 concentration of power leads to concentration of money and concentration of money leads to concentration of power by allowing people to change the rules, to buy themselves a different set of rules than everybody else. Our modern world is big, like really big, and yet it can often feel small. The internet and the technologies which enable it have made communication, which was at one time an expensive regional, or even local phenomenon, into something global, at will, free and constant for those who want it. Our modern era has made even global communication ubiquitous, and that element, just by itself, has been a great force for peace and a great threat to power. I'm Adam B. Levine, and this is Speaking of Bitcoin. Today, as always, I'm joined by the other host of the show, Stephanie Murphy. Hi. Jonathan Mohan. Hey, hey. And Andreas M. Antonopoulos. Hello. On today's episode of Speaking of Bitcoin, we're going to talk about power, because beneath all the technology, the consensus mechanisms, and certainly the price, that's what Bitcoin is really all about. Power. Who has it, what they can do with it, and how they keep it. These are pivotal issues for each of us and around the world today, whether we know it or not, and this discussion is long overdue. So, getting right into it, we were kind of talking about, like, what is this topic about power, right, before we actually started recording? Are we talking about electricity? Are we talking about the technological advancements? And the answer to that, just to, again, set the stages, no. We are talking specifically about the types of power that are used around the world to control us, right, to control the way that we think about things, to control the way that we value things. And that power is largely and generally very centralized. Bitcoin doesn't change the rest of the world. But what it does is it provides an alternative, an unstoppable form of competition that makes it so that anyone who has their grip on that old form of power, the way that we're used to it throughout the last thousand, two thousand years, maybe they don't in the future. Maybe there's a different way that we can do things, and maybe Bitcoin and other projects like it show us the path to it. When Adam's talking about controlling us, you might think, well, okay, money, how can money be used to control people? Oh, there's so many different ways, right? You might think of, well, if somebody controls your access to money, they control what you can buy, how much wealth you can accumulate to potentially be able to leave a situation, like, for example, an abusive relationship, something like that. Abusers often control their victims' access to money. But actually, you know, money is more than that. It's actually a means of expression, as Andreas has pointed out many times in his talks. Money is speech. It's expression. Because what you choose to buy, whether you choose to spend or save, what you invest, those are all making statements. And so if someone is controlling your money or making it worth less, they're actually tuning down your voice. And so it's more than just kind of like controlling your access to buy things or to accumulate wealth and protect your family or whatever. It's also like, affects your expression. It's also a form of power. It allows individuals to express power by using money to allocate resources and society to their liking. And that happens multiplied by all of the people in an environment. But it also means that people may choose to associate with others by combining their monetary power in various forms. And those forms of association are also commonly protected personal freedoms or civil rights that are respected in liberal democracies. So it's not just expression. It's also freedom of association. And so money is a form of power. And when it is decentralized, as it is in Bitcoin, it offends and challenges the concentration of power and the concentration of money that has occurred in traditional systems. And all of this comes back to probably one of the most important and relevant sayings about power, which is that power corrupts. And absolute power corrupts absolutely. And when it comes to the combination of money and power, that is the most corrupting influence you can have on an individual's personality. And so one of the elements we have to look at with power is how concentration of power leads to concentration of money and concentration of money leads to concentration of power by allowing people to change the rules to buy themselves a different set of rules than everybody else. When we talk about money as power, it's so foundational that sometimes you're a fish in water when it comes to how it affects your life. Up until 1971, when we got off the gold standard, the average American income rose in accordance with the American GDP. And that stopped when we got off any type of rate limiter in the printing of money. Any sort of basis in reality for what limited the printing and the creation of more money. And so in a very real way, when people point out and they say, I feel like I'm in a hamster wheel. I feel like there are those who do nothing and have value. And people who are suffering and all of their suffering amounts to them being in exactly the same position and their children being no better off than them. It's money that's doing that. And it's really hard to understand the diffuse cost of money in your life. But we have people now who, you know, in the 70s, you could work a little bit. One person could support a family. You could work over the summer, go to college and hell, like you could have children in your 20s. You can afford to have children in your 20s. All of that has been taken away from people in a way that they mostly don't even perceive because 3 to 4% of all of their wealth is taken from them every year. And if you're not making more than 6% every year in increasing yourself and your wealth and your income potential, you're staying exactly at zero. And so it really is evil and it affects you in so many foundational ways. Yeah. And you talked about 3 to 4% of your wealth