The Tim Ferriss Show Transcripts: Balaji Srinivasan — Centralized China vs Decentralized World, The DeFi Matrix, Ascending vs Descending Trends, Bitcoin Mining as Energy Storage, Reputational Civil War, and Maximalism vs. Optimalism (#547)

Please enjoy this transcript of my second interview with angel investor and entrepreneur Balaji S. Srinivasan (@balajis). Formerly the CTO of Coinbase and general partner at Andreessen Horowitz, he was also the co-founder of (acquired by Coinbase), Counsyl (acquired by Myriad), Teleport (acquired by Topia), and Coin Center.

Balaji was named to the MIT Technology Review’s “Innovators Under 35,” won a Wall Street Journal Innovation Award, and holds a BS/MS/PhD in Electrical Engineering and an MS in Chemical Engineering, all from Stanford University. Balaji also teaches the occasional class at Stanford, including an online MOOC in 2013, which reached 250,000+ students worldwide.

To learn more about Balaji’s most recent project, sign up at, a newsletter that pays you. They’re giving out BTC each day for completing tasks and tutorials. Subscribers also receive chapters from Balaji’s free book, The Network State.

Transcripts may contain a few typos. With many episodes lasting 2+ hours, it can be difficult to catch minor errors. Enjoy!

Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, Amazon Musicor on your favorite podcast platform. You can watch the interview on YouTube here.

#547: Balaji Srinivasan on Bitcoin, The Great Awokening, Wolf Warrior Diplomacy, Open-Source Ecology, Reputational Civil War, Creating New Cities, and Options for Becoming a Sane but Sovereign Individual


Tim Ferriss owns the copyright in and to all content in and transcripts of The Tim Ferriss Show podcast, with all rights reserved, as well as his right of publicity.

WHAT YOU’RE WELCOME TO DO: You are welcome to share the below transcript (up to 500 words but not more) in media articles (e.g., The New York Times, LA Times, The Guardian), on your personal website, in a non-commercial article or blog post (e.g., Medium), and/or on a personal social media account for non-commercial purposes, provided that you include attribution to “The Tim Ferriss Show” and link back to the URL. For the sake of clarity, media outlets with advertising models are permitted to use excerpts from the transcript per the above.

WHAT IS NOT ALLOWED: No one is authorized to copy any portion of the podcast content or use Tim Ferriss’ name, image or likeness for any commercial purpose or use, including without limitation inclusion in any books, e-books, book summaries or synopses, or on a commercial website or social media site (e.g., Facebook, Twitter, Instagram, etc.) that offers or promotes your or another’s products or services. For the sake of clarity, media outlets are permitted to use photos of Tim Ferriss from the media room on or (obviously) license photos of Tim Ferriss from Getty Images, etc.

Tim Ferriss: Balaji, welcome back, sir. It’s good to see you. Last we spoke, it was Q1 2021. It is now Q4 2021, late October. And I would like to ask you, where should we begin?

Balaji Srinivasan: I thought we might begin with some premises. Some of which were sort of predictions in the last pod. One in particular was, I think I had mentioned that COVID-19, I thought of it as a military defeat for the US. The reason I thought of it as such is because literally, billions of dollars had been allocated for biodefense over a span of about 20 years since the anthrax episode in 2001 and during SARS and Ebola, all of these sort of scares happened.

The US in 2018, they announced they had a national biodefense policy that was supposed to combat manmade and national threats. And so there’s an expectation of the WMDs, nuclear, biological, and chemical that the US military would have some trick up its sleeve, just like out of the movies where hard men would come in in America’s time of need and step in with some magic thing. That totally didn’t happen. When that didn’t happen — that’s why I said COVID-19 was a military defeat. Even if it wasn’t being presented that way to the American public, a big piece of the military-industrial complex or the military, whatever you want to call it, was like cardboard. It was like Potemkin village, kind of just fell over with a push.

People kind of argued with me about this. They said, “No, no, no.” It was right on the border of what you would think of as military or not. Since most of the folks who had been talked about publicly where the CDC and the FDA and the civilian agencies, but certainly billions had been allocated for biodefense and it was borderline. You could argue it wasn’t military. I was off base there, the military was actually highly competent, but then one thing that happened, six month-ish later after our podcast was the whole Afghanistan thing.

Now, you had something where the US military had 20 years and $2 trillion and total air superiority and total surveillance and the local government that they had set up and a military that they had trained, local military that they had trained and hand-picked and equipped, even a timeline that they had negotiated with the Taliban, which for the most part adhered to in terms of its terms, it hadn’t like fired on American troops during that process. I think it had adhered to its side of it. Those are advantages that you normally don’t get in a military conflict. Folks with that level of advantage — it’s like a huge handicap in golf. There’s that saying with military things, “amateurs talk tactics, professionals talk logistics,” and the withdrawal showed that this military is no longer really that amazing at logistics.

Also, the President and the Secretary of State, Blinken [Antony Blinken], said something like, “The collapse won’t happen from a Friday to a Monday.” And it basically did. It was like a Monday to a Wednesday or something like that, I forget the exact days, but it happened just over a few days. And Biden says “There’s not going to be a scene that’s like the helicopter evacuation in Vietnam.” And there was. And the thing is that, there’s no way that — it’s not a political comment really, it’s basically about the decline of state capacity over the last 20 or 30 years. In many ways in 1991, the US was the hyper power, after the collapse of the Soviet Union. It was a hyper power as the French put it, that could win everywhere without fighting. In many ways, the combination of administrations over the last 30-ish years have blown maybe the biggest lead in human history. Now rather than winning everywhere without fighting, it fights everywhere without winning.

And so the Afghanistan thing I think was sort of, I hate to call it a vindication because it’s a very unfortunate thing, especially for the Afghans who are now subject to this medieval regime. But I think that that is something which also has important ripple effects, kind of flips over a card and you kind of think there’s something that’s 70 percent probability and then it goes to a hundred percent probability, and then you think about what the consequences of that are. So that’s like one, I think, quote, prediction or something that came true or piece of a world model that was vindicated. Let me pause there and get your thoughts.

Tim Ferriss: I have no thoughts to share. Please continue.

Balaji Srinivasan: Okay, all right. I will just kind of download content and then pause and then you jump in, okay?

Tim Ferriss: And you’ll be met mostly with silence or “I’m not familiar.” If my last performance is any indication, but I appreciate the pauses. Yes. Also, since we’re on video, I can raise my hand like a student and then request pause, but yes, please proceed.

Balaji Srinivasan: One thing as a meta kind of comment that I want to do is sort of A: invite pauses, certainly, B: enumerate my premises and sort of open source my thinking so that people can understand where I’m coming from. And if I open source my premises and my logic comes from those premises then you can at least isolate, if you think I’m off base, I’m either wrong in the premises or the logic, but at least you start to decouple the two. So how do I build my worldview? How do I build my model?

So how do I build my model? Well, what’s rising? What’s up? Technology, which is drones and biomedicine and robotics and AI and so on. And particularly cryptocurrency, which is kind of the new backend of all of software, it’s what this will come to. So technology, cryptocurrency, China, and India. Basically, tech and Asia are up and to the right on many different kinds of graphs. Those are words, but that captures the phenomenon of literally billions of people every day, moving up into the right. Whether it’s global trade or it’s number of smartphones or it is the number of like people doing cryptocurrencies or the progress of that, all that is up and to the right. And then what is falling is the West as a percent of GDP. Like if you make a graph of the US and the EU’s percent of global GDP, that’s been dropping basically for the last 40 years. Whereas India and China’s share in particular has been rising.

Actually, as of 2019, McKinsey had a report on this, but Asia was more than 50 percent of GDP, I believe by 2019 on certainly PPP terms. And I think it’s going to pass or it’s already passed soon. So Asia’s not really the presence — 

Tim Ferriss: PPP is what? Pricing Power Parity — 

Balaji Srinivasan: Purchase Power Parity. It’s basically like — 

Tim Ferriss: Purchase Power Parity.

Balaji Srinivasan: That’s what I believe it is. It’s sort of like, what can the dollar buy there? What can your renminbi buy there? In terms of number of Big Macs, right? They have an adjustment for that because some of the production costs are less, $10,000 goes a longer way in some of these countries. So Asia isn’t really the future, it’s present. So what’s falling A: the West’s percentage of GDP. There’s a graph by visual capitalists, the US’ share of the world economy, that shows it in sort of absolute terms. And then you can kind of calculate the zero to a hundred percent terms, right? So West’s percentage of GDP, US military strength as we just discussed. And that’s kind of a very important topic to discuss further. Internal US cohesion, and also just the European percentage of the world, it was much higher in the early 1900s and now it’s like on the order of 10 percent. And so just a percentage of the world.

And so if the West is declining a percentage of GDP, in terms of its relative military strength, in terms of its internal cohesion, and in terms of just raw percentage of the world, yet all of these institutions that were set up years ago kind of assume Western predominance. For example, like the United Nations is the US, the UK, France, Russia, and China. And that’s like, I know it’s only four out of five, so it’s a small count, but that’s like 80 percent Western or at least European, if you think of Russia as a European country, you can argue that. Whereas, there’s no India, there’s no Brazil, there’s no Japan. And you can argue whether that actually reflects the world as it is. Certainly, probably India should be there rather than France, right? You might say India should be there rather than the UK. And the EU should be there rather than France or something like that, right?

Tim Ferriss: I raised my hand for those who can’t see me. I like this approach, this is a good approach. Professor Balaji, I have a question, sir.

Balaji Srinivasan: Please.

Tim Ferriss: And that is related to the up and to the right, with respect to technology. And let’s just take China as an example, but we can grab both China and India because we discussed India last time as a dark horse of sorts.

Balaji Srinivasan: Yes.

Tim Ferriss: And a lot has happened with respect to cryptocurrency in China, since we last recorded also. And I’m wondering how that factors in, in your mind, to the up and to the right, with respect to technology and Bitcoin or cryptocurrency or blockchain more broadly speaking, within China and say India? Does it mean that the best entrepreneurs or many of the best entrepreneurs simply get scattered to the wind, to places like Singapore and elsewhere from China? What are the implications and what are your thoughts overall?

Balaji Srinivasan: So a lot has happened this year in Chinese, American, and Indian crypto. So just to discuss that, when we were talking, a Chinese interference with the Bitcoin network was something that was TBD. It hadn’t actually happened yet. 

With Chinese crypto, what we’d discussed was that the Chinese state might for example, block at the firewall level but allow mining to continue, which would mean sort of a peekaboo problem where the Chinese chain gets extended, but so is the rest of the world and so on and that would be bad. But what I also said was, in some ways, the worst case scenario, it’s actually better and perhaps more probable that they would just ban mining entirely or go after that. And they’re the one state in the world that is ruthless enough and has a low enough disregard for civil liberties and contract law and all of that type of stuff for them to just be able to do that. And that is what they did.

Meaning they just said, “Get out of China.” And so if you go to and go to the all-time chart and look at kind of the period from May to July-ish of 2021, you’ll see it drop from about 180 terahashes per second to about 80 to 90 terahashes per second. And what is a terahash? That’s 10 to the 12th hashes per second. Meaning 10 to 12th attempts to solve the inequality that allows you to mine a new block of Bitcoin. It’s kind of a measure of the computational speed of the Bitcoin network. And the higher that is, the more secure the network, because the harder it is to falsify history.

Tim Ferriss: Quick interjection. Why did China do this? And there may be a headline press release equivalent, and then there may be some degree of speculation or informed opinion. I would just like to know kind of both.

Balaji Srinivasan: I think the fundamental thing is, we can drill into this, China is the exception to the sovereign individual thesis. India, by the way, might be the partial exception. But China is the exception to the sovereign individual thesis where they want root over everything. If it’s not made in China, they look at it with suspicion. And it’s funny, “made in China,” that’s sort of a play on words, right? If it’s not, they look at it with suspicion. And that’s why actually they were very early on things like the great firewall or social media bans, many years before politicians were getting deplatformed from Twitter. Xi Jinping denied Facebook’s attempt to come into China, and instead, basically they set up parallel social networks that could operate within China, but which the Chinese state had root access to.

And so fundamentally, their premise — they’ve articulated this actually, explicitly. It’s an interesting concept and I think, at least they’ve got some philosophical basis for it, which is the doctrine of internet sovereignty. That’s to say, if a nation state is allowed to intra-dite the physical packets crossing its border, then it should be able to intra-dite any internet packets crossing its border. And they’re doing like customs for that. That’s how they justify the great firewall. By the way, there’s actually an article that’s sort of making the rounds that folks who are listening to this probably should read on Wang Huning. Did you see this article?

Tim Ferriss: I did not. How do you spell that name?

Balaji Srinivasan: Yeah. So it’s W-A-N-G H-U-N-I-N-G. So “The Triumph and Terror of Wang Huning” at and this whole site is actually really good, but what’s great about this article is — first of all, reading this, you’re like, okay, the depth of this is just much more. Like the IQ level is frankly much higher than what you’re accustomed to seeing in mainstream media, because it just doesn’t come from the same set of trite premises and rehashed things that we usually see.

So I think it’s informative and the whole site is actually really good, but basically what this article is about is a guy, Wang Huning, who’s been there over three Chinese administrations. I think Jiang’s [Jiang Zemin], Hu’s [Hu Jintao] and Xi’s, which is unusual. It’s sort of like being, I don’t know, secretary — 

Tim Ferriss: He’s worked in the government?

Balaji Srinivasan: In the government, the most senior levels, the seven-man standing committee. And at least what the article says is, he’s China’s top ideological theorist and to be consistent across those three administrations, it’s sort of like being — rough analogy would be like Robert Gates, who is Sec Def under I believe both — was he under both Bush [George W. Bush] and Obama [Barack Obama]? I think so. Yes, he was appointed under both Bush and Obama, which is unusual. Usually, political appointees get fired by the — they’re appointed by the Republican, they’re fired by the Democrat — 

Tim Ferriss: The new regime.

Balaji Srinivasan: Exactly, and vice versa, right? So sort of like that. And he’s been there for a while. The reason I just bring this article up is, you can sort of get a sense of how much they’ve been conscious about the need for state control. Because they saw the fall of the USSR, they saw the US move in after that, they saw that Russia actually didn’t do that well, they saw the loss of control. So they’ve always been about control. And what’s interesting is there’s been a tension between total state control and of course, capitalism, which is decentralization of control, right? And one thing that is true, that I think is a constant across these sort of three eras of China, so the Mao [Mao Zedong] era was revolutionary communism, then Deng [Deng Xiaoping], Jiang, and Hu was internationalist capitalism. And now I think it’s fair to say under Xi Jinping, it’s now pretty clear that it’s sort of a nationalist socialism, militarism, and economics is no longer first. It is there, but they’re reasserting kind of root control, but from sort of the nationalist right rather than the communist left, in some ways.

And so the reason I think that’s important is, it’s a genuine change. In the same way that you can argue the US had a genuine change in culture over the last seven or eight years, call it like, “The Great Awokening,” which is what Matt Yglesias article at Vox kind of dubbed the whole thing, and you can sort of see this religious fervor taking over the country, all these graphs up into the right of various words. In kind of the same way, China for a long time had this, “keep your head down,” sort of policy, where they didn’t like a lot of the things that the West was telling them, but they sort of gritted their teeth and they manned the factories and they tolerated the humiliation of having like their embassy at Belgrade blown up by a stray bomb and the US being like, “Oh, our bad.” That type of stuff.

They didn’t have the power to protest on a world stage. They were just like, you know what, just suck it up and we’ll just continue trading for a while. But with Xi, that is no longer the case. They are, have you heard this term, “Wolf Warrior diplomacy?”

Tim Ferriss: Wolf warrior diplomacy? I have not. If I’m hearing that correctly.

Balaji Srinivasan: Yeah. Wolf warrior, right? So, you know, this is — 

Tim Ferriss: Just the sound of it, but maybe I shouldn’t. I’ll wait until you define it for me.

Balaji Srinivasan: I mean, look, this is not like deep China analysis or anything like that. And I basically consider myself, I think reasonably informed on China, but certainly there’s folks who speak fluent Chinese. It’s like a logarithmic scale. There’s folks who know 10X or 100X as much as I know on China. But wolf warrior diplomacy, what it refers to is, there’s a movie called Wolf Warrior 2, which was China’s number one movie, I think in 2017. It’s worth watching. And the reason it’s worth watching is it’s sort of surreal. It is American filmmaking techniques of the Rambo, Rocky variety of the mid-’80s, applied to a masculine Chinese-speaking hero, where the Chinese are basically cast in the role of the USA and the USA is cast in the role of the USSR. 

Tim Ferriss: Yep.

Balaji Srinivasan: So it is kind of like a rotation where you realize what aspects of filmmaking are constant and what are highly variable. Do you know what the number one movie in the world is right now, as of our time speaking?

Tim Ferriss: I do not. I learn so much when we have our conversations. I appreciate that — 

Balaji Srinivasan: No. It’s fine. Yeah. So it’s — 

Tim Ferriss: Frozen five. No?

Balaji Srinivasan: No. So that’s thing, it’s The Battle at Lake Changjin. Chinese language movie. Here’s the thing, it tells you a few things. First is, China’s in-person movie market is massive and it is able to do number one in the world. And I think it just crossed like a billion dollars in box office. Number two, what the movie depicts is basically the defeat of the US military in the Korean War by the Chinese military. 

Tim Ferriss: Yeah.

Balaji Srinivasan: So that’s where their head is at. They are making massive blockbuster epics, with all the Hollywood techniques, about the Chinese military winning and the Americans losing. And moreover, what you can get canceled for in China is insufficient nationalism. As somebody once said, in like the West today, for an ambitious young person, they would articulate a desire to quote, “change the world.” But in China it is like, “serve the motherland.”

Tim Ferriss: Yeah. It’s different. May I interject for just a second?

Balaji Srinivasan: Of course.

Tim Ferriss: I just want to say that lest listeners get too judgmental about what they’re hearing, the US has done what we’re describing, or I should say US entertainment certainly has done what we’re describing, for a very, very long time. So this isn’t unique to China. It just I think indicates it’s what is to come, right? It’s a harbinger and it’s also a gauge of public sentiment and the public sentiment, meaning Chinese sentiment, on a certain level.

Balaji Srinivasan: Yes.

Tim Ferriss: And I find that deeply interesting. Also, what I find interesting from an entertainment media perspective is, as an example, I just went to see the new Bond [James Bond]. It was my first time in a real movie theater seeing a film since COVID and there were many different trailers. Most of the movies had at least one Chinese lead actor or actress. And that is very deliberate because they need Chinese eyes. They need that. And so that’s another chess piece on the table. It’s more like backgammon than chess probably because it’s not a game of complete information, but you get the idea. So I just wanted to just note that, because I do think these are trends that are going to become more intensified over time.

Balaji Srinivasan: This is a startup analogy, but Microsoft made, I believe $[240] million investment in Facebook in 2007 as part of a way to kind of keep it from Google. And they did so the super high valuation, basically playing Game of Thrones when Facebook was still a startup. That was actually maybe Ballmer’s [Steve Ballmer] best decision in some ways. But what that did was that thing grew and grew and grew until Facebook is now — it’s not like extremely hostile to Microsoft, but it is certainly a peer to Microsoft. It is up there. It has grown into a Redwood tree of its own. It is also like roughly a trillion dollar company. It’s the youngest of the big five, Google, Apple, Amazon, Microsoft, Facebook.

And in sort of the same way, what the US did was it made a startup investment in China when Nixon [Richard Nixon] went to China, because the USSR was the number one rival at that time. And they’ve just executed phenomenally well over the last 35 to 40 years. And now they have the market size, the internal market size, to be the number one movie market in the world. And they dictate terms now. And so it is, winners write history, winners film history. And they are writing history where they’re the winners and they’re the good guys. And the thing is the airbrushing is super obvious when it’s somebody else’s propaganda. For example, in this movie, which is worth watching by the way, it’s hard to kind of see, you have to get like a streamer out of China or something like that. And by the way — 

Tim Ferriss: This is Wolf Warrior or the other?

Balaji Srinivasan: Well, Wolf Warrior, I think you can just download on iTunes, but The Battle at Lake Changjin is not that easy to see right now. And one of the things about it is, this itself is a change where China used to be super freewheeling on IP. The new Xi Jinping regime is not freewheeling on IP. It’s hard to get that. It’s basically almost as hard as it is to get like an American movie on the internet. You have to kind of like actually try. It’s not just like widely accessible, DVD on the street kind of thing. And some people think that this is similar to the whole Shang Yang school. Are you familiar with that? Like legalism?

Tim Ferriss: No.

Balaji Srinivasan: Oh, okay. Again, I’m not like a student of Chinese philosophy and so on. I know some, but basically there’s a philosopher named Shang Yang, who is well known as an expert of legalism. And legalism, we would call it like a super harsh — like one of his sayings, if I roughly paraphrase, if I’m getting this right is, “If there are harsh punishments, there will be no punishments.” Meaning if you articulate what the law is and you ruthlessly enforce it, then people won’t actually go near the border and so on. And there’s like another thing, after one year, people would not pick up items left lying in the street, nor would they take anything that was not their property. The army had grown strong and the feudal lords lived in fear.”

Tim Ferriss: What is the source of that?

Balaji Srinivasan: Oh, that’s like from Shang Yang’s biography. And so the point being, like Xi Jinping used working and all this stuff since the beginning, but the tipping point only came near the end of his first term, sort of like how the great awokening was also happening in the US and kind of went exponential in 2020 and 2021. China has changed. It is now a different thing than what you and I grew up with, which was the internationalist capitalism of the Deng, Jiang, and Hu era. Like “Hide your strength and bide your time,” I think was like the official philosophy and make plastics, serve for the West, have them call us uncreative, have them depict us as emasculated on TV, say just assemble iPhones, grit our teeth, tolerate the pollution, breathe the bad air, blah, blah, blah, and then work our way up. That’s kind of the mentality. And now they’re standing up, right?

Tim Ferriss: Yeah. May I just add one thing to that, which is when I was in Beijing, I lived in Beijing in 1996, I went to two universities there and the most popular book at the time, and this is very understandable for a lot of reasons so this is not to fault anyone, but the most popular book at the time, which was stacked. It was widely counterfeited, but also bought legitimately. stacked everywhere. You could see it in the streets, in front of stores. It was called China Can Say No

Balaji Srinivasan: Hmm. 

Tim Ferriss: I think it was 中国可以说不, and it was China Can Say No. There was this deep sense of, I think, warranted deep sense of being disrespected on a lot of levels from a geopolitical perspective.

Balaji Srinivasan: Yes.

Tim Ferriss: And that is not new. That is not new. And it’s just taken a while for them to play the game so well that they’re now in a position to execute extremely well on multiple fronts.

Balaji Srinivasan: That’s right. Now the thing that’s interesting is, if I recall that was modeled on The Japan That Can Say No, right? But there is a difference. And some people will basically say, “Oh, people talked about the rise of Japan in the 1980s, and why won’t the rise of China turn out the same way?” There’s a huge difference, by the way, between China and Japan, which is that Japan is literally occupied by the US military.

Tim Ferriss: Yeah, huge difference.

Balaji Srinivasan: Huge difference. The US basically wrote Japan’s operating system and constitution after World War II. And they have literally a military base there. And I think in a real sense, they are an independently operated US subsidiary. The purpose of NATO was to keep the Americans in, the Germans down, and the Russians out.

