E42: Naval Ravikant and Balaji Srinivasan on Why History Points to Crypto

24:16So that just happens in crypto all the time. So the downside is the moment you have digital governance, Revolution is really easy. Splintering, factionalism, tribalism is really easy. And so these wars become very much out in the open. But on the other hand, it's also sort of a good thing because everything is being tried as opposed to like in the US, we elect a president for four or eight years. We head in one direction for a little while. Then we tack back, we head in the other direction back. Here, we have to keep choosing. In crypto land, you don't have to choose. Everybody can fork off at any time, wherever they want.

24:48And if we could do that in the real world, that would be kind of an interesting experiment. We kind of already do. You fork to San Francisco or you go live in Texas, right? No one specific in mind. So you mentioned religion. I have to ask about it. Crypto is religion. Unpack that a little bit. And I mean, who are the priests? Who are the deacons? Who are the clergy? Like paint a picture for us. Well, I think I'll change that analogy a little bit. The priests, the religious fanatics, the Jesuits, you know, the Spanish Inquisition here are the crypto people. and normally they would have allied with or competed with the kings but here they're literally sacrificing the kings they're saying to the altar of crypto we get rid of the leaders so crypto is just another part of the grand trend line of the internet which is getting rid of the gatekeepers so the internet was supposed to get rid of all the gatekeepers i keep going back to this sorry to keep harping on it but it's a peer-to-peer network underneath it was supposed to get rid of all the gatekeepers but now who are new gatekeepers icann is the big dns gatekeeper Google is the search gatekeeper.

25:50Twitter and Facebook are the social network gatekeepers. And as far as Silicon Valley is concerned, oh yeah, the internet revolution was great. We got rid of the old gatekeepers and now we're the new gatekeepers. This is fantastic, revenge of the nerds. But I think this is phase two. This is saying, no, now let's get rid of the next set of gatekeepers and keep getting rid of them until there are no more gatekeepers. Yeah, I think one thing, as I look at this social phenomenon, I think there's sort of a core idea that unites us all in that power needs to be more diffuse, more equally held, and that technology and market mechanisms can play a critical role in achieving that goal.

26:27But I think what the blockchain community has not clearly articulated is what that society needs to look like or how that becomes possible. It's sort of technology that points in a vague direction, but not what it means or what it would look like. How do you respond to that? I think it's going to be an evolved process. I don't think it's a top-down design thing. If you look at markets, look at the economy, for example. The economy is a giant series of markets. No macroeconomist can actually tell you how the economy works. You get enough macroeconomists in a room together, it's like politics. They're all just arguing.

26:59They can't figure it out. It's back to the blind people and the elephant story. They're all feeling different parts of the elephant trying to describe it. So crypto is like that. We've created something that's larger than just us. It's like the internet. It's larger than us. It's like the economy. It's larger than us. You have to describe it observe it evolve it and try to keep up with it rather than trying to top down say Oh, yeah, this is how it should work and this is the vision. We're all heading towards I can give some you know without getting into the macro but I can give some examples of things I think will happen at the micro level that maybe it may be interesting one is I do think that crypto will in the medium to long term result in what I call instant jobs, right?

27:39So right now you can just land on a website and you can go and post like an like a forum or You know facebook or twitter you can just go and post and post information publish information We take that for granted But that's a huge thing relative to say 30 years ago when it was very hard to go and you know get a printing press and paper and distribute information um So instant jobs are interesting you click a button you do a task you make money We've got something like that at earn at coinbase and I think there's that's going to be a very big part of Let's say 5 10 15 years out and anywhere. There's a phone There's a job you have a feed of tasks and you do those tasks and that's that's your that's your job A second thing I think is going to happen is at the micro level, I think we're going to get billions of investors.

28:20And this is actually something that I think is now kind of an obvious thing that's going to happen, but has been under remarked on. I think maybe 99 % of the world will be investors and maybe like 1 % will be entrepreneurs. And what do I mean by that? I think everybody pretty much can buy something. You can go and buy something at Starbucks. You can, you know, swipe a credit card. Everybody here has bought something. It's pretty hard to build something. But with crypto there's no more any there's no longer any threshold for investing in something you can invest a dollar You can invest ten dollars people put ten dollars into a theorem They've got like, you know ten thousand dollars, you know, like a few years later Not every investment is obviously like that in crypto But it is the case that as you totally remove all thresholds You can have somebody from any country in the world click a button and in ten or fifteen or maybe in five But probably like more like ten years just as easily as you'd like something or poke somebody you could send them a dollar And you're going to start to see fundraising rounds, maybe not in the United States, maybe in other countries where it's like a million people putting$1 each into somebody.

