 It's great to be back in Georgia. Thank you Pata for putting this together and thank you for organizing all of this You know and and thank you to the to the many people who have met over the years in in Georgia who are here today You know one of the engines of progress one of the engines of the wealth that we all enjoy and Even in Georgia We are all extraordinarily wealthy I Know it's hard to believe But you guys are all rich when compared to any other period in human history 300 years ago 95% of humanity lived in what we consider extreme poverty $2 a day or less Try to imagine right now what it would mean to live on two dollars a day or less Two dollars in today's dollars 300 years ago Everybody lived on that Everybody survived on that it was easy They didn't have nice clothes They didn't have any electronics no iPhones. They didn't go out to eat. There was no such thing as restaurants. No movies There was nothing Life was Short, what was life expectancy? 45 if you were yeah, most places under 40 39 in Western Europe Rest of the world life expectancy was 30. I mean you guys are as young as you are you're all middle-aged already I'm dead a long time ago That was life And what did you do during the day you got up in the morning when the Sun came up? You went and worked through the field and when the Sun went down you went home You put out a fire you ate a little bit and you went to sleep No books nobody people couldn't read but there was no point. There was no time to read No electricity no light no lanterns too expensive Life was short and brutish Most children died before the age of 10 and this is how human beings have lived For almost all of human history So there's a famous graph. I'm gonna draw it in the air 10,000 years ago We made most people 90 plus percent made about $2 a day or less and they kept making about $2 There was a little bit better and a room that she got some some nice running water and things like that But then dark ages everything goes back to $2 a day or less and then one day Bam, we all got rich So you can't really understand us getting rich without understanding finance Without understanding financial markets how they evolved and how they contribute to human well-being human beings are better richer We have more opportunities Because of Financial markets financial institutions finance in the broadest sense So what I'm gonna do right now is give you kind of a an outline of the history You know we've got I don't know 30 45 minutes. We can't go too deep We can't give too many detail But I'm gonna give you an outline of the history of the way finance has evolved over the last I Always get too hot. All right. There goes the jacket over the last Really 10,000 years or so So when you think finance What is the product of finance? Money absolutely. It's all about money, right? Now where did money come from? How did we get money? Money came from our need to trade Why do we need to trade? Because the reality is That we can't produce everything that we need to live There's just too many things for a comfortable life for us to be able to produce I don't know how to I actually don't know how to make an iPhone I certainly don't know in a modern day. I don't know how to make most of the things I use I Don't know how to make clothes. I don't know how to make shoes. I don't know how to grow food I don't know how that camera works. I don't know so many things and The beauty of trade is I don't need to know any of that Because somebody specializes in cameras and somebody specializes in iPhones and somebody specializes in shoes I specialize in this and it's hard to believe but I can make a living doing this right make enough money So I can then trade With the guy who makes the iPhone and the guy who makes the shoes and the guy who makes the cameras And I can get all those things by doing what I am good at doing. I'm not good at these other things Every one of us has something we're good at something we love doing Something we can do to make a living so that we can Trade not buy don't think of it as buy you're trading For all the other things that you need But before we had money to do that trading It was really really difficult Because if I had cows, but I wanted chickens and you had chickens It was really difficult to trade a cow for chickens chickens are smaller Like how many chickens is one cow worth and you can't cut a cow up into pieces It's not the same right to cut it up is dead A dead cow is worth more or less probably than a live cow So it's it's very complicated to try if I'm growing if I grow tomatoes and I want a cow How many tomatoes for a cow a huge number of tomatoes? Right and the guy who has the cow has too many tomatoes now. What's he going to do with all these tomatoes? Use some of them to buy a chicken. It's just complicated It really is so that's called barter right when we trade goods for goods So some genius who knows when 10,000 15,000 years ago at some point in human history some genius thought What if we created some other product something that everybody wanted or at least everybody valued somehow And we could use that to exchange for everything else And maybe the first thing that they used was maybe I don't know Some rare bones of some animal that everybody thought was pretty and then they used that to exchange If you look at different cultures around the world, you find different things becoming money at different points in time Depending on what the culture valued But over time people kind of gravitated to using gold as money Why gold? Because it's rare Because it's shiny and pretty and we like to make jewelry from it, right Who doesn't like gold? Everybody loves gold right And it's you can break it up into units and you can measure it right So we can have a little bit of gold maybe for buying the tomato a little bit more gold to buy a chicken A big part of gold, you know to buy a cow, but now we can break it up like right and now it becomes and gold became money And suddenly the global economy was very local, but in a sense everywhere in the world where they used money Suddenly became more efficient I didn't have to worry about cows versus tomatoes versus chickens versus this versus that Everything is now denominated in ounces or some weight of gold Kilos of gold Right and that increases efficiency It encourages people now to specialize because they can trade for everything They don't have to worry about the units of exchange and how to do the trading now a whole world opens up Of all people specializing in their little different things and we can trade among all of us We don't have to worry about how do I move my cow? How do I move my tomatoes? You know the other problem with tomatoes is They rot they get bad after a while. So if you're going to trade tomatoes, you have to trade them quickly But now I can trade them for gold It's easy. I can trade to 10 different people each one can buy one tomato and that's okay But when I was bartering how am I going to how am I going to get rid of these tomatoes? So money made the economy immediately much more efficient and again, we don't know exactly when this happened One of the things people realized is that sometimes Sometimes I need more money than I have And maybe I go to You know the local farmer maybe has a little bit more money because he had a good harvest And he said and I say, you know, can you can you give me some of your money? I need I need to use it in order to buy some things in order to live or maybe to invest in my farm And he goes, why should I give you any money? Right? What's in it for me? Right So, you know, maybe people scratch their heads for a while and figure out how do we make this work because sometimes I've short of money Sometimes I have more money than I need This should be some way to use this money more efficiently So it's not just lying around because different people have different demands and different needs at different times How about if I give you the money, but I charge you interest When you return the money, you give me back a little bit more than before. Why? Because you're using my money for a while Also, you might not give it back So there's a little bit of a risk Right So to compensate me for the