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COIN TALK is produced in partnership with Medium and hosted by Aaron Lammer and Jay Caspian Kang. Press “Listen to the story” above to play the episode. (You can also subscribe on Apple Podcasts, Google Play, download the MP3, or email us at hi@cointalk.show)

Ch 1–3

Transcript

Aaron Lammer: Jay.

Jay Kang: What’s up?

Aaron Lammer: Did you read the Bitcoin Standard?

Jay Kang: I did. I mean, it actually was a little bit of an effort. And I had to scrap it together from different parts of the internet. But I believe that I got all the pages together.

Aaron Lammer: After we announced this, I assumed that you would have purchased the book. But instead, I understand that you’re working from like a PDF you got off of Reddit?

Jay Kang: Not entirely! To tell our future guest, the author of the book, I attempted to buy it on Kindle, and it had even a price on Kindle that I could order it on. And so I was going to pay it, but it was only in the sample. So it was like the prologue, the introduction, and the first chapter.

Aaron Lammer: That was it shows before you pay I think.

Jay Kang: Well I went back and I try to actually pay, and then I was like, oh no, I’m in trouble. And then I did what I do when I can’t get an NBA game to stream. So I went on like basically Bitcoin book streaming, like subreddit.

Aaron Lammer: Last week we had Art Kang, this week, bootlegger Kang.

Jay Kang: Yeah, like, it’s one of these things where, well look, you and I are both in our, I would say late thirties.

Aaron Lammer: Yeah. Got liveshare Kang in that.

Jay Kang: And I think that the one sort of weird artifact of our exact age is that we probably should just pay for things in the full way. But we just try and hack them to save like fourteen cents or something like that.

Aaron Lammer: Okay.

Jay Kang: Anyways, so the point being, I did read it.

Aaron Lammer: Well that, before we get going, the point being the book is only ten dollars in print on Amazon. If you haven’t picked it up, pick it up. This is kind of our like introduction to the book. So we’re only going to do the first couple chapters. You’re going to be able to catch up if you want to catch up. And we’re just going to start talking about things that we’re thinking about as we read this book. Jay, what’d you think?

Jay Kang: I thought it was a very interesting and provocative argument for Bitcoin. Being a very impressionable man, right, I find myself at times scratching my head and saying, hm. Like you know, like maybe I should just become a full on Bitcoin maximalist.

Aaron Lammer: Yeah, I mean, in some ways the vision doesn’t seem that crazy. Once you sort of start seeing the big leaps that have come before.

Jay Kang: Look, I think what he has presented us is a revision of the white paper. So for a lot of people who got into Bitcoin who weren’t there from the very beginning, we have a shorthand of these sorts of ideas. Of what money is, how Bitcoin fits into the evolution of money. But it’s never really fully articulated for any of us. And I think that we get, we sort of have a piecemeal understanding of it. And what this book does over the first three chapters and which I actually appreciated, even though there were parts obviously that I think anybody would, you know, I’m sure Saifedean wants people to disagree with, there were parts I disagreed with. But it was very nice to see the whole thing laid out.

Aaron Lammer: It’s interesting that you brought up the white paper there. That wasn’t what I thought about it in relation to the white paper. My thought when I was reading this, and basically like the second chapter, which is Monetary Metals, kind of goes through all of these previous incarnations of how we’ve created currency from scratch here on earth. And I was like, oh, this is definitely the stuff that Satoshi was interested in when he made Bitcoin. I always thought of Satoshi as a cryptographer. And a person interested in computer science, and it made me think of Satoshi in a more humanities, economics-based light. As someone who had really studied this human problem of currency as probably a big part of at least his passion in the world.

Jay Kang: Yeah, and I think that some of the earlier people who are interested in the space, whether it be like Zeba or, really anybody who was working on this currency projects before, that was also part of their interest. And I think that the 2008 crash really pushed a lot of those ideas even further when the government just started printing money. But let’s get to that a little bit later.

Aaron Lammer: Sure.

Jay Kang: So let’s start with the introduction, who is written by the man who has blocked me on Twitter, who seems to come up every single time in our episodes, Nassim Taleb. And he wrote the introduction.

Aaron Lammer: And I would like him, I’m going to try to get him to come on the show.

Jay Kang: Really?

Aaron Lammer: I’d love to have him on the show.

Jay Kang: I would too!

Aaron Lammer: He’s like, I think a, he hates journalists so I’d like to see him like go after you a little bit. Additionally, one of the things that actually I learned in trying to get in touch with Saifedean Ammous, that Taleb was actually influential in him getting this book published. I mean he’s not a quote unquote, writer, by trade. He is an economist and a researcher. Although I find his writing very crisp.

Jay Kang: Yeah, it was, I actually thought it was very readable.

Aaron Lammer: Yeah.

