We Study Billionaires - The Investor’s Podcast Network - BTC132: Mental Models For Understanding Bitcoin w/ Anil Patel (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have an extremely thoughtful and humble author, Anil Patel, who talks to us about his new book, The Bitcoin Handbook. When we think about how many different fields of study Bitcoin touches, it can sometimes be difficult for people to grasp all the complexity and harmonizing concepts that are happening on this protocol. As you'll see from this interview, Anil went on an intellectual journey, simplifying and stitching it, altogether while also providing names and references to various mental models and paradoxes that exist. At the start of the interview, Anil jokes that he wrote this book for himself because he's not smart. But as you'll see through the discussion, that couldn't be further from the

Starting point is 00:00:44 truth as he lays out such focused and clean first principles thinking on really complicated ideas and makes them all accessible. So without further delay, here's my interview with the thoughtful Anil Patel. by the Investors Podcast Network. Now for your host, Preston Pish. Hey everyone, welcome to the show. Like I said in the introduction, I'm here with Anil. Anil, you wrote this amazing book.

Starting point is 00:01:28 My first, welcome to the show. I guess we'll start there. Where I want to start is what inspired you to write this, because this is a really unique, this is different than other books in the space and different in a very good way. But I want to hear from you. What were you trying to accomplish with this? Absolutely. Thanks for having me on the show. Yeah, you already, you already nailed it. It was different. There are a lot of fantastic books out there that cover so many different aspects of the very complex topic that is Bitcoin. And I'm going to level with you,

Starting point is 00:02:05 and this is not me being humble. I'm an idiot. I needed. You force myself to go through this process to understand Bitcoin from first principles. So I wrote this book for myself as a project and doing so. Yeah, in the beginning, this is exactly what you said. I wrote this. I'm sorry, I didn't write this for you. I wrote this for myself. And when I read that, I was like, that is so awesome to just stayed up front because

Starting point is 00:02:35 you were on a journey. You were on a mission to learn and teach yourself all this stuff. It's fascinating. It's awesome. I'm at a point in life where I've got two young kids and limited bandwidth. So I know there are other people out there like me who can't walk around with 50 different frameworks and mental models in their head. So how could I condense it in a way that someone can just pick up a book when they hear a particular term or keyword, flick through the pages and get what they need at a very high level. You know, this is not a dense book, but at a very high level and be able to move through whatever else they're already consuming.

Starting point is 00:03:17 Well, I can tell you as my value investing background, it's all about mental models. Charlie Munger really kind of popularized the term of having these mental models. I know Shane Parrish does a lot with it as well. And going through the book, I've read a lot of books through the years that talk about these mental models. But as I was going through your book, I was like, wow, I'm learning a lot. Some that I've heard the term, but really just didn't know what it was. And then others that I've never even heard of before that have just really kind of helped me conceptualize ideas in the Bitcoin space that I'd never even thought about before. And we're going to go through some of those today.

Starting point is 00:03:55 But one other compliment I got for you on the book. When people are doing a book, sometimes doing graphics can really be a pain in the butt because it takes a lot of effort. It takes a lot of work to kind of make it accessible and organize it. It's just easier to kind of bang out the text. And this book is amazing in the graphical layout and the pictures that go along with these mental models that you're describing to make it accessible. Like, did you have a background in design or did you just link up with somebody who's like really good at design work in order to make this so? accessible? No, so I have zero training in design.

Starting point is 00:04:43 My dad was a graphic designer, so I kind of grew up around it. No formal training. Yeah. But I think it kind of came again from that forcing yourself to condense information into a way where you have to strip away everything that's unnecessary. Yeah. So, you know, what I really like to do is I would give a lot of presentations. in previous careers, and I kind of carried that maybe skill set into explaining Bitcoin.

Starting point is 00:05:15 And, you know, something that I do a lot is I doodle on Post-it notes. So, okay, here, here's an example. If you're giving a talk or a presentation and you're going to use visual aids, they have to be very simple so that an audience can take them in while they're also listening to what you're saying. the information you're giving them. So, you know, you really want to be able to communicate whatever you're trying to show on something about this size,

Starting point is 00:05:44 you know, using something like a Sharpie from about this far away. So, you know, if, and I like to, you know, let's just say like a Venn diagram. If you can't communicate something as simply as this, you don't understand it well enough to be trying to teach someone. And then you're just treating in a layers. You're just stepping down.

Starting point is 00:06:07 So after they understand the, the broader, larger concept than you're stepping down into the next layer, layer two of the idea, and you're making that accessible. I love it. And boy, does it come through in the book for people that are looking for something that talks about a lot of mental models and ideas and paradoxes that lay them out in an accessible kind of way. I love this. I will reference this on my shelf. Okay, so let's get you. I just have to say, I really, you know, appreciate. that coming from you. When the book actually came out,

Starting point is 00:06:44 I was terrified because it came out at the same time as Gladstein's new book, as Canute's book, who else? Someone else had a book coming out. And I'm just thinking like, I feel like that indie director that's trying to have their opening weekend

Starting point is 00:07:02 at the same time as like Ridley Scott and Scorsese. So, you know, to hear that, you just means a lot. I have a huge amount of respect for you. I mean it, man. So here, we'll go through this. So when we when when you're going through the book and you look back at the experience and it's been a little bit of time since you probably finished your last sentence in the book, what really kind of sticks out in your mind as maybe your favorite or something that while you were going through this self-discovery of writing this, that, you're just like, wow, something like really clicked.