risk of you not paying me back and to compensate me for the fact that I can't use the money While you have it. I want some interest And slowly people starting lending each other money. I think this developed very early on Where people lent each other money But this is interesting Because in the Old Testament In the Old Testament, God Tells the Jews in the Old Testament. He says You're not allowed to charge interest from your brother In other words, you're not allowed to give out loans and expect interest So I'm supposed to give my money to somebody And just hope it comes back and not charge anything for the use and not charge anything for the risk Yeah, God says no interest From your brother, which is interesting. We'll get to why from your brother's important because what God meant by brother What the Jews interpreted meaning is from other Jews But non-Jews were not brothers So Jews could charge interest of everybody else just not Jews One of the reasons Jews became money lenders later on But when Christianity came about The Christians said, huh? Everybody's my brother Right Christianity is a universal religion Jewish the Jewish religion is very Closed religion. You can't become a member. It's a club Right But Christianity everybody can become a Christian. It's very easy to become a Christian very hard to become Jewish So the Christians said well if God doesn't allow me to lend money with interest To my brother. He doesn't allow me to lend with interest to anybody And usury, which is interest charging interest on a loan became a mortal sin. You went to hell for doing it Now as you can imagine this creates financial problems Kings need to borrow money to go to wars. We talked about somebody talked about Georgians liking to go to army right wars were very popular sadly in human history, but you need money to go to war And they often needed to borrow money But Christians weren't allowed to lend They weren't allowed to charge interest And one of the reasons you saw Jews going into the sector of money lending and banking Ultimately what became banking is because they were allowed God allowed them to charge interest of non-Jews not just from the old brother And you can see how maybe Christians started hating Jews a little bit because of this Right. I'm not allowed to lend you money But the Jew is What the hell If if usury interest is a mortal sin, shouldn't it be a mortal sin to him as well? You also see, you know once in a while There's a famous story in york in england where you know the local aristocrat borrowed a little bit too much money Who knows what he spent it on? Maybe parties and other stuff and he borrowed too much money couldn't pay the jewish money lender back So what do you do if you can't pay your money lender back? Gotta be creative here Well, you organize a program you organize the killing of the jews and you make sure that the money lender is one of the Jews that are get skilled So some of the Antisemitism and some of the murder of jews throughout the centuries was a consequence of We owed the money. Let's get rid of the books. We burn the books. We burn the money lender and it disappears So unfortunately this connection Uh has stayed and a lot of anti-semitic anti-semitism is associated with this idea of jews money Why can't we do it? They can do it and all of that Um There wasn't a lot of progress in finance After the fall of roam during the during the uh the dark ages and the middle ages Partially to a large extent because of this prohibition on charging interest It's it's hard to develop a profession where that's the heart of it. That's the essential feature borrowing and lending money where suddenly It's prohibited the catholic church made it a mortal sin if you if you look at dante Dante's inferno All right, everybody. I don't know if you've read the book, but there's a it's a famous Middle Ages book The money lender is got is is on the seventh rung of hell He's got a bag of a gold around his neck and the gold Is being drawn to the fire in the middle. So he is burning up Right. This is not a pleasant image for people. This is not a noble good positive profession And that was it that was the view That most of the christian world held Uh during the middle ages even when you when you uh, when you see bankers like the The medici bankers in flaunt, you know, the medici is that the people supported Michelangelo and Raphael and uh, and all the great artists during the renaissance They pretended they want charging interest So they would make loans and this by the way still exists today in finance Islamic banking, I don't know if you've ever heard of islamic banking But the way they do banking in the middle east And the way it's called islamic banking and they they're not a lot of charge interest either islam prohibits charging interest So they give you a loan And you're supposed to pay back plus interest, but they don't call it interest It's now like you've like a dividend or it's like you you own a piece of the company It's all a lot of pretending But all the pretending is geared towards Not violating this law or this statement where you can't charge interest They find all kind of loopholes and all kinds of way around that and uh, you know charging interest on loans was prohibited by the catholic church until the late 19th century So these alternatives developed and You know the medici's were in renaissance italy. They started, you know the economies of europe started growing What happens when the economies grow? What is what is required in order to grow an economy and employ people and start businesses? What do you need? In order to do that Well fear will is the beginning it's not enough right you have to convince somebody to give you what What's that? Yeah, you need money you need capital So if you have an idea like even today, it's the same thing today as it was back then You have a great idea. You think you can change the world you can invent some new The best gadget ever better than iphone better than Okay How do you actually make it a reality you have to buy You know you have to do the research you have to write the program you have to buy the equipment You have to hire employees How are you going to do all those things? Well, you need money You need investors or you need bankers or you need a loan But you have to have money no business gets created Without capital Sometimes it's your own capital. Sometimes your family gives you the money But most of the time the money comes from a bank or venture capitalist or some investment bank But some kind of investment has to come in So as the economies of europe were growing more capital was needed more businesses started being created And people like the medici's realized that there was this enormous opportunity They started building branches of banks all over all over the country And making loans in gold they were still using gold in those days And they would move the gold from place to place depending on where it was required where there was more economic activity And that's how the first kind of multinational banks were created. They were created during the renaissance and in the following of the renaissance And even the jewish money lenders got more sophisticated and started banks and you see the Rothschilds the famous Rothschilds building banks all over europe that lent money borrowed money The important thing to note here is You know mox calm ox you've all heard of calm ox you all know calm ox right calm ox teachers are something That i think has become embedded in our culture in a deep deep way Where does all value come from according to mox? What what is Where the products where the goods where where where does the stuff we use who creates them according to mox? What kind of people workers Everything is a consequence of manual labor All creation is the creation of the workers you employ How do we get an employee? How do we get an automobile? We're in a mobile through the work of the workers who tighten the bolts who who put the car together. We assemble it And therefore everybody like managers and capitalists because they don't actually build the car. What are they? ex exploiters They're exploiting the workers because the workers build everything but