Jay Kang: And that the argument was laid out very clearly in a way that I actually appreciated because I expected given Saifedean’s somewhat, I think, purposefully heightened and somewhat florid Twitter account that this would be like a really over the top defense of Bitcoin. But it’s not. It is rational [crosstalk 00:06:39].

Aaron Lammer: No, it’s even keeled. I actually find it interesting that you have referred to it a couple times as an argument for Bitcoin. It’s so smooth that to me a lot of it reads like, and this is what happened through history and of course the logical place we’d end up with. It’s almost like the way that Marx describes the end state of socialism. Not as, hey, this would be a good idea. We should fight for it! But as like this is a historical inevitability.

Jay Kang: Yeah, and Marx is a very interesting example to use when talking about anarchocapitalist. But yes, I do think the rhetorical techniques are similar.So Taleb writes the introduction, I will say and I think you would agree, Taleb doesn’t, he writes a very short introduction. It’s kind of like an extended blurb.

Aaron Lammer: Yeah.

Jay Kang: But there was one part of it that was, rational markets do not require any individual trader to be rational. In fact, they work well under zero intelligence. Zero intelligence crowd under the right design, works better than a Soviet style management comprised of maximally intelligent human beings. And so what he’s making an argument for is essentially markets are going to stabilize over time and that they’re going to have their own logic to them. And that they don’t need actors within the market, they just need to exist. And that that’s what his argument for Bitcoin is.

Aaron Lammer: The way that that viewpoint works is that Bitcoin is by its very creation by the Satoshi moment, like on some inexorable rollercoaster ride towards ubiquity. Although I think it’s interesting that Taleb, he’s made this point in other writing that I’ve read of his. Does not say that Bitcoin is necessarily going to succeed or not succeed. He’s like, the cryptocurrency itself, the cat is out of the bag. And even if this fails, it can be recreated now. The idea can never go away.

Jay Kang: That is the real question I think that was sort of facing crypto right now. And it’s something that we’ve talked about before, but it is really, I mean there’s just news that is coming out that we’ll discuss later in the show. But it’s about sort of the high concentration of Bitcoin in a very small number of people’s hands. It makes me wonderful if that is sustainable or that will sort of tank the idea eventually. But I don’t think that-

Aaron Lammer: Really? See I thought that argument, like when you look at Bitcoin compared to all the other currencies. It’s like pretty spread out.

Jay Kang: No, well like the other cryptocurrencies.

Aaron Lammer: Yes.

Jay Kang: But not like world currencies.

Aaron Lammer: No, not world currencies, yes. Not legitimate currencies.

Jay Kang: That’s a separate argument, but I do think that the question of whether or not it will be Bitcoin is one that should be seriously asked right now. And I think eh is asking that same question as well. The person who is not asking that question is Saifedean Ammous, right? And so this book starts with a very bare bones and very sort of logical progression of an explanation of money. Did you know all this stuff about money?

Aaron Lammer: I would say that I knew like 50 percent of it. But I didn’t know it, know it.

Jay Kang: At the start of money then, Saifedean sort of starts with this idea of bartering, right? That the barter system is one that still exists today and it is by far the most logical way to exchange something. Which is like you’ll say I’ll give you these fish, and you give me, let’s say those apples, right? And that’s the barter that you do. And he explains that the problem is that when you go from saying I will give you these fish, you give me a house, right? Like, how do you make that exchange? Like obviously there are many problems with it because you can’t, how many fish do you need for a house? Now, do you give the fish at the beginning, or do you give it at the end when all the fish are dead? You know, how do you deal with a perishable good, versus like an actual thing, and how do you make that transaction over time? So that’s a very logical thing, I think that’s at the core of all economics. And I think that’s where he starts.

Aaron Lammer: Well, and in the twenty-first century, there’s such a great diversity of goods. There’s such an assymetry of what one person would have that the other person would need. And then that working the other direction. Kind of reminds me of, you ever buy stuff on Craigslist?

Jay Kang: Not as much as you do. You seem to have bought everything in your life off Craigslist at some point. So not quite like you. So why don’t you explain Craigslist?

Aaron Lammer: So sometimes I’ll be trying to buy like a synthesizer or something. And they’re like, also we’ll consider bartering and trades. What is the chances that I have something of equal value that this person wants? With like no guide whatsoever. That just seems like a pretty far fetched assumption to make about the world. So it kind of feels like almost immediately you start needing an intermediary if you’re going to be able to do almost any kind of business.

Jay Kang: Yeah, and that’s his argument is that the history of exchanges starts with bartering, and then you immediately run into these problems when it’s not just like hunter gatherers trading things with one another. And they need to actually trade goods. So you need something that stands in for some sort of promise, right? Which is saying like this is worth this. This is a store of exchange, or this is a store of value. And that there’s a logical progression that goes through a lot of different things. Shells, for example, he talks about a lot. There were like seashells that were used.

Aaron Lammer: Those rocks with the holes in the middle of them.

Jay Kang: Yeah, yeah. And then all these types of money have problems with them. So for example, wampum. Did you know what wampum was before?