Starting point is 00:07:41 Which one of these paradoxes or theories or mental models, if you will, was one that stuck out for you? For me, it's definitely creative destruction. I don't even have to think about it. That to me, personally, I think that most people would be the most useful thing to understand to make sense of the world. I cut my teeth in the music industry back in the early. 2000s, 2010s, and I could see things happening all over the place from, you know, we had the rise of MP3s and CD burners, completely changing the economics of the music industry. Now bands had to tour. You know, tickets were going digital from lighting up at your

Starting point is 00:08:27 physical box office. Stubhub launched. You know, if you wanted to make it as a band, you had to pay attention to social media and YouTube. So I could see all these forces around me reshaping this industry that for a very long time had existed in a very similar form, but I didn't know how to explain what was going on. So understanding creative destruction that, you know, technology will continue to evolve. You know, humans are ingenious. creatures. We're going to find better, faster, cheaper, smarter ways of doing things. And that's going to have real world consequences. So, you know, for me at that point in my life, I was looking around thinking, I don't understand what's going on. I have to stop what I'm doing.

Starting point is 00:09:20 I ended up going back to school because of it. Just because I felt completely out of my depth by not understanding the process of creative destruction. When we talk about creative destruction with Bitcoin, I look at it from just a macroeconomics lens and you look at the Fiat system and you look at how it just props up. The zombie is really kind of the term that everybody uses, the zombie companies. And it doesn't allow for creative destruction to occur. When you look at Bitcoin's progress after the past 10 years and where it potentially goes here in the coming 10 years.

Starting point is 00:10:05 How do you see the creative destruction getting better? Does it take time for Bitcoin to actually do its thing to force creative destruction upon the market? What are some of your thoughts on just like what's happened to date and kind of where we're going with respect to creative destruction? Yeah, absolutely. Bitcoin kind of provides the solution. I guess firstly we could look out at the world and survey all these different industries.

Starting point is 00:10:38 So I kind of mentioned the music industry. You could look at education at the moment. You could look at, I mean, software's impacted so many industries across the board, but one that's always been maybe immune to that because of the monopoly powers of governments and the central banking cartel is their power. over the issuance and transmission of value. So Bitcoin has been so successful because it's kind of come from the ground up. It's been a grassroots effort.

Starting point is 00:11:19 So it was very difficult to detect in its early days, you know, how much of a serious threat it was. And then it also happens to be decentralized in a way that makes it almost impossible to shut down. So it's pretty much indestructible. And that's really the key property you need in something that's going to challenge a system like that. So, you know, Bitcoin doesn't need to be the fanciest, shittiest, fastest thing out there. And I think this is something Michael Saylor talks a lot about, is it just needs to be indestructible. So, you know, this is a very unique situation where innovation is usually not welcomed in terms of,

Starting point is 00:12:00 the creation of private forms of money in the fiat era so bitcoin just does it in a way that cannot be shut down yeah it does it in a way that's very hard to detect and it did it in a way in the early days where it appeared to be a novelty it was almost treated as a toy so it had this perfect path to to get to where it is today which is you know half a tree trillion, millions of people around the world interact with it on a daily basis. So I'm very optimistic that Bitcoin is the thing that forces creative destruction on the central planning of the monetary system. One of the paradoxes that you bring up in the book that I was not familiar with before reading this was Jevon's paradox. Can you describe what this is and then how

Starting point is 00:12:56 it applies to Bitcoin. Yes. Firstly, everything mentioned in the book, these are not obviously my own original ideas. It comes from reading another book from someone smarter than me and realizing this is very important and it applies to Bitcoin beautifully.

Starting point is 00:13:13 So Javon's paradox really explains that as we get more efficient at extracting a particular source of energy, you know, let's just say whether that's coal or oil or what have you, or we get more efficient in using it in terms we get more out of it, make the most of its energy density. Well, obviously the cost per unit of it is going to go down.

Starting point is 00:13:46 And what does that do to demand usually? If oil was $1 a barrel, would we be using more or less energy? more. And, you know, Vakla, smell, so this is, this is kind of the book that really walks through the whole process. For me, this is like the Bitcoin standard of energy, is energy and civilization. And one key point to take away from the book is that every transition in terms of, like, the primary energy source that a society uses is driven by making the previous source.

Starting point is 00:14:25 abundant, which comes from declining costs in a very rapid fashion usually. So, you know, we would never have progressed to extracting oil unless we used massive amounts of coal through steam-powered engines that helped extract oil, you know, and that was only possible because the price of coal declined so much because we got so much more efficient at using it. And coal only became possible because we got so good at using wood as an energy source. So every major energy transition is powered by making the previous source of energy abundant. It's interesting because you have all these articles that come out of like the Wef and you name it publication for the past five to 10 years talking about how Bitcoin is going to consume all the energy in the world by in the, and then the date they provide. is like two years later.