the reality is The reality is that that's upside down The reality is that there are no workers until there's an idea Every business starts with an idea Every business starts with an entrepreneur With somebody who thinks they can do something better than it's being done before No business ever starts with workers Putting an automobile together somebody has to have an idea of an automobile And groups of workers don't have those ideas It takes an entrepreneur to have those ideas and if you read the history of business every single business starts With some entrepreneur and then what does the entrepreneur have to do? He has to raise capital Because you know what no workers work for nothing for free So he pays their wages even when the company is losing money If you think about today in financial markets today, if I want to start a biotechnology company I need to raise a lot of money Because I have to hire scientists and they have to do research and that research can take years and years and years to do Who's paying those researchers while this all happens? The investors I am through the investors right? And what's the chance that after all these research We actually have a product that we can sell that the regulators will approve and we can sell in the market And make a profit It's very small if you look at biotechnology very few companies ever succeed So somebody has put all their money at risk to play employees for years and years and years salaries None of them are doing it for free They might get zero back Usually they get zero back Maybe they get a you know if they're lucky they get a lot back But in the meantime they paid out so In a sense isn't the employee Quote exploiting the capitalist They're working. They're getting a salary capitalist is getting zero It might even if the capitalist gets a return it might be 10 years in the future Every startups loses money for the first few years. I don't know any business that doesn't lose money in the beginning Who's bearing the risk and the cost of that not the employees Never the employees It's always the capitalist. It's always the financier And who decides Which ideas should get funding and which ideas should not get funding because you know what some ideas are really really stupid I mean the bad ideas all the time You know, I don't know how many of you are in crypto But uh, there's a lot of bad ideas in crypto. You can see a lot of them collapsing right now, right over the last year A lot of them maybe some of you owned them as they went to zero Right But somebody has to decide when you come to an idea and say I've got this idea of a new product. I'm going to make x somebody has to decide. This is worth it This is not now in centralized You know in a modern world in centralized Authorities who gets to decide that governments get to decide it But in a free market bankers financial markets they decide i'm supporting this i'm not supporting that They allocate capital And what's the principle by which they're allocating the capital who they think will be successful and who they think will fail So capital goes to the most productive efficient place possible And different parts of the financial markets Take on different levels of risk Some people like venture capitalists who invest in startups in technology and biotech. They take a lot of risk You know for every 10 investments of venture capitalists make do you know how many generate zero return? Not nine, but probably six seven What's that five percent average go to zero Five percent that succeed. Yes five percent succeed Usually one out of ten, you know, usually five one out of 20 does really really well That's the five percent a few do okay And the rest do nothing zero they lose it all Most people don't have the stomach Don't have the courage to make those kind of investments that would scare me Only get five percent of only five percent winners would be very scary for my money, right? So venture capitalists take the most risky investors banks How many how often the bank loans go bankrupt? Very rare Maybe only five percent go bankrupt most of them pay back They take the least risky So financial markets have devised themselves into different categories So we went from no financial markets to very very sophisticated financial markets today on all of this has happened Really in the last 300 400 years Where we've created these networks these sophisticated banking and investment banking and investment vehicles Venture capitalists of all different kind private equity hedge funds anybody heard of hedge funds We've got hedge funds that make investments. I mean the financial market today is super sophisticated all Because the needs out there are so many and so diversified and so different And it's all based on different levels of risk And the way we evolve to where we are today from A simple ban on usury Is that starting certainly in the 18th century in the 19th century people catered to the realization that Put aside what the bible says In order to be successful in order to have growing economies in order to make money and develop and get rich We need financial markets. We need banks. We need to be able to lend and borrow money We need to be able to charge what they called usury And the prohibitions just went away the bible in a sense if you will was rewritten The catholic church reinterpreted it all the religions basically except the slum basically reinterpreted the old scriptures And what you started to get is banks everywhere and again these different types of financial markets One of the things that banks did early on and why we have today paper money so During the the 16th century a lot of people would go to the blacksmith You know what a blacksmith is somebody you who deals with metals, right? And they would say could you keep my gold for me? Just save it and and the goldsmith would give them a little receipt Saying I have your gold, you know if you this is uh, you know, you can come and and and Take your gold out And people had these pieces of paper with with it and they would go, huh? You know, I need to buy something. I could go and get my gold out and then pay the merchant Why don't I take this piece of paper? Maybe if I give it to the merchant He'll take it give me what I want to buy and then he can go to the bank and collect the money collect the gold That's how we got paper money these iou's Became kind of means of exchange they became much more convenient to dragging the gold with you And having these bags of gold and having to weigh them and different quantities now you got Paper that represented gold and that you could be redeemed for gold anytime you went to the bank And now these blacksmiths said, huh? Maybe we can give them different denominations Money right 10 paper money $10 $50 a hundred dollars one dollar And then they said maybe I can take all this gold that I've got in storage People don't usually take it all out and maybe I can take that and lend it out And start making loans And now you got a modern bank A modern bank that takes in deposits And issues out loans And you start seeing that in 16 17th century and they start growing But again, they really explode When the industrial revolution explodes when economic growth is high when demand for capital demand for investment Demand for loans really expands and then suddenly you have You know finance Funding this growth creating this growth, but also because Of the demand for their services Banks evolving and growing and becoming more substantial Now they get involved in Deal making in mergers in everything that a modern bank today does or modern financial institution In the in the 19th century One of the things that was happening was if I wanted to start like a railroad or something I need a lot of capital So it would go to all the people I knew and get money from them and then I would issue them shares A percentage ownership in my company And then what would happen is people would own these shares, but they didn't like just a piece of paper They wanted to be able to sell these pieces of paper and get money So used to go to a little coffee shop In new york city and this coffee shop was on a street called wall street And they would go to this coffee shop and