29:18Right. And that's going to be very commonplace. And maybe that's what you do recreationally each day. You spend a couple of bucks doing that. And that's like, you know, you're it's your replacement for Twitter or Facebook because you're not just liking or thumbs up in something. But you have a little bit of skin in the game. It's a little fun to follow that portfolio. You can see how it's doing. And you're helping somebody get financing when they might not otherwise be able to do so. So I'm interested in this from like a microeconomics. I think it makes a lot more people think like angel investors, think like venture capitalists.

29:44Yeah, you can have people crowdfunding entire countries. You could have people crowdfunding war. You could have people crowdfunding revolution. The possibilities here are kind of endless. When people are investing a dollar in something, maybe they're not even thinking about it as investing anymore. It's somewhere between donation and investing. It's like Kickstarter, a lot of those projects fail to deliver, but the investors don't really seem to care. They were kind of doing it more to just support the founder as much as anything else. One one comment I have there though if you did try to crowdfund a war I think you'd have a lot less war Because because I think people wouldn't wouldn't pay for it as as easily.

30:17That's true Yeah, it's it's easier to fight wars with other people's money. Yeah, Nassim Taleb made the good point recently that historically People who warmongers people who declared wars that skin of the game They had to go fight at the front of the war But today you can be sitting at your desk in washington dc or in or in moscow and you can launch a war and you never have to fight in it And you hide the cost by just creating money. You print money. Yeah. It's worth double-clicking on something Baha just said, which is if you had invested in Ethereum at$0.03, whenever the ICO was, that's a...

30:49$0.30. Wait, wait,$0.30. That's a, you would know perhaps, that was a better investment than investing in Facebook or Google at the Cedar Brown. Yeah, yeah. It's true. 700X within two or three years, fully liquid. Yep. Say more about some of the... So don't worry, you guys didn't miss anything. Say more about some of the... And it was open to everybody. And ironically, the people who missed it were the venture capitalists. Yeah, that's some karma. A great irony there. So talk more about what society looks like in a world in which everyone's an investor. There are way more investors. And I'm particularly interested in, because the life of the average American.

31:26Yeah, first it looks like a giant casino, right? First it goes completely crazy. So people lose money. Yeah, everybody scams everybody. A lot of people lose money. The lady does lots. But you kind of have to let them go through that. It's a learning curve. It's like it took a while before the Securities Act came along and divided penny stocks from public stocks and what was considered legit and what wasn't. So it'll take a while for people to figure it out and there'll be some money lost along the way. But it's a global learning curve. It's distributed across 7 billion people. It's happened very quickly.

31:54I would argue that, you know, the recent downturn has been great. Crypto has had 75, 80 percent of its value wiped out. some of these coins are down 95 % and will fully disappear. That's good because it's going to teach people that, oh, you know, you can't trust everything you read on the internet. And you certainly can't send money to strangers on the internet based on what they wrote. So it'll raise the levels of diligence. It'll raise the requirements for investing. And I'm hoping that out of it, we will see at some point a real investment market will emerge. But in the short to medium term, it looks like a big casino.

32:22Yeah, I would say a couple of things. I think a lot of the things that in Silicon Valley we've developed, like, you know, term sheets that contemplate things like liquidation preferences and drag along and stuff like that. They're all based on previous train crashes or car crashes that happened, like, you know, big conflicts that happened in the past. And then lawyers go and bake that into contracts to avoid those things happening in the future. I think you're going to start to see a lot of that baked into smart contracts where a lot of the wisdom of, you know, how investments have worked gets baked in and folks start getting one, two, three year lockups on their crypto.

32:56You're already starting to see this type of stuff and incentives start getting aligned And so I'm you know optimistic in the medium term that You know once you've got that those contracts out there and folks have done diligence on them And they've proven that they're also in for the long term alongside you Then you're gonna be more likely to listen to their recommendations on the coin and then you'd buy in So I think that's a process but I do think there's a light at the end of the tunnel Yeah long term you'll see that a lot of these crowd fundings online to the extent they still happen will require that the money goes into smart contracts that then very carefully bleed out the money to the developers or people as they hit milestones that are verified by third parties or held in escrow.

33:34And then as revenues come in, taxes are automatically paid and pieces are siphoned off and dividend to the investors and so on. Ronald Coase, the economist, famously said that a firm is just a nexus of contracts. And you can take the nexus of contracts here and you can program the whole thing. You don't necessarily need lawyers and bankers and judges watching every little piece for a lot of the simple stuff. You can just have it be on rails. And the first company that does it because it's open source, the second company will just copy it and copy it and copy it. You won't have to reinvent the wheel.

