Michael Saylor: Bitcoin, Inflation, and the Future of Money | Lex Fridman Podcast #276

- Remember George Washington, you know how he died? Well-meaning physicians bled him to death. And this was the most important patient in the country, maybe in the history of the country. And we bled him to death trying to help him. So when you're actually inflating the money supply at 7%, but you're calling it 2%. because you want to help the economy, you're literally bleeding the free market to death. But the sad fact is George Washington went along with it.

'cause he thought that they were gonna do him good. And the majority of the society, most companies, most conventional thinkers, the working class, they go along with this because they think. that someone has their best interest in mind. And the people that are bleeding them to death believe, they believe that prescription. because their mental models are just so defective.

- The following is a conversation with Michael Saylor, one of the most prominent and brilliant. Bitcoin proponents in the world. He is the CEO of MicroStrategy, founder of Saylor Academy, graduate of MIT. And Michael is one of the most fascinating. and rigorous thinkers I've ever gotten a chance. to explore ideas with. He can effortlessly zoom out to the big perspectives. of human civilization and human history, and zoom back in to the technical details of blockchains, markets, governments, and financial systems.

This is the, "Lex Fridman Podcast.". To support it, please check out. our sponsors in the description. And now, dear friends, here's Michael Saylor. Let's start with a big question of truth and wisdom. When advanced humans, or aliens or AI systems, let's say five to 10 centuries from now, look back at Earth on this early 21st century, how much do you think they would say we understood about.

money and economics, or even about engineering, science, life, death, meaning, intelligence, consciousness, all the big interesting questions? - I think they would probably give us a B- on engineering, on all the engineering things. The hard sciences. - [Lex] A passing grade. - Like we're doing okay. We're working our way through rockets and jets. and electric cars and electricity, transport systems.

and nuclear power and space flight and the like. And if you look at the walls. that grace the great court at MIT, it's full of all the great thinkers. and they're all pretty admirable. If you could be with Newton or Gauss or Madam Curie. or Einstein, you would respect them. I would say they'd give us like a D- on economics.

Like an F+ or a D-. - You see even an optimistic vision. First of all, optimistic vision of engineering. because everybody you've listed, not everybody, but most people you've listed. is just over the past couple of centuries. and maybe stretches a little farther back. But mostly all the cool stuff we've done in engineering, is the past couple of centuries. - I mean, Archimedes had his virtues.

(Lex chuckles). I studied the history of science at MIT. and I also studied aerospace engineering, and so I clearly have a bias in favor of science. And if I look at the past 10,000 years, and I consider all of the philosophy and the politics. and their impact on the human condition, I think it's awash. for every politician that came up with a good idea. Another politician came up with a bad idea, right? - [Lex] Yeah. - And it's not clear to me that most of the political.

and philosophical contributions to the human race. and the human conditions have advanced so much. I mean, we're still taking guidance. and admiring Aristotle and Plato and Seneca and the like. And on the other hand if you think about. what has made the human condition better. Fire, water, harnessing of wind energy.

Like try to row across an ocean, right? Not easy. - And for people who are just listening or watching, there's a beautiful, sexy ship from 16th, 17th century. - This is a 19th century handmade model. of a 17th century sailing ship, which is of the type. that the Dutch East India Company. used to sail the world and trade. So that was made, you know, the original was made. sometime in the 1600s. And then this model is made.

in the 19th century by individuals. - Both the model and the ship itself. is engineering at its best. And just imagine just like rock is flying out the space, how much hope this filled people with, exploring the unknown, going into the mystery, both the entrepreneurs and the business people. and the engineers and just humans. What's out there? What's out there to be discovered? - Yeah, the metaphor of human beings. leaving shore sailing across the horizon, risking their lives in pursuit of a better life.

is a incredibly powerful one. In 1900, I suppose the average life expectancy is 50. During the Revolutionary War, while our founding fathers. were fighting to establish life, liberty, pursuit of happiness, the constitution, average life expectancy of it's like 32, somewhere between 32 and 36. - [Lex] Yeah. - So all the sound and the fury. doesn't make you live past 32, but what does, right?

Antibiotics. Conquest of infectious diseases. If we understand the science of infectious disease. Sterilizing a knife and harnessing antibiotics. gets you from 50 to 70. And that happened fast, right? That happens from 1900 to 1950 or something like that. And I think if you look at the human condition, you ever get on one of those rowing machines.

where they actually keep track of your watts output. when you're on the- - [Lex] Yeah. - It's like 200 is a lot, okay? 200 is a lot. So a kilowatt hour is like all the energy that a human, a trained athlete can deliver in a day. And probably not 1% of the people in the world. could deliver a kilowatt hour in a day. And the commercial value of a kilowatt hour, the retail value is 11 cents today.

And the wholesale value is 2 cents. And so you have to look at the contribution. of politicians and philosophers and economists. to the human condition. And it's like at best of wash one way or the other. And then if you look at the contribution. of John D. Rockefeller when he delivered you. a barrel of oil. Yeah, and the energy in oil, liquid energy, or the contribution of Tesla, as we deliver electricity.

And what's the impact of the human condition. if I have electric power, if I have chemical power, if I have wind energy, if I can actually set up a reservoir, create a dam, spin a turbine, and generate energy from a hydraulic source, that's extraordinary, right? And so our ability to cross the ocean,

our ability to grow food, our ability to live, it's technology that gets the human race. from a brutal life where life expectancy is 30. to a world where life expectancy is 80. - You gave a D- to the economists, so are they too like the politicians, awash. in terms of there's good ideas and bad ideas? And that tiny delta between good and bad.

is how you squeak past the F+ onto the D- territory. - I think most economic ideas are bad ideas. - [Lex] Most? - Like take us back to MIT and you wanna solve. a fluid dynamics problem. Like design the shape of the hull of that ship, or you wanna design an air foil, a wing. Or if you want to an engine or a nozzle in a rocket ship,

you wouldn't do it with simple arithmetic, you wouldn't do it with a scaler. There's not a single number, right? It's vector math, computational fluid dynamics. There's end dimensional, higher level math, complicated stuff. So when an economist says the inflation rate is 2%, that's a scaler. And when an economist says it's not a problem. to print more money because the velocity of the money. is very low, monetary velocity is low.

That's another scaler, okay? So the truth of the matter is inflation is not a scaler. Inflation is an indimensional vector. Money velocity is not a scaler. Saying, what's the velocity of money? Oh, it's slow or it's fast. It ignores the question of what medium is the money. moving through in the same way. that what's the speed of sound?

Okay, well, what is sound, right? Sound is a compression wave. It's energy moving through a medium, but the speed is different. So for example, the speed of sound through air is different. than the speed of sound through water. And sound moves faster through water, it moves faster through a solid, and it moves faster through a stiffer solid. So there isn't one. - What is the fundamental problem with the way. economists reduce the world down to a model?

Is it too simple or is it just even the first principles. of constructing the model is wrong? - I think that the fundamental problem. is if you see the world as a scaler, you simply pick the one number. which supports whatever you wanna do, and you ignore the universe of other consequences. from your behavior. - In general, I don't know. if you've heard of like Eric Watson.

has been talking about this with gauge theory. So different kinds of approaches from the physics world, from the mathematical world. to extend past this scaler view of economics. So gauge theory is one way that comes from physics. Do you find that way of exploring economics interesting? So outside of cryptocurrency, outside of the extra technologies and so on, just analysis of how economics works, do you find that interesting?

- Yeah, I think that if we're gonna. wanna really make any scientific progress in economics, we have to apply much more computationally intensive. and richer forms of mathematics. - So, simulation perhaps? - Yeah, when I was at MIT, I studied system dynamics, they taught it at the Sloan School. It was developed by Jay Forrester, who was an extraordinary computer scientist. And when we created models of economic behavior,

they were all multidimensional non-linear models. So if you wanna describe how anything works. in the real world, you have to start. with the concept of feedback. If I double the price of something, demand will fall. and attempts to create supply will increase, and there will be a delay before the capacity increases. There'll be an instant demand change,

and there'll be rippling effects. throughout every other segment of the economy. downstream and upstream of such thing. So it's kind of common sense, but most economics, most classical economics, it's always taught. with linear models, fairly simplistic linear models. And oftentimes even I'm really shocked today. that the entire mainstream dialogue of economics. has been captured by scale or arithmetic.

For example, if you read any article in New York Times. or the Wall Street Journal, right? They just refer to there's an inflation number. or the CPI or the inflation rate is X. And if you look at all the historic studies. of the impact of inflation, generally they're all based. upon the idea that inflation equals CPI. and then they try to extrapolate from that, and you just get nowhere with it.

- So at the very least, we should be considering inflation. and other economics concept. is a non-linear dynamical system. So non-linearity, and also just embracing. the full complexity of just how the variables interact, maybe through simulation, maybe have some. interesting models around that. - Wouldn't it be refreshing if somebody for once. published a table of the change in price of every product, every service, and every asset and every place over time?

- You said table. Some of that also is the task of visualization. How to extract from this complex set of numbers, patterns that somehow indicate. something fundamental about what's happening. Summarization of data is still important. Perhaps summarization not down to a single scale of value, but looking at that whole sea of numbers, you have to find patterns like what is inflation.

in a particular sector, what is maybe change over time, maybe different geographical regions, things of that nature. I think that's kinda, I don't know even what that task is. That's what you could look at machine learning, you can look at AI with that perspective, which is like, how do you represent what's happening efficiently. as efficiently as possible? That's never going to be a single number, but it might be a compressed model. that captures something, something beautiful, something fundamental about what's happening.

- It's an opportunity for sure, right? You know, if we take, for example, during the pandemic, the response of the political apparatus. was to lower interest rates to zero. and to start buying assets, in essence printing money. And the defense was there's no inflation. - [Lex] Yeah. - But of course you had one part of the economy.

where it was locked down, so it was illegal to buy anything, but you couldn't, you know, it was either illegal. or it was impractical, so it would be impossible. for demand to manifest, so of course there is no inflation. On the other hand, there was instantaneous. immediate inflation in another part of the economy. For example, you lower the interest rates to zero. At one point we saw the swap rate on a 30 year note.

go to 72 basis points, okay? That means that the value. of a long dated bond immediately inflates. So the bond market had hyperinflation. within minutes of these financial decisions. The asset market had hyperinflation. We had what you call a K shape recovery, what we affectionately call a K shape recovery. Main Street shut down, Wall Street recovered all within six weeks.

The inflation was in the assets, like in the stocks, in the bonds. If you look today, you see that typical house. according to the Case-Shiller index today. is up 19.2% year over year. So if you're a first time home buyer, the inflation rate is 19%. The formal CPI announced as 7.9%. You can pretty much create any inflation rate you want.

by constructing a market basket, a weighted basket of products. or services or assets that yield you the answer. I think that the fundamental failing of economists. is first of all, they don't really have a term. for asset inflation, right? - What's an asset? What's asset hyperinflation? You mentioned bond market swap rate and asset.

is where the majority of the hyperinflation happen. What's inflation? What's hyperinflation? What's an asset? What's an asset market? And I'm gonna ask so many dumb questions. - In the conventional economic world, you would treat inflation as the rate of increase in price. of a market basket of consumer products. defined by a government agency, okay? - So they have a, like traditional things. that a regular consumer would be buying.

The government selects like toilet paper, food, toaster, refrigerator, electronics, all that kind of stuff. And it's like a representative basket of goods. that lead to a content existence on this earth. for a regular consumer. - They define a synthetic metric, right? I mean, I'm gonna say you should have. a thousand square foot apartment. and you should have a used car.

and you should eat three hamburgers a week. Now, 10 years go by and the apartment costs more. I could adjust the market basket by a, you know, they call 'em hedonic adjustments. I could decide that it used to be a 1970. needed a thousand square feet, but in the year 2020, you only need 700 square feet. because we've miniaturized televisions. and we've got more efficient electric appliances. and because things have collapsed into the iPhone, you just don't need as much space.

So now it may be that the apartment costs 50% more, but after the hedonic adjustment, there is no inflation. because I just downgraded the expectation. of what a normal person should have. - So the synthetic nature of the metric. allows for manipulation by people in power. - (chuckles) Pretty much. I guess my criticism of economist. is rather than embracing inflation. based upon its fundamental idea, which is the rate. at which the price of things go up, right?

They've been captured by mainstream conventional thinking. to immediately equate inflation to the government issued CPI. or government issued PCE or government issued PPI measure, which was never the rate at which things go up, it's simply the rate at which a synthetic basket of products. and services the government wishes to track go up.

Now the problem with that is two big things. One thing is the government. gets to create the market basket, and so they keep changing what's in the basket over time. So I mean, if I said three years ago, you should go see 10 concerts a year, and the concert tickets now cost $200 each. Now it's $2,000 a year to go see concerts. Now I'm in charge of calculating inflation, so I redefine your entertainment quota for the year.

to be eight Netflix streaming concerts. And now they don't cost $2,000, they cost nothing and there is no inflation, but you don't get your concerts, right? So the problem starts with continually changing. the definition of the market basket, but in my opinion, that's not the biggest problem. The more egregious problem is the fundamental idea. that assets aren't products or services.

A assets can't be inflated. - [Lex] What's an asset? - A house, a share of Apple stock, a bond. A Bitcoin is an asset or a Picasso painting. - Not a consumable good? - [Michael] Yeah. - Not a apple that you can eat. - Right, if I throw away an asset, then I'm not on the hook. to track the inflation rate for it.

So what happens if I change the policy such that, let's take the classic example. A million dollar bond at a 5% interest rate. gives you $50,000 a year in risk-free income, you might retire on $50,000 a year. in a low cost jurisdiction. So the cost of social security or early retirement. is $1 million when the interest rate is 5%. During the crisis of March of 2020, the interest rate on a 10-year bond. went to 50 basis points, okay?

So now the cost of that bond is $10 million, okay? The cost of social security. went from a million dollars to $10 million. So if you wanted to work your entire life, save money, and then retire risk free and live happily ever after. on a $50,000 salary living on a beach in Mexico, wherever you wanted to go, you had hyperinflation, the cost of your aspiration increased by a factor of 10. over the course of some amount of time.

In fact, in that case, that was like. over the course of about 12 years, right? As the inflation rate ground down, the asset traded up. But the conventional view is, oh, that's not a problem. because it's good that assets, it's good that the bond is highly priced. because we own the bond. Or what's the problem with the inflation rate. in housing being 19%? It's an awful problem for a 22-year-old. that's starting their first job.

that's saving money to buy a house. But it would be characterized as a benefit to society. by a conventional economist who would say, "Well, housing asset values are higher. because of interest rate fluctuation. and now the economy's got more wealth.". And so, that's viewed as a benefit. - What's being missed here? Like the suffering of the average person or the struggle,

the suffering, the pain of the average person, like metrics that captured that within the economic system. When you're talking about-. - What I'm going to say, it is a conventional view of inflation as CPI. understates the human misery that's inflicted. upon the working class and on mainstream companies. by the political class. And so it's a massive shift to wealth.

from the working class to the property class. It's a massive shift to power from the free market. to the centrally governed or the controlled market. It's a massive shift to power. from the people to the government. And maybe one more illustrative point here, Lex, is what do you think the inflation rate's. been for the past a hundred years? - Oh, we talking about the scaler again? - If you took a survey of everybody on the street.

and you asked them what do they think inflation was, what is it? You remember when Jerome Powell said, our target's 2%, but we're not there. If you go around the corner, I have posted the deed. to this house sold in 1930, okay? And the number on that deed is $100,000, 1930. And if you go on Zillow and you get the Zestimate, - Is it higher than that?

No? - [Michael] $30,500,000. - Yeah. - So that's 92 years. 1930 or 2022. (Lex chuckles). And in 92 years we've had 305X increase. in price of the house. Now if you actually back calculate, you come to a conclusion that the inflation rate. was approximately 6.5% a year every year for 92 years, okay?

And there's nobody, nobody in government, no conventional economists who would ever admit. to an inflation rate of 7% a year. in the US dollar over the last century. Now, if you dig deeper, I mean one guy. that's done a great job working on this is Saidedean Ammous, who wrote the book, "The Bitcoin Standard.". And he notes that on average. it looks like the inflation rate and the money supply. is about 7% a year all the way up to the year 2020.

If you look at the S&P index, which is a market basket. of scarce desirable stocks, it returned about 10%. If you talk to 10% a year for a hundred years. The money supply is expanding at 7% a hundred years. If you actually talk to economists. or you look at the economy and you ask the question, how fast does the economy grow. in its entirety year over year?

Generally about two to 3%. Like the sum total impact of all this technology. and human ingenuity might get you a two and a half, 3% improvement a year. - As measured by GDP. Are you okay with that measure? - I'm not sure I go that far yet, but I would just say. that if you had the human race doing stuff. - [Lex] Yeah. - And if you ask the question, how much more efficiently will we do the stuff. next year than this year, or what's the value of all of our innovations.

and inventions and investments in the past 12 months? You'd be hard pressed to say, we get 2% better. Typical investor thinks they're 10% better every year. So if you look at what's going on, really when you're holding a million dollars of stocks. and you're getting a 10% gain a year, you're really get a 7% expansion of the money supply. You're getting a two or 3% gain under best circumstances.

And another way to say that is if the money supply. stopped expanding at 7% a year, the S&P yield might be 3% and not 10%. It probably should be. Now, that gets you to start to ask a bunch. of other fundamental questions. like if I borrow a billion dollars and pay 3% interest. and the money supply expands at seven to 10% a year, and I ended up making a 10% return. on a billion dollar investment, paying 3% interest.

Is that fair? And who suffered? So that I could do that because in an environment. where you're just inflating the money supply. and you're holding the assets constant, it stands the reason that the price of all the assets. is going to appreciate somewhat proportional. to the money supply. And the difference in asset appreciations. is gonna be a function of the scarce, desirable quality of the assets, and to what extent can I make more of them,

and to what extent are they truly limited in supply? - Yeah, so we'll get to a lot of the words you said there. The scarcity and so connected to how limited they are. and the value of those assets. But you also said, so the expansion of the money supply, which is put another way is printing money. And so is that always bad? The expansion of the money supply is this,

just to put some terms on the table so we understand them. You nonchalantly say it's always the, on average expanding every year, the money supply is expanding every year by 7%. That's a bad thing. That's a universally a bad thing. - It's awful. I guess to be precise, it's the currency that, I mean, money, I would say money. is monetary energy or economic energy.

And the economic energy has to find its way into a medium. So if you wanna move it rapidly as a medium of exchange, it has to find its way into currency, but the money can also flow into property. like a house or gold. If the money flows into property, it'll probably hold its value much better. if the money flows into currency, right? If you had put a hundred thousand dollars in this house, you would have 305X return over 92 years. But if you had put the money,

a hundred thousand dollars into safe deposit box. and buried it in the basement, you would've lost 99.7% of your wealth. over the same time period. So, the expansion of the currency. creates a massive inefficiency in the society, what I'll call an adiabatic lapse. It's what we're doing is we're bleeding. the civilization to death, right? - What's the, adiabatic, what's that word?