Everybody who had the shares would be there and if you wanted everybody knew if you went to the coffee shop You could probably sell the shares somebody would be there and maybe they would buy the shares from you And they started to be a regular marketplace if you will be I've got shares of the railroad Anybody want to buy them and people would bid on them and so on And that slowly developed and became what did it become a stock market And that was it was on wall street. So today when we think wall street We associated with stock market investment banking today It's a big stock market exchange the same thing was happening in amsterdam The same thing was happening in london and the stock markets come around which basically take An ownership stake that you have in a company Which now you can trade in exchange for money You can get the money you can buy stock in another company you can diversify you can buy stock in lots of different companies Again, it all happened organically it all happened out of a out of a need of people to invest And people to raise money in order to in order to Create businesses So financial markets I've seen this massive evolution. I'd say primarily over the last 200 years just as All of the industrial revolution was happening all of this wealth was being created We saw this expansion and diversification of financial institutions and markets I consider finance The lifeblood of capitalism capitalism cannot exist without This flow of capital that goes throughout think of it if you want an analogy You know financial markets and financial institutions are like a like a circulatory system the blood If you will is money The heart pumps it to different. So finance is really our heart Pumping it to the right places like you're running. Where does all the blood go? To the muscles of your legs, right? The heart is pumping it the heart pushes it But it pushes it more to the legs than anywhere else because that's where it's needed When you're sitting and doing a test an exam at school Hopefully where does all the blood go to the brain? Well, I hope so otherwise you're not going to do well in the exam Right because you're spending a lot of energy Thinking thinking you'd be surprised how much thinking You know spells that energy you don't have to exercise just think and you'll and you'll get thin anyway Because calories are burnt when you do a lot of thinking So the blood is like the the the is like the money is like the money the circulatory system is like the Financial markets wherever it's needed That is where it goes So for example, I give you one example and then I'll take questions During the during the 1980s in the united states The united states was making a lot of stuff very inefficiently There were these factories that were making Steel products cables wires and it was very expensive because america's a high-cost country Labor is expensive real estate is expensive everything is expensive and you had these Factories that were losing money the japanese Much more efficient much more productive much cheaper and all these factories are just sitting there producing stuff and making a loss And one of the things financiers realized that wait a minute if we buy these factories And liquidate them Sell all their assets And take that capital and invest it in something where you can make money That would be really really cool And what you had in america in the 1980s is exactly that There's there's an area of the america in the middle called the rust belt today It's where all these steel manufacturing was happening And it was losing money and capitalists Financiers went in they bought it all up. They sold it. They shut it down. They fired the workers They were demonized because of it But where did all that capital go? All that capital from selling all these businesses. Where did it go? What happened in the 1980s? No 1980s there was actually economic boom So where did all the capital go? But where did it where did the boom happen? I mean you guys are too young to know what that happened in the 1980s In america. Let's just stick to america Silicon Valley That's all you have to silly. You know what silicon valley is computers Software microsoft apple Cisco sun micro systems a million little computer companies and software companies. This is a new industry It suddenly came out of nowhere And intel right microprocessors and where was all that where did all the money come from where did all the capital come from? From all those companies that were shut it down That freed up all that capital it went and it grew up in silicon valley In a sense financial markets know when to shut things down When things are not profitable and not worth investing in And then where they are worth investing in where they're worth investing in in 1980s was in the risk and we all today benefit from that Why? because every single one of you has Right now on you at home and probably several of the products that came out of silicon valley Products that were created with the capital That was redistributed but people don't get that so people think oh, but people lost their jobs Yeah, but many more jobs were created over here Then we'll shut down over here and better paying jobs So finance does that it reallocates capital constantly. They're looking Is this making money? Is this a good industry to be in? Is this is this the future? You know, so a lot of capital went into crypto. Sadly At least in certain companies in crypto. We'll see what happens nan Because people thought that we real opportunities there And a lot of money is going out and it's going to find the next right now Where's money flowing? Where's a lot of capital being invested right now? What's this hot sexy thing right now as we speak? Not crypto Artificial intelligence absolutely AI AI every venture capitalist in silicon valley wants an AI company right now Everybody's putting money into AI And that, you know, maybe they'll have some breakthroughs. Maybe not. Maybe there'll be over investment Maybe not and the capital will flow elsewhere But every one of these industries are created because capital flows into those industries You have ideas capital management That's what create companies So I don't believe there's more important a industry a business For economic growth for economic success for entrepreneurship for innovation, then financial markets, then finance Now that was a very brief history. I've got a book The market for finance if you're interested You can get it on an amazon and It kind of goes into a lot more detail But those of you who are going to go into finance or those of you interested in finance I know there's a lot of Shame and and people look weirdly at you if you're in finance and people denounce financiers But financiers should be proud of what they do It's a crucial crucial role in the economy. The economy would collapse without it Innovation and progress would not exist without robust healthy financial markets and the people doing the work in them Thank you, and I'll take any questions you might have Yes First of all, thank you once more again for your very energetic speech and very motivational So as you mentioned Humanity went through the Period where we had just less or about two dollars But nowadays completely different situation We have nowadays so many chances and opportunities But how to say at leftist and marxist ideas are still alive And not only a lot but becomes more and more popular What is the reason why do we have such situation from your perspective to discuss? Thank you. Sure. So so why is why are marxist left to the ideas still so popular and that's a big question And I can give a three hour lecture just on that easily right easily three hours But let me let me condense it. I think the two basic ideas that have to be Turned upside down that have to be challenged to challenge the marxist and the leftist and I don't think many people do them one Unfortunately most people I'm gonna I'm gonna try to be nice, but the reality is most people don't think And economics is an abstract field Most people just look and they see so for example If I buy an iphone for thousand dollars what most people see is I gave a thousand dollars I got an iphone and they