Starting point is 00:15:24 Like we've already passed multiple times when they've said it's going to consume all the electricity in the world. And not only do they not understand the tech advancements that are happening because of Moore's law and the rigs becoming more efficient, but I really don't think that they understand this principle that you just mentioned, this Javon's paradox moving forward. And there's just, there's so many mental models that are broke in the world when people looking at it, looking at Bitcoin superficially. But when you really do the work like you did in going through this book,

Starting point is 00:15:59 it's fascinating to see all these paradox like this one that just require people to go a level deeper and maybe even two levels deeper to really kind of understand why a lot of these narratives that are just kind of flung around on these, you know, clickbait type mediums to, they're just shot to pieces. But yeah, and that's probably a good actually segue into there's one concept in the book

Starting point is 00:16:30 that really summarized just about everything else in it and everything we're probably going to talk about in terms of our frustration with those clickbait narratives that kind of get put out there. And that's this idea of

Starting point is 00:16:45 the gel man amnesia effect. And it's a very obscure term, but it was coined by the author Michael Crichton, if you're familiar with him. But the basic idea is if you read something, a piece of information, usually journalism, like you just mentioned, that wonderful article that came from the West that Bitcoin would consume all the world's energy by 2020. and that does not happen. You have like this data point now, piece of evidence that shows that was incorrect. And you go back and you look at the logic they used to make that assertion.

Starting point is 00:17:29 Well, if they're not kind of thinking from first principles, like put aside the agenda they may have, but if they're not giving you information that has been, you know, thoroughly researched and is defensible in its sense, logic, then that's almost a sign you should disregard whatever else they say. Because you won't be able to verify if it's accurate or not, especially in areas where you're not an expert, you know, so outside of Bitcoin. So, you know, in the digital age where you're trying to curate your own information diet,

Starting point is 00:18:03 look out for those red flags because the tighter and tidy you can get your funnel to a group of people, usually individuals, not, you know, large publishing. entities, but a group of individuals who are clear thinkers where that's proven to you with evidence over time, the clearer your thinking will become, the better or easier it is for you to just tune out the noise and focus on what's actually going on at a fundamental level. 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.

Starting point is 00:18:52 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, many of them operating on the front lines of history. This is where you hear firsthand stories from people using. Bitcoin to survive currency collapse, using AI to expose human rights abuses, and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policy makers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful

Starting point is 00:19:39 main stage talks, hands-on workshops on freedom tech and financial sovereignty, immersive art installations and conversations that continue long after the sessions end. And it's all happening in Oslo in June. If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedomforum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just conference, it's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately.

Starting point is 00:20:20 How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move. With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence.

Starting point is 00:20:54 And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business. And whether your company does millions or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide, Dismifying AI at netsuite.com slash study. The guide is free to you at netsuite.com slash study. NetSuite.com slash study.

Starting point is 00:21:27 When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely. That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics.

Starting point is 00:22:01 So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing... Sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right.

Starting point is 00:22:44 Back to the show. So in finance, there's so many people that I follow that are wrong all the time. And but I think the, to your point, one of the reasons I continue to follow some of them is, is mostly because of their humility to admit like, hey, I was just dead wrong. about this and this is and then they almost like do a recap on what it is that they missed. Like that's a thinker and that's a person that I'm just not going to write off and say, yeah, I'm not going to listen to anything they say. But that humility that's matched with being wrong is the thing that I really think sets a lot of like great thinkers and

Starting point is 00:23:27 forecasters and people that are coming up with mental models on what they think's going to happen in the world. Whether you keep following. what they're saying or not. Is there anything else that you would that you would say beyond that is as far as not like writing somebody off just because they're wrong ones? How do we guard against that? I'm with you 100%. It's,

Starting point is 00:23:49 you know, everyone's going to be wrong most of the time. It's was the rationale behind your decision coming from a place of like critical thinking and sound logic. You know, sometimes you will make the best. decision in a situation, the outcome will be unfavorable or negative, but given the information you had and the environment you were in, you made the best possible decision. So, yeah, you should

Starting point is 00:24:18 be wrong most of the time. But like you said, are you humble enough to lower your ego and take it as a learning opportunity? There's a section in the book dedicated to network effects. Talk to us about this and why this is important. Every new technology that gets adopted at a significant enough scale that it becomes a core piece of how we live our lives gets there by way of network effects. It doesn't just get introduced or dropped into the world like a central bank digital currency. it grows with time because it offers something useful to its users, and that usefulness increases exponentially with each marginal additional user. So you could take the example of a telephone, really simple one.

Starting point is 00:25:20 You and I have a telephone, great, we can communicate. We throw an extra person into the mix. Well, now we have three individual lines of, communication, add in one more. Well, it doesn't just go to four. It goes up to six and you continue that trend onwards. And it's the same with Bitcoin in the sense that the benefit to me of using Bitcoin with each additional user, it increases beyond just having one more person in that group. Because now we've introduced another human with a unique set of skills, a unique set of values, who is going to provide value to that economy in a way that benefits the whole system.