- [Michael] Adiabatic lapse. - Adiabatic. - Right, and aerospace engineering, you wanna solve any problem, they start with the phrase, assume an adiabatic system. And what that means is a closed system, - [Lex] Okay, I've got it. - So, I've got a container, and in that container no air leaves. and no air enters, no energy exits or enters, so it's a closed system. - So you got the closed system lapse? - [Michael] Okay. (Lex laughs). Okay, I'm gonna use a.

- There's a leak in the ship. - [Michael] I'm gonna use a physical metaphor for you. 'cause you're the jujutsu, right? - Yeah. - Like you got 10 pints of blood in your body. And so before your next workout, I'm gonna take one pint from you. Now you're gonna go exercise, but you've lost 10% of your blood, okay? You're not gonna perform as well. It takes about one month for your body. to replace the red blood platelets. So what if I tell you every month. you gotta show up and I'm gonna bleed you?

- [Lex] Yeah. - Okay, so if I'm draining the energy, I'm draining the blood from your body. You can't perform. Adiabatic lapse is when you go up an altitude. Every thousand feet, you lose three degrees. You go at 50,000 feet, you're 150 degrees colder than sea level. That's why you look at your instruments. and instead of 80 degrees, you're minus 70 degrees. Why is the temperature falling? Temperature's falling because it's not a closed system,

it's an open system. As the air expands, the density falls, right? The energy per cubic, whatever, falls, and therefore the temperature falls, right? The heat's falling outta the solution. So when you're inflating, let's say you're inflating the currency supply by 6%, you're sucking 6% of the energy out of the fluid.

that the economy is using to function. - So the currency, this kind of ocean of currency, that's a nice way for the economy to function. It's the most kind of, it's being inefficient. when you expand the money supply, but it's the liquid, I'm trying to find. the right kind of adjective here. It's how you do transactions at a scale of billions. - Currency is the asset we use. to move monetary energy around.

And you could use the dollar or you could use the peso. or you could use the bolivar. - Selling houses and buying houses is much more inefficient. Or like you can't transact between. billions of people with houses. - Yeah, properties don't make such good mediums of exchange. They make better stores of value and they have utility value. if it's a ship or a house or a plane. or a bushel of corn, right? - Can I zoom out just for- - [Michael] Yeah.

- Can we zoom out, keep zooming out. until we reach the origin of human civilization. But on the way ask, you gave economists a D-, I'm not even gonna ask you what you give to governments. Do you think their failure, economists' and government failure. is malevolence or incompetence? - I think policy makers are well intentioned, but generally all government policy is inflationary.

and all government, it's inflammatory and inflationary. So what I mean by that is when you have a policy. pursuing supply chain independence, if you have an energy policy, if you have a labor policy, if you have a trade policy, if you have any kind. of foreign policy, a domestic policy, a manufacturing policy, a medical policy, every one of these policies interferes with the free market.

and generally prevents some rational actor. from doing it in a cheaper, more efficient way. So when you layer them on top of each other, they all have to be paid for. If you want to shut down the entire economy for a year, you have to pay for it, right? If you wanna fight a war, you have to pay for it, right? If you don't want to use oil or natural gas, you have to pay for it. If you don't wanna manufacture semiconductors in China.

and you want to manufacture them in the US, you gotta pay for it. If I rebuild the entire supply chain in Pennsylvania. and I hire a bunch of employees. and then I unionize the employees, then not only am I idle the factory in the far east, it goes to 50% capacity, so whatever it sells, it has to raise the price on. And then I drive up the cost of labor. for every other manufacturer in the US. because I competing against them, right?

I'm changing their condition. So everything gets less efficient, everything gets more expensive. And of course the government couldn't pay. for its policies and its wars with taxes. We didn't pay for World War I with tax, we didn't pay for World War II with tax, we didn't pay for Vietnam with tax. In fact, when you trace this, what you realize is the government. never pays for all of its policies with tax. It pays for-. - Because it's too painful to ask to raise the taxes. to truly transparently pay for the things you're doing.

with taxes with taxpayer money, 'cause they feel the pain. - Either that's one interpretation. or it's just too transparent. If people understood the true cost-. - Of war. They wouldn't want to go to war. - If you were told that you would lose 95% of your assets, and 90% of everything you will be ever. will be taken from you, you might reprioritize your thought. about a given policy and you might not vote.

for that politician. - But you're still saying incompetence not malevolence. So fundamentally, government creates a bureaucracy. of incompetence is kind of how you look at it. - I think a lack of humility, right? Like, if people had more humility than they would realize-. - Humility about how little they know, how little they understand about. the function of complex systems. - It's a phrase from Clint Eastwood's movie, "Unforgiven,".

where he says, "A man's gotta know his limitations.". (Lex chuckles). I think that a lot of people overestimate. what they can accomplish and experience in life. causes you to reevaluate that. So, I mean I've done a lot of things in my life. and generally my mistakes were always my good ideas. that I enthusiastically pursued to the detriment. of my great ideas that required 150%.

of my attention to prosper. So I think people pursue too many good ideas. and they all sound good, but there's just a limit. to what you can accomplish. And everybody underestimates the challenges. of implementing an idea, right? And they always overestimate. the benefits of the pursuit of that. And so I think it's an overconfidence.

that causes an overexuberance in pursuit of policies. And as the ambition of the government expands, so must the currency supply. Well, I could say the money supply, but let's say the currency supply. You can triple the number of pesos in the economy, but it doesn't triple the amount. of manufacturing capacity in the said economy. And it doesn't triple the amount of assets in the economy.

It just triples the pesos. So as you increase the currency supply, then the price of all those scarce desirable things. will tend to go up rapidly. And the confidence of all of the institutions, the corporations and the individual actors. and trading partners will collapse. - If we take a tangent on a tangent, and we will return. soon to the big human civilization question.

So if government naturally wants. to buy stuff it can't afford, what's the best form of government? Anarchism, libertarianism. There's not even armies, there's no borders. That's anarchism. - [Michael] The least. (chuckles). - The smallest possible. - The best government would be the least. And the debate will be over that.

- When you think about this stuff, do you think about, okay, government is the way it is, I as a person that can generate great ideas, how do I operate in this world? Or do you also think about the big picture? If we start a new civilization somewhere on Mars, do you think about what's the ultimate form of government? What's at least a promising thing to try?

- I have laser eyes on my profile on Twitter, Lex. - [Lex] Yes, I noticed. What does that mean? - And the significance of laser eyes. is to focus on the thing that can make a difference. - [Lex] Yes. - And if I look at the civilization, I would say half the problems in the civilization. are due to the fact that our understanding. of economics and money is defective.

Half, 50%. I don't know, it's worth $500 trillion worth of problems. Like money represents all the economic energy. and the civilization and it kind of equates. to all the products, all the services and all the assets. that we have and wherever we're gonna have. So, that's half. The other half of the problems in the civilization. are medical and military and political.

and philosophical and natural. And I think that there are a lot. of different solutions to all those problems. And they are all honorable professions. and they all merit a lifetime of consideration. for the specialist in all those areas. I think that what I could offer it's constructive is.

inflation is completely misunderstood. It's a much bigger problem than we understand it to be. We need to introduce engineering. and science techniques into economics. if we wanna further the human condition. All government policy is inflationary. And another pernicious myth is inflation. is always and everywhere a monetary phenomena. So, a famous quote by Milton Friedman, I believe. It's like, "It's a monetary phenomena.".

That is inflation comes from expanding the currency supply. It's a nice phrase and it's oftentimes quoted. by people that are anti inflation. But again, it just signifies a lack of appreciation. of what the issue is. Inflation is. If I had a currency which was completely non-inflationary, if I never printed another dollar. and if I eliminated fractional reserve banking. from the face of the earth, we'd still have inflation.

And we'd have inflation as long as we have government. that is capable of pursuing any kind of policies. that are in them self inflationary. And generally they all are. - So in general, inflationary is the big characteristic. of human nature that governments, collection of groups. that have power over others and allocate. other people's resources will try to intentionally. or not hide the costs of those allocations.

like in some tricky ways. Whatever the options ever available. - Hiding the cost is like the tertiary thing. Like the primary goal is the government. will attempt to do good, right? - [Lex] And that's the primary problem. - They will attempt to do good. and they will do good imperfectly. and they will create oftentimes as much damage,

more damage than the good they do. Most government policy will be iatrogenic, it will create more harm than good in the pursuit of it, but it is what it is. The secondary issue is they will unintentionally pay for it. by expanding the currency supply without realizing. that they're actually paying for it in a suboptimal fashion. They'll collapse their own currencies.

while they attempt to do good. The tertiary issue is they will mismeasure. how badly they're collapsing the currency. So for example, if you go to the Bureau of Labor Statistics, and look at the numbers printed by the Fed, they'll say, "Oh, it looks like the dollars lost 95%. of its purchasing power over a hundred years.". Okay, they sort of fess up there's a problem, but they make it 95% loss over a hundred years. What they don't do is realize.

it's a 99.7% loss over 80 years, so they will mismeasure just the horrific extent. of the monetary policy in pursuit. of the foreign policy and the domestic policy, which they overestimate their budget. and their means to accomplish their ends. and they underestimate the cost. and they're oblivious to the horrific damage.

that they do to the civilization. because the mental models that they use. that are conventionally taught are wrong, right? The mental model that like, it's okay, we can print all this money. because the velocity of the money is low, right? Because money velocity is a scaler. and inflation is the scaler. and we don't see 2% inflation yet, and the money velocity is low, and so it's okay if we print trillions of dollars.

Well, the money velocity was immediate, right? The velocity of money through the crypto economy. is 10,000 times faster than the velocity of money. through the consumer economy, right? I think Nick pointed out when you spoke to him, he said it takes two months. for a credit card transaction to settle, right? So you wanna spend a million dollars. in the consumer economy, you can move it six times a year. You put a million dollars into gold,

gold will sit in a vault for a decade. Okay, so the velocity of money through gold is 0.1. You put the money in the stock market. and you can trade it once a week. The settlement is t plus two. Maybe you get to two to one leverage. You might get to a money velocity. of a hundred a year in the stock market. You put your money into the crypto economy. and these people are settling every four hours. And if you're offshore, they're trading with 20X leverage.

So if you settle every day and you trade with 20X leverage, you just went to 7,000. - [Lex] Yeah. - So the velocity of the money varies. I think the politicians, they don't really understand inflation. and they don't understand economic. But you can't blame 'em. because the economists don't understand economics. because if they did, they would be creating. multi-variate computer simulations.

where they actually put in the price. of every piece of housing in every city in the world, the full array of foods and the full array of products. and the full array of assets. And then on a monthly basis. they would publish all those results. And that's a high bandwidth requirement. And I think that people don't really wanna embrace it. And also there's the most pernicious thing. Like there's that phrase, you know,

"You can't tell people what to think, but you can tell 'em what to think about.". The most pernicious thing is I get you. to misunderstand the phenomena, so that even when it's happening to you, you don't appreciate that it's a bad thing. and you think it's a good thing. So if housing prices are going up 20% year over year, and I say this is great for the American public. 'cause most of 'em are homeowners, then I have misrepresented a phenomena,

inflation is 20%, not 7%. And then I have misrepresented it. as being a positive rather than a negative. And people will stare at it. and you could even show them their house on fire. and they would perceive it as being great. because it's warming them up. and they're gonna save on their heat cost. - It does seem that the cruder of the model, whether it's economics, whether it's psychology, the easier it is to weave.

whatever the heck narrative you want. And not in a malicious way, but just like it's some kind of like emergent phenomena, this narrative thing that would tell ourselves. So you can tell any kind of story about inflation. Inflation is good, inflation is bad. Like the crude of the model, the easier just to tell a narrative about it. So like if you take an engineering approach, I feel like it's becomes more and more difficult. to run away from sort of a true deep understanding.

of the dynamics of the system. - I mean, honestly, if you went. to a hundred people on the street. and you asked them to define inflation, how many would say it's a vector. tracking the change in price. of every product service asset in the world over time? - [Lex] No. - Not many. - [Lex] Not many. - Now if you went to them and you said, do you think 2% inflation a year is good or bad?

The majority would probably say, "Well, here it's good." - Yeah. - The majority of economists. would say 2% inflation a year is good. And of course there's look at the ship next to us. What if I told you that the ship leaked 2%, right, of its volume every something, right? The ship is rotting 2% a year. That means the useful life of the ship is 50 years. Now, ironically, that's true. Like a wooden ship had a 50 year to a hundred year life.

A hundred would be long, 50 years not unlikely. So when we built ships outta wood, they had a useful life of about 50 years. and then they sunk, they rotted. There's nothing good about it, right? You build a ship out of steel, and it's zero as opposed to 2% degradation. And how much better is 0% versus 2%? Well, 2% means you have a useful life of, you know, it's half life of 35 years.

2% is a half life of 35 years. That's basically the half life of money and gold. If I store your life force in gold, under perfect circumstances, you have a useful life of 35 years. 0% is a useful life of forever. So 0% is immortal, 2% is 35 years average life expectancy. So, the idea that you would think. the life expectancy of the currency.

and the civilization should be 35 years. instead of forever is kind of a silly notion. But the tragic notion is it was seven into 70 or 10 years. It's the money has had a half life of 10 years. except for the fact that in weak societies and in Argentina. or the like, the half life of the money. is three to four years, in Venezuela one year. So the United States dollar. and the United States economic system.

was the most successful economic system. in the last a hundred years in the world. We won every war, we were the world superpower. Our currency lost 99.7% of its value. And that means horrifically. every other currency lost everything. In essence, the other ones were 99.9, except for most that were 100%. because they all completely failed. And you've got a mainstream economic community.

that thinks that inflation is a number and 2% is desirable. It's kind of like, you know, remember George Washington, you know how he died? - [Lex] No. - Well-meaning physicians bled him to death. - [Lex] Hmm. - Okay. The last thing in the world you would want to do. to a sick person is bleed them, right?

In the modern world, I think we understand. that oxygen is carried by the blood cells. There's that phrase, right? Triage phrase. What's the first thing you do in an injury? Stop the bleeding. Single first thing, right? You show up after any accident, I look at you, stop the bleeding, because you're gonna be dead. in a matter of minutes if you bleed out. So, it strikes me as being ironic.

that orthodox conventional wisdom. was bleed the patient to death. And this was the most important patient in the country, maybe in the history of the country. And we bled him to death trying to help him. So when you're actually inflating the money supply at 7%, but you're calling it 2%. because you want to help the economy, you're literally bleeding the free market to death. But the sad fact is George Washington went along with it.

'cause he thought that they were gonna do him good. And the majority of the society, most companies, most conventional thinkers, the working class, they go along with this because they think. that someone has their best interest in mind. And the people that are bleeding them to death believe, they believe that prescription. because their mental models are just so defective. And then understanding of energy and engineering.

and the economics that are at play. is crippled by these mental models. - But that's both the bug in the future. of human civilization that ideas take hold. They unite us, we believe in them, and we make a lot of cool stuff happen. By as an average sort of just the fact of the matter,

a lot of people believe the same thing. They get together and they get some shit done. because they believe that thing. And then some ideas can be really bad. and really destructive. But on average, the ideas seem to be progressing. in a direction of good. Let me just step back. What the hell are we doing here? Us humans on this earth. How do you think of humans? How special are humans? How did human civilization originate on this earth? And what is this human project they we're all taking on?

You mentioned fire and water. and apparently bleeding you to death is not a good idea. I always thought you can get the demons out in that way, but that was a recent invention. So, what's this thing we're doing here? - I think what distinguishes human beings. from all the other creatures on the earth. is our ability to engineer.

We're engineers, right? - To solve problems or just build incredible cool things? - Engineering, harnessing energy and technique. to make the world a better place than you found it. Right, from the point that we actually started. to play with fire, right? That was a big leap forward. Harnessing the power of kinetic energy and missiles, another step forward.

Every city built on water. Why water? Well, water's bringing energy, right? If you actually put a turbine on a river. or you capture a change in elevation of water, you've literally harnessed gravitational energy. But water's also bringing you food. It's also giving you a cheap form. of getting rid of your waste. It's also giving you free transportation.

You wanna move one ton blocks around, you want to move them in water. So I think, I mean the human story. is really the story of engineering a better world. And the rise in the human condition. is determined by those groups of people, those civilizations that were best at harnessing energy. Right, if you look, you know, the Greek civilization, they built it around ports and sea ports.

and water and created a trading network. The Romans were really good. at harnessing all sorts of engineering. I mean, the aqueducts are a great example. If you go to any big city, you travel through cities in the Med, you find that the carrying capacity of the city. or the island is 5,000 people without running water. And then if you can find a way to bring water to it. increases by a factor of 10. And so human flourishing is really only possible.

through that channeling of energy, right? That eventually takes the form of air power, right? I mean that ship, I mean, look at the intricacy. of those sails, right? I mean, it's just the model is intricate. Now think about all of the experimentation that took place. to figure out how many sails to put on that ship. and how to rig them and how to repair them. and how to operate them.

- There's thousands of lives spent. thinking through all the tiny little details. all to increase the efficiency of this, the effectiveness, the efficiency of this ship as it sails to water. And we should also note that there's a bunch. of cannons on the side. So obviously-. - Another form of engineering, right? Energy harnessing with explosives. - To achieve what end. That's another discussion, exactly. - [Michael] Suppose we're trying. to get off the planet, right?

- Well, there's a selection mechanism going on. So natural selection, this whatever, however evolution works, it seems that one. of the interesting inventions on earth. was the predator-prey dynamic, that you want to be the bigger fish. That violence seems to serve a useful purpose. if you look at earth as a whole. We as humans now like to think of violence. as really a bad thing. It seems to be one of the amazing things about humans. is we're ultimately tend towards cooperation.

We want to, we like peace. If you just look at history, we want things. to be nice and calm but just wars break out. every once in a while and lead to immense suffering. and destruction and so on. And they have a kind of like resetting the palate effect. It's one that's full of just immeasurable human suffering.

But it's like a way to start over. - We're clearly the apex predator on the planet. And I googled something the other day, what's the most common form of mammal life on the earth? - By number of organisms? - [Michael] Count. - By count. - And the answer that came back was human beings. I was shocked. I couldn't believe it, right? It says like apparently if we're just looking at mammals, the answer was human beings are the most common. Which was very interesting to me.

I almost didn't believe it, but I was trying to, you know, 8 billion or so human beings. - Yeah, it's a lot. - There's no other mammal that's got more than 8 billion. If you walk through downtown Edinburgh and Scotland, and you look up on this hill. and there's castle up on the hill, and you talk to people and the story is, "Oh yeah, well, that was a British castle before. It was a Scottish castle before it was a pick castle, before it was a Roman castle, before it was some other Celtic castle before it was a.".