34:04It's just like with code. It'll create layers and layers that people will build on until our kids will probably, to them, creating a company will be, they'll just hit one button and like a whole series of smart contracts will fire up and a company will get created. And they'll drag and drop in who's an employee, who's an investor, who's owed how much, and you'll be able to run this completely distributed, virtual, auditable, trackable, trustless company without needing armies of lawyers and judges. Yeah. And actually, just to just kind of emphasize that or drill into that, when you go and buy a car from somebody, right, they sell it to you.

34:37And the most important thing they're selling to you is, you know, the keys, you put in the keys and the car turns on, great, you can go with it, right? When you go and sell a company to somebody, it's not yet a machine like that, right? The owner can't just leave and you can't just operate it on your own. There's all of this hidden knowledge and how to give this instruction to this person, what's the context of this contract, et cetera. The more and more of that we can encode into a nexus of contracts, a system of smart contracts, the more salable and liquid a company is because it's like a machine that you can just sell for its future cash flows.

35:11And I think that's going to start with just basic websites like, let's say, a file conversion service or something like that. That's the kind of thing where you can start to imagine, okay, it's got this many visitors a month. It's just code that executes on inputs and returns outputs. That's the first kind of thing I could imagine that starts to get sold in this fashion. But then over time, more and more complex companies start to become machines like cars that you can just sell and then operate without the owner. So if the firm goes away or the way we understand company building becomes radically different, what skill sets are now needed much more in order to thrive in a new blockchain economy?

35:47It's the same skill sets that are always needed. Anything that a computer can eventually be trained to do, a computer will do. And the things that computers cannot do and probably will not do in our lifetimes, I'll take the other side of the general AI bet, is they can't be creative. So at the end of the day, you want to be creative. You want to be learning skills to create new things. Entrepreneurship is one instantiation of that. Art is another. But anytime you're solving a new problem, you're going to get paid for that. I forget who said it, but famously said that in the future, either you're telling a computer what to do or a computer is telling you what to do.

36:23And you don't want to be the wrong side of that transaction. So it's much better if you can be creative and then you can teach a computer how to do it rather than computers giving you instructions to do the last set of things that computers can't do yet. One question a lot of people ask about regulation, but I want to ask a slightly different question related to it, which is if you assume that a key role of governments and regulation in market economies is to correct for market failures, in a decentralized economy how will you correct for market failures? Or is part of the crypto thesis that there are no true market failures, only distortions created by regulation itself?

36:58I think that people want regulated markets in the sense that they want some trustworthy actor to ban bad actors and impose some form of quality rating on the system. Those are two different things, by the way. Banning a bad actor is not the same as giving – that's like a zero-star actor versus giving three stars to a well-intentioned but maybe not amazing good actor. So they want regulators to do this kind of thing. But the form that regulation can take It could be a national regulator or it can be an international regulator like an amazon and ebay or a lyft or an airbnb Which have star ratings they have reviews their reputation and people consult them and look at those star ratings prior to buying their products It doesn't have to be a like national regulator just to be some Trustworthy source of reviews and reputation that can de-platform bad actors And so I think what's going to happen with the crypto space is you're going to see a wide variety of different kinds of review and reputation and other kinds of sites arise.

37:58We're already seeing this. And then those that are good enough will either be subsidized by, you know, crypto transactions or will be good enough that people will pay for, just like the current market for, like, you know, buy side and sell side advice. So I think that will arise. And then we'll see whether, you know, more is necessary than that or whether that's a whole area in its own right. Yeah, and to the point of like if a certain crypto economy has a market failure, it's poorly designed and it's not allocating resources properly or people are getting cheated, they'll leave. They'll fork it or they'll just go to another one.

38:29There's a Cambrian explosion of crypto experiments out there, which makes it really, really easy to hop around. And when you look at the price of one of these, it's basically how much trust people have in it right now. I can add to that also. I think one thing that's an interesting concept is sometimes you have a period of tolerable anarchy. So, for example, with email spam, it got really bad, and there were all these vigilante-ish approaches that were proposed. And then, you know, finally what actually did work was a mathematical solution, Bayesian spam filtering, which maybe didn't solve 100 % of the problem but solved most of it, you know, with Gmail's, you know, spam filters.

39:05And sometimes if you have somebody intercede too soon, they can lock in a solution that's not necessarily the optimal one. Like another example is in terms of spectrum auctions. You know much later we developed things like cdma and and and technologies that don't require like this government spectrum auction of You know frequency division bandwidth, but but those weren't available and we locked in a solution based on regulation Rather than tolerating a period of anarchy and letting technology develop or like right now with investing rules We have a locked in solution called the accredited investor program where you have to have a million dollar net worth And then you're allowed to invest in a lot of private assets And if you have less than a million dollars, you're considered a moron.

