value to the consumer based on the advantages of Bitcoin as digital value over traditional financial products. Let's talk about this term that's used a lot in the community, which is the speculative attack on fiat currency. I think Pierre O'SHard was the first one. It was it Michael Goldstein. One of those two was using this. Pierre wrote this in 2014. So you put quite a bit of meat on the bone for this idea in an article, which we'll have in the show notes. You get into like the DNA of an asset, talk to us about what that is and then talk to us about what this speculative attack really represents as far as you're concerned.

Starting point is 00:34:11 Yeah, so I guess what I'm trying to do on Twitter is to put out like educational content that simplifies what I've come to understand or believe about Bitcoin and convey that educational message. And because of my background as a consultant, as an MBA and someone who took a lot of accounting classes, I have this view about how different assets perform over time. And that is that the best thing you can do historically over recent history for your net worth is to invest in assets like stocks and real estate because they appreciate over time because they're generating some kind of return. And they're either growing or they're in the case of stocks that they might be growing or they might be generating dividends. Sort of similar dynamics with property you own appreciates and value can generate rent.

Starting point is 00:35:10 So that's an exponential curve up into the right if you have an asset that performs. And so on a logarithmic scale, that means a straight line up into the right. That's the nature of those investable assets like stocks and real estate. Their DNA is such that they appreciate over time if you invest in good ones. On the flip side, on the downside, there are the things you can do with your money. you can consume it. You can buy clothing and whatever. And immediately the value of that clothing after you buy it drops dramatically into nothingness. You could invest in a car, which is not an investment at all. It's a form of consumption because you're purchasing a depreciating asset.

Starting point is 00:35:59 And the way that assets depreciate is in an exponential curve down and to the right. And if you put that on a logarithmic scale, that means a straight line down and to the right. So we have this landscape of different assets and they perform differently over time based on their DNA, you know, what the asset is. To add to this picture, you have to also include dollars, fiat currency. It is by design that the root idea of the dollar system is that we're going to print 2% more of it on average every year. And that means it's an exponential decay function. And so that means that it may not depreciate as fast as a car or lose its purchasing power as fast as storing value in a car. But it does on a logarithmic scale, it is a straight line down and to the right.

Starting point is 00:36:57 And then contrasting with that is this new kind of currency, this new digital currency of Bitcoin, whose design is increasing scarcity. To me, that's the root of what Bitcoin is or why it's an attractive asset to hold is because of the halvings, because of the supply issuance schedule, they're making less of it. It's the only asset in the world they're making less and less of over time, which means that if you hold some today, you are buying in at a time when they're making more of it, then they will be making of it four years from now. because of that supply issuance schedule. So that increasing scarcity over time, because of the supply demand balance of like today, there's 900 Bitcoin being mined every day. And that's going out

Starting point is 00:37:48 into the market to meet net inflowing demand. And we're in the process of finding some new equilibrium based on that amount of supply issuance per day. Because a year ago, just over a year ago, it was 1800 Bitcoin per day, and that got cut in half. So now we're in this price discovery mode of trying to find the right equilibrium for this new era of Bitcoin. And then four years from, three years from now, that will be cut in half again and will be producing 450 Bitcoin per day. And that increasing scarcity means that there won't be enough supply to meet the demand that at the equilibrium point we established during this current reward era, which means, well, the price will have to drift upwards.

Starting point is 00:38:39 I got a question on that because there was a question that came from Twitter, from Eddie, and he's curious whether we're going to start to see these halvings priced in to the current price. So I think at this point, there's been much debate leading up to the halving events. people have made the case of why it can't be priced in, why it is already priced in. But having seen this multiple times now, I think it's become, you know, fool me once. All right, shame on you. Fool me twice. Fool me the third time. Are we going to get a chance for Wall Street to sit on the sidelines and we go through a whole other four-year cycle waiting for the having to happen?