Then they found 13 prehistoric castles. buried one under the other. And you get the conclusion. that a hundred thousand years ago, somebody showed up. and grabbed the high point, the apex of the city, and they built a stronghold there. and they flourished and their family flourished. and their tribe flourished until someone came along. and knocked him off the hill. And it's been a nonstop never ending fight.

by the aggressive, most powerful entity, family, organization, municipality, tribe, whatever. - [Lex] Off the hill. - For that one hill going back since time in memorial. And you scratch your head and you think, "It seems like it's like just this never ending wheel.". - But does not lead if you just all kinds of metrics. that seems to improve the quality.

of our cannons and ships as a result. Like it seems that just like your laser eyes. focuses the mind on the engineering tasks. - It is that, and it does remind you. that the winner is always the most powerful. And we throw that phrase out, but no one thinks about what that phrase means. Like who's the most powerful or the most powerful side won, but they don't think about it and they think about power,

energy delivered in a period of time. And then you think a guy with a spear. is more powerful than someone with their fist. and someone with a bow and arrow is more powerful. than the person with the spear. And then you realize that somebody with bronze. is more powerful than without, and steel is more powerful than bronze. And if you look at the Romans, they persevered with artillery. and they could stand off from 800 meters. and blast you to smithereens, right?

You study the history of the Balearic slingers, right? And you think we invented bullets, but they invented bullets to put in slings. thousands of years ago that could have stood off 500 meters. and put a hole in your head, right? And so there was never a time when humanity wasn't vying. to come up with an asymmetric form. of projecting their own power via technology.

- An absolute power is when a leader is able. to control large amount of humans, they're facing the same direction, working in the same direction to leverage energy. - The most organized society wins. - [Lex] Yeah. - When the Romans were dominating everybody, they were the most organized civilization in Europe. And as long as they stayed organized, they dominated.

And at some point they over expanded. and got disorganized and they collapsed. And I guess you could say. that the struggle of human condition, it catalyzes the development of new technologies. one after the other. It penalizes anybody that rejects ocean power, right? Gets penalized. You reject artillery, you get penalized. You reject atomic power, you get penalized. If you reject digital power, cyber power, you get penalized.

And the underlying control of the property. keeps shifting hands from one institution. or one government to another based upon. how rationally they're able to channel that energy. and how well organized or coordinated they are. - Well, that's really interesting thing about. both the human mind and governments that they, once they get a few good and companies, once they get a few good ideas, they seem to stick with them.

They reject new ideas. It's almost whether that's emergent or however that evolved, it seems to have a really interesting effect. 'cause when you're young, you fight for the new ideas, you push them through. Then a few of us humans find success, then we get complacent. We take over the world using that new idea. And then the new young person. with a better new idea challenges you.

And you as opposed to pivoting, you stick with the old, and lose because of it. And that's how empires collapse. And it's just both at the individual level that happens. with two academics fighting about ideas. or something like that. And at the human civilization level, governments, they hold on to the ideas of old. It's fascinating. - Yeah, an ever persistent theme in the history of science. is the paradigm shifts and the paradigms shift.

when the old guard dies and a new generation arrives, or the paradigm shifts when there's a war. And everyone that disagrees with the idea of aviation. finds bombs dropping on their head or everyone. that disagrees with whatever your technology is. has a rude awakening. And if they totally disagree, they're society collapses. and they're replaced by that new thing. - A lot of the engineering you talked about had to do.

with ships and cannons and leveraging water. What about this whole digital thing that's happening? Been happening over the past century. Is that still engineering in your mind? You're starting to operate in these bits of information? - I think there's two big ideas. The first wave of ideas were digital information. And that was the internet wave been running. since 1990 or so for 30 years.

And the second wave is digital energy. So if I look at digital information, this idea that we wanna digitally transform a book, I'm gonna dematerialize every book in this room into bits, and then I'm going to deliver a copy. of the entire library to a billion people. And I'm gonna do it for pretty much de minimis electricity. If I can dematerialize music, books,

education, entertainment, maps, right? That is an incredibly like exothermic transaction. It's a crystallization when we collapse. into a lower energy state as a civilization. and we give off massive amounts of energy. Like if you look at what Carnegie did, the richest man in the world created libraries. everywhere at the time, and he gave away his entire fortune.

And now we can give a better library. to every 6-year-old for nothing. And so what's the value of giving a million books. to a 8 billion people, right? That's the explosion in prosperity. that comes from digital transformation. And when we do it with maps. I transform the map, I put it into a car. You get in the car and the car drives you. where you want to go with the map, right? And how much better is that. than a Rand McNally atlas right here?

It's like a million times better. - [Lex] Yeah. - So the first wave of digital transformation. was the dematerialization of all. of these informational things, which are non-conservative. That is I could take Beethoven's, "Fifth Symphony,". played for by the best orchestra in Germany, and I could give it to a billion people. and they could play it a thousand times each. at less than the cost of the one performance, right? So I deliver culture and education.

in their edition and intelligence and insight. to the entire civilization over digital rails. And the consequences of the human race. are first order generally good, right? The world is a better place. It drives growth and you create. these trillion dollar entities like Apple and Amazon. and Facebook and Google and Microsoft, right? That is the first wave. The second wave-. - Do you mind, I'm sorry to interrupt.

- [Michael] Yeah. - But that first wave, it feels like. the impact that's positive, you said the first order impact. is generally positive. It feels like it's positive in a way. that nothing else in history has been positive. And then we may not actually truly be able. to understand the orders of magnitude of increase. in productivity in just progress and human civilization.

until we look back centuries from now. Just looking at the impact of Wikipedia, the giving access to basic wisdom or basic knowledge. and then perhaps wisdom to billions of people. If you can just linger on that for a second. What's your sense of the impact of that? - I would say if you're a technologist philosopher,

the impact of a technology. is so much greater on the civilization. and the human condition than a non-technology. that is almost not worth your trouble to bother. trying to fix things a conventional way. So, let's take example. I have a foundation, the Saylor Academy. and the Saylor Academy gives away free education, free college education to anybody on earth that wants it.

And we've had more than a million students. And if you go and you take the physics class, the lectures were by the same physics lecture. that taught me physics at MIT except when I was at MIT, the cost of the first four weeks of MIT. would've drained my family's collective life savings. for the first, last a hundred years. - [Lex] Yep. (chuckles). - Like a hundred years worth of my father, my grandfather, my great-grandfather, they saved every penny they had after a hundred years, they could have paid for one week or two weeks of MIT.

- [Lex] Yeah. - That's how fiendishly expensive and inefficient it was. So, I went on scholarship. - [Lex] Yes. - I was lucky to have a scholarship. But on the other hand, I sat in the back of the 801 lecture hall. and I was like right up in the rafters. It's an awful experience on these. like uncomfortable wooden benches. and you can barely see the blackboard. and you gotta be there synchronously. And the stuff we upload, you can start it and stop it.

and watch it on your iPad or watch it on your computer. and rewind it multiple times and sit in a comfortable chair. and you can do it from anywhere on earth. And it's absolutely free. So, I think about this and I think. you wanna improve the human condition. You need people with postgraduate level education. You need PhDs, and I know this sounds kind of elitist, but you want to cure cancer. and you wanna go to the stars, fusion drive.

We need new propulsion, right? We need extraordinary breakthroughs. in every area of basic science. Be it biology or propulsion or material science. or computer science. You're not doing that with an undergraduate degree. You're certainly not doing it with a high school education. But the cost of a PhD is like a million bucks. There's like 10 million PhDs in the world. if you check it out. There's 8 billion people in the world.

How many people could get a PhD or would want to? Maybe not 8 billion, but a billion, 500 million. Let's just say 500 million to a billion. How do you go from 10 million. to a billion highly educated people, all of them specializing in, and I don't have to tell you how many different fields. of human endeavor there are. I mean, your life is interviewing these experts. And there's so many, right?

You know, it's amazing. So how do I give a multimillion dollar education. to a billion people? And there's two choices. You can either endow a scholarship, in which case you pay $75,000 a year. Let's pay a million dollars and a million dollars a person. I can do it that way. And you're never, even if you had a trillion dollars. If you had $10 trillion to throw at the problem.

and we've just thrown $10 trillion at certain problems. - [Lex] Yeah. - You don't solve the problem, right? If I put $10 trillion on the table and I said, "Educate everybody, give 'em all a PhD,". you still wouldn't solve the problem. Harvard University can't educate 18,000 people. simultaneously, or 87,000 or 800,000 or 8 million. So you have to dematerialize the professor. and dematerialize the experience. So you put it all as streaming on demand, computer generated education,

and you create simulations where you need. to create simulations and you upload it. It's like the human condition is being held back. by 500,000 well-meaning average algebra teachers. (Lex chuckles). I love 'em. I mean, please don't take of offense. if you're an algebra teacher, but instead of 500,000 algebra teachers. going through the same motion over and over again,

what you need is like one or five. or 10 really good algebra teachers. and they need to do it a billion times a day. or a billion times a year for free. And if we do that, there's no reason. why you can't give infinite education, certainly in science, technology, engineering, and math, right? Infinite education to everybody with no constraint.

And I think the same is true, right? With just about every other thing. If you wanna bring joy to the world, you need digital music. If you wanna bring enlightenment to the world, you need digital education. If you wanna bring anything of consequence in the world, you gotta digitally transform it. and then you gotta manufacture it. something like a hundred times more efficiently as a start. But a million times more efficiently.

is probably, that's hopeful. Maybe you have a chance. And if you look at all of these space endeavors. and everything, we're thinking about getting to Mars, getting off the planet, getting to other worlds. Number one thing you gotta do is you gotta make. a fundamental breakthrough in an engine. People dreamed about flying for thousands of years, but until the internal combustion engine, you didn't have enough energy, enough power in a light enough package.

in order to solve the problem. And the human race has all sorts. of those fundamental engines and materials. and techniques that we need to master. And each one of them is a lifetime of experimentation. of someone capable of making a seminal contribution. to the body of human knowledge. - There are certain problems like education. that could be solved through this process.

of dematerialization. And by the way, to give props to the 500K algebra teachers. When I look at YouTube, for example, one possible approach is each one of those 500,000 teachers. probably had days and moments of brilliance. And if they had ability to contribute to, in the natural selection process like the market. of education where the best ones rise up. That's a really interesting way, which is like the best day of your life,

the best lesson you've ever taught. could be found and sort of broadcast to billions of people. So all of those kinds of ideas. can be made real in the digital world. Now, traveling across planets, you still can't solve. that problem with dematerialization. Where you could solve potentially. is dematerializing the human brain.

where you can transfer, like you don't need. to have astronauts on the ship. You can have a floppy disc carrying a human brain. - Touching on those points. You'd love for the 500,000 algebra teachers. to become 500,000 math specialists. and maybe they comp into 50,000 specialties as teams. and they all pursue 50,000 new problems. and they put their algebra teaching on autopilot. - [Lex] Yeah. - That's the same as when I give you 11 cents.

worth of electricity and you don't have to row a boat. eight hours a day before you can eat, right? - [Lex] Yes. - It would be a lot better, that you would pay for your food. in the first eight seconds of your day. and then you could start thinking about other things, right? With regard to technology. One thing that I learned studying technology, when you look at S-curves is until you start the S-curve.

you don't know whether you're a hundred years. from viability, a thousand years from viability. or a few months from viability. - Isn't that fun? That's so fun. The early part of the S-curve is so fun, (chuckles) because you don't know. - In 1900 you could have got any number of learned academics. to give you 10,000 reasons why humans will never fly, right? - [Lex] Yeah. - And in 1903, the Wright brothers flew,

and by 1969 we're walking on the moon. So the advance that we made in that field was extraordinary. But for the a hundred years and 200 years before, they were just back and forth and nobody was close. And that's the happy part. The happy part is we went. from flying 20 miles an hour or whatever. to flying 25,000 miles an hour in 66 years.

The unhappy part is I studied aeronautical engineering. at MIT in the 80s. And in the 80s we had Gulfstream aircraft, we had Boeing 737s, we had the space shuttle. And you fast forward 40 years. and we pretty much had the same exact aircraft. The efficiency of the engines was 20, 30% more, right? - [Lex] Yeah. - We slammed into a brick wall around '69 to '75.

Like in fact the Global Express, the Gulfstream, these were all engineered in the 70s, some in the 60s. The actual, the fuselage silhouette of a Gulfstream, of a G5 was the same shape as a G4, is the same shape as a G3, is the same shape as a G2. And that's because they were afraid. to change the shape for 40 years. because they worked it out in a wind tunnel. They knew it worked. And when they finally decided to change the shape,

it was like a $10 billion exercise. with modern supercomputers and computational fluid dynamics. - Why was this so hard? What is that wall made of that you slammed into? - The right question is, so why does a guy that went to MIT. that got an aeronautical engineering degree. spent his career in software? - [Lex] Yeah. - Like why is it that I never a day in my life, with the exception of some Air Force reserve work, I never got paid to be an aeronautical engineer.

and I worked in software engineering my entire career. - Or maybe software engineering. is the new aeronautical engineering in some way. Maybe you hit fundamental walls uncertain. until you have to return to it centuries later, or no. - The National Gallery of Art. was endowed by a very rich man, Andrew Mellon, and you know how he made his money? Aluminum, okay? (Lex chuckles).

And you know what kind of airplanes. you can create without aluminum? Nothing. Nothing, right? - [Lex] So, it's a material. So, it's a materials problem? - Okay, so 1900, we made massive advances. in metallurgy, right? I mean, that was US Steel, that was iron to steel, aluminum, massive fortunes were created. because this was a massive technical advance. And then we also had the internal combustion engine. And the story of Ford and General Motors.

and Daimler Chrysler and the like is informed by that. So you have no jet engines, no rocket motors, no internal combustion engines, you have no aviation. But even if you had those engines, if you were trying to build those things with steel, no chance, you had to have aluminum. So there's like two pretty basic technologies. And once you have those two technologies, stuff happens very fast. So tell me the last big advance in like jet engines,

there hasn't been one. The last big advance in rocket engines hasn't been one. The big advances in spaceship design. from what I can see are in the control systems, the gyros and the ability to land, right, in a stable fashion, that's pretty amazing. Landing a rocket. - Also in the, at least according to the Elon and so on, the manufacturer of the more efficient.

and less expensive manufacturer of rockets. So like it's production, whatever that you call. that discipline of at scale manufacture, at scale production, so factory work. But it's not 10X. I mean maybe it's 10X over a period of a few decades. - When we figure out how to operate a spaceship. on the water, in your water bottle for a year, right? - [Lex] Yeah. - Now then you've got a breakthrough. So the bottom line is propulsion, propulsion technology,

propellants, and the materials technology, they were critical to getting on that aviation S-curve. And then we slammed into a wall in the 70s. and the Boeing 747, the Global Express, the Gulfstream, these things were, the space shuttle. They were all pretty much reflective of that. And then we kind of, then we stopped, and at that point, you have to switch to a new S-curve. So the next equivalent to the internal combustion engine.

was the CPU and the next aluminum equivalent was silicon. So when we actually started developing CPUs, transistor gateway to CPUs, and if you look at the power, right, the bandwidth that we had on computers. and Moore's law, right? What if the efficiency of jet engines. had doubled every three years, right, in the last 40 years. Where would we be right now, right?

So, I think that if you're a business person, if you're looking for commercially viable application. of your mind, then you have to find that S-curve. And ideally, you have to find it. in the first five, six, 10 years. But people always miss this. Let's take Google Glass, right? - [Lex] Yeah. - Google Glass was a idea 2013, the year is 2022.

And people were quite sure this was gonna be a big thing. - And it could have been at the beginning of the S-curve. - But fundamentally, we didn't really have. an effective mechanism. I mean, people getting vertigo and there-. - But you didn't know that. at the beginning of the S-curve, right? - [Michael] We didn't have that. - I mean, maybe some people had a deep intuition about. the fundamentals of augmented reality, but you don't know that, you don't have. Those, you're looking through the fog, you don't know. - So the point is, we're at year zero in 2013,

and we're still year zero in 2022 on that augmented reality. And when somebody puts out a set of glasses. that you can wear comfortably. without getting vertigo, right, without any disorientation that managed. to have the stability and the bandwidth necessary. to sync with the real world, you'll be in year one. And from that point, you'll have a 70 year. or some interesting future.

until you slam into a limit to growth. and then it'll slow down. This is the story of a lot of things, right? I mean, John D. Rockefeller got in the oil business. in the 1860s, and the oil business as we understood it, became fairly mature by the 1920s, the 30s. And then it actually stayed that way. until we got to fracking and like, which was like seven years later, and then it burst forward.

- The interesting story about Moore's law though. is that you get this like constant burst. of S-curves on top of S-curves on top of S-curve. It's like the moment you start slowing down, or almost ahead of you slowing down, you come up with another innovation, another innovation. So like Moore's law doesn't seem to happen. in every technological advancement. It seems like you only get a couple of S-curves. and then you're done for a bit.

So I wonder what the pressures there are. that resulted in such success over several decades. and still going. - Humility dictates that nobody knows. when the S-curve kicks off. And you could be 20 years early or a hundred years early. Leonardo da Vinci, Michelangelo, they were designing flying machines. hundreds and hundreds of years ago. So humility says you're not quite sure. when you really hit that commercial viability.

And it also dictates, you don't know when it ends. Like when will the party stop? When will Moore's law stop and we'll get to the point. where they're exponentially diminishing returns. on silicon performance. Just like we got exponentially. diminishing returns on jet engines, and it just takes an exponential increase. in effort to make it 10% better. But while you're in the middle of it, then you know you can do things.

So the reason that the digital revolution is so important. is because the underlying platforms, the bandwidth of, and the performance of the components, and I say the components are the radio protocols, mobile protocols, the batteries, the CPUs, and the displays, right? Those four components are pretty critical. They're all critical in the creation of an iPhone.

I wrote about it in the book, "The Mobile Wave,". and they catalyzed this entire mobile revolution. because they have advanced and continue to advance, they created the very fertile environment. for all these digital transformations. And the digital transformations themself, right? They call for creativity in their own, right? Like, I think the interesting thing about.

let's take digital maps, right? When you conceptualize something. as a dematerialized map, right? It becomes a map because I can put it on a display. like an iPad, or I can put it in a car like a Tesla. But if you really wanna figure it out, you can't think like an engineer. You need to think like a fantasy writer. Like this is where it's useful if you studied, if you read, played, "Dungeons and Dragons,". and you read, "Lord of the Rings,".

and you studied all the fantasy literature. because when I dematerialize the map, first I put 10 million pages of satellite imagery. into the map, right? That's a simple physical transform. But then I start to put telemetry into the map. and I keep track of the traffic rates on the roads, and I tell you whether you'll be in a traffic jam. if you drive that way, and I tell you which way to drive, and then I start to get feedback on where you're going.