being taken from you every year. That's really important because what you're referring to is the actual rate of inflation, which is something that governments go to huge efforts to actually hide from people so that they can't have accurate information about what that actually is. And inflation is a giant hidden drain and tax on people's savings, which another thing I wanted to mention about money is that money represents time. It represents lifetime and effort. At least somebody's time and effort. And say, oh, these people who have a family fortune and they inherited it, they didn't do anything to work for that money. Well, no, they didn't, but somebody did at some point in time and it's been saved through converting it into money. And for most people, you know, they get this really intuitively that they are directly exchanging their time, their lifetime for money so that they can do something with it later. And time is really the most finite resource. It's the thing we cannot get back. If we lose money, we can usually make more of it and sometimes recover, but lifetime is the thing that we can't get back ever. And so money as a banking or a representation of time is really important because it starts to get really personal when you think about it that way because if someone's taking your money from you, they're stealing your lifetime. They're taking away from you your precious time, your ancestors time, your loved one's time and eroding the value of it so that you have less to work with in life and that's very personal. I want to go back a little bit to the 1971 comment about the gold standard. When we talk about power, what we are talking about is, as Andrea said, the ability to change the rules. And there is no rule change that is more significant to the lives of the average person. I would argue around the world because of the way that the US dollar impacts around the world, much less people who are actually living in the United States in the environment that has been spawned since then. The rules were quite literally thrown out and a new set of rules were brought in that were felt to be the best choice by the people who made the rules. The people who made those rules did not have your best interest or my best interest in mine. They had a very specific set of interests in mind that, again, were not representative of everyone. But the point broadly is that it is impossible to change the rules in a way that is to the advantage of everyone. Whenever you change the rules, necessarily, the process of changing the rules and whatever it is changes that you're making will have people who will be better served by the new set and people who will be worse served by the new set. And perhaps a really, really, really good rule change has the majority of people benefiting from it and the minority of people suffering from it. But just inherent in any change to this type of system, there are winners and there are losers. And that really is a meaningful expression of power because the person or the group of people, no matter how benevolent they are, no matter how wise they are, they still have this same fundamental feature about any change that they make. There will be winners and there will be losers. And so who gets to make that decision is incredibly important and an incredible amount of power that in the United States is vested within, you know, largely the Federal Reserve, I mean, realistically. And, you know, around the world, you have central bank equivalents, New York government equivalents who do the same thing. They each have a regional monopoly, right? They have the people who live within their borders, the people who live under their rules and jurisdiction have no choice outside of to leave, right? And increasingly, as the world has gotten at the one hand bigger and smaller at the same time, the places that you could leave to to escape these types of things have really whittled down to almost nothing. There's nowhere you can go to escape completely from anybody's jurisdiction. There's nowhere you can go for complete freedom. Well, space, I mean, right? Well, yeah, I was thinking that, actually, you know, getting off the planet is something that I think about a lot, actually. Yeah, unfortunately, it's BYOO and bring your own oxygen is very, very difficult to achieve. I think in many ways, the fact that we are seriously considering space as a viable option to open up a new frontier to satisfy what ultimately is the idea of manifest destiny on a new unspoiled ground, which fortunately this time doesn't actually have natives living there. This really is giving up. Giving up on the idea that governance on a human scale can operate, or that we can create a better world right here that already has oxygen and nature and sustaining resources, and that we are so terrible at governance that we have to leave here and start from scratch. I think that's almost a form of political capitulation, and it tends to be a highly privileged position to take because, of course, for most people, it's not even a matter of escaping the planet or the gravity well. People can't even escape their own neighborhood, let alone the city or country they're in. And if you look around, you'll see that many people have never traveled more than a few kilometers from their place of birth. Even in the United States, it's something like two-thirds of people do not move from the state that they are born in. Yes. And so the idea that the solution lies in space, because we've given up on changing the way we govern ourselves here on Earth, I think, is ridiculous. Everything we do in space is far more difficult, and we've gone a bit on a tangent, but the bottom line is it's almost like saying the power of the status quo is so unassailable that the only way to leave it behind is a lot of delta V. And that's really a ridiculous idea. What's delta V? Escape velocity. Delta as in difference, delta mathematical, and V is in velocity. It is worth noting that a couple hundred years ago, there were these British people with very weird notions about freedom and what they think society's