Starting point is 00:39:27 or are we going to start to see that get priced into the curve? That's a great question. I don't really know. If you had to place a bet, one way or the other, what would you say? My bet is that Wall Street is in disbelief and can't comprehend the implications of the imminent having. But let's say it goes to 200,000 in this coming, in this year we're at right now in 2021. Let's say by the end of the year, this thing goes to 200,000 or even higher. What does Wall Street do at that point as they're looking at this thing in saying,

Starting point is 00:40:03 my God, like, this is going to happen again in a few years? So I think that like the Stock to Flow model has it pegged to go to like a million dollars in the next cycle. Yeah. And that's going to give everybody in traditional finance, they're going to balk at that, I think. You're talking about a total valuation twice, that of gold. in 15 years of Bitcoin's existence. But at the same time, they're looking at miners that keep coming online, and they're looking at something that has a difficulty adjustment that is adjusting itself

Starting point is 00:40:40 to ensure that some portion of those miners remain profitable. Like, they're going to start to, now that we're getting their attention, like nothing gets their attention like an imaginary coin that's over $100,000 in, valuation, right? So, like, they're going to start digging in. They're going to start realizing that you can't pull the supply curve to the left. You can't pull the production from the future further to the left by quadrupling the number of miners. It can't happen, at least not in any type of meaningful time frame, right? Like, they can do it for a week, but that's it. So they're going to start to understand what that means, especially when you would compare it to, well, what would that

Starting point is 00:41:23 mean if gold, if we look at the gold market, and the matter how many people you bring to mine that gold, you're not going to pull more ounces out of the ground than a certain rate that you're currently in as far as an epoch goes. And then magically in four years, you're just going to find half as much gold in the earth's crust. Like, people can start to do that analysis and say, whoa, maybe this, maybe this is a million dollars. Maybe I need to start front running that. I don't know. I just think that at this point, there's so much that's been written about this and you're getting so much attention. And I don't mean to push back on your point of view. I'm just, I guess I'm trying to challenge, I'm trying to challenge that point of view for you.

Starting point is 00:42:04 I think you have a, you have more faith in the capacity of Wall Street to, to imagine a changed world four years in the future or even a year after having. I think that you're right, though, that there will be some portion, some larger slice of the finance community that for the next having says, I'm going to get ahead of this. I'm going to front run it. I'm going to buy it in the six months, nine months before. And that should happen. There should be some pricing in of the having. But I think that what we keep seeing is disbelief at how fast the status quo changes with Bitcoin. people aren't prepared to accept it as what it is today, let alone what it is going to be for years from now, or if you're right before having a year from now. And a larger portion of the

Starting point is 00:43:01 world will wrap their heads around that. But I think that as humans, we're good at optimizing for conditions as they are today. And as like a collective organism, we find equilibrium with how things are today. And we struggle to project forward how things might change. And I think that's particularly true when the way in which something is going to change is outside of how everything else changes, which is to say that it's inelastic to our reaction to it. You know, you can't increase Bitcoin mining. And that's different from every other commodity in the world. And so I think Wall Street and humans generally will continue to underestimate how. different Bitcoin is going to be four years for now, just because we have no basis for comparison.

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Starting point is 00:47:30 Yeah, when I'm thinking about, let's say you buy into the stock the flow model, let's say that on this current epoch that we're in, the price settles in at $100,000 or $200,000 and you're looking at a price four years later of a million, when you do a compound annual growth rate of what growth rate am I getting if I'm going from $100,000 to a million over a four-year period of time. And where else in the market can I find that kind of return? nowhere, right? You're kind of like, maybe I should keep holding this. Maybe I shouldn't realize my capital gains and play the trading game here. Maybe I should just do what intelligent investors do

Starting point is 00:48:11 when they know that they've got a winner. And if for whatever reason, something fundamentally changes with the hash rate and minors and all that kind of stuff, and you're seeing it fundamentally fall apart between the cycles. Well, sure, like maybe you need to change. Yeah. This is actually how I became a Bitcoin Maximilus was, was, you know, the Stock to Flow model came out in 2019. And before that, I had been an alt-coiner. I started with Ethereum and was into that whole ecosystem. And the Stock to Flow model comes out in 2019. And it sounds so crazy. But it has this, this, I don't know, I suppose familiar analytical rigor around it that is a signpost to me that the person who made this is very smart. And I should pay attention to,