Tim Ferriss: I haven’t but I can imagine. May I also just pull us back to an initial query for those people who are wondering, what some of the punchlines are. So with respect, and then we can come back to all of this.

Balaji Srinivasan: Sure, yup.

Tim Ferriss: So just bookmark for a sec.

Balaji Srinivasan: Of course.

Tim Ferriss: When we look at the Chinese government’s decisions with respect to Bitcoin mining and perhaps cryptocurrency more broadly speaking, what are the first order, second order, third order effects of that? Some of which may have already been seen, but what has happened and what do you expect will happen as a result of that? And we could look at what that means within China and outside of China. Or however you want to approach it.

Balaji Srinivasan: I think what they’ve done is setting up the decade and maybe the century. I don’t think people realize how important some of this stuff is. But think about, for example, their social media ban. How important is that today versus how important was it seen to be at the time?

Tim Ferriss: Yeah, huge.

Balaji Srinivasan: Huge, right? That was a branch in history. So basically, China wants to maintain root. And because they want to maintain root, I think they’re going to have significant short and perhaps even medium-term advantages, but in the very long run like 20, 30, 40 years, I think the century lines up as centralized China versus a decentralized world. Or a centralized China versus a decentralized West. And I actually think India may be actually a big component of that. And that’s where I think things land up by 20, 40ish or so, but it’s really hard to say because time compresses in the internet era.

And just to drill into that, let me give a sci-fi scenario here. This is a sci-fi scenario, all right? When you do a simulation and it’s like, okay, all the molecules move in this path, but they can move in other paths. So I don’t assign super high probability to this, but let’s call it a scenario. I don’t assign zero probability to it. So Chinese control, American anarchy, Indian intermediate. So basically, coming back to the thing that we kicked it off with, which is the US military basically just got defeated by COVID and in Afghanistan. So obviously the immediate question is: will they lose versus China? And in particular will they lose first? What will happen with Taiwan? Now there’s the first order response, which is, oh, Taiwan and Afghanistan are totally different.

Taiwan is obviously a first world country and it’s an independent nation and it has its own judiciary, military, and a long history of operating independently and civil society and blah, blah, blah. Whereas Afghanistan, obviously that was a fixer upper at best and has a long history of civil war, and it was very difficult. So of course they’re totally different. But they’re not because there’re certain things that are the same. And one of the things that is very much shared between the two is America’s willingness to fight. Because the withdrawal from Afghanistan was based on a reluctance to pursue “forever wars,” right? And a thing where the American consensus on the right is isolationists like, why are we helping these folks out by fighting their wars for them?

And on the left is also isolationists, which is why are we harming these folks by bombing them, we should pull back. And while the stance is perhaps different, and actually I can see reasonable things on both though without litigating the percentage on each. The sum forces withdrawal. And so, it is from Taiwan’s view questionable as to whether the US would fight. And here’s the problem, wars get fought when things are questionable. Shang Yang said, if the punishments are certain, there will be no punishments, right? Wars happen when there’s a miscalculation. For example, I believe Saddam Hussein invaded Kuwait in 1991 because he thought he had gotten the go ahead from April Glaspie at that time, who was the US ambassador.

And basically in 1991, the Soviet Union was falling and so on, New World Order, let me settle scores. And I think that basically, there’s different transcripts. One of them was like, “We have no opinion on your Arab conflicts issue disputes with Kuwait. The Kuwait issue is not a situation with America. Secretary Baker [James Baker] has directed me to emphasize this.” But the thing about this is that Glaspie — I’m not a scholar of this particular issue, and she may have gotten a bum rap on this, but people thought that she had given unclear instructions to Saddam. Now first of all, what’s interesting is, the US were basically greenlighting an invasion is interesting in its own, right? That it could happen versus not. But that’s what being leviathan means. If you’re the guarantor of order — the Soviets allowed the North Koreans to go and invade the South, the North Koreans were looking for the nod, the go ahead from their patron to be able to do that, right?

And similarly the US had actually been working with Iraq during the Iraq-Iran war, because they were against Iran and they thought Iraq was a good way to put a thumb in the eye of the Iranians who had done the hostage crisis.

You’ve seen the whole video with Saddam shaking hands with Rumsfeld [Donald Rumsfeld], right? From many years ago, right? So anyway, coming back.

Tim Ferriss: How does this tie into China?

Balaji Srinivasan: How does this tie into China? So the thing is that that kind of uncertainty is what causes wars.

Tim Ferriss: Or provides fertile ground for wars depending on how it’s planned, right?

Balaji Srinivasan: Yeah. Because it’s not invincible US military, solid commitment to Taiwan. All right, we’re not going to start a fight. It is, will they, won’t they? You’re now decision treeing it out. It is uncertain for everybody involved. It’s uncertain for Taiwan, it’s uncertain for China. You have many scenarios. One scenario, which I think is underestimated, is that China speaks the language, they have lots of people across the border. They have total focus on this; Xi Jingping wants it. So one possibility is they try to force a gun to the head referendum, where they try to get KMT, the Pan-Blue party, to just vote for reunification with China. And that’s something where there’d be an obvious gun to the head, but it’d be like a peaceful Anschluss like Germany and Austria, right?

They vote for it. Another possibility of course is an actual military conflict where maybe the US just doesn’t even intervene. Maybe it does and then there’s a shooting war, and we don’t know what happens after that. But I think it’s quite likely that the US loses. Now why do I think it’s likely the US loses? So a couple of books I’ll recommend, there’s The Kill Chain by Christian Brose who was formally very senior on the Senate armed services committee. Saw the entire $700 billion defense budget, including the classified parts. 

And he has a quote in there, which is: “Over the past decade in US war games against China, the United States has a nearly perfect record. We have lost almost every single time.” And he says this is well known in the Department of Defense, but the American public doesn’t know this and Congress doesn’t know this. And he actually goes on in the first chapter to outline a scenario where China basically pursues an asymmetric strategy against the US. It uses area denial weapons, forced the US Navy to be way offshore while it’s invading Taiwan. And it can’t get the reinforcements over there, over this huge ocean, they’re all blown up or forced back. And basically he thinks China would win. 

So that’s a non-fiction book. There’s also another book that came out this year called 2034. The Kill Chain I think came out last year. 2034, which is co-authored by a former US Marine who’s on the ground, this guy, Elliot Ackerman and another guy, James Stavridis, who, I believe, was the former NATO commander.

And that also essentially talks about a serious Chinese effort or conflict with China, rather, in the South China Sea where the US does not definitively win. In fact, they almost portray the US as this old battleship that’s getting its butt kicked by the Chinese and it goes to nuclear very quickly, okay? That’s in their scenario. And I don’t want to spoil it, but India intervenes at the end to kind of play mediator in a sense.

Tim Ferriss: If we have hypothetically centralized China, decentralized world, and India is some type of intermediary —

Balaji Srinivasan: Yeah.

Tim Ferriss: — or very large and compelling nation state at the very least. Let’s just, so we’re on parity with the China discussion on some level, what has happened in India since we last spoke with respect to crypto, and where do you think it’s going?

Balaji Srinivasan: The good news is, and I may have actually influenced this on the margins, India had been floating, or there’s folks in India rather who’d been floating like a crypto ban in January thereabouts. I wrote three articles on this and the Indian crypto community, the Web3 community really got out there and now, Nirmala Sitharaman, who’s the Finance Minister of India, like the equivalent of the Treasury Secretary. Is actually quite smart and has made good comments on this in public and moreover with the deliberation, she said, “This is not going to be a ban. It’s going to be regulation of some kind.” And over the last nine months, Indian crypto has just absolutely exploded. There’s CoinSwitch/ Kuber and there’s a bunch of these exchanges. I won’t remember all of them, but they’ve all just gone vertical with the rise of cryptocurrency this year.

And there’s multiple India crypto unicorns, and Indians are a huge part of the global crypto community. And in the meantime, China has basically forced mining outside and it’s basically done with their new bill. It’s almost like pushing a guy until he’s just almost off the cliff. In 2017, they pushed pretty hard to stop much retail trading activity happening within China, and so, hence, Binance kind of left the country and Huobi and OKCoin were sort of forced overseas. But OTC was allowed or kind of winked at. Now they’re kind of going after OTC, they’re going after mining. 

Tim Ferriss: What does OTC mean in this context? Over the counter, but what does that mean in this context?

Balaji Srinivasan: One version of trading cryptocurrency is, you go to a website, you click a button, you buy cryptocurrency, there’s a user interface and so on. An OTC trade is like a big block trade where you call somebody on the phone and you’re like, “I want to buy a million dollars of Bitcoin.” And the thing is, them as a seller and you as a buyer actually have an incentive. See, if they try and sell a million bucks of Bitcoin, they might move the price. You try to buy a million bucks of Bitcoin, you might move the price up. And so you both settle on a mid-market price and then you do the trade real quick because you don’t know if it’ll go up or down, okay? So that was kind of allowed, but they’re cracking down on that too. Now what they haven’t done, and you can read this bill, it’s posted on their website. It’s a long thing, not bill, it’s like an announcement, rather. What they haven’t done is they haven’t criminalized holding.

Tim Ferriss: They have that in English?

Balaji Srinivasan: It is in Chinese.

Tim Ferriss: Chinese is a little rusty.

Balaji Srinivasan: I heard you say something in Chinese just now. So I thought, I was like — 

Tim Ferriss: I guess you could probably use Google Translate, possibly, to translate the page.

Balaji Srinivasan: Yeah, that’s what I did. Basically the People’s Bank of China statement on cryptocurrencies, it’s posted on the website it’s at — okay this is a super long URL. But if you — 

Tim Ferriss: We could put in the show notes.

Balaji Srinivasan: Yeah. It’s like notice on further preventing and disposing of the risk of hype in virtual currency trading. That’s the English translation via Google translate. And I have a tweet on this, but basically they’ve kind of done everything up to criminalizing holding. So they haven’t criminalized holding. You can still hold. 

Tim Ferriss: — Let me ask you a dumb question. Where do you purchase your holdings, or is it just preexisting holders of crypto who are now legacies in, somehow? How does it work?

Balaji Srinivasan: It’s kind of like that, it’s unclear. One of the things about China, a friend of mine over there said is, in the US there’s rule of law, right? Where you have written laws and that’s supposed to constrain the state and you can operate with those. Whereas there it’s often more like guidelines in a negotiation, which is actually more like interacting with the regulatory state in the US where it’s like a moving boundary and they will basically do what they want. And it’s not something where the laws are meant to be binding on the government in the same way.

And so we don’t know exactly how it’s going to be enforced, but it definitely signals a step up. And the way you can see that is actions speak louder than words and that drop in the hash rate is actually a remarkable drop. Now importantly by the way, it came all the way. I shouldn’t say all the way back up, but it came back up to like 150 terahashes. So even the Chinese government going after Bitcoin mining, it slowed down transactions a little bit for a few weeks, but not really all of it. However — 

Tim Ferriss: How much of that do you attribute to new mining operations elsewhere? Places where you can get cheap energy, where they would expect friendlier regulation or lack of regulation versus just the vertical climb of popularity in — 

Balaji Srinivasan: The rest of the world?

Tim Ferriss: Bitcoin and cryptocurrency. Yep, that’s right. What do you attribute that regaining of hash rate?

Balaji Srinivasan: So I don’t know the exact breakdown. One could say there’s folks who are looking at this every day, which I haven’t been doing for a while. But Bitcoin mining is now actually understood to be something which is a component of the energy grid. Because in a sense just like when you say a document, it’s both a paper document and it’s a digital thing. We use the term interchangeably now. In a sense, Bitcoin mining is now like a money battery because on the power grid, you can’t store power that easily. You have to instantaneously generate it as being consumed. And every flick of a light switch and so on is sort of in this model of this Gaussian, where all these small events, you can’t predict whether you’re going to flick the light switch on or not. But you can have sort of demand prediction and it kind of goes up and down.

You generate the power in proportion to that. The problem is that if you’ve got source of power that are themselves variable, like renewables for example, Is the sun shining or not? Is the wind blowing or not? Now you’ve got volatility on both sides and it’s hard to match that up. And Bitcoin mining actually comes in there because it’s a load that you can put basically in any location and dial it all the way up. And rather than trying to store that energy in a battery, you store it as money by mining Bitcoin. And depending on the economics, it may be better to do that. And then with that BTC, buy energy later than to actually store it in a conventional battery.

Tim Ferriss: So that’s super interesting, super interesting.

Balaji Srinivasan: So this is an important thing that is happening now. Actually Ted Cruz of all people actually gave a talk on this. So it’s starting to filter out into politicians and I think — 

Tim Ferriss: Wait, Ted Cruz gave a talk on this subject?

Balaji Srinivasan: Yes, just a few weeks ago.

Tim Ferriss: Wow. That’s unexpected. All right.

Balaji Srinivasan: So that’s the thing, this is becoming a big thing within natural gas and so on because the flaring problem of having this — it looks like this dystopian blast of flame into the air. When you have stranded gas that gets addressed with this.

Tim Ferriss: So was he speaking within the confines of the state of Texas or was it more broadly applied?

Balaji Srinivasan: So it’s much more broadly applied, right? This is something which I’m not an expert in this area. But Google like Bitcoin mining, oil, and gas and you will be able to read about this, right? But it’s also something, it’s not just oil and gas, it’s also renewables. Essentially your renewable energy, your renewable energy source, Bitcoin mining increases the profitability of it because there is always demand for the renewable energy you’re generating, okay?

Tim Ferriss: Say that one more time please.

Balaji Srinivasan: Maybe I’ll be more precise. So your renewable energy source especially if it’s volatile, like solar power or wind, now there’s always a way to make money from it. Even if there isn’t demand on the grid because it’s volatile. For example, the sun may be shining, but nobody’s turning on their appliances or the wind may be blowing and nobody’s actually consuming the power, but you can use that to mine Bitcoin.

Tim Ferriss: That’s very interesting.

Balaji Srinivasan: Right.

Tim Ferriss: I was just saying that’s super interesting.

Balaji Srinivasan: And power is like instantaneous energy over time, but go ahead.

Tim Ferriss: So this is going to be a very stochastic conversation by design, by the nature of it I think. Let me just come back. We may return to this subject, but come back to India for a moment. What would be your — predictions may be too strong a word — but what are some plausible things you see happening or developing in India over the next three to five years with respect to cryptocurrency or Web3, blockchain, all of the above?

Balaji Srinivasan: So what’s interesting is that now that China’s taken itself out of crypto, it has kind of left the door open for others. The US certainly has a big crypto sector. There’s a huge fight within the US on crypto regulation and Web3 and what not. And we’ll see where that pans out. And we’ll also see where it pans out in India. It might be better, it might be worse. We will see. But basically it is — I’m cautiously bullish in both the US and India on cryptocurrency and I’m cautiously optimistic that both India and China will maintain some degree of stability. And so I’m not saying it’s a five-year thing, but a 15-year-ish kind of thing, 10, 15, 20 years, India could be an intermediate between kind of a coming American anarchy and total Chinese control.

And let me explain what I mean by this, just to go back to that scenario we were talking about. And again, it’s sci-fi scenario. I’m not saying I’ve put a lot of weight on this, but I think it’s possible. I had this one-liner, which is the US government has lost root control or the system, the future of hard power is CCP. And the future of hard money is BTC. This is related to that like NYT, CCP, BTC triangle that we talked about last time, right?

Tim Ferriss: Yeah.

Balaji Srinivasan: Which is woke capital, communist capital, crypto capital. And just to recap that, communist capital says, you must submit. That’s a communist party, they’re strong, you’re weak. They have power, you don’t, bow to the government. It’s very straightforward, just down the middle like a fullback. Woke capital says you must sympathize.

And that’s different. That says, it is because you are powerful, because you are White or male or straight, you’re rich or something, you have power. And therefore you must sympathize, you must apologize. You must bend your eyes down, your eyes are downcast. Your head is bent, but it ends in the same position of submission as communist capital with a bent head and a dispirited stance. So it’s also an ideology of control. It’s just a little more subtle rather than saying, they’re powerful. They say, “You are powerful.” And the trick of it is with the algebra of intersectionality, everybody’s an oppressor on some axis. So everybody’s either White or male or straight or cis or wealthy, like Dave Chappelle, he’s an oppressor on some axis, for example. 

So anybody can be turned into an oppressor in this way. And so everybody kind of lives under threat of having their card yanked and instantly turned into an oppressor because you’re an oppressor on some axis. So that’s how woke capital works. It’s more subtle, slightly more subtle. And then crypto capital BTC is the third point on the triangle. And rather than saying, you must submit like communist capital or you must sympathize like woke capital, it says, you must be sovereign. You must hold your head up high. Like jaw out. And you must not just hold your own private keys, ideally you are living off grid with a solar panel and you’re growing your own food. And you’re in a Bitcoin citadel where you’re kind of waiting out the Mad Max and so on, right? And so all of those are actually extreme old points.

You must submit, you must sympathize, you must be sovereign. And the thing is that while each of them is actually bad, if you just go totally to that point, but they’re also bad if you have the total absence. So for example, obviously you don’t want to just completely bow your head to this totalitarian state, you must submit. But the opposite of that, where nobody submits is San Francisco, where you can walk in and they’ve legalized crime. Like anything under $950 or something you can shoplift from Walgreens. You go in, help yourself, walk out, repeat it. And that’s why 22 Walgreens are closing in San Francisco. Did you hear about that?

Tim Ferriss: I did not. But it doesn’t surprise me.

Balaji Srinivasan: Yeah. So they basically have legalized crime and then the city government is denying that this is a real thing.

They’re like, “Oh, Walgreens published in their SEC filing three years ago that they might shut down some stores. Therefore they’re just doing this to make more profit, blah, blah.” And the rate of crime, reported crime has dropped in San Francisco. And this is basically like quoting statistics from the Soviet Union at this point because — 

Tim Ferriss: “Nothing to see here; move along, folks.”

Balaji Srinivasan: Yeah. The crime rate in SF is so high, anybody who’s there has seen multiple crimes happening as you walk down the street. There’s open air drug deals, there’s public defecation. There’s people who will walk into a store and shoplift something. You can just record, probably put a camera up there, you’ll see a bunch of crimes.

The reporting doesn’t happen because the prosecution doesn’t have it; the police [don’t] have it. So, okay. Point is, if you do not submit, you get San Francisco. Then if everything is sympathizing, nobody is competing to be a victim all the time. And that’s kind of where we are in many ways in American society. But the total opposite of that is also bad because the total denial that any victims exist, is the denial of charity and many of our good impulses. And that leads you to a society that’s like Russia in the ’90s. Where for 70 years all compassion and charity, and goodwill had been milked out of them because communism had said “Share!” at gunpoint. And so all of that had been linked out. So all sympathy was kind of leached out and that’s kind of what you get there and the total opposite of that.

And then sovereignty, I mean of course I’m sympathetic to this, but total sovereignty is actually the opposite of, for example, division of labor. Which is also like a capitalist virtue. You’re trying to do everything yourself. And total sovereignty is also a position of total distrust of everybody else in society and taken to its limit. And unfortunately, the thing about the internet is people do take everything to their limit, take to its limit it’s like one person can do everything by themselves, but humans are not just individual animals, they’re also social animals. Now of course the total opposite of sovereignty is also bad. That’s actually the woke capital and communist capital model where they can deplatform you via the corporation or the state at any time, since you’re speech, et cetera, right? So this triangle model is kind of useful because each extreme point on the triangle is bad, but so is the opposite point.

And so that’s why I think what we want to do is carve out a decentralized center that has a healthy optimum between these with the recognition that different people will trace out different optima. For example, the Netherlands is a functional society, but so is Singapore. And so is Dubai in its own way and so on. And these have different trade offs of submission, sympathy, and sovereignty. So with that kind of like as a political philosophy ish kind of thing for the modern era, basically I think, one new piece of information for me, or last seven, eight months is that the woke capital corner of the triangle, the NYT corner. The reason I say NYT, CCP, BTC is in many ways, while CCP is in control of China, it is a state controlled press. It is something where — nobody in the press is going to go investigate Xi Jinping or whatever. In America there’s it saying, if China’s got a state-controlled press, America’s a press-controlled state. And when we have seen that is a corporate journalist can get a politician fired, but not really vice versa.

So the org chart is the other way, who can get who fired, who’s superior? Now the thing is immediate rebuttal is, well, what do you mean? I can write an article and they may not necessarily get fired. And I would agree, it’s like a stochastic org chart. And that’s what sort of hides the lines of reporting. But let’s take the Department of the Interior, if the guy from the WSJ and the guy from the Washington Post, the guy from the NYT who all have the beat that includes the Department of the Interior, just started writing negative article after article on the person in that position, they’d eventually get capped. Almost like a board meeting where it’s like a three to zero vote and they get fired.

Tim Ferriss: I just want to share something that came to mind, which has been on my mind for a while. And that is the trends in the US, I suppose it’s somewhat obvious, are very different from the trends collectively in China, in one very important respect, many respects. But one really jumps out and that is nationalism is unifying on a lot of levels, but what we’re seeing in the US, with as you put at the Great Awokening, and this is not to point fingers at any one side necessarily, but much like the nature of warfare, is changing over time.

And it’s going to involve more and more cyber attacks, nonphysical attacks. Although there will be physical components. I would argue just by watching an audience of say 10 to 20 million people per month, over the last several years, that we are in the midst of the beginning of a reputational civil war, where the weapons are provided by companies that produce tools for social media and so on. And the attacks may not be those that we would see among different ethnic groups in a case of say ethnic cleansing, but nonetheless the damage is seen reputationally. And that it’s not just the New York Times and a politician. It is like neighbor against neighbor. And I find that absolutely terrifying.

Balaji Srinivasan: Yes.

Tim Ferriss: But I do think we’re in the middle of that. I mean, when I look at it, the scale and the intensity, it is absolutely a reputational civil war.

Balaji Srinivasan: Absolutely.

Tim Ferriss: And the weapons are technological.

Balaji Srinivasan: Absolutely.

Balaji Srinivasan: You can argue that the corporate takeover of the US actually happened in the 1970s when three privately held newspaper corporations, the Washington Post, which was owned by the Grahams, the New York Times, owned by the Ochs-Sulzberger family, and the Wall Street Journal, which was owned by the Bancrofts at the time before their sale to Murdoch. They all went after Nixon with the Post certainly leading the way. And essentially they got the most powerful man in the world fired. Now of course you can argue, and I think it’s fair to say, that Nixon was a crook. He actually did do those things. He hasn’t denied doing Watergate or the Berkeley or anything like that. I’m not litigating that part. What I am, what I will say is that at the time, what he thought was, and was certainly talked about, was that JFK had done it as well in his race against Nixon in the 1960s.

So he just had to do it. And actually there’s a book by Seymour Hersh, who is a legendary investigative reporter, exposed the My Lai Massacre. Won the National Book Critics Award and so he has a book called The Dark Side of Camelot and claims, for example, that Kennedy stole the 1960 election with help of the mafia and that all this sort of stuff, right? Some of the stuff has kind of filtered onto the public that Kennedy had lots of affairs and all this type of stuff. But the election part is I think the material thing where Nixon thought that Kennedy had gotten away with it and “stole it fair and square” and Nixon decided not to contest it for the good of the country. And then Nixon kind of did it himself.