Aaron Lammer: I was not familiar with what wampum was.

Jay Kang: Okay, so wampum was a native american tribe’s version of currency, and it was shells, right?

Aaron Lammer: Yeah, seashells.

Jay Kang: Seashells. And at some point, some explorers I think came, and they sort of flooded the market with wampum. And then the wampum became devalued.

Aaron Lammer: Yeah.

Jay Kang: And he says that that’s bad for any number of reasons. Like did you understand the reasons he was saying that was bad?

Aaron Lammer: Well, I mean, he gives all these historical examples that seem like they’re divergent, but then end in the same place, which is technology catches up, and … So even when people like try to fight that devaluation, usually when technology catches up, and people can figure out how to make whatever it is you’re using as money, that thing is fucked.

Jay Kang: Yeah, so that’s one of the principles that I think he’s laying out here, which is that money needs to kind of be scarce, right? The resource needs to be scarce, it needs to be very unique in the sense that you can’t just go get more wampum out of like the wampum hole that nobody has discovered and then flood the market with new wampum.

Aaron Lammer: The end state of all this is that we resolve on these metal currencies, there’s been many metal currencies, but gold, silver, bronze, are like the biggest one in history that require a certain amount of labor to extract the medal, and it’s hard enough that the market cannot be flooded. And if it is flood, or if you do mine more, it’s not enough so that it undermines the value of the stuff.

Jay Kang: Yeah, there’s no sea captain coming in with like a whole bunch of gold.

Aaron Lammer: I mean the interesting, so like, those are sort of the end state of all these ideas or the like pre-fiat money end state of all these. Like we talk about like FUD, and what the like greatest existential threats to like Bitcoin system is. The greatest existential threat to the gold system was like alchemy, basically. If someone had figured out alchemy, it would have been like all over.

Jay Kang: Yeah, well if you could turn regular metal, that’s probably why alchemy was such a good racket for so long.

Aaron Lammer: That’s what I’m saying!

Jay Kang: So Saifedean goes on to outline his case then for why Bitcoin, given all these things that we know about money, is the best version of money that there ever has been, right? And that what used to be the gold standard, which is, like the problems with gold is that it’s hard to divide up. So if I bring out a nugget of gold for your synthesizer, and I haggle you down to-

Aaron Lammer: I’d be like, that’s a big nug man.

Jay Kang: Yeah, I haggle you down to like half an ounce of gold for your synthesizer. It’s very difficult for me to sit there and like hack off half an ounce and give it to you.

Aaron Lammer: Sure.

Jay Kang: And so that’s why paper money exists. Because it’s more divisible, and it is based on gold. So I think when the United States first dollar was printed, like an ounce of gold was twenty dollars or something like that. He mentioned it in his book.

Aaron Lammer: I mean, I didn’t realize that the gold standard wasn’t established until I think like the late 1800s. So like even the end state of gold is like a last 200 years kind of thing. Like we’re in a pretty young state of money.

Jay Kang: For the type of money that we have right now?

Aaron Lammer: Yeah. Fiat money, like money that originally represented gold in Fort Knox. And then was printed way more than there is gold in Fort Knox.

Jay Kang: Yeah, and I would argue that in the United States that we had another revolution in money beyond the switchover to fiat currency, which started in probably the 80s when Wall Street was basically printing money and money stopped meaning anything. And then 2008 obviously where people’s relationship with all this fiat currency and Wall Street radically changed. And now we’re in some sort of flux period. And so I think that within that continuum it does make sense that something would change. It’s not like we’re dealing with something that’s deeply rooted and has thousand of years of history that seems pretty intractable. And I think that of all the arguments makes, at least at the beginning of this book, is the most convincing to me. Which is that if you zoom out a little bit, the idea that this would switch over does actually make sense. It’s not like human nature or anything like that to have a fiat currency that used to be peg off the gold standard and is no longer.

Aaron Lammer: He also makes a pretty strong argument at least to me, that this problem of how do you keep money and hold its value over time? Any solution to that problem is in some ways a gamble. Whether it’s holding fiat currency, buying commodities. Whatever you’re doing, you’re in some ways gambling on some future state. And as he goes through all these historical examples of different kinds of money, eventually the long term money of just holding money keeps going down and people are driven to speculate on wilder and wilder things, rather than just holding their money. Do you mind if I read a quick quote from him [crosstalk 00:17:02].

Jay Kang: Yeah, no, please.

Aaron Lammer: It should be of interest to modern Keynesian economists as well as the present generation of investors that although the emperors of Rome frantically tried to manage their economies, he’s talking about these early Roman gold coins that the emperor kept clipping bits off of. They only succeeded in making matters worse. Price and wage controls and leaguer tender laws were passed, but it was like trying to hold back the tides. Rioting, corruption, lawlessness, and mindless mania for speculation and gambling engulfed the empire like a plague, with money so unreliable and debased, speculation in commodities became far more attractive than producing them.