Starting point is 00:48:57 you know, at least kick the tires on this. And so I spent the next couple months trying to figure out why it couldn't be true and ran my own numbers that basically said that this is totally plausible if we follow the classic tech adoption S curve. And we are where I, you know, we talked about earlier at the very beginning of that S curve. Demand is going to rapidly ramp up for Bitcoin. and at the same time, we have half as much being produced every halving era. And those, when you smash those two datasets together, that comes out to like a 10x increase in adoption adjusted scarcity, if you want to call it that, every four years for the next 20, 25 years, which is crazy.

Starting point is 00:49:46 And that's sort of what the stock to flow model is suggesting also is a 10x increase every every having. It's hard to pin down like exactly, you know, why is it working? I think it's somehow capturing like our human nature of valuing scarcity and this osmotic flow of value from that which is not scarce to that which is more scarce. And, you know, the constant re-level level setting of these different store value buckets. And if you have a I'm using this osmosis idea. If you have two water containers that have an osmotic membrane between them and you add salt to one of them, water is going to flow into the one that has salt, right?

Starting point is 00:50:37 Because that osmotic pressure goes in that direction. And it seems like that's what is built into us humans is an appreciation for scarcity and a desire to own that which is scarce as a sort of scoreboard in our culture. Actually, to zoom out all the way, this is fundamental to our species that I think in, yeah, it's in shelling out, Zobo includes this amazing little anecdote that he doesn't really expand upon, but shell money goes back 75,000 years. There's evidence of it in cave sites going back 75,000 years. But that's for Homo sapiens, sapiens, so our subspecies.

Starting point is 00:51:25 And Homo sapiens Neanderthals, Nandrothalens, their cave sites don't have any evidence of shell money. And what's interesting about that is that the population, there's no real, they can't really pin any notable differences between Neanderthals and Homo sapiens, besides the tools that Homo sapiens were using were slightly better, and this notable difference of there doesn't appear to be money in the Neanderthal sites. And the result of that is that the population density of the human, the Homo sapiens' caves, appears to be 10 times as great. So having this appreciation, this species level appreciation for scarcity, which makes money possible and facilitates trade

Starting point is 00:52:14 and allows you to support a larger population density and emergent civilization level behavior appears to be the difference that our species, the advantage that our species had over other early human groups, which is to say that appreciating scarcity is what makes us human, and valuing scarcity is what makes us human. Therefore, it's in our DNA to gravitate towards that which is scarce. So if you put Bitcoin in this, you know, this long timeline of human history, it is this perfection of that which makes us human that we are now witnessing, this creation of something which is absolutely scarce and slowly moving towards absolute scarcity.

Starting point is 00:53:05 And the whole world is slowly processing this reality. And the economic reality that this invention imposes a problem. on the world cannot be escaped. When you look at Adam Smith's main thesis, which is the division of labor, and the ability that it allows humans to collaborate in a meaningful way where I perform a task that's very skilled, and the person next to me performs another task that's completely different than mine that's very skilled, and we're able to exchange those units of work in a meaningful way, you can see how if you can optimize that system without there being blemishes or manipulation

Starting point is 00:53:49 entering itself into the system and the protocol that's being used to manage the labor data is how I would like to describe it. The price signaling of labor. Yes. You can just see how vital it is. And if I was going to be a real optimist here, like it's pretty exciting to think about what the implications of such a sound measuring system would be on a global scale and what that might mean.

Starting point is 00:54:18 And what a strange time to live there. And it's hard to, it's hard to believe that this is happening in our life. Yeah. Happening in our lifetimes. I know. I think about that often. I agree with you. I think it's just, it's humbling to think that we're living through this period,

Starting point is 00:54:35 this transition. It's crazy. Yeah. for all of human history, we've had physical stores of value. And this is this zero to one moment of going from from analog to digital. And it's right now. Talk to us about you were saying early on, you were, you were really interested in Ethereum and then you found your way to Bitcoin. Talk to us about like, what was the original thing that drove you there or that enticed you to look into that and then talk about your transatlient? transition over to Bitcoin. I guess I characterize this as in hindsight, for me, there are two stages, two major stages to the rabbit hole. And I think everybody is going down the rabbit hole and they're at different stages.

