How The Fed Bubble Will Burst | The Stock Market Bubble Explained

How The Fed Bubble Will Burst | The Stock Market Bubble Explained Recently I have highlighted how the liquidity provided by the Federal Reserve (Fed) has driven the stock market to new highs and, if the Fed continues to provide liquidity the stock market will continue to rise higher. This has left many people wondering if the stock market is a bubble and, if so, how and when will the stock market bubble burst. In this video I describe the dynamics of the current stock market bubble and some likely scenarios for how the stock market bubble might burst.

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MMT vs. Austrian School Debate

A public debate on macroeconomic theory and policy with leading thinkers from Modern Monetary Theory (MMT) and the Austrian School. Warren Mosler represents MMT, Robert Murphy, Ph.D, represents the Austrian School, and John Carney moderates.

 

WARREN MOSLER is an early developer of Modern Monetary Theory (MMT), the President of Valance Co, Inc., and Senior Financial Advisor to Senator Ronald E. Russell, President of the 29th Legislature of the U.S. Virgin Islands. He is the founder and current manager of the III Funds, which peaked at over $5 billion AUM in 2007 and currently manages about $1.5 billion, as well as the Founder and President of Mosler Automotive, which manufactures the MT900 sports car in Riviera Beach, Florida. Mr. Mosler has written a number of academic papers on issues relating to macroeconomics and monetary policy, and is the author of Seven Deadly Innocent Frauds of Economic Policy (2010). He maintains a personal blog, The Center of the Universe (http://moslereconomics.com), and can be followed on Twitter at http://moslereconomics.com.
ROBERT MURPHY, Ph.D, is a Senior Economist with the Institute for Energy Research and an Associated Scholar at the Ludwig von Mises Institute, where he teaches at the Mises Academy. He is also an adjunct scholar at the Mackinac Center for Public Policy. From 2003 until 2006, Murphy was Visiting Assistant Professor of Economics at Hillsdale College in Michigan, U.S. From 2006 until early 2007, he was employed as a research and portfolio analyst with Laffer Associates, an economic and investment consultancy in New York. He runs the blog Free Advice (http://consultingbyrpm.com/blog) and writes a column for Townhall.com and has also written for LewRockwell.com. He is the author of a number of books including The Politically Incorrect Guide to Capitalism and Lessons for the Young Economist. MODERATOR JOHN CARNEY is a senior editor at CNBC.com, covering Wall Street, hedge funds, financial regulation and other business news. Prior to joining CNBC.com, Carney was the editor of Business Insider’s Clusterstock.com and DealBreaker.com. He has also written for The Wall Street Journal, The New York Times, The New York Sun, Page Six Magazine, Gawker, TheAtlantic.com, The Daily Beast, Time Out New York, Fortune and New York magazine. Carney practiced corporate law at firms such as Skadden, Arps, Slate, Meagher & Flom and Latham & Watkins, primarily representing banks, hedge funds and private equity firms. He received his law degree from the University of Pennsylvania.

 

Jim Grant Warns Fed’s ‘All-In’ Actions Are A “Clear-And-Present-Danger” To US Creditors

In a veritable treatise on all that was wrong with The Fed’s actions, Jim Grant – founder and editor of Grant’s Interest Rate Observer – was somehow allowed nine minutes on CNBC’s Squawk Box to put America straight on what we are facing and the consequences of these unelected and unaccountable officials terrifying experiments.

Grant began by slamming Jay Powell’s seemingly blinkered proclamation that “he sees no prospective consequences with regard the purchasing power of the dollar” as “very concerning” adding more pertinently that he thinks “that wilful ignorance is a clear-and-present-danger for creditors of The United States.

It appears his fears are starting to be warranted as USA Sovereign credit risk is rising…

“I am in favor of life going on,” says Grant when asked by the anchor, “shouldn’t The Fed do something amid this massive global shutdown?”

The alternative, the venerable bond guru exclaims is the direction we are heading – “shutting everything down and putting the government in charge.”

Bernie Sanders may (or may not) be out of the presidential race but, as Grant highlights, “his programs are being implemented in fact daily.”

“One can die of despair as well as disease,” warned Grant, reminding viewers of the consequences of mass self-incarceration.

“There are health consequences to isolation, and health consequences to unemployment.. and life as it must go on is is a precious thing too and we ought to at least consider what we are condemning ourselves to if we choose to shut everything down for another month or two or three.”

“I think it would be a fatal error.”

Once again, the CNBC anchor urged Grant to support massive intervention but exclaiming “desperate times call for desperate measures.”

His retort shut down her argument quickly:

“experts are not expert in a dis-positive way, there is no certainty about this, just as there is no certainty in finance or indeed life,” and Grant adds ominously that “the cure is prospectively worse than the disease.”

“The delegation of political and economic authority to the US government to suppress this crisis is a clear and present danger.”

Finally, Grant, whose wife is a physician, reminded the anchors that the current actions (and consequences) have a direct analogy with the opioid crisis, as “in the early 2000s, the medical profession got it into its head that pain was the vital sign, and that no one ought to be in pain… this led to the deadly over-prescription of opioids.”

By the same token, Grant analogizes, “The Fed has intervened at ever-closer intervals to suppress the symptoms of misallocation of resources and the mis-pricing of credit. These radical interventions have become ever-more drastic and the ‘doctor-feel-goods’ of our central banks have worked to destroy the pricing mechanism in credit.”

Grant ends on a hanging chad of a rhetorical question “what do corrections correct? Is there no salutary role for recessions and bear markets?”

Of course there is, he answers, “they separate the sound from the unsound, they separate the well-financed from the over-leveraged and if we never have these episodes of economic pain, we will be much the worse for it.”

Watch the full interview below:

The Number Zero and Bitcoin

Satoshi gave the world Bitcoin, a true “something for nothing.” His discovery of absolute scarcity for money is an unstoppable idea that is changing the world tremendously, just like its digital ancestor: the number zero.

Zero is Special

“In the history of culture the discovery of zero will always stand out as one of the greatest single achievements of the human race.” — Tobias Danzig, Number: The Language of Science

Many believe that Bitcoin is “just one of thousands of cryptoassets”—this is true in the same way that the number zero is just one of an infinite series of numbers. In reality, Bitcoin is special, and so is zero: each is an invention which led to a discovery that fundamentally reshaped its overarching system—for Bitcoin, that system is money, and for zero, it is mathematics. Since money and math are mankind’s two universal languages, both Bitcoin and zero are critical constructs for civilization.

For most of history, mankind had no concept of zero: an understanding of it is not innate to us—a symbol for it had to be invented and continuously taught to successive generations. Zero is an abstract conception and is not discernible in the physical world—no one goes shopping for zero apples. To better understand this, we will walk down a winding path covering more than 4,000 years of human history that led to zero becoming part of the empirical bedrock of modernity.

Numerals, which are symbols for numbers, are the greatest abstractions ever invented by mankind: virtually everything we interact with is best grasped in numerical, quantifiable, or digital form. Math, the language of numerals, originally developed from a practical desire to count things—whether it was the amount of fish in the daily catch or the days since the last full moon. Many ancient civilizations developed rudimentary numeral systems: in 2000 BCE, the Babylonians, who failed to conceptualize zero, used two symbols in different arrangements to create unique numerals between 1 and 60:

Babylonian cuneiform was a relatively inefficient numeral system — notice how many more written strokes are necessary for each number symbol — and calculation using it was even more cumbersome.

Vestiges of the base-60 Babylonian cuneiform system still exist today: there are 60 seconds in a minute, 60 minutes in an hour, and 6 sets of 60 degrees in a circle. But this ancient system lacked a zero, which severely limited its usefulness. Ancient Greeks and Mayans developed their own numeral systems, each of which contained rough conceptions of zero. However, the first explicit and arithmetic use of zero came from ancient Indian and Cambodian cultures. They created a system with nine number symbols and a small dot used to mark the absence of a number—the original zero. This numeral system would eventually evolve into the one we use today:

The first known written zero: from the Bakhshali manuscript which contains pages dating back to the 3rd and 4th centuries AD.

Inscription K-127 bears the earliest zero ever discovered—dated from the 7th century, it was discovered in the 19th century in Cambodia.

In the 7th century, the Indian mathematician Brahmagupta developed terms for zero in addition, subtraction, multiplication, and division (although he struggled a bit with the latter, as would thinkers for centuries to come). As the discipline of mathematics matured in India, it was passed through trade networks eastward into China and westward into Islamic and Arabic cultures. It was this western advance of zero which ultimately led to the inception of the Hindu-Arabic numeral system—the most common means of symbolic number representation in the world today:

The Economization of Math

When zero reached Europe roughly 300 years later in the High Middle Ages, it was met with strong ideological resistance. Facing opposition from users of the well-established Roman numeral system, zero struggled to gain ground in Europe. People at the time were able to get by without zero, but (little did they know) performing computation without zero was horribly inefficient. An apt analogy to keep in mind arises here: both math and money are possible without zero and Bitcoin, respectively—however both are tremendously more wasteful systems without these core elements. Consider the difficulty of doing arithmetic in Roman numerals:

If you thought you were bad at arithmetic using numbers, just try doing it with letters.

Calculation performed using the Hindu-Arabic system is significantly more straightforward than with Roman numerals—and energy-efficient systems have a tendency to win out in the long run, as we saw when the steam engine outcompeted animal-sourced power or when capitalism prevailed over socialism (another important point to remember for Bitcoin later). This example just shows the pains of addition—multiplication and division were even more painstaking. As Amir D. Aczel described it in his book Finding Zero:

Roman numeral inefficiency would not be tolerated for long in a world enriching itself through commerce. With trade networks proliferating and productivity escalating in tandem, growing prospects of wealth creation incentivized merchants to become increasingly competitive, pushing them to always search for an edge over others. Computation and record-keeping with a zero-based numeral system was qualitatively easier, quantitatively faster, and less prone to error. Despite Europe’s resistance, this new numeral system simply could not be ignored: like its distant progeny Bitcoin would later be, zero was an unstoppable idea whose time had come:

Functions of Zero

Zero’s first function is as a placeholder in our numeric system: for instance, notice the “0” in the number “1,104” in the equation above, which indicates the absence of value in the tens place. Without zero acting as a symbol of absence at this order of magnitude in “1,104,” the number could not be represented unambiguously (without zero, is it “1,104” or “114”?). Lacking zero detracted from a numeral system’s capacity to maintain constancy of meaning as it scales. Inclusion of zero enables other digits to take on new meaning according to their position relative to it. In this way, zero lets us perform calculation with less effort—whether its pen strokes in a ledger, finger presses on a calculator, or mental gymnastics. Zero is a symbol for emptiness, which can be a highly useful quality—as Lao Tzu said:

More philosophically, zero is emblematic of the void, as Aczel describes it:

“…the void is everywhere and it moves around; it can stand for one truth when you write a number a certain way — no tens, for example — and another kind of truth in another case, say when you have no thousands in a number!”

Drawing analogies to the functions of money: zero is the “store of value” on which higher order of magnitude numerals can scale; this is the reason we always prefer to see another zero at the end of our bank account or Bitcoin balance. In the same way a sound economic store of value leads to increased savings, which undergirds investment and productivity growth, so too does a sound mathematical placeholder of value give us a numeral system capable of containing more meaning in less space, and supporting calculations in less time: both of which also foster productivity growth. Just as money is the medium through which capital is continuously cycled into places of optimal economic employment, zero gives other digits the ability to cycle—to be used again and again with different meanings for different purposes.

Zero’s second function is as a number in its own right: it is the midpoint between any positive number and its negative counterpart (like +2 and -2). Before the concept of zero, negative numbers were not used, as there was no conception of “nothing” as a number, much less “less than nothing.” Brahmagupta inverted the positive number line to create negative numbers and placed zero at the center, thus rounding out the numeral system we use today. Although negative numbers were written about in earlier times, like the Han Dynasty in China (206 BCE to 220 BCE), their use wasn’t formalized before Brahmagupta, since they required the concept of zero to be properly defined and aligned. In a visual sense, negative numbers are a reflection of positive numbers cast across zero:

Zero is the center of gravity for our entire numeral system, just as money is central to any economic system.

Interestingly, negative numbers were originally used to signify debts—well before the invention of double-entry accounting, which opted for debits and credits (partly to avoid the use of negative numbers). In this way, zero is the “medium of exchange” between the positive and negative domains of numbers—it is only possible to pass into, or out of, either territory by way of zero. By going below zero and conceptualizing negative numbers, many new and unusual (yet extremely useful) mathematical constructs come into being including imaginary numbers, complex numbers, fractals, and advanced astrophysical equations. In the same way the economic medium of exchange, money, leads to the acceleration of trade and innovation, so too does the mathematical medium of exchange, zero, lead to enhanced informational exchange, and its associated development of civilizational advances:

The Mandlebrot Set: one of the most famous examples of a fractal, a mind-bending mathematical structure formed with complex numbers that models the geometry of nature and its intrinsic complexity. One of the best known examples of mathematical beauty, this fractal exhibits infinite depth, breadth, and non-repeating self-similarity. Zero is a necessary prerequisite to such fractal modeling.

Zero’s third function is as a facilitator for fractions or ratios. For instance, the ancient Egyptians, whose numeral system lacked a zero, had an extremely cumbersome way of handling fractions: instead of thinking of 3/4 as a ratio of three to four (as we do today), they saw it as the sum of 1/2 and 1/4. The vast majority of Egyptian fractions were written as a sum of numbers as 1/n, where n is the counting number—these were called unit fractions. Without zero, long chains of unit fractions were necessary to handle larger and more complicated ratios (many of us remember the pain of converting fractions from our school days). With zero, we can easily convert fractions to decimal form (like 1/2 to 0.5), which obsoletes the need for complicated conversions when dealing with fractions. This is the “unit of account” function of zero. Prices expressed in money are just exchange ratios converted into a money-denominated price decimal: instead of saying “this house costs eleven cars” we say, “this house costs $440,000,” which is equal to the price of eleven $40,000 cars. Money gives us the ability to better handle exchange ratios in the same way zero gives us the ability to better handle numeric ratios.

