Michael Saylor: Bitcoin, Inflation, and the Future of Money | Lex Fridman Podcast #276
- Remember George Washington,
you know how he died? Well-meaning physicians bled him to death. And this was the most important
patient in the country, maybe in the history of the country. And we bled him to death
trying to help him. So when you're actually
inflating the money supply at 7%, but you're calling it 2% because you want to help the economy, you're literally bleeding
the free market to death. But the sad fact is George
Washington went along with it 'cause he thought that they
were gonna do him good. And the majority of the
society, most companies, most conventional thinkers,
the working class, they go along with this because they think that someone has their
best interest in mind. And the people that are
bleeding them to death believe, they believe that prescription because their mental models
are just so defective. - The following is a
conversation with Michael Saylor, one of the most prominent and brilliant Bitcoin proponents in the world. He is the CEO of MicroStrategy,
founder of Saylor Academy, graduate of MIT. And Michael is one of the most fascinating and rigorous thinkers
I've ever gotten a chance to explore ideas with. He can effortlessly zoom
out to the big perspectives of human civilization and human history, and zoom back in to the
technical details of blockchains, markets, governments,
and financial systems. This is the, "Lex Fridman Podcast." To support it, please check out our sponsors in the description. And now, dear friends,
here's Michael Saylor. Let's start with a big
question of truth and wisdom. When advanced humans,
or aliens or AI systems, let's say five to 10 centuries from now, look back at Earth on
this early 21st century, how much do you think they
would say we understood about money and economics, or
even about engineering, science, life, death,
meaning, intelligence, consciousness, all the
big interesting questions? - I think they would probably
give us a B- on engineering, on all the engineering things. The hard sciences. - [Lex] A passing grade. - Like we're doing okay. We're working our way
through rockets and jets and electric cars and
electricity, transport systems and nuclear power and
space flight and the like. And if you look at the walls that grace the great court at MIT, it's full of all the great thinkers and they're all pretty admirable. If you could be with Newton
or Gauss or Madam Curie or Einstein, you would respect them. I would say they'd give
us like a D- on economics. Like an F+ or a D-. - You see even an optimistic vision. First of all, optimistic
vision of engineering because everybody you've
listed, not everybody, but most people you've listed is just over the past couple of centuries and maybe stretches a little farther back. But mostly all the cool stuff
we've done in engineering, is the past couple of centuries. - I mean, Archimedes had his virtues. (Lex chuckles) I studied the history of science at MIT and I also studied aerospace engineering, and so I clearly have a
bias in favor of science. And if I look at the past 10,000 years, and I consider all of the
philosophy and the politics and their impact on the human
condition, I think it's awash for every politician that
came up with a good idea. Another politician came
up with a bad idea, right?
- [Lex] Yeah. - And it's not clear to me
that most of the political and philosophical
contributions to the human race and the human conditions
have advanced so much. I mean, we're still taking guidance and admiring Aristotle and
Plato and Seneca and the like. And on the other hand if you think about what has made the human condition better. Fire, water, harnessing of wind energy. Like try to row across an ocean, right? Not easy. - And for people who are
just listening or watching, there's a beautiful, sexy
ship from 16th, 17th century. - This is a 19th century handmade model of a 17th century sailing
ship, which is of the type that the Dutch East India Company used to sail the world and trade. So that was made, you
know, the original was made sometime in the 1600s. And then this model is made in the 19th century by individuals. - Both the model and the ship itself is engineering at its best. And just imagine just like
rock is flying out the space, how much hope this filled people with, exploring the unknown,
going into the mystery, both the entrepreneurs
and the business people and the engineers and just humans. What's out there? What's out there to be discovered? - Yeah, the metaphor of human beings leaving shore sailing across the horizon, risking their lives in
pursuit of a better life is a incredibly powerful one. In 1900, I suppose the
average life expectancy is 50. During the Revolutionary War,
while our founding fathers were fighting to establish life, liberty, pursuit of happiness, the constitution, average life expectancy of it's like 32, somewhere between 32 and 36. - [Lex] Yeah. - So all the sound and the fury doesn't make you live past
32, but what does, right? Antibiotics. Conquest of infectious diseases. If we understand the science
of infectious disease. Sterilizing a knife and
harnessing antibiotics gets you from 50 to 70. And that happened fast, right? That happens from 1900 to
1950 or something like that. And I think if you look
at the human condition, you ever get on one of
those rowing machines where they actually keep
track of your watts output when you're on the-
- [Lex] Yeah. - It's like 200 is a lot, okay? 200 is a lot. So a kilowatt hour is like
all the energy that a human, a trained athlete can deliver in a day. And probably not 1% of
the people in the world could deliver a kilowatt hour in a day. And the commercial value
of a kilowatt hour, the retail value is 11 cents today. And the wholesale value is 2 cents. And so you have to look
at the contribution of politicians and
philosophers and economists to the human condition. And it's like at best of
wash one way or the other. And then if you look at the contribution of John D. Rockefeller
when he delivered you a barrel of oil. Yeah, and the energy
in oil, liquid energy, or the contribution of Tesla,
as we deliver electricity. And what's the impact
of the human condition if I have electric power,
if I have chemical power, if I have wind energy, if I can
actually set up a reservoir, create a dam, spin a turbine, and generate energy
from a hydraulic source, that's extraordinary, right? And so our ability to cross the ocean, our ability to grow food,
our ability to live, it's technology that gets the human race from a brutal life where
life expectancy is 30 to a world where life expectancy is 80. - You gave a D- to the economists, so are they too like
the politicians, awash in terms of there's good
ideas and bad ideas? And that tiny delta between good and bad is how you squeak past the
F+ onto the D- territory. - I think most economic
ideas are bad ideas. - [Lex] Most? - Like take us back to
MIT and you wanna solve a fluid dynamics problem. Like design the shape of
the hull of that ship, or you wanna design an air foil, a wing. Or if you want to an engine
or a nozzle in a rocket ship, you wouldn't do it with simple arithmetic, you wouldn't do it with a scaler. There's not a single number, right? It's vector math,
computational fluid dynamics. There's end dimensional,
higher level math, complicated stuff. So when an economist says
the inflation rate is 2%, that's a scaler. And when an economist
says it's not a problem to print more money because
the velocity of the money is very low, monetary velocity is low. That's another scaler, okay? So the truth of the matter
is inflation is not a scaler. Inflation is an indimensional vector. Money velocity is not a scaler. Saying, what's the velocity of money? Oh, it's slow or it's fast. It ignores the question of
what medium is the money moving through in the same way that what's the speed of sound? Okay, well, what is sound, right? Sound is a compression wave. It's energy moving through a medium, but the speed is different. So for example, the speed of
sound through air is different than the speed of sound through water. And sound moves faster through water, it moves faster through a solid, and it moves faster
through a stiffer solid. So there isn't one. - What is the fundamental
problem with the way economists reduce the
world down to a model? Is it too simple or is it
just even the first principles of constructing the model is wrong? - I think that the fundamental problem is if you see the world as a scaler, you simply pick the one number which supports whatever you wanna do, and you ignore the universe
of other consequences from your behavior. - In general, I don't know if you've heard of like Eric Watson has been talking about
this with gauge theory. So different kinds of approaches
from the physics world, from the mathematical world to extend past this
scaler view of economics. So gauge theory is one way
that comes from physics. Do you find that way of
exploring economics interesting? So outside of cryptocurrency, outside of the extra
technologies and so on, just analysis of how economics works, do you find that interesting? - Yeah, I think that if we're gonna wanna really make any scientific
progress in economics, we have to apply much more
computationally intensive and richer forms of mathematics. - So, simulation perhaps? - Yeah, when I was at MIT,
I studied system dynamics, they taught it at the Sloan School. It was developed by Jay Forrester, who was an extraordinary
computer scientist. And when we created models
of economic behavior, they were all multidimensional
non-linear models. So if you wanna describe
how anything works in the real world, you have to start with the concept of feedback. If I double the price of
something, demand will fall and attempts to create
supply will increase, and there will be a delay
before the capacity increases. There'll be an instant demand change, and there'll be rippling effects throughout every other
segment of the economy downstream and upstream of such thing. So it's kind of common
sense, but most economics, most classical economics,
it's always taught with linear models, fairly
simplistic linear models. And oftentimes even I'm
really shocked today that the entire mainstream
dialogue of economics has been captured by scale or arithmetic. For example, if you read any
article in New York Times or the Wall Street Journal, right? They just refer to there's
an inflation number or the CPI or the inflation rate is X. And if you look at all
the historic studies of the impact of inflation,
generally they're all based upon the idea that inflation equals CPI and then they try to
extrapolate from that, and you just get nowhere with it. - So at the very least, we
should be considering inflation and other economics concept is a non-linear dynamical system. So non-linearity, and also just embracing the full complexity of just
how the variables interact, maybe through simulation, maybe have some interesting models around that. - Wouldn't it be refreshing
if somebody for once published a table of the change
in price of every product, every service, and every asset
and every place over time? - You said table. Some of that also is the
task of visualization. How to extract from this
complex set of numbers, patterns that somehow indicate something fundamental
about what's happening. Summarization of data is still important. Perhaps summarization not down
to a single scale of value, but looking at that whole sea of numbers, you have to find patterns
like what is inflation in a particular sector, what
is maybe change over time, maybe different geographical
regions, things of that nature. I think that's kinda, I don't
know even what that task is. That's what you could
look at machine learning, you can look at AI with that
perspective, which is like, how do you represent what's
happening efficiently as efficiently as possible? That's never going to be a single number, but it might be a compressed model that captures something,
something beautiful, something fundamental
about what's happening. - It's an opportunity for sure, right? You know, if we take, for
example, during the pandemic, the response of the political apparatus was to lower interest rates to zero and to start buying assets,
in essence printing money. And the defense was there's no inflation. - [Lex] Yeah. - But of course you had
one part of the economy where it was locked down, so
it was illegal to buy anything, but you couldn't, you
know, it was either illegal or it was impractical,
so it would be impossible for demand to manifest, so of
course there is no inflation. On the other hand, there was instantaneous immediate inflation in
another part of the economy. For example, you lower the
interest rates to zero. At one point we saw the
swap rate on a 30 year note go to 72 basis points, okay? That means that the value of a long dated bond immediately inflates. So the bond market had hyperinflation within minutes of these
financial decisions. The asset market had hyperinflation. We had what you call a K shape recovery, what we affectionately
call a K shape recovery. Main Street shut down, Wall Street recovered
all within six weeks. The inflation was in the
assets, like in the stocks, in the bonds. If you look today, you
see that typical house according to the Case-Shiller index today is up 19.2% year over year. So if you're a first time home buyer, the inflation rate is 19%. The formal CPI announced as 7.9%. You can pretty much create
any inflation rate you want by constructing a market basket, a weighted basket of products or services or assets
that yield you the answer. I think that the fundamental
failing of economists is first of all, they
don't really have a term for asset inflation, right? - What's an asset? What's asset hyperinflation? You mentioned bond market
swap rate and asset is where the majority of
the hyperinflation happen. What's inflation? What's hyperinflation? What's an asset? What's an asset market? And I'm gonna ask so many dumb questions. - In the conventional economic world, you would treat inflation as
the rate of increase in price of a market basket of consumer products defined by a government agency, okay? - So they have a, like traditional things that a regular consumer would be buying. The government selects
like toilet paper, food, toaster, refrigerator, electronics,
all that kind of stuff. And it's like a
representative basket of goods that lead to a content
existence on this earth for a regular consumer. - They define a synthetic metric, right? I mean, I'm gonna say you should have a thousand square foot apartment and you should have a used car and you should eat
three hamburgers a week. Now, 10 years go by and
the apartment costs more. I could adjust the market
basket by a, you know, they call 'em hedonic adjustments. I could decide that it used to be a 1970 needed a thousand square feet, but in the year 2020, you
only need 700 square feet because we've miniaturized televisions and we've got more efficient
electric appliances and because things have
collapsed into the iPhone, you just don't need as much space. So now it may be that the
apartment costs 50% more, but after the hedonic
adjustment, there is no inflation because I just downgraded the expectation of what a normal person should have. - So the synthetic nature of the metric allows for manipulation
by people in power. - (chuckles) Pretty much. I guess my criticism of economist is rather than embracing inflation based upon its fundamental
idea, which is the rate at which the price of things go up, right? They've been captured by
mainstream conventional thinking to immediately equate inflation
to the government issued CPI or government issued PCE or
government issued PPI measure, which was never the rate
at which things go up, it's simply the rate at which
a synthetic basket of products and services the government
wishes to track go up. Now the problem with
that is two big things. One thing is the government gets to create the market basket, and so they keep changing
what's in the basket over time. So I mean, if I said three years ago, you should go see 10 concerts a year, and the concert tickets
now cost $200 each. Now it's $2,000 a year to go see concerts. Now I'm in charge of
calculating inflation, so I redefine your
entertainment quota for the year to be eight Netflix streaming concerts. And now they don't cost $2,000, they cost nothing and
there is no inflation, but you don't get your concerts, right? So the problem starts
with continually changing the definition of the market basket, but in my opinion, that's
not the biggest problem. The more egregious problem
is the fundamental idea that assets aren't products or services. A assets can't be inflated. - [Lex] What's an asset? - A house, a share of Apple stock, a bond. A Bitcoin is an asset
or a Picasso painting. - Not a consumable good? - [Michael] Yeah. - Not a apple that you can eat. - Right, if I throw away an
asset, then I'm not on the hook to track the inflation rate for it. So what happens if I change
the policy such that, let's take the classic example. A million dollar bond
at a 5% interest rate gives you $50,000 a year
in risk-free income, you might retire on $50,000 a year in a low cost jurisdiction. So the cost of social
security or early retirement is $1 million when the
interest rate is 5%. During the crisis of March of 2020, the interest rate on a 10-year bond went to 50 basis points, okay? So now the cost of that
bond is $10 million, okay? The cost of social security went from a million
dollars to $10 million. So if you wanted to work
your entire life, save money, and then retire risk free
and live happily ever after on a $50,000 salary living
on a beach in Mexico, wherever you wanted to go,
you had hyperinflation, the cost of your aspiration
increased by a factor of 10 over the course of some amount of time. In fact, in that case, that was like over the course of about 12 years, right? As the inflation rate ground
down, the asset traded up. But the conventional view
is, oh, that's not a problem because it's good that assets, it's good that the bond is highly priced because we own the bond. Or what's the problem
with the inflation rate in housing being 19%? It's an awful problem for a 22-year-old that's starting their first job that's saving money to buy a house. But it would be characterized
as a benefit to society by a conventional economist who would say, "Well, housing asset values are higher because of interest rate fluctuation and now the economy's got more wealth." And so, that's viewed as a benefit. - What's being missed here? Like the suffering of the
average person or the struggle, the suffering, the pain
of the average person, like metrics that captured
that within the economic system When you're talking about- - What I'm going to say, it is a conventional
view of inflation as CPI understates the human
misery that's inflicted upon the working class and
on mainstream companies by the political class. And so it's a massive shift to wealth from the working class
to the property class. It's a massive shift to
power from the free market to the centrally governed
or the controlled market. It's a massive shift to power from the people to the government. And maybe one more
illustrative point here, Lex, is what do you think the inflation rate's been for the past a hundred years? - Oh, we talking about the scaler again? - If you took a survey of
everybody on the street and you asked them what do
they think inflation was, what is it? You remember when Jerome Powell said, our target's 2%, but we're not there. If you go around the corner,
I have posted the deed to this house sold in 1930, okay? And the number on that
deed is $100,000, 1930. And if you go on Zillow
and you get the Zestimate, - Is it higher than that? No?
- [Michael] $30,500,000. - Yeah. - So that's 92 years. 1930 or 2022. (Lex chuckles) And in 92 years we've had 305X increase in price of the house. Now if you actually back calculate, you come to a conclusion
that the inflation rate was approximately 6.5% a year
every year for 92 years, okay? And there's nobody, nobody in government, no conventional economists
who would ever admit to an inflation rate of 7% a year in the US dollar over the last century. Now, if you dig deeper, I mean one guy that's done a great job working
on this is Saidedean Ammous, who wrote the book,
"The Bitcoin Standard." And he notes that on average it looks like the inflation
rate and the money supply is about 7% a year all the
way up to the year 2020. If you look at the S&P index,
which is a market basket of scarce desirable stocks,
it returned about 10%. If you talk to 10% a
year for a hundred years. The money supply is expanding
at 7% a hundred years. If you actually talk to economists or you look at the economy
and you ask the question, how fast does the economy grow in its entirety year over year? Generally about two to 3%. Like the sum total impact
of all this technology and human ingenuity might
get you a two and a half, 3% improvement a year - As measured by GDP. Are you okay with that measure? - I'm not sure I go that far
yet, but I would just say that if you had the
human race doing stuff. - [Lex] Yeah.
- And if you ask the question, how much more efficiently
will we do the stuff next year than this year, or what's the value of
all of our innovations and inventions and investments
in the past 12 months? You'd be hard pressed to
say, we get 2% better. Typical investor thinks
they're 10% better every year. So if you look at what's going on, really when you're holding
a million dollars of stocks and you're getting a 10% gain a year, you're really get a 7%
expansion of the money supply. You're getting a two or 3%
gain under best circumstances. And another way to say
that is if the money supply stopped expanding at 7% a year, the S&P yield might be 3% and not 10%. It probably should be. Now, that gets you to start to ask a bunch of other fundamental questions like if I borrow a billion
dollars and pay 3% interest and the money supply expands
at seven to 10% a year, and I ended up making a 10% return on a billion dollar
investment, paying 3% interest. Is that fair? And who suffered? So that I could do that
because in an environment where you're just
inflating the money supply and you're holding the assets constant, it stands the reason that
the price of all the assets is going to appreciate
somewhat proportional to the money supply. And the difference in asset appreciations is gonna be a function of the scarce, desirable quality of the assets, and to what extent can
I make more of them, and to what extent are they
truly limited in supply? - Yeah, so we'll get to a lot
of the words you said there. The scarcity and so connected
to how limited they are and the value of those assets. But you also said, so the
expansion of the money supply, which is put another
way is printing money. And so is that always bad? The expansion of the money supply is this, just to put some terms on the
table so we understand them. You nonchalantly say it's always the, on average expanding every year, the money supply is
expanding every year by 7%. That's a bad thing. That's a universally a bad thing. - It's awful. I guess to be precise,
it's the currency that, I mean, money, I would say money is monetary energy or economic energy. And the economic energy has
to find its way into a medium. So if you wanna move it rapidly
as a medium of exchange, it has to find its way into currency, but the money can also flow into property like a house or gold. If the money flows into property, it'll probably hold its value much better if the money flows into currency, right? If you had put a hundred
thousand dollars in this house, you would have 305X return over 92 years. But if you had put the money, a hundred thousand dollars
into safe deposit box and buried it in the basement, you would've lost 99.7% of your wealth over the same time period. So, the expansion of the currency creates a massive
inefficiency in the society, what I'll call an adiabatic lapse. It's what we're doing is we're bleeding the civilization to death, right? - What's the, adiabatic, what's that word? - [Michael] Adiabatic lapse.