So he’s kind of talking about this great eternal human cycle of people growing dissatisfied with the current money or rightly believing that the current money is not going to maintain its value. And speculating on some sort of a future, whether it’s like Bitcoin or-

Jay Kang: What you described right there in that passage seems very similar to where we are right now.

Aaron Lammer: Absolutely.

Jay Kang: Everything is wild speculation and people’s idea of store of value is no longer in the country itself but or in civic or government institutions, but instead are in tech companies. When you do that you are engaging in wild speculation. You know, if you have all your money invested in Amazon or Apple or something like that, that’s wild speculation by anyone’s standards.

Aaron Lammer: Well I would also argue that what you’re seeing people doing cross a variety of investment activities over the last twenty years is betting on the future. If you bought apple when it IPO’ed in 1980, you were betting on the future. If you bought Apple stock when the iPhone came out, you’re betting on the future. If you’re buying Tesla right now, against the most massive market shorting in history, you’re betting on a specific future. And if you’re buying cryptos now, you’re betting on a specific future. So people have shown a wild appetite to gamble speculatively on what the future will be like.

Jay Kang: Yeah, and that doesn’t even count things like real estate and everything.

Aaron Lammer: Oh, sure.

Jay Kang: So we do live, I think, and I’m sure some economists will tweet at us and say that we’re wrong, but it feels to me at least, and maybe it is-

Aaron Lammer: We encourage that by the way.

Jay Kang: It is just you and me being also being very speculative. People with gambling problems.

Aaron Lammer: It’s a human impulse. That’s what he’s saying. People felt this way during the Roman empire. Like, it’s nothing new.

Jay Kang: And part of that I think does have to do with the fact that our faith in this currency and in the stability of the economy, for example like, it used to be that people worked for a company and that they would be paid a salary, but they would also be paid in the company stock, and it would never occur to them to trade that stock for something else, you know? That they could count on a certain stable life of comfort. And that’s not where we are right now, you know, we have people, like look at the people that got really rich off Bitcoin or Ethereum. Like they’re sort of the people that people look up to now. It’s not people who work twenty years anyway.

Aaron Lammer: I was struck, I mean he gives some great historical examples, but once you start wracking your mind, you can keep coming up with different ways that we’ve created weird markets that people then speculated on. And sometimes they were dead ends, and sometimes they led to giant economies. I was reading about Michael Cohen and his taxi medallions. I didn’t know what the origin of the New York City taxi medallion is.

Jay Kang: Oh my God, I know all about this, but go ahead.

Aaron Lammer: So it’s, during the Great Depression, in New York City, almost everyone was out of work. And lots of people had cars. So people would just start driving around trying to pick people up for like a little bit of money to drive them somewhere. And eventually there was like, huge traffic. People were like, we gotta regulate this, there’s too many cars on the road. So they were like, all right, we’re only going to grant a certain number of taxi medallions. What struck me about this medallion story was how quickly it went from being this regulation of basically unemployed people trying to make money on the side, to people were like massively speculating and accumulating taxi medallions.

Cut to 2009, where you have Michael Cohen, Trump’s attorney, buying tons of taxi medallions, then using those as collateral to buy even more taxi medallions. And being massively leveraged in taxi medallions, during the period when Uber rose and the taxi medallions cratered, he was like doubling down long on taxi medallions in debt. That is the most wrecked bet I have ever heard!

Jay Kang: It is actually, I cannot think of a worse, if you were going to be, how would you get most wrecked and be like listen, you just get up to nose leveraged in taxi medallions? There was a period of my time, Aaron Lammer, where I considered speculating on taxi medallions. [crosstalk 00:21:50]

Aaron Lammer: If I could short taxi medallions, I would!

Jay Kang: I don’t know if this shocks you or not, but I have a friend who is a city planner. He just finished his PhD. And his specialty is transit. And so when the green cabs came out, do you remember that? So they came out before Uber.

Aaron Lammer: Ecotaxis.

Jay Kang: No, no, not green. In Brooklyn-

Aaron Lammer: Yeah, they were like the borough cabs.

Jay Kang: Yeah, they’re green cabs that can not make pickups in Manhattan.

Aaron Lammer: And do you need a medallion for those?

Jay Kang: Yeah.

Aaron Lammer: But a different medallion.

Jay Kang: The medallion’s were way cheaper.

Aaron Lammer: It’s like an ICO for like a second wave of not quite as good medallions.

Jay Kang: Exactly. A taxi medallion at the time for Manhattan, a yellow taxi medallion cost over a million dollars. Right, so obviously that is out of my league. But a-

Aaron Lammer: Not anymore!

Jay Kang: First of all, don’t-

Aaron Lammer: No, I’m saying the medallions are-

Jay Kang: Oh yeah, they’re not a million dollars anymore. They’re not a million dollars anymore.