Starting point is 00:55:24 The first stage is recognizing that digital value has a place today and into the future. And I think that that's where Ethereum people are. That's where alt-corner's are. You recognize that we live in a digital world. We live on the internet. I grew up on the internet. And this makes sense to me. Digital value, being able to exchange value and store value in a digital format makes sense.

Starting point is 00:55:51 And of course, this is going to be a thing. And then the second stage of the rabbit hole is realizing why Bitcoin has already won and what it really deeply means, which is to say that this is not about technology. It's about money and where does Bitcoin fit in into the landscape, the history of money? How does it improve upon, you know, the prior iterations of money? Like, how does it improve upon gold? Why is it better than fiat? And importantly, why is it going to win out over those things? Understanding that the network effects of money and shelling point reality of money and the

Starting point is 00:56:35 significance of absolute scarcity. So yeah, so I started, I dipped my head into the rabbit hole, and I saw this party going on in alt coins and thought, this is great. This is, this is totally the thing. And that's because I was steeped in, and we all have been steeped in this ethos of internet, how the internet worked, how internet adoption, how internet businesses and internet ecosystem developed. And that was driven by innovation, new companies popping up, trying something new, move fast and break things, the whole Silicon Valley ethos. And our approach to investing in technology has been shaped by the cumulative experience of how the internet developed, meaning that we all take like a venture capitalist approach to investing in tech stocks, investing in internet

Starting point is 00:57:25 at companies because that was the best way to do it, because you couldn't own the protocol itself. So when I arrived in CryptoCene, I looked around and thought, all right, what's innovation? Where are upstart protocols challenging incumbents? And Ethereum was the first one in 2016 that seemed like it was following that narrative. And then I got into other altcoins. And then I got crushed in the bear market of 2018-19. And that plus the stock to flow model forced me to dig deeper and realize, you only realize then that, oh, wait, this rabbit hole, this first layer of the rabbit hole isn't the whole thing.

Starting point is 00:58:09 There's actually a little like back corner where if you dig a little deeper, you discover that there's a whole other chamber below and it's more glorious because it's a very different vibe in there. It's not a party. It's a beacon of hope and sunshine for the future of humanity. I think most people, we live in the, our worldview has been shaped by recent history and the learned wisdom of the internet revolution. And so we think that innovation is what matters. And that's why everybody's caught by Ethereum. And I think it fits our worldview, the status quo worldview better, the Ethereum narrative. But the truth is that Bitcoin is an economic reality that will continue to play out and overpower any narrative. And the sooner you dig down below

Starting point is 00:59:06 that first level of the rabbit hole to understand why this is true, the better off you are. Kresis, man, this was fun. I really enjoyed chatting with you. Keep pumping out this awesome content For people that were listening to this, and maybe you want to digest this in a more graphic kind of way. He has awesome graphics that go with the articles. I'll have the show notes with all these articles in there. Is there anything else that you wanted to provide a handoff to? A lot of this stuff, a lot of the educational content that I try to put out.

Starting point is 00:59:38 And, you know, I'm trying to do my part to communicate the value that can be had from stacking stats and the benefit that can create for people in their families. and a lot of that educational content is best seen with their own eyes and the graphics convey the message a little bit better. So check out my Twitter, I guess, which is at Kreis-C-R-O-E-S-U-S-U-S-U-S-U-S-U-S-U-S-B-T-C. All right. Hey, hey, thanks for joining us. This is a great time.

Starting point is 01:00:08 Hey, so thanks for everybody listening to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you're using. We really appreciate that. And if you have time, leave us a review. So thanks for joining us this week. And we'll catch you next Wednesday. Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC039: The Bitcoin Adoption Curve w/ Croesus (Bitcoin Podcast)

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