- Adiabatic. - Right, and aerospace engineering, you wanna solve any problem, they start with the phrase,
assume an adiabatic system. And what that means is a closed system, - [Lex] Okay, I've got it.
- So, I've got a container, and in that container no air leaves and no air enters, no
energy exits or enters, so it's a closed system. - So you got the closed system lapse? - [Michael] Okay.
(Lex laughs) Okay, I'm gonna use a. - There's a leak in the ship. - [Michael] I'm gonna use
a physical metaphor for you 'cause you're the jujutsu, right? - Yeah. - Like you got 10 pints
of blood in your body. And so before your next workout, I'm gonna take one pint from you. Now you're gonna go exercise, but you've lost 10% of your blood, okay? You're not gonna perform as well. It takes about one month for your body to replace the red blood platelets. So what if I tell you every month you gotta show up and I'm gonna bleed you? - [Lex] Yeah. - Okay, so if I'm draining the energy, I'm draining the blood from your body. You can't perform. Adiabatic lapse is when
you go up an altitude. Every thousand feet,
you lose three degrees. You go at 50,000 feet, you're 150 degrees colder than sea level. That's why you look at your instruments and instead of 80 degrees,
you're minus 70 degrees. Why is the temperature falling? Temperature's falling because
it's not a closed system, it's an open system. As the air expands, the
density falls, right? The energy per cubic, whatever, falls, and therefore the
temperature falls, right? The heat's falling outta the solution. So when you're inflating, let's say you're inflating
the currency supply by 6%, you're sucking 6% of the
energy out of the fluid that the economy is using to function. - So the currency, this
kind of ocean of currency, that's a nice way for
the economy to function. It's the most kind of,
it's being inefficient when you expand the money supply, but it's the liquid, I'm trying to find the right kind of adjective here. It's how you do transactions
at a scale of billions. - Currency is the asset we use to move monetary energy around. And you could use the dollar
or you could use the peso or you could use the bolivar. - Selling houses and buying
houses is much more inefficient. Or like you can't transact between billions of people with houses. - Yeah, properties don't make
such good mediums of exchange. They make better stores of value
and they have utility value if it's a ship or a house or a plane or a bushel of corn, right? - Can I zoom out just for-
- [Michael] Yeah. - Can we zoom out, keep zooming out until we reach the origin
of human civilization. But on the way ask, you
gave economists a D-, I'm not even gonna ask you
what you give to governments. Do you think their failure, economists' and government failure is malevolence or incompetence? - I think policy makers
are well intentioned, but generally all government
policy is inflationary and all government, it's
inflammatory and inflationary. So what I mean by that
is when you have a policy pursuing supply chain independence, if you have an energy policy,
if you have a labor policy, if you have a trade policy,
if you have any kind of foreign policy, a domestic policy, a manufacturing policy, a medical policy, every one of these policies
interferes with the free market and generally prevents some rational actor from doing it in a cheaper,
more efficient way. So when you layer them
on top of each other, they all have to be paid for. If you want to shut down the
entire economy for a year, you have to pay for it, right? If you wanna fight a war, you
have to pay for it, right? If you don't want to
use oil or natural gas, you have to pay for it. If you don't wanna manufacture
semiconductors in China and you want to
manufacture them in the US, you gotta pay for it. If I rebuild the entire
supply chain in Pennsylvania and I hire a bunch of employees and then I unionize the employees, then not only am I idle the
factory in the far east, it goes to 50% capacity, so whatever it sells, it
has to raise the price on. And then I drive up the cost of labor for every other manufacturer in the US because I competing against them, right? I'm changing their condition. So everything gets less efficient, everything gets more expensive. And of course the government couldn't pay for its policies and its wars with taxes. We didn't pay for World War I with tax, we didn't pay for World War II with tax, we didn't pay for Vietnam with tax. In fact, when you trace this, what you realize is the government never pays for all of
its policies with tax. It pays for- - Because it's too painful
to ask to raise the taxes to truly transparently pay
for the things you're doing with taxes with taxpayer money,
'cause they feel the pain. - Either that's one interpretation or it's just too transparent. If people understood the true cost- - Of war. They wouldn't want to go to war. - If you were told that you
would lose 95% of your assets, and 90% of everything you will be ever will be taken from you, you
might reprioritize your thought about a given policy
and you might not vote for that politician. - But you're still saying
incompetence not malevolence. So fundamentally, government
creates a bureaucracy of incompetence is kind
of how you look at it. - I think a lack of humility, right? Like, if people had more
humility than they would realize- - Humility about how little they know, how little they understand about the function of complex systems. - It's a phrase from Clint
Eastwood's movie, "Unforgiven," where he says, "A man's
gotta know his limitations." (Lex chuckles) I think that a lot of people overestimate what they can accomplish
and experience in life causes you to reevaluate that. So, I mean I've done a
lot of things in my life and generally my mistakes
were always my good ideas that I enthusiastically
pursued to the detriment of my great ideas that required 150% of my attention to prosper. So I think people pursue
too many good ideas and they all sound good,
but there's just a limit to what you can accomplish. And everybody underestimates
the challenges of implementing an idea, right? And they always overestimate the benefits of the pursuit of that. And so I think it's an overconfidence that causes an overexuberance
in pursuit of policies. And as the ambition of
the government expands, so must the currency supply. Well, I could say the money supply, but let's say the currency supply. You can triple the number
of pesos in the economy, but it doesn't triple the amount of manufacturing capacity
in the said economy. And it doesn't triple the
amount of assets in the economy. It just triples the pesos. So as you increase the currency supply, then the price of all those
scarce desirable things will tend to go up rapidly. And the confidence of
all of the institutions, the corporations and the individual actors and trading partners will collapse. - If we take a tangent on a
tangent, and we will return soon to the big human
civilization question. So if government naturally wants to buy stuff it can't afford, what's the best form of government? Anarchism, libertarianism. There's not even armies,
there's no borders. That's anarchism. - [Michael] The least. (chuckles) - The smallest possible. - The best government would be the least. And the debate will be over that. - When you think about this
stuff, do you think about, okay, government is the way it is, I as a person that can
generate great ideas, how do I operate in this world? Or do you also think
about the big picture? If we start a new civilization
somewhere on Mars, do you think about what's the
ultimate form of government? What's at least a promising thing to try? - I have laser eyes on my
profile on Twitter, Lex. - [Lex] Yes, I noticed. What does that mean? - And the significance of laser eyes is to focus on the thing
that can make a difference. - [Lex] Yes. - And if I look at the civilization, I would say half the
problems in the civilization are due to the fact that our understanding of economics and money is defective. Half, 50%. I don't know, it's worth $500
trillion worth of problems. Like money represents
all the economic energy and the civilization
and it kind of equates to all the products, all the
services and all the assets that we have and wherever
we're gonna have. So, that's half. The other half of the
problems in the civilization are medical and military and political and philosophical and natural. And I think that there are a lot of different solutions
to all those problems. And they are all honorable professions and they all merit a
lifetime of consideration for the specialist in all those areas. I think that what I could
offer it's constructive is inflation is completely misunderstood. It's a much bigger problem
than we understand it to be. We need to introduce engineering and science techniques into economics if we wanna further the human condition. All government policy is inflationary. And another pernicious myth is inflation is always and everywhere
a monetary phenomena. So, a famous quote by
Milton Friedman, I believe. It's like, "It's a monetary phenomena." That is inflation comes from
expanding the currency supply. It's a nice phrase and
it's oftentimes quoted by people that are anti inflation. But again, it just signifies
a lack of appreciation of what the issue is. Inflation is. If I had a currency which was
completely non-inflationary, if I never printed another dollar and if I eliminated
fractional reserve banking from the face of the earth,
we'd still have inflation. And we'd have inflation as
long as we have government that is capable of pursuing
any kind of policies that are in them self inflationary. And generally they all are. - So in general, inflationary
is the big characteristic of human nature that
governments, collection of groups that have power over others and allocate other people's resources
will try to intentionally or not hide the costs of those allocations like in some tricky ways. Whatever the options ever available. - Hiding the cost is
like the tertiary thing. Like the primary goal is the government will attempt to do good, right? - [Lex] And that's the primary problem. - They will attempt to do good and they will do good imperfectly and they will create
oftentimes as much damage, more damage than the good they do. Most government policy will be iatrogenic, it will create more harm than
good in the pursuit of it, but it is what it is. The secondary issue is they
will unintentionally pay for it by expanding the currency
supply without realizing that they're actually paying
for it in a suboptimal fashion. They'll collapse their own currencies while they attempt to do good. The tertiary issue is they will mismeasure how badly they're collapsing the currency. So for example, if you go to
the Bureau of Labor Statistics, and look at the numbers printed
by the Fed, they'll say, "Oh, it looks like the dollars lost 95% of its purchasing power
over a hundred years." Okay, they sort of fess
up there's a problem, but they make it 95% loss
over a hundred years. What they don't do is realize it's a 99.7% loss over 80 years, so they will mismeasure
just the horrific extent of the monetary policy in pursuit of the foreign policy
and the domestic policy, which they overestimate their budget and their means to accomplish their ends and they underestimate the cost and they're oblivious
to the horrific damage that they do to the civilization because the mental models that they use that are conventionally
taught are wrong, right? The mental model that like, it's okay, we can print all this money because the velocity of
the money is low, right? Because money velocity is a scaler and inflation is the scaler and we don't see 2% inflation yet, and the money velocity is low, and so it's okay if we
print trillions of dollars. Well, the money velocity
was immediate, right? The velocity of money
through the crypto economy is 10,000 times faster
than the velocity of money through the consumer economy, right? I think Nick pointed out
when you spoke to him, he said it takes two months for a credit card
transaction to settle, right? So you wanna spend a million dollars in the consumer economy, you
can move it six times a year. You put a million dollars into gold, gold will sit in a vault for a decade. Okay, so the velocity of
money through gold is 0.1. You put the money in the stock market and you can trade it once a week. The settlement is t plus two. Maybe you get to two to one leverage. You might get to a money velocity of a hundred a year in the stock market. You put your money into the crypto economy and these people are
settling every four hours. And if you're offshore, they're
trading with 20X leverage. So if you settle every day and
you trade with 20X leverage, you just went to 7,000.
- [Lex] Yeah. - So the velocity of the money varies. I think the politicians, they don't really understand inflation and they don't understand economic. But you can't blame 'em because the economists
don't understand economics because if they did,
they would be creating multi-variate computer simulations where they actually put in the price of every piece of housing
in every city in the world, the full array of foods and
the full array of products and the full array of assets. And then on a monthly basis they would publish all those results. And that's a high bandwidth requirement. And I think that people don't
really wanna embrace it. And also there's the
most pernicious thing. Like there's that phrase, you know, "You can't tell people what to think, but you can tell 'em what to think about." The most pernicious thing is I get you to misunderstand the phenomena, so that even when it's happening to you, you don't appreciate that it's a bad thing and you think it's a good thing. So if housing prices are
going up 20% year over year, and I say this is great
for the American public 'cause most of 'em are homeowners, then I have misrepresented a phenomena, inflation is 20%, not 7%. And then I have misrepresented it as being a positive
rather than a negative. And people will stare at it and you could even show
them their house on fire and they would perceive it as being great because it's warming them up and they're gonna save on their heat cost. - It does seem that the
cruder of the model, whether it's economics,
whether it's psychology, the easier it is to weave whatever the heck narrative you want. And not in a malicious way, but just like it's some kind
of like emergent phenomena, this narrative thing that
would tell ourselves. So you can tell any kind
of story about inflation. Inflation is good, inflation is bad. Like the crude of the model, the easier just to tell
a narrative about it. So like if you take an
engineering approach, I feel like it's becomes
more and more difficult to run away from sort of
a true deep understanding of the dynamics of the system. - I mean, honestly, if you went to a hundred people on the street and you asked them to define inflation, how many would say it's a vector tracking the change in price of every product service
asset in the world over time? - [Lex] No.
- Not many. - [Lex] Not many. - Now if you went to them and you said, do you think 2% inflation
a year is good or bad? The majority would probably say, "Well, here it's good."
- Yeah. - The majority of economists would say 2% inflation a year is good. And of course there's look
at the ship next to us. What if I told you that
the ship leaked 2%, right, of its volume every something, right? The ship is rotting 2% a year. That means the useful life
of the ship is 50 years. Now, ironically, that's true. Like a wooden ship had a 50
year to a hundred year life. A hundred would be long,
50 years not unlikely. So when we built ships outta wood, they had a useful life of about 50 years and then they sunk, they rotted. There's nothing good about it, right? You build a ship out of steel, and it's zero as opposed
to 2% degradation. And how much better is 0% versus 2%? Well, 2% means you have a
useful life of, you know, it's half life of 35 years. 2% is a half life of 35 years. That's basically the half
life of money and gold. If I store your life force in gold, under perfect circumstances, you have a useful life of 35 years. 0% is a useful life of forever. So 0% is immortal, 2% is 35 years average life expectancy. So, the idea that you would think the life expectancy of the currency and the civilization should be 35 years instead of forever is
kind of a silly notion. But the tragic notion is it
was seven into 70 or 10 years. It's the money has had
a half life of 10 years except for the fact that in
weak societies and in Argentina or the like, the half life of the money is three to four years,
in Venezuela one year. So the United States dollar and the United States economic system was the most successful economic system in the last a hundred years in the world. We won every war, we were
the world superpower. Our currency lost 99.7% of its value. And that means horrifically every other currency lost everything. In essence, the other ones were 99.9, except for most that were 100% because they all completely failed. And you've got a mainstream
economic community that thinks that inflation is
a number and 2% is desirable. It's kind of like, you know,
remember George Washington, you know how he died? - [Lex] No. - Well-meaning physicians
bled him to death. - [Lex] Hmm. - Okay. The last thing in the
world you would want to do to a sick person is bleed them, right? In the modern world, I think we understand that oxygen is carried by the blood cells. There's that phrase, right? Triage phrase. What's the first thing
you do in an injury? Stop the bleeding. Single first thing, right? You show up after any
accident, I look at you, stop the bleeding, because
you're gonna be dead in a matter of minutes if you bleed out. So, it strikes me as being ironic that orthodox conventional wisdom was bleed the patient to death. And this was the most important
patient in the country, maybe in the history of the country. And we bled him to death
trying to help him. So when you're actually
inflating the money supply at 7%, but you're calling it 2% because you want to help the economy, you're literally bleeding
the free market to death. But the sad fact is George
Washington went along with it 'cause he thought that they
were gonna do him good. And the majority of the
society, most companies, most conventional thinkers,
the working class, they go along with this because they think that someone has their
best interest in mind. And the people that are
bleeding them to death believe, they believe that prescription because their mental models
are just so defective. And then understanding
of energy and engineering and the economics that are at play is crippled by these mental models. - But that's both the bug in the future of human civilization
that ideas take hold. They unite us, we believe in them, and we make a lot of cool stuff happen. By as an average sort of
just the fact of the matter, a lot of people believe the same thing. They get together and
they get some shit done because they believe that thing. And then some ideas can be really bad and really destructive. But on average, the ideas
seem to be progressing in a direction of good. Let me just step back. What the hell are we doing here? Us humans on this earth. How do you think of humans? How special are humans? How did human civilization
originate on this earth? And what is this human project
they we're all taking on? You mentioned fire and water and apparently bleeding you
to death is not a good idea. I always thought you can get
the demons out in that way, but that was a recent invention. So, what's this thing we're doing here? - I think what distinguishes human beings from all the other creatures on the earth is our ability to engineer. We're engineers, right? - To solve problems or just
build incredible cool things? - Engineering, harnessing
energy and technique to make the world a better
place than you found it. Right, from the point
that we actually started to play with fire, right? That was a big leap forward. Harnessing the power of
kinetic energy and missiles, another step forward. Every city built on water. Why water? Well, water's bringing energy, right? If you actually put a turbine on a river or you capture a change
in elevation of water, you've literally harnessed
gravitational energy. But water's also bringing you food. It's also giving you a cheap form of getting rid of your waste. It's also giving you free transportation. You wanna move one ton blocks around, you want to move them in water. So I think, I mean the human story is really the story of
engineering a better world. And the rise in the human condition is determined by those groups of people, those civilizations that were
best at harnessing energy. Right, if you look, you
know, the Greek civilization, they built it around ports and sea ports and water and created a trading network. The Romans were really good at harnessing all sorts of engineering. I mean, the aqueducts are a great example. If you go to any big city, you travel through cities in the Med, you find that the carrying
capacity of the city or the island is 5,000
people without running water. And then if you can find
a way to bring water to it increases by a factor of 10. And so human flourishing
is really only possible through that channeling of energy, right? That eventually takes the
form of air power, right? I mean that ship, I mean,
look at the intricacy of those sails, right? I mean, it's just the model is intricate. Now think about all of the
experimentation that took place to figure out how many
sails to put on that ship and how to rig them and how to repair them and how to operate them. - There's thousands of lives spent thinking through all
the tiny little details all to increase the efficiency
of this, the effectiveness, the efficiency of this
ship as it sails to water. And we should also note
that there's a bunch of cannons on the side. So obviously- - Another form of engineering, right? Energy harnessing with explosives. - To achieve what end. That's another discussion, exactly. - [Michael] Suppose we're trying to get off the planet, right? - Well, there's a selection
mechanism going on. So natural selection, this whatever, however evolution works, it seems that one of the interesting inventions on earth was the predator-prey dynamic, that you want to be the bigger fish. That violence seems to
serve a useful purpose if you look at earth as a whole. We as humans now like to think of violence as really a bad thing. It seems to be one of the
amazing things about humans is we're ultimately tend
towards cooperation. We want to, we like peace. If you just look at
history, we want things to be nice and calm
but just wars break out every once in a while and
lead to immense suffering and destruction and so on. And they have a kind of like
resetting the palate effect. It's one that's full of just
immeasurable human suffering. But it's like a way to start over. - We're clearly the apex
predator on the planet. And I googled something the other day, what's the most common form
of mammal life on the earth? - By number of organisms?