Starting point is 00:26:04 So, you know, you kind of see this trend now where people will only sell their goods or services for Bitcoin. And the way you get Bitcoin from someone is you have to create more value or enough value, sorry, that encourages them to part with their Bitcoin. So the way I see it is you have this fiat system on one side and you have this Bitcoin circular economy growing on the other. One is creating an ever-growing pie and the other one is very much zero-sum and full of conflict. So, yeah, I think we're on a very clear path with Bitcoin in terms of its adoption.

Starting point is 00:26:53 mirroring what we've seen with the adoption of other major communications technologies. People that aren't investors in tech or they're more of the Buffett style, like really not looking at any of these like emerging technology type companies as being investable. I think this is one of the things that they often really miss is just the power of network effects. I was listening to an interview with Trace Mayer is probably 2015 time frame and he published this article on just network effects. It had been nothing I'd ever thought about before, before seeing this. And it was it was very, very influential to me really wrapping my head around how profound Bitcoin could potentially be. And so he had he had seven network effects back then.

Starting point is 00:27:48 And this is just for people just kind of to maybe do some research if they're interested in network effects more. But the seven that Trace listed back then was one, speculation. He was saying that because of the speculation, it's going to attract more people into Bitcoin because the price was actually so volatile and violent. The next one was merchant adoption, which you talked a little bit about there. Consumer adoption, the security features, he said, would turn into a network effect. which we're starting to see that more now. Developer mind share, he's saying, because you have some of the best developers in the world, it actually creates a further network effect of people building on top of Bitcoin. You're really seeing that on like layer two and whatnot

Starting point is 00:28:33 with lightning, liquid, other things. Now with the ordnals, you could look at that and say that that's another network effect that's just going to compound on Bitcoin. The financialization piece, that we're seeing that. and derivatives and everything else. And that's a huge network effect that's really picking up in the last two to three years.

Starting point is 00:28:56 And then his final network effect was just the adoption of it becoming a world reserve currency. And when we look around the world today with all the debate between net consumers and net producers and them not being able to really kind of come to an agreement on a settlement layer of using dollars, euros and and exchanging like raw molecules and materials for for those things. You can see how that's now like literally coming to the fold. And he he wrote about this what seven, eight years ago. Like I'm curious if there's more, more network effects that he would say now, but you know, he's nowhere to be found. But I'm curious if you have any thoughts or additional points to that, Yeah, well, just the fact that he wrote that in 2015 and there are, you know, other thinkers like, you know, Pierre Rashad or Michael Goldstein, who are putting out these incredible pieces so long ago. Yeah. With such incredible foresight that that what is what kind of drew me into the space in a very serious manner was thinking, here are these incredibly smart people. I cannot fault their logic.

Starting point is 00:30:07 and they're all heading in one direction. And that is focusing on Bitcoin and its monetization path. So, yeah, I feel like we've got all these amazing sort of signposts in our past in terms of like the Bitcoin educational content that came out that a lot of the work's been done for us and all those that hard thinking has been done for us if you're able to uh you know figure out who are the people providing that signal um another one that you bring up in the in the book is this idea of reflexivity uh i know george sorrows wrote an entire book on this idea um explain what this is and then explain to people how it applies the bitcoin in particular so the concept of reflexivity uh

Starting point is 00:31:07 Drills down to the individual that in a, let's say a free market, you have a number of thinking participants. They're going to come in with their own views, experiences, perspective, capital, risk tolerance, and they're going to be swayed by their own unique set of biases. So that inherently is going to introduce volatility into any market. Now, you couple that with something like Bitcoin that is being monetized from zero, and I think that just kind of compounds even more so. So the idea of understanding reflexivity in the context of Bitcoin is really a way to understand Bitcoin's highly cyclical nature through these boom and bus cycles that we see, which is, you know, people get very, overly optimistic about its future

Starting point is 00:32:07 during booms and that kind of plays into itself creating this positive feedback loop and we see the same thing on the way down. Now, the important thing to understand is we cannot differentiate between what factors are causing that. Is it someone's views over what's going to happen? Or is it the momentum of the market playing back into the individuals in that kind of

Starting point is 00:32:40 feedback week fashion? So, yeah, I really just personally use it as a way to make sense of Bitcoin's volatility in that kind of multi-year cyclical fashion. I mean, really, it just smashes the efficient market hypothesis to like shreds. It's really kind of like the idea of reflexivity is just like saying that this is, There's no way this can be valid for any quantity of time that you would measure it between. Yeah. And the benefit in understanding it is that if you choose to use Bitcoin as your long-term savings vehicle,

Starting point is 00:33:17 is you can tune out that volatility because you understand that's just the natural course that's going to happen given the inputs. Yeah. And just to add to that, I would say the more that you get direct. stood up around Bitcoin. It only enhances that volatility and that dissidents that you have between rational acting parties, parties that don't have enough information that are acting and thinking that they're rational and all the mix in between, right? Hey, so you talk, you have a great section in here. It's one of your longer sections that you talk about the laws of thermodynamics.