And then he got tagged for it when it wasn’t, no scrutiny was applied to Kennedy and so, point being though that this concept of journalists holding politicians accountable means that the US is a press-controlled state. It also means by the way, how’s that accountability doing? If journalists are holding politicians accountable and over the last 30 years, the US government has done very poorly, who’s holding accountable the people who are holding the government accountable, right? If they are actually the most senior management, like the board of directors vote, who comes in an emergency to remove the CEO, namely the President, via an impeachment or investigation or something. Well, ultimately the board of directors is responsible. So the thing is though that the whole thing is set up to exercise power without responsibility, because it’s a stochastic org chart.

No one reporter thinks of themselves as being in control of somebody because it’s like throwing a stone and somebody who’s being stoned. No one stone necessarily kills them, but the fusillade of the hailstorm does, right? And of course, if you’re at the Times or the Journal or the Washington Post back before social media, you had pretty big stones that you were tossing. And what’s interesting is there is just to be on this topic for a second. There is a whole field called, we’re in a field there’s a concept called impact journalism. Where the whole point is to make an impact, like that stone hitting somebody. Like the impact of a government truncheon hitting your head, where the idea is that people will brag this article led to a government investigation. This article led to so-and-so reforms.

And what those reforms mean is that the state made something that was previously discretionary now mandatory or forbidden. That say a law was passed. Freedom was constrained in the most trivial sense like a 40 mile per hour and 55 mile per hour speed limit put you in a box on the V axis of velocity. You can’t go below that or can’t go above that. Freedom was constrained. You were previously discretionary, now you’re in a box. You may argue that box is good or bad, but as every law is passed, you’re in a box on more and more and more and more parameters. You can only do, you cannot be below this amount. You cannot be above this amount. So it’s literally like an ideological box, like a constraint right? And so the thing is that when you are able to cause impact in this way, you are powerful, but because it’s stochastic and it’s not like you order it and it happens with a hundred percent probability, you can deny that that power exists, okay.

So the whole system has sort of evolved for the deniable exercise of power. In many ways the org chart is actually even embedded in the language. Do you know the concept of Russell Conjugation? Eric Weinstein is big on this. Do you know what that is?

Tim Ferriss: I do not know Russell Conjugation.

Balaji Srinivasan: Yeah. So Russell Conjugation, at first, it just seems like a funny curiosity. It’s by Bertrand Russell, the concept. Also known as emotive conjugation. So it’s like, I sweat, you perspire, but she glows. Okay. Like, okay.

Tim Ferriss: Got it.

Balaji Srinivasan: So he doxes, she leaks, but the New York Times investigates. Okay.

Tim Ferriss: Yeah, I gotcha. Right.

Balaji Srinivasan: And so the thing is —

Tim Ferriss: That’s actually a great, that’s a great example, actually. That’s a really good example.

Balaji Srinivasan: It’s a really, it’s a very important example.

Tim Ferriss: Very important example.

Balaji Srinivasan: Yeah. Here’s why is, when it comes to what journalism is, like what is real journalism? Anybody can go and set up a blog to go and re-review movies or restaurants well, pre-COVID probably easier, but you know, review books or whatever, all that stuff. Huge portions of a modern newspaper, you can just kind of go and do and set up and do yourself. What is the one thing that you can’t do on your own?

Tim Ferriss: I can think of a lot of things I can’t do on my own, but continue.

Balaji Srinivasan: I would argue it is the investigative journalism part because you can’t just go to somebody and start digging through their garbage, interrogating their friends. Acting as essentially a for-profit intelligence agency. Because basically what they would do is, they will put somebody under surveillance, okay. That’s literally what being an investigative journalist is. You’re putting somebody under surveillance, essentially wire tapping them, eavesdropping on them, and so on and it’s actually, it’s an extremely hostile thing. Because the goal often is to try to get that person fired, to cause harm to them. To cause harm to their company and to essentially write up a prosecution and put that in the paper. And that’s why they say the court of public opinion.

It’s basically like an indictment. In fact we sometimes use the same word, like a biting indictment appeared in the paper but it’s stochastic, right? It’s out there and it’s deniable as to what happens. Hey, I just put it out there. You know, the old Arthur Sulzberger used to say, “Our job is to tell the public that the cat is jumping through the window; the public will take care of the cat.” So it’s like a disassembled bomb strategy where you give them all the parts and you emotively conjugate, you Russell conjugate, the whole article such that the reader who’s unaware of this is led to a conclusion but you kind of have no fingerprints on it because you just did it with language okay.

Tim Ferriss: Well it’s yeah. It’s semantic like word-laundering.

Balaji Srinivasan: Yeah. It’s, that’s exactly. It’s power laundering. Okay. And I’ll give you some concrete examples of this. Here’s a really good one, okay. So there’s an article in 2012,”How Punch Protected the Times.” You can just Google that and it talks about how dual class stock was the savior of the Times it was something that was really good because they could think about the long term. Then, a few years later in, I think 2019, you can’t fire Mark Zuckerberg‘s kids’ kids, okay. And this is an enunciation of the same thing. Oh, we are creating a class of royalty that controls our national dialogue. Without, basically, it just emotively conjugates itself the other way, right? So dual class is good when the Sulzbergers do it and it’s bad when Zuckerberg does it.

Tim Ferriss: I would love to, if it’s okay with you, I’d love to shift gears just a little bit, but it’s going to be — it’ll be tangential.

Balaji Srinivasan: Yes.

Tim Ferriss: Still related.

Balaji Srinivasan: Yes.

Tim Ferriss: So we chatted very briefly about, I think a pretty justifiable stance that we are already in the midst, not in the middle, but in the beginning of what we might call widespread reputational civil war in the US, which is just going to intensify. And it’s going to get a lot worse once we have AI driving additional misinformation and so on, it’s going to be a hell of a thing. Which is not that far off, I don’t think. But where do you see the US going in the next, say three to five years, if we can constrain a little bit? Because I know it may be easier to go to say 15 directionally, but if you had to make some educated guesses or wild ass speculations, just based on your reading of the kind of gestalt next three to five years, what do you think plausibly happens in the US?

Balaji Srinivasan: So let me give a scenario, and I’m certainly not saying this is desirable. I think this is possible. This scenario is: Chinese control/American anarchy. So basically a Chinese victory of some kind in the South China Sea over Taiwan whether it’s a referendum or military victory or something like that. Especially if the US prints money only to lose, okay. Because you print a lot of money in a war. Foreign military defeat of that kind would show that the US is no longer a hyper power. And with that would potentially result in — you know that saying “fiat currency is backed by men with guns?”

Tim Ferriss: Yes. Finally, a saying I recognize! Yes.

Balaji Srinivasan: All right. Yeah. So that’s actually [Paul] Krugman himself said that in an interview to Joe Weisenthal several years ago, “Fiat money is backed by men with guns.” So what happens when those men with guns lose and not in a sort of deniable way to COVID or Afghanistan, like we didn’t really try or it wasn’t a military thing, but to a pure competitor. Well, there’s potentially an economic markdown that happens. I mean Russia’s outcome in World War I. Sean McMeekin has a book that argues that the Russian Revolution — it’s called A New History of the Russian Revolution argues that, very good book — that Russia’s most important thing was it was that war during 1917. And that’s what allowed Lenin [Vladimir Lenin] and others to take power. That it was a wartime thing. It wasn’t just some random proletarian revolution. It was the chaos of war that led to that.

And so foreign military defeat or even foreign conflict is the kind of thing where it turns things molten. Things that were bubbling, now things can flow and move around, right? And here’s a bad scenario. The bad scenario is an attempt to repeat Executive Order 6102, like the gold seizure, okay. Do you know what that is?

Tim Ferriss: Well, I can kind of read it between the lines, but why don’t you tell me what it is?

Balaji Srinivasan: So during the rise of the centralized government of the US and I’ll come back to this, the concept of peak centralization, but or ping me on it. But basically one of the things that FDR did was Executive Order 6102, which seized all the gold in the US and basically forced it to be kind of exchanged in at a certain price and whatnot.

Now, right now we’re seeing insane levels of money printing. And it is certainly possible that at some point in the future, they try something like an Executive Order 6102. And in fact, there’s this guy on Twitter who has moderate following, who basically is starting to advocate for this type of thing okay. Because he had been predicting Bitcoin, it was going to go to zero. It’s like Facebook is a fad, it’s a bubble. Oh, oh, no, it’s terribly powerful; it must be stopped. It’s a flip from this thing is nothing; it’s going to go to zero, to we must drive it to zero, right? Or we must seize it. So if they try something like that, and the reason that might be possible is you print a lot of money to finance this war and now you’ve got an executive order, 6102 like thing, and an attempted Bitcoin seizure.

That is the type of thing that could kick off serious civil unrest. It’s possible. The reason is if you’re trying to seize BTC in a time of rampant inflation, that is no longer something that can be portrayed as being for the good of the population because inflation touches, I mean, inflation’s already pretty high, but it touches, everybody touches White people, Black people, Latina people, Asian people. It is economics. It’s very hard to portray it as some grand historical conflict or something like that. It really is the state versus the people. And it’s not like the people were printing dollars or managing the economy. That was supposed to be the FED and the treasury and whatnot. So if inflation is rampant, any try to seize the BTC that I think could be the match for the next kind of wave of conflict.

Tim Ferriss: Just a quick logistics question.

Balaji Srinivasan: Yeah.

Tim Ferriss: [If] additional instruments and abstractions are created, ETFs, futures, et cetera, in a seizure scenario, would that be limited to a certain form of BTC, or would it apply across all of these different instruments?

Balaji Srinivasan: I don’t know, but I think that basically there’s a huge difference between you having —

Tim Ferriss: Physical gold and ETF.

Balaji Srinivasan: Yeah. Yeah, exactly. That’s right. And custodial Bitcoin, which is like, or let’s put it as user custodial Bitcoin versus holding coins on an exchange. If you have your coins on your laptop or your device, you know that saying: “Not your keys, not your coins.” That is something where there’ll have to be a serious legal process or even a SWAT team to try to get them from you. Whereas if they’re on an exchange or, by the way, I advise complying with the law at all times you know blah, blah, blah. But this would be something where it would be easier to enforce that law on a giant exchange that has all their coins there.

Tim Ferriss: You just log in and you get a notification.

Balaji Srinivasan: Yeah, that’s right. So there’s a graph that I posted November 17th, 18th 2020, Bitcoin is moving off exchanges, prices moving up, ecosystem’s going to be building out, having this constrained supply at the all-time high. May be just the beginning, which turned out to be true. That was almost exactly a year ago. And there’s a graph from Glassnode — Bitcoin: balance on exchanges — all exchanges which seems to show that coins have been moving off exchanges. And there’s another graph from Thalamu T H A L A M U_ also showing that BTC held on spot, exchanges may be falling. Now I haven’t dug into this, okay. So you needed a pro subscription to Glassnode and so on and so forth. But that’s an important metric to monitor because coins on exchanges are easier to seize than coins off exchanges.

Tim Ferriss: And to come back to something you said, is that because do you think the main driver there is because people can stake their coins or stake their, I suppose, yeah coins and get a higher return on decentralized platforms. Is that why you think they’re coming off?

Balaji Srinivasan: Interest is a massively scalable application, right? Just park your money and get money back. And DeFi offers insane interest at very high risk.

Tim Ferriss: And just for people who don’t know. So DeFi: decentralized finance. Yep.

Balaji Srinivasan: Decentralized finance offers an absolutely insane level of interest. I wouldn’t even quote the numbers because any number I quote you can find a higher one, if you can take on more risk basically. And what does that risk mean? It means possibly loss of principal, like the smart contract could be hacked, possibly other kinds of things. But you can put in a million bucks and get like a hundred thousand dollars a year or more in interest. The thing is that you could also try and put a million bucks and try to make $10 million. Because some of these coins will 10X. So it is absolutely like the upside of crypto. By contrast in banks they’re at like zero interest rates or like nothing.

Tim Ferriss: Just to play the other side, nowhere can you make more money and also lose more money if you make poor decisions.

Balaji Srinivasan: Exactly. Crypto: it’s like the Unix of money. You can RM -RF your entire fortune or move millions with a keystroke. Do you know what RM -RF is?

Tim Ferriss: I don’t, but I love that. I almost want you not to explain it because five people in my audience will find that amazing and the rest won’t get it. But I mean, I can sort of intuit what that means, but why don’t you spell it out for me.

Balaji Srinivasan: RM -RF is it’s like a Unix command, which means remove everything dash recursive dash force. So you do it at the top of your directory hierarchy. -R means to send it to everything. -Force means don’t ask me any questions. And you know people are used to doing this when they want to just nuke a directory. But if you do it in the wrong spot, you’re like, “Oh, my God, I deleted my entire files,” or whatever.

Tim Ferriss: Oops.

Balaji Srinivasan: Yeah. Now modern systems will kind of detect what node you’re in and you know, may not actually allow you to do that, right? But that’s what being a quote “power user” means the computer will do what you tell it to do, not necessarily what you actually wanted it to do. That’s what a bug is. You’ve instructed the computer to do something. There’s an error in your logic. You didn’t think through a scenario, you didn’t think through an input. And it does what you told it to do but not what you wanted to do. By the way, this is like a super important thing in terms of cryptocurrency, because it solves the principal-agent problem and replaces it with your ability to debug. Do you know what I mean by that? Should I talk about that for a second? Yeah.

Tim Ferriss: You said the principal Asian?

Balaji Srinivasan: Principal-agent problem.

Tim Ferriss: I’m kidding. Just kidding.

Balaji Srinivasan: Sure. So —

Tim Ferriss: I wanted to know who this principal Asian is! Principal-agent problem. No, I don’t know what that means. Please continue.

Balaji Srinivasan: Okay. So this was back in 2013, when I understood the full scope of this, I was like, holy cow. And the reason is whenever you have a principal and an agent, for example, you have a venture capitalist as a principal and they fund a CEO, who’s their agent. Or you are the principal and you hire a plumber, who’s your agent to fix something, right? Or you hire a banker to go and sell something for you. The problem is that in the two by two matrix of you win, you lose. They win, they lose, all four outcomes are possible. In particular it is possible for you to lose and them to win. For example, they take commission without delivering you returns on your portfolio okay. And in fact the principal-agent problem is a fundamental thing of every single relationship on an org chart, manager engineer, right?

CEO, manager, VC, CEO, every single edge there has a two by two matrix of who can win and who can lose, okay. Now the key is to try to diagonalize this as much as possible, such that the win/win and lose/lose are, you both win the most together and you both lose the most together. Such that there isn’t any temptation for one party to defect off diagonal and win at the other guy’s expense, okay.

Tim Ferriss: Yeah. Yeah. Read your terms and conditions carefully. Yeah.

Balaji Srinivasan: That’s right. And the thing is that this becomes more complicated when you have just two people. It’s a two by two. When you have three people, it’s a two by two by two, because there’s eight outcomes, win/lose times win/lose times win/lose. It’s a Cartesian product, okay? When you have N people, it’s two by two by two to the Nth power. It’s like this hypercube it as it gets very complicated.

So it starts to happen in large organizations, is that some subset of people picks the strategy where they win and everybody else loses. They try, for example, 51 percent can vote themselves the money of the other 49 percent. That’s a straight win/lose zero sum kind of dynamic, okay. Now the way that startups avoid this is with equity. If you’ve heard the term aligning incentives, it actually comes from math where it’s a diagonal alignment pointing through this hypercube of incentives, okay? Where the key thing to do is especially to start up, 51 percent could vote themselves the other 49 percent money in theory if everybody is a shareholder vote and everybody’s equal, but there isn’t any money to distribute. All the money comes in the exit. So internal politics are limited because internal resources are limited in a small company.

And so what you do there is rather than encourage people to compute every possible strategy in this giant two by two by two by two hypercube. Instead you say the win, win, win, win, win, win, win quadrant. Were all N of us win together in an exit, an acquisition, or an IPO. Well, you don’t have to do out the math that pays off the most and every other off agonal thing where some coalition wins while the other group loses is suboptimal. Now here’s the thing: the principal-agent problem comes from the fact that when you’ve got two human beings their interests never fully coincide.

There’s a situation where one can die and the other can live or vice versa. Trolley problem type things. Push hard enough and there’s often a divergence in incentives right? Not so for robots, not so for programs, not so for intelligent agents.

Tim Ferriss: And you’re going to tie this into crypto or blockchain. Yes?

Balaji Srinivasan: Yes. Because with cryptocurrency, a program can now trade on your behalf. You can, rather than hiring a banker to go and trade for you, you can write a program that will trade for you while you sleep on cryptocurrency exchanges and especially decentralized exchanges worldwide. That program that you write to trade, especially the reason I say decentralized exchanges worldwide, is that is truly just packet to packet, that’s full internet. There may not even be a signup process, okay. 

That is fully on chain and so that is something where see, just like you go from a telephone number to an IP address. Telephone number is a human associated thing but an IP address is a machine associated thing. Any machine can call any other machine via an IP address. That’s what an IP address really is, right? You go from a human bank account to a cryptocurrency address and you remove the human association and now a program can hold money, make money, lose money fully autonomously. And so now rather than hiring the banker you write the program.

There’s no more principal-agent problem because the program has no mind of its own. It’s only the mind that you give it, okay. Now this is super important because as trust in society decreases, it is harder and harder to maintain a scaled organization of human beings, because there’s more and more divergence. It’s an individual era. Everybody is going in this direction. Why are you the boss? I should be the boss. In fact, both equality and freedom while in some ways they’re often made antipodal to each other where if they’re actually also similar in another respect. Which is if we are all equal totally equal. If you ain’t the boss of me I have total freedom, then there’s zero hierarchy, right? It’s all flattened out, right?

It is basically anarchic, right? And in that situation, everybody feels that everybody’s interests have diverged. So every man for themselves, okay. Now in that situation it’s hard to maintain a civilized society. So I think that the answer is going to be robotics cryptocurrency. How do those things relate? Well, when you give a robot instructions to go and unpack a box, it just does it. There is no divergence between the capitalist and the worker. The capitalist is the worker, because management becomes automation. There’s a great book, Factory Physics.You ever heard of this book?

Tim Ferriss: I have not.

Balaji Srinivasan: So if you ever like, it’s way harder to build an assembly line than to work on an assembly line, okay? Factory Physics [by Wallace Hopp and Mark L. Spearman], a good book. Also Eliyahu Goldratt‘s book The Goal is quite good. He kind of managed to wrap a, it’s kind of funny. It’s almost like a fictional story around operations research type stuff. And it’s executed better than it sounds okay. You might like it.

Tim Ferriss: It’s like Who Moved My Cheese?

Balaji Srinivasan: Yeah. Yeah. Yeah.

Tim Ferriss: Operations research finance.

Balaji Srinivasan: That’s right. That’s right. So both of these are good books; Factory Physics, it’s like a textbook that takes a very quantitative approach to cycle times and other parameters within a factory setting. But the main thing that you take away from that is, I designed a robotic genome sequencing assembly line like 10 years ago as part of my first company. And this is something where you realize, whoa, it’s actually way harder to build an assembly line than to run it. It’s like the difference between writing a program and running a program, because every box there, it’s actually very similar to architecting a data analysis pipeline, which more of your viewers will have done because something has to flow out from this and into something else.

It has to be the right format. It has to process only this many units at a given time, you need to use buffers and queues to get rid of it and so on. And in many ways, by the way that data analysis pipeline thing now integrates with the offline physical stuff, where you’ll do some physical processing to wait for a computation online and then the physical process kicks off right? So 10 years ago I was kind of merging robotics and AI and cues and all this type of stuff and it seemed to me like tech people you’ll mess around with a Palm Pilot years before people are using an iPhone, right? Or you will be in World of Warcraft before people are doing VR or everybody’s on Twitter before other people are on Twitter, right? So I kind of saw this firsthand.

And one of the biggest things was, what you want to do from any process like that is eliminate as much human error as possible. And eliminating as much human error as possible means eliminating as many humans from the process as possible. It’s an error to have humans. If you want to, eliminate human error. And if you can reduce it to just bugs in your code, that’s way better because you can see that on screen, it’s super consistent at least. The error is made in the same way every time. Just to give you an example if somebody rotates a so-called 96 well plate, okay. An eight by 12 plate, if they just rotate it wrong, if they’re cranking through high volume and just rotate it wrong, which is easy to do, I mean they’ve got kind of markers on it but you know, people are people; they can screw up. There’s 96 samples that are off, 96 patients get the wrong report.

Tim Ferriss: 96 patients of what type? What does the plate have to do with patients?

Balaji Srinivasan: So visualize a plastic tray with indentations in it to contain liquid, okay. And so those indentations are like really small basically eyedropper, scale indentations. If you Google 96 well plate you’ll see, you know, go to Google images, you’ll see a visual of this, right?

Tim Ferriss: Okay. Got it.

Balaji Srinivasan: So each cell there is often like a patient sample, okay. So you might have 96 samples for 96 different patients in this plate. And then you’re putting various reagents in there and putting it through this process and if you rotate it wrong everybody gets the wrong result. like 23andMe — 

Tim Ferriss: Oh, I see what you’re saying. I understand what you’re saying. That they’re matched incorrectly. Is that what you mean?

Balaji Srinivasan: Yeah, exactly right. So they had a sample swap error back in 2010, where a bunch of people got the wrong ancestry results, they thought they were this ancestry, they were another ancestry, they thought, “Oh, my God, am I an illegitimate child?” Or something like that. So the downstream consequences of this like very human error are something that the error was to include a human. And so, what is going to happen is cryptocurrency means that you don’t have to hire a banker, you can write an intelligent agent to trade for you, robotics means you don’t have to hire a worker, you can program a robot. Management literally becomes automation, so rather than writing out instructions and setting up the assembly line and positioning workers there and calculating cycle times and so on and so forth, you as the manager, for many people, by the way, management is not tangible, and that’s why they devalue it. 

The way the labor theory of values is talked about, the Marxist theory of value, it starts with the visual of the factory floor, you have these workers who are working and it’s like, “Oh, we, oh, we, oh.” And you have this evil fat cat boss with a cigar, who’s got his feet up on the desk and is just like basically cracking the whip on these poor workers.

And, of course, scenes like this did exist in late 1800s America, and I’m not arguing that unethical bosses didn’t exist, but the fundamental premise of this is, “Oh, the workers are doing all the work, and this fat cat is just sitting there and contributing nothing,” and so on and so forth. And part of that is because capital and management are kind of intangible and it’s often denied that they create any value. But now what is actually possible is a totally different model where it doesn’t start at the factory floor, but instead you start, let’s say, in an academic lecture hall, let’s say it’s physics, right? What percentage of people are able to comprehend the material and what percentage of people could write the textbook? And then what percentage of people could rewrite the textbook? And it is on that small minority of people that we depend for refrigeration and flight and fiber optics, and so on.

It’s the opposite rather than like this small set of fat cats who exploits this giant pyramid with all these workers at the bottom, it’s like an inverse pyramid theory where the vast majority of people depend upon this small group of technologists to create all the stuff that they don’t understand how to operate that maintains modern civilization.

The funny thing is that your engineering grad student often has both of these mental models in their head at the same time, and it just depends on whether they’re thinking of themselves as a poor exploited worker or a sophisticated engineering kind of character. And what I’d argue is that in the 20th century, the reason that the labor theory of value preponderated is that there was leverage to large groups of workers, they could do a strike, because of mass production you needed workers to operate a factory, so there was leverage there.