- [Michael] Count. - By count. - And the answer that came
back was human beings. I was shocked. I couldn't believe it, right? It says like apparently if
we're just looking at mammals, the answer was human
beings are the most common. Which was very interesting to me. I almost didn't believe
it, but I was trying to, you know, 8 billion or so human beings. - Yeah, it's a lot. - There's no other mammal
that's got more than 8 billion. If you walk through downtown
Edinburgh and Scotland, and you look up on this hill and there's castle up on the hill, and you talk to people and the story is, "Oh yeah, well, that was
a British castle before. It was a Scottish castle
before it was a pick castle, before it was a Roman castle, before it was some other
Celtic castle before it was a." Then they found 13 prehistoric castles buried one under the other. And you get the conclusion that a hundred thousand
years ago, somebody showed up and grabbed the high point,
the apex of the city, and they built a stronghold there and they flourished and
their family flourished and their tribe flourished
until someone came along and knocked him off the hill. And it's been a nonstop never ending fight by the aggressive, most
powerful entity, family, organization, municipality,
tribe, whatever. - [Lex] Off the hill. - For that one hill going
back since time in memorial. And you scratch your head and you think, "It seems like it's like just
this never ending wheel." - But does not lead if you
just all kinds of metrics that seems to improve the quality of our cannons and ships as a result. Like it seems that just
like your laser eyes focuses the mind on the engineering tasks. - It is that, and it does remind you that the winner is
always the most powerful. And we throw that phrase out, but no one thinks about
what that phrase means. Like who's the most powerful
or the most powerful side won, but they don't think about it
and they think about power, energy delivered in a period of time. And then you think a guy with a spear is more powerful than
someone with their fist and someone with a bow
and arrow is more powerful than the person with the spear. And then you realize
that somebody with bronze is more powerful than without, and steel is more powerful than bronze. And if you look at the Romans, they persevered with artillery and they could stand off from 800 meters and blast you to smithereens, right? You study the history of the
Balearic slingers, right? And you think we invented bullets, but they invented bullets to put in slings thousands of years ago that
could have stood off 500 meters and put a hole in your head, right? And so there was never a time
when humanity wasn't vying to come up with an asymmetric form of projecting their own
power via technology. - An absolute power is
when a leader is able to control large amount of humans, they're facing the same direction, working in the same
direction to leverage energy. - The most organized society wins. - [Lex] Yeah. - When the Romans were
dominating everybody, they were the most organized
civilization in Europe. And as long as they stayed
organized, they dominated. And at some point they over expanded and got disorganized and they collapsed. And I guess you could say that the struggle of human condition, it catalyzes the development
of new technologies one after the other. It penalizes anybody that
rejects ocean power, right? Gets penalized. You reject artillery, you get penalized. You reject atomic power,
you get penalized. If you reject digital power,
cyber power, you get penalized. And the underlying control of the property keeps shifting hands from one institution or one government to another based upon how rationally they're
able to channel that energy and how well organized
or coordinated they are. - Well, that's really
interesting thing about both the human mind and
governments that they, once they get a few good and companies, once they get a few good ideas, they seem to stick with them. They reject new ideas. It's almost whether that's
emergent or however that evolved, it seems to have a
really interesting effect 'cause when you're young,
you fight for the new ideas, you push them through. Then a few of us humans find success, then we get complacent. We take over the world
using that new idea. And then the new young person with a better new idea challenges you. And you as opposed to pivoting,
you stick with the old, and lose because of it. And that's how empires collapse. And it's just both at the
individual level that happens with two academics fighting about ideas or something like that. And at the human civilization
level, governments, they hold on to the ideas of old. It's fascinating. - Yeah, an ever persistent
theme in the history of science is the paradigm shifts
and the paradigms shift when the old guard dies and
a new generation arrives, or the paradigm shifts when there's a war. And everyone that disagrees
with the idea of aviation finds bombs dropping on
their head or everyone that disagrees with
whatever your technology is has a rude awakening. And if they totally disagree,
they're society collapses and they're replaced by that new thing. - A lot of the engineering
you talked about had to do with ships and cannons
and leveraging water. What about this whole digital
thing that's happening? Been happening over the past century. Is that still engineering in your mind? You're starting to operate
in these bits of information? - I think there's two big ideas. The first wave of ideas
were digital information. And that was the internet
wave been running since 1990 or so for 30 years. And the second wave is digital energy. So if I look at digital information, this idea that we wanna
digitally transform a book, I'm gonna dematerialize every
book in this room into bits, and then I'm going to deliver a copy of the entire library to a billion people. And I'm gonna do it for pretty
much de minimis electricity. If I can dematerialize music, books, education, entertainment, maps, right? That is an incredibly like
exothermic transaction. It's a crystallization when we collapse into a lower energy
state as a civilization and we give off massive amounts of energy. Like if you look at what Carnegie did, the richest man in the
world created libraries everywhere at the time, and he
gave away his entire fortune. And now we can give a better library to every 6-year-old for nothing. And so what's the value
of giving a million books to a 8 billion people, right? That's the explosion in prosperity that comes from digital transformation. And when we do it with maps. I transform the map, I put it into a car. You get in the car and the car drives you where you want to go with the map, right? And how much better is that than a Rand McNally atlas right here? It's like a million times better. - [Lex] Yeah. - So the first wave of
digital transformation was the dematerialization of all of these informational things,
which are non-conservative. That is I could take
Beethoven's, "Fifth Symphony," played for by the best
orchestra in Germany, and I could give it to a billion people and they could play it
a thousand times each at less than the cost of
the one performance, right? So I deliver culture and education in their edition and
intelligence and insight to the entire civilization
over digital rails. And the consequences of the human race are first order generally good, right? The world is a better place. It drives growth and you create these trillion dollar
entities like Apple and Amazon and Facebook and Google
and Microsoft, right? That is the first wave. The second wave- - Do you mind, I'm sorry to interrupt. - [Michael] Yeah. - But that first wave, it feels like the impact that's positive,
you said the first order impact is generally positive. It feels like it's positive in a way that nothing else in
history has been positive. And then we may not actually truly be able to understand the orders
of magnitude of increase in productivity in just
progress and human civilization until we look back centuries from now. Just looking at the impact of Wikipedia, the giving access to basic
wisdom or basic knowledge and then perhaps wisdom
to billions of people. If you can just linger
on that for a second. What's your sense of the impact of that? - I would say if you're a
technologist philosopher, the impact of a technology is so much greater on the civilization and the human condition
than a non-technology that is almost not worth
your trouble to bother trying to fix things a conventional way. So, let's take example. I have a foundation, the Saylor Academy and the Saylor Academy
gives away free education, free college education to
anybody on earth that wants it. And we've had more than
a million students. And if you go and you
take the physics class, the lectures were by
the same physics lecture that taught me physics at
MIT except when I was at MIT, the cost of the first four weeks of MIT would've drained my family's
collective life savings for the first, last a hundred years. - [Lex] Yep. (chuckles) - Like a hundred years worth of my father, my grandfather, my great-grandfather, they saved every penny they
had after a hundred years, they could have paid for one
week or two weeks of MIT. - [Lex] Yeah. - That's how fiendishly
expensive and inefficient it was. So, I went on scholarship.
- [Lex] Yes. - I was lucky to have a scholarship. But on the other hand, I sat in the back of the 801 lecture hall and I was like right up in the rafters. It's an awful experience on these like uncomfortable wooden benches and you can barely see the blackboard and you gotta be there synchronously. And the stuff we upload,
you can start it and stop it and watch it on your iPad
or watch it on your computer and rewind it multiple times
and sit in a comfortable chair and you can do it from anywhere on earth. And it's absolutely free. So, I think about this and I think you wanna improve the human condition. You need people with
postgraduate level education. You need PhDs, and I know
this sounds kind of elitist, but you want to cure cancer and you wanna go to the
stars, fusion drive. We need new propulsion, right? We need extraordinary breakthroughs in every area of basic science. Be it biology or propulsion
or material science or computer science. You're not doing that with
an undergraduate degree. You're certainly not doing it
with a high school education. But the cost of a PhD
is like a million bucks. There's like 10 million PhDs in the world if you check it out. There's 8 billion people in the world. How many people could get
a PhD or would want to? Maybe not 8 billion, but
a billion, 500 million. Let's just say 500 million to a billion. How do you go from 10 million to a billion highly educated people, all of them specializing in, and I don't have to tell you
how many different fields of human endeavor there are. I mean, your life is
interviewing these experts. And there's so many, right? You know, it's amazing. So how do I give a
multimillion dollar education to a billion people? And there's two choices. You can either endow a scholarship, in which case you pay $75,000 a year. Let's pay a million dollars
and a million dollars a person. I can do it that way. And you're never, even if
you had a trillion dollars. If you had $10 trillion
to throw at the problem and we've just thrown $10
trillion at certain problems. - [Lex] Yeah. - You don't solve the problem, right? If I put $10 trillion
on the table and I said, "Educate everybody, give 'em all a PhD," you still wouldn't solve the problem. Harvard University can't
educate 18,000 people simultaneously, or 87,000
or 800,000 or 8 million. So you have to dematerialize the professor and dematerialize the experience. So you put it all as streaming on demand, computer generated education, and you create simulations where you need to create simulations and you upload it. It's like the human
condition is being held back by 500,000 well-meaning
average algebra teachers. (Lex chuckles) I love 'em. I mean, please don't take of offense if you're an algebra teacher, but instead of 500,000 algebra teachers going through the same
motion over and over again, what you need is like one or five or 10 really good algebra teachers and they need to do it
a billion times a day or a billion times a year for free. And if we do that, there's no reason why you can't give infinite
education, certainly in science, technology, engineering, and math, right? Infinite education to
everybody with no constraint. And I think the same is true, right? With just about every other thing. If you wanna bring joy to the
world, you need digital music. If you wanna bring
enlightenment to the world, you need digital education. If you wanna bring anything
of consequence in the world, you gotta digitally transform it and then you gotta manufacture it something like a hundred times
more efficiently as a start. But a million times more efficiently is probably, that's hopeful. Maybe you have a chance. And if you look at all
of these space endeavors and everything, we're thinking
about getting to Mars, getting off the planet,
getting to other worlds. Number one thing you
gotta do is you gotta make a fundamental breakthrough in an engine. People dreamed about flying
for thousands of years, but until the internal combustion engine, you didn't have enough energy, enough power in a light enough package in order to solve the problem. And the human race has all sorts of those fundamental engines and materials and techniques that we need to master. And each one of them is a
lifetime of experimentation of someone capable of making
a seminal contribution to the body of human knowledge. - There are certain
problems like education that could be solved through this process of dematerialization. And by the way, to give props
to the 500K algebra teachers. When I look at YouTube, for example, one possible approach is each
one of those 500,000 teachers probably had days and
moments of brilliance. And if they had ability to contribute to, in the natural selection
process like the market of education where the best ones rise up. That's a really interesting way, which is like the best day of your life, the best lesson you've ever taught could be found and sort of
broadcast to billions of people. So all of those kinds of ideas can be made real in the digital world. Now, traveling across
planets, you still can't solve that problem with dematerialization. Where you could solve potentially is dematerializing the human brain where you can transfer,
like you don't need to have astronauts on the ship. You can have a floppy disc
carrying a human brain. - Touching on those points. You'd love for the
500,000 algebra teachers to become 500,000 math specialists and maybe they comp into
50,000 specialties as teams and they all pursue 50,000 new problems and they put their algebra
teaching on autopilot. - [Lex] Yeah. - That's the same as
when I give you 11 cents worth of electricity and
you don't have to row a boat eight hours a day before
you can eat, right? - [Lex] Yes. - It would be a lot better,
that you would pay for your food in the first eight seconds of your day and then you could start thinking
about other things, right? With regard to technology. One thing that I learned
studying technology, when you look at S-curves is
until you start the S-curve you don't know whether
you're a hundred years from viability, a thousand
years from viability or a few months from viability. - Isn't that fun? That's so fun. The early part of the S-curve is so fun, (chuckles) because you don't know. - In 1900 you could have got
any number of learned academics to give you 10,000 reasons
why humans will never fly, right?
- [Lex] Yeah. - And in 1903, the Wright brothers flew, and by 1969 we're walking on the moon. So the advance that we made in
that field was extraordinary. But for the a hundred
years and 200 years before, they were just back and
forth and nobody was close. And that's the happy part. The happy part is we went from flying 20 miles an hour or whatever to flying 25,000 miles
an hour in 66 years. The unhappy part is I studied
aeronautical engineering at MIT in the 80s. And in the 80s we had Gulfstream aircraft, we had Boeing 737s, we
had the space shuttle. And you fast forward 40 years and we pretty much had
the same exact aircraft. The efficiency of the
engines was 20, 30% more, right?
- [Lex] Yeah. - We slammed into a brick
wall around '69 to '75. Like in fact the Global
Express, the Gulfstream, these were all engineered
in the 70s, some in the 60s. The actual, the fuselage
silhouette of a Gulfstream, of a G5 was the same shape as a G4, is the same shape as a G3,
is the same shape as a G2. And that's because they were afraid to change the shape for 40 years because they worked it
out in a wind tunnel. They knew it worked. And when they finally
decided to change the shape, it was like a $10 billion exercise with modern supercomputers and
computational fluid dynamics. - Why was this so hard? What is that wall made
of that you slammed into? - The right question is, so
why does a guy that went to MIT that got an aeronautical
engineering degree spent his career in software? - [Lex] Yeah. - Like why is it that I
never a day in my life, with the exception of some
Air Force reserve work, I never got paid to be
an aeronautical engineer and I worked in software
engineering my entire career. - Or maybe software engineering is the new aeronautical
engineering in some way. Maybe you hit fundamental walls uncertain until you have to return to
it centuries later, or no. - The National Gallery of Art was endowed by a very
rich man, Andrew Mellon, and you know how he made his money? Aluminum, okay?
(Lex chuckles) And you know what kind of airplanes you can create without aluminum? Nothing. Nothing, right? - [Lex] So, it's a material. So, it's a materials problem? - Okay, so 1900, we made massive advances in metallurgy, right? I mean, that was US Steel,
that was iron to steel, aluminum, massive fortunes were created because this was a
massive technical advance. And then we also had the
internal combustion engine. And the story of Ford and General Motors and Daimler Chrysler and the
like is informed by that. So you have no jet
engines, no rocket motors, no internal combustion
engines, you have no aviation. But even if you had those engines, if you were trying to build
those things with steel, no chance, you had to have aluminum. So there's like two
pretty basic technologies. And once you have those two technologies, stuff happens very fast. So tell me the last big
advance in like jet engines, there hasn't been one. The last big advance in rocket
engines hasn't been one. The big advances in spaceship design from what I can see are
in the control systems, the gyros and the ability to land, right, in a stable fashion,
that's pretty amazing. Landing a rocket. - Also in the, at least
according to the Elon and so on, the manufacturer of the more efficient and less expensive
manufacturer of rockets. So like it's production,
whatever that you call that discipline of at scale manufacture, at scale production, so factory work. But it's not 10X. I mean maybe it's 10X over
a period of a few decades. - When we figure out how
to operate a spaceship on the water, in your
water bottle for a year, right?
- [Lex] Yeah. - Now then you've got a breakthrough. So the bottom line is propulsion,
propulsion technology, propellants, and the materials technology, they were critical to getting
on that aviation S-curve. And then we slammed into a wall in the 70s and the Boeing 747, the Global
Express, the Gulfstream, these things were, the space shuttle. They were all pretty
much reflective of that. And then we kind of, then we
stopped, and at that point, you have to switch to a new S-curve. So the next equivalent to the
internal combustion engine was the CPU and the next
aluminum equivalent was silicon. So when we actually
started developing CPUs, transistor gateway to CPUs,
and if you look at the power, right, the bandwidth
that we had on computers and Moore's law, right? What if the efficiency of jet engines had doubled every three years,
right, in the last 40 years. Where would we be right now, right? So, I think that if
you're a business person, if you're looking for
commercially viable application of your mind, then you
have to find that S-curve. And ideally, you have to find it in the first five, six, 10 years. But people always miss this. Let's take Google Glass, right? - [Lex] Yeah. - Google Glass was a idea
2013, the year is 2022. And people were quite sure
this was gonna be a big thing. - And it could have been at
the beginning of the S-curve. - But fundamentally, we didn't really have an effective mechanism. I mean, people getting vertigo and there- - But you didn't know that at the beginning of the S-curve, right? - [Michael] We didn't have that. - I mean, maybe some people
had a deep intuition about the fundamentals of augmented reality, but you don't know that, you don't have. Those, you're looking through
the fog, you don't know. - So the point is, we're
at year zero in 2013, and we're still year zero in
2022 on that augmented reality. And when somebody puts
out a set of glasses that you can wear comfortably without getting vertigo, right, without any disorientation that managed to have the stability and
the bandwidth necessary to sync with the real world,
you'll be in year one. And from that point, you'll have a 70 year or some interesting future until you slam into a limit to growth and then it'll slow down. This is the story of a
lot of things, right? I mean, John D. Rockefeller
got in the oil business in the 1860s, and the oil
business as we understood it, became fairly mature
by the 1920s, the 30s. And then it actually stayed that way until we got to fracking and like, which was like seven years
later, and then it burst forward. - The interesting story
about Moore's law though is that you get this like constant burst of S-curves on top of
S-curves on top of S-curve. It's like the moment
you start slowing down, or almost ahead of you slowing down, you come up with another
innovation, another innovation. So like Moore's law doesn't seem to happen in every technological advancement. It seems like you only
get a couple of S-curves and then you're done for a bit. So I wonder what the pressures there are that resulted in such
success over several decades and still going. - Humility dictates that nobody knows when the S-curve kicks off. And you could be 20 years
early or a hundred years early. Leonardo da Vinci, Michelangelo, they were designing flying machines hundreds and hundreds of years ago. So humility says you're not quite sure when you really hit that
commercial viability. And it also dictates, you
don't know when it ends. Like when will the party stop? When will Moore's law stop
and we'll get to the point where they're exponentially
diminishing returns on silicon performance. Just like we got exponentially diminishing returns on jet engines, and it just takes an exponential increase in effort to make it 10% better. But while you're in the middle of it, then you know you can do things. So the reason that the digital
revolution is so important is because the underlying
platforms, the bandwidth of, and the performance of the components, and I say the components
are the radio protocols, mobile protocols, the batteries, the CPUs, and the displays, right? Those four components are pretty critical. They're all critical in
the creation of an iPhone. I wrote about it in the
book, "The Mobile Wave," and they catalyzed this
entire mobile revolution because they have advanced
and continue to advance, they created the very fertile environment for all these digital transformations. And the digital transformations
themself, right? They call for creativity
in their own, right? Like, I think the interesting thing about let's take digital maps, right? When you conceptualize something as a dematerialized map, right? It becomes a map because
I can put it on a display like an iPad, or I can put
it in a car like a Tesla. But if you really wanna figure it out, you can't think like an engineer. You need to think like a fantasy writer. Like this is where it's
useful if you studied, if you read, played,
"Dungeons and Dragons," and you read, "Lord of the Rings," and you studied all the fantasy literature because when I dematerialize the map, first I put 10 million
pages of satellite imagery into the map, right? That's a simple physical transform. But then I start to put
telemetry into the map and I keep track of the
traffic rates on the roads, and I tell you whether
you'll be in a traffic jam if you drive that way, and I
tell you which way to drive, and then I start to get
feedback on where you're going. And I tell you the restaurant's closed and people don't like it anyway. And then I put an AI on top of it and I have a drive your car for you. And eventually the implication of digital transformation of maps is I get in a self-driving car and I say, "Take me someplace cool where I can eat." - [Lex] Yeah. - And how did you get to
that last step, right? It wasn't simple engineering. There's a bit of fantasy
in there, a bit of magic. - Design, art, whatever
the heck you call it. It's whatever, yeah, yeah, fantasy injects magic into
the engineering process. Like imagination like
precedes great revolutions in engineering. It's like imagining a world, like of what you can do with the display, how will the interaction be? That's where Google
Glass actually came in. Augmented reality, virtual reality, people were playing in the
space of sci-fi, imagination. - They called it a moonshot. They tried, it didn't
work, but to their credit, they stopped trying, right? And then there's new
people, they keep dreaming, they're dreamers all around us. I love those dreamers and most of 'em fail and suffer because of it. But some of them won win Nobel Prizes or become billionaires. - Well, what I would say
is if half the civilization dropped what they were doing tomorrow and eagerly started working on launching a rocket to Alpha San Tori, it might not be the best
use of our resources because it's kind of
like if half of Athens in the year 500 BC eagerly started working on flying machines,
if you went back and you said, what advice would you give 'em? You would say, it's not gonna
work till you get to aluminum and you're not gonna get to aluminum till you work out the steel
and certain other things. And you're not gonna get to that until you work out the
calculus of variations and some metallurgy. And there's a dude Newton
that won't come along for quite a while and he's gonna give you the calculus to do it. And until then it's hopeless. So, you might be better
off to work on the aqueduct or to focus upon sales or something. So if I look at this today,
I say there's massive profound environment civilization advances to be made through digital
transformation of information. And you can see them. Like, this is the story of today. This is not the story of today, right? It's 10 years old what we've been seeing. - We're living through
different manifestations of that story today too though. - [Michael] Yeah. - Like social media, the effects of that is very interesting because ideas spread, even you talk about velocity of money, the velocity of ideas keeps increasing. - [Michael] Yeah. - So like Wikipedia is a passive store, it's a store of knowledge. Twitter is like a, (chuckles) it's like a water hose or something. It's like spraying you with knowledge whether you want it or not. It's like social media is just
like this explosion of ideas and then we pick 'em up and then we try to understand ourselves because the drama of it also
plays with our human psyche. So sometimes there's more
ability for misinformation, for propaganda to take hold. So we get to learn about ourselves, we get to learn about the technology that can decelerate the propaganda, for example, all that kind of stuff. But like, the reality is we're living, I feel like we're living
through a singularity in the digital information space. And we are not, we don't
have a great understanding of exactly how it's
transforming our lives. - This is where money is useful as a metaphor for significance. Because if money is the economic
energy of the civilization, then something that's
extraordinarily lucrative that's gonna generate a
monetary or a wealth increase is a way to increase the net
energy in the civilization. And ultimately, if we had 10
times as much of everything, we'd have a lot more
free resources to pursue all of our advanced
scientific and mathematical and theoretical endeavors. So let's take Twitter, right? Twitter's something that could be 10 times more valuable than it is, right? Twitter could be made 10 times better. - Oh, by the way, I should say that. People should follow you on Twitter. Your Twitter account is awesome. - Thank you.