Starting point is 00:34:03 You have an outstanding quote from Lynn Alden. She's, you have her quoted as saying, consensus mechanisms that don't involve work. Instead involve governance. Talk to us about the importance of the quote. Talk to us why this section was, was one of your larger sections in the book and why you think it's important to Bitcoin. Yeah. I mean, Lynn just nails it in that, in that quote, you know, that that'll save you reading several books. True, true.

Starting point is 00:34:35 Yeah, the whole point of Bitcoin is to remove third parties from exchanges of value and the issuance of money. And you can only do that if there is some kind of work or effort involved in both those things, either the issuance of currency or the validation of transactions. Now, if you choose not. to go down that route, which is something that's quite verifiable. You can have very transparent rules around

Starting point is 00:35:10 it and everyone's on the same footing. The other direction is governance, which is basically the Fiat system and you're putting all those responsibilities on the shoulders of a select group of individuals. You can choose

Starting point is 00:35:27 whoever you want those individuals to be. You can choose however they decide on particular decisions, but you've introduced moral hazard into it. Humans given a long enough time frame and the ability to influence things at that level of society, you know, like the base money of a society, you're just asking for trouble. So I kind of see those two polar opposites really as Bitcoin and everything else. Not just the Fiat system, but also other, I guess, digital currencies trying to compete with Bitcoin. But they're very separate things.

Starting point is 00:36:16 So it's really going back to proof of work. I even try to, like I agree with Lynn's quote all day long. I thoroughly believe in proof of work. but I also try to like challenge the idea, right? And so one of the better challenges that I've heard to, to the idea, which I don't agree with, but just to kind of throw it out there for the audience to kind of decide for themselves is,

Starting point is 00:36:39 so after you get all of the Bitcoin, the $21 million issued, why is proof of work still required after it's already been issued completely out into the market? And to counter that argument, I would personally, and I'm curious if you would, agree with this, Anil, is just think of like all the, all the, the, the 21 million sitting in a vault. There should be some type of work that's required to protect everything that's, the, the, the interactions that are happening inside of that vault. It shouldn't just be that the people that

Starting point is 00:37:15 hold the most coins can just sit there and get fat, dumb and happy on transaction fees by literally doing nothing. Like, it's not incentivizing, it's not incentivizing the recycling. It's not incentivizing the recycling of the coins. I guess that's how I would describe the fee structure at that point when all the coins are issued into the market into the strongest and fittest and most efficient hands in a free and open market. Whereas by continuing to have proof of work there, you are now incentivizing the miners to find, to go out and literally find the cheapest and most efficient energy on the planet, moving their rigs, moving themselves, performing this demonstration in this ecosystem that they truly are the fittest and that they truly are the most efficient actor to reallocate that

Starting point is 00:38:12 capital into the market. I don't know how else to kind of like combat that argument that people would say and I think that you would probably get now eith's uh eath is not pegged like the the amount of coins like we have no idea how many coins are even there or where that's ever going to end but I heard people making that argument like we don't really need proof of work anymore because most of the coins are already issued and that was under proof of work and that's why we can now just transition to proof of stake but um I'm curious if you agree with it or if you see it different or maybe you have a different way of describing I don't know that I did the best job describing my counterpoint to the argument.

Starting point is 00:38:51 Well, let's imagine that you're trying to move a hundred million dollars in equivalent Bitcoin units at this point in time. You probably want some level of confidence around the finality of that transaction. You're free to choose. You could choose to use the Bitcoin network. You could choose to use XYZ network. So I think the market is deciding, is demonstrating which one it values more just by how much value was transacted via it. Yeah, I completely agree with you.

Starting point is 00:39:33 I know which one I would pick. And the fees aren't going to be that high, even for a hundred million movement, right, like in comparison to the value that you're transacting. Right. Okay. here's another one that I was not well versed on. Gull's Law

Starting point is 00:39:51 and then I'll read a quote after you're kind of done describing it for people so that they can kind of understand it. The goal's law is the idea of first building a system

Starting point is 00:40:07 that is functional before you choose to add bells and whistles to it or iterate. on it. You want to have a very strong foundation, especially when we're talking about monetary systems. And make no mistake, Bitcoin is money. So imagine you're building a house. How important is the foundation or the stability of that foundation to you? I guess is the question. If it's not that important to you, by all means, you know, go crazy, be innovative. But what Bitcoin gave us

Starting point is 00:40:45 is a very strong, verifiably strong foundation that then allows us to innovate on top of it without causing any permanent damage to that underlying foundation.

Starting point is 00:41:01 You can kind of innovate without that risk. Now, if you choose to build a system where the kind of base of it is not yet functional or is still a work in progress, and you're adding all kinds of things on top of it, I mean, imagine a tower of jenga blocks that is only supported by a single

Starting point is 00:41:22 block. The more complexity you add into that system, before first getting it stable and functional, you're just adding more risk on top of it. So it really comes down to risk and introducing unknown or unknowable risk into a system by adding complexity on top of it. I think this one is so important and so lost on so many people that arrive to Bitcoin or the digital asset space. They look at it and they say they look at the complexity, especially from a software standpoint. And there's like, well, just put it all together. Like, why not, why does it have to go in these really small modular chunks and that have to be built upon? And it's crazy because when you look at physical reality, you see this everywhere that we build in layers.