interpret that as a zero sum transaction I gave up a thousand dollars got an iphone I didn't benefit I gave I gave up exactly what I received an apple It's it's kind of a zero sum and apple seems to make a profit somehow So it seems where did that profit come from how did apple make a profit? And yet I gave up a thousand dollars and got an iphone exactly what I paid for So it seems like apple made money off of me It seems like apple could have sold me this 500 dollars. They would have broken even and I'd break even and then everybody's happy That's what I ran called a perceptual level mentality all they can do is see they can't think And unfortunately most people treat economics that way they view the world as a zero sum game If a billionaire makes a billion he must have stolen it from someone I mean my mother when I was growing up told me every millionaires are thief She was a she was a you know at some level a socialist not you know and she believed that because it's zero sum What happens with zero sum if it's one pie if somebody gets a big piece somebody else gets a little piece And what they don't understand is that it's a growing pie That wealth is created now how is wealth created? When I buy an iphone One of the challenges we have as economists is we don't know how to measure The value the iphone has to me Because this iphone even though I paid a thousand dollars for it or the reason I paid a thousand dollars for it Is because this is worth a lot more than a thousand dollars to me Now if you promise not to tell apple, I'll tell you how much it's worth It's tens of thousands of dollars But don't tell them because that weighs the price just on me knowing that it's worth so much right It's worth a fortune And I could get you again. I could probably talk an hour just on my iphone But I'll give you a few examples, right? I can listen to every piece of music ever composed and recorded in all of human history on this thing at a marginal cost of Zero I buy a service and then I get all this music. I remember going to record stores And I'd have to buy what two million records at a hundred million dollars, right? It would cost me More money that I could ever imagine to ever have to buy all the records that I have right here On this little thing and by the way, I can listen to it Not just to my home with that record player and have to clean the records and put the needle on I can listen to this anywhere in the world while i'm flying while i'm driving Anyway, just from this little box Is this worth a thousand dollars to me? This is worth like millions of dollars And that's just one I'm not even you know Some of you are old enough to remember maps remember maps Paper and you would like have to drive like this and look at the map and look at the road and everybody would get into accident It was terrible now I can go anywhere in the world including tbilisi and drive myself anywhere and not get lost Which is amazing And the number of marriages this is saved is unbelievable because you always argued with your wife on whose right right turn left turn Now apple tells you and you don't have to argue anymore And you could go on and on about the phone calls and the video calls and The value of this is unbelievable. You guys were born with this. I know attached to your to your pocket So you don't appreciate it. But those of us who remember what life without an iphone know what it was like Where's the value creation? In my life my life is better And I don't know how to measure that and I people don't know how to explain that So people have this zero some mentality apples making money and i'm losing no i'm gaining more than apple Every time an iphone is sold the person buying it is gaining more than the profit apple gets And that so that's one That's the easier one. The second one is We live in a world where the moral code in the culture is That to be moral to be good You must give to others and not expect anything in return Real nobility real virtue saints Help other people and don't expect anything in return They suffer for other people. They'll die for other people. They'll give to other people And if they don't do it because it makes them happy it don't do it because it makes them feel good They do it because that's what they're supposed to do and that we live in a culture that is supposed to be morality Why why should I give you anything without expecting anything in return? My life is my life. Why is your life more important than mine to me? To you your life is more important. But to me my life is most important And this is rand's revolution, right? I mean rand tells us no Your life is the standard Your your happiness is what you should strive towards So when you give somebody something expect something in return, absolutely The way we should relate to one another is not So and somebody receiving sacrifices the way we should relate to one another as traders I give you something I get something back Whether it's monetary traders as in capitalism as in finance I give you money. I give you money. You give me a product or you pay me back with interest Or spiritual trade You know why I give you friendship and I get friendship back and and we have this interaction between us where both of us are benefit So the what we need to learn as a culture is the value of win-win relationships The value of trade from a moral perspective, not just an economic perspective We need to learn that value is created And the moral value is created that this is noble and good to seek your own happiness Your own self-interest not as an exploiter not as a user But as a trader with other people value for values so everybody wins win-win relationships So we've got a moral revolution and we need to teach people how to think about economic transactions Those are the two things we need to do to change the world so that they have a different view First of all, yours which was amazing and really interesting and also you mentioned that money change changed from time to time Like we had gold we had these papers I know that there was also some stones like Stones that's right. Yeah And I'm curious do you think that money that we have today will change in the future and be like maybe for a moment or something like that So do I think money today today? Where does money come from today? We print it and who prints it? The government does government prints the money and So at some point The government figured out governments all over the world figured out That having banks issue money Gives banks a lot of power and denies a lot of power over the economy to the governments themselves So governments started creating central banks Banks that the government owned And then they started saying okay, but that's not good enough because we want to we want to have even more political power state banned banks from issuing money And they made the central bank a monopoly Over the issuance of money and originally that monopoly over the issue of money still needed to get gold In order to print new money because gold was still the standard But then the government said This limits how much we can Siri always interferes in the middle of my talks. I don't know. She's she I think she's objecting to what I'm saying She's like stop it Governments figured out wait a minute the fact that I'm limited in how much money I print by the amount of gold Limits my power Let's get rid of gold And now I just print as much money as I want And that's what we have today Everyone in the world governments just print as much money as they want If they print too much money, what happens? Inflation we're seeing that now all over the world governments all over the world during covid printed lots of money So that they could lock you at home And keep you happy Because if they'd locked you at home and not giving you money you would have been upset So they locked you at home and then they printed money and handed it to you But then the consequence is inflation And then sometimes governments don't print money enough Because they're central planners and they get stuff wrong There's no competition And when they don't print enough money, what happens then? Well, there's a lot of demand for the money and not enough of it interest