And of course, what happened was, in the Soviet Union, they pushed everybody into a lose-lose scenario where there was a strike, but it wasn’t a win-lose scenario where the workers win and the bosses lose, it was a lose-lose scenario where after enough strikes, you got communism where nobody could strike. You had the White Sea labor canal, you had the Gulag, you had basically communism as this giant slave labor country, this prison state where you couldn’t escape, they would shoot you if you tried to get over the Berlin Wall, for example, right? So the leverage existed between workers and capitalists in a certain way.

Now, it’s a different kind of thing. Now, with the dock worker shortages, with the truck driver shortages, there’s a huge incentive for automation and for robotics. And people are just doing, if you’ve heard this thing, the great resignation, it’s happening across many different social classes.

Tim Ferriss: Yeah.

Balaji Srinivasan: With labor shortages of a different kind, it’s not a strike, it’s a resignation. “Okay, well, I can’t get somebody at this price, fine, let me figure out how to automate this with robots.” And here’s a critical thing: it is not intangible anymore. Management is not intangible, it’s not just instructions that the boss is giving to the workers and he puts his feet up on a desk, it is literally code and GitHub. It is lines of code that say, “Move this arm here and position it here, calculate the degrees of freedom here.” It is math, it is computer science, it is now tangible because it is code. And now you’re not giving instructions to a worker, you’re giving instructions to a robot, a computer, an agent.

Tim Ferriss: All right, so this is actually a perfect segue to what I was going to lead into. And I’m just going to talk for a little bit to set the stage.

Beginning, probably just before our last conversation in Q1 of this year, and certainly with increasing depth over the last six months, I’ve been spending a lot of my time in what we might consider Web3, more immersed in blockchain and cryptocurrencies, NFTs, et cetera. So many of the things that I had read about have become less theoretical for me. And there are things that I’ve been able to explore and thankfully not experience in some of the negative cases that have led me to all sorts of realizations. So for instance, one is if you just read crypto Twitter, at least some of the people on crypto Twitter, which I would suggest no one do if that is your sole source of information, but some interesting discussions, nonetheless, there are some sort of techno idealists or techno optimists who sort of paint this decentralized future that is just utopian in almost every respect. 

But there are risks in bad code, right? Smart contract risk, and there are insurance companies, Nexus Mutual and many others of different types that try to provide ways for people to protect themselves against the downside of certain types of smart contract risk. We talked about the pseudonymous economy last time, whereby people would use alter egos of different types that didn’t change constantly but rather accrued some type of reputational value. This is another thing that I’ve seen most acutely for myself within DeFi and NFTs, specifically within NFTs, people who are collecting high value or what are currently high value JPGs in essence, right? But pieces of artwork that are non-fungible and people now have hundreds of millions of dollars worth of these pieces of artwork in some instances, and very few people, if anyone, knows their real names, right?

So I’ve had this experience for the first time where I’ve even met some of these people in person and tried to make small talk, we chatted about this before we started recording, and I’m like, “Oh, hey, where are you flying in from?” And they’re like, “Nah, I’m not going to answer that.” And I was like, “Oh, wow, okay, this is a different conversation than I’m accustomed to.” But there’s also some degree of counterparty risk when you’re dealing with pseudonymous identities, let’s just say, where you don’t yet have established some reliability score outside of a verified account and check mark on Twitter, which can also be faked. I mean, that can also be sort of hacked in some respects. So here’s my sort of overarching question and I’m going to lead into it. So I’m sure you’ve heard this line, “Trusted third parties are security holes,” right?

Balaji Srinivasan: Yeah.

Tim Ferriss: So on paper, I’m like, “That makes sense.” But when you start to really weigh into say, NFTs is just as an example, and people say, “You need to be your own bank.” There’s a lot of responsibility and logistics that goes into being your own bank in the same way that if you, for instance, want to or imagine living in this kind of utopian decentralized world where there’s a degree, I’m not saying this is you, but a degree of anarchy, and we saw this during riots in the last year or two in places like Portland, in many cities around the world, you quickly end up in a state that is not unlike what we saw during Hurricane Katrina, where these atrocities being committed left and right because there’s no law enforcement. So then that leads to questions of, do you want to be your own law enforcement?

And I’ve seen how much fraud there is and sophisticated sort of social engineering goes into some shadowy corners of the world of NFTs, say with people posing as customer support and discords, and then taking snapshots of people’s QR codes and so on. I mean, there’s a level of kind of sophistication that I hadn’t personally been exposed to because I’m shielded by my — now, you could, I’m sure, pick this apart, but I’m shielded on some level from certain trusted third parties, right? I do not have the obligation to act as my own bouncer and security guard and banker. So I’m wondering if you’d like to kind of comment on any of this, because I have realized that for me personally, being Jason Bourne in my physical and digital life on every level is a scale and scope of responsibility that I don’t really want, even though I have firearms training, I have some technical ability, I have an incredibly good network, I could actually organize my life around some of those sort of pillars of self-sufficiency, but I’m not convinced I totally want to.

And I’ll tie this in also, you were talking about Singapore before we started recording, and you said, “For centralized, it delivers,” right? So I’m just wondering, for muggles who might be listening. And I would include myself in that group, where we’re like, “You know what? I’m not ready to be the lone ranger on the frontier of complete decentralization for all of the perceived risks that, at least, I see once you start to weigh into it.” Where’s the Goldilocks point, and how do you decide that for yourself?

Balaji Srinivasan: Excellent question, I’ve thought about this a lot from many different angles, and let me at least give you my thinking on it, and shoot it, or agree, as you want. So this kind of relates to the thing I was talking about earlier with communist capital, will capital, crypto capital, submission, sympathy, “You must submit, you must sympathize, you must be sovereign.” And that last point of the triangle, you must be sovereign, as you are discovering, is actually not — that’s why I said it’s an extreme point. It is too hard for pretty much anybody to not just hold their own currency, but grow their own food, and get their own water, and so on and so forth. Humans are individuals, but they’re also social animals and you make some compromises.

Now, the stuff I had just discussed on robotics actually reduces the necessary skill of societies. In theory, you could have, and this is where I think we end up in 2050 or 2040, maybe even sooner, you could go back to the future and have robotic farms, robotic, autarkic farms, where if you’re looking at the automation of agriculture, it’s getting there, it’s really improving dramatically, AI for picking things and so on, and you kind of give your instructions to your robotic field hands. And you might actually, because then you go truly full stack, you’re “off the grid,” but you have maybe a modern life.

Now, of course you need enough land, you’re still going to have trade, you’re not going to be able to grow every crop there, but you might be able to do okay. So I do think that there’s an eventual thing, I don’t know what the minimum scale society is, but I think it’s smaller than 300 million, it might be smaller than a million, it might be even a few thousand people could operate something decent. But there’s actually, to make that more explicit, you know the project Open Source Ecology?

Tim Ferriss: I don’t, I recognize the words, I can imagine, but why don’t you describe it?

Balaji Srinivasan: Yeah, so it’s a little different than what people think when they hear the word ecology. It’s basically a kit of like 30 open source machines that if you build them from scratch, you could rebuild civilization, the global village construction set. So it’s like, “How do I get running water? And how do I get this?” It’s all the things that civilization depends on, but it’s machines that you can build yourself. And there’s also a couple of other books like this, there’s a book called The Knowledge by, I think, Lewis Dartnell, which I think is really good, and [How to Rebuild Civilization in the Aftermath of a Cataclysm], kind of the post-apocalyptic thing.

Tim Ferriss: That’s what The Knowledge is about?

Balaji Srinivasan: Yeah, The Knowledge: [How to Rebuild Civilization in the Aftermath of a Cataclysm]. And then there’s another book, which is How to Invent Everything: A Survival Guide from the Stranded Time Traveler [by Ryan North]. And those books, I think, are quite good, those two, as well as like Open Source Ecology, because it addresses some of what you’re talking about, which is how would somebody start from scratch and do this? We don’t know how to do it. 

And in some ways what’s happening is there’s a cycle of centralization and decentralization that just happens. For example, in China, it’s like, there’s the warring states period, and then the whole thing is unified, and then it breaks up again, and it’s unified. And we see this in the computer industry in a totally different context, which is you have mainframes, then you have personal computers, and then you have cloud, and then you have cryptocurrency and smartphones. And it kind of goes back and forth like this.

And the thing about this is when a system is centralized, people chafe at the control and they want sovereignty, they want power, they push on it, then they manage to break it up, and then it’s all decentralized and it’s chaos. And now, what is scarce is leadership, they’re like, “Oh, let’s put it back together,” and so on. And seeing it from one vantage point, this just looks like a cycle, you just keep coming back where you came from, you go from anarchy back to tyranny to anarchy, to tyranny, right? But seeing it from another standpoint, it’s like a helix, it’s a cycle in the X, Y plane, but we are making progress in sort of this ascending kind of cycle over many generations.

Now I’ll put an asterisk on that too, which is I don’t believe that progress is necessarily guaranteed. In fact, there’s a couple of good podcasts or shows like the Fall of Civilizations Podcast [Paul M.M. Cooper], or Samo Burja actually has some good stuff on this where he talks about Gobekli Tepe, which is like the oldest human civilization. It appears, looking at some of the civilizational records, that humans may have gotten pretty advanced and then just kind of totally collapsed, and we’ve done that a few times in human history.

Tim Ferriss: So you’re saying you believe in Atlantis?

Balaji Srinivasan: Well, if not Atlantis — 

Tim Ferriss: I’m kidding.

Balaji Srinivasan: So like Gobekli Tepe, for example, it’s this site that’s kind of like Stonehenge except way older than Stonehenge, found in what is today modern Turkey, that pushed way back our dates of when civilization started. 

Tim Ferriss: Mm-hmm (affirmative).

Balaji Srinivasan: So it might be like playing a video game where you get to level 15 and then you die, you get to level 27 and then you die. And this just might be the most advanced human civilization we’ve built to date, but it could just collapse and we might come back, I mean, it happened to the dinosaurs, they got hit by a meteor.

Tim Ferriss: Yeah, I mean, there’s some pretty bizarre archeological records and really interesting carbon dating done in South America also that would point to advanced civilizational collapse of different types.

Balaji Srinivasan: That’s right, and so the thing is that when you say progress is possible but it’s not guaranteed, I mean for example, think about Christianity and the Roman Empire, Christianity in some sense was, no offense to your listeners, I have nothing against it, but it was like the original communism at the time of the Roman empire, it tore down the Roman Empire, it said that slaves are good and sooner a rich man go through the eye of a needle than get to Heaven. And basically it delegitimated the Roman Empire, and eventually it fell, at least the Western Roman Empire. And that was something, you got the Dark Ages for a while until this sort of fusion emerged on the other side, you had the Germanization of Christianity, for example, why do you have Saint Nicholas and Santa Claus and snow next to a scene of Bethlehem and the manger in the desert? Those are two totally different cultures, thousands of miles apart, but what’s happened is it’s like copy pasting one story next to another, like horizontal gene transfer in organisms, the meme replicates even if the substance is changed quite a bit.

And so what happened was eventually after the Dark Ages, you got a thing that was a contradiction in terms or oxymoron before the Christian king, not the Roman Empire or the Holy Roman Empire, of course it wasn’t continuous with the thing, but conceptually, and you kind of had that rapprochement, but there was a Dark Ages, like a collapse of civilization in between. And so, bad ideas, or let’s call it certain ideas, can collapse civilization. That has happened, okay?

Tim Ferriss: Yeah.

Balaji Srinivasan: And we’ve recovered, but it’s not necessarily a guarantee if we’ve collapsed there is a guarantee that we will fully recover. The dinosaurs didn’t, and of course, there was an external force — 

Tim Ferriss: Well, some ideas are even generated or myths to collapse civilizations, right?

Balaji Srinivasan: Yeah, right, so this gets to something which I think of as a very important part of the future political axis, which is you can say it is like Democrat, Republican, you can say it’s centralization, decentralization, but I think, and even more important access in the medium to long-term is going to be transhumanism versus anarcho-primitivism, and we kind of talked about some of this before, I think, did we?

Tim Ferriss: Yeah, let’s reiterate it, and then I just want to make sure I bookmark that I want to come back to how do you find this sweet spot on the spectrum?

Balaji Srinivasan: Yes.

Tim Ferriss: Because one concern I have is that the decentralized tools given the literacy required and the precautionary measures and tech savvy required will forever remain or for a long time, maybe not forever, but for a long time remain the tools of half a percent of a given population, or maybe a few percent of a given population. But unless there are kind of UIs slapped on top, which will extensively just create again, trusted third parties, so it seems sort of antithetical, I don’t want you to lose your train of thought, but I want to make sure that we come back to that.

Balaji Srinivasan: Let me quickly do anarcho-primitivism and transhumanism, and then come back to your point. So the quick thing on that is anarcho-primitivism says, “We’re not living in nature, we’re far away from it, we’re having all these plastics, we’re having all of this pollution.” There’s a right of center version of that, which is like, “Our testosterone count is down.” Which it is actually, that’s not like a conspiracy theory, it’s actually like a scientific fact, it’s way lower than it used to be for adult men. All that is down, and so there’s some aspect where this is now like neutral, we’re diabetic, we’re eating all these grains, it’s all bad, instead, we need to kind of reject modern civilization in part or full like the Unabomber [Ted Kaczynski] thesis, and just go back to the land, right? And of course, the problem with this is, I think that’s a romanticized version of what going back to the land is. I don’t care if some people want to go and do like an Amish thing and live on their own or snapshot some point in time, they want to like tear down industrial civilization.

Conversely, the transhumanist thing is the opposite, which says, “What makes us human is technology.” You know Richard Wrangham‘s book, How Cooking Made Us Human? You ever heard of that?

Tim Ferriss: I have, yeah. Finally, one book I’ve heard of.

Balaji Srinivasan: So Wrangham’s book is interesting — 

Tim Ferriss: I’ve also read Horton Hears a Who! Just to establish just my level of reading.

Balaji Srinivasan: Your Chinese is way better than mine, and we have a [inaudible], but what I learned from Tools of Titans was amazing.

Tim Ferriss: Thank you.

Balaji Srinivasan: But Cooking Made Us Human essentially says that technology is actually part of humanity in the sense that we sort of outsource our metabolism to cooking and therefore could evolve in a different way, right?

Tim Ferriss: 100 percent agree.

Balaji Srinivasan: And that’s true for clothes and other things, there’s this book, The Naked Ape [by Desmond Moriss], which is kind of also about that. And the idea is that we are a technological species, technology is not some anti-human thing, it is humanity, there is a difference between us versus animals, and so, our destiny is to get to the stars, let’s do this, right? Let’s become transcendent beings, one with the machine, brain-machine interface. This vessel is just who we are today, but our ancestors’ ancestors, if we really want to make our ancestors proud, they were single cell organisms or non-human creatures, so whatever is in front will be to us as we are to them.

And so, that’s like the transhumanism thing, and what’s funny is both of these in their extreme form are like off-putting to some people, right? They’re like, “Why can’t we just stick where we are?” But the nature of things is that those people who have ideological zeal will start pulling the train in one direction versus another, it’s very hard to kind of keep something just stable in one state, you know?

Tim Ferriss: Yeah.

Balaji Srinivasan: You’d have to end technology and communication etc., right? Okay, so now coming back to your point, basically, what do you do when all of these institutions collapse? I’ll slightly rephrase it. What do you do when all these institutions collapse? Because most people cannot be that sovereign, because it’s like an overnight plunge into refounding everything. It is not simply, “Be your own bank,” it’s maybe, “Be your own food supply,” and there’s certain things that are sitting on your desk that cost you 10 bucks, but you would never be able to build them, or it’s very expensive to build them from scratch. Like, I don’t know, like a USB cable.

Tim Ferriss: Well, how am I going to build this? I’m holding up a ballpoint pen.

Balaji Srinivasan: Yeah, of course, that’s a famous saying, “No one can build a pencil,” right? The first unit rolling off the assembly line is wildly expensive, then the one millionth or billionth unit is super cheap, but getting to that point of technology from just a grass field and sand is super hard. 

Tim Ferriss: Yeah, it’s going to be hard to do from your intentional community in the jungles of Costa Rica.

Balaji Srinivasan: That’s right, but all the supply chain stuff is going to start forcing a greater degree of autarky. If we’re lucky, it is just a gradual ramping up. If unlucky, it is too fast and you don’t have time to adapt. It’s like the difference between like working out gradually versus like go put up 300 and break your elbow or whatever, right?

And so, the point is what I think happens is unbundling and rebundling. So one of Marc Andreessen‘s collaborators a long time ago had this throw off line, which I love, because it’s so funny, but it’s also true, is, “The only ways to make money in business are bundling and unbundling.” [said by James L. (Jim) Barksdale] And this goes back to the spiral thing I was talking about. For example, you take the songs off of a CD and you unbundle them into MP3s, then you rebundle them into Spotify playlists, or you take articles out of a newspaper and you put them into individual URLs, and then you rebundle them into Twitter feeds. 

Tim Ferriss: Yeah, or a subscription, right?

Balaji Srinivasan: Or a subscription, that’s right, and you take the countries that we have today that the people no longer feel a loyalty to, you’re unbundling them into the coming American anarchy, and then you’re going to rebundle them on the other side into groups that do have something in common, and that will be probably a really messy global process when this Pax Americana falls. And one analogy is the 30 Years’ War, right? In some ways, by the way, that’s actually quite analogous to what we’re going through, do you know about what happened then?

Tim Ferriss: I do not! I would love to know. Tell me, sir.

Balaji Srinivasan: The printing press — I have this tweet actually on this. Printing press plus Martin Luther led to the Reformation, led to the Counter-Reformation, led to the religious wars, the 30 Years’ War led to eventually the Peace of Westphalia and the nation state. And the internet plus Satoshi Nakamoto led to the decentralization — by analogy the Reformation — led to the counter-decentralization, led to potentially the coin wars, the American anarchy, and then question mark, question mark, and then network states.

So let me explain what that means. So basically by the time of Martin Luther, the Catholic Church had become this ossified, centralized power and had, for example, this thing called indulgences, where you could go and sin and you could just go and pay some money and be like, “Yeah,” give it to the church, they’d be like, “No biggie, okay, you have, you know, a…“

Tim Ferriss: Hall pass.

Balaji Srinivasan: Yeah, it’s a hall pass, exactly. You can argue it’s similar, and this is a little bit of a poke, but like a carbon credit, go and sin with carbon and then buy a credit. You might argue that’s a good thing or a bad thing, but it’s analogous, right?

Tim Ferriss: Yeah, got to make those fuckers more expensive, got to make it more expensive. Anyway, continue.

Balaji Srinivasan: An even better example is like TSA Pre, where like, “Everybody’s a sinner, everybody’s a potential terrorist, but pay this money and you can be in an express lane.” Like, “Huh?” It doesn’t strike anybody as right. It’s like this weird thing where if the issue is safety, why can you pay for it? Or at least let’s call it — it arouses question marks, right? And so Martin Luther — 

Tim Ferriss: So two things, I was just going to bring us back to your tweet. The other thing I’ll say for folks is if you want to learn a bit more about Martin Luther and many of the things that followed, there’s an incredible podcast episode, it takes a little while to get warmed up, called Prophets of Doom, which is on Hardcore History by Dan Carlin. It was the first episode I ever listened to of his, which got me hooked, but a fascinating listen. So I recommend that to folks, and back to our regularly schedule. Apologies, sir, please continue.

Balaji Srinivasan: Great, also there’s a good thing on this called the Bitcoin Reformation with Tuur Demeester T-U-U-R D-E-M-E-E-S-T-E-R, and that kind of goes through some similar ideas, basically like analogizing Bitcoin to Martin Luther. So maybe look at both of those together, and then you know the historical version and some of the parallels. But briefly, basically Martin Luther, because it was the time of the printing press, he didn’t just nail his 95 Theses to [Wittenberg] in I think 1517, basically people were able to copy his arguments, and for the first time people had heard these sort of deconstructing arguments that said, “The Catholic Church is a scam. You should have a personal relationship with God. It doesn’t matter what the Church says,” et cetera.

And so, there was a religious argument, but it was also an argument over power and who should hold power. And for a long time when I was a kid, I didn’t understand, “Why are people arguing about the Body of Christ, a wafer?” It seemed like the weirdest kind of thing to argue about and fight and kill about. I just didn’t understand this. Now, I understand that a lot of those things were sort of proxies for who has power. Does the Church have power or did these new guys have power? And so what happened was the Reformation was like this thing of basically decentralization of power away from the church, and the Counter-Reformation took a little while to get underway, but this was the Catholic Church saying, “Not so fast,” and basically fought. There are some reforms, but there’s also some combat.

And these were the wars of religion. Do you go with the centralized church or the decentralized Protestant movement? Protestant versus Catholic. And eventually after 30 years of war, a very bloody war, people were like, “Okay, we’re going to come up with essentially a live and let live philosophy, the Peace of Westfalia, where we’re within nation states and you have the monopoly of violence within that, and a transnational religion doesn’t have influence within this geography.” So that is to say, “The Catholic Church doesn’t have influence here.” And it was like, “Okay, we’re both pretty bloody, let’s settle this.”

And the thing is, that’s way out of living memory, that is many generations ago, but sometimes people seem to need — one thing that’s funny is a lot of things kind of, you can argue, they happen on like 70, 80-year cycles because things drop out of living memory and then certain aspects repeat. So the thing is, people have sort of forgotten how bad war is in some ways, so they’re kind of LARPing it, right? And maybe they’ll make it into a real thing. Actually, Fukuyama [Francis Fukuyama] mentioned this, his End of History thing actually had a pressing comment, that people on some level are wired to struggle, and if they don’t have struggled, they will reinvent struggle, they will struggle against order and prosperity to kind of make it harder.

Tim Ferriss: Yeah, manufacture struggle, absolutely.

Balaji Srinivasan: Yeah, exactly, that’s right.

Tim Ferriss: And that’s Francis Fukuyama?

Balaji Srinivasan: Yeah. Let me actually — I’ll find the exact quote. One second.

Tim Ferriss: And while you’re looking for that, then I want to come back to the Bitcoin or cryptocurrency comparison and the part that I stumbled over when you were reading the tweet initially was the, I want to say the great re-centralization or something like that and I just wasn’t sure what that was.

Balaji Srinivasan: Ah, okay. Yes, right? So basically centralization, de-centralization, re-centralization is like entity unbundling, rebundling. It’s like CDs, individual MP3s playlists. It is newspapers, individual articles, Twitter feeds. It is countries, anarchy, new countries, new cities.

Tim Ferriss: What is that in cryptocurrency, the re-centralization?

Balaji Srinivasan: What is that in cryptocurrency? So it is, for example, an exchange, so it’s happening on many different scales, but one of them is store your money at a bank, okay, pull it all out and then you’ve got Bitcoin on your computer, store your money in exchange, okay. Pull that out and then put it on a dex partially and each step here actually gives you greater control.

Tim Ferriss: Decentralized exchange.