Aaron Lammer: I’m thinking, I think under 500 now.

Jay Kang: Yeah, yeah. So the-

Aaron Lammer: Jay, that’s your ultimate contrarian move if you start aggregating rock bottom taxi.

Jay Kang: I thought about that too! At the time I think we could have bought a taxi medallion for 14000 dollars for the green cabs. And the way that I looked at it, and this must have been like, I don’t remember what year it was. But it was right before Uber. And thank God I didn’t do it. But obviously Brooklyn was growing rapidly at that time, in terms of like having more wealth come into that area. And I was like, this-

Aaron Lammer: Oh, I see where you’re going with this.

Jay Kang: This green taxi medallion is such a bargain right now. And so-

Aaron Lammer: I see your investment hypothesis.

Jay Kang: I considered buying some.

Aaron Lammer: Hey, I think, green cab medallion could be worth more than Manhattan medallion after the flippening!

Jay Kang: I did not think that. Yeah, the taxi medallion fork. I was buying up all the PCH.

Aaron Lammer: Yeah. It would be crazy if it like, the really cheap medallions, like you’re like, I’ve got some bargain basement New Burgh, New York medallions, seven dollars!

Jay Kang: People do that though, it is on an open market like that. And so I think that what that does prove, essentially, is that the second that you open any type of market like this, then you have wild speculation that happens almost immediately by people who have a giant, giant stomach for that type of speculation. As a person who has basically lived his entire life doing that type of wild speculation, I was not immune to the problems of green taxi medallions. And thank God, I did not do it.

Aaron Lammer: Yeah, but what are they worth now? They’re worth less than 14000 dollars now?

Jay Kang: I think they’re pretty hard to even-

Aaron Lammer: Oh, like, there’s just no volume on the [crosstalk 00:24:20].

Jay Kang: There’s no volume. There’s no volume on the green taxi. The candles are flat.

Aaron Lammer: Oh, wow.

Jay Kang: Anyways, so that, why are we talking about this one?

Aaron Lammer: Well, because Michael Cohen, well Michael Cohen got racked, and-

Jay Kang: That is such racket!

Aaron Lammer: I mean, it’s a similar dynamic of what might happen if a large number of people, and I don’t know if people have done this. Take out loans to buy Bitcoin.

Jay Kang: Yeah.

Aaron Lammer: Which was happening during the height of the mania.

Jay Kang: Yeah, around 14000 was-

Aaron Lammer: I think we haven’t heard about that for a while, thank God. If that could get rooted out of the system, that would be a good idea.

Jay Kang: The problem with the taxi medallion thing, compared to Bitcoin though, is that Bitcoin might go back up to 25000 dollars, or 20000 dollars this year.

Aaron Lammer: Yeah.

Jay Kang: The taxi medallion is never going back up to a million dollars.

Aaron Lammer: Well if you, the only way to bet on that long, the taxi medallions, would be betting that New York City is going to ban Uber.

Jay Kang: Yeah.

Aaron Lammer: Ban all ride hailing apps. Which I could have seen as a bet you maybe would have made in 2012. That is a tough call right now.

Jay Kang: But if you had an inside track onto New York City’s gonna ban uber, that is a great next Bloomberg business story. This man had a-

Aaron Lammer: Whereas, if you had stayed in the Austin taxi market, which doesn’t have Uber. Maybe those medallion’s had done better over this period.

Jay Kang: No, I think they have. And that was a lot of the argument about regulating Uber was that all these people who own medallions were getting completely racked, you know?

Aaron Lammer: Well, and tell me if I’m wrong, as long as we’re this deep into taxi medallions, I think we should just go whole episode with it.

Jay Kang: Should we just start a taxi medallion podcast?

Aaron Lammer: Taxi medallion podcast. But it seems like the guys like Michael Cohen who were deep leveraged in the taxi medallion game, liked being in that business because as far as I understand, when you have a medallion, driver goes drives a shift and gives you a hundred bucks.

Jay Kang: Yeah.

Aaron Lammer: And I would guess that that historically has been a cash payment?

Jay Kang: It was for years the best investment that you could have because the value only went up, right? New York City’s, they cap it, right. So at some point there can’t be more. The taxi licensing commission has to put out more, they wouldn’t. You know because they were controlled by all these people who were leveraged to the eyeballs on it, so they were scarce. Population in New York City kept going up. So you know, obviously these rides are in high demand. And if you own five of them, then you have two things. Right, you have the people who you rent the medallion to who are paying you-

Aaron Lammer: Cash, which makes you a very friendly person to the mafia.

Jay Kang: All the time, and the value keeps going up. And it’s so it’s like owning an apartment in a neighborhood where the price can only go up and getting rent without having to pay any sort of maintenance fees or anything like that. I mean it was an amazing investment for years.

Aaron Lammer: I believe Saifedean Ammous is arguing that Bitcoin is that investment right now.

Jay Kang: You can have someone drive your Bitcoin around.