place and role is in their lives, and they got on a boat for six months and then chose to have a 30% death rate every year just because that's how much they didn't want the state to be a part of their life. And it wouldn't surprise me if in the next 20 years, we're going to replay that story. Well, then they tried their best to create a new state that was going to be better than the other one, and, you know, for a while it worked pretty well, but... Look where we are now. Maybe my family's ability to have a life without the government shouldn't affect the consequences of what will happen to Mars in 500 years. We look at history in terms of the wars that happen. Sometimes I just like to look at the freedom that happens in between those wars, and by going to Mars, I may be planting the seeds of the obliteration of Earth 500 years from now, but there'll be like a good 100 or 200 years of human prosperity that we can look at in between. So back to our topic of power, I think a much better way to shift power instead of trying to escape is to virtually exit. So instead of exiting physically and having to leave the planet, virtually exit. And what that means is, first and foremost, exiting from the institutional confines of traditional money. Because ultimately, you can create this fiction of money, and you can perpetuate the inequality that it creates through confiscation, inflation, and the transfer of wealth through inflation that happens, as well as the power imbalance that it creates by allowing those with proximity to flows of money to enrich themselves ridiculously while everybody else is on a treadmill uphill against inflation. But the bottom line here is that by choosing to use Bitcoin, you're not only hedging, and I think this is a very important point, you're not only hedging your inflation risk and making a choice that adds to the Bitcoin economy and adds to your own wealth protection. You're doing something else that is equally important. You are removing your labor from the participation in the traditional economic system. You are removing your contribution from that economy and participating only in the most tangential ways that they can force you to participate, meaning once a year, you have to pay them their pound of flesh in an ever-inflating currency which you can afford more and more easily because you actually store your savings in Bitcoin. And the bottom line is that by removing your participation, you also remove your moral approval of the system. You remove your consent. You remove your philosophical and political affiliation with that system, and you don't have to leave where you are. You can remain in exactly the same place as you are. You don't have to retreat into a gated community. You don't have to build a wall around you. You don't have to exit the country and go to another country or try to build a floating city outside of international waters or escape to Mars. You can exit the system without changing your location. That's the best thing to do right now, especially when more and more we're kind of being isolated and pushed onto the internet as the only space where we can really stretch our limbs and actually do something because our options are more limited in the real world. So an interesting thing with Bitcoin, and it's funny how you have things that sound radical and then at different points in Bitcoin's evolution, they become completely not the issue anymore. Remember in the very early days of Bitcoin when the idea of an algorithmic fixed and unchanging distribution scheme blew people's minds? That was the part that they had to challenge, that they had to poke at and prod at. And the idea is not just that it was a system that was releasing money, but that it was an unchanging fixed and understood in advanced way in which that would happen and that that would be chaos. Well, the crazy thing about inflation and CPI, like a lot of things in the traditional world, is every five to ten years when it doesn't suit their interests, they fundamentally change the way that they calculate what it is that they're describing in order to continue to divest power from those that should be getting it. And so you go to the state and you say, you can inflate your money, but we're going to have this thing called social security. And so the people at the bottom will be able to live. And what we're going to do is we're going to put these cuffs on you and say the extent to which you print more money is the extent to which you have to give the people at the bottom more money so that they can continue living. And that's what the idea of CPI was. Wait a minute, CPI stands for consumer price index, right? Yes. Unlike Bitcoin, where it's fixed and codified and unchanging as to how you would calculate an issuance in a system, every couple of decades, the government fundamentally changes how they calculate CPI. And so it used to be that the meat component of what constituted a cost for an American was steak. And now it's ground beef. Ah, right. It's just like, you know, there's inflation in the sizes or amounts of food. Like, for example, you know, you might get a tub of ice cream or something, but then you find out over time that more of it is air at the top or a bag of chips or something like that. You know, and this is sneaky ways to hide the fact that people are getting less and less for their purchasing power. Yeah, it's almost like we went from let them eat cake and then they redefined cake as styrofoam or, you know, let them eat steak, but now it's just snouts, tails and hoofs. And we've redefined steak as sausage. Listen, Andreas, there are many opinions I'll let you express in this podcast, but besmirching the integrity of beef turkey is just not one of them. Okay, okay. Hang on. So we've pulled the stats from ShadowStats.com. And just to give you an idea of how big these divergences are, ShadowStats is a site that tracks inflation in the modern era, but using the methodologies that the government used to track it in the 80s and 90s. So they actually have two different indexes that they maintain about this. So if you