Balaji Srinivasan: Decentralized exchange. And there’s ways of doing this where you have less risk than on a centralized exchange. For example, it’s an atomic trade, it’s on the dex, like a flash loan, and then you’re getting it back in the next transaction. There’s various ways of doing this where a centralized exchange improves your control over a bank and a decentralized exchange improves your control over centralized exchange. Even if there’s parts of it that seem like you’re reinventing the wheel, the wheel was reinvented. In fact, there’s this great graphic that shows like an original stone wheel and then like a chariot wheel and then like a modern Michelin tire. We do need to reinvent the wheel. Okay. And we have reinvented the wheel. We just need to be conscious of when we’re doing it. So the way I kind of think about this, oh, just finish that Reformation analogy, by the way.

So just like there was the Catholic Church and then there’s the Reformation, which is a decentralizing event and then there’s this huge fight with the Counter-Reformation and then eventually a truce where Protestantism basically won relative to the previous era, but Catholicism did not die out, it’s still a big thing. Similarly, I think, you can think of the era we’re in as the decentralization and now the counter-decentralization. So just like the printing press and Martin Luther kicked off the Reformation, the internet and cryptocurrency have kicked off the decentralization. And what does a counter-decentralization look like? It looks like deplatforming from social media platforms. It looks like unbanking, it looks like the Chinese surveillance state, it looks like basically exercising root control over this, it’s basically root versus routers. Okay. So do you have root over this computer system and you’re exercising root control, or do you have this decentralized set of routers that are just routing packets back and forth? 

And the counter-decentralization, I believe, is going to succeed in China and fail in the US and what I mean by that is I think China, because they have very ruthlessly competent managers. There’s actually a good video by Eric X. Li from 2013, which it doesn’t hold up in every aspect today because there’s certain claims he makes that, for example, that Xi Jinping will step down and it’s like a multi — that they’ve figured out political succession. Xi Jinping repealed that or whatever. Those are things where he says that the Mao era is continuous with the Deng era when Deng was really a coup against Mao’s successor and it was a total shift in direction. It’s not what Mao intended.

So those two parts, maybe he just has to say that for domestic consumption or what have you. So you have to take it with a grain of salt. But the rest of it is actually very interesting where at least gives a 2013 Chinese vantage point on their system. Why do they actually have these ruthlessly competent managers? Because the way that the CCP works is yes, there isn’t voting. If people want to exercise political power, they join the party. Sort of similar to how in the US, yes, you can vote. But if you really want to be politically powerful, you want to run for mayor or something like that, that means joining a party. So sort of like that, of course not the same, but roughly analogous, those people who are quite politically ambitious join the Communist party and they might start as running some small really tiny town of a hundred people and then they level up and they go to something of 10,000 or a hundred thousand people or a million, and then eventually 10 million.

Each level becomes more and more competitive and they have surveys they do of the populus and they do 360 reviews where they’re looking at your peers who are running other cities, and they’re looking at your superiors’ reports, it’s like promotion in a corporation. So of course there’s patronage and there’s connections and so on that go into it but it’s like a giant corporation where they’re looking very much at metrics and did you build this many toilets? Did you hit your numbers from above? Did you manage the population’s discontent? Is this region, does it have higher dissatisfaction than other parts of China and so and so forth?

So a corporation is not a democracy, but it is responsive to its customers in a certain way and the Chinese government was always kind of conscious of losing the mandate of heaven and having too much dissatisfaction. So did all these polls and so on, try to keep ahead of public sentiment, solve these kinds of problems and so on. Again, I’m not saying they’re good. I’m saying that this is how they selected for competent leadership. That’s why they have a lot of engineers in their ranks and that’s why they built a great firewall and other things because they have guys who are basically selected as capital allocators as managers. So because of that, because they have the Great Firewall, because they ban social media, because they’ve done other things, I think China is going to win the counter-decentralization where people thought that their bands on the internet and their controls on internet wouldn’t work, they kind of did. They basically just had their wall garden where they have root access and you know, Xi Jinping can basically push a button and anybody can be disappeared.

There’s like super famous actresses that just got disappeared. Now that’s, as I said, ruthlessly coming, because that’s kind of a scary thing to be under. You don’t really have any recourse. There’s no civil liberties, there’s no human rights. And yeah, it’s true that they over the last 40 years they’ve delivered a lot of benefits to their population. There’s this huge group that’s being pulled out of poverty, but that level of absolute power can also go south. And so, but the point is that I think they will succeed, have succeeded arguably in the counter-decentralization, by contrast in the US.

The US establishment is by turns apathetic. It’s either apathy or panic, for example on COVID, oh, it’s not a big deal. For example, these tech journalists wrote this article, “No Handshakes Please,” trying to make fun of anybody for taking precautions, trying to shame taking precautions, folks wrote about, oh, these bubble boys are so concerned about this, making fun of this early on in COVID. And then they switched completely to panic later and never acknowledged that they had had all this false reporting, misleading reporting. They accused people of being racist for saying, “Hey, maybe we shouldn’t have the Chinatown parade” after with the Wuhan coronavirus on the loose, after Wuhan itself had canceled its own parades. This is like January-February, 2020.

So what happened was they were at first apathetic, “Oh, this is not going to be a big deal, nobody should do anything.” And then they’re panicking, “Oh, my God.” And so that kind of mode is very common. The US establishment is not selected for folks who look ahead, it’s selected for actors and propagandists. It’s not selected for capital allocators. Just a couple of examples like there’s Lorena Gonzalez, this legislator in California thought that relatively junior guy at Founder’s Fund was a billionaire or Brian Williams and a member of the New York Times editorial board thought that if you divide a Bloomberg’s fortune by 300 million Americans, all of them would get like a ton of money and obviously they wouldn’t.

So you actually select for folks who are verbally good, but enumerate and that’s very different from what the Chinese system selects for and that results in folks who are not like VCs or technologists, who are not calculating ahead or doing contingency planning or saying neither apathy or panic, we can have a technical plan to potentially succeed if we do X, Y, and Z. So what that results in the US establishment that’s always behind the eight ball. Lehman is a surprise. Bear is a surprise. COVID is a surprise. Trump is a surprise. Afghanistan’s a surprise. Everything is a surprise. And then they react in this very reactive way. Facebook is a surprise. And why is it a surprise? Because Facebook’s a fad, Facebook’s a bubble.

These tech journalists, for example, in 2013, even there’s this article “Why Facebook Will Never Make a Significant Profit,” right or famous article, “Amazon.bomb.” Okay. Or another NYT classic, “Google’s Toughest Search is for a Business Model.” And it’s something where this goes back so far in some ways, basically these guys are, they’re so used to inheriting something that they could never have built. They sit upon this US establishment that they don’t understand what it is to build something and they don’t think anybody can build something and so they’re dismissive of the stuff until it gets so big that it can’t be denied and then they react in this super panicked way.

Tim Ferriss: Okay.

Balaji Srinivasan: That’s why I think — 

Tim Ferriss: Let’s extend that to current and near term crypto and you could take that in any direction you want. It could be — 

Balaji Srinivasan: Sure.

Tim Ferriss: — otherwise in the US, is there going to be a rash regulatory whiplash, because we’ve already seen cease and desist letters and so on to DeFi companies and there’s a lot of scrutiny over lending products. Where do you foresee that going?

Balaji Srinivasan: Yeah. So by the way, I will say one thing, which is, once you do get in the mode of trying to react to this stuff, that’s all at 0.00001 percent traction, you’re thinking like an angel investor, because it’s like, when you start looking at that dashboard and you no longer set your filter at something that’s at 50 percent of the population traction, or even 10 percent, when you go to 0.0001 percent and a tiny percent of the population’s using it, the number of things you’re looking at explodes, and you need to have a really good detector for what will be important, what won’t be, and it’s going to be erroneous at times and it needs to be quantitative because you put in 50K into this and 50 million to this and so it’s hard, but that’s actually what capital allocation involves, especially in the modern era is figuring out what’s going to get big in getting ahead of it.

So to your question, what is going to happen with sort of the regulatory state’s collision with crypto. There’s various scenarios. Okay. But I think on balance, they’re going to lose and let me explain what I mean by that.

Tim Ferriss: They meaning the US government?

Balaji Srinivasan: The federal government is going to lose.

Tim Ferriss: Federal government.

Balaji Srinivasan: Okay. And why do I say that? Well, so the macro — the short version is the US government is losing control over both domestic and international affairs and so states and cities within the US will take positions at variants with the Feds because cryptocurrencies are becoming so valuable to them that they’ll have the equivalent of sanctuary states and sanctuary cities for crypto. Crypto entrepreneurs will write model legislation that will be adopted by places like Texas and Wyoming and Colorado and Florida and other kinds of things that, for example, prevent Bitcoin seizures in law before the thing happens, this is already there, by the way, in some ways like Wyoming’s DAO law is quite advanced, right?

Miami has accepted some city coins and Texas is big in Bitcoin minings. This is already happening but the next level of that is doing the same thing that they’re already doing versus the Feds, which is basically openly define them and saying, actually we’re doing state nullification and just to give you some recent examples of this, the federal government is losing control of events. I just made a little list of this the other day, both domestic and international affairs, inflation, Afghanistan, China on Taiwan, France on the AUKUS thing, El Salvador on Bitcoin. 17 states, by the way, opposed this idea that the FBI should be sent to school board meetings. So 17 states wrote a letter on education. Texas has taken a different policy on vaccine mandates and abortion. Germany went its own way on Nord Stream 2. Florida is pushing back on this financial surveillance thing, saying that they are not going to abide by the federal government’s edict on this.

So you’re seeing significant energy at the state level within empire and then also outside from places like El Salvador or Switzerland that are just taking policies that are at variance with what the US government’s position is. Now this is quite different from 10 or 15 or 20 years ago, when under Obama, for example, there was a lot of kicking in doors in Europe, like going after Swiss bank accounts or sanctioning everybody on the planet or invading everybody for democracy like under Bush. So abroad there are a lot of muscle is being thrown on and then domestically, basically the feds would step in and force states to do something. But over the last few decades, what we’ve seen are sanctuary cities for immigration, we’ve seen states have different gun laws, we’ve seen states have different marijuana laws.

We’re seeing a larger and larger divergence. States, for example, had different gay marriage laws, than the feds for a long time. We’re seeing a larger and larger divergence. States are becoming genuinely differentiated from each other and from the federal government and that’s happening within, and then countries abroad are also taking a different route. So France, for example, now they’re going hard on nuclear, which is definitely not a priority of, to my knowledge, at least the current admin, they’re doing things, Germany is trading with Russia. That’s not something the US government wants them to do. India’s trading with Russia on some missile stuff. That’s again, something the US government threatened sanctions on. So countries are doing things that the US government doesn’t want them to do and states within the US are doing things that federal government doesn’t want them to do.

So because they’re losing control over world events, see, the whole Pax Americana is based on basically the repeal of the 10th Amendment at home and regulatory harmonization abroad. So FDR effectively repealed the 10th Amendment where everything that wasn’t officially the federal government’s was left to the states, but a very broad interpretation of the Interstate Commerce Clause said that everything is interstate commerce. So the states actually don’t have any rights. We’re going to reinterpret as a federal government having power of everything and therefore you get these alphabet soup of agencies, FDA and SEC and all these things, kind of rose out of the FDR era and then abroad. Go ahead, you laughed.

Tim Ferriss: No. Oh, well I just like the alphabet soup mention, it shows you my level of humor sophistication, but if I could interject for one second.

Balaji Srinivasan: Of course.

Tim Ferriss: If you had to live in the United States, where would you live and why?

Balaji Srinivasan: Texas or Florida.

Tim Ferriss: Okay. Why?

Balaji Srinivasan: Probably Florida. Why? Because those are becoming freedom states. I think Wyoming’s also good. I think Colorado under Jared Polis is really good. You’re basically seeing the pro freedom. Jared Polis is a Democrat, by the way. He’s a tech founder. He understands what wealth creation is and so on.

Tim Ferriss: That was Blue Mountain way back in the day? Didn’t he have Blue Mountain, the gift card company way back in the early days? I could have sworn that that was —

Balaji Srinivasan: Yeah. That’s right. So — 

Tim Ferriss: Yeah, he was a few years ahead of me at Princeton and did very well.

Balaji Srinivasan: Super smart guy. I think he actually is involved with Techstars and so on. So it’s something where, in some sort of the Center and South of the country are going to diverge from the West coast and the Northeast, I think, roughly speaking, but that’s not straight Democrat, Republican. That is more decentralization versus centralization. And so I think that those states and it’s literally like a search engine, right? I think one thing I’ve wanted for a long time, actually I wrote about this like eight, nine years ago but I think that the next political model is what I call a crowd choice, where you have a search engine where the rows are jurisdictions and the columns are policies, sort of like, but it’s basically a bunch of attributes and then you just put in your preference and then you sort and filter, but then the next step is to group with a bunch of your friends and have you all put in your preference vector, and then it finds a jurisdiction that is closest to your collective preferences.

Tim Ferriss: Okay. Let me ask you just before we — I want to not lose that, but with Florida and Texas, when we’re talking about freedom, what types of freedom, what is your hierarchy of freedoms look like? Because there are also a lot of people listening, just to ask to act as a proxy for listeners, say, well, you may have greater say, financial freedom because a state might act like a crypto-safe haven of some type, but there may be sacrifices that you make and sort of tacitly endorse in for civil liberties —

Balaji Srinivasan: Like reproductive freedom.

Tim Ferriss: Exactly. So how do you think about how to stack rank?

Balaji Srinivasan: Yeah. So the first thing I’d say is as a pragmatist, like being in the US and a US citizen, means you’re sort of de facto funding, like all the wars the US wages around the world and so on. So people are implicitly already making moral trade offs of some kind, right? They might, when you point that out, that someone takes the heat down, because then because a new thing is different from the things it’s already baked. The moral compromise they’ve already made implicitly. Right? You buy stuff and you don’t know where that supply chain comes from. Maybe there’s something that you would disagree with ethically. Right? So people make these compromises all the time and fundamentally I think it’s a vector, right? Policy is not a scaler, it’s a vector. It’s a set of decisions, a tax rate of X and a zero one as to whether drones are legal and this is your reproductive freedom/abortion policy and this is your this policy. And you know, there’s an aspect of de gustibus non est disputandum. I cannot — 

Tim Ferriss: Before you ask, I don’t know what that means.

Balaji Srinivasan: Oh.

Tim Ferriss: Sounds like some Latin though, if I’m not — 

Balaji Srinivasan: Yeah. So I probably mispronounced it but, “De gustibus non est disputandum” is, in matters of taste, there can be no disputes, right? So there’s aspects of this that are preferences rather than absolutes. I might say “Thou shall not kill,” but I can’t say “Thou shall like the color green.” That’s a preference, right?

Tim Ferriss: Uh-huh (affirmative).

Balaji Srinivasan: And so some of these things, and crucially by the way, I think there are multiple optima, okay? This by the way, I was coming up with sort of a name for how I think about my philosophy or something and — 

Tim Ferriss: Could you define optima please?

Balaji Srinivasan: Sure, yes. So imagine looking down at a bit of hilly terrain, okay? And a local optima is the peak of one of those hills and a global optima is the highest peak of the highest hill, okay?

So if your goal was to ascend to the highest height, you might ascend to the top of one of the hills, but really what you want is the global optima in this case, which is the top of the highest hill. Right? However, it could be the case, they could have multiple hills all in the same region that are basically of the same height.

Tim Ferriss: Got it. Okay.

Balaji Srinivasan: Okay. And if, for example, you thought of your kind of latitude and launched you there as, I don’t know, let’s say your percent of time spent remote and your, I don’t know, your equity compensation versus cash percentage, right? In a company culture, these are sliders that you could set to like zero and a hundred, both of them and if you replace that hill analogy with latitude and longitude with these two, zero and a hundred sliders, you could imagine different kinds of companies that had different combinations that are both equally successful in market cap on the Z axis, but that had different policy combinations.

Tim Ferriss: Okay. Yep. How does that apply to states, similarly?

Balaji Srinivasan: Very similarly. That’s right. Because I think right now we sort of think of companies, currencies, cities, countries, communities as being different things, but they’re all going to become the same thing, essentially the projection of a social network or rather companies become like apps effectively on the — this will sound like tech babble, okay, but a blockchain is property rights, identity, historical records, marriage and birth certificates, all the type of stuff a society can run a ton of stuff that currently does at city hall on a blockchain. It’s property rights. It is who has admission to what building, who owns what property, what sale occurred at what time, who paid who, dispute resolution. A lot of that stuff goes on chain and then a lot of companies are butt off from that and use that as an application point.

So all of these things basically set around companies, currency, cities, countries, communities, all settle around chains, right? That is like the software stack for running a community and an analogy to this is before the internet, books and movies and music and songs, television, telephone calls, those are all different. And then after the internet, they go turn into packets and all kind of mixed together and so the normal thing that a macroeconomist will say is, he’ll say something like “Governments aren’t households.”

Tim Ferriss: Okay.

Balaji Srinivasan: Have you heard that before?

Tim Ferriss: Nope, I have not.

Balaji Srinivasan: So there’s a quote, actually, I think it was Tyler Cowen quoted it. I think it was John Lanchester in the London Review of Books. Gosh, hold on. Let me find it. Yeah, here we are. So January, 2013, “Richard Feynman was once asked what he would pass on if the whole edifice of modern scientific knowledge had been lost, and all he could give to posterity was a single sentence. What axiom would convey the maximum amount of scientific information in the fewest possible words? His candidate was ‘All things are made of atoms.’”

In a similar spirit, if the whole ramshackle structure of contemporary macroeconomics vanished into thin air and the field had to reconstruct from scratch, the sentence which packs much of the discipline in the fewest possible words might be, quote, “governments are not households.” Now the reason this is really important is this is why people will argue that what I’m talking about for companies doesn’t apply to cities or to countries, because they’re fundamentally different. Governments are not households and there’s a whole discipline of macro that that has arisen around this.

However, I argue that actually in many ways, American and Western in macroeconomics is in its own way as pseudo-scientific as Soviet economics was. There’s a whole discipline, by the way of Soviet economics, Marxist economics that had all these equations and so on and there are some aspects of it that are still useful like Kantor’s work on — or maybe his name was Kantor or Kantorovich — on linear programming and optimal allocation and some of it is okay, but a lot of it was basically essentially just a recapitulation of Marxist premises, right? And when they say governments are not households and they say that recapitulates a whole field, what they mean is that the government has guns and households do not and therefore the government can seize money and coerce people to do things and households cannot do this.

So everything which assumes, some ability to do redistribution, some ability to print, some ability to do this, some that, that is a hidden assumption. The bullet point at the end of QED is a bullet.

Tim Ferriss: Okay.

Balaji Srinivasan: And it is basically the assumption is of coercive force as opposed to physics where it’s the analogy gives us to physics and atoms, the human element isn’t there. Okay. So once you say governments are not households and you think of it from a different angle of governments have guns. Yes, it is true. They are different. But I do think that in the medium term future, because of exit, because of global ability, I mean, we have this tension now, I talked about exit a lot even before the coronavirus, as the most important, right? But post Corona, post lockdown, people prize it way more. When it’s taken away, you prize it more.

Tim Ferriss: Okay.

Balaji Srinivasan: You prize free migration, you prize ability to leave, and we’re seeing a great migration in the US. So the great resignation, the great migration, remote work, all this and lockdown, all this stuff has made people both more aware of how important the policy is of the state that they’re in and were able to move and by the way, everybody doesn’t have to move. Only a small percentage of the world moved to the US and look at what a big deal that was.

On the margins, some degree of mobility can cause massive change. This is also why everybody doesn’t necessarily need to hold their coins. The fact that some people can is enormous leverage on the system. It’s just like Steve Ballmer back when, this apocryphal story, but when an executive left from Microsoft to Google, supposedly he threw a chair or shoved a chair or something like that. Everybody didn’t need to leave Google. Enough people need to leave, then he was like, okay, this is real, okay. Google is a real competitor and eventually that led to him stepping down and Satya [Satya Nadella] taking over.

So thing is that, the great resignation, the great migration, remote lockdown, all of these things mean much more exit. When there’s much more exit, when you can hold your coins on your person, when you’re renting rather than buying, when you’re basically running a light and your stuff is in NFTs rather than real estate and when all of the stuff, when your books are in Kindle, when your mail is in Gmail, all of that type of stuff, right or ideally, in some kind of decentralized thing versus centralized service. When you don’t have obligate ties to the land, then the state has less leverage and so because of that, over time, it moves, for example, to a subscription model and because the cost of — 

Tim Ferriss: When you say it, you mean residency in a given place?

Balaji Srinivasan: Yeah. Like Swiss cantons have something like this, where you pay X dollars per year and that satisfies your obligation to them to live there.

Tim Ferriss: Okay.

Balaji Srinivasan: So I think the future business model of governments, is A, subscription and B, inflation. So what that means is, there’s a SaaS type service that you subscribe to and that gives you access to all this government stuff, like a V zero that is like Singpass in Singapore, for example, right? Estonia, there’s something called X-Road. And the thing about this is, it actually isn’t just a revenue model for them, it’s also actually a crime and punishment model where, right now we think of digital deplatforming as completely lawless and policing as forceful and inhumane. But it may turn out that in the future, if your punishment is being deplatformed for something, but it’s written in law beforehand, it’s not some arbitrary thing that’s being made up, it’s like, seven-day suspension in order for doing this — 

Tim Ferriss: It’s like having your driver’s license revoked for infractions?

Balaji Srinivasan: Yeah, exactly. And so, the thing about this is, I’m not saying that’s good necessarily, but it is more humane than jailing somebody, arguably, right? And again, I’m not also saying, I’m not so unrealistic as to think that physical punishment is never necessary or anything like that, not at all. But I do think that having levels of steps are valuable where you don’t have to escalate it all the way, that you can have a deterrent, which is a slap, like a digital slap or digital suspension versus all the way to the gun. The gun is a really serious thing.

So basically, when you have these subscription in states, you pay and you have effectively access to this service and doors open, and literally physically open, the key unlocks it. It’s basically digital border control in the sense of, why do you have access to the state? Because you’ve paid in, you have a subscription, you have an identity, unifies, passport, driver’s license, all of this stuff, right? Now, immediately people say, “Oh, my God, that gives the root operator of the state enormous control.” And it does, so that’s why you have to preserve the right to exit. You have to preserve Bitcoin, you have to preserve cryptocurrency. And then there’s boundary cases where, if you went and killed somebody, would you then have the right to exit right after that? Probably not. And so there’s some social smart contract that you sign, upon physically entering or virtually entering this jurisdiction, just like terms of service on a website, but it’s more serious and you might require a cryptocurrency deposit for example, rather than just a click-through of, I have read this and so it’s almost like posting bail or posting a bond to enter the jurisdiction or posting a deposit with rent, right? If you exit without doing it, then that is forfeit and that is significant enough, for example, to deter petty crimes and whatnot.

So that’s the subscription aspect and the inflation aspect is I think as I said, unbundling and bundling, okay? Bitcoin is necessary as a corrective to 20th century fiat, but there’s another way of thinking about fiat, which was actually a useful thing for me to conceptualize. You know Chesterton’s fence [after G.K. Chesterton]? You know that concept?

Tim Ferriss: I do not.

Balaji Srinivasan: So there’s a fence, sitting out there and someone says, “I don’t know why this fence is here. I’m going to tear it down.” He’s like, “Well, if you know why that fence is there, then maybe I’ll let you tear it down because it might be there for a good reason.” There’s a second version of this, which says often there’s a structure that exists and the reasons that people give for its existence are not the actual reasons. For example, religious taboos on preparing milk and meat a certain way, like tray for Haram.