rates go up and often the economy goes into recession So I would argue I think most economists in the room would argue That governments printing money is not a good idea And will therefore not survive Now what will replace it? I don't know I believe in competition So I believe that governments should get out of the business of money And let the markets decide maybe it's bitcoin Maybe it's ethereum Maybe we go back to gold Maybe it's digital gold like gold with a digital currency backed by a deposit of gold Maybe it's something nobody's thought of yet That's the beauty of markets. The beauty of markets is That we don't know what the outcome is going to be We have different systems competing with one another and the one that's most efficient and most desirable by the people Is the one that wins So I am convinced That I don't want to put a time frame, but at least you know, maybe sooner but in a hundred years We won't have the same monetary system we have today government will not be printing money because it's too disastrous It's too costly. It's too bad for the economy What exactly replaces it? We'll see but it certainly could be Some form of crypto and it might be some form of crypto. We haven't invented yet, right? I mean everybody thinks bitcoin is it But bitcoin is like 1.0 Of crypto You know, who knows what it's going to be in 50 years how crypto is going to evolve the technology and our ability to use it I mean bitcoin has real flaws and real problems as money Maybe maybe somebody will figure out how to fix them and create a different crypto that's even better So I don't know and and usually when people ask me Well, if the government doesn't do it, how will the market solve it? I don't know But the beauty of the market is it solves it often in ways that none of us can predict. Did I predict the iphone? No, did I predict the internet? No, I'd be much richer than I am today if I predicted any of these things So I don't make predictions about specific technologies I just know that markets work because that is clearly proven Thank you Well, hi, it's always both experience and both motivation for School students to listen to professional people like you. Thank you. And let's get back to my question I have I wonder if it's possible for countries to have isolated economical system for a while to say in your team Parted products and it said support local businesses have a people work Okay, so the question is is Is having local closed local economies? possible and is it good in order to support local businesses and not by by Shielding them from competition from outside of the country And I would say I would say it's possible But it's not good It's possible, but you're going to get poorer Because the fact is that when you shield a country from imports You're shielding the country from cheaper products The reason the imports are coming in is because the products being made overseas are cheaper to buy Than the local products. So a the cost of living goes up. What happens when the cost of living goes up? Your standard of living goes down Because you're spending more money on On these goods and you have less money to save you have less money to go to the movies you have less money for other things So first you're making everything more expensive second You're shielding your companies from competition But we know that competition is good. What's good about competition? It spurs innovation It spurs getting better at what you do and now your local companies become lazy Because there is no competition So they produce bad products at higher and higher prices. Again, your standard of living goes down And it denies you as a consumer The best opportunities the best products the best prices And if you what happens if you pay less, let's say let's say all your clothes are coming from China or Vietnam or India or something Nobody in Georgia produces clothes you buy all your clothes from there and it's a lot cheaper. What happens to the difference? What happens to the money you save? What do you do with that money you save? What's that? Yeah, you might spend it on other things some of which might be made in Georgia You might not spend it. I'm I spent out. I'm gonna save it And if you save it, what happens that savings? It's invested in businesses in Georgia So for Georgian businesses, what you want is You to buy What's cheaper elsewhere and for Georgian businesses to specialize in the things that they are better than other places at You know every country this is called comparative advantage every country needs to find Every businesses in every country need to find the things that they are good at doing where they have a comparative advantage Over people in the other country where they can produce something cheaper There's no difference in that sense between countries and individuals right, it's like saying For a while, I'm not going to buy anything from anybody else. I'm just going to make everything myself Is that a good strategy? Oh, it's terrible So it's not good for you as an individual can't be good for the country either I mean in general if you think about comparing policies for the country and policies for the individual When it's not good for the individual, it's not going to be good for the country either So no, I would say never the only good strategy for trade And I think the store of every country Is zero tariffs and I would say unilaterally So tariffs trade restrictions import restrictions all of those throw them out One of the great achievements in georgia is you have the relatively open economy You have relatively open free trade with other parts of the world And that's one of the strengths of the georgian economy Any kind of trade barriers are always going to produce negative results Yeah How do you how do you do what I didn't get the end So you said that A lot of money is a reason of inflation. Yeah, and during covid do we Do you like printing money? Yeah? Yeah, and after that I think inflation must be everywhere, right? Yeah, and how did we get through from said situation? So how do we how do we move forward? Um, what was the first part of the question? I'm getting old First part quickly. Just give me a word Yeah, so the economic crisis Is caused almost all economic crisis are caused basically by two factors Um, one is inflation now. What does inflation actually do not only does it raise your cost of living? And it raises your costs and if your wages don't keep up with inflation Your cost of living and your standard of living therefore goes down. You have less money to spend So you spend less of it you buy the things you have to buy Those prices keep going up and you stop buying the things you don't have to buy those businesses go down And that starts creating a crisis So that's one big cause is bad management of money, which the government is at fault I'd say the second big cause is government regulation of business Government restricting what businesses can and cannot do restricting their flexibility to adapt and adjust Uh, making it difficult to open new businesses for entrepreneurs to start out Making it difficult for capitalists for for financial markets to funnel money into the areas the way it's most needed Banks Are the most regulated industry we have in pretty much every country In the in the planet that restricts the flow of the blood. It's like having cholesterol It's like having a blocks in your arteries that don't allow the blood to get to where it's most needed So if you want to solve economic crises One is you have to find a better monetary system I think the government getting out of it is the solution But that's long term in the short run you have to stop government running deficits So that they don't have an incentive to print more money You have to stop government running running deficits and you have to stop Governments manipulating the interest rates And then you have to deregulate you have to get the government to lower and and and eliminate regulations And the more regulations you eliminate the more vibrant the business community is and more economic activity You know is created so right now to get out of this crisis what we need, you know the inflation Unless the government to continue to print