Numbers are the ultimate level of objective abstraction: for example, the number 3 stands for the idea of “threeness” — a quality that can be ascribed to anything in the universe that comes in treble form. Equally, 9 stands for the quality of “nineness” shared by anything that is composed of nine parts. Numerals and math greatly enhanced interpersonal exchange of knowledge (which can be embodied in goods or services), as people can communicate about almost anything in the common language of numeracy. Money, then, is just the mathematized measure of capital available in the marketplace: it is the least common denominator among all economic goods and is necessarily the most liquid asset with the least mutable supply. It is used as a measuring system for the constantly shifting valuations of capital (this is why gold became money—it is the monetary metal with a supply that is most difficult to change). Ratios of money to capital (aka prices) are among the most important in the world, and ratios are a foundational element of being:

“In the beginning, there was the ratio, and the ratio was with God, and the ratio was God.” — John 1:1*

*(A more “rational” translation of Jesus’s beloved disciple John: the Greek word for ratio was λόγος (logos), which is also the term for word.)

An ability to more efficiently handle ratios directly contributed to mankind’s later development of rationality, a logic-based way of thinking at the root of major social movements such as the Renaissance, the Reformation, and the Enlightenment. To truly grasp the strange logic of zero, we must start with its point of origin—the philosophy from which it was born.

Philosophy of Zero

“In the earliest age of the gods, existence was born from non-existence.” — The Rig Veda

Zero arose from the bizarre logic of the ancient East. Interestingly, the Buddha himself was a known mathematician — in early books about him, like the Lalita Vistara, he is said to be excellent in numeracy (a skill he uses to woo a certain princess). In Buddhism, the logical character of the phenomenological world is more complex than true or false:

Or not true,

Or both true and not true,

Or neither true nor not true.

This is the Lord Buddha’s teaching.”

This is the Tetralemma (or the four corners of the catuskoti): the key to understanding the seeming strangeness of this ancient Eastern logic is the concept of Shunya, a Hindi word meaning zero: it is derived from the Buddhist philosophical concept of Śūnyatā (or Shunyata). The ultimate goal of meditation is the attainment of enlightenment, or an ideal state of nirvana, which is equivalent to emptying oneself entirely of thought, desire, and worldly attachment. Achievement of this absolute emptiness is the state of being in Shunyata: a philosophical concept closely related to the void—as the Buddhist writer Thich Nhat Hanh describes it:

“The first door of liberation is emptiness, Shunyata

Emptiness always means empty of something

Emptiness is the Middle Way between existent and nonexistent

Reality goes beyond notions of being and nonbeing

True emptiness is called “wondrous being,” because it goes beyond existence and nonexistence

The concentration on Emptiness is a way of staying in touch with life as it is, but it has to be practiced and not just talked about.”

Or, as a Buddhist monk of ancient Wats temple in Southeast Asia described the meditative experience of the void:

A direct experience of emptiness is achievable through meditation. In a true meditative state, the Shunyata and the number zero are one and the same. Emptiness is the conduit between existence and nonexistence, in the same way zero is the door from positive to negative numbers: each being a perfect reflection of the other. Zero arose in the ancient East as the epitome of this deeply philosophical and experiential concept of absolute emptiness. Empirically, today we now know that meditation benefits the brain in many ways. It seems too, that its contribution to the discovery of zero helped forge an idea that benefits mankind’s collective intelligence — our global hive-mind.

Despite being discovered in a spiritual state, zero is a profoundly practical concept: perhaps it is best understood as a fusion of philosophy and pragmatism. By traversing across zero into the territory of negative numbers, we encounter the imaginary numbers, which have a base unit of the square root of -1, denoted by the letter i. The number i is paradoxical: consider the equations x² + 1 = 0 and x³ + 1 = 0, the only possible answers are positive square root of -1 (i) and negative square root of -1 (-i or i³), respectively. Visualizing these real and imaginary domains, we find a rotational axis centered on zero with orientations reminiscent of the tetralemma: one true (1), one not true (i), one both true and not true (-1 or ), and one neither true nor not true (-i or i³):

Zero is the fulcrum between real and imaginary number planes.

Going through the gateway of zero into the realms of negative and imaginary numbers provides a more continuous form of logic when compared to the discrete either-or logic, commonly accredited to Aristotle and his followers. This framework is less “black and white” than the binary Aristotelean logic system, which was based on true or false, and provides many gradations of logicality; a more accurate map to the many “shades of grey” we find in nature. Continuous logic is insinuated throughout the world: for instance, someone may say “she wasn’t unattractive,” meaning that her appeal was ambivalent, somewhere between attractive and unattractive. This perspective is often more realistic than a binary assessment of attractive or not attractive.

Importantly, zero gave us the concept of infinity: which was notably absent from the minds of ancient Greek logicians. The rotations around zero through the real and imaginary number axes can be mathematically scaled up into a three-dimensional model called the Riemann Sphere. In this structure, zero and infinity are geometric reflections of one another and can transpose themselves in a flash of mathematical permutation. Always at the opposite pole of this three-dimensional, mathematical interpretation of the tetralemma, we find zero’s twin—infinity:

Scaling the real and imaginary number planes into the third dimension, we discover zero’s twin: infinity.

The twin polarities of zero and infinity are akin to yin and yang — as Charles Seife, author of Zero: Biography of a Dangerous Idea, describes them:

In Eastern philosophy, the kinship of zero and infinity made sense: only in a state of absolute nothingness can possibility become infinite. Buddhist logic insists that everything is endlessly intertwined: a vast causal network in which all is inexorably interlinked, such that no single thing can truly be considered independent — as having its own isolated, non-interdependent essence. In this view, interrelation is the sole source of substantiation. Fundamental to their teachings, this truth is what Buddhists call dependent co-origination, meaning that all things depend on one another. The only exception to this truth is nirvana: liberation from the endless cycles of reincarnation. In Buddhism, the only pathway to nirvana is through pure emptiness:

Nirvana, the ultimate spiritual goal in Buddhism, is attained by entering the void in meditation—this is where zero was discovered.

Some ancient Buddhist texts state: “the truly absolute and the truly free must be nothingness.” In this sense, the invention of zero was special; it can be considered the discovery of absolute nothingness, a latent quality of reality that was not previously presupposed in philosophy or systems of knowledge like mathematics. Its discovery would prove to be an emancipating force for mankind, in that zero is foundational to the mathematized, software-enabled reality of convenience we inhabit today.

Zero was liberation discovered deep in meditation, a remnant of truth found in close proximity to nirvana — a place where one encounters universal, unbounded, and infinite awareness: God’s kingdom within us. To buddhists, zero was a whisper from the universe, from dharma, from God (words always fail us in the domain of divinity). Paradoxically, zero would ultimately shatter the institution which built its power structure by monopolizing access to God. In finding footing in the void, mankind uncovered the deepest, soundest substrate on which to build modern society: zero would prove to be a critical piece of infrastructure that led to the interconnection of the world via telecommunications, which ushered in the gold standard and the digital age (Bitcoin’s two key inceptors) many years later.

Blazing a path forward: the twin conceptions of zero and infinity would ignite the Renaissance, the Reformation, and the Enlightenment — all movements that mitigated the power of The Catholic Church as the dominant institution in the world and paved the way for the industrialized nation-state.

Power of The Church Falls to Zero

The universe of the ancient Greeks was founded on the philosophical tenets of Pythagoras, Aristotle, and Ptolemy. Central to their conception of the cosmos was the precept that there is no void, no nothingness, no zero. Greeks, who had inherited their numbers from the geometry-loving Egyptians, made little distinction between shape and number. Even today, when we square a number (x²), this is equivalent to converting a line into a square and calculating its area. Pythagoreans were mystified by this connection between shapes and numbers, which explains why they didn’t conceive of zero as a number: after all, what shape could represent nothingness? Ancient Greeks believed numbers had to be visible to be real, whereas the ancient Indians perceived numbers as an intrinsic part of a latent, invisible reality separate from mankind’s conception of them.

The symbol of the Pythagorean cult was the pentagram (a five-pointed star); this sacred shape contained within it the key to their view of the universe—the golden ratio. Considered to be the “most beautiful number,” the golden ratio is achieved by dividing a line such that the ratio of the small part to the large part is the same as the ratio of the large part to the whole. Such proportionality was found to be not only aesthetically pleasing, but also naturally occurring in a variety of forms including nautilus shells, pineapples, and (centuries later) the double-helix of DNA. Beauty this objectively pure was considered to be a window into the transcendent; a soul-sustaining quality. The golden ratio became widely used in art, music, and architecture:

A simple sequence of calculations converges on the golden ratio, the “beautiful number” bountiful in nature. Beauty of this caliber heavily influenced many domains including architecture (as seen in the design of The Parthenon here).

The golden ratio was also found in musical harmonics: when plucking a string instrument from its specified segments, musicians could create the perfect fifth, a dual resonance of notes said to be the most evocative musical relationship. Discordant tritones, on the other hand, were derided as the “devil in music.” Such harmony of music was considered to be one and the same with that of mathematics and the universe—in the Pythagorean finite view of the cosmos (later called the Aristotelean celestial spheres model), movements of planets and other heavenly bodies generated a symphonic “harmony of the spheres”—a celestial music that suffused the cosmic depths. From the perspective of Pythagoreans, “all was number,” meaning ratios ruled the universe. The golden ratio’s seemingly supernatural connection to aesthetics, life, and the universe became a central tenet of Western Civilization and, later, The Catholic Church (aka The Church).

Zero posed a major threat to the conception of a finite universe. Dividing by zero is devastating to the framework of logic, and thus threatened the perfect order and integrity of a Pythagorean worldview. This was a serious problem for The Church which, after the fall of the Roman Empire, appeared as the dominant institution in Europe. To substantiate its dominion in the world, The Church proffered itself as the gatekeeper to heaven. Anyone who crossed The Church in any way could find themselves eternally barred from the holy gates. The Church’s claim to absolute sovereignty was critically dependent on the Pythagorean model, as the dominant institution over Earth—which was in their view the center of the universe—necessarily held dominion in God’s universe. Standing as a symbol for both the void and the infinite, zero was heretical to The Church. Centuries later, a similar dynamic would unfold in the discovery of absolute scarcity for money, which is dissident to the dominion of The Fed—the false church of modernity.

Ancient Greeks clung tightly to a worldview that did not tolerate zero or the infinite: rejection of these crucial concepts proved to be their biggest failure, as it prevented the discovery of calculus—the mathematical machinery on which much of the physical sciences and, thus, the modern world are constructed. Core to their (flawed) belief system was the concept of the “indivisible atom,” the elementary particle which could not be subdivided ad infinitum. In their minds, there was no way beyond the micro barrier of the atomic surface. In the same vein, they considered the universe a “macrocosmic atom” that was strictly bound by an outermost sphere of stars winking down towards the cosmic core—Earth. As above, so below: with nothing conceived to be above this stellar sphere and nothing below the atomic surface, there was no infinity and no void:

A finite universe with Earth at the center was the central tenet of ancient Greek philosophy and, later, of The Catholic Church’s institutional dominion over the world.

Aristotle (with later refinements by Ptolemy) would interpret this finite universe philosophically and, in doing so, form the ideological foundation for God’s existence and The Church’s power on Earth. In the Aristotelean conception of the universe, the force moving the stars, which drove the motion of all elements below, was the prime mover: God. This cascade of cosmic force from on high downward into the movements of mankind was considered the officially accepted interpretation of divine will. As Christianity swept through the West, The Church relied upon the explanatory power of this Aristotelean philosophy as proof of God’s existence in their proselytizing efforts. Objecting to the Aristotelean doctrine was soon considered an objection to the existence of God and the power of The Church.

Infinity was unavoidably actualized by the same Aristotelean logic which sought to deny it. By the 13th century, some bishops began calling assemblies to question the Aristotelean doctrines that went against the omnipotence of God: for example, the notion that “God can not move the heavens in a straight line, because that would leave behind a vacuum.” If the heavens moved linearly, then what was left in their wake? Through what substance were they moving? This implied either the existence of the void (the vacuum), or that God was not truly omnipotent as he could not move the heavens. Suddenly, Aristotelean philosophy started to break under its own weight, thereby eroding the premise of The Church’s power. Although The Church would cling to Aristotle’s views for a few more centuries—it fought heresy by forbidding certain books and burning certain Protestants alive—zero marked the beginning of the end for this domineering and oppressive institution.

An infinite universe meant there were, at least, a vast multitude of planets, many of which likely had their own populations and churches. Earth was no longer the center of the universe, so why should The Church have universal dominion? In a grand ideological shift that foreshadowed the invention of Bitcoin centuries later, zero became the idea that broke The Church’s grip on humanity, just as absolute scarcity of money is breaking The Fed’s stranglehold on the world today. In an echo of history, us moderns can once again hear the discovery of nothing beginning to change everything.

Zero was the smooth stone slung into the face of Goliath, a death-stroke to the dominion of The Church; felled by an unstoppable idea, this oppressive institution’s fall from grace would make way for the rise of the nation-state—the dominant institutional model in modernity.

Zero: An Ideological Juggernaut

Indoctrinated in The Church’s dogma, Christianity initially refused to accept zero, as it was linked to a primal fear of the void. Zero’s inexorable connection to nothingness and chaos made it a fearsome concept in the eyes of most Christians at the time. But zero’s capacity to support honest weights and measures, a core Biblical concept, would prove more important than the countermeasures of The Church (and the invention of zero would later lead to the invention of the most infallible of weights and measures, the most honest money in history—Bitcoin). In a world being built on trade, merchants needed zero for its superior arithmetic utility. As Pierre-Simon Laplace said:

“…[zero is] a profound and important idea which appears so simple to us now that we ignore its true merit. But its very simplicity and the great ease which it lent to all computations put our arithmetic in the first rank of useful inventions.”