And I tell you the restaurant's closed. and people don't like it anyway. And then I put an AI on top of it. and I have a drive your car for you. And eventually the implication. of digital transformation of maps. is I get in a self-driving car and I say, "Take me someplace cool where I can eat.". - [Lex] Yeah. - And how did you get to that last step, right? It wasn't simple engineering. There's a bit of fantasy in there, a bit of magic.

- Design, art, whatever the heck you call it. It's whatever, yeah, yeah, fantasy injects magic into the engineering process. Like imagination like precedes great revolutions. in engineering. It's like imagining a world, like of what you can do with the display, how will the interaction be? That's where Google Glass actually came in. Augmented reality, virtual reality, people were playing in the space of sci-fi, imagination.

- They called it a moonshot. They tried, it didn't work, but to their credit, they stopped trying, right? And then there's new people, they keep dreaming, they're dreamers all around us. I love those dreamers and most of 'em fail. and suffer because of it. But some of them won win Nobel Prizes. or become billionaires. - Well, what I would say is if half the civilization. dropped what they were doing tomorrow. and eagerly started working on launching.

a rocket to Alpha San Tori, it might not be the best use of our resources. because it's kind of like if half of Athens. in the year 500 BC eagerly started. working on flying machines, if you went back and you said, what advice would you give 'em? You would say, it's not gonna work till you get to aluminum. and you're not gonna get to aluminum. till you work out the steel and certain other things. And you're not gonna get to that. until you work out the calculus of variations.

and some metallurgy. And there's a dude Newton that won't come along. for quite a while and he's gonna give you. the calculus to do it. And until then it's hopeless. So, you might be better off to work on the aqueduct. or to focus upon sales or something. So if I look at this today, I say there's massive. profound environment civilization advances. to be made through digital transformation of information. And you can see them. Like, this is the story of today.

This is not the story of today, right? It's 10 years old what we've been seeing. - We're living through different manifestations. of that story today too though. - [Michael] Yeah. - Like social media, the effects of that. is very interesting because ideas spread, even you talk about velocity of money, the velocity of ideas keeps increasing. - [Michael] Yeah. - So like Wikipedia is a passive store, it's a store of knowledge. Twitter is like a, (chuckles).

it's like a water hose or something. It's like spraying you with knowledge. whether you want it or not. It's like social media is just like this explosion of ideas. and then we pick 'em up. and then we try to understand ourselves. because the drama of it also plays with our human psyche. So sometimes there's more ability for misinformation, for propaganda to take hold. So we get to learn about ourselves, we get to learn about the technology. that can decelerate the propaganda, for example, all that kind of stuff.

But like, the reality is we're living, I feel like we're living through a singularity. in the digital information space. And we are not, we don't have a great understanding. of exactly how it's transforming our lives. - This is where money is useful. as a metaphor for significance. Because if money is the economic energy of the civilization, then something that's extraordinarily lucrative. that's gonna generate a monetary or a wealth increase.

is a way to increase the net energy in the civilization. And ultimately, if we had 10 times as much of everything, we'd have a lot more free resources to pursue. all of our advanced scientific and mathematical. and theoretical endeavors. So let's take Twitter, right? Twitter's something that could be 10 times. more valuable than it is, right? Twitter could be made 10 times better. - Oh, by the way, I should say that. People should follow you on Twitter. Your Twitter account is awesome.

- Thank you. (Lex chuckles). Thank you. - It could be made 10 times better, yeah. - Yeah, Twitter can be made 10 times better. If we take YouTube or take education, we could generate a billion PhDs. And the question is, do you need any profound breakthrough. in materials or technology to do that? And the answer is not really no. So if you wanna, you could make Apple, Amazon, Facebook, Google, Twitter, all these things better.

The United States government, if they took 1%. of the money they spend on the Department of Education. and they simply poured it into digital education. and they gave degrees to people. that actually met those requirements, they could provide 100X as much education. for 1/100 of the cost, and they could do it with no new technology. That's a marketing and political challenge.

So I don't think every objective is equally practical. And I think the benefit of being an engineer. or thinking about practical achievements. is when the government pursues an impractical objective. or when anybody, an entrepreneur. Not so bad with an entrepreneur. 'cause they don't have that much money to waste. When a government pursues an impractical objective, they squander trillions and trillions of dollars.

and achieve nothing. Whereas if they pursue a practical objective. or if they simply get out of the way and do nothing, and they allow the free market. to pursue the practical objectives, then I think you can have profound impact. on the human civilization. And if I look at the world we're in today, I think that there are multi-trillion 10,

20, $50 trillion worth of opportunities. in the digital information realm yet to be obtained. But there's hundreds of trillions of dollars. of opportunities in the digital energy realm. that not only are they not obtained, the majority of people. don't even know what digital energy is. Most of them would reject the concept. They're not looking for it,

they're not expecting to find it. It's inconceivable because it is a paradigm shift. But in fact, it's completely practical, right under our nose. It's staring at us. And it could make the entire civilization. work dramatically better in every respect. - So you mentioned in the digital world, digital information is one, digital energy is two, and the possible impact on the world.

and the set of opportunities available. in the digital energy space is much greater. So how do you think about digital energy? What is it? - So I'll start with Tesla. He had a very famous quote. He said, "If you wanna understand the universe, think in terms of energy, vibration and frequency,". and it gets you thinking about what is the universe? And of course the universe is just all energy. And then what does matter?

Matter is low frequency energy. And what are we? We're vibrating from... Ashes to ashes, dust to dust. I can turn a tree into light. I can turn light back into a tree. if I consider the entire universe. And then it's very important. because we don't really think this way. Let's take the New York disco model. If I walk into a nightclub. and there's loud music blaring in New York City,

what's really going on there, right? If you blast out 15, 14 billion years ago, the universe is formed. - [Lex] Yeah. - Okay, that's a low frequency thing. The universe, four and a half billion years ago, the sun, maybe the earth are formed. The continents are 400 million years old. The shift that New York City is on. is some hundreds of millions of years. But the Hudson River is only 20,000 years. There's a building that's probably 50 years old.

There's a company operating that disco or that club, which is five to 10 years old. There's a person, a customer walking in there. for an experience for a few hours. There's music that's oscillating at some kilohertz, and then there's light. - [Lex] Right. - And you have all forms of energy, all frequencies, right? All layered, all moving through different medium. And how you perceive the world is a question of.

at what frequency do you want to perceive the world? And I think that once you start to think that way, you're catalyze to think about. what would digital energy look like, and why would I want it? And what is it? So why don't we just start right there. What is it? The most famous manifestation of digital energy is Bitcoin.

Bitcoin's a crypto asset. It's a crypto asset that has monetary value. - Can we just linger on that? Bitcoin is a, so it is digital asset. that has monetary value. What is a digital asset? What is monetary? Why use those terms versus the words of money and currency? Is there something interesting. in that disambiguation of different terms?

- I'd call it a crypto asset network. The goal is to create a billion dollar block, a pure energy in cyberspace. One that I could then move with no friction. at the speed of light, right? It's the equivalent to putting a million pounds in orbit. How do I actually launch something into orbit, right? How do I launch something into cyberspace.

that such that it moves friction free? And the solution is a decentralized. proof of work network, right? Satoshi's solution was, I'm going to establish. protocol running on a distributed set of computers. that will maintain a constant supply. of never more than 21 million Bitcoin. sub dividable by a hundred million satoshis, each transferable via transferring private keys.

Now the innovation is to create that. in a ethical, durable fashion, right? The ethical innovation is I want it to be property. and not a security. A bushel of corn, an acre of land, a stack of lumber and a bar of gold. and a Bitcoin are all property. And that means they're all commonly.

occurring elements in the world. You could call them commodities, but commodities a little bit misleading. And I'll tell you why in a second. But they're all distinguished by the fact that no one entity. or person or government controls them. If you have a barrel of oil and you're in Ukraine. versus Russia versus Saudi Arabia versus the US, you have a barrel of oil, right? And it doesn't matter what the premier in Japan.

or the mayor of Miami Beach thinks about your barrel. They cannot wave their hand and make it. not a barrel of oil or a cord of wood, right? And so property is just a naturally occurring element. in the universe, right? - Why use the word, ethical? And sorry to, I may interrupt occasionally. Why ethical assigned to property? - Because if it's a security,

a security would be an example. of a share of a stock or a crypto token. controlled by a small team. And in the event that something is a security. because some small group or some identifiable group. can control its nature, character supply, then it really only becomes ethical to promote it. or sell it pursuant to fair disclosures.

So, I'll give you maybe practical example. I'm the mayor of Chicago, I give a speech. In my speech, I'll say, I think everybody in Chicago. should own their own farm and have chicken, a chicken in the backyard. and their own horse and an automobile. That's ethical. I give the same speech and I say, I think everybody in Chicago should buy Twitter stock, sell their house, or sell their cash and buy Twitter stock.

Well, is that ethical? Not really. But at that point, you've entered into a conflict. of interest because what you're doing is you're promoting. an asset which is substantially controlled by a small group. of people, the board of directors or the CEO of the company. How would you feel. if the president of the United States said, I really think Americans should all buy Apple stock. Especially if you worked at Google.

But you worked anywhere, you'd be like, "Why isn't he saying buy mine?". Right? A security is a proprietary asset. in some way, shape or form. And the whole nature of securities law, it starts from this ancient idea. thou shalt not lie, cheat, or steal, okay? So if I'm going to sell you securities, or I'm gonna promote securities as a public figure. or as an influencer or anybody else, right?

If I create my own yo-yo coin or Mikey coin, and then there's a million of them, and I tell you that I think that it's a really good thing, and Mikey coin will go up forever, right? And everybody buys Mikey coin, and then I give 10 million to you. and don't tell the public, right? I've cheated them. Maybe if I have Mikey coin and I think. there's only 2 million Mikey coin, and I swear to you there's only 2 million, and then I get married and I have three kids.

and my third kid is in the hospital and my kid's gonna die. and I have this ethical reason. to print 500,000 more Mikey coin. or else people are gonna die, and everybody tells me it's fine. I've still abused the investor, right? It's a ethical challenge. If you look at ethics laws everywhere in the world, they all boil down to having a clause. which says that if you're a public figure,

you can't endorse any, a security, you can't endorse something that would cause you. to have a conflict of interest. So if you're a mayor, a governor, a country, a public figure, an influencer, and you want to promote or promulgate. or support something using any public influence. or funds or resources you may have, it needs to be property. It can't be security. So it goes beyond that, right?

I mean, like what the Chinese want. to support an American company, right? As soon as you look at what's in the best interest. of the human race, the civilization, you realize that if you want an ethical path forward, it needs to be based on common property, which is fair. And the way you get to a common property. is through an open permissionless protocol. If it's not open, right? If it's proprietary and I know what the code says.

and you don't know what the code says, that makes it a security. If it's permissioned, if you're not allowed on my network. or if you can be censored or booted off my network, that also makes it a security. So, when I talk about property, I mean the challenge here. is how do I create something that's equivalent. to a barrel of oil in cyberspace?

And that means it has to be. a non sovereign bearer instrument, open, permissionless, not sensorable, right? If I could do that, then I could deliver you. 10,000 dematerialized barrels of oil. and you would take settlement of them. and you would know that you have possession. of that property regardless of the opinion of any politician.

or any company or anybody else in the world. That's a really critical characteristic. And it actually is, it's probably one. of the fundamental things that makes Bitcoin special. Bitcoin isn't just a crypto asset network, it's easy to create a crypto asset network. It's very hard to create an ethical crypto asset network. because you have to create one.

without any government or corporation or investor. exercising into influence to make it successful. - So, open, permissionless, non-sensorable. So basically no way for you without explicitly saying so. outsourcing control to somebody else. So it's a kinda, you have full control. Even with a barrel of oil, what's the difference. between a barrel of oil and a Bitcoin to you?

Because you kind of mentioned that both are property is, you mentioned Russia and China and so on. Is it the ability of the government to confiscate. In the end, governments can probably confiscate. no matter what the asset is, but you want to lessen the effort involved. - A barrel oil is a bucket of physical property, liquid property. - [Lex] That's very complicated. - And Bitcoin is a digital property. - But it's easier to confiscate a barrel of oil.

- It's easier to confiscate things in the real world. than things in cyberspace, much easier. - So, that's not universally true. Some things in the digital space are actually easier. to confiscate because just the nature. of how things move easily with information, right? - I think in the Bitcoin world, what we would say. is that Bitcoin is the most difficult property. that the human race possesses. or has yet invented to confiscate.

And that's by virtue of the fact. that you could take possession of it via your private key. So, if you've got your 12 seed phrases in your head, then that would be the highest form of property, right? Because I literally have to crack your head open. and read your mind to take it. It doesn't mean I couldn't extract it from you under duress, but it means that it's harder. than every other thing you might own. In fact, it's exponentially harder.

If you consider every other thing you might own, a car, a house, a share of stock, gold, diamonds, property rights, intellectual property rights, movie rights, music rights, anything imaginable, they would all be easier. by orders and orders of magnitude to seize. So digital property in the form of a set of private keys. is by far the apex property of the human race. In terms of ethics, I wanna make one more point.

It's like I might say to you, Lex, I think Bitcoin is the best, most secure, most durable crypto asset network in the world, is gonna go up forever, and there's nothing better in the world. I might be right, I might be wrong, but the point is, because it's property, it's ethical for me to say that. If I were to turn around and say, Lex, I think the same about MicroStrategy stock, MSTR. That's a security, okay? If I'm wrong about that,

I have civil liability or other liability. because I could go to a board meeting tomorrow. and I could actually propose we issue. a million more shares of MicroStrategy stock. Whereas the thing that makes Bitcoin ethical for me. to even promote is the knowledge that I can't change it. If I knew that I could make it 42 million. instead of 21 million and I had the button back here,

right? - [Lex] Yeah. - Then I have a different degree of ethical responsibility. Now, I could tell you your life will be better. if you buy Bitcoin, and it might not. You might go buy Bitcoin, you might lose the keys. and be bankrupt and your life ends. and your life is not better. because you bought Bitcoin, right? But it wouldn't be my ethical liability. any more than if I were to say, Lex, I think you ought to get a farm. I think you should be a farmer. I think a chicken in every pot, you should get a horse.

I think you'd be better. I mean, they're all opinions expressed about property, which may or may not be right. that you may or may not agree with. But in a legal sense, if we read the law, if we understand securities law, and I would say, you know, most people in the crypto industry, they didn't take companies public, and so they're not really focused on the securities law. They don't even know the securities law. If you focus on the securities law, that would say.

you just can't legally sell this stuff to the general public. or promote it without a full set of continuing disclosures. signed off on by a regulator. So, there's a fairly bright line there. with regard to securities. But when you get to the secondary issue, it's how do you actually build a world. based on digital property if public figures.

can't embrace it or endorse it, you see? So you're not gonna build a better world. based upon Twitter stock if that's your idea of property, because Twitter stock is a security, and Twitter stock is never going to be. a non sovereign bearer instrument in Russia, right? Or in China, right? It's not even legal in China, right? So it's not a global, permissionless, open thing. It will never be trusted by the rest of the world,

and legally it's impractical. But would you really wanna put a hundred trillion dollars. worth of economic value on Twitter stock. if there's a board of directors and a CEO. that could just get up and like take half of it tomorrow? The answer is no. So if you wanna build a better world. based on digital energy, you need to start. with constructing a digital property. And I'm using property here in the-. - Open, permissionless, non-sensorable.

- [Michael] In the legal sense. - Okay. - But I would also go to the next step. and say property is low frequency money. So if I give you a million dollars. and you wanna hold it for a decade, you might go buy a house with it, right? And the house is low frequency money. You converted the million dollars of economic energy. into a structure called a house. Maybe in after a decade. you might convert it back into energy,

you might sell the house for currency, and it'll be worth more or less. depending upon the monetary climate you sell. - The frequency means what here? How quickly it changes state? - How quickly does something vibrate? So if I transfer $10 from me to you for a drink, and then you turn around and you buy another, right? We're vibrating on a frequency of every few hours, right?

The energy is changing hands. But it's not likely that you sell. and buy houses every few hours, right? The frequency of a transaction in real estate. is every 10 years, every five, it's a much lower frequency transaction. And so when you think about what's going on here, you have extremely low frequency things. which we'll call property, then you have mid frequency things,

I'm gonna call 'em money or currency. And then you have high frequency, and that's energy. And that's why I use the illustration. of you got the building, you got the light, and you got the sound, and they're all just energy. moving at different frequencies. Now, Bitcoin is magical and it is truly the innovation. It's like a singularity because it represents. the first time in the history of the human race.

that we managed to create. a digital property properly understood. It's easy to create something digital, right? Every coupon and every scan on, "Fortnite," and, "Roblox,". and Apple TV credits and all these things, they're all digital something, but they're securities, right? Shares of stock are securities. Whenever anybody transfers, when you transfer money on PayPal or Apple Pay,

you're transferring in essence a security or an IOU. And so transferring a bearer instrument. with final settlement in the internet domain. or in cyberspace, that's a critical thing. And anybody in the crypto world can do that. All the cryptos can do that. But what they can't do, what 99% of them fail to do is be property. They're securities, right? - Well, there's a line there. I'd like to explore a little further.

For example, what about when you like Coinbase. or something like that, when there's an exchange. that you buy, Bitcoin is in, you start to move away. from this kind of, some of the aspects. that you said makes up a property, which is this non-sensorable and permissionless and open.

So in order to achieve the convenience, the effectiveness of the transfer of energy, you have to leverage some of these, of the places that remove the aspects of property. So, maybe you can comment on that. - Let me give you a good model for that. If you think about the layer one of Bitcoin, the layer one is the property settlement layer. and we're gonna do 350,000 transactions or less a day. A hundred million transactions a year.

is the bandwidth on the layer one. And it would be an ideal layer one. to move a billion dollars from point A to point B. with the massive security. The role of the layer one is two things. One thing is I wanna move a large sum of money. through space with security. I can move any amount of Bitcoin in a matter of minutes. for dollars on layer one. The second important feature of the layer one.

is I need the money to last forever, right? I need the money indestructible, immortal. So, the bigger trick is not to move. a billion dollars from here to Tokyo. The big trick is to move a billion dollars. from here to the year 2140. And that's what we wanna solve with layer one. And the best real metaphor in New York City. would be the granite or the schist. What you want is a city block of bedrock.