Starting point is 00:42:20 Clear down to like building a skyscraper, right? Like you got the concrete. Well, why don't you use glass, the glass windows, the material of glass windows for the concrete, right? Like we have to build in layers to optimize for the things that we desire and for the utility of what we're trying to do. I was in Miami and Brandon Quidim gave me a book called Entangled Life. And one of the most mind-blowing books I've ever come across because it's talking about like forests. And it's talking about how these plants are using the fungi underneath of the soil to use as a communication layer with the other plants. And the way that they're literally transacting energy, they're transacting materials with each other.

Starting point is 00:43:09 And it's this whole like complex network, almost like the trees are the web pages and the fungi underneath or are the hyperlinks between the trees. And it's just, it's totally blowing my mind. And when I think of this law, this Gall's law that you're talking about, like, why didn't the trees just develop the, the, the material that the fungi basically offer the trees to conduct this, this communication exchange and energy exchange between each other. It's because you have to build in layers. Nature's demonstrated time and time again that we've got to build in layers in order to make sure that we don't breach the security or the integrity of doing too much at one spot, right? So I love this in your book. It was fantastic. Yeah. And Brandon's really done the work on that. He's someone who's taken a passion in his life compared it to Bitcoin, found out what rules or laws from nature translate. And he's written

Starting point is 00:44:15 some brilliant, brilliant pieces that kind of make that link. So I encourage anyone to go and check out his work. Yeah. Brilliant guy. Great guy. So in your book, you have a quote on this one that I'm just going to read for people to really kind of give the reinforcement on what you're talking about. So Alan Farrington, another just brilliant thinker in the space. He said, cramming all the features of lightning, liquid, discrete log contracts, RGB, and so on into the main chain is just an obvious bad idea. It would introduce unknowable attack vectors, and hence holistic fragility to the layer one network. So love this. I think this is a really important one, but we're leading up to my favorite one that I saw in the book. Let's take a quick break and hear from today's sponsors.

Starting point is 00:45:03 No, it's not your imagination. Risk and regulation are ran. ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, VANTA gives you continuous automation across

Starting point is 00:45:35 more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with Vanta. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires. That's Vanta.com slash billionaires. Ever wanted to explore the world of online trading, but have haven't dared try? The futures market is more active now than ever before, and Plus 500 futures is the perfect place to start.

Starting point is 00:46:14 Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4x, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for. See a trading opportunity, you'll be able to trade it in just two clicks once your account is open. Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience,

Starting point is 00:46:56 plus 500 is your gateway to the markets. Visit plus 500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high-yield savings accounts. Instead, they often use one of the premier passive income strategies for institutional investors, private credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than $600 million invested in a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in

Starting point is 00:47:44 the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8%, and the average annual total return since Inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right, back to the show. Here it is. Teach us about intransigent minority, what it is, why this applies the Bitcoin, truly my favorite model in this book.

Starting point is 00:48:37 And I had never read about this before until now. So teach us. Yeah, first of all, this is a concept popularized by Teleb. and I know many Bitcoiners don't always feel that great about acknowledging him, but I think this is an idea we should absolutely preserve and use for our own understanding. And the idea around the intransigent minority is think of Bitcoiners and how willing they would be once understanding Bitcoin to accept an alternative unit of account to measure economic value or even denominate their own savings in at this point.

Starting point is 00:49:26 You're just not going to get them to change. They've already made the switch. They've left that chip permanently. And so now you have a group of bitcoins who are unwilling to change their unit of account. And that number is growing over time. you know, we can visibly see that. So what is likely to happen? If the friction is low enough for someone outside of that group to offer, say, goods or services

Starting point is 00:50:00 in both denominations, for example, they can still serve their Fiat customers, but now they can also serve customers who exclusively operate in the Bitcoin world. And the friction is low enough. Why would they not do that? They now have access to this entire new group of potential customers, trading partners, whatever you want to call them. So over time, that small group of individuals not only grows, but it forces its preference on the rest of the system because there's just very little risk or cost for others outside

Starting point is 00:50:37 of it to cater to that group. And I feel like we're seeing that. And part of that is because Bitcoin is just a superior unit of a campaign. count, especially one thing I try to keep tabs on because it's really interesting to me is the insurance industry. How many Bitcoiners do you think would want to have a life insurance policy payout denominated in Bitcoin? Now, take out the counterparty risk part of it, but just try and think of that example. It benefits both parties. Why would they not do that eventually if the regulatory barriers lower enough to allow that.

Starting point is 00:51:15 So I feel like we're going to see this play out in many different industries where people will want to serve Bitcoiners and they'll be able to do so because the tools to do that are just very easy to implement. You had a great one sentence line in this section in your book and I'm just going to read it to folks. You said when a few individuals shape the preferences of the majority. by their unwillingness to submit to the default option. Like this describes me to a T, like how I view Bitcoin, how I view it as like people,

Starting point is 00:51:56 you know, they get involved in politics and they're saying, oh, I'm going to vote this way or I'm going to vote that way. And I'm like, I'm voting with my Bitcoin. And I refuse to sell it. And I guess it's just, and I think there's a lot of other people in Bitcoin. that feel the exact same way. Like they, they are going to beat that drum

Starting point is 00:52:16 until the rest of the world begins to dance to, to, to, uh, their bend to their desires, right? Which is we are going to use this as our ledger.