In the 13th century, academics like the renowned Italian mathematician Fibonacci began championing zero in their work, helping the Hindu-Arabic system gain credibility in Europe. As trade began to flourish and generate unprecedented levels of wealth in the world, math moved from purely practical applications to ever more abstracted functions. As Alfred North Whitehead said:

The point about zero is that we do not need to use it in the operations of daily life. No one goes out to buy zero fish. It is in a way the most civilized of all the cardinals, and its use is only forced on us by the needs of cultivated modes of thought.”

As our thinking became more sophisticated, so too did our demands on math. Tools like the abacus relied upon a set of sliding stones to help us keep track of amounts and perform calculation. An abacus was like an ancient calculator, and as the use of zero became popularized in Europe, competitions were held between users of the abacus (the abacists) and of the newly arrived Hindu-Arabic numeral system (the algorists) to see who could solve complex calculations faster. With training, algorists could readily outpace abacists in computation. Contests like these led to the demise of the abacus as a useful tool, however it still left a lasting mark on our language: the words calculate, calculus, and calcium are all derived from the Latin word for pebble—calculus.

The algorists competing against the abacists: contests like these empirically proved the supremacy of a zero-based numeral system over others, even when aided by ancient mathematical tools like the abacus.

Before the Hindu-Arabic numerals, money counters had to use the abacus or a counting board to keep track of value flows. Germans called the counting board a Rechenbank, which is why moneylenders came to be known as banks. Not only did banks use counting boards, but they also used tally sticks to keep track of lending activities: the monetary value of a loan was written on the side of a stick, and it was split into two pieces, with the lender keeping the larger piece, known as the stock—which is where we get the term stockholder:

An ancient loan tracking device called a tally stick: the lender kept the larger portion, the stock, and became a stockholder in the bank that made the loan.

Despite its superior utility for business, governments despised zero. In 1299, Florence banned the Hindu-Arabic numeral system. As with many profound innovations, zero faced vehement resistance from entrenched power structures that were threatened by its existence. Carrying on lawlessly, Italian merchants continued to use the zero-based numeral system, and even began using it to transmit encrypted messages. Zero was essential to these early encryption systems—which is why the word cipher, which originally meant zero, came to mean “secret code.” The criticality of zero to ancient encryption systems is yet another aspect of its contribution to Bitcoin’s ancestral heritage.

At the beginning of the Renaissance, the threat zero would soon pose to the power of The Church was not obvious. By then, zero had been adapted as an artistic tool to create the vanishing point: an acute place of infinite nothingness used in many paintings that sparked the great Renaissance in the visual arts. Drawings and paintings prior to the vanishing point appear flat and lifeless: their imagery was mostly two-dimensional and unrealistic. Even the best artists couldn’t capture realism without the use of zero:

Pre-Renaissance art: still better than a banana duct taped to a canvas.

With the concept of zero, artists could create a zero-dimension point in their work that was “infinitely far” from the viewer, and into which all objects in the painting visually collapsed. As objects appear to recede from the viewer into the distance, they become ever-more compressed into the “dimensionlessness” of the vanishing point, before finally disappearing. Just as it does today, art had a strong influence on people’s perceptions. Eventually, Nicholas of Cusa, a cardinal of The Church declared, “Terra non est centra mundi,” which meant “the Earth is not the center of the universe.” This declaration would later lead to Copernicus proving heliocentrism—the spark that ignited The Reformation and, later, the Age of Enlightenment:

By adding the vanishing point (a visual conception of zero) to drawings and paintings, art gained the realistic qualities of depth, breadth, and spatial proportion.

A dangerous, heretical, and revolutionary idea had been planted by zero and its visual incarnation, the vanishing point. At this point of infinite distance, the concept of zero was captured visually, and space was made infinite—as Seife describes it:

“It was no coincidence that zero and infinity are linked in the vanishing point. Just as multiplying by zero causes the number line to collapse into a point, the vanishing point has caused most of the universe to sit in a tiny dot. This is a singularity, a concept that became very important later in the history of science—but at this early stage, mathematicians knew little more than the artists about the properties of zero.”

The purpose of the artist is to the mythologize the present: this is evident in much of the consumerist “trash art” produced in our current fiat-currency-fueled world. Renaissance artists (who were often also mathematicians, true Renaissance men) worked assiduously in line with this purpose as the vanishing point became an increasingly popular element of art in lockstep with zero’s proliferation across the world. Indeed, art accelerated the propulsion of zero across the mindscape of mankind.

Modernity: The Age of Ones and Zeros

Eventually, zero became the cornerstone of calculus: an innovative system of mathematics that enabled people to contend with ever-smaller units approaching zero, but cunningly avoided the logic-trap of having to divide by zero. This new system gave mankind myriad new ways to comprehend and grasp his surroundings. Diverse disciplines such as chemistry, engineering, and physics all depend on calculus to fulfill their functions in the world today:

Calculus enables us to make symphonic arrangements of matter in precise accordance with our imaginations; this mathematical study of continuous change is fundamental to all physical sciences.

Zero serves as the source-waters of many technological breakthroughs—some of which would flow together into the most important invention in history: Bitcoin. Zero punched a hole and created a vacuum in the framework of mathematics and shattered Aristotelean philosophy, on which the power of The Church was premised. Today, Bitcoin is punching a hole and creating a vacuum in the market for money; it is killing Keynesian economics—which is the propagandistic power-base of the nation-state (along with its apparatus of theft: the central bank).

In modernity, zero has become a celebrated tool in our mathematical arsenal. As the binary numerical system now forms the foundation of modern computer programming, zero was essential to the development of digital tools like the personal computer, the internet, and Bitcoin. Amazingly, all modern miracles made possible by digital technologies can be traced back to the invention of a figure for numeric nothingness by an ancient Indian mathematician: Brahmagupta gave the world a real “something for nothing,” a generosity Satoshi would emulate several centuries later. As Aczel says:

A composition of countless zeroes and ones, binary code led to the proliferation and standardization of communications protocols including those embodied in the internet protocol suite. As people freely experimented with these new tools, they organized themselves around the most useful protocols like http, TCP/IP, etc. Ossification of digital communication standards provided the substrate upon which new societal utilities—like email, ride sharing, and mobile computing—were built. Latest (and arguably the greatest) among these digital innovations is the uninflatable, unconfiscatable, and unstoppable money called Bitcoin.

A common misconception of Bitcoin is that it is just one of thousands of cryptoassets in the world today. One may be forgiven for this misunderstanding, as our world today is home to many national currencies. But all these currencies began as warehouse receipts for the same type of thing—namely, monetary metal (usually gold). Today, national currencies are not redeemable for gold, and are instead liquid equity units in a pyramid scheme called fiat currency: a hierarchy of thievery built on top of the freely selected money of the world (gold) which their issuers (central banks) hoard to manipulate its price, insulate their inferior fiat currencies from competitive threats, and perpetually extract wealth from those lower down the pyramid.

Given this confusion, many mistakenly believe that Bitcoin could be disrupted by any one of the thousands of alternative cryptoassets in the marketplace today. This is understandable, as the reasons that make Bitcoin different are not part of common parlance and are relatively difficult to understand. Even Ray Dalio, the greatest hedge fund manager in history, said that he believes Bitcoin could be disrupted by a competitor in the same way that iPhone disrupted Blackberry. However, disruption of Bitcoin is extremely unlikely: Bitcoin is a path-dependent, one-time invention; its critical breakthrough is the discovery of absolute scarcity—a monetary property never before (and never again) achievable by mankind.

Like the invention of zero, which led to the discovery of “nothing as something” in mathematics and other domains, Bitcoin is the catalyst of a worldwide paradigmatic phase change (which some have started calling The Great Awakening). What numeral is to number, and zero is to the void for mathematics, Bitcoin is to absolute scarcity for money: each is a symbol that allows mankind to apprehend a latent reality (in the case of money, time). More than just a new monetary technology, Bitcoin is an entirely new economic paradigm: an uncompromisable base money protocol for a global, digital, non-state economy. To better understand the profundity of this, we first need to understand the nature of path-dependence.

The Path-Dependence of Bitcoin

Path-dependence is the sensitivity of an outcome to the order of events that led to it. In the broadest sense, it means history has inertia:

Path-dependence entails that the sequence of events matters as much as the events themselves: as a simple example, you get a dramatically different result if you shower and then dry yourself off versus if you dry yourself off first and then shower. Path-dependence is especially prevalent in complex systems due to their high interconnectivity and numerous (often unforeseeable) interdependencies. Once started down a particular pathway, breaking away from its sociopolitical inertia can become impossible—for instance, imagine if the world tried to standardize to a different size electrical outlet: consumers, manufacturers, and suppliers would all resist this costly change unless there was a gigantic prospective gain. To coordinate this shift in standardization would require either a dramatically more efficient technology (a pull method—by which people stand to benefit) or an imposing organization to force the change (a push method—in which people would be forced to change in the face of some threat). Path-dependence is why occurrences in the sociopolitical domain often influence developments in the technical; US citizens saw path-dependent pushback firsthand when their government made a failed attempt to switch to the metric system back in the 1970s.

Bitcoin was launched into the world as a one of a kind technology: a non-state digital money that is issued on a perfectly fixed, diminishing, and predictable schedule. It was strategically released into the wild (into an online group of cryptographers) at a time when no comparative technology existed. Bitcoin’s organic adoption path and mining network expansion are a non-repeatable sequence of events. As a thought experiment, consider that if a “New Bitcoin” was launched today, it would exhibit weak chain security early on, as its mining network and hash rate would have to start from scratch. Today, in a world that is aware of Bitcoin, this “New Bitcoin” with comparatively weak chain security would inevitably be attacked—whether these were incumbent projects seeking to defend their head start, international banking cartels, or even nation-states:

Bitcoin’s head start in hash rate is seemingly insurmountable.

Path-dependence protects Bitcoin from disruption, as the organic sequence of events which led to its release and assimilation into the marketplace cannot be replicated. Further, Bitcoin’s money supply is absolutely scarce; a totally unique and one-time discovery for money. Even if “New Bitcoin” was released with an absolutely scarce money supply, its holders would be incentivized to hold the money with the greatest liquidity, network effects, and chain security. This would cause them to dump “New Bitcoin” for the original Bitcoin. More realistically, instead of launching “New Bitcoin,” those seeking to compete with Bitcoin would take a social contract attack-vector by initiating a hard fork. An attempt like this was already made with the “Bitcoin Cash” fork, which tried to increase block sizes to (ostensibly) improve its utility for payments. This chain fork was an abject failure and a real world reinforcement of the importance of Bitcoin’s path-dependent emergence:

Bitcoin Cash is considering a rebrand to Bitcoin Crash.

Continuing our thought experiment: even if “New Bitcoin” featured a diminishing money supply (in other words, a deflationary monetary policy), how would its rate of money supply decay (deflation) be determined? By what mechanism would its beneficiaries be selected? As market participants (nodes and miners) jockeyed for position to maximize their accrual of economic benefit from the deflationary monetary policy, forks would ensue that would diminish the liquidity, network effects, and chain security for “New Bitcoin,” causing everyone to eventually pile back into the original Bitcoin—just like they did in the wake of Bitcoin Cash’s failure.

Path-dependence ensures that those who try to game Bitcoin get burned. Reinforced by four-sided network effects, it makes Bitcoin’s first-mover advantage seemingly insurmountable. The idea of absolute monetary scarcity goes against the wishes of entrenched power structures like The Fed: like zero, once an idea whose time has come is released into the world, it is nearly impossible to put the proverbial genie back in the bottle. After all, unstoppable ideas are independent lifeforms:

Finite and Infinite Games

Macroeconomics is essentially the set of games played globally to satisfy the demands of mankind (which are infinite) within the bounds of his time (which is strictly finite). In these games, scores are tracked in monetary terms. Using lingo from the groundbreaking book Finite and Infinite Games, there are two types of economic games: unfree (or centrally planned) markets are theatrical, meaning that they are performed in accordance with a predetermined script that often entails dutifulness and disregard for humanity. The atrocities committed in Soviet Russia are exemplary of the consequences of a theatrical economic system. On the other hand, free markets are dramatic, meaning that they are enacted in the present according to consensual and adaptable boundaries. Software development is a good example of a dramatic market, as entrepreneurs are free to adopt the rules, tools, and protocols that best serve customers. Simply: theatrical games are governed by imposed rules (based on tyranny), whereas rulesets for dramatic games are voluntarily adopted (based on individual sovereignty).

From a moral perspective, sovereignty is always superior to tyranny. And from a practical perspective, tyrannies are less energy-efficient than free markets because they require tyrants to expend resources enforcing compliance with their imposed rulesets and protecting their turf. Voluntary games (free market capitalism) outcompete involuntary games (centrally planned socialism) as they do not accrue these enforcement and protection costs: hence the reason capitalism (freedom) outcompetes socialism (slavery) in the long run. Since interpersonal interdependency is at the heart of the comparative advantage and division of labor dynamics that drive the value proposition of cooperation and competition, we can say that money is an infinite game: meaning that its purpose is not to win, but rather to continue to play. After all, if one player had all the money, the game would end (like the game of Monopoly).

In this sense, Bitcoin’s terminal money supply growth (inflation) rate of absolute zero is the ultimate monetary Schelling point a game-theoretic focal point that people tend to choose in an adversarial game. In game theory, a game is any situation where there can be winners or losers, a strategy is a decision-making process, and a Schelling point is the default strategy for games in which the players cannot fully trust one another (like money):

Among many spheres of competing interpersonal interests, scarcity is the Schelling point of money.

Economic actors are incentivized to choose the money that best holds its value across time, is most widely accepted, and most clearly conveys market pricing information. All three of these qualities are rooted in scarcity: resistance to inflation ensures that money retains its value and ability to accurately price capital across time, which leads to its use as an exchange medium. For these reasons, holding the scarcest money is the most energy-efficient strategy a player can employ, which makes the absolute scarcity of Bitcoin an irrefutable Schelling point—a singular, unshakable motif in games played for money.

A distant digital descendent of zero, the invention of Bitcoin represents the discovery of absolute scarcity for money: an idea as equally unstoppable.