And how long has it been there? Like millions of years it's been there. And how fast you want it to move? You don't. In fact, the single thing. that's most important is that it not deflect. If it deflects a foot in a hundred years, it's too much. If it deflects an inch in a hundred years, you might not want that. So the layer one of Bitcoin is a foundation. upon which you put weight. How much weight can you put on it? You put a trillion, 10 trillion,

a hundred trillion, a quadrillion. How much weight's on the bedrock in Manhattan, right? Think about a hundred story buildings. So the real key there is the foundational asset. needs to be there at all. So the fact that you can create. a hundred trillion dollars layer one. that would stand for a hundred years, that is the revolutionary breakthrough first time. And the fact that it's ethical, right? It's ethical and it's common property.

global, permissionless. Extremely unlikely that would happen. People tried 50 times before and they all failed. They tried 15,000 times after, and they've all been, they've all generally failed. 98% have failed and a couple have like been less successful. But for the most part, that's an extraordinary thing. - Just really quickly pause. just to find some terms people don't know. Layer one is that Michael's referring to.

is in general what people know of. as the Bitcoin technology originally defined, which is there's blockchain, there's a consensus mechanism of proof of work, low number of transactions, but you can move a very large amount of money. The reason he's using the term layer one. is now that there's a lot of ideas of layer two technologies. that built on top of this bedrock that allow you.

to move a much larger number of transactions. So sort of higher frequency, I don't know what terminology I wanna to use, but basically be able to use now something. that is based on Bitcoin to then buy stuff, be a consumer to transfer money, to use it as currency. Just to define some terms. - Yeah, so the layer one is the foundation.

for the entire cyber economy, and we don't want it to move fast. What we want is immortality, incorrupt, immortal, incorruptible and destructible, right? That's what you want. Integrity from the layer one. Now there's layer two and layer three. And layer two I would define as an open, permissionless, non-custodial protocol that uses. the underlying layer one token as it's gas fee.

- So what's custodial mean. and how does the different markets, like is Lightning Network? - So Lightning Network would be an example. of a layer two, non-custodial. So the Lightning Network will sit on top of layer one, it'll sit on top of Bitcoin and it solves the, what you wanna do is solve the problem. of it's well and fine, I don't wanna move a billion dollars every day. What I wanna move is $5 a billion times a day.

So if I wanna move $5 a billion times a day, I don't really need to put the entire trillion dollars. of assets at risk every time I move $5. All I really need to do. is put a hundred thousand dollars in a channel. or a million dollars in a channel, and then I do 10 million transactions. where I have a million dollars at risk. And of course it's kind of simple.

If I lower my security requirement by a factor of a million, I can probably move the stuff a million times faster, right? And that's how Lightning works. It's non-custodial because there's no corporation. or custodian or counterparty you're trusting, right? There's the risk of moving through the channel, but Lightning is an example. of how I go from 350,000 transactions a day.

to 350 million transactions a day. So on that layer two, you could move the Bitcoin. in seconds for fractions of pennies. Now that's not the end all be all. because the truth is there are a lot of open protocols. Lightning probably won't be the only one. There's a open market competition. of other permissionless open source protocols. to do this work. And in theory, any other crypto network. that was deemed to be property, deemed to be non security,

you could also think of. as potentially a layer two to Bitcoin, right? There's a debate about are there any and what are they? And we could leave that for a later time. - But why do you think of them as layer two. as opposed to contending for layer one? - Yeah, actually if they're using their own token, then they are a layer one. If you create an open protocol. that uses the Bitcoin token got as the fee-. - [Lex] I got you, I got you.

- Then it becomes a layer two, right? - [Lex] Okay. - Bitcoin itself, right, incentivizes its own transactions. with its own token. And that's what makes it layer one. - Okay, what's layer three then? - Layer three is a custodial layer. So if you wanna move Bitcoin in milliseconds for free, you move it through Binance or Coinbase or Cash App. So this is a very straightforward thing. I mean it seems pretty obvious when you think about it.

that there are gonna be hundreds of thousands. of layer threes, there may be dozens of layer twos. I mean Lightning is a one, but it's not the only one. Anybody can invent something, right? And we can have this debate about custodial, non-custodial. - Don't you think there's a. monopolization possibilities at layer three? So, you mentioned Binance, Coinbase,

what if they start to dominate. and basically everybody's using them practically speaking, and then it becomes too costly. to memorize the private key in your brain. I mean, or like cold storage of layer one technology. - Well, the idealist fear the layer threes. because they think, and especially they detest, they would detest a bit... There's almost like a layer four by the way, if you want to.

A layer four would be, I've got Bitcoin on an application, but I can't withdraw it. So, I've got an application that's backed by Bitcoin, but the Bitcoin is sealed. It's a proprietary example. And I'll give you an example of that. That would be like gray scale. If I own a share of GBTC, and so I own a security. Actually you could own MSTR. If you own a security or you own a product. that has Bitcoin embedded in it,

you get the benefits of Bitcoin, but you don't have the ability to withdraw the asset. - You can the security market at layer four. Am I understanding this correctly? - I don't know if I would say. Not all securities are layer four, but anything that's a proprietary product. based upon with Bitcoin embedded in it. where you can't withdraw the Bitcoin. is another application of Bitcoin. So, if you think about different ways you can use this,

you can either stay completely on the layer one. and use the base chain for your transactions. or you can limit yourself. to layer one in layer two Lightning. And the purist would say, "We stay there. Get your Bitcoin off the exchange.". But you could also go to the layer three. When Cash App supported Bitcoin, they made it very easy. to buy it and then they gave you the ability of withdraw. When PayPal or I think Robinhood let you buy it,

they wouldn't let you withdraw it, and it was a big community uproar. And people want, they want these layer threes. to make it possible to withdraw the Bitcoin, so you can take it to your own private wallet. and get it off the exchange. I think the answer to the question. of well is corruption possible? Is corruption is possible in all human institutions. and all governments everywhere. The difference between digital property. and physical property is when you own a building.

in Los Angeles and the city politics turn against you, you can't move the building. - [Lex] Yeah. - And when you own a share of a security. that's like a US traded security. and you wish to move to some other country, you can't take the security with you either. And when you own a bunch of gold. and you try to get through the airport, they might not let you take it. So Bitcoin is advantageous versus all those.

because you actually do have the option. to withdraw your asset from the exchange. And if you had Bitcoin with Fidelity. and you had shares of stock with Fidelity. and if you had bonds and sovereign debt with Fidelity, and if you own some mutual funds. and some other random limited partnerships with Fidelity, none of those things can be removed from the custodian, but the Bitcoin, you can take off the exchange,

you can remove from the custodian. - It's still possible though. - [Michael] There's a deterrent. - Yes. - There's a deterrent. That's an anti-corruption element. And the phrase is an armed society. is a polite society, right? Because you have the optionality to withdraw. all your assets from the crypto exchange, you can enforce fairness. And at the point where you disagree with their policies, you can within an hour move your assets.

to another counterparty. or take personal custody of those assets, and you don't have that option. with most other forms of property. Maybe you don't have as much optionality. with any other form of property on earth. And so what makes digital property distinct. is the fact that it has the most optionality for custody. Now, coming back to this digital energy issue. The real key point is the energy moves in milliseconds. for free on layer threes, it moves in seconds.

or less than seconds on layer twos. It moves in minutes on the layer one. And I don't think it makes any sense. to even think about trying to solve. all three problems on the layer one, because it's impossible to achieve the security. and the incorruptibility and immortality. if you try to build that much speed. and that functionality and performance. In fact, if you come back to the New York model,

you really wanted a block of granite, a building, and a company. That's what makes the economy, right? If I said to you, "You're gonna build a building, but you can only have one company in it. for the life of the building," it would be very fragile. Like very brittle. What company a hundred years ago is still relevant today? You want all three layers. because they all oscillate at different frequencies. And there's a tendency to think, "Well,

it's gotta be this L1 or that L1," not really. And sometimes people think, "Well, I don't really want any L3,". but companies, it's not an even or. Companies are better than crypto asset networks. at certain things. If you want complexity, you want to implement complexity. or you wanna implement compliance. or customer service, right? Companies do these things well, right? We know it.

You couldn't decentralize Apple or Netflix or even YouTube. The performance wouldn't be there. and the subtlety wouldn't be there. And you can't really legally decentralize certain forms. of banking and insurance because they would become illegal. in the political jurisdiction they're in. So unless you're a crypto anarchist. and you believe in no companies and no nation states, right? Which is just not very practical.

Not anytime soon. Once you allow that nation states will continue. and companies have a role, then the layered architecture follows, and the free market determines who wins. For example, there are layer threes. that's let you acquire Bitcoin and withdraw Bitcoin. There are other applications. that let you acquire but not withdraw it. And they don't get the same market share,

but they might give you some other advantage. There are certain layer threes like Jack Dorsey's Cash App. where they just incorporated Lightning. and implementation of it. - Into Cash App. - So that makes it more, that makes it advantageous. versus an application that doesn't incorporate Lightning. If you think about the big picture, the big picture is 8 billion people. with mobile phones served a hundred million companies.

doing billions of transactions an hour. And the companies are settling with each other. on the base layer in blocks of 80 million at a time. And then the companies are trading. with the consumers, right, in proprietary layers like layer three. And then on occasion, people are shuffling assets. across custodians with Lightning layer two,

because you don't wanna pay $5 to move $50. You want to pay a 20th of a penny to move $50. And so all of these things create efficiency in the economy. And, Lex, if you wanna consider how much efficiency. If you gave me a billion dollars in 20 years, I couldn't find a way to trade with another company. or a counterparty in Nigeria. Like no amount of money.

Gimme $10 billion, I couldn't do it. Because you get shut down at the banking level. You can't link up a bank in Nigeria with the bank in the US. You get shut down at this credit card level. because they don't have the credit card, so they won't clear. You'll get shut down at the compliance FCPA level, because you wouldn't be able to implement a system. that interfaced with somebody else's system.

if it's not in the right political jurisdiction. On the other hand, three entrepreneurs in Nigeria. on the weekend could create a website. that would trade in this Lightning economy. using open protocols without asking anybody's permission. So you're talking about something. that's like a million times cheaper, less friction. and faster to do it if you wanna get money to move. - What do you think that looks like? So that now there's a war going on in Ukraine,

there's other wars, Yemen, going out throughout the world. In this most difficult of states than a nation can be in, which is at war, civil war or war with other nations, what's the role of Bitcoin in this context? - I mean, Bitcoin's a universal trust protocol, right? A universal energy protocol, if you will. English is one, okay.

What I see is a bunch of fragmentation of applications. For example, the Russian payment app. is not gonna work in Ukraine. The Ukraine payment app is not gonna work in Russia. The US payment apps won't work either. of those places as far as I know. And in Argentina, their payment app. may not work in certain parts of Africa. So what you have is different local economies. where people spin up their own applications compliant.

with their own local laws or in war zones, not compliant, but just spinning up, you know? - So, how do you build something that's not compliant? What is the revolutionary act here when you don't agree. with the government or what you want. to free yourself from the? So, here's the thing. When a nation is really at war, especially if it's an authoritarian regime,

it's going to try to control the, like lock everything down. - [Michael] Yeah. - The spread of information. How do you break through that? Do you do the thing that you mentioned, which is you have to build another app essentially. that allows you the flow of money. outside the legal constraints. placed on you by the government. So, basically break the law. - Metaphorically speaking, if you wanna break outta the constraints of your culture, you learn to speak English. For example, it's not illegal to speak English,

or even if it is, right, doesn't matter. But English works everywhere in the world. if you can speak it, and then you can tap into. a global commerce and intelligence network. So Bitcoin is a language, so you learn to speak Bitcoin. or you learn to speak Lightning, and then you tap into that network. in whatever manner you can. - But the problem is, it's still very difficult. to move Bitcoin around in Russia and Ukraine now during war.

And there was a sense to me. that the cryptocurrency in general. could be the savior for helping people. There's millions of refugees, they're moving all around. It's very difficult to move money around. in that space to help people. - I think we're very early. Like we're very embryonic here. If you look at the- - Who's we, sorry. We as a human civilization. or we operating in the cryptocurrency space? - I think the entire crypto economy is very embryonic.

and the human races adoption of it is embryonic. We're like one, 2% down that adoption curve. If you take Lightning, for example, the first real commercial applications. of Lightning are just in the last 12 months. - [Lex] Yeah. - So, we're like year one. We might be approaching year two. of commercial Lightning adoption. And if you look at Lightning adoption, Lightning's not built into Coinbase,

it's not built into Binance, it's not built into FTX. Cash App just implemented the first implementation, but not all the features are built into it. There's a few dozen, a dozen Lightning wallets. circulating out there. So, I think that we're probably gonna be 36 months. of software development at the point. that every Android phone and every iPhone. has a Bitcoin wallet or a crypto wallet in it of sorts.

That's a big deal. If Apple embraced Lightning, that's a big deal. - So the adoption is the thing, like in a war zone adoption, the people who struggle the most in war are people. who weren't doing that great before the war started. They don't have the technological sophistication. - [Michael] Sure. - The hackers and all those kinds of people will find a way. It's just regular people who are just struggling. to make day by day living.

And so if the adoption permeates the entire culture, then you can start to move money. around in the digital space. If you can psychoanalyze Jack Dorsey for a second. So he's one of the early adopters, or he's one of the people pushing the early adoption, this layer three, so inside Cash App. What do you make of the man. of this decision as a business owner,

as somebody playing in the space? Why did he do it and what does that mean for others. at this scale that might be doing the same? So incorporating Lightning Networking, incorporating Bitcoin into their products. - I think he's been pretty clear about this. He feels that Bitcoin is an instrument. of economic empowerment for billions of people. that are unbanked and have no property rights in the world. If you want to give an incorruptible bank.

to 8 billion people on the planet, that's the same as asking the question, how do you give a full education. through PhD to 8 billion people on the planet? And the answer is a digital version. of the 20th century thing, running on a mobile phone.

And Bitcoin is a bank in cyberspace. It's run by incorruptible software. and it's for everybody on earth. So I think when Jack looks at it, he's very sensitive to the plight of everybody in Africa. If you look at Africans, right, like you're gonna give them banks, you're not gonna put a bank branch on every corner. That's an obscene waste of energy. You're not gonna run copper wires across the continent. That's an obscene waste of energy. You're not gonna give them gold. And so, how are you going to provide.

people with a decent life? The metaphor I think is relevant here. The biological metaphor, Lex, is a type one diabetic. If you're a type one diabetic, you can't form fat. And if you can't form fat, then you can't store excess energy. So that means that, I mean, fat is the ultimate organic battery, and if you've got 30 pounds of it, you can go 60 days without eating. But if you can't generate insulin, you can't form fat cells. And if you can't form fat cells and store energy,

then you can eat yourself to death. I mean, you will eat and you will die. You'll starve to death. So the lack of property rights. is like being a type one diabetic. And so if you look at most people everywhere in the world, they don't have property rights, they don't have effective bank, and their currency is broken. Like what are the two things that in theory. would serve as the equivalent of an organic battery.

or an economic battery to civilization? It would be, I have a currency which holds its value. and I can store it in a bank. So, a risk-free currency derivative. I pay you your money, you take your life savings, you put it in a bank, you save up for your retirement, you'll have happily ever after. That's the American dream, right? That's the idyllic situation.

The real situation is there are no banks. You can't get a bank account. So I give you your pay in currency. and then I double the supply and I give it to my cousin, or I give it to whatever cause I want, or I use it to buy weapons. And then you find a loaf of bread cost triple next month. is what it costs, and your life savings is worthless. And so in that environment, everybody's ripped back. to stone age barter. And the problem with that, even stone age barter.

is you're gonna carry your life savings on your back. And what happens when the guy with a machine gun. points it at your head and just takes your life savings? So, I think from Jack's point of view, he thinks that life is, this is maybe too strong, but these are my words, life is hopeless for a lot of people. And Bitcoin is hope, right? Because it gives everyone an engineered monetary asset.

that's a bearer instrument, and it gives them a bank on their mobile phone. and they don't have to trust their government. or another counterparty with their life force. So there's a secondary thing I think he's in interested in, which is the first thing is the human rights issue. And the second thing would be the friction. to trade cross borders is so great, right?

- [Lex] Yeah. - You like AI, so I'll give you a beautiful notion. Maybe one day there'll be an artificially intelligent. creature in cyberspace that is self-sufficient and rich. - Like that, it would've sovereignty, you mean. - Can a robot own money or property? How about, can a Tesla car?

Can I actually put enough money in a car. for it to drive itself and maintain itself forever? Or can I create an artificially intelligent creature. in cyberspace that is endowed such. that it would live a thousand years. and continue to do its job, right? We have a word for that in the real world is institution. Harvard, Cambridge, Stanford, right? There are institutions with endowments. that go on in perpetuity. But what if I wanted to perpetuate a software program?

And with something like digital property, with Bitcoin and Lightning, you could do it. And on the other hand, with banks. and credit cards, you couldn't, right? You couldn't ever, so you can create things. that are beautiful and lasting. And what's the difference in speed?

Well, it's, so I can either trade. with everybody in the world at the speed of light, friction free in 24 hours writing a Python script, or I can spend a hundred billion dollars to trade. with a few million people in the world. after it takes them six months of application. The impedance is like a 10 million. to one difference, right? And the metaphors are literally like launching something.

in orbit versus almost orbit or vacuum sealing something. Does it last forever and does it orbit forever, or does it go up and come down and burn up, right? And I think Jack is interested. in putting freedom in orbit, right? - (chuckles) Putting freedom. - Putting freedom in orbit. And he said it many times, he said, "The internet needs a native currency,". right? - [Lex] Yeah.

- And no political construct or security. can be a native currency. You need a property and you need a property. that can be moved a million times a second. Can you oscillate it at 10 kilohertz or a hundred kilohertz? And the answer is only if it's a pure digital. construct, permissionless and open. And so I think that he's enthusiastic as the technologist. and he is enthusiastic as the humanitarian.

And what he's doing is to support both those areas. He's supporting the Bitcoin and the Lightning protocol. by building them into his products, but he is also building the applications. which you need at the Cash App level. in order to commercialize and deliver the functionality. and the compliance necessary. And they're related. - And I should also say he's just a fascinating person. For a random reason that I couldn't even explain.

if I tried, I met him a few days ago. and gave him a great big hug in the middle of nowhere. There was no explanation. He just appeared. That's a fascinating human, his relationship with art, with the world, with human suffering, with technology is fascinating. I don't know what his path looks like, but it's interesting that people like that exist. And in part I'm saddened that he no longer. is involved with Twitter directly as a CEO,

because I was hoping something inside Twitter. would also integrate some of these ideas. of what you're calling digital energy. to see how social networks, something I'm really interested in. and passionate about could be transformed. Let me ask you just for educational purposes. (chuckles). Can you please explain to me what Web3. and the beef between Jack and Marc Andreesen is exactly?

Did you see what happened? Sorry to have you analyze Twitter like it's Shakespeare, but can you please explain to me. why there was any drama over this topic? - First of all, Web3 is a term that's used. to refer to the part of the economy that's token finance. So if I'm launching an application and my ideas to. is to create a token along with the application. and issue the token to the community.

so as to finance the application and build support for it. I think that that's the most common interpretation of Web3. There are other interpretation too, so I'm just gonna refer to that one. And I think the beef in a nutshell, not articulated, but I'll articulate it, is whether or not. you should focus all your energy creating applications. on top of an ethical digital property like Bitcoin. or whether you should attempt to create a competitor to it,

which generally would be deemed. as a security by the Bitcoin community. So, I'm gonna put on my Bitcoin hat here, right? - Yeah. - All the tokens that are being, if it's driven by a venture capitalist, well, it's a security. If there's a CEO and a CTO, it's a security. All these projects, they're companies. Foundations are companies, right? If you call them a project or a foundation, it doesn't make it not a security.