39:43And if you have more than a million dollars, you're a genius. And that's obviously not how the world works. And it should probably be replaced by some kind of sophistication test. And everyone's known it should be replaced by some kind of sophistication test. And here we are 83 years later still talking about what is a sophistication test. Yeah. I want to hear more about how you two, we've talked about, you know, outlined the future and what we see, how you two want to participate in that future. So maybe first you can describe the vision for Coinbase and your work there. And then Naval, you can get into AngelList, CoinList and other efforts.

40:16Sure. Yeah. So what am I doing at Coinbase? So I am driving the addition of new assets, first and foremost. The integration of earn and making that something that I think maybe you'll be able to earn as well as buy and sell at Coinbase. And then a bunch of other cool projects I can't talk about too much And then doing a bunch of things with Coinbase ventures and investing in a lot of companies are coming up and talk about the Vision of Coinbase. Oh vision of Coinbase Build an open financial system and while that sounds maybe like, you know generic corporate speak or whatever What it really means is You know if you think about what Linux was versus Windows Linux was an open source system and anybody could download it and you could hack and you could get access to it And now you had an operating system that you could customize and the same way like building a more open financial system It's hard to imagine a financial system.

41:12That's more closed than our one is today, right? So a more open one is one where you can pull a blockchain and a kid in Vietnam can go and collaborate with somebody from Japan and And brazil and turkey because they're all using the blockchain at the same time And we've helped onboard people into that. We've helped educate them We've helped them get their first amount of digital currency. Maybe we've set up an exchange in their country We've basically onboarded people into this more open financial system and that's that's our mission Yeah, I'm mostly involved in this space with coin list and with Metastable Coin list is the legal regulated well-lit marketplace for ICOs that we spun out of AngelList And we've run ICOs for Filecoin Blockstack and a few other pretty well-known players in the space Now also doing legal compliant airdrops.

41:56So we just ran the DFINITY airdrop airdrop being when they're giving out coins to influential people like developers who they want supporting the project and then with metastable we're the oldest cryptocurrency fund that bought anything other than bitcoin and mainly there we back teams that are building that are improving decentralization and scaling for new protocols on blockchains so we're investors in chia basis coda you may have heard of a bunch of these but a ton of them and we're always in the first round And what we try and do is we have a highly technical team that works with the companies to basically look at solving fundamental protocol challenges.

42:34I don't think we're quite yet in the phase yet where somebody can build large-scale working applications on blockchains. You may not have caught this at the beginning, but the solution to how to make sure somebody doesn't run off with your money in blockchain land is everybody keeps a copy of the entire database going all the way back to the beginning of time. It's incredibly inefficient. So blockchains just don't scale well. You trade off decentralization and survivability for scalability. And so now there's a whole generation of startups that are trying to solve the scalability problem. And so we back teams that do that.

43:07And you've also, of course, started AngelList. And AngelList, among other things, really tried to democratize venture capital, democratize investing in startups. So I'm curious how you think about inequality as it relates to crypto blockchain, wealth inequality, social inequality. Yeah, I mean you got to unpack the word inequality because some people used to mean Inequality of opportunity and some people use it to mean inequality of outcome So equal opportunity is you know the American dream it's in theory of the American dream works We all have equal opportunity to get to wherever we want with enough effort But equal outcome is quite the opposite.

43:46I mean that's what you get in North Korea, right? So you have to be very careful about differentiating between the two because free people make free choices And if you make different choices, you'll get different outcomes and they will be unequal outcomes. And now we're living in an age of tremendous leverage. So if you make the choice to start a social network while you're a student at Harvard, you know, you might be Zuck and you might make billions of dollars. But if I make the choice to start, I don't know, like a location tracking network, you know, three years ago, that goes to zero. Or if I make the choice to go study medicine, that's unleveraged.

44:15So we are seeing very unequal outcomes because the huge amount of leverage in the system. So I think that what blockchains do offer is they do offer equal access. Anybody can go and contribute to the Bitcoin blockchain or the Ethereum blockchain. Anyone can contribute code to it. Anyone can contribute resources to it. And I'm not even just talking about good old-fashioned inequality or equality of opportunity in the USA. I'm talking about globally. I'm talking across all ages. I'm talking about a 14-year-old kid who's sitting in Bangladesh can contribute to the Bitcoin blockchain. So you want to talk equal opportunity, they have equal opportunity in that regard.

44:51But on the other hand, in no way does a promise equal outcome. It's a meritocracy, and meritocracies have winners and losers. Yeah, I'd cut the problem slightly different. I mean, complementary, which is inequality is typically concerned with, let's call it centralization of wealth. And within crypto, people are often concerned with centralization of power. But those are actually very related things. and You know what I'm optimistic about block chains for is they give us a way as a community to fork off and Someone's only powerful or wealthy if effectively other folks are giving them that power at least in the context of blockchains So we always have this exit we always have this ability to vote against You know some kind of tyrannical force with our feet and with our wallet and fork away from it Yeah Yeah, in fact, I think one of the interesting things to note is that one of the ways that some of the new coins are competing with the existing coins is they're taking a model, which is called the fair coin model, which is they're trying to airdrop or distribute the currency as widely as possible.