(Lex chuckles) Thank you. - It could be made 10 times better, yeah. - Yeah, Twitter can be
made 10 times better. If we take YouTube or take education, we could generate a billion PhDs. And the question is, do you
need any profound breakthrough in materials or technology to do that? And the answer is not really no. So if you wanna, you could
make Apple, Amazon, Facebook, Google, Twitter, all these things better. The United States
government, if they took 1% of the money they spend on
the Department of Education and they simply poured
it into digital education and they gave degrees to people that actually met those requirements, they could provide 100X as much education for 1/100 of the cost, and they could do it
with no new technology. That's a marketing and
political challenge. So I don't think every
objective is equally practical. And I think the benefit
of being an engineer or thinking about practical achievements is when the government pursues
an impractical objective or when anybody, an entrepreneur. Not so bad with an entrepreneur 'cause they don't have
that much money to waste. When a government pursues
an impractical objective, they squander trillions
and trillions of dollars and achieve nothing. Whereas if they pursue
a practical objective or if they simply get out
of the way and do nothing, and they allow the free market to pursue the practical objectives, then I think you can have profound impact on the human civilization. And if I look at the world we're in today, I think that there are multi-trillion 10, 20, $50 trillion worth of opportunities in the digital information
realm yet to be obtained. But there's hundreds
of trillions of dollars of opportunities in the
digital energy realm that not only are they not
obtained, the majority of people don't even know what digital energy is. Most of them would reject the concept. They're not looking for it, they're not expecting to find it. It's inconceivable because
it is a paradigm shift. But in fact, it's completely practical, right under our nose. It's staring at us. And it could make the entire civilization work dramatically better in every respect. - So you mentioned in the digital world, digital information is
one, digital energy is two, and the possible impact on the world and the set of opportunities available in the digital energy
space is much greater. So how do you think about digital energy? What is it? - So I'll start with Tesla. He had a very famous quote. He said, "If you wanna
understand the universe, think in terms of energy,
vibration and frequency," and it gets you thinking
about what is the universe? And of course the universe
is just all energy. And then what does matter? Matter is low frequency energy. And what are we? We're vibrating from... Ashes to ashes, dust to dust. I can turn a tree into light. I can turn light back into a tree if I consider the entire universe. And then it's very important because we don't really think this way. Let's take the New York disco model. If I walk into a nightclub and there's loud music
blaring in New York City, what's really going on there, right? If you blast out 15, 14 billion years ago, the universe is formed.
- [Lex] Yeah. - Okay, that's a low frequency thing. The universe, four and a
half billion years ago, the sun, maybe the earth are formed. The continents are 400 million years old. The shift that New York City is on is some hundreds of millions of years. But the Hudson River is only 20,000 years. There's a building that's
probably 50 years old. There's a company operating
that disco or that club, which is five to 10 years old. There's a person, a
customer walking in there for an experience for a few hours. There's music that's
oscillating at some kilohertz, and then there's light.
- [Lex] Right. - And you have all forms of energy, all frequencies, right? All layered, all moving
through different medium. And how you perceive the
world is a question of at what frequency do you
want to perceive the world? And I think that once you
start to think that way, you're catalyze to think about what would digital energy look like, and why would I want it? And what is it? So why don't we just start right there. What is it? The most famous manifestation
of digital energy is Bitcoin. Bitcoin's a crypto asset. It's a crypto asset
that has monetary value. - Can we just linger on that? Bitcoin is a, so it is digital asset that has monetary value. What is a digital asset? What is monetary? Why use those terms versus the
words of money and currency? Is there something interesting in that disambiguation of different terms? - I'd call it a crypto asset network. The goal is to create
a billion dollar block, a pure energy in cyberspace. One that I could then
move with no friction at the speed of light, right? It's the equivalent to putting
a million pounds in orbit. How do I actually launch
something into orbit, right? How do I launch something into cyberspace that such that it moves friction free? And the solution is a decentralized proof of work network, right? Satoshi's solution was,
I'm going to establish protocol running on a
distributed set of computers that will maintain a constant supply of never more than 21 million Bitcoin sub dividable by a
hundred million satoshis, each transferable via
transferring private keys. Now the innovation is to create that in a ethical, durable fashion, right? The ethical innovation is
I want it to be property and not a security. A bushel of corn, an acre of land, a stack of lumber and a bar of gold and a Bitcoin are all property. And that means they're all commonly occurring elements in the world. You could call them commodities, but commodities a little bit misleading. And I'll tell you why in a second. But they're all distinguished
by the fact that no one entity or person or government controls them. If you have a barrel of
oil and you're in Ukraine versus Russia versus Saudi
Arabia versus the US, you have a barrel of oil, right? And it doesn't matter
what the premier in Japan or the mayor of Miami Beach
thinks about your barrel. They cannot wave their hand and make it not a barrel of oil or
a cord of wood, right? And so property is just a
naturally occurring element in the universe, right? - Why use the word, ethical? And sorry to, I may
interrupt occasionally. Why ethical assigned to property? - Because if it's a security, a security would be an example of a share of a stock or a crypto token controlled by a small team. And in the event that
something is a security because some small group
or some identifiable group can control its nature, character supply, then it really only becomes
ethical to promote it or sell it pursuant to fair disclosures. So, I'll give you maybe practical example. I'm the mayor of Chicago, I give a speech. In my speech, I'll say, I
think everybody in Chicago should own their own
farm and have chicken, a chicken in the backyard and their own horse and an automobile. That's ethical. I give the same speech and I say, I think everybody in Chicago
should buy Twitter stock, sell their house, or sell their
cash and buy Twitter stock. Well, is that ethical? Not really. But at that point, you've
entered into a conflict of interest because what you're
doing is you're promoting an asset which is substantially
controlled by a small group of people, the board of directors
or the CEO of the company. How would you feel if the president of
the United States said, I really think Americans
should all buy Apple stock. Especially if you worked at Google. But you worked anywhere, you'd be like, "Why isn't he saying buy mine?" Right? A security is a proprietary asset in some way, shape or form. And the whole nature of securities law, it starts from this ancient idea thou shalt not lie, cheat, or steal, okay? So if I'm going to sell you securities, or I'm gonna promote
securities as a public figure or as an influencer or
anybody else, right? If I create my own yo-yo
coin or Mikey coin, and then there's a million of them, and I tell you that I think
that it's a really good thing, and Mikey coin will go up forever, right? And everybody buys Mikey coin, and then I give 10 million to you and don't tell the public, right? I've cheated them. Maybe if I have Mikey coin and I think there's only 2 million Mikey coin, and I swear to you there's only 2 million, and then I get married
and I have three kids and my third kid is in the
hospital and my kid's gonna die and I have this ethical reason to print 500,000 more Mikey coin or else people are gonna die, and everybody tells me it's fine. I've still abused the investor, right? It's a ethical challenge. If you look at ethics laws
everywhere in the world, they all boil down to having a clause which says that if you're a public figure, you can't endorse any, a security, you can't endorse something
that would cause you to have a conflict of interest. So if you're a mayor,
a governor, a country, a public figure, an influencer, and you want to promote or promulgate or support something
using any public influence or funds or resources you may
have, it needs to be property. It can't be security. So it goes beyond that, right? I mean, like what the Chinese want to support an American company, right? As soon as you look at
what's in the best interest of the human race, the civilization, you realize that if you want
an ethical path forward, it needs to be based on common
property, which is fair. And the way you get to a common property is through an open
permissionless protocol. If it's not open, right? If it's proprietary and
I know what the code says and you don't know what the code says, that makes it a security. If it's permissioned, if you're
not allowed on my network or if you can be censored
or booted off my network, that also makes it a security. So, when I talk about property,
I mean the challenge here is how do I create
something that's equivalent to a barrel of oil in cyberspace? And that means it has to be a non sovereign bearer instrument, open, permissionless,
not sensorable, right? If I could do that,
then I could deliver you 10,000 dematerialized barrels of oil and you would take settlement of them and you would know that
you have possession of that property regardless of
the opinion of any politician or any company or anybody
else in the world. That's a really critical characteristic. And it actually is, it's probably one of the fundamental things
that makes Bitcoin special. Bitcoin isn't just a crypto asset network, it's easy to create a
crypto asset network. It's very hard to create an
ethical crypto asset network because you have to create one without any government or
corporation or investor exercising into influence
to make it successful. - So, open, permissionless,
non-sensorable. So basically no way for you
without explicitly saying so outsourcing control to somebody else. So it's a kinda, you have full control. Even with a barrel of
oil, what's the difference between a barrel of oil
and a Bitcoin to you? Because you kind of mentioned
that both are property is, you mentioned Russia and China and so on. Is it the ability of the
government to confiscate. In the end, governments
can probably confiscate no matter what the asset is, but you want to lessen
the effort involved. - A barrel oil is a bucket
of physical property, liquid property. - [Lex] That's very complicated. - And Bitcoin is a digital property. - But it's easier to
confiscate a barrel of oil. - It's easier to confiscate
things in the real world than things in cyberspace, much easier. - So, that's not universally true. Some things in the digital
space are actually easier to confiscate because just the nature of how things move easily
with information, right? - I think in the Bitcoin
world, what we would say is that Bitcoin is the
most difficult property that the human race possesses or has yet invented to confiscate. And that's by virtue of the fact that you could take possession
of it via your private key. So, if you've got your 12
seed phrases in your head, then that would be the highest
form of property, right? Because I literally have
to crack your head open and read your mind to take it. It doesn't mean I couldn't
extract it from you under duress, but it means that it's harder than every other thing you might own. In fact, it's exponentially harder. If you consider every other
thing you might own, a car, a house, a share of stock,
gold, diamonds, property rights, intellectual property rights,
movie rights, music rights, anything imaginable,
they would all be easier by orders and orders
of magnitude to seize. So digital property in the
form of a set of private keys is by far the apex
property of the human race. In terms of ethics, I
wanna make one more point. It's like I might say to you, Lex, I think Bitcoin is the best, most secure, most durable crypto asset
network in the world, is gonna go up forever, and there's nothing better in the world. I might be right, I might be wrong, but the point is, because it's property, it's ethical for me to say that. If I were to turn around and say, Lex, I think the same about
MicroStrategy stock, MSTR. That's a security, okay? If I'm wrong about that, I have civil liability or other liability because I could go to a
board meeting tomorrow and I could actually propose we issue a million more shares
of MicroStrategy stock. Whereas the thing that
makes Bitcoin ethical for me to even promote is the knowledge
that I can't change it. If I knew that I could make it 42 million instead of 21 million and
I had the button back here, right?
- [Lex] Yeah. - Then I have a different degree
of ethical responsibility. Now, I could tell you
your life will be better if you buy Bitcoin, and it might not. You might go buy Bitcoin,
you might lose the keys and be bankrupt and your life ends and your life is not better because you bought Bitcoin, right? But it wouldn't be my ethical liability any more than if I were to say, Lex, I think you ought to get a farm. I think you should be a farmer. I think a chicken in every
pot, you should get a horse. I think you'd be better. I mean, they're all opinions
expressed about property, which may or may not be right that you may or may not agree with. But in a legal sense, if we read the law, if we understand securities
law, and I would say, you know, most people
in the crypto industry, they didn't take companies public, and so they're not really
focused on the securities law. They don't even know the securities law. If you focus on the
securities law, that would say you just can't legally sell
this stuff to the general public or promote it without a full
set of continuing disclosures signed off on by a regulator. So, there's a fairly bright line there with regard to securities. But when you get to the secondary issue, it's how do you actually build a world based on digital property
if public figures can't embrace it or endorse it, you see? So you're not gonna build a better world based upon Twitter stock if
that's your idea of property, because Twitter stock is a security, and Twitter stock is never going to be a non sovereign bearer
instrument in Russia, right? Or in China, right? It's not even legal in China, right? So it's not a global,
permissionless, open thing. It will never be trusted
by the rest of the world, and legally it's impractical. But would you really wanna
put a hundred trillion dollars worth of economic value on Twitter stock if there's a board of directors and a CEO that could just get up and
like take half of it tomorrow? The answer is no. So if you wanna build a better world based on digital energy, you need to start with constructing a digital property. And I'm using property here in the- - Open, permissionless, non-sensorable. - [Michael] In the legal sense. - Okay. - But I would also go to the next step and say property is low frequency money. So if I give you a million dollars and you wanna hold it for a decade, you might go buy a house with it, right? And the house is low frequency money. You converted the million
dollars of economic energy into a structure called a house. Maybe in after a decade you might convert it back into energy, you might sell the house for currency, and it'll be worth more or less depending upon the
monetary climate you sell. - The frequency means what here? How quickly it changes state? - How quickly does something vibrate? So if I transfer $10 from
me to you for a drink, and then you turn around
and you buy another, right? We're vibrating on a frequency
of every few hours, right? The energy is changing hands. But it's not likely that you sell and buy houses every few hours, right? The frequency of a
transaction in real estate is every 10 years, every five, it's a much lower frequency transaction. And so when you think
about what's going on here, you have extremely low frequency things which we'll call property, then you have mid frequency things, I'm gonna call 'em money or currency. And then you have high
frequency, and that's energy. And that's why I use the illustration of you got the building,
you got the light, and you got the sound, and
they're all just energy moving at different frequencies. Now, Bitcoin is magical and
it is truly the innovation. It's like a singularity
because it represents the first time in the
history of the human race that we managed to create a digital property properly understood. It's easy to create
something digital, right? Every coupon and every scan
on, "Fortnite," and, "Roblox," and Apple TV credits and all these things, they're all digital something, but they're securities, right? Shares of stock are securities. Whenever anybody transfers, when you transfer money
on PayPal or Apple Pay, you're transferring in
essence a security or an IOU. And so transferring a bearer instrument with final settlement
in the internet domain or in cyberspace, that's a critical thing. And anybody in the
crypto world can do that. All the cryptos can do that. But what they can't do, what 99% of them fail
to do is be property. They're securities, right? - Well, there's a line there I'd like to explore a little further. For example, what about
when you like Coinbase or something like that,
when there's an exchange that you buy, Bitcoin is
in, you start to move away from this kind of, some of the aspects that you said makes up a property, which is this non-sensorable
and permissionless and open. So in order to achieve the convenience, the effectiveness of
the transfer of energy, you have to leverage some of these, of the places that remove
the aspects of property. So, maybe you can comment on that. - Let me give you a good model for that. If you think about the
layer one of Bitcoin, the layer one is the
property settlement layer and we're gonna do 350,000
transactions or less a day. A hundred million transactions a year is the bandwidth on the layer one. And it would be an ideal layer one to move a billion dollars
from point A to point B with the massive security. The role of the layer one is two things. One thing is I wanna
move a large sum of money through space with security. I can move any amount of
Bitcoin in a matter of minutes for dollars on layer one. The second important
feature of the layer one is I need the money to
last forever, right? I need the money indestructible, immortal. So, the bigger trick is not to move a billion dollars from here to Tokyo. The big trick is to move a billion dollars from here to the year 2140. And that's what we wanna
solve with layer one. And the best real
metaphor in New York City would be the granite or the schist. What you want is a city block of bedrock. And how long has it been there? Like millions of years it's been there. And how fast you want it to move? You don't. In fact, the single thing that's most important
is that it not deflect. If it deflects a foot in a
hundred years, it's too much. If it deflects an inch in a hundred years, you might not want that. So the layer one of
Bitcoin is a foundation upon which you put weight. How much weight can you put on it? You put a trillion, 10 trillion, a hundred trillion, a quadrillion. How much weight's on the
bedrock in Manhattan, right? Think about a hundred story buildings. So the real key there is
the foundational asset needs to be there at all. So the fact that you can create a hundred trillion dollars layer one that would stand for a hundred years, that is the revolutionary
breakthrough first time. And the fact that it's ethical, right? It's ethical and it's common property. global, permissionless. Extremely unlikely that would happen. People tried 50 times
before and they all failed. They tried 15,000 times
after, and they've all been, they've all generally failed. 98% have failed and a couple
have like been less successful. But for the most part, that's
an extraordinary thing. - Just really quickly pause just to find some terms people don't know. Layer one is that Michael's referring to is in general what people know of as the Bitcoin technology
originally defined, which is there's blockchain, there's a consensus
mechanism of proof of work, low number of transactions, but you can move a very
large amount of money. The reason he's using the term layer one is now that there's a lot of
ideas of layer two technologies that built on top of this
bedrock that allow you to move a much larger
number of transactions. So sort of higher frequency, I don't know what
terminology I wanna to use, but basically be able to use now something that is based on Bitcoin
to then buy stuff, be a consumer to transfer
money, to use it as currency. Just to define some terms. - Yeah, so the layer one is the foundation for the entire cyber economy, and we don't want it to move fast. What we want is immortality,
incorrupt, immortal, incorruptible and destructible, right? That's what you want. Integrity from the layer one. Now there's layer two and layer three. And layer two I would define
as an open, permissionless, non-custodial protocol that uses the underlying layer one
token as it's gas fee. - So what's custodial mean and how does the different markets, like is Lightning Network? - So Lightning Network would be an example of a layer two, non-custodial. So the Lightning Network
will sit on top of layer one, it'll sit on top of
Bitcoin and it solves the, what you wanna do is solve the problem of it's well and fine, I don't wanna move a
billion dollars every day. What I wanna move is $5
a billion times a day. So if I wanna move $5
a billion times a day, I don't really need to put
the entire trillion dollars of assets at risk every time I move $5. All I really need to do is put a hundred thousand
dollars in a channel or a million dollars in a channel, and then I do 10 million transactions where I have a million dollars at risk. And of course it's kind of simple. If I lower my security requirement
by a factor of a million, I can probably move the stuff
a million times faster, right? And that's how Lightning works. It's non-custodial because
there's no corporation or custodian or counterparty
you're trusting, right? There's the risk of moving
through the channel, but Lightning is an example of how I go from 350,000
transactions a day to 350 million transactions a day. So on that layer two, you
could move the Bitcoin in seconds for fractions of pennies. Now that's not the end all be all because the truth is there
are a lot of open protocols. Lightning probably won't be the only one. There's a open market competition of other permissionless
open source protocols to do this work. And in theory, any other crypto network that was deemed to be property,
deemed to be non security, you could also think of as potentially a layer
two to Bitcoin, right? There's a debate about are
there any and what are they? And we could leave that for a later time. - But why do you think
of them as layer two as opposed to contending for layer one? - Yeah, actually if they're
using their own token, then they are a layer one. If you create an open protocol that uses the Bitcoin
token got as the fee- - [Lex] I got you, I got you. - Then it becomes a layer two, right?