Aaron Lammer: No, it’s all of those qualities that you just described.

Jay Kang: Yes. Because it’s deflationary.

Aaron Lammer: Because it’s deflationary. And that’s ultimately like we’ve been experimenting with all of these currencies and here’s what’s gone wrong. All of these things lead up to this point in history. And gold mining has been pretty successful. They’ve been able to control it, but Bitcoin is one step further. They’re not anymore. There’s not the same gold, I think they say there’s two percent added to the world’s supply every year. There’s 21 million Bitcoin. That’s it. You know. It’s a taxi medallion.

Jay Kang: So maybe this is a question we should ask-

Aaron Lammer: Except there’s no Uber in this universe.

Jay Kang: Well there is Ubers. There’s like 5000 Ubers that are trying to take down Bitcoin. That’s the biggest problem. Ethereum is fucking Uber, man! You know, and Ripple is Juno. And there is competition. So but I think he would acknowledge that.

Aaron Lammer: I think he would too.

Jay Kang: The second part of the taxi medallion example which I actually think is pretty apt. I’m glad that you brought it up. Is that the problem with the taxi medallion is that it was not that like an immigrant family from Bangladesh would scrape together and use all their family network to pool together to buy a taxi medallion. That did happen, it was very rare. It’s that this whole thing got you know, swapped up by a small number of people who are either prospecting for it or were straight up mafia, you know?

Aaron Lammer: Or in the case of Michael Cohen, were like Jewish attorney mafia.

Jay Kang: Yeah. Exactly. So that’s the problem with the deflationary currency or any sort of deflationary … And I do think that you can say that taxi medallions are a currency. Is that once it’s fucked, it’s very hard to unfuck it, right?

Aaron Lammer: And I think that’s the risk of Bitcoin, which is you’re like, this is great. It’s taxi medallion! Also if an Uber comes out, this could be worth almost nothing.

Jay Kang: Yeah, exactly. And also now that I have these medallions, and I’m making money off of it, nobody else can have medallions, because I also control the guy who prints more medallions. And I’ve told him that he cannot print any more medallions. So, a few weeks ago we talked about Jim Surawak’s article that he wrote in MIT Technology Review. And one of the things that he said was that the reason that fiat currency is good is because you can unfuck things. Like you can figure out how to solve massive problems that happen.

Aaron Lammer: You can engineer an economy.

Jay Kang: Yes.

Aaron Lammer: And Bitcoin is not an engineered economy.

Jay Kang: Yes, like basically Bitcoin right now is taxi medallions at the height of Michael Cohen, fucking leveraging himself, borrowing money to buy more taxi medallions.

Aaron Lammer: And I think to their credit, people who believe in Bitcoin, true maximalists. People who believe fully in Bitcoin are like yeah, that’s better. Like don’t engineer the economy. Like the example we just read of Rome, it’s like they did all this crazy stuff trying to engineer the economy, but people kept wildly speculating. And it ultimately led to x and y. So I don’t embrace total free market libertarianism myself, but I find a lot worthwhile about the idea of Bitcoin and I think to criticize it from any sort of a standpoint that we need to engineer economies. If you believe that you’re never going to believe in cryptocurrencies. There’s like a fundamental disconnect. You either want engineered economies or you want some sort of amorphous, unengineered world money pool.

Jay Kang: And that’s what I appreciate about Saifedean’s book, which is that it is a very clear eyed, if you believe in crypto, this is what you should believe in. Like you should be an Austrian school economics person. And you should believe in anarchocaptalism. You should believe that, and I don’t know if he would say that this is true, but if he is consistent with his opinions, which I imagine he is, he’s okay with the Uber coming along.

Aaron Lammer: Sure.

Jay Kang: Like he’s okay with Michael Cohen getting completely wrecked. He doesn’t think that the government should step in and save Michael Cohen because Michael Cohen was profiting off a New York City taxi licensing commission that was completely corrupt, and was inefficient and was not servicing the number of people who needed it. And so when Uber comes along, it destroys it, you know. And that’s a good thing. So that could happen to Bitcoin as well. I don’t think he would say it would because he would say that all the other coins are shit except for Bitcoin. And that’s why Bitcoin is good.

Aaron Lammer: I don’t know what he thinks about other coins.

Jay Kang: He calls them all shit coins.

Aaron Lammer: But I find-

Jay Kang: But that’s what part of his Twitter persona is, like everything except Bitcoin is a shit coin. And people will be like what about Ethereum, [crosstalk 00:31:34] shit coin?