45:54So you're literally seeing new coins instead of doing fundraisers from investors. They're just trying to identify people and just give away the coins. And the extreme version of that would be Facebook airdropping a coin to billions and billions of users under the idea that the more widespread the money is, the more likely it will be used as money and become valuable. As opposed to today, we're sitting in a system where land ownership goes back hundreds or thousands of years based on whose great-great-great-grandfather got there with a gun first. So that's an unequal system. It's far more equal to reset the wealth and redistribute and then hope if you can get into enough hands, you can re-spark what money really is.

46:33Today, for example, the way the Federal Reserve distributes money is they basically drop it to the banks, who have extremely sticky fingers and then slowly bleed it out in the economy. Is that the best way to distribute money? I'm not so sure. So I think at least with blockchains, we get to test new models of equal distribution of resources. This is perhaps another version of a purity test. But I'm curious, what would need to be true or what facts would have to emerge in order to change your mind on some of these topics and maybe not become a crypto maximalist anymore, you say, you know what, maybe this is not going to have that much of an impact and I shouldn't spend that much time on it.

47:08What do failure modes look like here? I would say like if there's some fundamental heretofore undiscovered security issue, that's the kind of thing which, and what I mean by that is not something that can be patched, right? But like a theoretical new class of attack that renders, you know, all these different kinds of blockchains like infeasible or you can constantly attack them and update them in a bad way. That would be the kind of thing which would make me say, okay, you know what, I thought this was a secure way of building things, but maybe it's not. I think that's hard to do because we've now got a diversity of different approaches of doing blockchains, but it's possible.

47:41So that's the kind of thing that would make me question whether that future was real. Yeah, I think there's a technological failure cases. I think that you could have, let's say, a Bitcoin or something like that gets used in a horrible terrorist attack. And you know how the government is. like any excuse to grab power. Like after 9-11, we got the Patriot Act. Patriot Act gave us all these kinds of abuses, including NSA surveillance of all of our activities for the rest of time. I could see politicians overreacting and blaming all of crypto and basically cracking down on next-gen internet, in which case it sort of flees to other countries and it kind of goes underground and it still gets developed.

48:19It just gets developed elsewhere more slowly. How should governments be responding to all this, engaging? Well, the government, the governments are in a little bit of a, they may not realize this, but they're in a little bit of a race with each other. The United States is extremely lucky that we are, we have the reserve currency of the world today. And we're extremely lucky that Silicon Valley is parked in the US. It's not luck. I mean, a lot of it is due to good policy. But we're lucky that that good policy existed or exists that allowed those formations to happen. And I think in crypto land, what we're basically saying is at least big chunks of the next generation of the Internet and possibly what is the next definition of money is up for grabs.

48:59Like if I was like, you know, running a little Singapore, I would strongly consider just buying up a bunch of some cryptocurrency, probably Bitcoin. But if it's too expensive, maybe I'll just make my own and then make sure we have all of it and make a legal tender and then make it available to the rest of the world. So then all of a sudden you have a cryptocurrency that has a lot of usage and other people in the world can adopt and use as sound money. And by being the first adopter here in a big way, the country would end up just making trillions upon trillions of dollars equivalent and would probably become the new reserve currency after the U.S.

49:34dollar. So in some light sense, the countries of the world are in a competition against each other. But it takes a big leap. Yeah. Just go ahead. No, no. Okay. So I would mostly agree that I also think there's a there's a big mental shift you make when you go from thinking of the government to a government because there's more than 100 governments in the world. Right. And, you know, depending on how you count it, more than 70 percent of Silicon Valley is made of immigrants. and everybody here, you know, either within your lifetime or your parents' lifetime up and up and left, why? To make a better life, right?

50:08For economic opportunity. And if that economic opportunity is not in the U.S. because it's not keeping pace with the blockchain, well, you know, it's easier to move nowadays. Now you've got mobile, you've got social, you've got all this stuff. You can get on an Uber, get to a flight right away. So, you know, the other aspect of it is you don't need huge amounts of natural resources. You don't need like a, you know, a mine of uranium or something like that. To build a blockchain community, you just need a... Internet connection. Yeah, an internet connection and a good regulatory environment, right?

50:38Maybe a nice beach. That's right. So any... Maybe a nice beach. That helps, right? But actually, the blockchain companies are the most distributed companies in the world. Right. Because we invest in them all day long. We see them all day long. Their developers are spread out. Some cases, they're fully anonymous. Like, even the team members don't know who the other team members are. and they're all over the world. And they're not necessarily all companies. Some of them just go straight. Open source groups, yeah. Yeah, they're open source groups that just go straight crypto and may not even have traditional terrestrial bank accounts.