They're all, in essence, collections of individuals. that are issuing equity in the form of a token. And if there's a pre mine, an IPO, an ICO, a foundation. or any kind of protocol where there's a group of engineers. that have influence over it, then to a securities lawyer. or to most Bitcoiners and definitely to anybody.

that's steeped in securities law, you look at and say, "Well, that passes the Howie test.". It looks like a security, it should be sold. to the public pursuant to disclosures and regulations. and you're just ducking the IPO process, right? And so, now we get back to the ethical issue. Well, the ethical issue is if you're trading it. as a commodity and representing it as a commodity,

while truthfully it's a security, then it's a violation of ethics rules. and it's probably illegal. - Well, you keep leaning on this. Let me push back on that part. - [Michael] Yeah. - Maybe you can educate me. But you keep leaning on this line of securities law. as if it, with all due respect to lawyers, as if that line somehow defines what is and isn't ethical. I think there's a lot of correlation as you've discussed, but I'd like to leave the line aside.

If the law calls something a security, it doesn't mean in my eyes that it's is unethical. I mean, there could be some technicalities and lawyers. and people play games with this kind of stuff all the time. But I take your bigger point that if there's a CEO, there's a project lead that's fundamentally, well, that to you is fundamentally different. than the structure of Bitcoin. - It's not that creating securities is unethical. I created a security. I took a company public, right?

That's not the unethical part. It's completely ethical to create securities. Block is a security, all companies are securities. The unethical part is to represent it as property. when it's a security and to promote it or trade it as such. - This whole promotion, that's also a technical thing. 'cause like what counts as not as promotion. is a legal thing and you get in trouble. for all these things, but that the game that lawyers play.

There's an ethical thing here, which is like what's right to promote or not. To me, propaganda is unethical, but it's usually not illegal. (chuckles). - You roll the clock back 20 years, right? All the boiler room pump and dump schemes. were all about someone pitching a penny stock. - [Lex] Sure. - Selling swamp land in Florida. And if you roll the clock back forward 20 years, and I create my own company.

and I represented it as the same thing. and I don't make the disclosures, right? You're just one step removed from the boiler room scheme. - [Lex] Yeah. - And that's what's distasteful about it. There are ways to sell securities to the public, but there are expectations. Maybe we could forget about whether the security laws. are ethical or not, right? I will leave that alone. We'll just start with the Biblical definition of ethics.

- [Lex] Yes. - Don't lie, cheat or steal. So if I'm going to sell something to you, I need to fully disclose what I'm selling to you, right? And that's a matter of great debate right now. And so I think that that's part of the debate. But the other part of the debate. is whether or not we need more than one token. Like we need at least one, right? - [Lex] Yes. - We need at least one digital property.

- [Lex] One is better than zero. - Because zero means there is no digital economy. - [Lex] Yes. - And by the way, the conventional view of maximalist. is they think there's only one and everything else isn't. That's not the point I'm gonna make. I would say we know there is at least one digital property, and that is Bitcoin. If you can create a truly decentralized. non-custodial bearer instrument.

that is not under the control. of any organization that is fairly distributed, then you might create another or multiple. And there may be others out there. But I think that the frustration of a lot of people. in the Bitcoin community and I share this with Jack, is we could create a hundred trillion dollars of value. in the real world simply by building applications. on top of Bitcoin as a foundation.

And so continually trying to reinvent the wheel. and create competitive things is a massive waste of time. And it's diversion of human creativity. It's like we have an ethical good thing. - [Lex] Yeah. - And now we're going to try to create. a third or a fourth one. Why? - Well, let's talk about it.

So first of all, I'm with you, but let me ask you this interesting question. because we talked about properties and securities. Let's talk about conflict of interest. So you said you could advertise public, you have a popular Twitter account. It's hilarious and insightful. You do promote Bitcoin in a sense. I don't know if you would say that. But do you think there's a conflict of interest. in anyone who owns Bitcoin promoting Bitcoin?

Is it the same as you promoting the farming? - I would say no. There's an interest. I think that you can promote a property or an idea. to the extent that you don't control it. I think that the point at which you start. to have a conflict of interest. is when you're promoting a proprietary product. or proprietary security. A security in general is a proprietary asset.

So for example, if you look at my Twitter, you'll find that I make lots of statements about Bitcoin. You won't ever see me making a statement. that say MicroStrategy stock will go up forever. Right, I'm not promoting a security, MSTR, because at the end of the day, MSTR is a security, it is proprietary. I have proprietary interest in it. I have a disproportionate amount of control. and influence on the direction whereas-.

- The control is the problem. The control is the problem. because you have interest in both. You can very, if Bitcoin is a successful, as we're talking about, you are very possibly. can become the richest human on earth. given how much you own in Bitcoin, right? The wealthiest, not the richest. I don't know what those words mean. - I would benefit economically. - [Lex] Economic, you would benefit economically. - That's true. - So, the reason that's not conflict of interest.

is because the word property, that Bitcoin is an idea. and it's Bitcoin is open. - [Michael] It's because I don't own it. - You don't. - I don't control it. In essence, the ethical line here. is could I print myself 10 million more Bitcoin. or not, right? I could. - Or can anyone, right? It's not just you, it's can anyone. Because can you promote somebody else's? Yes, I guess you can.

Like can you promote Apple (chuckles). when you have no stake. - It's like you could have a Twitter account. where you promote oil or you promote camping. or you promote family values or promote a carnivore diet. or promote the Iron Man, right? - But you're not gonna get wealthier if you promote camping. 'cause you can't own a stake in. I mean, you own a lot of Bitcoin. What is that? Don't you own the stake in the idea of Bitcoin?

- Yeah, I would grant you that. - But the lack of control is the fundamental ethical line. that you just, you don't have. All you are is you're a fan of the idea. You believe in the idea and the power of the idea. You can't take that idea away from others. - Let's come back to, let me give you. some maybe easier examples. If you were the head of the Marine Corps, right?

And someone came to you and said, I created Marine coin. And the twist on Marine coin is I want you. to tell every Marine that they'll get an extra Marine coin. when they get their next stripe. And then I'm gonna give you, and I'm gonna let you buy Marine coin now, and then after you buy Marine coin, I want you to like promote it to them, right? At some point, if you start to have. a disproportional influence on it,

or if you're in a conversation with people. with disproportionate influence becomes conflict of interest. and it would make you profoundly uncomfortable, I think. - [Lex] Yeah. - If the head of the Marine Corps. started promoting anything that looked like a security. Now if the head of the Marine Corps. started promoting canoeing, you might think he's kind of wacky. Like maybe like that's kind of. a waste of time at a distraction. But to the extent that canoeing is not a security,

not a problem unless you... Ultimately the issue of decentralization. is really a critical one. - So not having a head. So is it something, can Bitcoin be replicated? So all the things that you're saying. that make it a property, can that be replicated, have any other-. - I think it's possible to create other crypto properties. - Does the having a head like of a project.

a thing that limits its ability to be a property. if you try to replicate a project? Or is that the fundamental flaw? - Look, I think the real fundamental issue. is you just never want it to change. Like if you really want something decentralized, you want a genetic template that substantially. is not gonna change for a thousand years. So I think Satoshi said it at one point.

He said the nature of the software. is such that by version 0.1, it's genetic code was set. If there was any development team. that's continually changing it on a routine basis, it becomes harder and harder. to maintain is decentralization. because now there's the issue. of who's influencing the changes. - [Lex] Yeah. - So what you really want. is a very, very simple idea, right?

The simplest idea, I'm just gonna keep track. of who owns 21 million parts of energy. And when someone proposes big functional upgrades, you don't really want that development. to go on the base layer. You want that development to go on the layer threes. because now Cash App has a proprietary set of functionality. and it's a security. And if you're gonna promote the use of this thing, you're not gonna promote the layer three security.

because that's an edge to a given entity. and you're trusting the counterparty. You're gonna promote the layer one or most the layer two. - Okay, so one of the fascinating things about Bitcoin, and sorry to romanticize certain notions, but Satoshi Nakamoto, that the founder is anonymous. Maybe you can speak to whether that's useful,

but also I just like the psychology of that. to imagine that there's a human being that was able. to create something special and walk away. So first, are you Satoshi Nakamoto? - I'm certain I'm not. (chuckles). (Lex chuckles). No, actually, I think the providence is really important. and if I were to look at the highlighted points, I think having a founder that was anonymous. or synonymous is important. I think the founder disappearing is also important.

I think that the fact that the Satoshi coins. never moved is also important. I think the lack of an initial coin offering. is also important. I think the lack of a corporate sponsor is important. I think the fact that it traded for 15 months. with no commercial value was also important. I think that the simplicity of the protocol. is very important. I think that the outcome of the block size wars.

is very important. And all of those things add up to common property. They're all indicia, indicators of a digital property. as opposed to security. If there was a Satoshi sitting around, sitting on top of $50 billion worth of Bitcoin, I don't think it would cripple Bitcoin as property, but I think it would undermine its digital property.

And if I wanted to undermine a crypto asset network, I would do the opposite of all those things. I would launch one myself. I would sell 25% or 50% to the general public. I would keep some of the initial, I would pre mine some stuff or early mine it, and I would keep an influence on it. Those are all the opposite of what you would do. in order to create common property. And so I see the entire story as Satoshi.

giving a gift of digital property. to the human race and disappearing. - Do you think it was one person? Do you have ideas of who it could be? - I don't care to speculate. (laughs). - [Lex] Okay, but do you think it was one person? - I think it was one person, maybe in conjunction. with a bunch of others. I mean, it might have been a group of people. that were working together, but certainly there's a Satoshi. - I mean, it's just so fascinating to me. that one person could be so brave and thoughtful.

Or do you think a lot of his accent, like the block size wars, the decision to make a block a certain size. All the things you mentioned led up. to the characteristics that make Bitcoin property. Do you think that's an accident, or was it deeply thought through? This is almost like a history of science question. - I think people tried it. They tried 40 of them, right? I mean, I think there's a history. of attempting to create something like this. And it was tried many, many times.

and they failed for different reasons. And I think that it's like Prometheus. tried to start a fire 47 times. and maybe the 48th time it sparked. And that's how I see this is the first one that sparked. and it sets a roadmap for us. And I think if you're looking for any one word. that characterize, it's fair, right? The whole point of the network. is it's a fair launch, a fair distribution. Like yeah, I have Bitcoin, but I bought it.

In fact, at this point we've paid $4 billion. of real cash to buy it. If I was sitting on the same position and I had it for free, then there's always this question of did I pay, or I bought it for a nickel, a coin, or a penny of coin. The question is, was it fair? And that's a very hard question to answer, right? Did you acquire the Bitcoin that you own fairly?

And if you rolled the clock back, you could have bought it for a nickel or a dime, but that was when it was a million times. more likely to fail, right? When the risk was greater, the cost was lower, and then over time the risk became lower. and the cost became greater. And the real critical thing was to allow the marketplace. absent any powerful, interested actor, right? It's almost like if Satoshi held a million coins.

and then stayed engaged for 10 more years, tweaking things in the background, there'd still be that question. But what we've got is really a beautiful thing. We've got a chain reaction in cyberspace. or an ideology spreading virally in the world. that has seasoned in a fair, ethical fashion. Sometimes it's a very violent, brutal fashion. with all the volatility, right?

And there's been a lot of sound and fury along the way. - How do you psychoanalyze, how do you deal from a financial, from a human perspective. with the volatility? You mentioned you could have gotten it for a nickel, and the risk was great. Where's the risk today? What's your sense? - We're 13 years into this entire activity. I think the risk has never been lower. If you look at all the risks, right? The risks in the early years are,

is the engineering protocol proper? Like one megabyte block size, 10 minute clock frequency cryptography is first, will it be hacked or will it crash 730,000 blocks. and it hasn't crashed? Will it be hacked? Hasn't been hacked. But it's a lengthy thing, right? You wait 13 years to see if it'll be hacked. But on the other hand, with a billion dollars, it's not as interesting a target. as it is with a hundred billion.

And when it gets to be worth a trillion, then it's a bigger target. So, the risk has been bleeding off over time. as the network monetized. I think the second question is, will it be banned? You couldn't know. It literally could have been banned at many times early on. In fact, in 2013 I tweeted on the subject, I thought it would be banned. I made a very infamous tweet. - Infamous tweet, yeah. - I thought it was gonna be banned.

In 2014, the IRS designated it as property. and gave it property tax treatment, okay? So they could have given it a tax treatment. where you had to pay tax. on the unrealized capital gains every year, and it probably would've crushed it to death, right? So it could have been in any number. of places banned by a government, but in fact it was legitimized as property. And then the question is, would it be hacked or would it be copied?

Will it be something better than that? And it was copied 15,000 times. And the story of all those and they either diverged. to be something totally different and not comparable, or someone trying to copy. a non sovereign bearer instrument store of value. found that their networks crashed. to be 1% of what Bitcoin is. So now we're sitting at a point. where all those risks are out of the way. I would say that year one of institutional adoption is,

it started August, 2020, that's when MicroStrategy bought. $250 million worth of Bitcoin. And we put that out on the wire. We were the first publicly traded company. to actually buy Bitcoin. I don't think you could have found a $5 million purchase. from a public company before we did that. So that was kinda like a gun going off. And then in the next 12 months, Tesla bought Bitcoin, Square bought Bitcoin, and I'd say now we're in year two.

of institutional adoption, and about 24, should be 24 publicly traded Bitcoin miners. by the end of this quarter. So you're looking at 36 publicly traded companies, and you've got 50, at least in the range of $50 billion. of Bitcoin on the balance sheet of publicly traded companies. and hundreds of billions of dollars. of market cap of Bitcoin exposed companies.

So, I would say the asset, decade one was entrepreneurial experimental, decade two is a rotation from entrepreneurs to institutions. and is becoming institutionalized. So maybe decade one, you go from zero to a trillion, and a decade two, you go from 1 trillion. to a hundred trillion. - What about governments, government adoption? You said institutional adoption. Are governments important in this? Maybe making it some governments incorporating it.

into as a currency into their banks, all that kind of stuff. Is that important? And if it is, when will it happen? - It's not essential for the success of the asset class, but I think it's inevitable in various degrees over time. But the most likely thing to happen next. is large acquisitions by institutional investors.

of Bitcoin as a digital gold. where they're just swapping out gold for digital gold. and thinking of it like that. And the government entities most likely to be involved. with that would be sovereign wealth funds. If you look at all the sovereign wealth funds. that are holding big tech stock, equities, the Swiss, the Norwegians, the Middle Easterners, if you can hold big tech then holding digital gold. would be not far removed from that. That's a non-controversial adoption.

I think there are opportunities for governments. that are much more profound, right? If a government started to adopt Bitcoin. as a treasury reserve asset, that's much bigger than just an asset investment. that's 100X bigger. And you could imagine. that's like a trillion dollar opportunity. Like any government that wanted to adopt it. as a treasury reserve asset.

would probably generate trillions of dollars, a trillion or more of value. And then the thing that people think about is, well, will oil ever be priced in Bitcoin. or any other export commodity? I think there's like $1.8 trillion. or more of export commodities in the world. And right now they're all priced in dollars. I think that this is a colorful thing, but it not really that relevant. Like you could sell all that stuff in dollars.

The relevant decision that any institution makes, whether they're a non-profit university, a corporation or a government, is what's your treasury reserve asset? And if your treasury reserve asset is the peso, and if the peso is losing 20% or 30% of its value a year, then your balance sheet is collapsing within five years. And if the treasury reserve asset is dollars.

in currency derivatives and US treasuries, then you're getting your seven. Right now it's probably 15% or more monetary inflation. We're running double the historic average. You could argue triple. Somewhere between double and triple. depending upon what your metric is. So, do I think it'll happen? I think that they're conservative, but they have to be shocked. And I think there is a shock. The late Russian sanctions are a big shock.

that when the West sees $300 billion worth of Russian gold. and currency derivatives, I think it, you know, you got the famous quote by Putin. that we have to rethink our treasury strategies. and that pushes everybody toward a commodity strategy. What commodities do I wanna hold? I think that's got a lot of people thinking. I think it's got the Chinese thinking. Everybody wants to be the reserve currency, right? So if I buy $50 billion worth of dollars every year,

then I buy 500 billion over a decade. and I probably pay $250 billion of inflation costs. on the backs of my citizens in a decade. - So inflation could be one of the sources of shock. And you wonder if there is a switch to Bitcoin, whether it would be a bang or a whimper.

Like what is the nature of the shock or the transition? - I think that the year 2022 is pretty catalytic. for digital assets in general and for Bitcoin in particular. The Canadian trucker crisis, I think educated hundreds of millions of people. and made them start questioning. their property rights and their banks. I think the Ukraine was a second shock, but I think that the Russian sanctions was a third shock.

- [Lex] Yeah. - I think all three of the, and I think hyperinflation in the rest of the world. is a fourth shock and then persistent inflation. in the US is a fifth shock. So, I think it's a perfect storm. And if you put all these events together, what do they signify? They signify the rational conclusion. for any person thinking about this is, I'm not sure if I can trust my property,

I don't know if I have property rights, I don't know if I can trust the bank. And if I'm politically at odds with the leader. of my own country, I'm gonna lose my property. And if I'm politically at odds with the owner. of another country, I'm still gonna lose my property. And when push comes to shove, the banks will freeze my assets and seize them. And I think that is playing out. in front of everybody in the world.

such that your logical response would be, I'm going to convert my weak currency to a strong currency. Like I'll convert my peso and lira to the dollar. I'm going to convert my weak property to strong property. I'm gonna sell my building downtown Moscow, and I'd rather own a building in New York City.

I'd rather own in a powerful nation. than be stuck with a building in Nigeria. or a building in Argentina or whatever. So, I'm gonna sell my weak properties, buy strong properties, I'm gonna convert my physical assets. to digital assets. I'd rather own a digital building. than own a physical building. Because if I had a billion dollar building in Moscow, who can I rent that to? But if I have a billion dollar digital building, I can rent it to anybody in any city in the world,

anybody with money and the maintenance cost. is almost nothing. And I can hold it for a hundred years, okay? So it's an indestructible building. And then finally, I wanna move from having my assets. in a bank with a counterparty to self custody assets, right? And this is not, it's not just Ukraine, but this is like the story in Turkey, Lebanon, Syria, Afghanistan, Iraq, South America, you don't really wanna be sitting.

with $10 million in a bank in Istanbul. The bank's gonna freeze your money, convert it to lira, devalue the lira, and then feed it. back to you over 17 years, right? - So self custody assets would be layer one Bitcoin? - Self custody assets, it's like if I got. my own hardware wallet. and I've either got your highest form of self custody. would be Bitcoin on your own hardware wallet.

or Bitcoin on your own self custody. And the other thing people think about. is how do I get crypto dollars. like Tether, like some stable coin? - [Lex] Yeah. - Like I'd rather, if you had a choice, would you rather have your money in a bank. in a war zone in dollars, or have your money in a stable coin. on your mobile phone in dollars, right? I mean, you would take the latter risk. rather than the former risk. - In a war zone, definitely yeah. - [Michael] And you can see that happening,

like we've gone from 5 billion. in stable coins to 200 billion. - Yeah. - [Michael] In the last 24 months. - Yeah. - So, I do think there's massive demand. for crypto dollars in the form of a US dollar asset. And everybody in the world would say, "Yeah, I want that.". Well, unless you're just an extreme patriot, but most people in the world would say, "I want that.". And then a lesser group of people would say, "I think I want to be able to carry my property. in the palm of my hand, so I have self custody of it.".