Aaron Lammer: I mean it’s sort of a gray zone. What I noted is sometimes I wasn’t sure if the things that Saifedean was saying in this were like his ideas or his interpretation of Satoshi’s ideas because they’re so close. But like the way you just described, you know, don’t save the economy. The very first thing we know about Satoshi is that Bitcoin is directly inspired by the like, banking bailout. It’s like one of the only things we sort of know is that what is what he was thinking about when he launched Bitcoin. So I think if you look at that as the foundational myth of the Bitcoin narrative, we’re driving towards some point where economies can no longer be bailed out because they’re not under the control of governments. If you look at, if you’re a true Bitcoin maximalist. I also think he makes an argument, I’m wondering what you think about this. That there’s no real half way with Bitcoin. That the only path for Bitcoin is maximalism at some point.

Jay Kang: Yeah, and I actually found that part of his book to be the most convincing. Was that this thing only really will get to its full potential if it becomes the standard for the world. And I actually-

Aaron Lammer: I didn’t even think about the title until you like said that.

Jay Kang: Yeah, I have real problems with that pragmatically, but I actually think I might agree with it in a theoretical idea where I don’t even know which way I would go, but I would say yeah, if it’s going to work, it needs to be full on. It can’t be this thing that only certain people use. And is like an interesting idea and is only used for certain types of transactions. It need to be like the store of value for everything. And that’s where the idea, the deflationary currency really needs to be, it needs to be the only deflationary currency. And like I actually found that to be quite convincing.

Aaron Lammer: It made me think about like what the last project that I had heard about that’s goal was the whole world. Which is probably Facebook. If you invested in Facebook, when it was already being publicly traded, you’re basically like what’s the ceiling? Well the ceiling is the entire world. And at a certain point, as enough people invest in these things. Like an investor in Facebook, if you’re buying Facebook, you know as it’s already up there, you’re basically like I think it will. And at a certain point, if you’re buying Bitcoin, you have to believe in a Bitcoin maximalism. As Bitcoin gets up over 20, 50, 100 thousand dollars, if you’re still buying then, the only way you’re going to win is if Bitcoin maximalism takes over the world.

Jay Kang: Well yeah because the price, even at 10000 right now or whatever it’s at, 9000. That potential is baked into the price right now. It’s not like people think that a Bitcoin is actually worth 9000 dollars right now. They’re baking in the idea that perhaps this is going to take over the world. He actually brings Facebook up in the book in a way. Where he says, well look, these types of ideas have worked in technology where like look Facebook became the standard because it allowed for certain features. And as the network grew and after a certain size, all other competition became impossible. So like Google could create Orchid or Google Plus, it didn’t matter. You know, like things like MySpace fell off obviously. Massive, massive companies could try and make social networks, but it wouldn’t matter because Facebook had gotten a certain amount of share in which there was no feature you could add could actually replicate the features that happen when you have a ton of people on it, right?

Aaron Lammer: Yes.

Jay Kang: And he says that for Bitcoin to work it needs to reach that point. He believes, he seems to believe that it is close to that right now.

Aaron Lammer: Not just in value, but in terms of the nodes to the network and the connectivity [crosstalk 00:35:10].

Jay Kang: The number of people who use it. Yeah, yeah, yeah, yeah.

Aaron Lammer: People who use it to make transactions, yeah.

Jay Kang: And that that’s why everything else is a shit coin that is a distraction from this idea that Bitcoin will take over in the way that Facebook has taken over.

Aaron Lammer: I think that’s a provocative argument, but let me push back on one of those points because I’m curious what you think. So you said that that’s already cooked into the 10000ish price of [crosstalk 00:35:32].

Jay Kang: Of course, yeah,

Aaron Lammer: But when I read this history of money that Ammous lays out in this book, we already know how much money like all the gold in the world is worth based on the current value of gold. And gold is the jump before Bitcoin. For Bitcoin to even pass gold, and he is making the argument that Bitcoin is like a vastly superior technology to gold, Bitcoin would be hundreds of fold more valuable than it is now.

Jay Kang: Oh yeah, sure, but-

Aaron Lammer: So, so, the possibility of that is cooked into the price, but you would also say, if Bitcoin even vaguely makes good on the possibilities ascribed in the book, [crosstalk 00:36:15] millions of dollars, okay that was my read. I was like, if you believe this book is the future, Bitcoin is worth over a million dollars.

Jay Kang: I mean, look at the price of Amazon stock right now. Like it’s 1600 dollars a share.

Aaron Lammer: Would have been unthinkable five years ago.

Jay Kang: But part of that 1600 dollars is people speculate on the future, and that’s part of the price. It’s like, it’s baked in, the idea that like everything we buy-

Aaron Lammer: The entire economy.

Jay Kang: The entire economy is-

Aaron Lammer: The entire retail profit [crosstalk 00:36:39]

Jay Kang: Yeah, and they might take it over like large states. You know, which is what they’re trying to do. That’s baked into the 1600 dollar price. It’s not like the actual business right now is worth that whatever it is at 1600 dollars a share. The speculation is baked in. So with Bitcoin, you know, some of the criticism of it is that there is no actual fundamental, that the whole thing is baked in potential. Which you know, Saifedean would disagree with. But which I find a little bit more convincing.