51:06Yeah, there's one that's coming up that's really people are into that all the developers are named after Harry Potter characters and nobody actually knows who they are, where they live. Yeah, yeah, yeah. But why isn't Singapore or other governments doing this now? Or what would, is it possible that they might or is it too much of an invader's dilemma? No, they're sharding like Malta. It'll just take one. It'll just take one, forward-looking one. Someone has to be both desperate enough and smart enough. Like Venezuela is desperate, but the thugs are still in charge, right? So it kind of just has to come together in the right way.

51:38You could see, for example, a post-communist Venezuela that sort of recovers. When people are getting together, they're going to have a choice of what do we do with our currency. And nobody will ever trust a Bolivar ever again, hopefully. So then what do you do? Do we adopt the U.S. dollar's legal tender? but now our monetary policy is set by the United States. So you could see that there are scenarios where if the crypto infrastructure is good enough that they might go with the cryptocurrency. Yeah, and there's already governments that are definitely moving in a very pro-blockchain direction.

52:06So Malta, Bermuda, Estonia, and then a bunch of others that haven't necessarily announced anything publicly. But I think governments are already trying to compete, for example, for Amazon's HQ2, right? They're trying to compete for Google's Sidewalk Labs. and they're trying to compete for various investment dollars from startups and tech companies. This is just an extension of that. And, Bob, do you have some thoughts on how blockchain unlocks or enables new career opportunities for us to think about our careers in a different way that you don't have to be in Silicon Valley? Oh, yeah. Unpack that a little bit.

52:40Sure, sure. Yeah. So I have this concept that your single most important metric for your life is arguably your personal runway, which is your savings divided by your burn rate. Right. And the thing that's interesting about that, well, you know, savings, very anti-American thing to talk about. Let's suppose it's not all immigrants. OK, great. So, you know, the thing that's interesting about that is it's much, much easier to reduce your burn rate by 5x or 10x by moving out of San Francisco to, you know, Thailand or India or South America or something than it is to increase your net worth by 5 or 10x.

53:14Right. And because like reducing your burn rate is deterministic. It's within your power. you could execute on it tomorrow. And what's interesting about crypto is it's making it even easier to go and earn like a San Francisco or first world salary, even if you're in, you know, the developing world and the developing world has gotten a lot nicer because, you know, globalization over the last 10 or 15 years. So you can have a basically first world standard of living with, you know, three or four X as much savings each year. And then you don't need angel investment. You've, you've got plenty of runway.

53:45You can work for a year and take two or three years off. So I think that's going to become a bigger deal. This is a combination of digital nomadism, remote work, cryptocurrency, et cetera. That's a trend I see growing. Yeah, this already happened to me. I won't name the town, but I went on a vacation to Beach Town somewhere in Asia. And I was looking to get away from all this stuff. And I get there and they have multiple crypto co-working spaces. They have a big blockchain incubator. People are recognizing me. Next thing I know, I'm giving talks about the blockchain there. So especially when you get to Those kinds of places where there are a lot of expats you notice that a number of them are now making a living somehow in the crypto community We have some great audience questions that I don't want to get into AI and blockchain complementary or competitive in the long term so teal actually has a good line on this which is He had an observation that AI is mostly centralizing and blockchain is Decentralizing in the sense that you know first this is like definitely buzzword bingo first Yeah, just just right but but if you actually engage with it to build a machine learning algorithm you typically need to accumulate a lot of data and That is typically a centralizing thing You've got data from lots of different people or lots of different cameras or ever all in one spot You know with the Chinese government being like the zenith of that kind of centralization It is possible with technologies like federated machine learning or homomorphic encryption to actually keep the data local and then just collect some coefficients, but it's harder, much harder.

55:13So AI is going to be this probably centralizing force that will give more power to centralized institutions. Conversely, blockchain is a decentralizing force. And the key thing is, even though it makes it more complicated because it decentralized everything, it creates enough money and wealth that that more than compensates for the cost of decentralization, which I think is a critical thing. And that's why I think blockchain without Bitcoin doesn't work or blockchain without a token doesn't work because then you're just decentralizing without that added economic incentive. So those are these two kind of forces, centralization, decentralization.

55:43I think you're going to see interesting mixes and remixes between them, but that's one axis on which to cut it. How do you think about identity in a blockchain world? How does it change the concept of how we understand identity? A lot of people talk about anonymity, privacy, but perhaps they're missing the bigger picture on how it's going to reframe our sense of identity. What are some thoughts on that? Can we go on? I'll let you dig into it again, But I think at a very high level you can have identity You can have your wealth tied to anonymous identities in the blockchain world Which you can't do in the real world or as much harder to do in the real world And then also in blockchain land you can actually own and control your identity today Our choices for identity ownership are the government which like leaks Social Security numbers left and right credit card companies every waiter has your credit card or it's You know Experian or whoever just got who got hacked and lost everything it's Facebook.