Similar to the discovery of absolute nothingness symbolized by zero, the discovery of absolutely scarce money symbolized by Bitcoin is special. Gold became money because out of the monetary metals it had the most inelastic (or relatively scarce) money supply: meaning that no matter how much time was allocated towards gold production, its supply increased the least. Since its supply increased the slowest and most predictable rate, gold was favored for storing value and pricing things—which encouraged people to voluntarily adopt it, thus making it the dominant money on the free market. Before Bitcoin, gold was the world’s monetary Schelling point, because it made trade easier in a manner that minimized the need to trust other players. Like its digital ancestor zero, Bitcoin is an invention that radically enhances exchange efficiency by purifying informational transmissions: for zero, this meant instilling more meaning per proximate digit, for Bitcoin, this means generating more salience per price signal. In the game of money, the objective has always been to hold the most relatively scarce monetary metal (gold); now, the goal is to occupy the most territory on the absolutely scarce monetary network called Bitcoin.

A New Epoch for Money

Historically, precious metals were the best monetary technologies in terms of money’s five critical traits:

  1. divisibility,
  2. durability,
  3. portability,
  4. recognizability, and
  5. scarcity.

Among the monetary metals, gold was relatively the most scarce, and therefore it outcompeted others in the marketplace as it was a more sound store of value. In the ascension of gold as money, it was as if free market dynamics were trying to zero-in on a sufficiently divisible, durable, portable, and recognizable monetary technology that was also absolutely scarce (strong arguments for this may be found by studying the Eurodollar system). Free markets are distributed computing systems that zero-in on the most useful prices and technologies based on the prevailing demands of people and the available supplies of capital: they constantly assimilate all of mankind’s intersubjective perspectives on the world within the bounds of objective reality to produce our best approximations of truth. In this context, verifiable scarcity is the best proxy for the truthfulness of money: assurance that it will not be debased over time.

As a (pre-Bitcoin) thought experiment, had a “new gold” been discovered in the Earth’s crust, assuming it was mostly distributed evenly across the Earth’s surface and was exactly comparable to gold in terms of these five monetary traits (with the exception that it was more scarce), free market dynamics would have led to its selection as money, as it would be that much closer to absolute scarcity, making it a better means of storing value and propagating price signals. Seen this way, gold as a monetary technology was the closest the free market could come to absolutely scarce money before it was discovered in its only possible form—digital. The supply of any physical thing can only be limited by the time necessary to procure it: if we could flip a switch and force everyone on Earth to make their sole occupation gold mining, the supply of gold would soon soar. Unlike Bitcoin, no physical form of money could possibly guarantee a permanently fixed supply—so far as we know, absolute scarcity can only be digital.

Digitization is advantageous across all five traits of money. Since Bitcoin is just information, relative to other monetary technologies, we can say: its

  1. divisibility is supreme, as information can be infinitely subdivided and recombined at near-zero cost (like numbers); its
  2. durability is supreme, as information does not decompose (books can outlast empires); its
  3. portability is supreme, as information can move at the speed of light (thanks to telecommunications); and its
  4. recognizability is supreme, as information is the most objectively discernible substance in the universe (like the written word). Finally, and most critically, since Bitcoin algorithmically and thermodynamically enforces an absolutely scarce money supply, we can say that its
  5. scarcity is infinite (as scarce as time, the substance money is intended to tokenize in the first place). Taken in combination, these traits make absolutely scarce digital money seemingly indomitable in the marketplace.

In the same way that the number zero enables our numeric system to scale and more easily perform calculation, so too does money give an economy the ability to socially scale by simplifying trade and economic calculation. Said simply: scarcity is essential to the utility of money, and a zero-growth terminal money supply represents “perfect” scarcity — which makes Bitcoin as near a “perfect” monetary technology as mankind has ever had. Absolute scarcity is a monumental monetary breakthrough. Since money is valued according to reflexivity, meaning that investor perceptions of its future exchangeability influence its present valuation, Bitcoin’s perfectly predictable and finite future supply underpins an unprecedented rate of expansion in market capitalization:

Bitcoin is truly unique: a perfectly scarce and predictably supplied money.

In summary: the invention of Bitcoin represents the discovery of absolute scarcity, or absolute irreproducibility, which occurred due to a particular sequence of idiosyncratic events that cannot be reproduced. Any attempt to introduce an absolutely scarce or diminishing supplied money into the world would likely collapse into Bitcoin (as we saw with the Bitcoin Cash fork). Absolute scarcity is a one-time discovery, just like heliocentrism or any other major scientific paradigm shift. In a world where Bitcoin already exists, a successful launch via a proof-of-work system is no longer possible due to path-dependence; yet another reason why Bitcoin cannot be replicated or disrupted by another cryptoasset using this consensus mechanism. At this point, it seems absolute scarcity for money is truly a one-time discovery that cannot “disrupted” any more than the concept of zero can be disrupted.

A true “Bitcoin killer” would necessitate an entirely new consensus mechanism and distribution model; with an implementation overseen by an unprecedentedly organized group of human beings: nothing to date has been conceived that could even come close to satisfying these requirements. In the same way that there has only ever been one analog gold, there is likely to only ever be one digital gold. For the same quantifiable reasons a zero-based numeral system became a dominant mathematical protocol, and capitalism outcompetes socialism, the absolute scarcity of Bitcoin’s supply will continue outcompeting all other monetary protocols in its path to global dominance.

Numbers are the fundamental abstractions which rule our world. Zero is the vanishing point of the mathematical landscape. In the realm of interpersonal competition and cooperation, money is the dominant abstraction which governs our behavior. Money arises naturally as the most tradable thing within a society—this includes exchanges with others and with our future selves. Scarcity is the trait of money that allows it to hold value across time, enabling us to trade it with our future selves for the foregone opportunity costs (the things we could have otherwise traded money for had we not decided to hold it). Scarce money accrues value as our productivity grows. For these reasons, the most scarce technology which otherwise exhibits sufficient monetary traits (divisibility, durability, recognizability, portability) tends to become money. Said simply: the most relatively scarce money wins. In this sense, what zero is to math, absolute scarcity is to money. It is an astonishing discovery, a window into the void, just like its predecessor zero:

Actual footage of Bitcoin devouring fiat currencies.

Fiat Currency Always Falls to Zero

Zero has proven itself as the capstone of our numeral system by making it scalable, invertible, and easily convertible. In time, Bitcoin will prove itself as the most important network in the global economic system by increasing social scalability, causing an inversion of economic power, and converting culture into a realignment with Natural Law. Bitcoin will allow sovereignty to once again inhere at the individual level, instead of being usurped at the institutional level as it is today—all thanks to its special forebear, zero:

Central planning in the market for money (aka monetary socialism) is dying. This tyrannical financial hierarchy has increased worldwide wealth disparities, funded perpetual warfare, and plundered entire commonwealths to “bail out” failing institutions. A reversion to the free market for money is the only way to heal the devastation it has wrought over the past 100+ years. Unlike central bankers, who are fallible human beings that give into political pressure to pillage value from people by printing money, Bitcoin’s monetary policy does not bend for anyone: it gives zero fucks. And in a world where central banks can “just add zeros” to steal your wealth, people’s only hope is a “zero fucks” money that cannot be confiscated, inflated, or stopped:

Central banks literally “just add zeros” to steal vast swathes of societal wealth.

Bitcoin was specifically designed as a countermeasure to “expansionary monetary policies” (aka wealth confiscation via inflation) by central bankers. Bitcoin is a true zero-to-one invention, an innovation that profoundly changes society instead of just introducing an incremental advancement. Bitcoin is ushering in a new paradigm for money, nation-states, and energy-efficiency. Most importantly, it promises to break the cycle of criminality in which governments continuously privatize gains (via seigniorage) and socialize losses (via inflation). Time and time again, excessive inflation has torn societies apart, yet the lessons of history remain unlearned—once again, here we are:

Thank you internet for all the hilarious yet meaningful memes.

The Zero Hour

How much longer will monetary socialism remain an extant economic model? The countdown has already begun: Ten. Nine. Eight. Seven. Six. Five. Four. Three. Two. One. Liftoff. Rocket technicians always wait for zero before ignition; countdowns always finalize at the zero hour. Oil price wars erupting in Eurasia, a global pandemic, an unprecedented expansionary monetary policy response, and another quadrennial Bitcoin inflation-rate halving: 2020 is quickly becoming the zero hour for Bitcoin.

Inflation rate and societal wellbeing are inversely related: the more reliably value can be stored across time, the more trust can be cultivated among market participants. When a money’s roots to economic reality are severed—as happened when the peg to gold was broken and fiat currency was born—its supply inevitably trends towards infinity (hyperinflation) and the functioning of its underlying society deteriorates towards zero (economic collapse). An unstoppable free market alternative, Bitcoin is anchored to economic reality (through proof-of-work energy expenditure) and has an inflation rate predestined for zero, meaning that a society operating on a Bitcoin standard would stand to gain in virtually infinite ways. When Bitcoin’s inflation rate finally reaches zero in the mid 22nd century, the measure of its soundness as a store of value (the stock-to-flow ratio) will become infinite; people that realize this and adopt it early will benefit disproportionately from the resultant mass wealth transfer.

Zero and infinity are reciprocal: 1/∞ = 0 and 1/0 = ∞. In the same way, a society’s wellbeing shrinks towards zero the more closely the inflation rate approaches infinity (through the hyperinflation of fiat currency). Conversely, societal wellbeing can, in theory, be expanded towards infinity the more closely the inflation rate approaches zero (through the absolute scarcity of Bitcoin). Remember: The Fed is now doing whatever it takes to make sure there is “infinite cash” in the banking system, meaning that its value will eventually fall to zero:

Market value of money always converges to its marginal cost of production: “Infinite cash” means dollars will inevitably become as valuable as the paper on which they are printed.

Zero arose in the world as an unstoppable idea because its time had come; it broke the dominion of The Church and put an end to its monopolization over access to knowledge and the gates to heaven. The resultant movement—The Separation of Church and State—reinvigorated self-sovereignty in the world, setting the individual firmly as the cornerstone of the state. Rising from The Church’s ashes came a nation-state model founded on sound property rights, rule of law, and free market money (aka hard money). With this new age came an unprecedented boom in scientific advancement, wealth creation, and worldwide wellbeing. In the same way, Bitcoin and its underlying discovery of absolute scarcity for money is an idea whose time has come. Bitcoin is shattering the siege of central banks on our financial sovereignty; it is invoking a new movement—The Separation of Money and State—as its revolutionary banner; and it is restoring Natural Law in a world ravaged by a mega-wealth-parasite—The Fed.

Only unstoppable ideas can break otherwise immovable institutions: zero brought The Church to its knees and Bitcoin is bringing the false church of The Fed into the sunlight of its long-awaited judgement day.

Both zero and Bitcoin are emblematic of the void, a realm of pure potentiality from which all things spring forth into being — the nothingness from which everything effervesces, and into which all possibility finally collapses. Zero and Bitcoin are unstoppable ideas gifted to mankind; gestures made in the spirit of “something for nothing.” In a world run by central banks with zero accountability, a cabal that uses the specious prospects of “infinite cash” to promise us everything (thereby introducing the specter of hyperinflation), nothingness may prove to be the greatest gift we could ever receive…

Thank you Brahmagupta and Satoshi Nakamoto for your generosity.

Iran Could Still Strike Back at the U.S.

The Islamic Republic is too weak to wage a conventional war on the U.S. — but that doesn’t mean it poses no threat.

How might Iran respond to the death of Qasem Soleimani? Ever since the Trump administration’s January 3 killing of Soleimani, the Islamic Republic’s top military commander, that question has been on the mind of policymakers in Washington and the American public at large.

Iran’s January 8 rocket attack on U.S. military bases in Iraq clearly constituted part of its response, but Iranian leaders quickly made clear that more retaliation is forthcoming. Supreme Leader Ali Khamenei himself has said that, while the rocket attack was a “slap” at the United States, it was “not enough,” and the Islamic Republic will continue its opposition to the United States with the ultimate goal of driving America out of the Middle East altogether.

Doing so, however, is likely to prove difficult for Iran. As a recent analysis by CNBC notes, sanctions leveled by the Trump administration over the past two years have inflicted extensive damage on the Iranian economy. The country’s GDP shrunk by nearly 10 percent last year, and its exports of crude oil declined from a peak of 2.5 million barrels per day to less than 500,000 daily.

Domestic conditions, meanwhile, are deteriorating. Inflation is on the rise within the Islamic Republic and is now pegged at over 30 percent. So, too, is joblessness; nearly a fifth of the country’s workforce is currently estimated to be unemployed. Meanwhile, governmental expenditures have surged as Iran’s ayatollahs struggle to keep a lid on an increasingly impoverished, and discontented, population.

All of this, according to CNBC’s analysis, profoundly limits Iran’s ability “to fund a war” against the United States. But that doesn’t mean the threat from Iran is nonexistent. Iran still has the ability to “ramp up its aggression against the U.S.” through the use of its network of proxy forces in the region.

That network is extensive — and lethal. It comprises not only Iran’s traditional terrorist proxies, such as Lebanon’s Hezbollah militia and the Palestinian Hamas movement, but also assorted Shiite militias in Iraq (the so-called “Hashd al-Shaabi”) and even Yemen’s Houthi rebels. Recently, it has also made use of theShi’a Liberation Army” (SLA), a group of as many as 200,000 Shiite fighters — drawn from Afghanistan, Yemen, Pakistan, and elsewhere — that has been trained and equipped by Iran’s Islamic Revolutionary Guard Corps and deployed to foreign theaters such as Syria.

Notably, these forces appear to have been thrown into chaos, at least temporarily, by the killing of Soleimani. Reports from the region suggest that Iraqi militias are “in a state of disarray” after the death of the Iranian general, and aren’t currently ready to strike U.S. or allied targets. Over time, however, we can expect Tehran to regain control and direction of its troops and weaponize them anew against the United States and regional U.S. allies such as Israel, Saudi Arabia, and Bahrain. That is doubtless the top priority of Soleimani’s successor as head of the Quds Force, Esmail Ghaani, who has already commenced outreach to Iranian proxies in an effort to reinforce Tehran’s support for “resistance” activities.