Starting point is 00:52:28 Yeah. And that's not us being jerks. It's we've experimented with something. We've had, you know, positive outcomes because of it or impacts in the rest of our life. Um, and,

Starting point is 00:52:38 you know, now I want to help others kind of come on to that life boat because I feel or believe that they'll see similar results in other aspects of their life. Yeah. I think the reason you see so many people that like once they finally do the hard work and educate themselves on what it actually is, they're looking at it as a tool that I know when I buy this and I save in this that it can't be debased no matter what.

Starting point is 00:53:06 And once you come to that realization and truly understand why it can't. can't be debased because of the full nodes and all the game theory that's around it, it becomes a really powerful thing of just thinking about all your hard work and everything that you're doing and just being able to freeze it into these units that you know this some outside entity can't just make up more of. And I don't know. It just doesn't seem like there's anything more important that I could possibly try to educate or work on in my life than making sure that the most amount of people in the world can participate in such a system that they're not going to be, you know, debased to the tune of trillions of units on a whim.

Starting point is 00:53:52 But yeah, I really like this one. I love this one. This is so important. Thank you. Yeah. And it's just, look, it's an opportunity for us to help protect just the most productive members of society. Yes.

Starting point is 00:54:09 Yes. I love that. What's something that you think the community, the Bitcoin community can do better right now? So, I mean, look, I don't think there is a Bitcoin community. There's a lot of individuals with different preferences, beliefs. And I think just a lot of the clear rational thinkers that the world have become Bitcoiners over time. If, you know, a lot of my time now, and I think this is true for most other people who have adopted Bitcoin is spending time educating those they love people around them, their family.

Starting point is 00:54:48 And how to best go about doing that. And what I think without being annoying, right? What most of us miss is we're trying to bring logic to an emotional discussion. And I would maybe encourage people. to try to bring more emotion to that conversation because that's what enables change and that will only come if you can pinpoint someone's source of pain or friction in their life.

Starting point is 00:55:27 Until you can validate that emotion with them, not for them, but with them, they're not going to listen to you about making some fundamental change of how they live their life or how they choose to denominate their life sacred. things, you know, you have to earn their trust. And one great way to do that is just demonstrate your values. You know, one thing that was obvious to me in the early days is I'm just watching

Starting point is 00:55:53 all these bitcoins live a lower stress life. They were fitter than me. They were happier than me. They had better relationships. What was going on? You know, I was curious enough, thankfully, to kind of pursue that question, but it was through them demonstrating a life that was worthy of imitation that I took the leap. You know, they didn't have to shout down my,

Starting point is 00:56:20 you know, throat or throw facts in my face. It was just obvious. Yeah. So, yeah. What's sad is, is the parties that are sometimes using

Starting point is 00:56:32 aggression, and I'm not saying like physical aggression, I'm just saying, argumentative aggression. They come off really strong. I think most of them are doing it from a place of just deep love for family members or whatever. But what they don't realize is it's a total turnoff to the person who's just not mentally there or they can't even understand the problem that's being solved.

Starting point is 00:56:57 And so then it just turns into conflict and it actually pushes the person away. It performs the exact opposite of what they're trying to accomplish, right? And I don't know how we can get through to people. Like you've got to, it has to be more passive. It has to be more like, let me lead through, through example, as opposed to lead through force or lead through inspiration to the others. But at the same time, how do you extract all the knowledge that's really kind of required for somebody to get it and to be able to sit through the volatility because they get it?

Starting point is 00:57:36 is just what makes it so difficult. And I wish I had a turnkey solution to it, but I don't know that there is. You do. It's called a podcast, Preston. There's so many people that I would love to just be able to like, you know, give a turnkey here. And like here, this unlocks like the whole breadth of everything that you really need to know and understand. Yeah. But that's part of it too.

Starting point is 00:58:02 I, you know, you still do and used to think that way. But then just through redirecting my focus on the people who are already at a point where they're open-minded enough to listen or to take that leap or eager to learn more. And then I've met a whole new group of people that I now love and admire and respect through that. So, you know, I just feel that's the less, that's the more frictionless road to take. Do you have a favorite book or something or a book that like has really influenced you and just maybe made you look through the look at the world through maybe a different lens beside your own book which is phenomenal. But anything you want to highlight? Yeah. I mean it's it's one that had a pretty profound impact on me and taking down a number of mental blocks that were stopping me from maybe.

Starting point is 00:59:03 fully adopting Bitcoin when I still had questions around, well, maybe the state would come up with something equally as useful. And that was really understanding the process of innovation. And Matt Ridley wrote this fantastic book called How Innovation Works. I really try to reread it as often as possible. And it's just, it's a very easy read.