56:35You trust Zuck with your identity, right? He'll sell you for like a 10 cent click ad. So all the ways that your identity gets held out there are just sieves. Like you don't actually own your own identity. Anyone here who's been the victim of identity theft knows how incredibly frustrating and useless it is trying to like regain your identity. And then we talk about biometrics where, yeah, somebody lifts your fingerprint once and your identity is stolen for life so i think we have a big problem where in a world where we have digital assets that our identities are all over the place and the good news about crypto is that to secure your digital assets properly they've had to build tools that are very very good for preserving identity so we're going to see a lot of effort spent by a lot of crypto entrepreneurs to bring personal ownership of private keys identities and passwords to the masses and that's one area that i'm really excited about over the next decade.

57:27So if that happens, it's not just for securing your Bitcoin ownership, it's also for securing all of your identity data, including your medical records and your credit history and all those kinds of things. That's right. I think your crypto private keys are going to be an anchor that brings a lot of stuff local. And that doesn't mean the cloud goes away. But what it might mean, for example, is that your private keys encrypt a lot of your data in the cloud and only you can view them or only you can compute on them or something. One aspect of having private keys be local is that, you know, an identity system is effectively built into every cryptocurrency because it's as if you have to sort of present credentials, you know, you need to sign a transaction before it can be broadcast and accepted by the network.

58:12And that process of signing it is effectively an identity verification step. And so we can build a lot of stuff on that primitive, just like, you know, Your your credit card might be looked at by the person at the counter and they just see is that actually you? This step of identity verification can be used to set up new kinds of social networks right where You're pseudonymous, but your balance shows that you're actually you know an actor with some investment You're not just a troll you put you know 50 or 100 bucks into a token governing this network And now there's less incentive to just go and a character assassinate people because they have no character to assassinate You just kind of have to discuss ideas, right?

58:51And or you can pseudonymously troll them, you know, but it's not you know, where's the fun in that right? So so I think that this you know, this entire concept is something I call like the pseudonymous economy I think in 20 30 years It's going to become much less frequent to put your quote real name on the internet It's like putting a social security number out there or your personal phone number It's this global identifier by which all the people who need to know it and know it and the people who don't need to know it can just use a pseudonym, maybe a realistic sounding pseudonym, but they wouldn't know it wasn't your real name, but they don't actually have that handle that kind of grabs you and they can pull the database records on you.

59:30We talked about blockchain and AI. I'm curious how you see blockchain intersecting with other emerging technologies, whether it's virtual reality or Internet of Things or something like quantum computing. Yeah, it's buzzword bingo. So, you know, quantum computing gets brought up as like, oh, this could break blockchain and encryption. Not really. There are already quantum resistant hashing schemes out there. And in a very deep physics sense, quantum mechanics may, sorry, quantum computing may actually help blockchains because it turns out that doing the hash function and tangling things is easier than detangling them, even in quantum computing relative to normal computing.

1:00:08So it gets brought up as this, ooh, what about quantum computing thing? I'm not worried about it at that level. With VR, it's actually really interesting because VR is about, now we're in digital world, and I'm sure many of you have seen or read Ready Player One. And the foundation of a digital world is a digital economy. And if you want a digital economy, then you're not going to sit there in your digital economy and swipe a credit card and wait for it to go to Visa or MasterCard or PayPal, right? It's got to be like programmable. It's got to be part of the whole ecosystem. It's got to be permissionlessly programmable.

1:00:38the internet especially if it's going to dominate our lives to that extent is going to have its own native money right do you imagine that a hundred years from now the internet not going to have its own native money but it's still going to be using dollars and rmb or people shipping bricks of gold around of course not right so i think that uh a true functioning virtual reality ecosystem uh which is probably you know one to two decades away so it's still a little far out will require its own native programmable electronic money and crypto is the way to do it. Yeah. You look, let's, let's play it out.

1:01:11One, one to two decades away, you're 20 to 30 years, even further, who are the big winners and losers or what types of players are going to be the big winners and losers? So I think, well, winners hopefully will be the world in the sense that you're going to have way more people able to get jobs, raise capital, trade without banking fees, You know incorporate exit star companies and investing companies all of that type of stuff, you know I think is going to become much much more widespread in terms of you know folks who might be on the other side of it Well, I definitely think Wall Street's gonna get a run for their money You know from from all of this and you know Some of the firms are smart and they know that blockchain is important and others, you know They they're not yet there and then you know, we'll see what happens it's almost you have a form of government governance right now that doesn't require rulers or central actors anymore so anyone who's made a living as a gatekeeper is going to get hurt um and and on the contrary on the on the converse of it anyone who was kept back by a gatekeeper gets helped but it's a very it's a very fuzzy statement right it plays out in a million different ways for the for the builders in the audience for the engineers for the people who are either starting to build in the space or perhaps they work at, I don't know, Facebook or Google and are curious about the space and want to get into it.