Tehran likewise has another potent tool by which to target the United States: cyber warfare. Over the past decade, the Iranian regime has made enormous investments in its cyber-war capabilities and carried out a series of demonstration attacks on targets such as Saudi Arabia’s state oil company and various U.S. financial institutions to showcase its newfound technological prowess. In the wake of President Trump’s pullout from President Obama’s 2015 nuclear deal, Iran reshaped its cyber-activism against the United States, focusing less on offensive attacks and more on gathering information about potential policy from the notoriously opaque new administration in Washington.

But Tehran’s potential to do significant harm to the U.S. in cyberspace remains. Indeed, the U.S. Department of Homeland Security has warned publicly that Iran could carry out a cyberattack against critical U.S. infrastructure in the near future, with potentially significant “disruptive effects.” And so far, neither the Pentagon nor the State Department has articulated much by way of a strategy to deter Iran from carrying out such attacks, or to mitigate the damage they could do. (In the aftermath of Soleimani’s killing, that lack of strategy has become a matter of growing concern on Capitol Hill.)

Perhaps the most compelling reason to expect an asymmetric Iranian response to Soleimani’s killing, however, is that asymmetric warfare plays to Iran’s inherent strengths. Ever since the regime’s grinding eight-year war with neighboring Iraq in the 1980s — a conflict that Iran lost handily — its leaders have exhibited a strong penchant for military asymmetry over direct confrontation. This preference has only been reinforced by persistent Western sanctions, which have eroded the country’s conventional military capabilities and made the acquisition of spare parts and matériel considerably more difficult.

Soleimani was the regime’s principal architect of asymmetric war, and had devoted nearly a quarter-century to building up the Islamic Republic’s asymmetric potency. That is precisely why his targeted killing by the Trump administration represents such a significant blow to the integrity of Iran’s proxy network — and to the prudence of its time-tested asymmetric strategy. Going forward, Tehran may well have to rethink its approach, and could conclude that the potential costs of continuing its campaign of aggression against U.S. forces in the region are now simply too high. If it doesn’t, however, the very capabilities that Soleimani spent his career cultivating will remain the most potent weapons the Islamic Republic has to wield against the United States.

Nate Heckmann: Peter Schiff is Wrong About Everything

Yves here. I’m of two minds about featuring a post about Peter Schiff, since criticizing him treats him as being a more legitimate commentator than he is. But some targets ask so hard for a debunking that it’s hard to resist.

Schiff has been in the press recently for having said on the Daily Show that some people, such as the “mentally retarded,” didn’t even deserve minimum wage but should be paid only $2 an hour. But being offensive is not the worst of his sins.

Schiff is a money manager who claims to be an economist but has no formal credentials.* He such a terrible money manager that one wonders why the SEC hasn’t come calling. He lost 60% to 70% of customer assets in a two-year period when he was supposedly making correct macro calls. It isn’t just that he made disastrously bad timing decisions. He violated one of the basic rules of investment management, which is diversification (as of the last time his account results were made public, his picks represented only 2 bets: energy and gold, and that via small gold stocks or trusts). And he also appears to loaded up his customers with lots of risk. If so, he might have violated “know your customer” rules.

Mind you, this performance occurred when his public calls were generally correct. One can only imagine how he’s done when he’s been screaming “hyperinflation” and we instead have disinflation tending to deflation.

Now some readers might surmise that the fact that Schiff still has an investment business is the result of personal charm and selling skills, at least in the presence of Important People. Quite the reverse. so gratuitously rude. He got to the studio so late that he nearly missed the hit time (a huge deal in TV) and was unapologetic and haughty toward the tech who had to put up makeup and mike him up in haste. He repeatedly interrupted the host and even the Australian Finance Minister, who dealt with him with unruffled professional calm. And even though we sat elbow by elbow during the shoot, he pointedly never introduced himself and brushed off my move to shake his hand (I guess he’s afraid contact with non-libertarians might contaminate his precious bodily fluids). Mind you, I wasn’t offended but rather much as bemused and perplexed. What was the point of this display of lack of self control and basic manners? Did he really think it meant people would take him more seriously?

My recollection is that on the SBS show, the producers were able to contain Schiff by virtue of both him (and me) and the Australian Finance minister being on remote video. They could cut to someone else when they thought he’d had his say. Philip Pilkington sent this clip of Schiff with Cenk Uygur, “Uyger is the only one who handled him properly.” Of course, a fanboy or more likely, a flack put up overlay attempting to depict Schiff as a victim, as opposed to getting the treatment he deserved.

So let’s turn to Nate Heckmann’s takedown.

By Nate Heckmann, a graduate student at UC Irvine’s medical school who writes about health care, economics, and tax policy. Originally published at Et Vita

“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.” 
― Stephen Hawking

A libertarian friend of mine who — like most libertarians — subscribes to the Austrian school of economics sent me a video, convinced that I would no longer think about inflation the same way after watching it. The video is of well-known libertarian pundit, investor, and self-proclaimed Austrian economistPeter Schiff.

In the video, Peter Schiff responds to his critics who attacked him for a prediction he made at the end of 2009 about hyperinflation:

You know, look, I know inflation is going to get worse in 2010. Whether it’s going to run out of control or it’s going to take until 2011 or 2012, but I know we’re going to have a major currency crisis coming soon. It’s going to dwarf the financial crisis and it’s going to send consumer prices absolutely ballistic, as well as interest rates and unemployment.

According to Schiff, the reason we haven’t seen hyperinflation yet is because the CPI is flawed, “deliberately designed” by the government to hide the true rate of inflation.

The video was so bad, it compelled me to write this post. First, watch the video above. Then read about what Schiff gets wrong:

1) “I never said the money printing would cause inflation. I said the money printing is inflation.”

Any student who has taken macroecon 101 knows this is an overly-simplistic view of inflation. It’s hard to believe that an “economist” holds this view.

Schiff’s view doesn’t take into account inflationary expectations, the rate of money exchange, or where said money ends up in the economy (e.g. M1, M2, M3, etc). If the treasury printed $1T and buried it in a hole the money would not exert the same inflationary pressure as it would if the printed $1T were distributed to the nation’s poor and middle class. The former would have a much smaller inflationary effect than the later. Schiff, at least, ought to acknowledge the fact that while the Fed has expanded the monetary base from $0.87 to $2.92 trillion, it is holding on to $1.62 trillion of excess private bank reserves. That’s $1.62 trillion sitting in a hole, not being circulated, exerting no inflationary effect. This money parked at the Fed is not inflationary.

This is not a difficult concept to grasp, but Schiff fails to grasp it nonetheless.

2) “But Krugman would say that Peter Schiff is wrong because prices haven’t risen. But, again, the proof that he offers, and that other Keynesians offer, are government-created statistics that purport to measure inflation like the CPI.”

For someone like me that has been following this narrative closely, it’s plain to see that Schiff is misrepresenting Krugman’s critique. I’ll explain.

First, Krugman has criticized Schiff’s predictions of hyperinflation, not normal levels of inflation (i.e. “rising prices”). According to Schiff’s predictions in 2009, we should have sky-rocketing prices by now, but we don’t. And this is exactly why people like Krugman say Schiff’s predictions haven’t panned out.

Furthermore, in Krugman’s most recent post about Schiff, he doesn’t offer the CPI as proof that inflation is under control because he knows that Austrians don’t care for “government-created statistics”. Instead, Krugman offers MIT’s Billion Prices Project as a third-party estimate of inflation. This project monitors the daily prices of over 5 million online transactions in over 70 countries. Guess what? This metric only varies slightly from the CPI and it tells the exact same story — namely, that inflation is not a problem.

According to my calculations, from the end of 2009 when Schiff made his prediction, until the beginning of 2012 when this video was made, inflation has increased by the following:

CPI less food and energy ~5.1%
PCEPI ~5.5%
CPI ~6.4%
MIT’s BPP ~7.1%
Monetary Base (“money printing is inflation”)  ~32.9%
Gold ~51.2%

The first three metrics are “government-created statistics”, the 4th is a third-party estimate of inflation, and the 5th and 6th are the Austrian metrics of inflation. Ask yourself: Which of these measures of inflation is inconsistent with reality? Has your cost of living gone up 30-50% since late 2009 or has it increased somewhere on the order of 5-7%?

3) “The CPI does a lousy job of measuring inflation. And I think it deliberately does so by design.”

By design? Evidence?

4) “In fact, I’m not the only one that’s convinced that inflation is a lot higher than the government admits.”

Schiff’s support for this claim? No, not a third party mathematically driven model like MIT’s or some other equivalent  — a FOX News poll. The poll referenced, however, does not support Schiff’s claim that the CPI underestimates inflation. All the report states is that 41% of people polled felt that rising prices were their primary concern.

5) “Well, if the government is correct, if the CPI is accurate, then why are so many people worried about inflation that doesn’t exist?”

First, nobody said inflation doesn’t exist (see point #2).

Second, this poll does not support the notion that the CPI is inaccurate. Inflation is real and people who are out of a job or underemployed ought to be concerned about rising prices. As a student, I am concerned about rising prices, but this does not mean that I believe the CPI is inaccurate. Nor does my concern mean that I think there is ongoing hyperinflation.

6) “Afterall, what makes more sense? That the government can print all this money, and prices not rise? Or that prices are rising and the government is just not being honest?”

Arguments of incredulity are not only weak, but they often-time reveal a lack of knowledge or understanding in the person that uses them. Also, once again, nobody is saying that prices aren’t rising (i.e. see point #2).

Schiff doesn’t understand that printing money against the zero-lower bound — the point at which the federal funds rate is zero — does not have the same inflationary effects that it would in times of economic prosperity. I’ll outsource the explanation as to why this happens but, in a nutshell, “if interest rates are near [or at] zero, money printed now just gets hoarded, and monetary policy has no traction on the real economy.”

Given Schiff’s definition of inflation, I don’t blame him for not grasping this concept.

7) “The items that I selected for my basket were eggs, cars, milk, gasoline, bread, rent for a primary residency, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store-purchased beer, apples, public transportation, cereal, tires, beef, and prescription drugs.”

According to Schiff, the CPI’s basket of goods is deliberately misleading, but his own basket of (20) goods is stable, unbiased, and more accurately represents price levels than the CPI? Does anybody buy this? I don’t.

First, Schiff’s basket is food and fuel-dominant, relying heavily on two factors that are commonly removed from measures of core inflation because of their inherent volatility.

Second, even if we accept Schiff’s high-ball basket of goods as being accurate, we are still left with a decade with only 44.3% of inflation. This is odd because it contains the recent post-recession period of hyperinflation (or high inflation) that many Austrians are angry about, yet inflation in this past decade is still well bellow the 117% increase during the 70s. So according to Schiff’s calculations, we’ve still only seen a fraction of the inflation that plagued us during the 70s.

Did Schiff intentionally show that inflation during this past decade was actually much lower than it was during the 70s, or did he do this by accident?

8) “But it actually gets worse because the government numbers are wrong. And I’ll prove it…”

Schiff continues by pointing out, what he claims to be, specific “inaccuracies” in the CPI. These warranted a fact-check on my part.

I checked Schiff’s claim about healthcare premiums only increasing 4.3% from 2008-2012 according to the CPI. According to the CPI — the CPI that I just looked up — health insurance premiums have increased by almost 20% over this period. The Kaiser report that he references, which by the way only refers to employer provided insurance, shows an increase of 24.2%. This doesn’t seem like a contradiction, but it makes me wonder where Schiff is getting his CPI numbers.

It appears that the CPI is actually referring to a 4.3% increase in the healthcare premium costs per year, but Schiff is — either misleadingly or accidentally — implying that according to the CPI, premiums have increased by a total of 4.3% over the entire five year period of 2008-2012, which, of course, is not true.

9) “So if the government is wrong about newspapers and magazines, if they’re wrong about health insurance, how should we believe that they are right about anything?”

Wait, how did Schiff prove that the government is wrong?

Krugman’s description of the Austrian viewpoint sums it up best:

Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot.

Schiff is wrong, but he’s sticking to his guns. And, in the process, he’s revealing just how little he knows about economics, policy, and pretty much everything else. Why do people still listen to this guy?

______________
*Schiff has a BA from UCLA in Accounting and Finance. His father is a well-known con artist who sold books and led seminars claiming no one had to pay Federal taxes and told followers his “secrets”. Schiff’s father is now serving a 13-year prison sentence for tax evasion, his second prison term (he previously served a four year term, again for tax evasion).