- [Lex] Okay. - Bitcoin itself, right,
incentivizes its own transactions with its own token. And that's what makes it layer one. - Okay, what's layer three then? - Layer three is a custodial layer. So if you wanna move Bitcoin
in milliseconds for free, you move it through Binance
or Coinbase or Cash App. So this is a very straightforward thing. I mean it seems pretty obvious
when you think about it that there are gonna be
hundreds of thousands of layer threes, there may
be dozens of layer twos. I mean Lightning is a one,
but it's not the only one. Anybody can invent something, right? And we can have this debate
about custodial, non-custodial. - Don't you think there's a monopolization possibilities
at layer three? So, you mentioned Binance, Coinbase, what if they start to dominate and basically everybody's using
them practically speaking, and then it becomes too costly to memorize the private key in your brain. I mean, or like cold storage
of layer one technology. - Well, the idealist fear the layer threes because they think, and
especially they detest, they would detest a bit... There's almost like a layer
four by the way, if you want to. A layer four would be, I've
got Bitcoin on an application, but I can't withdraw it. So, I've got an application
that's backed by Bitcoin, but the Bitcoin is sealed. It's a proprietary example. And I'll give you an example of that. That would be like gray scale. If I own a share of GBTC,
and so I own a security. Actually you could own MSTR. If you own a security or you own a product that has Bitcoin embedded in it, you get the benefits of Bitcoin, but you don't have the
ability to withdraw the asset. - You can the security
market at layer four. Am I understanding this correctly? - I don't know if I would say. Not all securities are layer four, but anything that's a proprietary product based upon with Bitcoin embedded in it where you can't withdraw the Bitcoin is another application of Bitcoin. So, if you think about
different ways you can use this, you can either stay
completely on the layer one and use the base chain
for your transactions or you can limit yourself to layer one in layer two Lightning. And the purist would say, "We stay there. Get your Bitcoin off the exchange." But you could also go to the layer three. When Cash App supported
Bitcoin, they made it very easy to buy it and then they gave
you the ability of withdraw. When PayPal or I think
Robinhood let you buy it, they wouldn't let you withdraw it, and it was a big community uproar. And people want, they
want these layer threes to make it possible to
withdraw the Bitcoin, so you can take it to
your own private wallet and get it off the exchange. I think the answer to the question of well is corruption possible? Is corruption is possible
in all human institutions and all governments everywhere. The difference between digital property and physical property is
when you own a building in Los Angeles and the city
politics turn against you, you can't move the building. - [Lex] Yeah. - And when you own a share of a security that's like a US traded security and you wish to move
to some other country, you can't take the
security with you either. And when you own a bunch of gold and you try to get through the airport, they might not let you take it. So Bitcoin is advantageous
versus all those because you actually do have the option to withdraw your asset from the exchange. And if you had Bitcoin with Fidelity and you had shares of stock with Fidelity and if you had bonds and
sovereign debt with Fidelity, and if you own some mutual funds and some other random limited
partnerships with Fidelity, none of those things can be
removed from the custodian, but the Bitcoin, you can
take off the exchange, you can remove from the custodian. - It's still possible though. - [Michael] There's a deterrent. - Yes.
- There's a deterrent. That's an anti-corruption element. And the phrase is an armed society is a polite society, right? Because you have the
optionality to withdraw all your assets from the crypto exchange, you can enforce fairness. And at the point where you
disagree with their policies, you can within an hour move your assets to another counterparty or take personal custody of those assets, and you don't have that option with most other forms of property. Maybe you don't have as much optionality with any other form of property on earth. And so what makes
digital property distinct is the fact that it has the
most optionality for custody. Now, coming back to this
digital energy issue. The real key point is the
energy moves in milliseconds for free on layer threes,
it moves in seconds or less than seconds on layer twos. It moves in minutes on the layer one. And I don't think it makes any sense to even think about trying to solve all three problems on the layer one, because it's impossible
to achieve the security and the incorruptibility and immortality if you try to build that much speed and that functionality and performance. In fact, if you come back
to the New York model, you really wanted a block of granite, a building, and a company. That's what makes the economy, right? If I said to you, "You're
gonna build a building, but you can only have one company in it for the life of the building,"
it would be very fragile. Like very brittle. What company a hundred years
ago is still relevant today? You want all three layers because they all oscillate
at different frequencies. And there's a tendency to think, "Well, it's gotta be this L1
or that L1," not really. And sometimes people think, "Well, I don't really want any L3," but companies, it's not an even or. Companies are better than
crypto asset networks at certain things. If you want complexity, you
want to implement complexity or you wanna implement compliance or customer service, right? Companies do these things well, right? We know it. You couldn't decentralize Apple
or Netflix or even YouTube. The performance wouldn't be there and the subtlety wouldn't be there. And you can't really legally
decentralize certain forms of banking and insurance because
they would become illegal in the political jurisdiction they're in. So unless you're a crypto anarchist and you believe in no companies
and no nation states, right? Which is just not very practical. Not anytime soon. Once you allow that nation
states will continue and companies have a role, then the layered architecture follows, and the free market determines who wins. For example, there are layer threes that's let you acquire
Bitcoin and withdraw Bitcoin. There are other applications that let you acquire but not withdraw it. And they don't get the same market share, but they might give you
some other advantage. There are certain layer threes
like Jack Dorsey's Cash App where they just incorporated Lightning and implementation of it. - Into Cash App. - So that makes it more,
that makes it advantageous versus an application that
doesn't incorporate Lightning. If you think about the big picture, the big picture is 8 billion people with mobile phones served
a hundred million companies doing billions of transactions an hour. And the companies are
settling with each other on the base layer in blocks
of 80 million at a time. And then the companies are trading with the consumers, right, in proprietary layers like layer three. And then on occasion,
people are shuffling assets across custodians with
Lightning layer two, because you don't wanna
pay $5 to move $50. You want to pay a 20th
of a penny to move $50. And so all of these things
create efficiency in the economy. And, Lex, if you wanna
consider how much efficiency. If you gave me a billion
dollars in 20 years, I couldn't find a way to
trade with another company or a counterparty in Nigeria. Like no amount of money. Gimme $10 billion, I couldn't do it. Because you get shut down
at the banking level. You can't link up a bank in
Nigeria with the bank in the US. You get shut down at
this credit card level because they don't have the credit card, so they won't clear. You'll get shut down at
the compliance FCPA level, because you wouldn't be
able to implement a system that interfaced with
somebody else's system if it's not in the right
political jurisdiction. On the other hand, three
entrepreneurs in Nigeria on the weekend could create a website that would trade in this Lightning economy using open protocols without
asking anybody's permission. So you're talking about something that's like a million times
cheaper, less friction and faster to do it if you
wanna get money to move. - What do you think that looks like? So that now there's a
war going on in Ukraine, there's other wars, Yemen,
going out throughout the world. In this most difficult of
states than a nation can be in, which is at war, civil war
or war with other nations, what's the role of
Bitcoin in this context? - I mean, Bitcoin's a universal
trust protocol, right? A universal energy protocol, if you will. English is one, okay. What I see is a bunch of
fragmentation of applications. For example, the Russian payment app is not gonna work in Ukraine. The Ukraine payment app is
not gonna work in Russia. The US payment apps won't work either of those places as far as I know. And in Argentina, their payment app may not work in certain parts of Africa. So what you have is
different local economies where people spin up their
own applications compliant with their own local laws or
in war zones, not compliant, but just spinning up, you know? - So, how do you build
something that's not compliant? What is the revolutionary
act here when you don't agree with the government or what you want to free yourself from the? So, here's the thing. When a nation is really at war, especially if it's an
authoritarian regime, it's going to try to control
the, like lock everything down. - [Michael] Yeah.
- The spread of information. How do you break through that? Do you do the thing that you mentioned, which is you have to build
another app essentially that allows you the flow of money outside the legal constraints placed on you by the government. So, basically break the law. - Metaphorically speaking, if you wanna break outta the
constraints of your culture, you learn to speak English. For example, it's not
illegal to speak English, or even if it is, right, doesn't matter. But English works everywhere in the world if you can speak it, and
then you can tap into a global commerce and
intelligence network. So Bitcoin is a language, so
you learn to speak Bitcoin or you learn to speak Lightning, and then you tap into that network in whatever manner you can. - But the problem is,
it's still very difficult to move Bitcoin around in Russia
and Ukraine now during war. And there was a sense to me that the cryptocurrency in general could be the savior for helping people. There's millions of refugees,
they're moving all around. It's very difficult to move money around in that space to help people. - I think we're very early. Like we're very embryonic here. If you look at the-
- Who's we, sorry. We as a human civilization or we operating in the
cryptocurrency space? - I think the entire crypto
economy is very embryonic and the human races
adoption of it is embryonic. We're like one, 2% down
that adoption curve. If you take Lightning, for example, the first real commercial applications of Lightning are just
in the last 12 months. - [Lex] Yeah.
- So, we're like year one. We might be approaching year two of commercial Lightning adoption. And if you look at Lightning adoption, Lightning's not built into Coinbase, it's not built into Binance,
it's not built into FTX. Cash App just implemented
the first implementation, but not all the features
are built into it. There's a few dozen, a
dozen Lightning wallets circulating out there. So, I think that we're
probably gonna be 36 months of software development at the point that every Android phone and every iPhone has a Bitcoin wallet or a
crypto wallet in it of sorts. That's a big deal. If Apple embraced Lightning,
that's a big deal. - So the adoption is the thing,
like in a war zone adoption, the people who struggle
the most in war are people who weren't doing that great
before the war started. They don't have the
technological sophistication. - [Michael] Sure. - The hackers and all those
kinds of people will find a way. It's just regular people
who are just struggling to make day by day living. And so if the adoption
permeates the entire culture, then you can start to move money around in the digital space. If you can psychoanalyze
Jack Dorsey for a second. So he's one of the early adopters, or he's one of the people
pushing the early adoption, this layer three, so inside Cash App. What do you make of the man of this decision as a business owner, as somebody playing in the space? Why did he do it and what
does that mean for others at this scale that
might be doing the same? So incorporating Lightning Networking, incorporating Bitcoin into their products. - I think he's been
pretty clear about this. He feels that Bitcoin is an instrument of economic empowerment
for billions of people that are unbanked and have no
property rights in the world. If you want to give an incorruptible bank to 8 billion people on the planet, that's the same as asking the question, how do you give a full education through PhD to 8 billion
people on the planet? And the answer is a digital version of the 20th century thing,
running on a mobile phone. And Bitcoin is a bank in cyberspace. It's run by incorruptible software and it's for everybody on earth. So I think when Jack looks at it, he's very sensitive to the
plight of everybody in Africa. If you look at Africans, right, like you're gonna give them banks, you're not gonna put a bank
branch on every corner. That's an obscene waste of energy. You're not gonna run copper
wires across the continent. That's an obscene waste of energy. You're not gonna give them gold. And so, how are you going to provide people with a decent life? The metaphor I think is relevant here. The biological metaphor,
Lex, is a type one diabetic. If you're a type one
diabetic, you can't form fat. And if you can't form fat, then you can't store excess energy. So that means that, I mean, fat is the ultimate organic battery, and if you've got 30 pounds of it, you can go 60 days without eating. But if you can't generate
insulin, you can't form fat cells. And if you can't form fat
cells and store energy, then you can eat yourself to death. I mean, you will eat and you will die. You'll starve to death. So the lack of property rights is like being a type one diabetic. And so if you look at most
people everywhere in the world, they don't have property rights, they don't have effective bank, and their currency is broken. Like what are the two
things that in theory would serve as the equivalent
of an organic battery or an economic battery to civilization? It would be, I have a
currency which holds its value and I can store it in a bank. So, a risk-free currency derivative. I pay you your money, you
take your life savings, you put it in a bank, you
save up for your retirement, you'll have happily ever after. That's the American dream, right? That's the idyllic situation. The real situation is there are no banks. You can't get a bank account. So I give you your pay in currency and then I double the supply
and I give it to my cousin, or I give it to whatever cause I want, or I use it to buy weapons. And then you find a loaf of
bread cost triple next month is what it costs, and your
life savings is worthless. And so in that environment,
everybody's ripped back to stone age barter. And the problem with that,
even stone age barter is you're gonna carry your
life savings on your back. And what happens when the
guy with a machine gun points it at your head and
just takes your life savings? So, I think from Jack's point of view, he thinks that life is,
this is maybe too strong, but these are my words, life is hopeless for a lot of people. And Bitcoin is hope, right? Because it gives everyone
an engineered monetary asset that's a bearer instrument, and it gives them a bank
on their mobile phone and they don't have to
trust their government or another counterparty
with their life force. So there's a secondary thing
I think he's in interested in, which is the first thing
is the human rights issue. And the second thing would be the friction to trade cross borders is so great, right? - [Lex] Yeah. - You like AI, so I'll give
you a beautiful notion. Maybe one day there'll be
an artificially intelligent creature in cyberspace that
is self-sufficient and rich. - Like that, it would've
sovereignty, you mean. - Can a robot own money or property? How about, can a Tesla car? Can I actually put enough money in a car for it to drive itself and
maintain itself forever? Or can I create an artificially
intelligent creature in cyberspace that is endowed such that it would live a thousand years and continue to do its job, right? We have a word for that in
the real world is institution. Harvard, Cambridge, Stanford, right? There are institutions with endowments that go on in perpetuity. But what if I wanted to
perpetuate a software program? And with something like digital property, with Bitcoin and
Lightning, you could do it. And on the other hand, with banks and credit cards, you couldn't, right? You couldn't ever, so
you can create things that are beautiful and lasting. And what's the difference in speed? Well, it's, so I can either trade with everybody in the world
at the speed of light, friction free in 24 hours
writing a Python script, or I can spend a hundred
billion dollars to trade with a few million people in the world after it takes them six
months of application. The impedance is like a 10 million to one difference, right? And the metaphors are literally
like launching something in orbit versus almost orbit
or vacuum sealing something. Does it last forever and
does it orbit forever, or does it go up and come
down and burn up, right? And I think Jack is interested in putting freedom in orbit, right? - (chuckles) Putting freedom. - Putting freedom in orbit. And he said it many times, he said, "The internet needs a native currency," right?
- [Lex] Yeah. - And no political construct or security can be a native currency. You need a property
and you need a property that can be moved a
million times a second. Can you oscillate it at 10
kilohertz or a hundred kilohertz? And the answer is only
if it's a pure digital construct, permissionless and open. And so I think that he's
enthusiastic as the technologist and he is enthusiastic
as the humanitarian. And what he's doing is to
support both those areas. He's supporting the Bitcoin
and the Lightning protocol by building them into his products, but he is also building the applications which you need at the Cash App level in order to commercialize
and deliver the functionality and the compliance necessary. And they're related. - And I should also say he's
just a fascinating person. For a random reason that
I couldn't even explain if I tried, I met him a few days ago and gave him a great big hug
in the middle of nowhere. There was no explanation. He just appeared. That's a fascinating human,
his relationship with art, with the world, with human suffering, with technology is fascinating. I don't know what his path looks like, but it's interesting that
people like that exist. And in part I'm saddened that he no longer is involved with Twitter
directly as a CEO, because I was hoping
something inside Twitter would also integrate some of these ideas of what you're calling digital energy to see how social networks, something I'm really interested in and passionate about could be transformed. Let me ask you just for
educational purposes. (chuckles) Can you please explain to me what Web3 and the beef between Jack and
Marc Andreesen is exactly? Did you see what happened? Sorry to have you analyze
Twitter like it's Shakespeare, but can you please explain to me why there was any drama over this topic? - First of all, Web3 is a term that's used to refer to the part of the
economy that's token finance. So if I'm launching an
application and my ideas to is to create a token
along with the application and issue the token to the community so as to finance the application
and build support for it. I think that that's the most
common interpretation of Web3. There are other interpretation too, so I'm just gonna refer to that one. And I think the beef in a
nutshell, not articulated, but I'll articulate it, is whether or not you should focus all your
energy creating applications on top of an ethical digital
property like Bitcoin or whether you should attempt
to create a competitor to it, which generally would be deemed as a security by the Bitcoin community. So, I'm gonna put on my Bitcoin hat here, right?