look at inflation today based on the 1980s method, inflation is running at about 9% annually compared to the little bit below 2% that the official stat. Wait a minute, 9%? Yeah. What kind of investment accounts do you know that pay a 9% return? Because I don't know any, and this is why everybody pumps their money into the stock market and they're chasing these huge returns because you cannot get ahead by investing 9% inflation per year? Yeah. No, even better. They put all of their money in the stock market. They get an 8% return and they go, we're winning. And according to this stat, they just lost 1%. We're not even saying that the 1980 way to calculate it was correct. We're just saying that by their own metric, these would be their own numbers. Yeah. And then there is a 1990s standard and the 1990s standard shows that as of early 2021, we're currently experiencing about 5%. So you can see 9% in the 1980s by the way they measured it becomes 5%. By the way, they measured it in the 1990s becomes less than 2% in the way that we measure it today. But it's the same data just being run through different calculations that as Jonathan said, the government used at various points in time to calculate this. I think it's such a poignant example, right? Like we feel, I think, that the cost of living goes up, right? You look at houses, you look at all the things that as a person who's trying to live like a normal quasi successful life, that you need to acquire and all those things are going up way more than 9% per year, right? But like, again, according to the way that the government measures it, which has implications in terms of the social welfare systems and different like types of things that are tied to the official quote unquote measure of inflation. Again, it's a way where if you can't control reality, but you can control how people talk about, perceive or measure reality, then that's almost as good. And it's what we see here. Another dirty trick they do is they mix the measurements of the prices of electronics and technology that are decreasing because the technology to make them is getting better and cheaper and stuff in with the price of everything else. And they say, see, oh, these prices, a TV is really cheap. You can get a big screen TV much cheaper. And that's true. And that's great. But also like food is getting way more expensive. Or they'll do something as disgusting as saying, well, that's a car, but that car has a tablet in it. So really it's a smart car. So even though every single car now costs 10% more since they have tablets, there are a new type of product. And it's unfair to say that cars went up 10% this year. This trickles out to a whole other category of things, which are all of the things that are indexed for inflation or should be indexed for inflation, or the perception of things that are not indexed for inflation and we count in dollars that no longer mean the same thing. Let's take a typical example here would be the federal minimum wage, which is currently at $7.25. I believe the last time they changed that was 1990s, at some point. I thought they just passed it to $15 too, like just a couple of days ago. Yeah, well, that's the example. So it was last changed sometime in the 1990s. And correct me if I'm wrong, it doesn't matter. But the point is that it was $7.25. And it's been $7.25 for a very, very long time. And now there was a bill passed in this budget that raises the federal minimum wage to $15. And this was presented as being a radical departure from norms and the end of capitalist life as we know it and straight up Marxism. But if you actually index those dollars today to the value of the dollars when the minimum wage was last set, guess what $15 are worth today? $7.25. So basically there wasn't a change. This is simply catching up to what inflation should have done. If you count inflation the way that the government counts inflation and we already know that they're under counting it. So in fact, in terms of purchasing power, in order to sustain the same quality of life, in order to be able to sustain the same living standards that an American in the 1970s could sustain when they're like, well, yeah, I went to college too, but I had to mow the lawns all day in order to go to college. I couldn't afford my Harvard tuition without mowing at least three hours of lawns a day. And you're like, you do the math and you're like, well, dude, that means you were getting paid like $25 an hour in today's money. That's the purchasing value that you have. That's where you'd have to set the minimum wage in order to equate to the living standards in the 1960s. And ironically, it's precisely the people who grew up during the 1960s who consider the Gen Z to be lazy loaves who are constantly complaining about the lack of quality of life. And if only they would just stop this frivolous spending on their daily latte and avocado toast, maybe they could learn the value of a dollar and save up enough money to get their act together, right? Yes, where a single earner in a basic blue-collar job could afford to be a single-earning family with two children buy a house and fully own it within 20 years that is like a decent-sized two-bedroom house, own a car, and be able to send both kids to college. Now, that is impossible today. It's impossible not only on a blue-collar job, it's impossible at most levels of jobs. And so the idea that it's lattes or avocados, which of course costs a dime at the time, is ridiculous. What it is is inflation. I remember when I was a teenager in the 1990s, I went to the mall with my friend and she said, my mom gave me $20 to spend at the mall. And I said, wow, that's a lot, $20. And she said, are you kidding? $20 buys like a piece of pizza. And I laughed. But now I think about it and I'm like, wow, $20 does buy a pizza. And I think like the story illustrates how people feel this when they go to actually buy things. They're not fooling anyone with this funny math where they're saying there's like less than 2% inflation. People know that things are getting more expensive in terms of the units of dollars