money is probably peaked But what now we need is more economic activity. So what now I would emphasize is cut government spending And reduce regulations dramatically and the more regulations you reduce The greater the economy the economy grows and this assumes that we have a rule of law Which I think you do have in georgia you have a rule of law now You just need to get the government out of the way and let entrepreneurs Power the economy forward Hey, stand up There you go I'm good. Thank you So, uh, what do you think about the future of money, um, because cryptocurrencies are more You know, shouldn't I say that? But My question is where the cryptocurrency is Uh Sure So I cryptocurrencies are not worth more than money I mean cryptocurrency is actually a fraction a tiny fraction of the money in the world Right, so there are many more dollars than the value of crypto crypto is about a trillion dollars Maybe less than a trillion dollars I can't remember how many dollars are circulating in the world, but many many many many many times One trillion dollars a lot more than that Look, um, I think I think the crypto that ultimately replaces money has not been invented yet That's my view. I don't think it's bitcoin. I don't think it's any of the crypto we have today I think this is still a young industry that needs to develop I think the other aspect of this is that you always have to remember is That governments don't want to lose control Will they let crypto become money? Because at the end of the day, what do we use money for to buy stuff? Now imagine if the government said No business is allowed to sell you stuff for crypto Then crypto is worthless. You can't use it to buy stuff And I think governments are going to do that I think governments are going to hold on to their monopoly over money for as long as they can And they will use all the means necessary to do it Right now in the united states since december There's been a campaign by the by the united by the us regulators To try to kill crypto or crypto businesses They've made it impossible for crypto companies to bank They've made they haven't given bank charters to crypto entities They're really making an effort to shrink the universe of crypto And I think they're just beginning I think these I think governments are pretty nasty when it comes to this thing You're you're challenging their control You're challenging their monopoly and they're going to fight and they have big weapons when they fight right What what what kind of weapons do the government have that we don't? They have big guns They have the law which is the biggest gun of all right because what happens when you violate the law You get punished Whether you like it or not somebody shows up and takes you to prison They have a big gun so I think I think things are going to be very very challenging for crypto You know because I think governments will fight for this power that they have over money Very very viciously because I don't think they want to give it up Which is sad but Sad but realistic Do we have another question? Good Oh, and we have one here as well, okay How does what money what do you mean by black money illegal money illegal money, okay effect finance and And the cost of products Gbt oh gross domestic product, okay Look black markets always exist black markets always exist When you ban things when you make things illegal that people want You get a black market So for example in in america in the 1920s They banned alcohol But everybody wants to drink alcohol almost everybody So what happened? alcohol went into a black market and violence Associated with it because what happens when something's illegal? risk goes up Value goes up prices go up all prices alcohol go up when it's illegal because it's very difficult to smuggle it And to have a the speakeasy where you can drink it in secret all of that is expensive So costs go up the profits go way up And who gets into the business because they have guns The mafia the bad guys So black markets always exist when you ban a product And violence always increases when you ban a product So having black markets is very detrimental To an economy you don't capture it in gdp Cost of the good goes up Violence increases the mafia gets created in america the mafia was created during prohibition There's nothing positive about it. So what do you do? How do you get rid of black markets? Some governments Use it as an advantage because they want you first of all they want to control you They want to tell you what you can and cannot use and what you can and cannot consume They want to tell you how you can consume it and so on But they also they like to pit people against each other So they use it to control you. But how do we get rid of black markets? What's the only way the only way to get rid of black markets? Is to whiten them Which means Legalize them make it legal So for example, what's the biggest back market in the world right now? Drugs Right illegal drugs heroin cocaine Stuff like that What's the consequence of having an illegal market in cocaine and heroin prices are very high Profit margins very high Very risky too. So what happens? Lots of violence Thousands of people maybe tens of thousands of people are killed every year Because of the drug trade Because of drug related violence Do people still use drugs? Oh, yeah, lots of them particularly in america lots of drugs But it costs them a lot And people get killed and they overdose. Why do they overdose? Why do so many people in america die from from cocaine overdose because the quality is bad and they can't measure the quality Well, but also there's no quality when I go buy something at the drug store I know that there's a quality on it, right? There's some current quality control. There's liability I could sue the company if they if they if they do something bad to me This competition so I could choose another product with the drugs I buy what's on the street and I can't choose and I can't complain who am I going to sue the You know the the gangs in mexico. I mean there's nobody to sue So how do we get rid of the black market in drugs? I know it's hard to imagine but you legalize them If you make drugs legal I don't think a lot more people will use but the cost of using will go down Violence will be eliminated And more treatments will be available for those people who do use because there'll be a market for those treatments Basically pretty much everybody wins Except the politicians who use the war on drugs to control us and also the people who want to tell us how to live There are people out there who think you don't know how to make choices for yourself God if I made drugs legal all of you would become heroin addicts So I'm going to prevent you I'm going to be a good person and prevent you from becoming drug addicts by not allowing you to have Heroin or whatever right, but that they think we're children They think we can't think for ourselves I read some research that said that when they legalize the drugs or some kind of for example marijuana The using of it in Country was less than yeah It first goes up and then it comes back because it first goes up because we want to experiment We want to see what it was like the secret this and then we experiment and then yeah Not a big deal and we and and we give it up. So portugal has basically legalized drugs And uh drug use has come down And it's no big deal in portugal one way or the other and it's not like everybody's addicted So there are ways to get rid of black markets and the way to get rid of black markets is get government out of the way Legalize it, but it is harmful to the economy and harmful to having black markets. It's harmful to everybody Yeah, but there wasn't there wasn't really free trade during the opium wars in uh in china china was not a free country And the drugs were being used to manipulate people and the drugs were being pushed Uh were being pushed on those people I don't I don't consider what happened during the opium wars An example of legal I consider that part of the part of this You know government's kind of controlling this and Using it to control their people by getting them addicted Yeah Is Is Yeah, so Sure So there's no question. I