The theory is that it was related to like in a desert environment, food would spoil. These taboos would roughly keep people safe, even if they were kind of religious as opposed to scientific, they sort of help people stay away from impure food. So people thought that you were struck down by God if you violated them, but it’s really a bacteria or something you had. So the practice kept you safe, so even if the active ingredient wasn’t well understood. So one thing about fiat currency that I observed the other day is — 

Tim Ferriss: But hold on, hold on a second. Pause there. So you said they believe something or they believe the justification for something. I think you’ve, but there’s sort of an inaccurate assessment of the history of something. So that is true. You take that to be true or untrue what you just said?

Balaji Srinivasan: [crosstalk 02:46:57]

It’s sometimes true. In that particular like I haven’t run the study myself to see if these written religious practices actually ended up in food purification. There’s certainly things where there’s tribes that have had potion preparation processes that include a genuine active ingredient that pharmaceutical companies have then extracted and put into a pill. 

Tim Ferriss: Yeah.

Balaji Srinivasan: So basically, there’s often an active ingredient in some folk practice that we don’t yet know how it works. For example, one thing that’s sort of interesting is acupuncture and bioelectricity.

Bioelectricity is actually like a real thing. It’s not really talked about, but evidently has implications for wound healing and so on, and maybe acupuncture is tapping into that. Right? There’s this guy, he’s got a great TikTok. What is this guy’s name?

Tim Ferriss: Are you on TikTok?

Balaji Srinivasan: No, but educational TikTok. What’s his name? NASJAQ has a great video on bioelectricity and limb regeneration with citations and visuals and so on.

So sometimes there’s stuff and it works and we don’t know why it works. In fact, maybe our reasoning for why it works is wrong. People actually still disagree in some ways on how like lift works for an airplane. Of course, with physics, there’s things like this.

So the two business models of states in the future will be, I think rather than coercive, will be subscription and inflation. Subscription, we just described. Inflation, the idea is this, Bitcoin is short-term volatile but shows immense long-term appreciation. The US dollar is actually the opposite. It is short-term, relatively stable. Forget about inflation for now.

I’ll come back to that. It is short-term, relatively stable, but over the long term, you can see it has had a huge drop in purchasing power. Right now, this is talked about in a moral way. I understand why because essentially the “fiat” engineers don’t really acknowledge this as a trade-off or even recognize it as such.

It gets back to this thing of like the religious taboo. But if you think about it from an engineering mindset, most people hold a portfolio. They don’t hold a hundred percent BTC and a hundred or a hundred percent. Well, some people hold a hundred percent USD, but you don’t usually hold a hundred percent BTC, you hold some BTC and some USD. Why? Because some of this is stable on a daily basis and the rest is appreciating over time. 

Now here’s the concept. What if those are just opposite engineering trade-offs that say the long-term depreciation of fiat provides effectively the funds to stabilize it in the short term. Just to think about that from an equation standpoint, if you were to — do you know what an order book is?

Tim Ferriss: Probably not what I have in my imagination. So why don’t you tell me?

Balaji Srinivasan: Okay, so this was something actually which I didn’t know before I got into cryptocurrency and I think, I mean, the number of people who know this is probably increased by a hundred or a thousand acts over the last 10 years. It’s very important because it describes how supply and demand and prices really interact. Prices don’t come from stores. They come from this and where does it come from? Okay. So let me explain, then I’ll come all the way back up.

So you go to the store and you buy, I don’t know, a gallon of milk. All right. That’s going to cost you, I don’t know how much it is today. Let’s say it’s $5. Maybe $10 with all the inflation, but all right. $5. So fine. You’re a price taker. Okay? If instead you go to the store and you say, “I want all your milk. I want 200 individual, one-gallon bottles, I’ll pay $5 per.”

You can do that. But now if you want to get more milk, you need to go to the next store. They’re selling, they have an inventory of 30-gallon bottles, but it’s $5.50. Okay? As you start buying out the inventory here, word gets around and people start hiking the price because they know you’re going to walk in and clear them out of all of this liquidity of milk. 

That is a difference between having a small enough demand that you don’t really affect the price and having a large enough demand that you actually move the market. One way of thinking about it is these are like bids that are placed on either side. One store has placed a sale order of 200 gallons of milk at $5. The next store has placed a sale order of 30 gallons of milk at $5.50. 

All of these add up to be all of what is for sale. There might be like a ton, there might be thousands of gallons if somebody really wants to pay like $20 a gallon, there’s like thousands of gallons that become profitable to produce at that level, at that price. Then conversely, demand is sort of lowest at $5, but there’d be a ton of demand. There might be lots of people who would buy a gallon of milk for a dollar. 

So you can visualize this sort of V-shaped thing where the current market-clearing price is $5. But if a lot of people suddenly buy and clear out the supply, then the next available unit might be at $8 or $10. Conversely, if there’s a huge amount of supply and there isn’t demand, then the market-clearing price drops from like $5 to $4 or $3. Okay? With me so far, right?

Tim Ferriss: I am.

Balaji Srinivasan: So that is called an order book. That is actually how prices are born. Prices literally come from the interaction of supply and demand. So all kinds of people are being trained as true capitalists, because they’re actually seeing the root acts of the system, how prices are set between supply and demand. Supply and demand are now computable, visible, tangible. This has huge implications for lots of things because those order books are going to come to everything.

As we cryptify the whole world, it’s not just BTC, USD, that has an order book where you’re buying units of BTC for blocks of USD or vice versa. It’s not just like either USD, it’s not just every coin versus every coin, it’s every asset versus every asset. Okay? This is what I call the DeFi matrix. Essentially, every financial interaction that we think of. A digital wallet doesn’t just hold Bitcoin. It can eventually hold everything.

It can hold fiat currencies, Ethereum tokens, NFTs, whatever. So it’s got billions of rows, but it doesn’t just hold everything, everything trades against everything.

Tim Ferriss: Yeah.

Balaji Srinivasan: Right.

Tim Ferriss: Well, just to interject for a second. I mean, a very concrete, I feel like NFTs and expensive or not expensive JPGs are sort of the — will be an on ramp. It’s like a gateway drug for a lot of people into crypto and Web3 and so on. You can see just for people who want to look for articles on this and certainly, you can see it yourself.

But if you compare traditional art to say OpenSea and collectibles or an NFT artwork on OpenSea price discovery and the sort of transparency of order book that you’re talking about is right there. Then, there are analytics being built on top of these marketplaces. Just I wanted to give one example of what’s already happening for folks.

Balaji Srinivasan: Exactly. Essentially, order books mean price discovery. All kinds of things suddenly become liquid and priceable. Things we could never price before, like a minute of your time, like as a JPG, like a byte on your hard or megabyte on your hard drive, all the type of stuff becomes priceable.

Just to relate it, I’m going to talk about DeFi matrix, come back up to the order book, come back up to smart fiat, then back up to subscription inflation, then back up to the rebundling after the American anarchy. 

What is the DeFi matrix? Digital wallets mean you can hold every asset on your computer. Not just Bitcoin, not just Ethereum, but fiat currencies like CBDCs when central bank digital currencies come out, every stock, every bond, every NFT, every video game potion, you have a billion items in your digital wallet, those billion items, you don’t just hold them, you trade them against the billion items.

You have this gigantic table and every existing exchange today, a crypto exchange, a stock exchange, a foreign exchange, foreign currency exchange, all of them can be considered sub-matrices of these like a crypto exchange is fiat currencies, cryptocurrencies versus each other. A stock exchange is stocks and fiat currencies of foreign exchanges, currencies versus currencies.

All those are just sub-matrices of this massive DeFi matrix. Some of them are actually exchanges and some of them are so-called automated market makers where you’ve got some rare piece of art and you’ve got rather like some infrequently traded token and you’ve got another infrequently traded token. This will give you some conversion between at some price, it might be a high price, but you can go directly between them. Okay.

The DeFi matrix means everything is just getting re-priced all the time. Every asset competes against every other asset. People don’t understand how big a deal this is. It’s kind of like once every [crosstalk 02:56:58].

Tim Ferriss: Even for a Luddite like me, it’s a huge deal. Once you really start to look at it, it’s huge.

Balaji Srinivasan: It is the internet of wealth, internet of money, and it’s going to be similar to every newspaper went online and then Google News came online and indexed them, and suddenly every newspaper was competing against every other newspaper. So what that meant was that now all the ones that were just reprinting AP stories were no longer competitive.

So lots of weak newspapers that weren’t adding that much value died. Right? So in the same way, when every asset is competing against every other asset is extreme capitalism. Okay. There’s no geographical advantage anymore.

Tim Ferriss: Not just competing, but also you can sort of cross-collateralize and do all sorts of wacky, not wacky, but new things that are going to upend a lot of our current thinking around how capital flows.

Balaji Srinivasan: That’s right. One of the big ones is it’s actually a second attack on fiat currency. The first attack is that Bitcoin appreciates and Bitcoin can’t be seized and so on, like all the stuff we’ve known over the last 10 years. The second attack — what do they call it when you sell a company or you go IPO, they call it a liquidity event. Because cash is universal barter and you can exchange it for other things whereas you can’t exchange stock directly.

The DeFi matrix changes that. Everything is always liquid all the time. So at some price, you can get a quote for something so long as it’s not banned by the state. If you can get a quote for something, do you need to actually convert it into cash, you can just do it instantaneously. You can liquidate it as necessary. In fact, you want to hold minimum necessary cash and have everything else because cash doesn’t appreciate.

In fact, cash depreciates. So now liquidity is itself second whole access where it reduces the amount of wealth held in fiat currencies. The DeFi matrix is this very, very big thing. It will be to this decade what the social graph was the previous one. You might say, “Well, why don’t countries just ban it?” Well, the thing is that coercion only works within your borders and large countries can try it, but small countries like Switzerland or Singapore or Dubai or Arsenia will see an opportunity here to level up their fiat currencies, recognizing that they no longer have a geographical advantage, just like local newspapers, no longer have the geographical advantage.

They were just put into this global competition recognizing no longer a geographical advantage, they might add privacy features. Okay. They might add transparent management of reserves. They might add Bitcoin backing. Suddenly, currencies are competing with each other in a way they never have before on features and not simply like monetary policy and so on, like central bankers become like Vitalik and Zooko. The smart ones at least to the ones who don’t just like the newspaper guys that don’t. NGMI, you’ve heard that one?

Tim Ferriss: Yes.

Balaji Srinivasan: Not going to make — 

Tim Ferriss: I do know NGMI.

Balaji Srinivasan: Not going to make it. Exactly.

Tim Ferriss: Not going to make it.

Balaji Srinivasan: That’s right. So this is this.

Tim Ferriss: Probably nothing.

Balaji Srinivasan: Yeah. Probably nothing. Exactly. So this is the same thing that the remote economy has done. It has put Miami in direct competition with San Francisco and poorly managed cities. Right? This was recently reported. I don’t know how true it is, but the mayor of SF told the mayor of Miami, “Hey, stop taking my people.” He’s like, “I love you, but no.” That is awesome and the reason that is awesome is removing from the tiered two-party system to the wired and city system. 

From two parties to 20 or 30 or 50 or a hundred cities competing for you means that internal disputes are less and intercity competition is more, which is healthier. Arguably, you can say that gets bad when it goes to interstate violence. But it is good when it is economic competition because this Marquess of Queensberry Rules and make your city better and make it greener and make it cleaner and make it healthier and have a better life for people and you’ll attract good residents. So all right, coming back up.

So the DeFi matrix was every asset against every other asset, all assets trade against all other assets in the DeFi economy, just like all cities trade against all other cities in the remote economy. By the way, those are related because municipal bonds and municipal equity, like city coins are like municipal equity, the equivalent municipal bonds in a sense, or like the next version, all of those will also trade. So you’ll have the price of a city. Every ideology, everything will have a price, which roughly reflects people’s measure of belief in it.

Are there more buy orders? Are people long on the cities? Do they think it’s going to improve in 10 years? Is the next Shanghai, or is it the next Detroit sell, right? That’s reflected in real estate values currently today, but it’s kind of opaque that all becomes REITs that are on-chain. So the price of a city goes up and down. In fact, that is actually probably going to be the determinant of your reelection. Did you boost the REIT of the city or not? That’s actually quantitative and numerical and empirical, it cuts through the BS.

Did you deliver shared prosperity for your residents or not? Basically, did more people want to buy into the city, buy a subscription, buy a piece of the digital REIT versus not. By the way, let me just talk about the REIT for a second. REIT, real estate investment trust. One thing I’ve thought a lot about is there’s an interesting way to sort of cut the Gordian Knot of NIMBYYIMBY and one issue.

Tim Ferriss: What the hell is NIMBY-YIMBY? I was like, I got Gordian but what in the hell is NIMBY-YIMBY.

Balaji Srinivasan: NIMBY-YIMBY, this is a big. I’m a little surprised you haven’t heard this one, because this is a big thing in cities, probably in Austin, but NIMBY is Not In My BackYard. You can’t build in my backyard and then YIMBY is a more recent movement. That’s like, Yes, In My BackYard, we need to build housing. Housing scarcity is bad and essentially this is like this intra-city kind of thing. 

Now, what leads to this dispute is that the NIMBYs have their own houses and their property values go up if they can constrain supply while demand remains constant. Now, a lot of the stuff they did in San Francisco restricting housing construction because of shadows and so forth, I think is shortsighted because by driving away demand, it’s like it’s something where the long term it’s, tonifying the city. Tech is leaving not even that long term it’s happening now.

Tim Ferriss: Especially with such a limited inventory. I mean, especially for a city of that size. 

Balaji Srinivasan: The rebuttal to this is “That place sucks; it’s too crowded and the food sucks.” That seems like a contradiction, I’m butchering that. You know the proverb, right? Nobody wants to go there. It’s too crowded. But there’s a truth to that, which is why did Friendster not make it? It couldn’t handle the traffic, so people went elsewhere.

Nobody goes there anymore. It was too crowded, meaning it fell over, it couldn’t handle the load. It couldn’t scale and therefore it lost. So the demand goes up, and then it crashes down to nothing. So nobody goes there anymore. It’s too crowded. It is not always a fallacy. It’s sometimes a real thing. It means the thing couldn’t scale. Okay. So the point is that with NIMBY-YIMBY, and hear me out, because I’m going to say something that will sound shocking.

Tim Ferriss: Thank God. This was — the whole conversation was just so timid.

Balaji Srinivasan: Yeah.

Tim Ferriss: Please continue.

Balaji Srinivasan: Maybe the problem is actually that direct ownership of non-fungible property leads people to only have an interest in their local house, but not a shared interest in the city or community or town as a whole. If you can separate out the utility of living in the house from the value proposition of selling the house and actually, Xi of all people was like, “Houses should be for living in, not speculation.”

The more that people move into the digital realm, the more they start thinking about things in terms of investments and so on, just like you can split out, for example, a corporate stock, you can split out the voting shares versus the economics and you can sell the vote independently in some context. Can we split out the utility from the appreciation? One model is, you buy like a big plot of land, like a Burning Man style thing in the middle of nowhere and you set up a REIT on it and basically every square, I don’t know, maybe every square meter or something like that is like a share in the REIT because it’s all equal at the beginning, right?

Now, you might say the city center is somewhat more valuable than the outside, but when somebody goes and lives there, they do not own their home. Instead, they own shares in the REIT. So as the city expands, if they are asked to literally demolish their home and move to maybe a bigger home, but something differently, they have an interest in the city as a whole, they have an economic interest in the city as a whole, not just their individual home. Do you understand what I’m saying?

Tim Ferriss: I was thinking I do. I was thinking in addition to the REIT, I can’t remember the terminology used, but like the municipal bonds, the city tokens, I’m not sure the proper phrasing, but if your taxes or your SaaS fee that you paid to a given city or state went into a city or state-based token in sufficient quantity, and you’d have to figure out what the sufficient quantity is to properly incentivize someone who’s the resourced at X level or Y level or Z level that would also sort of align on.

Balaji Srinivasan: Yeah.

Tim Ferriss: Align interest.

Balaji Srinivasan: So it’s interesting. You could kind of go back to — have you heard of Georgism?

Tim Ferriss: I haven’t, it sounds like it has something to do with George, though.

Balaji Srinivasan: Henry George, this was this a concept, which is it, it is obscure. Now this one is pretty obscure, I guess, but I think it might come back to the future. So Georgism is the idea that the one thing that governments really do own is land.

That’s the arbitrary thing and that all revenue should come from that. It’s interesting because it’s kind of outside of left and right. Basically, the premise is everything else is a value added by humans. But land is this thing that was arbitrarily sort of stolen or controlled or whatever by a government.

So land is the ledger that states have access to. Right? More generally, land plus natural resource rights. Okay. The thing about this is, you can imagine, people talk about gold-backed currency. You can imagine land-backed city coins where the city is reorganized as a REIT.

Or this might have to be done from scratch, but by the way, because legacy cities might not be able to do this reform. It’s basically like land reform under communism in a sense collectivization except its capitalization. Ideally, you would be opt-in where you do it with a new — 

Tim Ferriss: Sounds tricky. This sounds tricky.

Balaji Srinivasan: So like doing with the legacy city, I don’t have a good answer for it. But let’s say you go and buy land in the middle of nowhere and there’s a ton of middle of nowhere, by the way, America is still a big country.

Russia’s big, Canada’s big, there’s actually lots of wide-open pieces of land. What you do is because it’s the internet, you do a drone overflight of it, you recruit people to crowdfund this territory and they have to buy in and hold the city coin to hold that’s like the right to build on this number of shares like square-meters or whatever the territory.

They have to commit to some holding period. They can’t just buy and then leave and speculate. So there’s a commitment to actually build into it. Then, you have something where at the beginning.

Tim Ferriss: That’s another thing, just a quick side note. That’s another thing I learned about since kind of wading into the waters of Web3 is wash trading and all that kind of — 

Balaji Srinivasan: Yeah. 

Tim Ferriss: Anyway, we don’t have to go down that rabbit hole, but yes. So to prevent people from flipping, there’s a holding period.

Balaji Srinivasan: Yeah. It’s essentially something where it’s again, unbundling and re-bundling where in a sense markets say, “Hey, screw loyalty, it’s an economic transaction.” These sort of rediscovered loyalty or patriotism or loyalty cards or frequent flyer miles, or holding periods, whatever you want to call it, loyalty is valuable, right?

Because loyalty produces collective goods that an individual can’t necessarily have on their own. Other people’s loyalty to something is valuable to you because it’ll be stable and be there when you come back, right?

Tim Ferriss: We should take a second just for people. So HODLing, H-O-D-L, I’ve read a number of different explanations for this one is, Hold On for Dear Life. Another one is hold, but it was a typo.

Balaji Srinivasan: Yeah. That’s what it is. Yeah. That’s what it was. Basically, it was a typo, there’s a guy who’s drunk and he posted, “I’m not smart enough to do the trade. I’m just HODLing.” I think, it’s — 

Tim Ferriss: Off it went.

Balaji Srinivasan: Have you heard the term bacronym?

Tim Ferriss: I have not heard the term bacronym.

Balaji Srinivasan: The bacronym is a reverse-engineered acronym. So hold on for dear life is like a reverse-engineered acronym. They often do this.

Tim Ferriss: I like that.

Balaji Srinivasan: They often, just for like a Bill’s coming out of DC, Like the PATRIOT Act or something, something like abbreviation or whatever.

Tim Ferriss: Yeah.

Balaji Srinivasan: Or the CARES Act. So basically, and by the way, on the topic of like loyalty and so on, this is actually a deep point because, if my friend and somebody who I agree with on some things disagree on other things, Noah Smith had this tweet about how, when the police were basically quasi-abolished in San Francisco, you have organized crime looting these stores.

Actually, the working-class employees at these stores are being victimized by essentially a mafia criminal class, because the police have left. It’s not like some Jean Valjean going and stealing a loaf of bread. It’s a guy who’s just like methodically loading stuff into the car and then going and fencing it on Amazon or eBay, a very different kind of thing. Right? It’s a genuine crime organized people.

Tim Ferriss: You can look back at the Loma Prieta, Loma Prieta earthquake. What happened during that period of time in San Francisco? Same story.

Balaji Srinivasan: I just heard after the Loma Prieta earthquake that happened.

Tim Ferriss: Well, after the Loma Prieta earthquake. I think people overestimated the amount of infrastructure, mobile infrastructure that is available in a given city. Right? So in San Francisco, I did disaster response training with the — it’s called NCERT, Northern California Emergency Response Team training with the fire department.

I believe the police department was also involved and they just kind of specced out how long you could expect to go without services if certain capacities went down like water or electric and during Loma Prieta, which was also called, I believe the World Series earthquake because it was caught on camera during the World Series.

People were, well, I shouldn’t say people. Criminals were greasing the Hills at Dolores Park and just carjacking car after car, which is sort of just a reminder of some of the possible harsh realities that await you if you have no available law enforcement or infrastructure.

Balaji Srinivasan: Yes. So let’s get to decentralized defense in a bit after the American anarchy, but basically — 

Tim Ferriss: I still don’t know how inflation fits into.

Balaji Srinivasan: Yeah. Okay. I’m coming. Okay. So the thing about this is like abolish the police, abolish the economy, or at least the physical economy. Okay? The reason is in the digital world and everything that you can map digital, you can protect it with cryptography, but the physical world still requires physical violence.

It may eventually move to robots like drone enforcement of law or something like that. That would actually mean law is code really is law, but at least for a while, it is going to be physical police and so on. The thing about that, but we were starting to see robocops like robodogs and stuff, walking around with the cops and so on in the V1 of this era, V0.1.

But abolish the police, abolish the economy means if you don’t have police, then people are just going to steal. If they’re just going to steal, there’s no property rights and there’s no stores and all the Walgreens leave and whatnot. But it’s actually also deeper than that, which is unless there’s some prestige or praise because the police, the military do risk their lives for relatively low pay.

Actually, I mean, I know policemen are sometimes well-paid nowadays, but in general and you can argue this point, of course, there’s lots of people who get mad about this. But in general, at least for service, the risk of death is actually non-trivial and so the price often can offset that. But what does is the patriotism and the feeling of serving your country and serving your collective and whatnot.

When that loyalty and patriotism is no longer there when that center doesn’t hold when people don’t believe in it, it’s not like the economics can just continue or at least they can’t continue very easily because the guys who will step up to essentially, collectively defend property and going back to the earlier thing, it’s when there’s uncertainty that war happens; it’s when there’s uncertainty that crime happens. 

If there are strong punishments, there will be no punishments, right? The Shang Yang concept, it is the end. It’s like the variable reward, the variable punishment that kind of like, “Should I make a break for it? Should I go for it?” If it’s certain, then people typically won’t do it. It’s like a very swift and certain deterrent.

If it’s worth the risk, it might be worth the risk. Well, what you don’t want is people to start calculating whether that kind of crime pays, right? Once they start calculating it, then it’s bad and you get a destabilization because more people do it and that overwhelms even more limited resources and you start moving to a new equilibrium of a mafia state, which is like Russia in the ’90s, which unfortunately I think is similar to what the American anarchy might be.

So just talking about this, coming back. So the DeFi matrix is all versus all, all assets versus all. The order book tells you how prices are determined. When I mentioned that future states will have subscription versus inflation, all currencies are going to compete against all other assets. And cities will also be able to issue their currencies alongside states.