- So Bitcoin price has gone through quite a rollercoaster. What do you think is the high point is gonna hit? - I think it'll go forever, right? I mean, I think the Bitcoin is going to, it's going to climb in a serpentine fashion. It's going to advance and come back. and it's gonna keep climbing. I think that the volatility attracts. all the capital into the marketplace.

And so the volatility makes it the most interesting thing. in the financial universe. It also generates massive yield. and massive returns for traders, and that attracts capital. Like we're talking about the difference. between 5% return and 500% return. So the fast money is attracted by the volatility. The volatility's been decreasing year by year by year. I think that it's stabilizing.

I don't think we'll see as much volatility. in the future as we have in the past. I think that if we look at Bitcoin. and model it as digital gold, you know, the market cap goes to between 10 and 20 trillion. Remember gold is defective property, gold is dead money. You have a billion dollars of gold. that sits in a vault for a decade. It's very hard to mortgage the gold.

It's also very hard to rent the gold. You can't loan the gold. No one's going to create a business with your gold. So gold doesn't generate much of a yield. So for that reason, most people wouldn't store. a billion dollars for a decade in gold. They would buy a billion dollars. of commercial real estate, property. And the reason why is because I can rent it. and generate a yield on it. that's in excess of the maintenance cost. So if you consider digital property, that's a hundred to $200 trillion addressable market.

So I would think it goes from 10 trillion. to a hundred trillion as people. start to think of it as digital property. - What does that mean in terms of price per coin? - At 500,000, right? That's a $10 trillion asset- - [Lex] Essentially. - At 5 million, that's a hundred trillion dollars asset. - So you think it crosses a million, it can go even higher. - Yeah, I think it keeps going up forever. I mean, there's no reason. we can't go to 10 million a coin, right? Because digital property isn't the highest form, right?

Gold was that low frequency money. Property is mid frequency money. But when I start to program it faster, it starts to look like digital energy. and then it doesn't just replace property, then you're starting to replace bonds. It's a hundred trillion in bonds. There's 50 to hundred trillion. in other currency derivatives.

And then and these are all conventional use cases, right? I think that there's 350 trillion. to $500 trillion worth of currency, currency derivatives in the world. And when I say that, I mean things. that are valued based upon fiat cash flows. Any commercial real estate, any bond, any sovereign debt, any currency itself, any derivatives to those things, they're all derivatives and they're all defective.

And they're all defective. because of this persistent seven to 14% lapse. which we call inflation or monetary expansion. Can we switch? So I'm just gonna talk about the energy side of it. - Sure. - [Michael] Like the innovative piece. - Yeah. - Let's just start with this idea that I've got a hotel. worth a billion dollars with a thousand rooms. When it becomes a dematerialized hotel. - I love that word so much, by the way,

dematerialized hotel. - Wait, we're across from the fountain blow here. Imagine the fountain blow is dematerialized. - [Lex] Yeah. - The problem with the physical hotel. is it gotta hire real people. moving subject to the speed of sound. and physics laws and Newton's laws. And I can rent it to people in Miami Beach. But if it was a digital hotel, I could rent the room. to people in Paris, London, and New York every night, and I can run it with robots. And as soon as I do that, I can rent it by the room hour. and I can rent it by the room minute.

And so I start to chop my hotel. up into a hundred thousand room hours that I sell. to the highest bidder anywhere in the world. And you can see, all of a sudden the yield, the rent and the income of the property. is dramatically increased. I can also see the maintenance cost of the property falls. I get on Moore's law and I'm operating in cyberspace. So I got rid of Newton's laws, I got rid of all the friction.

and all those problems. - [Lex] Yeah. - I tapped into the benefits of cyberspace. I created a global property. I started monetizing at different frequencies. And of course now I can mortgage it. to anybody in the world, right? I mean, you're not gonna be able to get a mortgage. on a Turkish building from someone in South Africa. You have to find someone that's local. to the culture you're in. So when you start to move from analog property.

to digital property, it's not just a little bit better, it's a lot better. And what I just described, Lex, is like the DeFi vision, right? It's the beauty of DeFi flash loans, money moving at high velocity. At some point if the hotel is dematerialized, then what's the difference between renting a hotel room. and loaning a block of stock, right?

I'm just finding the highest best use of the thing. - It feels like the magic really emerges though, when you build a lot a market of layer two. and layer three technologies on top of that. So like, maybe you can correct me if I'm wrong, but for all these hotels and all these kinds of ideas, it's always touching humans at some point. and the consumers or humans, business holders and so on,

so you have to create interface, you have to create services. that make all of that super efficient, super fun to use, pleasant, effective, all those kinds of things. And so you have to build a whole economy on top of that. - Yeah, and I happen to think that won't be done. by the crypto industry at all. I think that'll be done by centralized applications. I think it'll be the Citadels of the world, the high speed traders of the world, the New Yorkers, I think it'll be Binance, FTX and Coinbase.

as a layer three exchange that will give you the yield. and will give you the loan and the best terms. because ultimately you have to jump these compliance hoops. It comes, like BlockFi can give you yield, but they have to do it in compliant way. with the United States jurisdiction. So ultimately those applications. to use that digital property and either generate a loan on,

give you a loan on it, or give you yield on it, are gonna come from companies. But the difference, the fundamental difference. is it could be companies anywhere in the world. So if a company in Singapore comes up. with a better offering, right? Then the capital is gonna start to flow to Singapore. I can't send 10 steady blocks of LA to Singapore. to rent during a festival. - [Lex] Yeah. - But I can send 10 blocks of Bitcoin to Singapore.

So you've got a truly global market that's functioning. and this asset and is their second order asset. For example, maybe you're an American citizen. and you own 10 Bitcoin and someone in Singapore. will generate 27% yield in the Bitcoin, but legally you can't send the money to them. or the Bitcoin to them, it doesn't matter, because the fact that that exists. means that someone in Hong Kong. will borrow the 10 Bitcoin from somebody in New York, and then they will put on the trade in Singapore,

and that will create a demand for Bitcoin, which will drive up the price of Bitcoin, which will result in an effective tax-free yield. for the person in the US. that's not even in the jurisdiction. So there's nothing that's going on in Singapore. to drive up the price of your land in LA. But there is something going on everywhere in the world. to drive up the price of property and cyberspace. if there's only one digital Manhattan.

And so there's a dynamic there, which is profound because it's global. But now let's go to the next extreme. I'm still giving you a fairly conventional idea, which is let's just loan the money fast on a global network. and let's just rent the hotel room fast in cyberspace. But now let's move to maybe a more innovative idea. The first generation of internet. brought a lot of productivity, but there's also just a lot of flaws in it.

For example, Twitter is full of garbage. Instagram DMs are full of garbage. Your Twitter DMs are full of garbage. YouTube is full of scams. Every 15 minutes there's a Michael Saylor Bitcoin giveaway. spun up on YouTube. - [Lex] Yep. - My Office 365 inbox, it's full of garbage, millions of spam messages. I'm running four different email filters. My company spends million dollars a year. to fight denial of service attacks.

and all sorts of other security things. There are denial of service attacks everywhere. against everybody in cyberspace all the time. It's extreme. And we're all beset with hostility, right? You've been a victim of it on Twitter. You go on Twitter and people post stuff. they would never say to your face. And then if you look, you find out. that the account was created like three days ago. and it's not even a real person. So, we're beset with phishing attacks.

and scams and spam bots and garbage and why? And the answer is because the first generation. of internet was digital information and there's no energy. There's no conservation of energy in cyberspace. The thing that makes the universe work. is conservation of energy. Like if I went to a hotel room, I'd have to post a credit card, and then if I smashed the place up, there'd be economic consequences, maybe there'd be criminal consequences,

there might be reputational consequences. A lamp might fall on me. But in the worst case thing, I can only smash up one hotel room. Now imagine I could actually write a Python script. to send myself to every hotel room in the world, every minute, not post a credit card. and smash them all up anonymously. The thing that makes the universe work is friction, speed of sound, speed of light.

And the fact that it's ultimately, it's conservative. You're either energy or your matter, but once you've used the energy, it's gone. And you can't do infinite everything. That's missing in cyberspace right now. And if you look at all of the moral hazards. and all of the product defects that we have. in all of these products, most of them, 99% of them. could be cured if we introduced conservation.

of energy into cyberspace. And that's what you can do. with high speed digital property, high speed Bitcoin. And by high speed, I mean, not 20 transactions a day. I mean, 20,000 transactions a day. So, how do you do that? Well, I let everybody on Twitter post a thousand. or 10,000 satoshis via Lightning wallet, a Lightning badge, gimme an orange check.

If you put up 20 bucks once in your life, you could give 300 million people an orange check. Right now you don't have a blue check, Lex. You're a famous person. I don't know why you don't have a blue check. Have you ever applied for a blue check? - No. - There are 360,000 people on Twitter with a blue check. There are 300 million people on Twitter. So the conventional way to verify accounts.

is elitist, archaic. - Yeah, how does it work? How do you get blue check? - You gotta apply and wait six months. and you have to post like three articles. in the public mainstream media. - Sure. - That illustrates you're a person of interest. - [Lex] Interesting. - Generally, they would grant them. to CEOs of public companies, or the whole idea is to verify that you are. who you say you are. - [Lex] Yeah, who you are. Right. - But the question is, why isn't everybody verified? And there's a couple of threads on that.

One, is some people don't wanna be doxed, they wanna be anonymous. - [Lex] Sure. - But they're even anonymous people that should be verified. Because otherwise you're subjecting their entire following. to phishing attacks and scams and hostility. But the other-. - What's the orange verification? So this idea, can you actually elaborate. a little bit more if you put up 20 bucks? - Yeah, I think everybody on Twitter ought be able. to get an orange check if they could come up with like $10.

- And what is the power of that orange check? What does that verify exactly? - You basically post a security deposit. for your safe patches through cyberspace. So the way it would work is. if you've got $10 once in your life, you can basically show that you're credit worthy. And that's your pledge to me. that you're gonna act responsibly. So you put the 10 of the $20 into the Lightning wallet,

you get an orange check. Then Twitter just gives you a setting where I can say, the only people that can DM me are orange checks. The only people that can post on my tweets. are orange checks. So instead of locking out the public. and just letting your followers comment, you lock out all the unverified. And that means people that don't wanna post. $10 security deposit can't comment. Once you've done those two things, then you're in a position to monetize malice.

Right, monetize motion or malice for that matter. But let's just say for the sake of argument, you post something and 9,700 bots spin up, and pitch their whatever scam. Right now you sit and you go report, report, report, report, report, report. And if you spend an hour, you get through half of them, you waste an hour of your life. and they just spin up another 97 kazillion. because they've got a Python script spinning it up, so it's hopeless.

But on the other hand, if you report them. and they really are a bot, Twitter's got a method. to actually delete the account. They know that they're bots. The problem is not they don't know. how to delete the account. The problem is there are no consequences. when they delete the account. So if there are consequences Twitter could give, they could just seize the $10 or seize the $20, 'cause it's a bot, it's a malicious criminal act. or whatever as a violation of the platform rules.

You end up seizing $10,000, give half the money. to the reporter and half the money to the Twitter platform. - That's a really powerful idea, but that's tying it, that's adding friction. akin to the kind of friction you have in the physical world. You're tying, you have consequences. You have real consequences. - [Michael] There's putting conservation of energy. - Conservation of energy. - There's no friction, there's no nothing on this earth, right? I mean, you can't walk across the room. without friction, right? So friction is not bad, right?

Unnecessary friction is bad. So in this particular case, you're introducing conservation of energy. and in essence you're introducing the concept. of consequence or truth into cyberspace. And that means if you do wanna spin up 10 million fakes, fake Lex Fridmans, right? - [Lex] Its gonna cost. - It's gonna cost you a hundred million dollars. to spin up 10 million fake Lexes.

- But the thing is, you could do that with the dollar, but your case, you're saying that it's more tied. to physical reality when you do that with Bitcoin? - Yeah, well, let's follow up on that idea a bit more. If you did do it with the dollar, then the question is, how does 6 billion people deposit the dollars, right? Because what you're doing is, yeah, could you do it with a credit card? Like how do you send dollars? Well, you have to dox yourself.

Like, it's not easy. So you're talking about inputting a credit card transaction, doxing yourself, and now you've just eliminated. the 2 billion people that don't have credit cards. or don't have banks. You've also got a problem with everybody. that wants to remain anonymous. But you've also got this other problem, which is credit cards are expensive transactions, low frequency, slow settlement. So do you really want to pay 2.5%. every time you actually show a $20 deposit?

And maybe you could do a kludgy version. of this for a subset of people. It's 10% as good if you did it. with conventional payment rails. But what you can't do is the next idea, which is I want the orange badge. to be used to give me safe passage. through cyberspace tripping across every platform.

How do I solve the denial of service attacks. against a website? I publish a website, you hit it with a million requests. Okay, now how do I deal with that? Well, I can lock you out. and I can make it a zero trust website, and then you have to be coming at me. through a trusted firewall. or with a trusted credential. But that's a pretty draconian thing. Or I could put it behind a Lightning wall. A Lightning wall would be I just challenge you,

Lex, you wanna browse my website? You have to show me your a hundred thousand satoshis. Do you have a hundred thousand satoshis? Click. Okay, now you click away a hundred times. or a thousand times. And after a thousand times, I'm like, "Well, now, Lex, you're getting offensive. to take a satoshi from you, or 10 satoshis a micro transaction.". You wanna hit me a million times? I'm taking all your satoshis and locking you out. What you wanna do is you want.

to go through 200 websites a day and what you want, every time you cross a domain, you need to be able to. in a split second, prove that you've got some asset. And now when you cross back, when you exit domain, you wanna fetch your asset back. So how do I, in a friction free fashion, browse through dozens or hundreds of websites, post a security deposit for safe passage, and then get it back.

You couldn't afford to pay a credit card fee each time. When you think about two point a half percent. as a transaction fee, it means you trade the money. 40 times and it's gone. - [Lex] (chuckles) Yeah. - It's gone. - Yeah, so you can't do this kind of hopping around. through the internet with this kind of verification. that grounds you to a physical reality. It's a really, really interesting idea. Why hasn't that been done? - I think you need two things.

You need an idea like a digital asset like Bitcoin. that's a bearer instrument for final settlement. And then you need a high speed transaction network. like Lightning where the transaction cost. might be a 20th of a penny or less. And if you roll the clock back 24 months, I don't think you had the Lightning Network. in a stable point. It's really just the past 12 months. It's an idea you could think about this year.

And I think you need to be aware of Bitcoin. as something other than like a scary speculative asset. So I really think we're just the beginning, - The embryonic stage. I have to ask Michael Saylor, you said before there's no second best to Bitcoin. What would be the second best? Traditionally there's Ethereum with smart contracts, Cardano with proof of stake, Polkadot with interoperability. between blockchains, Dogecoin has the incredible power.

of the meme, privacy with Monero. I just can keep going. There's of course after the block size wars, the different offshoots of Bitcoin. - I think if you decompose or segment the crypto market, you've got crypto property, Bitcoin is the king of that, you know, and other Bitcoin forks that wanted. to be a bearer instrument store of value.

would be a property, a Bitcoin Cash or a Litecoin, something like that. Then you've got cryptocurrencies. I don't think Bitcoin's a currency. because a currency, I define in nation states sense. A currency is a digital asset that you can transfer. in a transaction without incurring a taxable obligation. So that means it has to be a stable dollar. or a stable euro or a stable yen, a stable coin.

So I think you've got cryptocurrencies, Tether, Circle, most famous, I think you've got crypto platforms, and Ethereum is the most famous of the crypto platforms, the platform upon which, you know, with smart contract functionality, et cetera. And then I think you've got just crypto securities. It's just like my favorite whatever, meme coin. And I love it, 'cause I love it and it's attached to my game. or my company or my persona or my whatever. I think if you pushed me and said,

"Well, what's the second best?". I would say the world wants two things. It wants crypto property as a savings account, and it wants cryptocurrency as a checking account. And that means that the most popular thing. really is going to be a stable coin dollar, right? There's a maybe a fight right now. It might be Tether, right? But a stable dollar because I feel like. the market opportunity, it's not clear. that there'll be one that will win.

The class of stable dollars is probably. a one to $10 trillion market easily. I think that in the crypto platform space, Ethereum will compete with Solana. and Binance Smart Chain and the like. And are there certain characteristics of any of them. that kind of stand out to you? Don't you think the competition. is based on a set of features? Also, so the set of features that a cryptocurrency provides, but also the community that it provides.

Don't you think the community matters. and sort of the adoption, the dynamic of the adoption. both across the developers and the investors. - And if I'm looking at them, I mean the first question. is what's the regulatory risk, how likely is it to be deemed a property versus security? And the second is what's the competitive risk? And the third is what's the speed and the performance. And all those things lead to the question. of what's the security risk? How likely is it to crash and burn,

and how stable or unstable is it? And then there's the marketing risk. I mean, there are different teams. behind each of these things and communities behind them. I think that the big cloud looming over the crypto industry. is regulatory treatment of cryptocurrencies. and regulatory treatment of crypto securities. and crypto platforms. And I think that won't be determined. until the end of the first Biden administration. For example, there are people that would like.

only US FDIC insured banks to issue cryptocurrencies. They want JP Morgan to issue. a crypto dollar backed one-to-one. But then in the US right now we have Circle. and we have other companies that are licensed entities. that are backed by cash and cash equivalents, but they're not FDIC insured banks. There's also a debate in Congress about. whether state chartered banks should be able. to issue these things. And then we have Tether and others.

that are outside of the US jurisdiction, they're probably not backed by cash and cash equivalents. They're backed by stuff. And we don't know what stuff. And then finally you have UST and D, which are algorithmic stable coins, right? That are even more innovative, further outside the compliance framework. So if you ask who's gonna win? The question is really, I don't know, will the market decide. or will the regulators decide.