- Yeah. - All the tokens that are being, if it's driven by a venture capitalist, well, it's a security. If there's a CEO and a
CTO, it's a security. All these projects, they're companies. Foundations are companies, right? If you call them a
project or a foundation, it doesn't make it not a security. They're all, in essence,
collections of individuals that are issuing equity
in the form of a token. And if there's a pre mine,
an IPO, an ICO, a foundation or any kind of protocol where
there's a group of engineers that have influence over it,
then to a securities lawyer or to most Bitcoiners
and definitely to anybody that's steeped in securities
law, you look at and say, "Well, that passes the Howie test." It looks like a security,
it should be sold to the public pursuant to
disclosures and regulations and you're just ducking
the IPO process, right? And so, now we get back
to the ethical issue. Well, the ethical issue
is if you're trading it as a commodity and
representing it as a commodity, while truthfully it's a security, then it's a violation of ethics rules and it's probably illegal. - Well, you keep leaning on this. Let me push back on that part. - [Michael] Yeah.
- Maybe you can educate me. But you keep leaning on
this line of securities law as if it, with all due respect to lawyers, as if that line somehow defines
what is and isn't ethical. I think there's a lot of
correlation as you've discussed, but I'd like to leave the line aside. If the law calls something a security, it doesn't mean in my eyes
that it's is unethical. I mean, there could be some
technicalities and lawyers and people play games with this
kind of stuff all the time. But I take your bigger
point that if there's a CEO, there's a project lead
that's fundamentally, well, that to you is
fundamentally different than the structure of Bitcoin. - It's not that creating
securities is unethical. I created a security. I took a company public, right? That's not the unethical part. It's completely ethical
to create securities. Block is a security, all
companies are securities. The unethical part is to
represent it as property when it's a security and to
promote it or trade it as such. - This whole promotion,
that's also a technical thing. 'cause like what counts
as not as promotion is a legal thing and you get in trouble for all these things, but that
the game that lawyers play. There's an ethical thing here, which is like what's
right to promote or not. To me, propaganda is unethical, but it's usually not illegal. (chuckles) - You roll the clock back 20 years, right? All the boiler room pump and dump schemes were all about someone
pitching a penny stock. - [Lex] Sure. - Selling swamp land in Florida. And if you roll the clock
back forward 20 years, and I create my own company and I represented it as the same thing and I don't make the disclosures, right? You're just one step removed
from the boiler room scheme. - [Lex] Yeah. - And that's what's distasteful about it. There are ways to sell
securities to the public, but there are expectations. Maybe we could forget about
whether the security laws are ethical or not, right? I will leave that alone. We'll just start with the
Biblical definition of ethics. - [Lex] Yes.
- Don't lie, cheat or steal. So if I'm going to sell something to you, I need to fully disclose what
I'm selling to you, right? And that's a matter of
great debate right now. And so I think that
that's part of the debate. But the other part of the debate is whether or not we
need more than one token. Like we need at least one, right? - [Lex] Yes. - We need at least one digital property. - [Lex] One is better than zero. - Because zero means there
is no digital economy. - [Lex] Yes. - And by the way, the
conventional view of maximalist is they think there's only
one and everything else isn't. That's not the point I'm gonna make. I would say we know there is
at least one digital property, and that is Bitcoin. If you can create a truly decentralized non-custodial bearer instrument that is not under the control of any organization that
is fairly distributed, then you might create another or multiple. And there may be others out there. But I think that the
frustration of a lot of people in the Bitcoin community
and I share this with Jack, is we could create a hundred
trillion dollars of value in the real world simply
by building applications on top of Bitcoin as a foundation. And so continually trying
to reinvent the wheel and create competitive things
is a massive waste of time. And it's diversion of human creativity. It's like we have an ethical good thing. - [Lex] Yeah. - And now we're going to try to create a third or a fourth one. Why? - Well, let's talk about it. So first of all, I'm with you, but let me ask you this
interesting question because we talked about
properties and securities. Let's talk about conflict of interest. So you said you could advertise public, you have a popular Twitter account. It's hilarious and insightful. You do promote Bitcoin in a sense. I don't know if you would say that. But do you think there's
a conflict of interest in anyone who owns
Bitcoin promoting Bitcoin? Is it the same as you
promoting the farming? - I would say no. There's an interest. I think that you can promote
a property or an idea to the extent that you don't control it. I think that the point at which you start to have a conflict of interest is when you're promoting
a proprietary product or proprietary security. A security in general
is a proprietary asset. So for example, if you look at my Twitter, you'll find that I make lots
of statements about Bitcoin. You won't ever see me making a statement that say MicroStrategy
stock will go up forever. Right, I'm not promoting a security, MSTR, because at the end of the
day, MSTR is a security, it is proprietary. I have proprietary interest in it. I have a disproportionate
amount of control and influence on the direction whereas- - The control is the problem. The control is the problem because you have interest in both. You can very, if Bitcoin is a successful, as we're talking about,
you are very possibly can become the richest human on earth given how much you own in Bitcoin, right? The wealthiest, not the richest. I don't know what those words mean. - I would benefit economically. - [Lex] Economic, you
would benefit economically. - That's true. - So, the reason that's
not conflict of interest is because the word property,
that Bitcoin is an idea and it's Bitcoin is open. - [Michael] It's because I don't own it. - You don't.
- I don't control it. In essence, the ethical line here is could I print myself
10 million more Bitcoin or not, right? I could.
- Or can anyone, right? It's not just you, it's can anyone. Because can you promote somebody else's? Yes, I guess you can. Like can you promote Apple (chuckles) when you have no stake. - It's like you could
have a Twitter account where you promote oil
or you promote camping or you promote family values
or promote a carnivore diet or promote the Iron Man, right? - But you're not gonna get
wealthier if you promote camping. 'cause you can't own a stake in. I mean, you own a lot of Bitcoin. What is that? Don't you own the stake
in the idea of Bitcoin? - Yeah, I would grant you that. - But the lack of control is
the fundamental ethical line that you just, you don't have. All you are is you're a fan of the idea. You believe in the idea
and the power of the idea. You can't take that idea away from others. - Let's come back to, let me give you some maybe easier examples. If you were the head of
the Marine Corps, right? And someone came to you and
said, I created Marine coin. And the twist on Marine coin is I want you to tell every Marine that
they'll get an extra Marine coin when they get their next stripe. And then I'm gonna give you, and I'm gonna let you buy Marine coin now, and then after you buy Marine coin, I want you to like
promote it to them, right? At some point, if you start to have a disproportional influence on it, or if you're in a conversation with people with disproportionate influence
becomes conflict of interest and it would make you profoundly
uncomfortable, I think. - [Lex] Yeah. - If the head of the Marine Corps started promoting anything
that looked like a security. Now if the head of the Marine Corps started promoting canoeing, you might think he's kind of wacky. Like maybe like that's kind of a waste of time at a distraction. But to the extent that
canoeing is not a security, not a problem unless you... Ultimately the issue of decentralization is really a critical one.
- So not having a head. So is it something, can
Bitcoin be replicated? So all the things that you're saying that make it a property,
can that be replicated, have any other- - I think it's possible to
create other crypto properties. - Does the having a head like of a project a thing that limits its
ability to be a property if you try to replicate a project? Or is that the fundamental flaw? - Look, I think the real fundamental issue is you just never want it to change. Like if you really want
something decentralized, you want a genetic
template that substantially is not gonna change for a thousand years. So I think Satoshi said it at one point. He said the nature of the software is such that by version 0.1,
it's genetic code was set. If there was any development team that's continually changing
it on a routine basis, it becomes harder and harder to maintain is decentralization because now there's the issue of who's influencing the changes. - [Lex] Yeah.
- So what you really want is a very, very simple idea, right? The simplest idea, I'm
just gonna keep track of who owns 21 million parts of energy. And when someone proposes
big functional upgrades, you don't really want that development to go on the base layer. You want that development
to go on the layer threes because now Cash App has a
proprietary set of functionality and it's a security. And if you're gonna promote
the use of this thing, you're not gonna promote
the layer three security because that's an edge to a given entity and you're trusting the counterparty. You're gonna promote the layer
one or most the layer two. - Okay, so one of the
fascinating things about Bitcoin, and sorry to romanticize certain notions, but Satoshi Nakamoto, that
the founder is anonymous. Maybe you can speak to
whether that's useful, but also I just like
the psychology of that to imagine that there's a
human being that was able to create something special and walk away. So first, are you Satoshi Nakamoto? - I'm certain I'm not. (chuckles) (Lex chuckles) No, actually, I think the
providence is really important and if I were to look at
the highlighted points, I think having a founder
that was anonymous or synonymous is important. I think the founder
disappearing is also important. I think that the fact
that the Satoshi coins never moved is also important. I think the lack of an
initial coin offering is also important. I think the lack of a
corporate sponsor is important. I think the fact that
it traded for 15 months with no commercial value
was also important. I think that the
simplicity of the protocol is very important. I think that the outcome
of the block size wars is very important. And all of those things
add up to common property. They're all indicia, indicators
of a digital property as opposed to security. If there was a Satoshi sitting around, sitting on top of $50
billion worth of Bitcoin, I don't think it would
cripple Bitcoin as property, but I think it would undermine
its digital property. And if I wanted to undermine
a crypto asset network, I would do the opposite
of all those things. I would launch one myself. I would sell 25% or 50%
to the general public. I would keep some of the initial, I would pre mine some
stuff or early mine it, and I would keep an influence on it. Those are all the opposite
of what you would do in order to create common property. And so I see the entire story as Satoshi giving a gift of digital property to the human race and disappearing. - Do you think it was one person? Do you have ideas of who it could be? - I don't care to speculate. (laughs) - [Lex] Okay, but do you
think it was one person? - I think it was one
person, maybe in conjunction with a bunch of others. I mean, it might have
been a group of people that were working together, but
certainly there's a Satoshi. - I mean, it's just so fascinating to me that one person could be
so brave and thoughtful. Or do you think a lot of his accent, like the block size wars, the decision to make a
block a certain size. All the things you mentioned led up to the characteristics
that make Bitcoin property. Do you think that's an accident, or was it deeply thought through? This is almost like a
history of science question. - I think people tried it. They tried 40 of them, right? I mean, I think there's a history of attempting to create
something like this. And it was tried many, many times and they failed for different reasons. And I think that it's like Prometheus tried to start a fire 47 times and maybe the 48th time it sparked. And that's how I see this is
the first one that sparked and it sets a roadmap for us. And I think if you're
looking for any one word that characterize, it's fair, right? The whole point of the network is it's a fair launch,
a fair distribution. Like yeah, I have
Bitcoin, but I bought it. In fact, at this point
we've paid $4 billion of real cash to buy it. If I was sitting on the same
position and I had it for free, then there's always this
question of did I pay, or I bought it for a nickel,
a coin, or a penny of coin. The question is, was it fair? And that's a very hard
question to answer, right? Did you acquire the Bitcoin
that you own fairly? And if you rolled the clock back, you could have bought it
for a nickel or a dime, but that was when it was a million times more likely to fail, right? When the risk was greater,
the cost was lower, and then over time the risk became lower and the cost became greater. And the real critical thing
was to allow the marketplace absent any powerful,
interested actor, right? It's almost like if Satoshi
held a million coins and then stayed engaged for 10 more years, tweaking things in the background, there'd still be that question. But what we've got is
really a beautiful thing. We've got a chain reaction in cyberspace or an ideology spreading
virally in the world that has seasoned in a
fair, ethical fashion. Sometimes it's a very
violent, brutal fashion with all the volatility, right? And there's been a lot of
sound and fury along the way. - How do you psychoanalyze, how do you deal from a financial,
from a human perspective with the volatility? You mentioned you could
have gotten it for a nickel, and the risk was great. Where's the risk today? What's your sense? - We're 13 years into
this entire activity. I think the risk has never been lower. If you look at all the risks, right? The risks in the early years are, is the engineering protocol proper? Like one megabyte block size, 10 minute clock frequency
cryptography is first, will it be hacked or will
it crash 730,000 blocks and it hasn't crashed? Will it be hacked? Hasn't been hacked. But it's a lengthy thing, right? You wait 13 years to
see if it'll be hacked. But on the other hand,
with a billion dollars, it's not as interesting a target as it is with a hundred billion. And when it gets to be worth a trillion, then it's a bigger target. So, the risk has been
bleeding off over time as the network monetized. I think the second question
is, will it be banned? You couldn't know. It literally could have been
banned at many times early on. In fact, in 2013 I tweeted on the subject, I thought it would be banned. I made a very infamous tweet.
- Infamous tweet, yeah. - I thought it was gonna be banned. In 2014, the IRS designated it as property and gave it property tax treatment, okay? So they could have
given it a tax treatment where you had to pay tax on the unrealized
capital gains every year, and it probably would've
crushed it to death, right? So it could have been in any number of places banned by a government, but in fact it was
legitimized as property. And then the question is, would it be hacked or would it be copied? Will it be something better than that? And it was copied 15,000 times. And the story of all those
and they either diverged to be something totally
different and not comparable, or someone trying to copy a non sovereign bearer
instrument store of value found that their networks crashed to be 1% of what Bitcoin is. So now we're sitting at a point where all those risks are out of the way. I would say that year one of
institutional adoption is, it started August, 2020, that's
when MicroStrategy bought $250 million worth of Bitcoin. And we put that out on the wire. We were the first publicly traded company to actually buy Bitcoin. I don't think you could have
found a $5 million purchase from a public company before we did that. So that was kinda like a gun going off. And then in the next 12
months, Tesla bought Bitcoin, Square bought Bitcoin, and
I'd say now we're in year two of institutional adoption, and about 24, should be 24 publicly
traded Bitcoin miners by the end of this quarter. So you're looking at 36
publicly traded companies, and you've got 50, at least
in the range of $50 billion of Bitcoin on the balance sheet
of publicly traded companies and hundreds of billions of dollars of market cap of Bitcoin
exposed companies. So, I would say the asset, decade one was
entrepreneurial experimental, decade two is a rotation from
entrepreneurs to institutions and is becoming institutionalized. So maybe decade one, you
go from zero to a trillion, and a decade two, you go from 1 trillion to a hundred trillion. - What about governments,
government adoption? You said institutional adoption. Are governments important in this? Maybe making it some
governments incorporating it into as a currency into their
banks, all that kind of stuff. Is that important? And if it is, when will it happen? - It's not essential for the
success of the asset class, but I think it's inevitable
in various degrees over time. But the most likely thing to happen next is large acquisitions by
institutional investors of Bitcoin as a digital gold where they're just swapping
out gold for digital gold and thinking of it like that. And the government entities
most likely to be involved with that would be sovereign wealth funds. If you look at all the
sovereign wealth funds that are holding big tech stock, equities, the Swiss, the Norwegians,
the Middle Easterners, if you can hold big tech
then holding digital gold would be not far removed from that. That's a non-controversial adoption. I think there are
opportunities for governments that are much more profound, right? If a government started to adopt Bitcoin as a treasury reserve asset, that's much bigger than
just an asset investment that's 100X bigger. And you could imagine that's like a trillion dollar opportunity. Like any government
that wanted to adopt it as a treasury reserve asset would probably generate
trillions of dollars, a trillion or more of value. And then the thing that
people think about is, well, will oil ever be priced in Bitcoin or any other export commodity? I think there's like $1.8 trillion or more of export
commodities in the world. And right now they're
all priced in dollars. I think that this is a colorful thing, but it not really that relevant. Like you could sell all
that stuff in dollars. The relevant decision that
any institution makes, whether they're a non-profit university, a corporation or a government, is what's your treasury reserve asset? And if your treasury
reserve asset is the peso, and if the peso is losing 20%
or 30% of its value a year, then your balance sheet is
collapsing within five years. And if the treasury
reserve asset is dollars in currency derivatives and US treasuries, then you're getting your seven. Right now it's probably 15%
or more monetary inflation. We're running double the historic average. You could argue triple. Somewhere between double and triple depending upon what your metric is. So, do I think it'll happen? I think that they're conservative, but they have to be shocked. And I think there is a shock. The late Russian sanctions are a big shock that when the West sees $300
billion worth of Russian gold and currency derivatives,
I think it, you know, you got the famous quote by Putin that we have to rethink
our treasury strategies and that pushes everybody
toward a commodity strategy. What commodities do I wanna hold? I think that's got a
lot of people thinking. I think it's got the Chinese thinking. Everybody wants to be the
reserve currency, right? So if I buy $50 billion
worth of dollars every year, then I buy 500 billion over a decade and I probably pay $250
billion of inflation costs on the backs of my citizens in a decade. - So inflation could be one
of the sources of shock. And you wonder if there
is a switch to Bitcoin, whether it would be a bang or a whimper. Like what is the nature of
the shock or the transition? - I think that the year
2022 is pretty catalytic for digital assets in general
and for Bitcoin in particular. The Canadian trucker crisis, I think educated hundreds
of millions of people and made them start questioning their property rights and their banks. I think the Ukraine was a second shock, but I think that the Russian
sanctions was a third shock. - [Lex] Yeah.