Live interview: Marc Andreessen and Reid Hoffman, Co-Founder of LinkedIn | Code 2017

00:10
both for a long
00:13
many many debates with each of them is
00:16
really one of them named Marc Andreessen
00:19
for a long time now so let’s bring them
00:22
out Marc Andreessen and Reid Hoffman
00:24
[Applause]
00:31
you don’t
00:33
oh hello so I you know he was Marc
00:39
Andreessen has this habit of texting me
00:41
really rude things almost continually
00:42
and while I was sitting backstage within
00:45
10 feet of him he was tweeting at me
00:46
about that last talk so what did you I
think it’s very important because I
think Facebook is sucking the life out
of us
so what do you think that’s the
opening question outstanding uh so it’s
just sitting facebook director I think I
did I politely decline to answer
but oh
me let me jet let me generalize out so
this is something that one hears about
01:07
the internet a very son that’s the one
01:09
hears about the internet a lot so we
01:11
start by saying that that gentleman I’m
01:13
sure he’s doing fantastic work and he
01:14
clearly means well I really really
deeply disagree with everything
he just
said and the reason is because not just
because I had some role in creating the
whole thing but but a friend of mine Oh
Cronin who works in VR and is the
advanced thinker on these things has a
term he uses called reality privilege
and so it’s a view from the from the box
seats it’s the view from it’s a view
from places in the world that’s exactly
the kind of you get from places in the
world in which there are super rich real
world experiences to have right and so
you grow up an upper-middle class
community probably on the coast you have
these incredible schools you have these
incredible and rich activities you have
all these after-school activities
you’ve
always incredible people to talk to you
go to a college campus you get to you
know you get to hang out with all these
incredible super geniuses for the point
zero zero one percent of the population
of the world who gets to do all those
things then this internet thing is a big
step down for everybody else the
Internet is a giant step up right most
people
don’t have that level of reality
privilege like most people grow up in
places where there’s a much higher level
of what you might call intellectual
deprivation there’s just not that many
people around to talk to there’s just
not that many interesting things being
discussed there’s not that many great
experiences to have it’s hard to learn
new things the schools aren’t good I
mean all kind of you know most kids in
the world don’t even go to school like
or go to school up to the grade four
grade six to grade eight
it just can’t
progress beyond that point because
there’s there’s nothing locally there’s
there’s there’s just no local system
infrastructure or community to be able
to engage on ideas and so the internet
represents a giant level up on all those
topics for most the world and I think
it’s a fantastic thing
okay well then find snapchat for
everybody so read you like to oh well so
02:53
look I think that it’s it’s correct that
02:56
there is various forms of kind of call
it commercial system biases to come out
which is companies try to say look when
you want to occupy a bunch of time so we
try to figure out how to have that time
be occupied
and this is the similar true
this range is everything from the
agriculture industry which says will eat
more sugar like you have these
commercial biases the whole way through
and we adjust them now that being said
the overall system is better and we can
tune it right and so I think that the
one of the other things frequently is
not realizing there’s things you can do
to change for more of the that kind of
the good and they and and the bad and
these things and and obviously I am less
focused at the moment on questions
around the auto play
or kind of
equivalent and I’m more focused on
03:37
questions about like how do we get to
03:39
discernment of truth and how do we get
03:41
like you know truth media and what is
03:43
this whole fake news and all you know
03:45
facts and all that kind of stuff and
03:46
that is I think a much more deep issue
03:49
that I’m focused on at the moment well I
03:51
think one of the things that one of the
03:52
reasons I wanted to have these two was
03:53
one because you make investments you
03:55
change companies you decide you make a
03:58
lot of decisions that impact other
03:59
people too you’re you’re super
04:02
argumentative and debating about what
04:03
where that’s going you know where it
04:05
happened and I wanted people get a sense
04:07
from both of you of how where innovation
04:09
is going how it’s going because you’re
04:11
in none in charge of it but very
04:12
influential to the process both of you
04:15
in different ways so let’s start on that
04:17
idea that you just talked about which
04:20
brings in all of socially I’m not going
04:21
to pull out facebook but at all social
04:23
media the idea is something I’ve been
railing on recently for some reason is
that responsibility the social
responsibility the the civil
responsibility of social media companies
and other companies in Silicon Valley to
not to stop pretending these platforms
are benign
so as someone who’s created
these platforms each of you each of you
is on your part how do you look at them
now because I think they’ve morphed in
ways some people think social medias
become weaponized some people think
other things but that that take mark and
Marco Decker Brady’s been talking about
this a lot the idea of the
responsibility so how do you look at
where we are right now
for Silicon Valley why don’t we start
with you mark Ari how do you look okay
05:02
I’m happy to start okay look so I think
05:05
that the question is is that we had
05:09
presumed that broad brush that most
05:11
people could kind of make assert a ssin
05:14
of truth within their kind of normal set
05:17
and I think actually in fact it is
05:19
somewhat hackable it’s it’s filter
05:21
bubbles is one of the things that people
05:22
talk about a lot in the valley and kind
05:24
of how do you make sure that you’re not
05:25
blinded by it you have communications
05:27
that go across that there’s questions
05:29
about assertion of you know what is the
05:33
most relevant fact or in you know I
05:35
don’t think there is any such thing as
05:36
an alternative fact I mean I think
05:38
that’s that’s that’s that’s George
05:40
Orwell and and Aldous Huxley speak but
05:45
the but I think that the question is
05:47
okay how do we help people figure out
05:50
better guideposts to the truth because
05:54
simply being as part of the feed on the
05:56
screen sometimes is treated as too much
06:00
of that must be true and so what I think
06:02
is good is is I think the whole industry
06:05
and I’ve been part of a number of
06:07
conversations about ok what are the
06:08
right ways to do that and part of the
06:10
reason why they try to say it’s more
06:11
platform I don’t know if it’s trying to
06:13
say it’s benign is they’re trying to say
06:14
we’re not trying to impose a point of
06:15
view
we’re trying to help you get to
06:17
truth oh it’s kind of classic like what
06:20
is the algorithm part of it and and so I
06:23
think that there’s a lot of thinking now
06:25
about like what are the different ways
06:27
we can do that one of the things that I
06:29
think is is important is perhaps
06:31
building that out of the kinds of things
06:33
we trust like we trust other people and
06:35
can we get to some kind of version of ok
06:39
I know this kind of information is much
06:41
more contentious there’s a lot of people
06:43
who disagree with it this kind of
06:44
information is is something that I can
06:46
rely upon more and I think we need to
06:49
get to that kind of scoring system and I
06:51
think we need to make it simple enough
06:52
that it helps unify discourse across the
06:54
country how do you look at this so I
06:57
think truth has become shorthand for
06:59
things that people on the coasts believe
07:00
ok and fake news or false whatever
07:03
alternative facts has become shorthand
07:04
for people things that people in the
07:06
center of the country believe I think
07:07
this whole topic is gone completely off
of based on how in the wake of the
election so if you read the
coastal press which is generally
spectacular job I think I’m covering the
election last year but if you just read
the press in aggregate
where all the
stories the overwhelming thing that you
were carried away with was there is no
way on earth a Donald Trump can win this
election right it’s impossible you did
your the fantastic editor of the New
York Times up here on stage today they
had the day of the election they had
Hillary that morning at 92 92 percent
outs winning
election I saw the 92
percent out so it actually turned out if
you actually wanted to if you actually
wanted last year in 2016 to read the
story of the election actually get the
truth you read breitbart
now nobody
wants to hear that because we all like
have concluded that right Bart is like
absurd right-wing propaganda and that
somehow you know the tradition of the
coastal press is somehow the truth but
like it just like de bossed early last
year that was not true
so I just think
we all just need to take a step back on
this idea that there’s absolute truth
and that somehow we somehow have some
sort of monopoly or preferential access
07:58
to it and the rest of these people kind
07:59
of don’t understand anything
by the way it’s a surefire way to lose
elections because if Democrats are ever
going to lose elections are ever going
to win elections again in the center of
the country in the south of the country
they have to show up the some message
other than you’re all a bunch of morons

that’s not going to work that’s not
that’s not what the point is are these
you can split this and that is the
message yes I think that’s what’s being
heard yes but that’s an easy shorthand
way of saying no matter what they say on
the left though either coast is untrue
you can say untruth to people and get
them to vote a certain way
I mean
there’s it’s very you know you know if
you want if you want if you like your
health care plan you can keep it
right
right Obama 2008 right Obama care like
how’s that how’s that well I’m gonna
come in a close I’m gonna quote I’m
gonna close Guantanamo on my first year

in office you do it like for some reason
but the fact that politicians break
promises to us is not it’s not a very
big if you read the press coverage of
those promises at the time they were
presented as truth they were presented
as yes these are absolutely things that
are going to happen like there was there
were reams of coverage around Obama care
of how well it was going to work right
for news coverage over what is the
responsibility these platforms do they
have any because because Dean would say
no he said no they’re just there as
platforms he didn’t he thought the New
York Times that our responsibility they
necessarily don’t do you imagine all the
all these technology platforms have any
social responsibility mark has been
talking about it a lot he’s been
visiting lots of the country he’s been
petting livestock quite a bit