If the regulator get outta the way and the market fought up? Well, then it's an interesting discussion. - [Lex] Yeah. - And then I think that all bets are off. if the regulators get more heavy handed with this. And I think you could have the same discussion. with crypto properties like the DeFi exchanges. and the crypto exchanges. The SEC would like to regulate the crypto exchanges. They like to regulate the DeFi exchanges. That means they may regulate the crypto platforms. and at what rate and in what fashion. And so I think that I could give you an opinion.

if it was limited to competition. under the current regulatory regime. But I think that the regulations are so fast moving. and it's so uncertain that it's, you can't make a decision. without considering the potential actions of the regulators. - I hope the regulators get out of the way. Can you steelman the case that Dogecoin is,

I guess the second best cryptocurrency. or if you don't consider Bitcoin a cryptocurrency, but instead of crypto property. - I would classify it as crypto property. because the US dollar is a currency. So unless your crypto asset is pegged algorithmically. or stably to the value of the dollar is not a currency, it's a property or it's an asset. - So then can you steelman the case. that Dogecoin is the best cryptocurrency then, because Bitcoin is not even in that list.

- The debate is gonna be whether it's property or security, and there's a debate whether it's decentralized enough. So let's assume it was decentralized. - Yep. - Well, it's increasing at not quite five, what 5% a year inflation rate. But it's not 5% exponentially, it's like a plus 5 million, 5%, something capped in is less. I forget the exact number, but it's an inflationary property.

It's got a lower inflation rate than the US dollar, and it's got a much lower inflation rate. than many other fiat currencies. So, I think you could say that. - But don't you see the power of meme, the power of ideas, the power of fun or whatever mechanism. is used to captivate a community? - I do, but there are meme stocks. It doesn't absolve you of your ethical.

and securities liabilities if you're promoting it. So like I don't have a problem. with like people buying a stock. It's just the way I divide the world is right, there's investment, there's saving. and there's speculation and there's trading. So Bitcoin is an asset for saving. If you wanna save money for a hundred years, you don't really want to take on execution risk. or the like, so you're just buying.

something to hold forever. For you to actually endorse something as a property. Like if you said to me, "Mike, what should I buy for the next a hundred years?". I say, "Well, some amount of real estate, some amount of scarce collectibles, some amount of Bitcoin," right? You can run your company, right? But running your company as an investment, so the savings are properties. If you said, "What should I invest in?". I'd say, "Well, here's a list of good companies, private companies, you could start your own company.".

That's an investment, right? If you said, "What should I trade?". Well, I'm trading as like a proprietary thing. Like I don't have any special insight into that. If you're a good trader, you know you are. If you said to me, "What should you speculate in?". We talk about meme stocks, right, and meme coins, and it's kind of sits up there. It sits right in the same space. with what horse should you bet on. and what sports team should you gamble on?

And should you bet on black six times in a row. and double down each time? I mean, it's fun, but at the end of the day. it's a speculation, right? You can't build a civilization-. - On speculation. - On it. It's not an institutional asset. And in fact, where I'd leave it, right, is Bitcoin is clearly digital, which makes it an institutional grade investible asset. for a public company, a public figure, a public investor or anybody that's risk adverse.

I think that the other, the top 100 other cryptos. are like venture capital investments. And if you're a VC. and if you're a qualified technical investor. and you have a pool of capital. and you can take that kind of risk, then you can parse through that and form opinions. It's just orders of magnitude more risky. because of competition, because of ambition. and because of regulation. And if you take the meme coins, it's like when some rapper comes out with a meme coin,

it's like maybe it'll peak when I hear about it, right? It's like, I mean, Shib was created as the coin. such that it had so many zeros after the decimal point. that when you looked at it on the exchanges, it always showed 0000. And it wasn't until like six months after it got popular. that they started expanding the display, so you could see whether the price had changed. - That's speculation.

Maybe you can correct me, but you've been critical of Elon Musk. in the past in the crypto space. Where do you stand on Elon's effect on Bitcoin. and cryptocurrency in general these days? - I believe that Bitcoin is a massive breakthrough. for the human race that will cure half the problems. in the world and generate hundreds of trillions of dollars. of economic value to the civilization. And I believe that it's in an early stage. where many people don't understand it.

and they're afraid of it. And there's FUD and there's uncertainty, there's doubt. and there's fear and there's a very noisy crypto world. and there's 15,000 other cryptos that are seeking relevance. And I think most of the FUD is actually fueled. by the other crypto entrepreneurs. So the environmental FUD and the other types of uncertainty. that surround Bitcoin, generally they're not coming.

from legitimate environmentalists. They don't come from legitimate critics. They actually are guerilla marketing campaigns. that are being financed and fueled. by other crypto entrepreneurs. because they have an interest in doing so. So if I look at the constructive path forward. First, I think it'd be very constructive. for corporations to embrace Bitcoin.

and build applications on top of it. You don't need to fix it. There's nothing wrong with it, right? Like when you put it on a layer two and a layer three, it moves a billion times a second at the speed of light. So every beautiful, cool DeFi application, every crypto application, everything you could imagine. you might wanna do, you can do with a legitimate company. and a legitimate website or mobile application.

sitting on top of Bitcoin or Lightning if you want to. So I think that to the extent that people do that, that's gonna be better for the world. If you consider what holds people back, I think it's just misperceptions about what Bitcoin is. So I'm a big fan of just educating people. If you're not going to commercialize it, then just educate people on what it is. So for example, Bitcoin's the most efficient.

use of energy in the world by far, right? Most people don't, they don't necessarily perceive that. or realize that. But if you were to take any metric energy intensity, you put like $2 billion worth of electricity. in the network every year and it's worth $850 billion. There is no industry in the real world, right, that is that energy efficient. Not only that energy efficient,

it's also the most sustainable industry. We do surveys, 58% of Bitcoin mining energy is sustainable. So there's a very good story. In fact every other industry, planes, trains, automobiles, construction, food, medicine, everything else, it's less clean, less efficient. - So the basic debate was-. - I would like to, I wouldn't say there is a debate, I would just say that to the extent. that the Bitcoin community had any issue with Elon,

it was just this environmental uncertainty. that he fueled in a couple of his tweets, right? Which I think just is very distracting. - Well, that was one of them. But I think it's like the Bitcoin maximalist, but generally the crypto community, what you call the crypto entrepreneurs are. it's also they're using it for, I mean, for investment, for speculation, and therefore get very passionate.

about people's kind of celebrities, including you, like famous people. saying positive stuff about. any one particular crypto, a thing you can buy in Coinbase. And so they might be unhappy with Elon Musk. that he's promoting Bitcoin and then not, and then promoting Dogecoin, then not. And this kind of there's so much emotion.

tied up in the communication on this topic. I think that's where a lot of the-. - Look, I don't have a criticism of Elon Musk. He's free to do whatever he wishes to do. It's his life. In fact, Elon Musk is the second largest. supporter of Bitcoin in the world. So I think that the Bitcoin community. tends to eat its own quite a bit. - [Lex] Yeah. - Like it tends to be very self-critical. And instead of saying, well, Elon is more supportive.

of Bitcoin than the other 10,000 people in the world, with serious amounts of money, they're like, they focus upon, you know? - Yeah, this is strange. Eating your own is just-. - So, I mean, I think he's free to do what he wants to do. And I think he's done a lot of good for Bitcoin. in putting it on the balance sheet of Tesla and holding it. And I think that sent a very powerful message.

- Do you have advice for young people? So, you've had a heck of a life. You've done quite a lot of things before MIT, but starting with MIT. Is there advice you have for young people. in high school and college, how to have a career they can be proud of, how to have a life they can be proud of? - I was asked by somebody for quick advice. for his young children, he had twins,

when they enter adulthood. He said, "Give me your advice for them in a letter. I'm gonna give it to them when they turn 21 or something.". I was at a party and then he handed me. this sheet of paper and I thought, "Oh, he wants me to write it down right now.". So I sat down, I started writing and I figured, "Well, what would you want to tell someone at age 21?". - You wrote it down? - [Michael] So I wrote it down. - Awesome. Then I tweeted it and it's sitting on Twitter. But I tell you what I said. I said my advice if you're entering adulthood.

Focus your energy, guard your time, train your mind, train your body, think for yourself, curate your friends, curate your environment, keep your promises, stay cheerful. and constructive, and upgrade the world.

Like that was the 10. - Upgrade the world. That's an interesting choice of words. Upgrade the world, upgrade the world. - [Michael] It's like an engineering-. - Focus your energy. Yeah, it is a very engineering themed. Keep your promises too. That's an interesting one. - I think most people suffer because they don't focus. Like you gotta figure out, I think the big risk in this world. is there's too much of everything.

- [Lex] Yeah. - Like you can sit and watch chess videos. a hundred hours a week and you'll never get through. all the chess videos, right? There's too much of every possible thing, too much of every good thing. So figuring out what you wanna do. and then everything will suck up your time, right? There's a hundred streaming channels to binge watch on. So you gotta guard your time and then train your body, train your mind, and control who's around you,

control what surrounds you. So ultimately in a world where there's too much. of everything, then your success-. - It's like those laser eyes. It's like those laser eyes, you have to focus. on just a few of those things. - Yeah, I mean, I got a thousand opinions. we could talk about and I could pursue a thousand things, but I don't expect to be successful. And I'm not sure that my opinion in any of the 999.

is any more valid than the leader of thought in that area, so how about if I just focus upon one thing. and then deliver the best I can in the one thing. That's the laser eye message. The rest get you distracted. - How do you achieve that? Do you find yourself given where you are in life. having to say no a lot or just fo focus comes natural.

when you just ignore everything around you? So how do you achieve that focus? - I think it helps if people know what you're focused on. (Lex chuckles). - So everything about you just radiates that, people know. People know this is-. - Right, if they know what you're focused on, then you won't get so many other things coming your way. If you dally or if you flirt with 27 different things, then you're gonna get approached by people.

in each of the 27 communities, right? - You mentioned at beginning a PhD. and given your roots at MIT, do you think there's all kinds of journeys. you can take to educate yourself? Do you think a PhD or school is still worth it? Or is there other paths through life that-. - Is it worth it if you had to pay for it? Is it worth it if you to spend the time on it? - The time and the money is a big cost.

Time probably the bigger one, right? - It seems clear to me that the world. wants more specialists. It wants you to be an expert in and to focus on in one area, and it's punishing generalist, jack of all trades, especially people that are generalists. in the physical realm, 'cause if you're a specialist. in the digital realm, you might very well, you're the person with 700,000 followers on Twitter.

and you show them how to tie knots. or you're the banjo player with 1.8 million followers, and when everybody types banjo, it's you, right? - [Lex] Yeah. - And so the world wants people that do something well, and then it wants to stamp out 18 million copies of them. And so that argues in favor of focus. Now, I mean, the definition of a PhD is someone.

with enough of an education that they're capable of. or have made, I guess to get a PhD, technically you have to have done a dissertation. where you made a seminal contribution. to the body of human knowledge, right? And if you haven't done that, technically you have a master's degree, but you're not a doctor. So if you're interested in any of the academic disciplines. that a PhD would be granted for, then I can see that being a reasonable pursuit.

But there are many people that are specialists. You know the Agadmator? - Yeah, yeah. - The Agadmator on YouTube. - Yeah, yeah, yeah, yeah. - He's the world's greatest chess commentator. - [Lex] Yeah. (chuckles). - And I've watched his career. and he is got progressively better. And he is really good. - He's gonna love hearing this. (chuckles). - Yeah, if the Agadmator overhears this, I'm a big fan of the Agadmator, unfortunately, I have to cut myself off, right, because otherwise you'll watch. the entire Paul Morphy saga for your weekend.

But the point really is YouTube is full of experts. who are specialists in something, and they rise to the top of their profession. And Twitter is too, and the internet is. So I would advocate that you figure out. what you're passionate about and what you're good at, and you do focus on it, especially if the thing. that you're doing can be automated.

The problem is back to that. 500,000 algebra teacher type comment. The problem is if it is possible to be automated, then over time someone's probably gonna automate it. and that squeezes the state space of everybody else. It's like after the lockdowns, it used to be there. are like all these local bands that played in bars,

and everybody went to the bar to see the local band. And then during the lockdown. you would have like these six super groups. and they would all get 500,000 or a million followers. and all these smaller local bands. just got no attention at all. - Well, the interesting thing is, one of those 500,000 algebra teachers. is likely to be part of the automation, so it's like it's an opportunity for you to think, where's my field, my discipline evolving into.

I talked to a bunch of librarians, just happen to be friends with librarians. and libraries will probably be evolving. And it's up to you as a librarian to be one. of the few that remain in the rubble. - If you're gonna give commentary on Shakespeare plays, I want you to basically do it for every Shakespeare play. Like, I want you to be the Shakespeare dude. Just like Lex, you're like-.

- I don't know what kind of. (chuckles). - You are the deep thinking podcaster, right? Or you're the podcaster that goes. after the deep intellectual conversations. And once I get comfortable with you and I like you, then I start binge watching Lex. - [Lex] Yeah. - But if you changed your format. through 16 different formats, so that you could compete. with 16 different other personalities on YouTube, you'd probably wouldn't beat any of 'em, right?

You would probably just kind of sink into the, you're the number two or number three guy. You're not the number one guy in the format. And I think the algorithm, right? The Twitter algorithm and the YouTube algorithms, they really reward the person. that's focused on message, consistent. The world wants somebody they can trust. that's consistent and reliable. and they kind of want to know what they're getting into. because and this is taken for granted maybe,

but there's 10 million people. vying for every hour of your time, and so the fact that anybody gives you any time at all. is a huge privilege, right? - [Lex] Is amazing. - And you should be thanking them. And you should respect their time. - It's interesting, like everything you said. is very interesting. But of course, from my perspective. and probably from your perspective, my actual life has nothing to do with,

it's just being focused on stuff. And in my case, it's like focused. on doing the thing I really enjoy doing and being myself. and not caring about anything else. Like I don't care about views or likes or attention. And that just maintaining that focus. is the way from an individual perspective, you live that life. But yeah, it does seem that there's the world. and technology is rewarding the specialization. and creating bigger and bigger platforms. for the different specializations.

Yeah, and then that lifts all boats actually, 'cause the specializations get better and better. and better at teaching people to do specific things. and they educate themselves and it just, everybody gets more. and more knowledgeable and more and more empowered. - The reward for authenticity more than offsets. the specificity with which you pursue your mission. - [Lex] That's true, yeah. - Another way to say it is like, nobody wants to read advertising. Like if you were to spend.

a hundred million dollars advertising your thing, I probably wouldn't wanna watch it. - Yeah, that's so fascinating. Yeah, so fascinating. - [Michael] We see the death of that. - Yeah. - And so the commercial shows are losing their audiences. and the authentic specialists or the authentic artists. are gaining their audience. - And that's a beautiful thing. Speaking of deep thinking, you're just a human,

your life ends, you've accumulated so much wisdom, so much money, but the ride ends. Do you think about that? Do you ponder your death, your mortality? Are you afraid of it? - When I go all my assets will flow into a foundation, and the foundation's mission. is to make education free for everybody forever. And if I'm able to contribute to the creation.

of a more perfect monetary system, then maybe that foundation will go on forever, right? - (chuckles) The idea, the foundation of the idea, so not just the, it's each of the foundations. - It's not clear we're on the S-curve of a mortal life yet. Like that's a biological question. And you asked that on some of your other interviews a lot. I think that we are on the threshold of immortal life.

for ideas or immortal life. for certain institutions or computer programs. So if we can fix the money, then you can create a technically perfected endowment. And then the question really is what are your ideas? What do you want to leave behind? And so if it's a park, then you endow the park, right? If it's free education, you endow that. If it's some other ethical idea, right?

- Does it make you sad that there's something. that you've endowed some very powerful idea. of digital energy that you help put into the world, and then your mind, your conscious mind. will no longer be there to experience it. It's just gone forever. - I'd rather think that the thing that Satoshi taught us.

is you should do your part during some phase of the journey, and then you should get out of the way. - [Lex] (chuckles) Yeah. - I think Steve Jobs said something similar. to that effect in a very, very famous speech one day, which is, "Death is a natural part of life. and it makes way for the next generation.". And I think the goal is you upgrade the world, right? You leave it a better place, but you get out of the way.

And I think when that breaks down, bad things happen. I think nature cleanses itself. There's a cycle of life. - And speaking one of great people. who did also get outta the way is George Washington. So hopefully when you get outta the way. and nobody's bleeding you to death in hope of helping you.

To do a bit of a callback. What do you think is the meaning of this whole thing? What's the meaning of life? Why are we here? We talked about the rise of human civilization. It seems like we're engineers at heart. We build cool stuff, better and better use of energy, channeling energy to be productive. Why? What's it all for? - (chuckles) You're getting metaphysical on me. - Very, there's a beautiful boat to the left of us. Like why do we do that?

This boat that sailed the ocean, then we build models of it. to celebrate great engineering of the past. - To engineer is divine. You can make lots of arguments as why we're here. We're either here to entertain ourself. or we're here to create something that's beautiful. or something that's functional. I think if you're an engineer, you entertain yourself. by creating something that's both beautiful and functional. So I think all three of those things, it's entertaining, but it's ethical.

You gotta admire the first person that built a bridge, crossing a chasm or the first person to work out the problem. of how to get running water to a village. or the first person to figure out. how to dam up a river or mastered agriculture. or the guy that figured out how to grow fruit on trees. or created orchards, and maybe one day. he had like 10 fruit trees.

He is pretty proud of himself. - So, that's functional. There is also something to that, just like you said, that's just beautiful. It does get you closer to, like you said, the divine something. When you step back and look at the entirety of it, a collective of humans using a beautiful invention. or creation or just something about this instrument.

is creating a beautiful piece of music. That seems just right. That's what we're here for. Whatever the divine is, it seems like we're here for that. And I of course love talking to you. because from the engineering perspective, the functional is ultimately. the mechanism towards the beauty. - Isn't there something beautiful about. making the world a better place for people that you love? - [Lex] Yeah. - Your friends, your family, or yourself.

- [Lex] Yeah, yeah. - And when you think about the entire arc of human existence. and you roll the clock back 500,000 years. and you think about every struggle. of everyone that came before us. and everything they had to overcome. in order to put you here right now, you know, you kind of, you gotta admire that, right? You gotta respect that.

- That's a heck of a gift they gave us. It's also a heck of a responsibility. Don't screw it up. (chuckles). - If I dropped you 500,000 years ago. and I said, figure out steel refining, or figure out silicon chips, fab production. or whatever it is or fire? - Why? - And so now we're here and I guess the way you repay them. is you fix everything in front of your face you can, right?

And that means to someone like Elon, it means get us off the planet, right? To someone like me, it's like, I think fix the energy and the system. - And that gives me hope. Michael, this was an incredible conversation. You're an incredible human. It's a huge honor you would sit down with me. Thank you so much for talking today. - Yeah, thanks for having me, Lex. - Thanks for listening to this conversation. with Michael Saylor. To support this podcast,

please check out our sponsors in the description. And now let me leave you. with a few words from Francis Bacon. "Money is a great servant, but a bad master.". Thank you for listening and hope to see you next time.