So issuing a currency will become a new business model. It already has been. The currencies of companies and cities and countries and communities will trade alongside digital currencies in one gigantic thing. In this environment you are constraint — 

Tim Ferriss: Do currencies, almost like tokens, become — we have to be careful herewith, I mean, who knows how it’ll get resolved, but sort of unregulated securities, but there they’re sort of interchangeable in this hypothetical example. 

Balaji Srinivasan: Yeah. So on that topic, by the way, I do not believe tokens are securities any more than I believe YouTube is television. The thing is YouTube was not regulated like television, you don’t need a TV license. You don’t need a broadcast license like Skype or telephony to go and place a WhatsApp call. That’s not regulated like AT&T.

Email is not regulated like the post office because we didn’t take these super old things and apply them to the internet and the same way going citing hundred-year-old statutes from or stuff from like the 1930s in the 2020s or 2030s is simply in aposite. Larry Page had the saying, “Any law that’s more than 50 years old just has to be reexamined, probably can’t be right.”

I mean this is before the internet, right? This paraphrases Larry Page. So I think these laws will get reexamined. I think what the Soviets called the correlation of forces is against them. But so far as they’re in effect or being interpreted that way, of course, be compliant, et cetera, et cetera. With that said, not every country is America.

In effect, actually, I RTed something the other day where it’s actually more and more common now for crypto projects to ban Americans from buying into them, you may have seen some of these things, right? They literally IP ban Americans. Right? And the thing is [crosstalk 03:17:58].

Tim Ferriss: Like a lot of Swiss banks.

Balaji Srinivasan: Yeah, exactly.

Tim Ferriss: They’re just ID banning instead of IP banning.

Balaji Srinivasan: That’s right. This, you should expect more and more of, where the US throwing its weight around with sanctions and threats and so on, is suddenly starting to realize that, okay, it’s backlashing on them. Because the expectation is, “Oh, so you want the American market? Well, you need to comply with us.” And now, entrepreneurs realize, “I don’t need the US market to win, so no, thank you very much. I’m just going to block Americans.”

Tim Ferriss: Yeah.

Balaji Srinivasan: Okay? This already happened in New York with the BitLicense, where it basically meant that any crypto innovation — in a sense, it was good, because it just ensured that we move the future of finance out of Wall Street.

Tim Ferriss: Could you describe what BitLicense was, and then what happened?

Balaji Srinivasan: Yeah. It’s a set of onerous regulations on cryptocurrency companies, where — it was just basically passed so that somebody could have a career achievement. It was something where you just have to fill out enormous amounts of paperwork, and it was uncertain, the timeline and the cost. A startup can’t wait years for a possible license before it operates.

Tim Ferriss: Right.

Balaji Srinivasan: So what happened was, New York overestimated their leverage, and they’re like, “We’re New York. What are you going to do? We’re the center of the world. You can make it here, you can make it anywhere.” Actually, no, I can make it elsewhere, and New York is last on the list. And so, rather than putting them at the front, it was too onerous, it was too high a form to fill out, too high a price imposed, for that first customer. Because that’s what regulation is. It’s the price of your first customer. 

Tim Ferriss: Yeah.

Balaji Srinivasan: Or another way of putting it, your first customer is the state that grants you the license to operate and have access to their market. Now, as the relative share of that market declines, as the rest of the world becomes bigger, as the percent of GDP that New York controls or financial GP, whatever you want to call it, finance market that New York controls drops, suddenly, its leverage drops off a cliff. But its regulators haven’t caught up, and they still think that they have that leverage, when you’ve just IP banned all New York people and just have them last. And maybe you do that feature three years in. So it ensures New York is at the back of the line for innovation. That is now happening to America.

Tim Ferriss: So startups just move?

Balaji Srinivasan: Startups just move, but they also IP ban. And so this is a new thing, because the US is supposed to be at the front of things and whatnot. So — 

Tim Ferriss: That’s happening in Asia-Pacific, right? In the sense that entrepreneurs are sort of leaving the gravitational pull of China to have their physical base elsewhere. 

Balaji Srinivasan: Yes, absolutely. So both China and the US are driving away their best — actually, all three corners of that triangle: NYT, CCP, and BTC, their fundamental weaknesses are they’re driving away some of the best. NYT for example, is piling up the mid-widths, but it’s losing Marc Andreessen and Glenn Greenwald. CCP has certainly got a bunch of nationalist-like zombies. Some of them are actually pretty smart, but they’re losing the next Jack Ma and Meituan CEO and ByteDance CEO, and so on. They’ve decapitated all of their major tech companies, and they don’t make the pretenses about it.

When NYT did that to Uber, there’s this whole — because it’s decentralized, because it’s stochastic, because the press can’t just fire somebody, like Xi Jinping can just basically order and fire somebody, it had to be like a thousand articles, and this whole process to decapitate them, and replace Travis [Kalanick] with a guy who I like, but who was formerly on the NYT Editorial Board, who was acceptable to NYC. So the journalists effectively went and decapitated a tech company. They’re trying to do that to Facebook now; but because there’s still some pretensive rule of law, and some pretense of due process and free speech, it can’t just be like they do in China, where they just chop and gone. But it certainly is doing something where it’s alienating many of the best from the NYC corner, just as CCP is alienating many of the best from the CCP corner of the triangle.

And actually, even the BTC corner of the triangle, maximalism, which is like the extreme version, is alienating people like Vitalik, or Zooko, or the Solana founders, or anybody who wants to innovate on so-called L1, they’re kind of being pushed away from that corner.

So those three corners are kind of pushing what I think of as the decentralized center. It is the folks who no longer believe in NYT, the folks who are leaving CCP, or the folks who want to do L1 innovation besides BTC. There may be BTC and, they may respect BTC, and use it and hold it, but they’re not mononumists. That is to say, like there’s monotheism. Monotheism is only one God. There’s also monoseatism, only one government; the government can do everything. There’s this ad from 10 years ago, “Government is the [only] thing we all belong to.” Where people replaced G-O-D with G-O-V, as the strong man up there; rather than the guy with the beard, it becomes the US government, the US military. It’s really strong and it’s benevolent. It can kill your enemies, and it can redistribute the money, and take care of the poor.

And then, the third version of that is mononuism, which is not replacing G-O-D with G-O-V, but G-O-V with B-T-C, where it’s like, just like the there’s certain people who believe the government can do anything. It’s sort of a joke; Bitcoin fixes this. And I do believe by the way that Bitcoin fixes a lot of things, but it doesn’t fix everything. And when you project so much onto it, it actually becomes unrealistic.

Tim Ferriss: Yeah. Right.

Balaji Srinivasan: And again, to be clear, relative to most people, I’m probably down near that corner, but it’s a log scale. You know?

Tim Ferriss: Yeah. Yeah. Totally.

Balaji Srinivasan: So the people who are at 10X are a hundred X.

Tim Ferriss: Okay. Oh, yeah. No, what are we missing from the Matrix? Because I definitely want to ask you some additional questions.

Balaji Srinivasan: Okay. So I’ll just kind of come back up those six points. Right? So DeFi Matrix, all versus all, all currencies trade against all other currencies. The order book is each cell in the DeFi Matrix, how that price is determined. How does this relate to the concept of the future business models of governments? So subscription and inflation; basically you pay for the subscription to have like this effectively digital passport wallet, driver’s license, currency of the city, login, property rights, marriage certificate, birth certificate, all this stuff. The inflation comes from, the smart version of fiat, says, “Hey. Bitcoin is volatile today, but appreciating over time. fiat is flat today, but depreciating over time. And the reason it’s flat today is we’re sort of seizing some of the money, a little bit, to maintain its price stability against a bunch of goods.”

And this is where all the pieces link together. So essentially, if you were to design, not a fiat currency, but what I call not, not a fiat coin, but a flat coin. Where it’s not the dollar or the renminbi; it is a new digital asset, whose property is, that unlike the inflating dollar, it is flat against the number of chairs, or bottles of milk, or things like that. 

If flat coin would try to be as flat as possible, in a time of money-driven inflation, in order for that to work, you need some reserve of that flat coin. And you need to sort of — let’s say there’s 10 goods that you’re monitoring: the price of flat coin versus chairs, the price versus milk, the price versus tomatoes, whatever. Those are 10 order books, with buy and sell demand like we talked about.

In order to maintain it to be flat, you need to keep the price within that V, just not moving too much. And that means some amount of money, so you can place buy and sell orders to stabilize it when other people are selling and buying. Now, that will deplete that amount of money over time. And where do you replenish it from? It may come from — 

Tim Ferriss: Let me ask you a dumb question. When you say, “So you can place buy and sell orders to maintain the flatness of the flat coin.” Who is you in this case? Is it — 

Balaji Srinivasan: That would be the manager.

Tim Ferriss: Is it just code?

Balaji Srinivasan: Yeah. Or, it’s basically the manager of that flat coin. It is the city, or the government, or the entity.

Tim Ferriss: I see. I see what you’re saying.

Balaji Srinivasan: Right? Basically, it’s a new central bank.

Tim Ferriss: It’s acting like a — right. Exactly. It’s like the central bank.

Balaji Srinivasan: It’s like [Alan] Greenspan has this concept, the Plunge Protection Team. And the thing about it, and this is crucial, you might say, “Well, wait. Didn’t we just invent the new boss, same as the old boss? So how come you’re saying central bankers?” Well, that’s why, like I mentioned the helix, the spiral, unbundling, and rebundling, just like you go from CDs to MP3s to playlists, here you go from unconstrained fiat, where you have no alternatives, and it is just being printed and seizing everybody’s money, silently, to Bitcoin, which checks that. And now, to a checked fiat, where, if they print too much or inflate too much, and they’re doing too much more than is necessary to achieve short-term monetary stability, you exit to BTC. In the same way that with a company, if it issues too many shares, and dilutes everybody down, you’re like, “No, thank you very much.” And then you liquidate to cash.

So Bitcoin then, and I mentioned this before, Bitcoin at a hundred billion valuation market cap, Bitcoin at a hundred billion is an industry. Bitcoin at $1 trillion is a government. Bitcoin at $10 trillion, or maybe $100 trillion, somewhere in that range, is a world government, just not the one that anybody imagined. Essentially, there’s this vision of a world government that was like this sort of communist, socialist world government thing, that everybody would be brotherhood of man. And this sort of the libertarian thing of, “F that, F the UN, we want to decentralize.” And then, Bitcoin is actually like a libertarian-issued world government, which constrains every state, in the sense that they can’t spend more than they have, because their users will go to the DeFi Matrix, and cash out the currency for BTC. Which is like, BTC is like the zero, zero of the DeFi Matrix.

Most people don’t think about this, but, gold is — when people thought, “Okay, Bitcoin would achieve convergence with gold.” It has done that, by the way. It’s around a trillion. It’s like, the same order of magnitude as gold. And gold is like two, and Bitcoin is like one or two. It’s like 1.2. So Bitcoin is like 1.2 trill, and I think gold, last time I looked, it was like two trill. So it’s the same order of magnitude. Bitcoin has now hit gold. But here’s the thing. Gold today is a shadow of what gold was. Gold was the thing that kings wanted. It was the thing that constrained all states. It had its flaws because Spain could mine gold out of the New World, and basically cause this huge inflation shock of gold coming back. So it wasn’t like a constant in the same way.

But Bitcoin is digital gold, as the world economy has re-centered around it. That’s not a trillion dollar thing. That’s like a hundred trillion dollar thing. That’s like the thing that everybody cares about. It’s a very, very different matter. 

Tim Ferriss: Yeah.

Balaji Srinivasan: So that is how basically a future government — so our subscription and inflation, which is roughly similar to a SaaS company is SaaS subscription, and it’s equity.

Those are the new business models of governments: subscription and inflation. They’re non-coercive, because it’s not profitable to be coercive. Sending SWAT teams around costs money. And so instead, what you want to do is have somebody hit a key, and enter your society. Enforcing compliance is costly. 

Drones and so on may change this. And so, that is actually, I think, a trend for like 2040, late 2030s. I say drones. I don’t just mean aerial drones. I mean autonomous robotics of all kinds: walking robots, driving robots, all that stuff. As we mentioned earlier, that solves the principal-agent problem. You don’t need to have people fold into you. The robot will do exactly what you say. So an individual can exert much more control if they’ve got a robot fleet. Okay?

But coming back up, this is how I see us sort of rebundling eventually, after the coming American anarchy. And why do I say American anarchy? If you recall, we talked about the decentralization and the counter-decentralization. And why I thought the counter-decentralization would succeed in China, because they have highly competent management; they’re ruthlessly competent, but they’re selected for capital allocators, people who can get ahead of the curve, engineers, folks who basically set up the Great Firewall, and blocked social media, before anybody in the West realized how significant that stuff is going to be. They had seen the Arab Spring in China, so they knew what it could be. But they acted early.

And now today, what you have is the same writers who celebrated free speech at that time are now u-turning on it, and basically arguing only media corporations should be considered true. And they’re trying to jam the jack-in-the box, but it’s already kind of sprung out, because they’re very rarely looking. 

So in the West, I think the counter-decentralization will fail, because these guys are rearward looking, because it got too big, because also, they’re not selected for engineering competence. How many people in Congress can even name what a firewall is? How many of them could define what a private key is? They’re selected for being lawyers and actually also, actors. And why do I say actors? This is actually a bigger thing that I realized. Hollywood explains more of America than I had realized.

Essentially, everybody who’s an influencer is a celebrity; and politicians are reading lines given to them. And when there’s less and less and less connection with the real world, when it’s more and more just rhetoric to win elections, and celebrity influencing online, they basically become like actors reading scripts. And there’s no follow through. There’s no follow-up. Of course, this trend has been going on for a while. Obviously, Reagan was an actor, and there have been famous actors on the base of name recognition.

But now, just the concept of acting — Bruno Maçães has also written about this, how the current admin is kind of like a, and it has been for a while, [Donald] Trump as well. It’s not a partisan thing. It’s like a hologram. It’s like an order, that people are going through the motions and acting, but something very different bubbling elsewhere. It’s like CCP and BTC, and these things that are not part of the movie.

And so the thing is that with San Francisco in 2019, I actually had this post that I think holds up fairly well. And I said — this is about six months, seven months, right before the COVID-19. And I said, this is like June 19th, 2019, “San Francisco has 30,000 car break-ins a year. The streets are filthy, and a health hazard. It’s extraordinarily expensive, yet feces and prices, rise in tandem. This is a bubble which will burst when the right alternative finally appears, just like taxi medallions.” And I said, “San Francisco can be compared to a terrible product with great legacy distribution. Users hate it and want to leave, just like they want to leave Oracle or something like that. But network effects keep people in for a while, at least, as extractive brands continue to soar. When the true alternative finally arrives, exit will be rapid.” 

Tim Ferriss: When was that?

Balaji Srinivasan: That was June 18th, 2019.

Tim Ferriss: Good timing.

Balaji Srinivasan: Good timing, right? So I was like, this feels like a rubber band tension, which is getting too strong. And what was funny, by the way, was Paul Graham’s response, which I actually think also held up well, which I only actually saw much later. Paul said in response, “This seems unlikely. Historically, it’s been common for hubs of certain industries to draw people, despite high cost and low quality of life. When they decline, it’s always due to some external force, e.g., the whole country does, not simply an alternative appearing.” And there’s a guy who replied to both. He said, “It looks like both tweets held up” from October 2021. Right? It’s pretty — isn’t that good? I thought that was really cool.

Tim Ferriss: Yeah. That is good. That is good.

Balaji Srinivasan: And so, essentially — there’s a recent post that I actually like a lot. Have you heard of the concept of tensegrity?

Tim Ferriss: I have, actually. That’s a nice boost to my confidence. Yes.

Balaji Srinivasan: I had not heard of tensegrity.

Tim Ferriss: So I’m familiar with tensegrity, within the context of Buckminster Fuller and different design principles.

Balaji Srinivasan: Yeah. And so, this is something where, I had probably seen it, but I was not actually aware of the word until a few days ago. And tensegrity is, I think, an excellent visual metaphor. See, I had thought of things, a lot of things implicitly, in terms of that, in terms of rubber band tensions and force diagrams. And there’s a rubber band tension in SF between how horrible the city was, which was pushing people out, like feces and prices rising in tandem, just being attacked on the street, in this super expensive city, and no public transport, and it’s unsafe for women, and crime, all this stuff. Yet, on the other hand, you had all of these tech jobs, and all this stuff keeping people, and the valuations of these companies kept going up. So the money was available to compensate for this stuff: Uber this, an expensive apartment, or whatever.

So there’s just this crazy thing happening, where money is being pumped in from the cloud, and just incinerated by the city. And it’s $12 billion a year on this stuff. I think it’s 13.7. Now it’s like probably the worst managed — you can’t even call it a first-world city really, anymore. That doesn’t even apply. It’s a descending world city. Did I tell you about that? I don’t use the term developed world and developing world anymore. It’s just all ascending world and declining world. And that’s a declining world city. 

Tim Ferriss: Yeah. That makes sense to me. Let me say one thing, just real quick on tensegrity.

Balaji Srinivasan: Yes.

Tim Ferriss: So it’s a combination of tension and integrity. Here’s the definition: “the characteristic property of a stable, three-dimensional structure, consisting of members under tension, that are contiguous, and members under compression, that are not.” So you can find this on Wikipedia. There are also somatic or physiological examples of this. At least certainly some people would posit that fascia, and some of the internal structures of the body, one could make an argument, would also fall under this principle, or definition of tensegrity.

Balaji Srinivasan: Yes. And there’s this good post; there’s a blogger I hadn’t heard of before, but it’s Panalysis, So it’s a tensegrity model of international relations. Right? I thought this was really well done, because it was kind of a — this is kind of how I model things in my head. But it was great to see a visual metaphor for it, and relate to stuff I already know, like force diagrams and stuff. In this post, you can see, for example, the UK and Germany. They both align, because they have democratic ideals, and they have auto and meat trade, and they’re part of the NATO Alliance, but what pushes them apart? Well, language, and they have different regulations. 

So there’s both pull and push. And the thing is, that whenever you have that rubber band tension, but tensegrity is a better model, because it’s not just one force at a time, it’s many different forces. This thing can kind of withstand some push and pull, and whatnot. But if something just goes really strong or really weak, suddenly, the whole structure goes ca-chunk. Right? Because there’s things that are connecting to other things. And so, what happened with San Francisco was I could tell that these forces were just in extreme tension, but I felt that it would collapse. I didn’t realize there was going to be COVID, of course, six months before COVID. But I did know that it wasn’t going to persist.

And just what happened was, these forces were there, and then one of them just suddenly went to zero, because everybody went remote. Since you didn’t have to be in the city at all, all the culture changed at once; it was a crowd exit. It was a collective exit, a cultural convention change, which said, “If you’re serious, you’re not in-person.” Because before, if you were serious about a deal, you were in-person. But now, if you’re serious about your health, you are not in-person. And so, now there’s an excuse, in a sense; and not just an excuse, but you can turn down every plane flight, you can turn down every in-person conference. They must offer a remote option. It’s actually really important now. And so, the thing is, that’s why COVID-19 is a permanent shock. Whenever you take a bunch of people who were at the zero point on an axis, and then you spread them out where some of them were 100 percent remote, even in the removal of that force, like post-vaccination, it doesn’t all come back. It’s like hysteresis.

Tim Ferriss: Oh, no, no, no. Yeah. No. Absolutely. Yeah. There’s a lot of durability. And we could just look at examples of how many Zoom invites I get, even though we could just do telephone, and walk around, even though people are now re-engaging with one another. And also, there’s something to be said for the proof of concept that we witnessed for mobility and relocations during COVID. So people proved to themselves, and their peer groups proved to them, that it was possible to not just trial other locations while working, but insist on being relocated, or else you are going to take a different job. And those kind of macro-trends feed on each other. And Austin is a great example. Right? It’s like when you have zero friends in Austin, moving to Austin is a harder decision than if you have five. And once you have 50 friends in Austin, it becomes quite easy. And I think we see that along a number of different directions.

Balaji Srinivasan: That’s right. And now the new thing is, those 50 friends can all move together. So I wrote an article at, which actually cites articles from, I think, from 2013 that I think predict this, in some detail. I gave this talk, Silicon Valley’s Ultimate Exit, and a follow-up essay called “Software is Reorganizing the World,” that talk about how software is enabling these mass migrations. And that’s fundamentally the resolution to our current, disaligned world.

What you really want is not a 51 percent democracy, you want a 100 percent democracy. That is, you don’t want a situation where it’s the absolute minimum necessary consent, where it’s a Fosbury Flop like we talked about before. You’re just barely clearing the bar, and you have 51 percent of people vote, and 49 percent of people are unhappy. Those 49 percent will comply in the most grudging way possible. And your majority is very contingent, and could drop with one bad headline or event.

But what happens is, low levels of consent, the 51 percent may feel like they want to impose their will on the 49 percent via coercion. And that’s actually bad, because, it’s easy to coerce when it’s like 0.01 percent of the society, when it’s like some random murderer. You’re going to get 99.99 percent of society agreeing that coerce of force is legitimate against them. When it’s 51 versus 49 percent, not only is coercion much, much, much harder to do by orders of magnitude, because the ratio of 99.99 to 0.01 is much greater than the ratio of 51 to 49. Okay? Not only is coercion much, much, much harder, it is also not obvious that it’s going to be something that’ll even maintain your majority, because even the application of coercion reduces your majority.

So instead, what you want is to resolve this, right? You’re not going to resolve that by just voting more. It’s going to be resolved by some combination of either coercion or migration. And when I say, “Why coercion?” Well, one side coerces the other into just completely agreeing with them. They basically win a civil war. That’s what happened with the Russian Reds versus the Russian Whites after the Russian Civil War. But there was, in the US and the Cold Civil War, there was an article on this in 2018 that actually was RTed by both Jack Dorsey and Evan Williams. And it was — here, hold on. I’m going to see, get the exact — there’s an article from early 2018, so almost four years ago now, three. Yeah. “The Great Lesson of California in America’s New Civil War: Why There’s No Bipartisan Way Forward at This Juncture in Our History. One Side Must Win.” 

And the people writing this, Ruy Teixeira is a coauthor of The Emerging Democratic Majority. And essentially they say, “Remember the great lesson of California, the harbinger of America’s political future, and realize today, such bipartisan cooperation simply can’t get done.” And essentially, what they are basically saying is, California’s is one-party, Democrat state; and that’s what you want for the country. And so then, the national continuum of more progressive to more moderate solutions then got worked out within the context of the only remaining functioning party.

And so, essentially, they’re just saying, “Just win.” And now, of course, is a question mark, as to whether you actually “want” democracy, if you want your party to win every single election. If you don’t even want the other party to exist, and consider them illegitimate, then that’s actually not really in a democracy anymore. Or, if it is, it is something that’s actually more similar. If it’s a one-party rule it’s more similar to a communist party, where it’s just a smoke-filled room, where the primary is not really the general election. General election is just a formality, and the primary is the real election.

So you could argue it’s still democracy if the primary is an open primary. But the thing about this is, this kind of relates to — now. Evan, Jack, basically RTed this; didn’t endorse it per se, as you said, interesting take. But, it definitely got a fair amount of attention.