Aaron Lammer: I think that the current price compensates for a lot of scenarios that are not Bitcoin maximalism. That are like, hey, Bitcoin gets so big, it’s as big as the fifteenth largest economy or something like that. But it does not totally take over in that kind of way. Did the book make you want to buy Bitcoin?

Jay Kang: Yeah, it did. And you know, I think we should go over one example that he brings up. Of why Bitcoin is good. And he, this is about Bitcoin’s potential to influence governments, right? That right now is a veil between the government and the people. So that even when you have the gold standard and you have dollars that are pegged to the gold standard. Like we can’t peer into Fort Knox or walk in there with like a little scale or something like that and make sure that the amount of gold that they say they have is what they actually have.

Aaron Lammer: Similar to my like arguments about bad actors on block chains, which is like, yes, all this works if you assume that people are not lying. But in a non-public block chain, there is a certain trust that people are not lying, just like there would be in Fort Knox there.

Jay Kang: Yeah, and he is essentially saying that when you have this radical transparency of money, that people will, and when money is scarce, that people are actually much more prudent about how they spend money. And so his argument is that this will affect everything. So people will actually become more engaged in how the government spends money because they don’t assume that there is an endless amount of it. And this, I actually find somewhat convincing, because like, you know what the federal deficit is right now?

Aaron Lammer: I would not try to say it on air.

Jay Kang: Do you have any idea how the deficit affects the government functions?

Aaron Lammer: Generally, like debt ceiling shut downs is the main time I hear about it.

Jay Kang: Nobody knows any of this. Like nobody knows actually how much money the United States government has. Nobody actually understands how it, every once in a while it’s like USA today will make a cool infographic that shows how much of it’s military spending or whatever. But that’s it, you know. And he says that if money is scarce, if it is on the block chain, if it is very transparent, then the government will be forced into only making prudent decisions. He says that that will actually cut down military spending, that because while people will feel a certain need to do things like improve health care or whatever like that, what they won’t do is sort of say, hey we should fund this small operation in Yemen. And we should fund this small operation in the in the Philippines. And this one in the Sudan. That once people are actually aware of how much money is being spent on those types of things, that they will backlash and they will vote people out of office. Do you find that convincing?

Aaron Lammer: I think the government stuff is the final leap, where I don’t quite understand how Bitcoin works as a governmental currency.

Jay Kang: Well, it would just be the money that everybody uses around the world, right, so then-

Aaron Lammer: So the US federal reserve would be-

Jay Kang: Would be Bitcoin.

Aaron Lammer: 10 million Bitcoin. [crosstalk 00:40:06]

Jay Kang: Yeah, well that would be a lot.

Aaron Lammer: If we’re doing really well. That’s an American maximalist scenario.

Jay Kang: Exactly, that’s Aaron the imperialist talking.

Aaron Lammer: You know, Trumplandia, of course.

Jay Kang: I mean, I think that it’s more just what happens psychologically when money is scarce and transparent, is what he’s talking about.

Aaron Lammer: Right, know I under-

Jay Kang: That people would really track it a lot harder. And that they’d be more interested in short term personal outcomes instead of these sort of abstract campaigns that toss them personally money and that they would be more prone to push for things like healthcare or you know, like social security than they would be to push for like a campaign in Yemen that they don’t know why we’re doing it.

Aaron Lammer: Right, and the counterargument to all this would be the argument that we talked about. That a Bitcoin economy would be unkind, perhaps even cruel. And all the engineering that is done on the economy would be undone to disastrous effects for human life in America.

Jay Kang: 95 percent of the people in America would be too poor to even get themselves to a polling station is the alternative.

Aaron Lammer: Yeah, and I think that there’s usually a lot of guns in these scenarios. Like when I really start playing them out in my mind, I’m like, I believe in that world I think I’m also long on gun stocks.

Jay Kang: All right, well is that a good place to end?

Aaron Lammer: Yeah, that’s not a world I want to live in. But I’d still buy some Bitcoin.

Jay Kang: Yes, the answer is always we should buy Bitcoin.

Aaron Lammer: Okay, so Jay, this was great, I enjoyed talking about this book with you.

Jay Kang: Yeah.

Aaron Lammer: We’re going to get you a real copy of the book for next week.

Jay Kang: I’ve already ordered it.

Aaron Lammer: And people at home, order the book. We kind of did like the first couple chapters, a little bit of maybe chapter three there. So four through seven we’ll try and do next week. Let us know if you are listening and you have questions in your reading, comments. We’d love to hear from you, we’re going to talk to the author of this book, Saifedean Ammous, on the last episode. So listen along, catch up if you can. And we’ll be there in a few weeks. Yeah, thanks for listening. You got anything you want to talk about Jay, anything you want to promo?

Jay Kang: No.

Aaron Lammer: Push that show man!

Jay Kang: What show?

Aaron Lammer: Oh you mean this show! That’s right, that’s what I’m talking about.