which is nice do you know how fluffy
cows are that they are apparently how’s
our super high I have been around many
cows I am aware of cows but how do you
how do you look at that responsible
because everyone seems to be visiting
doing that kind of thing they are in
Silicon Valley how do you look at their
is there a social responsibility for
this technology now we’re all going
where I grew up I know it’s amazing
thing I’ve ever seen oh and you left
there not going back so I’m gonna
frustrate I’m gonna I’m gonna frustrate
I’m just not gonna I can’t I’m sitting
back for Facebook
I need a wet face but
I talked about that Facebook but just in
general like as technology evolves do
you think that Silicon Valley needs to
have more of a social conscience so I
think it’s definitely a good idea for
businesses to have social conscience and
again this is where I would say I
believe there is much more but it’s
become very trendy to claim that Silicon
Valley doesn’t have a social conscience
10:07
and it’s just the default assumption is
10:09
that all these companies are doing
10:10
horrible things all the time and I just
10:11
don’t think it’s true okay all right I
10:13
don’t think the situation is anywhere
10:14
near as polarized as people are
10:15
presenting it well people liked it but
10:17
by the way Silicon Valley just if I
10:18
could from Silicon Valley people Cuba
10:21
lead a very much good and you will so
10:23
two years ago two years ago two years
10:26
ago the conventional wisdom right around
10:27
or much of the rest of the country and
10:28
that you read actually frankly a lot of
10:30
the press coverage in Silicon Valley was
10:31
it’s this hotbed of like these crazy
10:33
libertarians like it’s these crazy
10:34
extreme outlier like you know fringe
10:36
elements and of course our friend Peter
10:37
was kind of always kind of held up as a
10:40
good friend Peter a very good friend
10:42
Peter actually was held up as kind of
10:44
representative of the valley right a
10:46
funny thing happened last year which was
10:48
it turns out that was fake news okay it
10:51
turns out that was not true in fact it
10:52
turns out the opposite is true which is
10:53
the 99.999% of so look about last year
10:57
voted for Hillary Clinton supported
10:58
Hillary Clinton donated to Hillary
10:59
Clinton like it was over it was like the
11:01
money difference I don’t know is like
11:02
some giant multiple money difference
11:04
basic is nobody nobody nobody here Trump
11:05
and so the valley not whole is it as
11:08
well by the way may point out you
11:09
tweeted I’m with her correct that is if
11:11
it is true I well I will concede to that
11:12
okay I subsequently believe Obama
11:14
subsequently deleted all my tweets
11:16
including that look after that okay um
11:18
so what about it I think Silicon Valley
11:21
not only has has a real sense of social
11:23
responsibility if anything Silicon
11:24
Valley’s all the way over on the other
11:25
side
11:26
silk valley is extremely left-wing
11:28
extremely liberal and actually think
11:30
this is now this is become part of the
11:32
problem it’s now you have the other
11:33
version of the problem which is actually
11:34
I
11:35
it’s really hard for a lot of people in
11:36
Silicon Valley even articulate the other
11:38
side at this at this point it’s hard to
11:40
even articulate the case for voting for
11:41
Donald Trump I think it’s hard to
11:42
articulate what people in the Midwest in
11:44
the south are thinking and I think this
11:45
polarization thing it’s the general
11:47
problem that I was talking about earlier
11:48
but I think that I think the valley is
11:51
part of the Coast polarizing from the
11:52
center of the country to a much greater
11:54
extreme than we’ve ever seen in our
11:55
lifetimes all right now and it this does
11:57
not left unchecked this does not have to
11:59
good places okay this is great because
12:00
you didn’t want to talk about politics
12:01
at all but great okay so you have been
12:04
very active yes in that left-wing cabal
12:07
apparently and that’s the way we’ve all
12:10
it’s it’s like a way it’s like nearly
12:12
everybody know it’s a cabal so talk
12:15
about what you’re doing cuz I think
12:16
people are people are looking to you lot
12:19
everyone says we’ve got to get Reid as
12:20
the leader of this though yes but I do I
12:23
do I don’t ya know so talk about what
12:26
you’re doing precisely with Mark Pincus
12:27
and others yeah so mark who’s here in
12:30
the audience he and I started talking
12:32
years ago about how do you essentially
12:34
try to create consumer no technologies
12:36
to help shape a kind of pro-business and
12:40
also Pro kind of social values future
12:42
and how do you put that together into a
12:44
moment because I actually think part of
12:45
the whole thing is to get the bridge
12:47
building to make the right thing and I
12:48
think part of the social responsibility
12:50
for these growing strength of tech
12:53
platforms is to make that happen so I
12:55
think there is I think there is
12:56
responsibility I think it’s a growing
12:58
sense of it and I think people are
12:59
trying to figure out what it means and
13:00
how to operationalize it the right way
13:02
and then personally you know it’s
13:04
everything from obviously part of the
13:05
question that that that led to the
13:08
election of Donald Trump is there’s a
13:10
lot of people in a number of states that
13:11
are feeling in pain they worry that
13:13
their children have less good futures
13:15
and they had there is you know kind of
13:18
serious opioid epidemics and a number of
13:21
different states and and regions and
13:23
they say look these need to be fixed
13:25
don’t tell us more of the same tell us
13:27
how we have opportunity tell us how we
13:29
make that happen and I think you know
13:30
part of the thing about being invented
13:32
being problem solvers you know because
13:34
that’s part of what we try to do with
13:35
technology and businesses and so it is
13:37
we should do more of that now I think
13:39
another part of it is the earlier thing
13:40
is I do think we have a problem
13:42
I think the fake news thing is actually
13:44
levelled both ways like I don’t think
13:46
it’s a the coast saying the mid
13:48
Midwest I mean you’ve got your president
13:50
saying CNN is fake news etc etc I mean
13:52
you know you have the erosion of these
13:54
kinds of institutions and I we have to
13:56
be able to talk but if you can’t have
13:58
some basis for conversation which says
14:01
okay this is what we think truth is this
14:03
is where we think we should be going it
14:05
very difficult for democracy to work so
14:08
you know it’s everything from the kind
14:10
of win the future this is this
14:13
organization yes that WTF WTF with a
14:16
deliberate you know kind of on I see
14:18
what you’re doing yes yeah uh I find it
14:22
juvenile but go right ahead
14:23
Oh what we specialize in Juma I know
14:25
that no believe me after many years of
14:27
covering all of you like um and so I’m a
14:31
matter of fact actually one of my most
14:34
favorite theories of the evolution
14:36
humanities in the Otton II right we were
14:37
born early and and that plasticity and
14:40
ability to learn is is key so and so I
14:43
think there’s a whole stack of things
14:45
and I think some of it is like what is
14:46
the future work look like I think some
14:48
of it is the question of how do we get
14:50
communication channel how do we get to a
14:51
rebuild of here’s some kind of
14:54
communication like one of the projects
14:55
that I’ve funded at the MIT Media labs
14:57
called core Co which is done has done an
14:59
analysis through the Twitter firehose of
15:01
how fragmented the discourse is well how
15:05
do we get that discourse somewhat less
15:06
fragmented because with that with
15:09
fragmented discourse of course you end
15:10
up with you know kind of complete like
15:13
different planets no it’s a hellscape
15:15
out there but go ahead yeah so any with
15:17
that but that’s the well and then
15:18
there’s a whole question about how these
15:20
things get hacked by you know autocratic
15:23
hostile actors right and you know one of
15:26
the things that we have to pay attention
15:27
to is it is not necessarily purely just
15:30
the diversity of humanity that’s playing
15:32
on it but there are people who have
15:34
political aims that may be investing and
15:37
you know I’m really interested to see
15:38
what will emerge out of you know kind of
15:41
Russian and foreign power influence on
15:43
trying to hack social media because
15:45
that’s that’s kind of a key issue and I
15:47
think actually one of the things that
15:49
you know Brad Smith at Microsoft called
15:52
for that I think is real interesting is
15:54
how do we get to a Geneva Convention and
15:55
cyber I think that’s actually an
15:57
important thing to to look at happening
15:59
because part of that is what
16:02
happen with these things being hackable
16:03
a little bit like they talk just before
16:05
us your attention can be hacked in ways
16:08
that it isn’t just code hacking this is
16:11
just cyber but it’s kind of a question
16:12
of what you presume to be true and and
16:15
you know we want a vibrant democracy we
16:17
have to try to to get to a point so
16:20
we’re having rational conversations and
16:22
we’re actually using evidence and
16:24
argumentation to decide X is true and Y
16:26
is not right all right I want to get to
16:28
where innovations going think that’s
16:29
really what investments is but are you
16:31
you investing a lot of your money in
16:33
this I’m not supposed to call you a
16:34
certain thing of the left but what are
16:36
you investing a lot of money do you want
16:38
to run for office
16:39
definitely not run for office why well
16:42
look I I prefer the partnering board
16:47
member investing that’s one of the
16:49
reasons that guy behind it yes yeah I’m
16:51
guy behind you of LinkedIn the
16:53
smoking-room yes yeah yeah role model
16:56
for elbows who didn’t get the X Files
16:59
right yeah and so and then but I’m
17:05
vesting a bunch of money I’m trying to
17:06
actually facilitate conversations trying
17:08
to facilitate what the right kinds of
17:10
ideas are like what are the ways that we
17:13
can make sure that we have you know
17:15
vibrant economic ecosystems and
17:17
middle-class jobs across the country
17:18
which my network ultimately a lot I’d
17:22
say thus far is probably millions
17:24
millions but hundreds of millions you
17:26
think this is it could get there could
17:27
get there all right so let’s talk about
17:29
where and Mark you’re not running for
17:32
office I hope okay I would not advise
17:35
thank you can you imagine anybody voting
17:36
for me yes I don’t I might just as a
17:40
joke separate you got to oh if I run
17:43
I’ll take the sarcastic alright so let’s
17:46
talk about innovation where it’s going
17:48
you guys have been around forever
17:49
there’s been a lot of different
17:50
investments and periods of time and
17:53
things like that and it is related to
17:55
jobs the future of jobs let’s start with
17:57
there how do you look cause I think to
18:00
me it seems like Silicon Valley is doing
18:01
a lot more serious thought about
18:02
investing beyond into the into it into
18:05
the next era cars automation robotics
18:08
each of you want you start Marc talk
18:10
about you think of the most last time
18:12
you were here you’re talking about
18:13
software eating the world
18:14
talked about a wide range of things how
18:16
are you thinking now about investments
18:18
yes it’s interesting we have two sectors
18:21
two different kinds of economy in the US
18:24
or do two different kind of categories
18:25
of sectors divide them in one might call
18:27
the fast sectors and the slow sectors or
18:29
the fast chain sectors slow chain sector
18:30
so the fast chain sectors are sectors
18:32
like retail transportation media in
18:35
which technology has had a huge impact
18:37
software is eating those sectors there’s
18:40
massive change happening in those
18:41
sectors massive productivity
18:42
improvements as measured by productivity
18:44
which is how economists measure the rate
18:46
of technological change by the way Janak
18:48
churn in in jobs right turn in obviously
18:52
media and retail and you’re in BuzzFeed
18:54
you’re in a bunch of yeah yeah exactly
18:56
right and in lots of debates about the
18:57
nature of that churn by the way however
18:59
along with that rapidly falling prices
19:01
right so the prices of basically
19:03
everything and reaching or as if the
19:05
experience everybody has an Amazon
19:06
customer prices in retail prices in
19:08
media with all the free media and
19:09
internet and prices in transportation
19:11
are going to fall you know dramatically
19:12
with self-driving cars and so very
19:15
rapidly falling prices but like a big
19:17
and then a big concern of where the jobs
19:19
going to come from so that’s part of the
19:21
economy the other part of economy is
19:22
what you might call the slow change part
19:24
of the economy which is all the sectors
19:25
in which the opposite of that is
19:27
happening and so these are sectors like
19:29
health care education and construction
19:32
elder care child care and also by the
19:35
way government so took all those kind of
19:37
the big six in those sectors the
19:39
opposite is happening which is in those
19:40
sectors we have a price crisis right the
19:42
price of all those things is rising
super fast right so that the FT had a
story today eighty eight percent of all
the price inflation in the US economy
since 1990 is attributable entirely
eighty eight percent of it attributable
to health care education and
construction
right and so what’s
happening on and the sort of the slow
change sector of the economy is
19:59
basically everything’s becoming super
20:00
expensive and if you try to buy a house
20:02
or if you want to send a kid to school
20:04
or if you need to get care for an ailing
20:06
relative you experience this and hence
20:08
all the concern around the cost of all
20:10
these things those are the sectors the
20:12
economy the technologies having almost
20:13
no impact on right software is playing a
20:15
very small role at best those are also
20:18
the sectors that have almost no
20:20
productivity growth right as measured by
20:21
economists and left unchecked those
20:23
sectors are basically just going to eat
20:25
the economy right if those if the if the
20:28
products and services in those sectors
20:29
keep rising in price they end up being
everything we pay for health care is
eating the account yeah health care
healthcare education and construction of
the big three and there’s eating the
economy fully-loaded construction costs
have doubled since the year 2000 in the
US I mean just like absurd things are
20:42
happening in real estate and
20:42
construction and so I think the
20:45
opportunity and the challenge is for the
20:48
tech industry in Silicon Valley and all
20:49
of us to go figure out how to have a
20:51
much bigger impact in the in the slow
20:53
growth sectors of the economy the slow
20:55
change sectors the economy I think if we
20:56
do that if we’re effective at it we have
20:59
the opportunity to bend the cost curves
21:00
over time and these by the way are very
21:02
very big sectors with very very big kind
21:04
of entrenched forces I play by the way
21:06
these also the slow change sectors also
21:08
happen to be highly regulated right
21:09
these are sectors of the economy where
21:10
the government plays a gigantic role in
21:12
the economics of these sectors and so
21:13
these are not easy sectors to disrupt
21:15
these are this is the big leagues but
21:18
the opportunity exists to really go
21:19
after the price curves and
21:20
systematically drive down prices in
21:22
those industries if we do that like that
21:25
may be the single biggest thing we could
21:26
do to improve quality of life for a
21:28
living that’s ordinary people we are
21:29
actively investing so super actively
21:32
investing education Udacity one of our
21:34
companies going directly after skills
21:35
acquisition doing very well with an
21:37
entirely new way to link with employers
21:39
to do skills acquisition training online
21:40
we’re very aggressively investing in
21:42
healthcare we think there’s a whole new
21:44
very interesting thing happening at the
21:45
intersection of healthcare and software
21:47
that’s just getting started and we’re
21:49
investing very aggressively on that
constructions harder you know the big
challenge that we’re all going to have
to tack on the long run is this sort of
question of cities and this question of
land use
and whether cities are going to
be allowed to get big enough where
everybody who wants to get to them is
going to be able to get to them Mayer
Swisher in San Francisco I think it’s
22:05
going to have this on the top of her
22:06
list yeah as thanks to solve oh really
22:09
so that’s the sector that’s a second be
22:10
you’re going to be my deputy of
22:12
something I’m looking forward to it yes
22:14
yes I will take that on my business card
22:16
so that’s a big one we’re also by the
22:18
way elder care and childcare are both
22:21
both are increasingly central elements
22:25
to the economy huge employers in both
22:27
fast rising sectors we have a company
22:29
honor that I’m involved in that’s trying
22:30
to come up the fundamentally better way
22:31
to orchestrate whole process go right
22:33
here mean what about you know so
22:36
slightly different division so I think
22:39
about things that are kind of classic
22:41
for what we do
22:41
is kind of businesses with network
22:43
effects which can include both consumer
22:45
and enterprise sides so those are things
22:47
like you know obviously Airbnb or convoy
22:50
which is kind of over for trucking
22:52
we just recently can we still use that
22:54
uber for or is that not allowed uh well
22:57
I think we always use the version of it
22:59
I mean before whatever it’s a it’s a
23:01
it’s a quick did that for mark or prefer
23:03
X is better now because it has an extra
23:05
element of danger okay ah the lyft guy
23:10
that one guys
23:12
and so there’s a stack of those sort of
23:15
businesses which I think are the I think
23:17
we will continually design new forms of
23:20
software ecosystems that have these
23:22
network effects that organize how
23:25
millions to billions of people
23:26
communicate work you know kind of
23:29
coordinate communicate all that sort of
23:32
thing together and then part of what we
23:35
look for is what are things that are
23:37
substantially contrarian that are not in
23:40
the kind of the current you know cut a
23:41
buzz cycle right the buzz cycle okay is
23:44
AI ARV are you know etc and then what
23:50
are the things that they’re you can
23:51
actually do something that actually
23:53
might be really interesting some of
23:55
those will play out into those
23:56
industries so you know if you figure out
23:59
different kinds of of construction you
24:03
know robotics so you figure out you know
24:05
energy sources or other kinds of things
24:06
those can actually play into those and
24:08
can actually change those cloths curves
24:09
so it isn’t it is it’s a different way
24:11
of looking at it which is kind of
24:13
