1001 Days: How to Beat the Turkey Problem (And How It Applies to Bitcoin)
The Turkey Problem is described by Nassim Nicholas Taleb in his book “The Black Swan” to be as follows: Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.
This problem is one of Inductive Knowledge, a term coined by Bertrand Russell. How can we go from specific instances in the past to reach logical generalized conclusions about the future?
Think of the feeding again. What can a turkey know about tomorrow from the events of yesterday? A lot, perhaps, but certainly a little less than it thinks. And it is just that little less that might make all the difference.
This problem strikes at the nature of empirical knowledge itself. Something has worked in the past, until — well, it unexpectedly no longer does, and what we have learned from the past turns out to be at best irrelevant or false, at worst viciously misleading.
Upon reading about the Turkey Problem, it was impossible not to see how this concept applied to our financial dependence on government. Since 1971, when Richard Nixon threw out the gold standard, the U.S. Dollar has been a fiat currency. Basically, the USD is money because the U.S. government says it is money, granting it legal tender status, and merchants must accept it as payment. As long as everyone agrees that this money represents real value and can be traded across all industries, the dollar really does carry this value. Therefore, money is a social construct. As long as everyone believes it represents value, then it really does and can be practically used for this purpose.
True, the U.S. government backing the USD definitely adds credibility and inspires belief in the system. However, it is not necessary for the social construct to operate smoothly. Any unit of value that society believes holds value, for any reason (in Bitcoin’s case, carrying ideal properties of money) will actually hold that value and allow for trade to continue.
“Our system isn’t broken… why mess with it when we are at our peak performance in seemingly all metrics?”
This is where it may serve us well to learn from the turkey, whose feeling of safety is at an all time high just before Thanksgiving.
Allow me to provide an analogy. The farmer who feeds the turkey every day is the U.S. government, central bankers and all other’s who benefit from the general public playing within their monetary system. Obviously, the turkey is us, the people. The reason these entities get to play the role of the farmer is because of the centralization that those with the power to create money also get to make the rules. This creates a “heads I win, tails you lose” dynamic where if banks make a good bet, they get to reap the profits, but if they make a bad bet, such as the 2008 financial crash, the public must pay the debt. Anyways, the turkey’s survival is completely out of his hands. Now imagine instead of his daily feeding, the turkey finds his own food in the wild, as turkeys have for the past 11 million years. This may provide its own challenges, but is in line with nature and prevents yearly gallinicide of turkeys, allowing for natural equilibrium. Note that, obviously, turkeys living in the wild instead of on farms is bad for farmers. It wrecks profits and makes their lives harder.
Bitcoin for people is the equivalent of getting turkeys off of the farm.
Printing money dates back to the death of Alexander the Great and was initially introduced as a way to fund wars without increasing taxes on the people. It was a secretive and frowned upon practice but the people had no power to stop it. They understood that it was hurting the domestic saver in order to forward the agenda of those with the power to print money. Now, it is looked at as the norm and inflation is calculated in to the year’s budget.
According to a study of 775 fiat currencies by DollarDaze.org, there is no historical precedence for a fiat currency that has succeeded in holding its value. 20% failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes. The average life expectancy for a fiat currency is 27 years. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it’s worth less than 1/200 or 0.5% of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value.
Bankers do not want to lose their self-serving system. This accounts for the backlash that we have started to see from huge banks against Bitcoin, and will continue to see in the future. Bitcoin forces a level of true skin-in-the-game and transparency on banks that they have never had to comply with before. Banks will not regulate Bitcoin; Bitcoin will regulate banks. Without quantitative easing and the Fed bailing out banks when they fly too close to the sun, they will need to employ proper risk management that does not give the taxpayer the short end of the stick when they mess up.
Basically, Bitcoin allows people to trust that basic math works rather than trust the most powerful bankers and politicians to operate in their best interest. Bitcoin is transparent. It’s open source and everyone can know how it works with a little bit of research.
If there’s anything we can learn from studying history, it is this: power corrupts. Why would you choose a system where you must trust the rich and powerful to look out for you when you could have a system that is just as good and does not rely on that trust?