Starting point is 00:59:29 It's just a lot of historical examples of how the purpose, of how the process of innovation occurred. And you know, you read the book, you go through all these examples of really groundbreaking discoveries or, you know, innovations that turned into technology we use in our day-to-day lives now. And in very few scenarios, was the state involved. It usually came from individuals hammering away

Starting point is 01:00:01 usually as part of a group they weren't doing it for the money or the fame and it was very much you know grassroots movements that that eventually took off because they just offered value to society

Starting point is 01:00:18 in a way that hadn't before so it really just changed my thinking of how the future will be shaped and who is going to lead that that was cold courage. Yeah, that was called How Innovation Works. Is that right? How Innovation works by Matt Ridley. Okay. And then you held up another one on the energy front. What was the name of that one? Yeah, that's called Energy and Civilization History by Vaclib Smil. Yeah, that looks really good as well. Sorry, I'm literally writing these down because I got a long drive on my hands over the weekend here. So I'm going to be listening to these. Why is it so hard to be a Bitcoiner? Is it hard to be a Bitcoiner?

Starting point is 01:01:06 It's not when you're able to have conversations like this with other Bitcoiners and kind of flesh out your thinking to maybe confirm that you're not completely crazy. But being a Bitcoiner, especially if you came to Bitcoin as independent of, your circle of friends, your family is just lonely because it forces you to completely rethink how you live your life, how the world works. You're probably reading completely different books to normies. So it's just lonely because it's a very different path. In the future, I believe this will be the norm.

Starting point is 01:01:55 Kids will be learning about Bitcoin or sound money. and Bitcoin just happens to be the soundest money. But it's hard being a Bitcoin because it's a lonely journey if you're doing it in isolation. So go out and find your other Bitcoiners. Go to a meetup, go to a conference. I think that's why Bitcoin Twitter is so people are so active is because of what you're describing, which is a little bit of loneliness. you kind of feel like you're like this strange person that nobody can understand you, right?

Starting point is 01:02:36 And it's a little bit of a place to seek salvation online because you can actually interact with people that understand why you're so excited and hopeful for the future and where this is all going. But it's a great point. I never really thought about it being lonely. But I think you're right. I think if I didn't have my like online community, and Twitter and people that I could talk to, it would be extremely lonely, I think.

Starting point is 01:03:03 Yeah, and think about how much of your life is influenced by the values that Bitcoin gives you, and then how much of that do you have to hide in public? Just because it's going to lead to a lot of maybe unnecessary conversations or further alienation.

Starting point is 01:03:20 So having to hide... Very uncomfortable conversations. Yes. Yes. Yes. Yeah. Yeah. And having to hide such a core part of yourself is difficult. You know, you can't then be authentic or vulnerable with the people that you usually are. Yeah, I find myself using the phrase, if you say so, a lot with, you know, close family, friends, whatever, right?

Starting point is 01:03:49 Yeah, and that's why, like, if you don't attack that challenge. using the B word, but some other like fundamental concept that helps them see flaws in the current system, perhaps then they might be willing to search or the solution to that. So for folks that are watching this on YouTube, here's the book right here, the Bitcoin handbook. I have it tabbed, highlighted. Like I said at the start of the show, this will sit over on my shelf and I know I'm going to be walking over there from time to time and pulling it off and looking up some of these mental models because, you know, some of these ideas you think about them. You kind of are aware that that's a framework, right? But for some of them, I just didn't even know that there was like a name to it. And I want to be able to capture it so that I can hand off to something. Oh, well, this is the mental model or the idea that this is based upon. And then there's like, you could read an entire book on some of these mental models that go into excruciating details. detail on them. But you do such a great job outlining them and just the organization, the graphical design work is phenomenal. Hats off to your dad. It was in your DNA, man. But thank you so much for

Starting point is 01:05:12 coming on. And Neil, is there any other thing that you want to highlight? Just tell people where they can find the book. And yeah, give a handoff. Yeah, you can find me on Twitter in the bio of my Twitter handle, it's a nil, said so, is a link to another page where you can download pretty much all my educational resources for free. They're designed to be very visual, very introductory, normie friendly, send them to loved ones. It's all free. Spread them around, steal them. And Preston, I just got to say, man, like, I'm such a huge fan of yours. Like what you've done for not just everyone, but for me personally, you know, the amount of value you put out into the world without asking for anything in return.

Starting point is 01:06:06 I'm just really grateful that we have you. Thank you. So thank you. I'm thankful we have you as well putting out amazing material like this. So this was a real pleasure. I look forward to staying in contact. And hopefully I meet you at a conference or some meet up someday in the future here. And Neil, that was really fun.

Starting point is 01:06:26 Thanks, Preston. Look off to yourself. You as well, sir. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener.

Starting point is 01:06:43 If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview. in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening, and I'll catch you again next week. Thank you for listening to TIP. To access our show notes, courses, or forums, go to the investors podcast.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

Starting point is 01:07:19 permissions must be granted before syndication or rebroadcasting. Thank you.

We Study Billionaires - The Investor’s Podcast Network - BTC132: Mental Models For Understanding Bitcoin w/ Anil Patel (Bitcoin Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.