mean this this question was answered 250 years ago by adam smith and the wealth of nations Um economic libelism is true and economic nationalism is false economic nationalism is mercantilism And mercantilism is false for the same reason there's no look Let me step back one second and say that all of international relations Most of international is just wrong And even the framing of the question is wrong Because the reality is that countries don't trade with one another Georgians don't trade with who do you trade with? Armenians Georgia doesn't trade with Armenia Who trades with who? People individuals a Georgian person buys something from Armenia And it happens to cross a border. Who cares? Two people just exchange goods when two people exchange goods is it win win or lose lose or lose win It's win win It doesn't matter that the person is right in front of me in the same country Or across the border or across the other side of the planet. I buy stuff um I buy stuff from germans America doesn't buy anything from germany Iran Goes into his local store and buy something made in germany that store has bought it from somebody in germany Who has then bought it from a supplier? I traded with some guy in germany All trade is between individuals Or between companies but but at the end all companies owned by individuals all traders between individuals countries don't trade So there's no such thing as a trade deficit You know what whether you know who has a huge trade deficit? You do Every single one of you has a massive trade deficit with your grocery store You know the grocery store you go in you buy you buy groceries and you buy um Yeah, I don't know as cleaning materials and you buy paper towels at the grocery store, right? And you give them money and you get all the groceries That's a massive trade deficit as a grocery store ever asked you to do work for them No, I I have a huge trade deficit with the grocery store grocery stores never asked me to come and give a lecture So what did I have a grocery a trade deficit? That's the whole point of money the whole point of money is that I can buy whatever I want from whoever I want And it's fungible it moves about So countries don't really have trade deficits Individuals do and it doesn't matter one way or another so the whole conception of economic nationalism Is wrong and it was wrong 250 years ago and it's doubly wrong today because What's that? Oh, no, it's not just discussed politicians believe it people believe it And indeed we are moving into an era right now of more and more economic nationalism, but it's wrong Thoroughly wrong absolutely wrong It's one of the one thing in economics That almost all economists believe agree on even people on the left and on the right free trade is so Obviously true Works that almost everybody agrees about it, but then it's politicized It's pulled it. It's politicized and it takes into account the fact that most people are ignorant sadly and don't think but but Economic I don't know who still teaches economic nationalism, but it's non-economist almost certainly non-economist I mean even I don't know if you know who paul krugman is. Do you know paul krugman is? It's very left-wing economist in the united states. He got his Nobel Prize for free trade thing even though he's a leftist Even he is an advocate of free trade at least used to be before he became political All right. Thank you. Okay. I think this is the last question because people want to eat. I don't know I'm not hungry. You guys like I can go all night. So don't test me. Yeah Well, I mean you're gonna use economic freedom for your own good first By living it right by by by The very fact that you live in a country that is relatively free. You have more employment opportunities You have more entrepreneurial opportunities. You have more wealth creating opportunities more investment opportunities So take advantage of the fact, you know, many of you might become entrepreneurs This is a pretty good place to become an entrepreneur because you're going to face less regulations than a lot of other places around the world Um, the other thing I think that's really important for the younger generation To do is to fight for this freedom and liberty the economic freedom. You have in georgia today Is the large extent a product of patas generation, right? That fought in the night, you know in the 2000s 20 years ago for real liberalizing the the georgian economy until a large extent That is slowly you've drifted away a little bit from that georgia was more economically free to some extent 20 years ago Than it is today You need to embrace the mantle of economic freedom and economic liberalism demand from your politician To continue this trend towards more and more liberalization More and more freedom. Uh, you're I think you're number 20 something in the world on the economic freedom index. Am I right 20 something? Last time I think you were 60 or something like that. Oh, you're way down 60. Yeah, because of the covid Oh during covid so you should be why can't you be number one? What's that Yeah, so let's let's say you're somewhere there. Why can't you be number one? Right a goal should be to be at the top of the economic freedom index to be the most free country in the world There's no reason it can't be georgia. It happens to be singapore right now But that doesn't mean anything you can why can't you do better than singapore? So there's nothing inherent in singapore that suggests it has to be that I would like to see countries compete And who can be the freest And what happens when you have freedoms you have more opportunities What happens when you have freedom is you can do a lot more with your life You can do a lot you have more opportunities both as a consumer a producer an employee an entrepreneur And that's what you want. You want to maximize the opportunities that you have in life And that's what economic freedom gives you so fight for it You know too many people in the young generation take the world for granted whatever world they're given That's what the world they get now you get to shape your world When pata was young he fought for for the liberty you're enjoying today You need to continue fighting it. We always need to continue liberty and freedom are things that are very slippery They go away very quickly if we don't constantly fight for them It's not constantly vigilant for them. We will lose them So I encourage everybody here who's young and old, you know, whatever you're in between as well To fight for freedom fight for liberty you're fighting for your own life your own values your own prosperity And you're fighting for your kids and you're fighting for everybody by doing so so Don't just accept the world as it is Okay, Jonathan is Wants me to remind you of a couple of things you can get A free iron rand book By scanning that one card and you can download a free iron rand book I encourage everybody to do it you get to choose which book and you can download it Free book. How can you say no to a free book and potentially life changing, right? Jonathan's life was changed by atlas shrugged my life was changed by atlas shrugged I read it when I was younger than most of you when I was 16 And it blew my mind away completely turned my life upside down second You can still apply for a scholarship to this amazing conference we have in greece In beginning of april it's in athens What better place to be than athens amazing place you get lectures and courses and tours and You get all for free including your flight there and your hotel there But you have to apply you have to write a little essay about why you want it and everything and not everybody's going to get it But you should apply because you might get it and you spend a weekend in greece Life is rough. I know And then finally if you're already into iron rands books And you've already read some mind books and you'd like to participate in a reading group With other people and kind of go over essays and have discussions and debates There's another card over there where you can scan the code And you can and you can join one of those reading groups that we're putting together right now Thank you. Really really appreciate it. Really enjoyed this