- I think all three of the, and I think hyperinflation
in the rest of the world is a fourth shock and
then persistent inflation in the US is a fifth shock. So, I think it's a perfect storm. And if you put all these events together, what do they signify? They signify the rational conclusion for any person thinking about this is, I'm not sure if I can trust my property, I don't know if I have property rights, I don't know if I can trust the bank. And if I'm politically
at odds with the leader of my own country, I'm
gonna lose my property. And if I'm politically
at odds with the owner of another country, I'm
still gonna lose my property. And when push comes to shove, the banks will freeze my
assets and seize them. And I think that is playing out in front of everybody in the world such that your logical response would be, I'm going to convert my weak
currency to a strong currency. Like I'll convert my peso
and lira to the dollar. I'm going to convert my weak
property to strong property. I'm gonna sell my
building downtown Moscow, and I'd rather own a
building in New York City. I'd rather own in a powerful nation than be stuck with a building in Nigeria or a building in Argentina or whatever. So, I'm gonna sell my weak properties, buy strong properties, I'm
gonna convert my physical assets to digital assets. I'd rather own a digital building than own a physical building. Because if I had a billion
dollar building in Moscow, who can I rent that to? But if I have a billion
dollar digital building, I can rent it to anybody
in any city in the world, anybody with money and
the maintenance cost is almost nothing. And I can hold it for
a hundred years, okay? So it's an indestructible building. And then finally, I wanna
move from having my assets in a bank with a counterparty
to self custody assets, right? And this is not, it's not just Ukraine, but this is like the
story in Turkey, Lebanon, Syria, Afghanistan, Iraq, South America, you don't really wanna be sitting with $10 million in a bank in Istanbul. The bank's gonna freeze your
money, convert it to lira, devalue the lira, and then feed it back to you over 17 years, right? - So self custody assets
would be layer one Bitcoin? - Self custody assets, it's like if I got my own hardware wallet and I've either got your
highest form of self custody would be Bitcoin on
your own hardware wallet or Bitcoin on your own self custody. And the other thing people think about is how do I get crypto dollars like Tether, like some stable coin? - [Lex] Yeah. - Like I'd rather, if you had a choice, would you rather have your money in a bank in a war zone in dollars, or have your money in a stable coin on your mobile phone in dollars, right? I mean, you would take the latter risk rather than the former risk. - In a war zone, definitely yeah. - [Michael] And you
can see that happening, like we've gone from 5 billion in stable coins to 200 billion. - Yeah. - [Michael] In the last 24 months. - Yeah. - So, I do think there's massive demand for crypto dollars in the
form of a US dollar asset. And everybody in the world
would say, "Yeah, I want that." Well, unless you're
just an extreme patriot, but most people in the world
would say, "I want that." And then a lesser group
of people would say, "I think I want to be
able to carry my property in the palm of my hand, so
I have self custody of it." - So Bitcoin price has gone
through quite a rollercoaster. What do you think is the
high point is gonna hit? - I think it'll go forever, right? I mean, I think the Bitcoin is going to, it's going to climb in
a serpentine fashion. It's going to advance and come back and it's gonna keep climbing. I think that the volatility attracts all the capital into the marketplace. And so the volatility makes
it the most interesting thing in the financial universe. It also generates massive yield and massive returns for traders,
and that attracts capital. Like we're talking about the difference between 5% return and 500% return. So the fast money is
attracted by the volatility. The volatility's been
decreasing year by year by year. I think that it's stabilizing. I don't think we'll see as much volatility in the future as we have in the past. I think that if we look at Bitcoin and model it as digital gold, you know, the market cap goes to
between 10 and 20 trillion. Remember gold is defective
property, gold is dead money. You have a billion dollars of gold that sits in a vault for a decade. It's very hard to mortgage the gold. It's also very hard to rent the gold. You can't loan the gold. No one's going to create
a business with your gold. So gold doesn't generate much of a yield. So for that reason, most
people wouldn't store a billion dollars for a decade in gold. They would buy a billion dollars of commercial real estate, property. And the reason why is
because I can rent it and generate a yield on it that's in excess of the maintenance cost. So if you consider digital property, that's a hundred to $200
trillion addressable market. So I would think it goes from 10 trillion to a hundred trillion as people start to think of it as digital property. - What does that mean in
terms of price per coin? - At 500,000, right? That's a $10 trillion asset-
- [Lex] Essentially. - At 5 million, that's a
hundred trillion dollars asset. - So you think it crosses a
million, it can go even higher. - Yeah, I think it keeps going up forever. I mean, there's no reason we can't go to 10 million a coin, right? Because digital property
isn't the highest form, right? Gold was that low frequency money. Property is mid frequency money. But when I start to program it faster, it starts to look like digital energy and then it doesn't just replace property, then you're starting to replace bonds. It's a hundred trillion in bonds. There's 50 to hundred trillion in other currency derivatives. And then and these are all
conventional use cases, right? I think that there's 350 trillion to $500 trillion worth of currency, currency derivatives in the world. And when I say that, I mean things that are valued based
upon fiat cash flows. Any commercial real estate,
any bond, any sovereign debt, any currency itself, any
derivatives to those things, they're all derivatives
and they're all defective. And they're all defective because of this persistent
seven to 14% lapse which we call inflation
or monetary expansion. Can we switch? So I'm just gonna talk
about the energy side of it. - Sure. - [Michael] Like the innovative piece. - Yeah. - Let's just start with this
idea that I've got a hotel worth a billion dollars
with a thousand rooms. When it becomes a dematerialized hotel. - I love that word so much, by the way, dematerialized hotel. - Wait, we're across from
the fountain blow here. Imagine the fountain
blow is dematerialized. - [Lex] Yeah. - The problem with the physical hotel is it gotta hire real people moving subject to the speed of sound and physics laws and Newton's laws. And I can rent it to
people in Miami Beach. But if it was a digital
hotel, I could rent the room to people in Paris, London,
and New York every night, and I can run it with robots. And as soon as I do that, I
can rent it by the room hour and I can rent it by the room minute. And so I start to chop my hotel up into a hundred thousand
room hours that I sell to the highest bidder
anywhere in the world. And you can see, all
of a sudden the yield, the rent and the income of the property is dramatically increased. I can also see the maintenance
cost of the property falls. I get on Moore's law and
I'm operating in cyberspace. So I got rid of Newton's laws,
I got rid of all the friction and all those problems.
- [Lex] Yeah. - I tapped into the
benefits of cyberspace. I created a global property. I started monetizing at
different frequencies. And of course now I can mortgage it to anybody in the world, right? I mean, you're not gonna
be able to get a mortgage on a Turkish building from
someone in South Africa. You have to find someone that's local to the culture you're in. So when you start to
move from analog property to digital property, it's
not just a little bit better, it's a lot better. And what I just described, Lex, is like the DeFi vision, right? It's the beauty of DeFi flash loans, money moving at high velocity. At some point if the
hotel is dematerialized, then what's the difference
between renting a hotel room and loaning a block of stock, right? I'm just finding the highest
best use of the thing. - It feels like the magic
really emerges though, when you build a lot a market of layer two and layer three
technologies on top of that. So like, maybe you can
correct me if I'm wrong, but for all these hotels and
all these kinds of ideas, it's always touching humans at some point and the consumers or humans,
business holders and so on, so you have to create interface, you have to create services that make all of that super
efficient, super fun to use, pleasant, effective, all
those kinds of things. And so you have to build a
whole economy on top of that. - Yeah, and I happen to
think that won't be done by the crypto industry at all. I think that'll be done by
centralized applications. I think it'll be the
Citadels of the world, the high speed traders of
the world, the New Yorkers, I think it'll be Binance, FTX and Coinbase as a layer three exchange
that will give you the yield and will give you the
loan and the best terms because ultimately you have to
jump these compliance hoops. It comes, like BlockFi can give you yield, but they have to do it in compliant way with the United States jurisdiction. So ultimately those applications to use that digital property
and either generate a loan on, give you a loan on it,
or give you yield on it, are gonna come from companies. But the difference, the
fundamental difference is it could be companies
anywhere in the world. So if a company in Singapore comes up with a better offering, right? Then the capital is gonna
start to flow to Singapore. I can't send 10 steady
blocks of LA to Singapore to rent during a festival.
- [Lex] Yeah. - But I can send 10 blocks
of Bitcoin to Singapore. So you've got a truly global
market that's functioning and this asset and is
their second order asset. For example, maybe you're
an American citizen and you own 10 Bitcoin
and someone in Singapore will generate 27% yield in the Bitcoin, but legally you can't
send the money to them or the Bitcoin to them, it doesn't matter, because the fact that that exists means that someone in Hong Kong will borrow the 10 Bitcoin
from somebody in New York, and then they will put on
the trade in Singapore, and that will create a demand for Bitcoin, which will drive up the price of Bitcoin, which will result in an
effective tax-free yield for the person in the US that's not even in the jurisdiction. So there's nothing that's
going on in Singapore to drive up the price of your land in LA. But there is something going
on everywhere in the world to drive up the price of
property and cyberspace if there's only one digital Manhattan. And so there's a dynamic there, which is profound because it's global. But now let's go to the next extreme. I'm still giving you a
fairly conventional idea, which is let's just loan the
money fast on a global network and let's just rent the hotel
room fast in cyberspace. But now let's move to maybe
a more innovative idea. The first generation of internet brought a lot of productivity, but there's also just
a lot of flaws in it. For example, Twitter is full of garbage. Instagram DMs are full of garbage. Your Twitter DMs are full of garbage. YouTube is full of scams. Every 15 minutes there's a
Michael Saylor Bitcoin giveaway spun up on YouTube.
- [Lex] Yep. - My Office 365 inbox,
it's full of garbage, millions of spam messages. I'm running four different email filters. My company spends million dollars a year to fight denial of service attacks and all sorts of other security things. There are denial of
service attacks everywhere against everybody in
cyberspace all the time. It's extreme. And we're all beset with hostility, right? You've been a victim of it on Twitter. You go on Twitter and people post stuff they would never say to your face. And then if you look, you find out that the account was
created like three days ago and it's not even a real person. So, we're beset with phishing attacks and scams and spam bots
and garbage and why? And the answer is because
the first generation of internet was digital
information and there's no energy. There's no conservation
of energy in cyberspace. The thing that makes the universe work is conservation of energy. Like if I went to a hotel room, I'd have to post a credit card, and then if I smashed the place up, there'd be economic consequences, maybe there'd be criminal consequences, there might be reputational consequences. A lamp might fall on me. But in the worst case thing, I can only smash up one hotel room. Now imagine I could actually
write a Python script to send myself to every
hotel room in the world, every minute, not post a credit card and smash them all up anonymously. The thing that makes the
universe work is friction, speed of sound, speed of light. And the fact that it's
ultimately, it's conservative. You're either energy or your matter, but once you've used
the energy, it's gone. And you can't do infinite everything. That's missing in cyberspace right now. And if you look at all
of the moral hazards and all of the product
defects that we have in all of these products,
most of them, 99% of them could be cured if we
introduced conservation of energy into cyberspace. And that's what you can do with high speed digital
property, high speed Bitcoin. And by high speed, I mean,
not 20 transactions a day. I mean, 20,000 transactions a day. So, how do you do that? Well, I let everybody on
Twitter post a thousand or 10,000 satoshis via Lightning wallet, a Lightning badge, gimme an orange check. If you put up 20 bucks once in your life, you could give 300 million
people an orange check. Right now you don't
have a blue check, Lex. You're a famous person. I don't know why you
don't have a blue check. Have you ever applied for a blue check? - No. - There are 360,000 people
on Twitter with a blue check. There are 300 million people on Twitter. So the conventional way to verify accounts is elitist, archaic. - Yeah, how does it work? How do you get blue check? - You gotta apply and wait six months and you have to post like three articles in the public mainstream media. - Sure. - That illustrates you're
a person of interest. - [Lex] Interesting. - Generally, they would grant them to CEOs of public companies, or the whole idea is
to verify that you are who you say you are.
- [Lex] Yeah, who you are. Right. - But the question is, why
isn't everybody verified? And there's a couple of threads on that. One, is some people don't wanna be doxed, they wanna be anonymous.
- [Lex] Sure. - But they're even anonymous
people that should be verified. Because otherwise you're
subjecting their entire following to phishing attacks and
scams and hostility. But the other- - What's the orange verification? So this idea, can you actually elaborate a little bit more if you put up 20 bucks? - Yeah, I think everybody
on Twitter ought be able to get an orange check if they
could come up with like $10. - And what is the power
of that orange check? What does that verify exactly? - You basically post a security deposit for your safe patches through cyberspace. So the way it would work is if you've got $10 once in your life, you can basically show
that you're credit worthy. And that's your pledge to me that you're gonna act responsibly. So you put the 10 of the $20
into the Lightning wallet, you get an orange check. Then Twitter just gives you
a setting where I can say, the only people that can
DM me are orange checks. The only people that can post on my tweets are orange checks. So instead of locking out the public and just letting your followers comment, you lock out all the unverified. And that means people
that don't wanna post $10 security deposit can't comment. Once you've done those two things, then you're in a position
to monetize malice. Right, monetize motion or
malice for that matter. But let's just say for
the sake of argument, you post something and 9,700 bots spin up, and pitch their whatever scam. Right now you sit and
you go report, report, report, report, report, report. And if you spend an hour,
you get through half of them, you waste an hour of your life and they just spin up another 97 kazillion because they've got a Python
script spinning it up, so it's hopeless. But on the other hand, if you report them and they really are a bot,
Twitter's got a method to actually delete the account. They know that they're bots. The problem is not they don't know how to delete the account. The problem is there are no consequences when they delete the account. So if there are consequences
Twitter could give, they could just seize
the $10 or seize the $20, 'cause it's a bot, it's
a malicious criminal act or whatever as a violation
of the platform rules. You end up seizing $10,000,
give half the money to the reporter and half the
money to the Twitter platform. - That's a really powerful idea, but that's tying it,
that's adding friction akin to the kind of friction
you have in the physical world. You're tying, you have consequences. You have real consequences. - [Michael] There's putting
conservation of energy. - Conservation of energy. - There's no friction, there's no nothing on this earth, right? I mean, you can't walk across the room without friction, right? So friction is not bad, right? Unnecessary friction is bad. So in this particular case, you're introducing conservation of energy and in essence you're
introducing the concept of consequence or truth into cyberspace. And that means if you do wanna
spin up 10 million fakes, fake Lex Fridmans, right? - [Lex] Its gonna cost. - It's gonna cost you a
hundred million dollars to spin up 10 million fake Lexes. - But the thing is, you could
do that with the dollar, but your case, you're
saying that it's more tied to physical reality when
you do that with Bitcoin? - Yeah, well, let's follow
up on that idea a bit more. If you did do it with the
dollar, then the question is, how does 6 billion people
deposit the dollars, right? Because what you're doing is, yeah, could you do it with a credit card? Like how do you send dollars? Well, you have to dox yourself. Like, it's not easy. So you're talking about inputting
a credit card transaction, doxing yourself, and now
you've just eliminated the 2 billion people that
don't have credit cards or don't have banks. You've also got a problem with everybody that wants to remain anonymous. But you've also got this other problem, which is credit cards are
expensive transactions, low frequency, slow settlement. So do you really want to pay 2.5% every time you actually
show a $20 deposit? And maybe you could do a kludgy version of this for a subset of people. It's 10% as good if you did it with conventional payment rails. But what you can't do is the next idea, which is I want the orange badge to be used to give me safe passage through cyberspace tripping
across every platform. How do I solve the
denial of service attacks against a website? I publish a website, you hit
it with a million requests. Okay, now how do I deal with that? Well, I can lock you out and I can make it a zero trust website, and then you have to be coming at me through a trusted firewall or with a trusted credential. But that's a pretty draconian thing. Or I could put it behind a Lightning wall. A Lightning wall would
be I just challenge you, Lex, you wanna browse my website? You have to show me your a
hundred thousand satoshis. Do you have a hundred thousand satoshis? Click. Okay, now you click away a hundred times or a thousand times. And after a thousand times, I'm like, "Well, now, Lex, you're getting offensive to take a satoshi from you, or 10 satoshis a micro transaction." You wanna hit me a million times? I'm taking all your satoshis
and locking you out. What you wanna do is you want to go through 200 websites
a day and what you want, every time you cross a
domain, you need to be able to in a split second, prove
that you've got some asset. And now when you cross
back, when you exit domain, you wanna fetch your asset back. So how do I, in a friction free fashion, browse through dozens
or hundreds of websites, post a security deposit for safe passage, and then get it back. You couldn't afford to pay
a credit card fee each time. When you think about
two point a half percent as a transaction fee, it
means you trade the money 40 times and it's gone. - [Lex] (chuckles) Yeah.