that are required to purchase them and that the currency is getting less valuable over time and that their savings is going to be eaten away if they don't invest it in something that gives a return that's higher than the real rate of inflation. And so I think people know at least on a subconscious level because it feels like things are getting more expensive, like they can't make ends meet and they're constantly just being squeezed and they can't get ahead and that's the hamster wheel feeling that Jonathan described that I think all of us can relate to. I want to point out one very, very important factor to give this a global perspective. This is in the country with the reserve currency of the world that gets a discount on inflation vis-à-vis every other currency. So this is as good as it gets. This is as good as it gets for fiat currencies. It only gets worse from there. It only gets worse with currencies like the euro, the yen, and further down. And once you go past the first dozen currencies in the global standing, if you like, of 190-some currencies, it very quickly turns into silly math. So what we've described here, which is an untenable situation, a set of smoke and mirrors, a mirage of affordability, the complete destruction of the middle class, upward mobility, the American dream, and all of that, that's the best-case scenario. And it gets worse from there. And that's why Bitcoin has such an important function to play, not just in the United States, but everywhere around the world, where people look at the US dollar as an icon of stability compared to their own local currency that is far, far worse, all the way down to prices changing on the shelves of the supermarket by an order of magnitude three times a day, which is the kind of thing you see in places like Venezuela or Zimbabwe when they're having hyperinflation. The stupor market? I like that. Did I say stupor market? Yes. It is a stupor market. I think that this is kind of it, right? Like, the whole point is that the reason why people in other countries prefer US dollars to their local currency isn't because it's good by some absolute standard, but because in relative terms, it represents a more stable, a better store of value. But this is an argument that we often call the cleanest dirty shirt argument, right? No good options, so you pick the least worst option, right? And then that's the best option that's available to you. And this really is where it comes back to Bitcoin, as Andrea said. Bitcoin, again, as we said at the top of the show, represents an unstoppable form of competition on the one side, which means that it is broadly available to everyone, whether government likes it or not. Governments can and probably will as time goes on, seek to slow it down, seek to put roadblocks in front of it. Those things will certainly detract from the price, but the continued existence of it is almost assured at this point. The important part here is that this show is about power, and that power in a normal system is very concentrated in a group of perhaps well-intentioned, perhaps not well-intentioned people who make the best decisions they can, making any decision, there are casualties of that. And that bleeds over into all these different parts of our lives. And so, again, the magic combination, there's lots of other things about Bitcoin that are important, but the most important parts, to me at least, is that it has this decentralized form of power where even well-intentioned, very smart people simply cannot change things because they think that they should be changed. It has to be a consensus effort that's driven by more than half of the participants within the system. And if you compare that to any other system of power on Earth, you will find that it is incredibly egalitarian and incredibly empowering for people who have no power in other systems. I'd only challenge the idea that it takes more than half the participants' consensus is much stronger than that. A 51% attack can deny service, but it can change the rules. To change the rules, you need overwhelming consensus, overwhelming in the high 90s, and even then it's not assured or easy, and it's usually reserved for the most conservative of changes. It is almost a system that requires complete unanimity because you get to choose which rules you apply on your node, and those are the rules of what you call Bitcoin. And so, it really takes a lot more than just a majority, a plurality, or even a supermajority. It takes almost unanimous consensus to modify what actually is Bitcoin and whether that will survive as an available option. And the point that you're making, which I think is a very good one, is that in a system like this, things just don't change unless the reason to change is so absolutely compelling and completely clear that it needs to happen that it motivates that change. Because lacking that sort of just broad engagement across the entire network, the change simply doesn't happen. And again, that is in contrast to every other such system you could compare it against around the world. So those two things combined together, the need for consensus to change the rules on the one hand and the unstoppable, borderless nature of competition on the other hand makes Bitcoin, to me, the most important thing in the world today as we seek to discover what the future of money holds. Certainly, the one thing we know will happen is that change will happen throughout the history of money, change has been inevitable. And this certainly feels like the end of a cycle, but even if it's not, even if this current cycle that we're in continues for another 20 years, well, Bitcoin still represents that alternative for people who want it. And that is incredibly powerful. And that's a wrap on another episode of Speaking of Bitcoin. Today's show featured Stephanie Murphy, Andreas M. Antonopoulos, Jonathan Mohan, and Adam B. Levine. This episode is edited by Jonas and featured music by Jared Rubin. If you have any questions or comments, send me an email at adamatspeakingofbitcoin.show or adamatsobshow.com. We'll see you next time.