1:02:35What's your sort of call to them? Where do you want to see them building, experimenting, innovating? What's your call to arms? I think the best way to get into it is if you're a developer or an engineer, is start understanding blockchains themselves. Go contribute to some of the open source code bases. These are all open source. And they're always looking for volunteers and contributors. And it's amazing how even some of these incredibly large blockchains that have tens of billions of dollars riding on them will have a handful of developers. You can count them on one or two hands. So just people diving in, helping out, it just takes a small number of people to make a huge difference.

1:03:09And it automatically makes a name for you. Like if you're one of the Bitcoin developers today, you've got any number of career opportunities, whether it's at a hedge fund or whether it's at an exchange like a Coinbase or wherever, people want to work with you. So it's the ultimate. 25. Yeah, it's the ultimate resume. You could be 12. You could be a Harry Potter character. It's the ultimate resume. You could be 80. There's no one stopping you. How many folks here in the audience are engineers? Okay, a few. A lot listening as well. Yeah, okay. Most of them have better things to do. So if you are an engineer, so certainly the highest threshold is contributing to the code base.

1:03:49If you aren't yet there, what you can do is use Kubernetes, set up a private cluster of Ethereum nodes or Bitcoin nodes, and then you can actually simulate an entire set of transactions on them. You can have them mine, you can have them send things back and forth, and you'll actually get an understanding for how the thing works in its own hothouse environment because you can replay an economy. That's, I think, a really good way to understand how all the pieces work. You don't even have to build anything in crypto. I can't build anything in crypto. It's so incredibly complicated. It's the intersection of cryptography and mathematics and computer science and economics and governance.

1:04:28It's a really hard field. Yeah. Just learn about it. I mean, just go read up on it. It's really endlessly fascinating. It's like when the internet first launched to contribute to the internet, to do something on the internet, you didn't have to go write a web server. You didn't have to go contribute to a browser. You could just understand how this thing works underneath and start thinking through how it can play out. And eventually, of course, the internet is impacting almost every aspect of our lives. So that is the potential here as well. Yeah, that's, that's one of the interesting things about this space, like 99 % of people can be capitalists and 1 % are labor, because the labor is this really mathematically, technically challenging thing, but everybody can at least go and buy it.

1:05:08So that's, it's something that's sort of an inversion of what things used to be or can be airdropped it yeah that's right and maybe that'll be the new basic income and it's not quite a joke there are people in crypto land who are talking about how do we airdrop enough coins to everybody that if this takes off that that's the new basic income yeah and i can definitely say that learning about it is its own reward yeah um so it is uh my honor uh to have us participate in the commonwealth club tradition which is with one minute left um to ask both of you what is your idea to change the world?

1:05:45I think it's your turn. All right, my turn. So I think that this is somewhat related to crypto. I think that the ability to collectively move large numbers of human beings, and by that what I mean is like crowd migration. You take a Facebook group right now, and people are just talking to each other and so on. But over time you start adding cryptocurrency to that that becomes like a digital economy You start adding virtual reality that that becomes like a true virtual economy people It's got a persistence to it. It's got you know money to it. You've got a job there, etc That's I think where this you know social network thing is going in 10 20 years I think eventually those you know virtual economies You're going to have all these folks who are you know Some are in arkansas and some are in new york or whatever They're going to want to actually like move to one place And I think that that's going to be a very important feature of the next 10 or 20 years It's something called t-bow sorting in economics Mine is not crypto related.

1:06:42I think that it would be computers getting so cheap tablets are getting so cheap And I think that and we have the entire library of Alexandria of the modern age available on the internet That I would love to see like a giant airdrop of tablets the developing world where you can basically just have all the textbooks, you can have all the interesting learning materials, you can have all the courses, all the Khan Academy preloaded, ready to go. It can figure out with some simple software what language you speak, what level of education you're at, and automatically start teaching you from there. And it can connect you with a volunteer network of millions of teachers across the world who can video in at any point and help you that you're stuck.

1:07:22So I think we can educate the whole world much more cheaply than we're trying to do it today. I'd love to invest in that. Thank you very much. One last huge round of applause. Naval Ravikant, Valadziz, you're in a basket.

1:07:40Turpentine VC is a podcast from Turpentine, the network behind Moment of Zen and Econ 102. If you liked the episode, please leave a review in the Apple store or rate us on Spotify.