through the lens of these things or
24:14
defining kind of network effects
24:16
software ecosystems with people and and
24:20
devices you know kind of combined
24:22
together and then these things are
24:23
what’s kind of off the current beaten
24:26
path so what is that what do you name
24:28
something so let’s see what can i name
24:34
well i mean so you know one of the
24:37
things that we did last year is a energy
24:41
company which i can’t talk about in
24:42
depth all right what kind of energy uh
24:45
so possibly fusion possibly fusion look
24:51
Oh God yeah and and investing in that in
24:56
a new and exciting way yeah okay all
24:59
right
25:00
what about robotics so I think robotics
25:03
is generally speaking one of the areas
25:05
that everyone knows is going to be super
25:07
important everything from autonomous
25:08
vehicles to other kinds of things
25:09
so there’s AI just a ton of them like
25:12
the number of autonomous vehicles
25:14
startups is yeah they’re like yes is
25:16
like an uncountable set but it’s clearly
25:20
going to be there and then robotics are
25:21
going to be like for example when you
25:22
started saying construction I was like
25:24
oh robotics is the interesting you know
25:26
angle is the first reflex there and I
25:29
think there’s going to be a bunch of
25:30
things there which some of which we’ll
25:32
see from the big companies I think some
25:33
of it you’ll see from startups what do
25:35
you that robotic because you know Bill
25:36
Gates was just saying we should tax
25:38
robots that right and then mark injuries
25:40
is Mark Cuban is saying we’ve got to get
25:43
into it because China is going to do
25:45
this first we should is horrible and
25:46
evil but we have to we have to we have
25:48
to be really good at it yeah this is a
25:50
little bit of a paradox in there so we
25:53
should definitely tax robots right after
25:54
we get done taxing pcs okay uh which
25:56
took away all the secretary jobs all
25:58
right okay so I’d do it in that order
26:00
okay all right so so far how do you look
26:02
for Microsoft hasn’t taken us up on that
26:04
all right how do you get to what do you
26:05
imagine robotics is going oh it’s very
26:07
the content we’ll get to the job issue
26:09
in a second but you know but talk about
26:11
the sector’s automation and robotics
26:13
together and I suppose AI also gets in
26:17
that pot yeah so look so the big thing
26:18
is the big thing is happening is that
26:20
the so-called so-called AI but machine
26:23
learning the whole the whole sort of
26:24
family of technologies around Aero
26:25
machine learning and sensors right
26:26
something dramatic has really happened
26:29
something dramatic really tipped about
26:30
five years ago we’re a whole category of
26:32
things that just didn’t work at one
26:33
point all of a sudden work and so I just
26:35
I think – I think at this point there’s
26:37
just a feeding frenzy in the tech
26:39
industry in the valley to try to
26:40
experiment with every single possible
26:41
permutation what can be done with AI and
26:43
robots at every possible shape size and
26:46
description it’s I think it’s
26:48
spectacular it’s a it’s it’s one of the
26:50
biggest it’s one of the biggest booms
26:51
slash kind of exploratory let’s go map
26:54
the landscape and let’s go try all the
26:55
ideas that I think I’ve ever seen and
26:56
what do you know and we’re actively
26:57
investing what do you like about that
26:59
what do you end what are you worrying
27:00
area when you say if everyone’s pursuing
27:02
it just oh it’s a classic it’s the
27:04
Silicon Valley it’s the thing that it’s
27:05
the thing that gets everybody excited
27:06
about Silicon Valley and then it’s the
27:07
thing everybody always criticizing
27:08
Silicon Valley for which is of course
27:10
we’re going to overdo it like of course
27:11
there are way too many companies being
27:13
funded doing self-driving cars but out
27:14
of so what always happens in the valley
27:16
right the great strengths of the valley
27:18
I would argue is that when something
27:20
starts to work we over fund it like we
27:21
have way too many companies going after
27:23
this most of them don’t work but the
27:25
ones that do end up becoming very big
27:27
and important right and ultimately
27:29
valuable and so well I think we’ll get
27:30
that exact exact same result out of this
27:32
phenomenon for people who want to say
27:34
the Silicon Valley just does well pulls
27:35
over and over again there will be
27:36
ammunition to support that view but I
27:38
think out of that will come you know
27:39
defining companies of the era that we
27:41
probably haven’t even heard of the app
27:42
that are going to be on the on the scale
27:43
of the big technology win in that sector
27:45
in that sector yeah the opportunities
27:46
are very very very big do you worry
27:48
either view about the job impact when
27:51
we’re talking and I want to understand
27:52
where you look at the where you feel the
27:54
responsibility if you have any on the
27:56
future of jobs it’s the thing I’m very
27:58
interested in well so and obviously I
28:00
mean to some degree what I found in
28:03
LinkedIn was trying to help people
28:04
figure out what the skills jobs
28:06
opportunities of the future so taking
28:08
software and networks to enable that and
28:10
enable people to be able to find the
28:13
right opportunities get the right skills
28:15
get the right connections to those kinds
28:17
of things that’s actually very central
28:18
let me give you a kind of a classic kind
28:21
of thought on within the autonomous
28:23
vehicles because people frequently say
28:24
oh these home Thomas vehicle is going to
28:26
take a whole bunch of jobs there’s an
28:28
issue there and you have to get that
28:29
transition but on the other hand once
28:30
you have autonomous vehicles for example
28:32
being able to have people now actually
28:35
in fact go be able to get to work in a
28:39
much more easy way to be able to
28:40
actually when they’re in transit to be
28:43
actually doing things that are either
28:44
relaxing or working as a way of doing it
28:46
it also opens up a variety of
28:49
productivity possibilities no I get that
28:51
argument of like you can now text and
28:52
drink I get that I get you know it’s
28:54
it’s all that I drink is the funnest
28:55
thing the texting all right the but it
28:58
is that happy shiny future idea of like
29:00
oh it’s going to be so much the same
29:01
thing with AI same thing with that mark
29:04
you were just going to say something but
29:04
what I wonder about is when that happens
29:07
there are millions of jobs driving take
29:11
driving millions of jobs and I think
29:13
when Travis was on this stage
29:14
said the problem is the guy he actually
29:16
was honest compared to most people sit
29:20
by saying the guy in the front seats the
29:21
problem we need to get rid of the guy in
29:23
the front seat you know I mean which
29:24
everyone we had a sharp intake of breath
29:26
I was like yay he said it but but what
29:30
do you how do you look at that do you
29:32
feel what are you going to do about that
29:34
or do you have nothing to do about it
29:35
so it’s a fallacy okay it’s the lump of
29:38
Labor fallacy is the Luddite fallacy
29:39
it’s it’s recurring panic this happens
29:41
every 25 50 years people get all amped
29:43
up okay machines are going to take all
29:44
the jobs and it never happens so let’s
29:45
talk about cars specifically because
29:47
that that’s front center for the
29:48
conversation so when the automobile 100
29:50
years ago in the automobile went
29:51
mainstream this concern literally
29:52
existed exactly same panic happened it
29:55
happened because of all the people whose
29:56
livelihood literally was taking care of
29:57
horses right so everybody running
29:58
stables and everybody doing blacksmiths
30:00
and like the whole thing an I god what’s
30:02
going to happen cuz Ford Motor Company’s
30:03
you know in the world and nobody else is
30:04
going to have anything to do the car
30:06
then created not only a lot of jobs
30:08
building cars right it became a huge
30:10
employer right now the car industry
30:12
became such a huge employer that we had
30:13
to bail out all the car companies to
30:14
keep working like a hundred years it
30:16
went entirely in the other direction not
30:19
only that the car think of everything
30:21
else that happened as a consequence of
30:22
the car so the idea of surface streets
30:24
right paved streets emerge because of
30:26
the car right streets weren’t paved
30:27
before the car they were paid for the
30:29
car so paving streets the idea of the
30:31
idea of restaurants the idea that you
30:33
might actually go someplace to eat
30:34
something was an invention of the car
30:36
the idea of motels hotels the place
30:39
we’re in here is it exists entirely
30:41
because the automobile the idea of movie
30:43
theater is the idea of apartment
30:45
complexes the idea of office complexes
30:47
the idea of at some suburbs the entire
30:50
build-out of suburban America the jobs
30:53
that were created by the automobile on
30:54
the second third and fourth order
30:55
defects were a hundred X a thousand X
30:58
the number of jobs the blacksmith’s had
30:59
and so this goes to kind of the
31:01
fundamental kind of flaw in the logic
31:03
that they call the length of labor
31:04
fallacy which is technological change
31:06
causes productivity growth productivity
31:08
growth lets us produce more of what we
31:11
can already make with less resources and
31:13
then lets us create that that’s what
31:15
frees up the spending power to let us
31:16
create lots of new things great lots new
31:18
demand and that’s what creates new
31:19
industries and that’s what creates new
31:20
jobs and then 100 years later we look
31:22
back on it we’re like I can’t believe
31:23
anybody who’s ever a blacksmith and so
31:25
this has been the pant literally this is
31:27
like the panic every
31:28
8550 years except if you are a
31:29
blacksmith and it never comes true the
31:32
good news is you didn’t work out the
31:33
good the good news is the car company
31:35
the car companies and all of these other
31:37
industries hired huge numbers of people
31:38
and so I think the self-driving car has
31:39
the opportunity to not only improve
31:42
productivity for people in the car which
31:44
will be a huge economic boost for those
31:45
people not only has the opportunity to
31:47
save lives right over a million people
31:49
died worldwide in road deaths today
31:50
caused by human drivers and I think we
31:52
can take that very close to zero right
31:54
which is very good for both human
31:55
welfare and in terms of economic
31:56
productivity right it’s it’s like it’s a
31:58
very serious dent in productivity when
32:00
people get killed and then and then and
32:04
then and then and then all the all the
32:07
ancillary industries that end up getting
32:08
built out so as an example maybe this
32:10
whole land use thing everybody’s worried
32:11
about maybe with salt driving cars we
32:13
can start to have excerpts that actually
32:15
work which is to say another layer
32:17
around cities right further out right
32:19
they don’t qualify as suburbs because
32:21
you couldn’t tolerate couldn’t possibly
32:22
tolerate commuting in an hour hour and a
32:24
half right so people in Silicon Valley
32:25
right experiencing if you live south of
32:27
San Jose your commute now might be an
32:28
hour and a half but it’s not half in the
32:29
car driving the car if you were in the
32:32
self-driving car all of a sudden then
32:33
you’ve got you might have a huge
32:34
construction boom in all the outlying
32:35
areas around these cities and that
32:36
construction boom might hire for more
32:38
people than were ever involved in
32:39
driving cars so well and so the process
32:41
works by the way as evidence of that
32:44
after all of the technological
32:46
disruption that has everybody all
32:47
freaked out that got us to where we are
32:48
today
32:48
right unemployment in the u.s. is now
32:50
back below it’s not below 4.3 percent
32:52
right there’s if you’re living in areas
32:54
like Kentucky there’s six million
32:57
there’s six million job openings up in
32:58
the US and the the panic stories in the
33:01
press have gone overnight from oh my god
33:03
not enough jobs to oh my god not enough
33:05
workers right and The Times is an
33:07
example of Dean’s paper had a very good
33:09
story about two weeks ago on there’s an
33:10
hour crisis in Utah there aren’t enough
33:11
people to literally milk all the cows
33:13
they’ve literally run out of people to
33:15
milk the cows and so what the the jobs
33:16
crisis we actually have in the u.s.
33:18
today is we don’t have enough workers
33:18
it’s aimed in the right thing by the way
33:21
we might make that you know for this if
33:22
these immigration policies continuing we
33:24
might make that problem far worse yeah
33:25
okay you’re in for immigration very much
33:28
okay good
33:29
what are you worried about are you
33:32
worried about this at all then we’re
33:33
going to get to questions well so the
33:35
one thing I agree with most of what Mark
33:37
said there including the fact that if
33:39
you remap what is the logistics and
33:41
space
33:42
it creates a lot of different
33:42
productivity not just construction but a
33:44
lot of different ways that that may play
33:46
out and change his clusters
33:48
I think the transitions can be very
33:50
painful so I think we need to pay
33:52
attention to the pain that pain so like
33:53
example the agriculture – Industrial
33:56
Revolution actually involved a large
33:58
ugly very ugly and so while I tend to
34:00
think oh look it works out it’ll
34:02
probably work out anyway the the
34:04
question is let’s try to make it work
34:06
out in a way that’s more humane more you
34:10
know kind of the society that we want to
34:11
be and kind of not as much pain in that
34:13
kind of transition right absolutely do
34:15
you think about that pain so look so
34:17
whatever you just Blofeld or what’s
34:19
don’t let me ask so let’s talk about
34:22
what’s actually happening so these are
34:23
all hypotheticals are both actually
34:24
happening so economists have a way of
34:26
measuring the rate of technological
34:27
change disruption in the economy is
34:29
called productivity productivity growth
34:30
would we expect based on everything that
34:33
we read here and understand with this
34:34
rate of technological change and
34:35
disruption would we think that
34:37
productivity growth is at generational
34:38
highs or lows I’ll be highs right and it
34:41
turns out it’s a it’s a generational
34:43
lowest productivity growth is running
34:44
super low and economists are writing
34:46
books left right and center agonizing
34:47
over why productivity isn’t growing
34:48
faster would you expect that the rate of
34:50
job churn the rate of both job creation
34:53
and destruction in the economy which
34:55
tend to go hand-in-hand would you expect
34:56
that those the rate of churn is at a
34:58
generational higher generational low no
35:00
idea I’m not going to answer so it’s a
35:01
trick it’s a trick question as you
35:02
anticipated oh just right now
35:04
everything’s a trick question with you
35:06
the rate of job churn American economy
35:08
has been declining for 40 years and it
35:09
shows no sign of growing would you
35:11
expect that the rate of which people are
35:12
turning over in jobs individuals turning
35:14
over in jobs is increasing or decreasing
35:16
well Millennials are who everybody but
35:18
just everybody is the set by the way
35:19
including Millennials probably are
35:21
decreasing all right people are staying
35:22
in jobs longer and would you expect
35:24
because of all the disruption that we
35:25
know about would you expect that the
35:26
rate of new entrants of new companies
35:28
and existing industries is accelerating
35:30
sorry it’s decelerating okay we don’t
35:33
have the problem work at 11:00 p.m. we
35:35
don’t have I haven’t even had a Scott
35:37
yet okay that can be fixed that can be
35:41
fixed we don’t even we don’t we do not
35:43
not only do we not have the problem
35:44
everybody’s worried about we have the
35:45
opposite problem we don’t have enough
35:46
change we don’t have enough change we
35:48
don’t have enough creation of new jobs
35:50
we don’t have enough creation a new
35:51
opportunity which is what in my view
35:52
goes right back to the politics is what
35:54
leads to zero-sum politics
35:55
the reason our politics is going
35:56
sideways is not because there’s too much
35:58
changes because there’s not enough
35:59
change because people don’t see a future
36:01
because they don’t see anything changing
36:01
and I think you see the zero the zero
36:03
sum politics you see that sense on both
36:05
the left-right with you on the Bernie
36:07
left and on the Trump right I think
36:09
that’s the problem the way through that
36:10
is not just slowed down the way through
36:12
that is to speed up right the way
36:13
through that is more change more growth
36:15
more opportunity all right that’s the
36:17
path forward and so I does this goes
36:18
back to like I’m just I’m very worried
36:20
that we’ve actually gotten off and we’re
36:21
just talking about completely the wrong
36:22
thing right now and I’m hoping maybe
36:24
over the next couple yes yes we can
36:25
massage this a little bit more towards
36:27
the actual the actual crisis that we
36:28
have all right questions from the
36:30
audience right here hey guy Horowitz T
36:33
capital are you so this is a very
36:36
Silicon Valley centric view which is
36:40
where you guys are is the world changing
36:43
in that respect are we seeing more ideas
36:46
and concepts coming from other parts of
36:49
the world so I think the I think the
36:53
answer to the question in some degree is
36:55
both which is yes there’s more
36:57
entrepreneurship there’s more technology
36:58
there’s multiple areas not just
37:00
obviously a huge amount of stuff going
37:02
on in China but like when you get to
37:04
Europe it’s you know Stockholm and
37:06
Berlin and London there’s various cities
37:08
across the u.s. on the other hand
37:10
frequently that’s the is the Silicon
37:14
Valley losing some of that’s always the
37:16
class and I actually think that Silicon
37:17
Valley is persisting because of the
37:19
network effect of Silicon Valley in
37:21
terms of lots of entrepreneurs move here
37:24
the ideation moves at a very fast pace
37:26
rate because people talk to each other
37:29
about what’s what’s going on what truth
37:31
what are you seeing in autonomous
37:32
vehicles which things going to work etc
37:33
etc and that also creates something so I
37:35
think the answer is some grades yes to
37:38
the rest of the world but also
37:39
continuing very interesting patterns of
37:42
leadership from Silicon Valley are you
37:44
worried about Slocombe I was losing its
37:45
step no never never
37:47
not right now yeah well we’re doing
37:49
everything we can to kill it but as a
37:50
part we so far we keep so far we keep
37:52
missing all right we collectively the
37:55
state of California oh okay consider San
37:56
Francisco alright got it okay good I’m
37:58
gonna make it even worse for anyway
38:02
hello Manny Cuchillo