- It's gone. - Yeah, so you can't do
this kind of hopping around through the internet with
this kind of verification that grounds you to a physical reality. It's a really, really interesting idea. Why hasn't that been done? - I think you need two things. You need an idea like a
digital asset like Bitcoin that's a bearer instrument
for final settlement. And then you need a high
speed transaction network like Lightning where the transaction cost might be a 20th of a penny or less. And if you roll the clock back 24 months, I don't think you had
the Lightning Network in a stable point. It's really just the past 12 months. It's an idea you could
think about this year. And I think you need
to be aware of Bitcoin as something other than like
a scary speculative asset. So I really think we're
just the beginning, - The embryonic stage. I have to ask Michael Saylor, you said before there's
no second best to Bitcoin. What would be the second best? Traditionally there's
Ethereum with smart contracts, Cardano with proof of stake,
Polkadot with interoperability between blockchains, Dogecoin
has the incredible power of the meme, privacy with Monero. I just can keep going. There's of course after
the block size wars, the different offshoots of Bitcoin. - I think if you decompose
or segment the crypto market, you've got crypto property, Bitcoin is the king of that, you know, and other Bitcoin forks that wanted to be a bearer instrument store of value would be a property, a
Bitcoin Cash or a Litecoin, something like that. Then you've got cryptocurrencies. I don't think Bitcoin's a currency because a currency, I define
in nation states sense. A currency is a digital
asset that you can transfer in a transaction without
incurring a taxable obligation. So that means it has to be a stable dollar or a stable euro or a
stable yen, a stable coin. So I think you've got
cryptocurrencies, Tether, Circle, most famous, I think
you've got crypto platforms, and Ethereum is the most
famous of the crypto platforms, the platform upon which, you know, with smart contract
functionality, et cetera. And then I think you've
got just crypto securities. It's just like my favorite
whatever, meme coin. And I love it, 'cause I love
it and it's attached to my game or my company or my
persona or my whatever. I think if you pushed me and said, "Well, what's the second best?" I would say the world wants two things. It wants crypto property
as a savings account, and it wants cryptocurrency
as a checking account. And that means that the most popular thing really is going to be a
stable coin dollar, right? There's a maybe a fight right now. It might be Tether, right? But a stable dollar because I feel like the market opportunity, it's not clear that there'll be one that will win. The class of stable dollars is probably a one to $10 trillion market easily. I think that in the crypto platform space, Ethereum will compete with Solana and Binance Smart Chain and the like. And are there certain
characteristics of any of them that kind of stand out to you? Don't you think the competition is based on a set of features? Also, so the set of features
that a cryptocurrency provides, but also the community that it provides. Don't you think the community matters and sort of the adoption,
the dynamic of the adoption both across the developers
and the investors. - And if I'm looking at them,
I mean the first question is what's the regulatory risk, how likely is it to be deemed
a property versus security? And the second is what's
the competitive risk? And the third is what's the
speed and the performance. And all those things lead to the question of what's the security risk? How likely is it to crash and burn, and how stable or unstable is it? And then there's the marketing risk. I mean, there are different teams behind each of these things
and communities behind them. I think that the big cloud
looming over the crypto industry is regulatory treatment
of cryptocurrencies and regulatory treatment
of crypto securities and crypto platforms. And I think that won't be determined until the end of the first
Biden administration. For example, there are
people that would like only US FDIC insured banks
to issue cryptocurrencies. They want JP Morgan to issue a crypto dollar backed one-to-one. But then in the US
right now we have Circle and we have other companies
that are licensed entities that are backed by cash
and cash equivalents, but they're not FDIC insured banks. There's also a debate in Congress about whether state chartered
banks should be able to issue these things. And then we have Tether and others that are outside of the US jurisdiction, they're probably not backed
by cash and cash equivalents. They're backed by stuff. And we don't know what stuff. And then finally you have UST and D, which are algorithmic stable coins, right? That are even more innovative, further outside the compliance framework. So if you ask who's gonna win? The question is really, I don't
know, will the market decide or will the regulators decide. If the regulator get outta the
way and the market fought up? Well, then it's an interesting discussion. - [Lex] Yeah. - And then I think that all bets are off if the regulators get more
heavy handed with this. And I think you could
have the same discussion with crypto properties
like the DeFi exchanges and the crypto exchanges. The SEC would like to
regulate the crypto exchanges. They like to regulate the DeFi exchanges. That means they may regulate
the crypto platforms and at what rate and in what fashion. And so I think that I
could give you an opinion if it was limited to competition under the current regulatory regime. But I think that the
regulations are so fast moving and it's so uncertain that
it's, you can't make a decision without considering the potential
actions of the regulators. - I hope the regulators
get out of the way. Can you steelman the
case that Dogecoin is, I guess the second best cryptocurrency or if you don't consider
Bitcoin a cryptocurrency, but instead of crypto property. - I would classify it as crypto property because the US dollar is a currency. So unless your crypto asset
is pegged algorithmically or stably to the value of
the dollar is not a currency, it's a property or it's an asset. - So then can you steelman the case that Dogecoin is the
best cryptocurrency then, because Bitcoin is not even in that list. - The debate is gonna be whether
it's property or security, and there's a debate whether
it's decentralized enough. So let's assume it was decentralized. - Yep. - Well, it's increasing at not quite five, what 5% a year inflation rate. But it's not 5% exponentially, it's like a plus 5 million, 5%,
something capped in is less. I forget the exact number, but it's an inflationary property. It's got a lower inflation
rate than the US dollar, and it's got a much lower inflation rate than many other fiat currencies. So, I think you could say that. - But don't you see the power
of meme, the power of ideas, the power of fun or whatever mechanism is used to captivate a community? - I do, but there are meme stocks. It doesn't absolve you of your ethical and securities liabilities
if you're promoting it. So like I don't have a problem with like people buying a stock. It's just the way I
divide the world is right, there's investment, there's saving and there's speculation
and there's trading. So Bitcoin is an asset for saving. If you wanna save money
for a hundred years, you don't really want to
take on execution risk or the like, so you're just buying something to hold forever. For you to actually endorse
something as a property. Like if you said to me, "Mike, what should I buy for the
next a hundred years?" I say, "Well, some amount of real estate, some amount of scarce collectibles, some amount of Bitcoin," right? You can run your company, right? But running your company as an investment, so the savings are properties. If you said, "What should I invest in?" I'd say, "Well, here's a
list of good companies, private companies, you could
start your own company." That's an investment, right? If you said, "What should I trade?" Well, I'm trading as
like a proprietary thing. Like I don't have any
special insight into that. If you're a good trader, you know you are. If you said to me, "What
should you speculate in?" We talk about meme stocks,
right, and meme coins, and it's kind of sits up there. It sits right in the same space with what horse should you bet on and what sports team should you gamble on? And should you bet on
black six times in a row and double down each time? I mean, it's fun, but
at the end of the day it's a speculation, right? You can't build a civilization- - On speculation. - On it. It's not an institutional asset. And in fact, where I'd leave it, right, is Bitcoin is clearly digital, which makes it an institutional
grade investible asset for a public company, a public figure, a public investor or
anybody that's risk adverse. I think that the other,
the top 100 other cryptos are like venture capital investments. And if you're a VC and if you're a qualified
technical investor and you have a pool of capital and you can take that kind of risk, then you can parse through
that and form opinions. It's just orders of magnitude more risky because of competition,
because of ambition and because of regulation. And if you take the meme coins, it's like when some rapper
comes out with a meme coin, it's like maybe it'll peak
when I hear about it, right? It's like, I mean, Shib
was created as the coin such that it had so many
zeros after the decimal point that when you looked
at it on the exchanges, it always showed 0000. And it wasn't until like six
months after it got popular that they started expanding the display, so you could see whether
the price had changed. - That's speculation. Maybe you can correct me, but you've been critical of Elon Musk in the past in the crypto space. Where do you stand on
Elon's effect on Bitcoin and cryptocurrency in general these days? - I believe that Bitcoin
is a massive breakthrough for the human race that
will cure half the problems in the world and generate
hundreds of trillions of dollars of economic value to the civilization. And I believe that it's in an early stage where many people don't understand it and they're afraid of it. And there's FUD and there's
uncertainty, there's doubt and there's fear and there's
a very noisy crypto world and there's 15,000 other cryptos
that are seeking relevance. And I think most of the
FUD is actually fueled by the other crypto entrepreneurs. So the environmental FUD and
the other types of uncertainty that surround Bitcoin,
generally they're not coming from legitimate environmentalists. They don't come from legitimate critics. They actually are guerilla
marketing campaigns that are being financed and fueled by other crypto entrepreneurs because they have an interest in doing so. So if I look at the
constructive path forward. First, I think it'd be very constructive for corporations to embrace Bitcoin and build applications on top of it. You don't need to fix it. There's nothing wrong with it, right? Like when you put it on a
layer two and a layer three, it moves a billion times a
second at the speed of light. So every beautiful, cool DeFi application, every crypto application,
everything you could imagine you might wanna do, you can
do with a legitimate company and a legitimate website
or mobile application sitting on top of Bitcoin
or Lightning if you want to. So I think that to the
extent that people do that, that's gonna be better for the world. If you consider what holds people back, I think it's just misperceptions
about what Bitcoin is. So I'm a big fan of just educating people. If you're not going to commercialize it, then just educate people on what it is. So for example, Bitcoin's
the most efficient use of energy in the world by far, right? Most people don't, they don't
necessarily perceive that or realize that. But if you were to take any
metric energy intensity, you put like $2 billion
worth of electricity in the network every year
and it's worth $850 billion. There is no industry in
the real world, right, that is that energy efficient. Not only that energy efficient, it's also the most sustainable industry. We do surveys, 58% of Bitcoin
mining energy is sustainable. So there's a very good story. In fact every other industry,
planes, trains, automobiles, construction, food,
medicine, everything else, it's less clean, less efficient. - So the basic debate was- - I would like to, I wouldn't
say there is a debate, I would just say that to the extent that the Bitcoin community
had any issue with Elon, it was just this environmental uncertainty that he fueled in a couple
of his tweets, right? Which I think just is very distracting. - Well, that was one of them. But I think it's like
the Bitcoin maximalist, but generally the crypto community, what you call the crypto entrepreneurs are it's also they're using it
for, I mean, for investment, for speculation, and
therefore get very passionate about people's kind of celebrities, including you, like famous people saying positive stuff about any one particular crypto, a thing you can buy in Coinbase. And so they might be
unhappy with Elon Musk that he's promoting Bitcoin and then not, and then promoting Dogecoin, then not. And this kind of there's so much emotion tied up in the
communication on this topic. I think that's where a lot of the- - Look, I don't have a
criticism of Elon Musk. He's free to do whatever he wishes to do. It's his life. In fact, Elon Musk is the second largest supporter of Bitcoin in the world. So I think that the Bitcoin community tends to eat its own quite a bit. - [Lex] Yeah. - Like it tends to be very self-critical. And instead of saying, well,
Elon is more supportive of Bitcoin than the other
10,000 people in the world, with serious amounts
of money, they're like, they focus upon, you know? - Yeah, this is strange. Eating your own is just- - So, I mean, I think he's
free to do what he wants to do. And I think he's done a
lot of good for Bitcoin in putting it on the balance
sheet of Tesla and holding it. And I think that sent a
very powerful message. - Do you have advice for young people? So, you've had a heck of a life. You've done quite a lot
of things before MIT, but starting with MIT. Is there advice you have for young people in high school and college, how to have a career they can be proud of, how to have a life they can be proud of? - I was asked by somebody for quick advice for his young children, he had twins, when they enter adulthood. He said, "Give me your
advice for them in a letter. I'm gonna give it to them when
they turn 21 or something." I was at a party and then he handed me this sheet of paper and I thought, "Oh, he wants me to
write it down right now." So I sat down, I started
writing and I figured, "Well, what would you want
to tell someone at age 21?" - You wrote it down? - [Michael] So I wrote it down. - Awesome. Then I tweeted it and
it's sitting on Twitter. But I tell you what I said. I said my advice if
you're entering adulthood. Focus your energy, guard your time, train your mind, train your
body, think for yourself, curate your friends,
curate your environment, keep your promises, stay cheerful and constructive, and upgrade the world. Like that was the 10. - Upgrade the world. That's an interesting choice of words. Upgrade the world, upgrade the world. - [Michael] It's like an engineering- - Focus your energy. Yeah, it is a very engineering themed. Keep your promises too. That's an interesting one. - I think most people suffer
because they don't focus. Like you gotta figure out, I think the big risk in this world is there's too much of everything. - [Lex] Yeah. - Like you can sit and watch chess videos a hundred hours a week and
you'll never get through all the chess videos, right? There's too much of every possible thing, too much of every good thing. So figuring out what you wanna do and then everything will
suck up your time, right? There's a hundred streaming
channels to binge watch on. So you gotta guard your time
and then train your body, train your mind, and
control who's around you, control what surrounds you. So ultimately in a world
where there's too much of everything, then your success- - It's like those laser eyes. It's like those laser
eyes, you have to focus on just a few of those things. - Yeah, I mean, I got a thousand opinions we could talk about and I
could pursue a thousand things, but I don't expect to be successful. And I'm not sure that my
opinion in any of the 999 is any more valid than the
leader of thought in that area, so how about if I just
focus upon one thing and then deliver the best
I can in the one thing. That's the laser eye message. The rest get you distracted. - How do you achieve that? Do you find yourself given
where you are in life having to say no a lot or
just fo focus comes natural when you just ignore
everything around you? So how do you achieve that focus? - I think it helps if people
know what you're focused on. (Lex chuckles) - So everything about you just
radiates that, people know. People know this is- - Right, if they know
what you're focused on, then you won't get so many
other things coming your way. If you dally or if you flirt
with 27 different things, then you're gonna get approached by people in each of the 27 communities, right? - You mentioned at beginning a PhD and given your roots at MIT, do you think there's all kinds of journeys you can take to educate yourself? Do you think a PhD or
school is still worth it? Or is there other paths through life that- - Is it worth it if you had to pay for it? Is it worth it if you
to spend the time on it? - The time and the money is a big cost. Time probably the bigger one, right? - It seems clear to me that the world wants more specialists. It wants you to be an expert
in and to focus on in one area, and it's punishing generalist,
jack of all trades, especially people that are generalists in the physical realm,
'cause if you're a specialist in the digital realm, you might very well, you're the person with
700,000 followers on Twitter and you show them how to tie knots or you're the banjo player
with 1.8 million followers, and when everybody types
banjo, it's you, right? - [Lex] Yeah. - And so the world wants
people that do something well, and then it wants to stamp
out 18 million copies of them. And so that argues in favor of focus. Now, I mean, the definition
of a PhD is someone with enough of an education
that they're capable of or have made, I guess to get a PhD, technically you have to
have done a dissertation where you made a seminal contribution to the body of human knowledge, right? And if you haven't done that, technically you have a master's degree, but you're not a doctor. So if you're interested in any
of the academic disciplines that a PhD would be granted for, then I can see that being
a reasonable pursuit. But there are many people
that are specialists. You know the Agadmator? - Yeah, yeah.
- The Agadmator on YouTube. - Yeah, yeah, yeah, yeah. - He's the world's
greatest chess commentator. - [Lex] Yeah. (chuckles) - And I've watched his career and he is got progressively better. And he is really good. - He's gonna love hearing this. (chuckles) - Yeah, if the Agadmator overhears this, I'm a big fan of the Agadmator, unfortunately, I have to
cut myself off, right, because otherwise you'll watch the entire Paul Morphy
saga for your weekend. But the point really is
YouTube is full of experts who are specialists in something, and they rise to the
top of their profession. And Twitter is too, and the internet is. So I would advocate that you figure out what you're passionate about
and what you're good at, and you do focus on it,
especially if the thing that you're doing can be automated. The problem is back to that 500,000 algebra teacher type comment. The problem is if it is
possible to be automated, then over time someone's
probably gonna automate it and that squeezes the state
space of everybody else. It's like after the
lockdowns, it used to be there are like all these local
bands that played in bars, and everybody went to the
bar to see the local band. And then during the lockdown you would have like these six super groups and they would all get
500,000 or a million followers and all these smaller local bands just got no attention at all. - Well, the interesting thing is, one of those 500,000 algebra teachers is likely to be part of the automation, so it's like it's an
opportunity for you to think, where's my field, my
discipline evolving into. I talked to a bunch of librarians, just happen to be friends with librarians and libraries will probably be evolving. And it's up to you as
a librarian to be one of the few that remain in the rubble. - If you're gonna give
commentary on Shakespeare plays, I want you to basically do it
for every Shakespeare play. Like, I want you to be
the Shakespeare dude. Just like Lex, you're like- - I don't know what kind of. (chuckles) - You are the deep
thinking podcaster, right? Or you're the podcaster that goes after the deep intellectual conversations. And once I get comfortable
with you and I like you, then I start binge watching Lex. - [Lex] Yeah. - But if you changed your format through 16 different formats,
so that you could compete with 16 different other
personalities on YouTube, you'd probably wouldn't
beat any of 'em, right? You would probably just
kind of sink into the, you're the number two or number three guy. You're not the number
one guy in the format. And I think the algorithm, right? The Twitter algorithm and
the YouTube algorithms, they really reward the person that's focused on message, consistent. The world wants somebody they can trust that's consistent and reliable and they kind of want to know
what they're getting into because and this is
taken for granted maybe, but there's 10 million people vying for every hour of your time, and so the fact that anybody
gives you any time at all is a huge privilege, right?
- [Lex] Is amazing. - And you should be thanking them. And you should respect their time. - It's interesting,
like everything you said is very interesting. But of course, from my perspective and probably from your perspective, my actual life has nothing to do with, it's just being focused on stuff. And in my case, it's like focused on doing the thing I really
enjoy doing and being myself and not caring about anything else. Like I don't care about
views or likes or attention. And that just maintaining that focus is the way from an individual perspective, you live that life. But yeah, it does seem
that there's the world and technology is rewarding
the specialization and creating bigger and bigger platforms for the different specializations. Yeah, and then that
lifts all boats actually, 'cause the specializations
get better and better and better at teaching
people to do specific things and they educate themselves and
it just, everybody gets more and more knowledgeable and
more and more empowered. - The reward for authenticity
more than offsets the specificity with which
you pursue your mission. - [Lex] That's true, yeah. - Another way to say it is like, nobody wants to read advertising. Like if you were to spend a hundred million dollars
advertising your thing, I probably wouldn't wanna watch it. - Yeah, that's so fascinating. Yeah, so fascinating. - [Michael] We see the death of that. - Yeah. - And so the commercial shows
are losing their audiences and the authentic specialists
or the authentic artists are gaining their audience. - And that's a beautiful thing. Speaking of deep thinking,
you're just a human, your life ends, you've
accumulated so much wisdom, so much money, but the ride ends. Do you think about that? Do you ponder your death, your mortality? Are you afraid of it? - When I go all my assets
will flow into a foundation, and the foundation's mission is to make education free
for everybody forever. And if I'm able to
contribute to the creation of a more perfect monetary system, then maybe that foundation
will go on forever, right? - (chuckles) The idea, the
foundation of the idea, so not just the, it's
each of the foundations. - It's not clear we're on the
S-curve of a mortal life yet. Like that's a biological question. And you asked that on some of
your other interviews a lot. I think that we are on the
threshold of immortal life for ideas or immortal life for certain institutions
or computer programs. So if we can fix the money, then you can create a
technically perfected endowment. And then the question really
is what are your ideas? What do you want to leave behind? And so if it's a park, then
you endow the park, right? If it's free education, you endow that. If it's some other ethical idea, right? - Does it make you sad
that there's something that you've endowed
some very powerful idea of digital energy that you
help put into the world, and then your mind, your conscious mind will no longer be there to experience it. It's just gone forever. - I'd rather think that the
thing that Satoshi taught us is you should do your part
during some phase of the journey, and then you should get out of the way. - [Lex] (chuckles) Yeah. - I think Steve Jobs
said something similar to that effect in a very,
very famous speech one day, which is, "Death is a natural part of life and it makes way for the next generation." And I think the goal is you
upgrade the world, right? You leave it a better place,
but you get out of the way. And I think when that breaks
down, bad things happen. I think nature cleanses itself. There's a cycle of life. - And speaking one of great people who did also get outta the
way is George Washington. So hopefully when you get outta the way and nobody's bleeding you to
death in hope of helping you. To do a bit of a callback. What do you think is the
meaning of this whole thing? What's the meaning of life? Why are we here? We talked about the rise
of human civilization. It seems like we're engineers at heart. We build cool stuff, better
and better use of energy, channeling energy to be productive. Why? What's it all for? - (chuckles) You're
getting metaphysical on me. - Very, there's a beautiful
boat to the left of us. Like why do we do that? This boat that sailed the ocean,
then we build models of it to celebrate great
engineering of the past. - To engineer is divine. You can make lots of
arguments as why we're here. We're either here to entertain ourself or we're here to create
something that's beautiful or something that's functional. I think if you're an engineer,
you entertain yourself by creating something that's
both beautiful and functional. So I think all three of those things, it's entertaining, but it's ethical. You gotta admire the first
person that built a bridge, crossing a chasm or the first
person to work out the problem of how to get running water to a village or the first person to figure out how to dam up a river
or mastered agriculture or the guy that figured out
how to grow fruit on trees or created orchards, and maybe one day he had like 10 fruit trees. He is pretty proud of himself. - So, that's functional. There is also something to that, just like you said, that's just beautiful. It does get you closer to, like you said, the divine something. When you step back and
look at the entirety of it, a collective of humans
using a beautiful invention or creation or just something
about this instrument is creating a beautiful piece of music. That seems just right. That's what we're here for. Whatever the divine is, it
seems like we're here for that. And I of course love talking to you because from the engineering perspective, the functional is ultimately the mechanism towards the beauty. - Isn't there something beautiful about making the world a better
place for people that you love? - [Lex] Yeah. - Your friends, your family, or yourself. - [Lex] Yeah, yeah. - And when you think about the
entire arc of human existence and you roll the clock back 500,000 years and you think about every struggle of everyone that came before us and everything they had to overcome in order to put you here
right now, you know, you kind of, you gotta admire that, right? You gotta respect that. - That's a heck of a gift they gave us. It's also a heck of a responsibility. Don't screw it up. (chuckles) - If I dropped you 500,000 years ago and I said, figure out steel refining, or figure out silicon
chips, fab production or whatever it is or fire?
- Why? - And so now we're here and I
guess the way you repay them is you fix everything in front
of your face you can, right? And that means to someone like Elon, it means get us off the planet, right? To someone like me, it's like, I think fix the energy and the system. - And that gives me hope. Michael, this was an
incredible conversation. You're an incredible human. It's a huge honor you
would sit down with me. Thank you so much for talking today. - Yeah, thanks for having me, Lex. - Thanks for listening
to this conversation with Michael Saylor. To support this podcast, please check out our
sponsors in the description. And now let me leave you with a few words from Francis Bacon. "Money is a great servant,
but a bad master." Thank you for listening and
hope to see you next time.