And this is what I mean about one path forward when you have massive disagreement, like that, is just one party just courses the other. Okay? And course includes a lot of stuff. It could mean physical force, but it can also mean what we’ve seen, which is, deplatforming on banking, et cetera. In fact, one way of thinking about this sort of cold civil war is, with 1861-1865, if you look at the map prior to 1861, the blue and the gray were geographically separated. And of course, they were ideologically separated. But the victory condition was obvious; the North invades the South’s territory. Ideological and geographical victory coincide. 

But today, if you look at a map of the US, blue and red are — they’re at the county level; they’re all mixed between themselves. And so, there’s nothing to invade, there’s nothing in physical space that you can invade. They’re all mixed. Right? But, there is an article from 2017 that gives a visual. So from, it’s title is “Study: Breitbart-Led Right-Wing Media Ecosystem Altered Broader Media Agenda.” But the main thing about this is the graphs that are mid-screen on this. So I have no opinion on the article itself, but the graphs that are in the middle show that — here, I just pasted the link for you, so you can see them. The graphs in the middle show that even if the blue and the red are on top of each other in physical space, they’re completely disjoint in digital space.

Tim Ferriss: Yeah. That’s interesting.

Balaji Srinivasan: Okay. Do you see that?

Tim Ferriss: I do. Yep. Yep.

Balaji Srinivasan: So that is where the war is being waged. And here’s the thing. If victory in the physical realm is invading somebody’s territory, victory in the digital realm is invading their mind. Victory here looks like blue blotting out red, or red blotting out blue.

Tim Ferriss: Mm-hmm (affirmative).

Balaji Srinivasan: And now, we can actually look back on the last several years with a completely new lens, which is not the marketplace of ideas, but the battlefield of ideas. And now we understand deplatforming, unbanking, canceling, et cetera, not as disputes within a free society, but as digital warfare, where you’re trying to take out their tanks, their battleships, et cetera, their big guns on the other side, by having them wink out of the digital space, so they can’t recruit more soldiers, energize them, et cetera.

Now, this is war that is fought with words and with keystrokes and with economics; it’s not guns and shells, though, it did bleed over to the real world during the riots in the Capitol, and so on. The physicality of this is secondary, but it’s not non-existent.

So this, I think, is actually not the coming conflict, though. This conflict is Democrat/Republican. I think the coming conflict rotates it by X degrees, or in a different plane. The coming conflict is going to be centralization versus decentralization, where it’s going to be basically like fiat versus Bitcoin. I think that’s quite likely to come. And so, a lot of people switch sides. There’s going to be people who are like, let’s say super patriot Republicans, who will side with the government, my country, right or wrong, like the guys who were in the Russian military, who stayed in the Soviet military. It doesn’t kind of matter.

And then there’s folks who will switch to the — or take the decentralist side. And that’s like, actually many of the tech CEOs, who, like Jack Dorsey’s a Bitcoin maximalist. Zuck is now doing Ethereum with Facebook, and so on. Many of those are going to go on the crypto side. Right? So I think Bitcoin itself will be the main flash in the conflict, and crypto is sort of — Bitcoin is different from crypto, because maximalists want it to be different. That is to say, whether you think of them — It’s kind of like, “Is Taiwan part of China, or is it its own country?” If you’re the Chinese government, Taiwan is part of China. And if not, it’s its own country.

Now in reverse, if you’re a maximalist, Bitcoin is its own thing, and all of crypto is just scams, et cetera, et cetera. Whereas, if you are in crypto or in Web3, actually, Bitcoin is great, but it does one thing, which is digital gold. And then we need that. We also need private cash, and we need programmable currency, we need smart contracts. We know all this stuff. Now, for what it’s worth. I had a couple of tweets on this, but basically, Satoshi wasn’t a troll. He didn’t start fights on the internet. He spoke to Zooko, who was the founder of Zcash. He endorsed the idea of Bitcoin. In general, I think he was about as attitudinally, different from some of his self-styled disciples as a mythical Jesus was from the Spanish inquisitors. So I definitely wouldn’t call myself a maximalist. However, and moreover, I would also say, if you look at Satoshi’s writings, you know Hal Finney, you heard of Hal Finney who’s basically like the — 

Tim Ferriss: I have heard that name, but I can’t place it.

Balaji Srinivasan: He’s the first named person to engage with the Bitcoin, the first person to engage with Bitcoin publicly, other than Satoshi, replied on the original email. Some people think it was Satoshi and used his name to boost it. Certainly he fits, but he passed away from a general disease. However, he froze his body. So maybe we can revive him at some point, but here’s the thing. Hal Finney and Satoshi had a discussion and Finney said, “Satoshi, are you endorsing the idea that additional blockchains each create their own flavor of coins, which would trade with Bitcoin on exchanges?” And Satoshi said, “Right, domain coins could represent the right to own a domain for a year.” So Satoshi Nakamoto did entertain the concept of issuing other digital currencies. Domain coins. The reason is that might seem like totally obvious to you or me, but whereas I, or you, might think of Satoshi as like a Newton and the Bitcoin white paper is like Principia Mathematica, like a feat of science or a feat of engineering. There’s other, a lot of maximalists think of it more as like a religious text.

And to be fair, you can argue, it’s got aspects of it, because it’s not simply an engineering innovation. It has implications for how one lives. And that basically debt is bad and inflation is bad and equity is good and capitalism is good. There’s a lot of principles that are bound up in it. Freedom, pseudonymity, lots of different principles, the network society, all those things are bound up in it, even though a genesis block has this concept of, the bank bailouts being bad. And so it does have something which is more than just F = ma. And so, I understand where that comes from. And basically in many ways, I think this will be seen as something like the Bible or the Quran or the Communist Manifesto, or the American Declaration, we’re still close to this event, but the Bitcoin white paper, the invention of Bitcoin is going to be something that just like there’s Sunni and Shiites, Protestants and Catholics, there’s all these different schools of thought and there’s maximalists and there’s Ethereum people.

And there’s, CBDCs are this weird kind of thing. The Counter-Reformation, Catholicism adopted some aspects of it. Protestantism was criticizing them for it. CBDCs are the centralized state adopting some aspects of digital currency. All of these things come out of this.

Tim Ferriss: Hold on. May I interrupt?

Balaji Srinivasan: Here’s what it is. Here’s what it is. I’ll just say this.

Tim Ferriss: 60 seconds. I’m going to give you 60 seconds.

Balaji Srinivasan: Here’s what I was saying. I was saying that the past iteration of this cold civil war was Democrat, Republican, think of that as like World War I. Now, there’s like a rotation of it, which is like World War II. And that may not be the best analogy, because there’s most of the same groups who fought the same time. We might come up with a better one, which is like I don’t know, World War I and the Cold War or World War II and the Cold War, where the US and the USSR, were on the same side, then on different sides. But the point is that is Democrat, Republican, the next one is decentralist versus centralist and Bitcoin maximalists on one side and woke capital on the other. And then there’s folks who are in the middle and crypto is sort of in the middle, Web3’s in the middle. But I think it’s more on the decentralized side. And then you’ll have folks who are, I don’t know, Republican types who are also more in the middle, but they’re going to be more on the state side.

So that’s I think what the coming axises, which are the rotation of the current axis, and that leads to, I think, significant civil conflict, because they’re kind of irreconcilable, but I do think the decentralist version will win. But now let me give the mic to you and I’ll come back and explain why I think that.

Tim Ferriss: We may end up hitting pause on that and coming back to it in another conversation. I want to say a few things, then I’m going to segue to some rapid fire questions. We’ll see how successful I am, but the couple things I’ll say. Number one, is that for people who are interested in how humans make meaning and create myth, spread myth, you could substitute ideology for myth, if it makes you sound smarter, that’s fine, I would suggest they read or reread Dune. So I’m rereading Dune, I’ve read it before by Frank Herbert. And it is incredibly sophisticated and nuanced with respect to — 

Balaji Srinivasan: As an adult.

Tim Ferriss: As an adult, oh absolutely.

Balaji Srinivasan: Yep.

Tim Ferriss: It’s basically meme warfare and the use of kind of the use of not just myth, but the human proclivity, almost necessity, for myth, whether that myth is something called my country or whether it is a religious doctrine. And this we can get into separately. We talked about it a bit in the first episode, but I would suggest people reread Dune, which I’m doing right now, because I’m about to see the movie and I want to make sure my memory is fresh, but the whole idea of the lineage of the Bene Gesserit is really worth looking at very, very, very closely. Also, really talks about in a sense, decentralized guerilla warfare on multiple fronts. It’s a fucking fantastic book. So everybody should read that. And a bit of trivia, because I imagine a lot of people listening will be, if not crypto native, crypto curious. So the word in the name Nakamoto is in Japanese — my Japanese is a lot better than my Mandarin — but is center origin, would be one way to translate that, Nakamoto.

And the character for Naka is the same character, different reading, as the zhòng of zhòngwa of China, Middle Kingdom. Although I think the better way to translate that is Center Kingdom. And I just want to drop a little bit of trivia for any language nerds out there, but Nakamoto is a really, it’s a great last name for Satoshi Nakamoto. All right. My questions. First one. Very important. Have you always said RTed instead of retweeted?

Balaji Srinivasan: I guess. I don’t know. I mean, I think I might use them interchangeably. Is this an accent thing?

Tim Ferriss: No, no, I just like it. I’ve never heard that verbally before, so I like that. All right. So you said “I’m not a Bitcoin maximalist,” but I want to ask you a question. I’ll preface it with saying people listening, this is not investment advice, informational purposes only. It’s a way for me to better understand and share your thinking, Balaji. If you were starting from scratch, had no holdings in crypto, but could only bet in one place, BTC versus ETH versus other, you only get to pick one, which would you choose and why?

Balaji Srinivasan: BTC.

Tim Ferriss: BTC, why?

Balaji Srinivasan: And the reason is: everything else is a technology company, whereas Bitcoin has become almost like an element, like gold. That’s to say the fact that Bitcoin not only is the first, but it has the disappeared founder. Because it has a disappeared founder, it fits a certain kind of mentality where, because there’s no leader, you don’t feel like you’re submitting to somebody. You don’t feel like you’re submitting to somebody by buying gold. Satoshi is who you make them out to be. I mean, one thing, this is not how I think about money typically, but if you look on any dollar bill, there’s weird incantations, there’s a pyramid with eyes on it, and so on. Most forms of bills they have the most famous people in the country on them. The branding exercise is actually pretty important on this stuff. And the thing is that you can separate out the economic, the ideological, and the technological. As I said, it’s a log scale. Most people would consider me from the outset, very similar to a Bitcoin maximalist. But I’ll give you two thoughts on that.

So first is on the economics, yes, if I can only buy one thing, you just buy Bitcoin, because nothing competes with it. It is possible by the way now, to be clear, do I think it’s a 100 percent chance of success? No. I think it’s possible that there is some remaining security issue associated with the code, but what’s interesting is Square is now doing something with decentralizing mining and the fact that mining’s being driven out of China is actually good, because I don’t think any other state has the state capacity to do what China did and the ruthlessness. So it’s unlikely that there’s going to be a technical attack on Bitcoin. The only thing that’s going to happen going forward is potentially a regulatory or a software attack. But outside of that, it’s community is so strong that can probably repair on that. Regulatory attacks are also less likely to kill it, because the US is losing control over the world. If Germany defies on Nord Stream 2 and if sanctions don’t affect Germany anymore, doesn’t affect India, El Salvador can go Bitcoin.

Some states will have Bitcoin be legal as well as within the US. So the federal government doesn’t have the veto. So finally, really the technical attack is there some possibility of some zero day that can inflate a lot of coins and be hard to patch? That’s possible. It is still something where there’s one client that is very popular, one Bitcoin client, it’s not a multi-client thing. So that’s the main weakness right now. Is it possible there’s some supply chain attack where some library’s included and it hasn’t been audited sufficiently? Yes. Also, quantum cryptography, that’s kind of an unknown, but is it possible that say, quantum decryption becomes something that is out there before quantum encryption, that quantum decryption is highly centralized and some governments can do it or some centralized actor can do it? But quantum encryption is not something everybody has access to. Those are all possibilities, but the risk factors relatively low. So that’s on the economics. On the ideological kind of the way I think about it is I actually, if you go item by item, probably I agree with maximalist, on so many things.

I understand where they’re coming from. Exit the Fed, check, stop the bailouts, check, return to sound money, check, build a voluntarist society, check, end the welfare warfare state, check, Bitcoin is a global reserve currency, check, Bitcoin has an apocryphal technological breakthrough, check, but Bitcoin is only digital asset ever and everything else is evil, that’s where they lose me, and that’s X. And that’s why buy Bitcoin sell maximalism is the economic/ideological thing, because I’m not a monotheist, I’m like you might say from my cultural background or something like that India’s polytheistic, it’s plastic, it’s pluralist. I believe in the value of immutability, but I also believe in the value of programmability, and I think it’s good that those are two separate things. If it’s highly immutable like Bitcoin or gold, it’s not going to be highly mutable and programmable, those are two valuable things, but they’re two almost necessarily separate things.

And so the thing about it is that’s that’s on the ideology. Again though, the reason I think the maximalists are going to have amazing traction or huge traction over the coming years, I think Bitcoin maximalist in a sense is the most important political movement in the world that people don’t understand about today, because essentially their argument is it’s all a scam that is to say the Fed is a scam, but actually all the printed money means many of the corporations are a scam. The censorship is a scam. Lots of things that the state is saying are false. Everybody who’s rich, they’re all cantillonaires, because have you heard that term, the Cantillon Effect? Do you know what that is?

Tim Ferriss: I do not.

Balaji Srinivasan: The Cantillon Effect is like some people get the printed money first. So it’s not uniform in terms of its application or of society. There’s some truth to that. That’s bidding up assets, that is causing something where it’s like dunking on Mars. Actually, I think Mars has lower gravity than the US. It’s like Space Jam.

Tim Ferriss: Dunking on the Moon.

Balaji Srinivasan: Yeah. Dunking on the Moon. That’s right. Actually, Mars has 38 percent of gravity. So yeah, basically dunking in a lower gravity environment, you might still need to be athletic but less so, that’s sort of what it’s like doing tech or VC in this highly inflationary environment, at least for now, it’s possible that all gains are just wiped out, because things go totally vertical, that’s what happened in Weimar. Everybody thought they were — have you read When Money Dies?

Tim Ferriss: I have not.

Balaji Srinivasan: Okay. That’s a good book. Actually, Joe Colangelo had a good clip from, I’ll just kind of read that clip. This is by Adam Ferguson, he had a great quote. “So currently reading When Money Dies: The History of Hyper-inflation, Wiemar, Germany. One of the wildest aspects I never knew was that early on people all thought they were getting rich. They were selling hard assets for what they thought were insanely high prices in marks.” And so essentially because the printed money flowed to some first, rather than others, there was this Cantillon effect. Here’s some quotes. “My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me, it already amounts to millions. Speculation on the stock change is spread to all ranks of the population and shares rise like air balloons, limitless heights. The value of my industrial investments is rising to extent, which seems to be incomprehensible and always makes me uneasy.”

And basically, this thing is something of course, then the hyperinflation comes, because everybody’s rich, they all spend, and all the prices suddenly rise, because more money is chasing fewer goods. In the US, it’s nonlinear actually. One aspect of it that I hadn’t fully understood is the printed money is in some ways contributing to the great resignation. So for whatever reason you’re having strikes, you’re having people who are not working as truck drivers or working as dock workers anymore, maybe more power to them. They’ve gotten this printed money. But what that does is actually it non-linearly depresses supply, not just of labor but of goods, because the ports aren’t being unpacked. That’s why the administration’s talking about bringing the National Guard to go and man the docs.

But that concept is it’s not just more money chasing fewer goods or it’s not more money chasing the same goods. It’s more money chasing fewer goods, fewer supply of both goods and services, less labor and less stuff, because people are not being paid to unload things or build things. So I think there’s a non-linear inflation effect that might be coming.

Tim Ferriss: Oh, yeah. Well you can look at lumber and a number of other things that I think are byproducts of multiple factors.

Balaji Srinivasan: It’s a byproduct of multiple factors. Lumber in particular, I think it like went up and then it crashed, but overall, inflation is definitely here. It’s now no longer being denied as some conspiracy theory. They’re no longer seeing it’s transitory. They’re admitting it’s bad. “Oh, I’m confused as to why it happened.” Eventually they’re going to say, “It’s good, because it’s wiping out all of the fortunes. It’s like a jubilee. All your debts are gone, why are you mad about it?” And then they might move to seizures, unfortunately. So I know that, I know I’m saying this in a chipper tone, but let me give some maybe some good aspect to this. One of my macro-theses as we’ve kind of talked about before is that peak centralization was 1950. One telephone company, AT&T, and two superpowers, the US and USSR, and three TV stations, ABC, CBS and NBC. And so we’re kind of running history in reverse, at least in the West.

And I have this essay on this at He gave this very flattering title to it, which I would not have chosen. But if you Google “S-O-T-O-N-Y-E Balaji Srinivasan” you’ll see it.

Tim Ferriss: We’ll put it in the show notes as well.

Balaji Srinivasan: Put it in the show notes. This goes into more detail. But basically, if you go backwards from 1950 to 1890, the Western frontier closes, but you go forward from 1950 to 1991, the internet frontier reopens, and you can actually map these things. Backwards in time, you get the Spanish Flu, forwards, you get COVID-19. Backwards, you get the robber barons, forwards, the tech billionaires. Backwards, you get the private banking era, forwards, you get the crypto era. Backwards, you get the Cross of Gold speech by William Jennings Bryan, today, forwards, you get digital gold. Backwards, you have right and left fighting in the streets, and today, you have right and left, fighting in the streets. Backwards, you get Weimar, Germany, today, we have Weimar, America, where it’s both the inflation and the cultural stuff that was very common.

If you see Babylon Berlin, a lot of similarities to modern America. There’s this book called Voluptuous Panic [by Mel Gordon], that kind of documents what Weimar, Germany was like similar to America today, culturally as well, it’s not just the — When Money Dies gives the economic aspect, Voluptuous Panic where Babylon Berlin will give the cultural aspects similar. You also have the conflict between the state and capitalism where the centralized states, FDR was doing the Brain Trust and he was doing, he was packing the courts, National Industrial Recovery Act, he was doing the what am I going to call it? The entire alphabet soup was set up at that time. And of course, the gold seizure. And you also have something, if you go even further back in time, sort of antebellum polarization.

Now the thing is the attentive listener will say, “Well, Balaji, you just mixed things from like the 1920s with the 1800s and so on.” And I say, yes, but that’s because it’s sort of like A, B, C, D, but it’s not exactly DCBA, it’s not exactly happening in exactly the same reverse order. I think the common symptom is the centralized fist clenching in 1950 is now losing control. And so, similar events are recurring in a different order, because centralized control is dropping off. For example, that centralized control allowed for public health and also censorship. That’s why the Spanish flu, I’m not sure if it was solved, but you just didn’t hear about it, because censorship was actually effective. Now as part of the arc up of decentralized state. And now we have the arc down of decentralized state. There’s neither effective censorship nor effective public health.

And so, you have this total catastrophe or at least perceived catastrophe around COVID-19. And the way I think about it is it wasn’t the Spanish flu, fortunately it wasn’t 100 million dead, but it’s going to be on the other 10 million dead. So it’s pretty severe or lucky that it wasn’t Spanish flu. It might who knows, could mutate. And the thing about this is when you have this worldview, at least in the West and as I’ll come back to China, a lot of these things are happening, but we’re seeing the alternative outcome. So for example, you’re getting the Cross of Gold speech and he’s like, “We will not be tortured [inaudible], impaled, crucified I think, on a cross of gold,” and now we’re getting digital gold, people want gold back.

So the populist movement is not against gold, it’s for it. And so you’re seeing a lot of these things happening in reverse, not the frontier closing, but the frontier opening. And one of them that I think is pretty important is the stuff that FDR had the Brain Trust. He had the brains on his side and so Executive Order 6102, the seizure, they were able to implement it. But I think if they try it this time, it’s not going to work, because history’s running in reverse and the IQ is not part of the state and now — 

Tim Ferriss: May I interrupt?

Balaji Srinivasan: Yeah, of course.

Tim Ferriss: Okay. Maybe could we pause that and leave the audience wanting more on this particular thread? And may I ask a number of new questions?

Balaji Srinivasan: Sure. But let me just say one last thing and then let’s go to that. Now I’m going to say something that sounds sci-fi. Basically, the modern US, the whole thing is that there were the entire mythology is beating the Nazis and beating the Confederates. So beating the ethnonationalists abroad and the secessionists what we have here at home. And what may happen over the next 10 to 15 years is the regime may lose to the ethnonationalists abroad, namely CCP. And they may lose to the maximalists at home and the secessionists at home and the breakup may happen. And the difference is, of course, that the Chinese communists are non-white and they’re communists, they’re not like White Nazis, so they’re different ethnonationalists, so it’s different enough. And the secessionists or whatever you want to call them this time, are absolutely not for slavery. They’re for freedom.

In fact, you could argue they’re anti-slavery activists, because they don’t want to submit. So I think that it’s quite possible that we see the reverse outcome of a lot of things. And then at that point, what we want to do is if the CCP wins and if we have American anarchy, we need to figure out some way to rebuild civilization, because in that world, the thing is anything good can massively over-correct. You have to have some limiting principle, because otherwise too much is not enough. This is why I would not call myself a maximalist, I’d call myself an optimalist. That is to say, I want to figure out what the optimum is across many variables and set an explicit objective function rather than simply maximize something where too much is never enough. Maximalism just leads — you can call it fundamentalism, you can call it, it just leads to a certain variety there. And again, I’m not trying to beat anybody up on this. I’m just trying to say that. Yeah, okay, retire the current system. Whatever you do or I do, it seems destined for that retirement.

We have to think about what the next system looks like after that. How do we ensure that we don’t have crypto-anarchy, but crypto-civilization? Yes. I think that the Chinese are going to rise, but what does an unchecked China look like? The US unchecked after 1991 behaved quite badly in some ways, in all the invasions, the unchecked China might be quite mean. And so how do we defend civil liberties? How do we defend privacy? How do we defend civilization in this environment where we have sort of the reverse outcome? I know that’s provocative, call that a sci-fi scenario. 

Tim Ferriss: You are once again outlasting me and the battery in my headset. And I know I can’t change my audio source with the software we’re using, so I may lose audio altogether. So I want to ask a couple of remaining questions and I’m going to just throw a number of them out there at once, because I think this will make the most sense. And then, you can pick and choose which you want to go after. Here are some of them.

If you had to be bullish on one US-based big tech company, which would you choose? And then, if you’re still doing angel investing or if you were doing angel investing, which categories or areas would you find most interesting. And then, any predictions for the next 12 months? Or are there any things you’re preparing for in the next 12 months with contingency plans of different types? Either one.

Balaji Srinivasan: Yes. So all right. So basically, the one thing I want to say is before we get into that, just on the topic of secession for a second, just to make sure I clarify what my position is. I believe in volunteerism. And so, I think rather than fighting over land, I have zero interest in doing that personally. Instead, I think you should try to crowdfund territory in no man’s land. So nobody else has a claim on it and you’ve got it fair and square. And it’s in the middle of nowhere. Like basically, the equivalent of Burning Man, because fighting is stupid and there’s plenty of territory out there and I’d rather build it from scratch without a fight. So I would not call myself a secessionist. I do think that if you look at some of the conversation around national divorce that is happening on both sides, that is happening in, NY Mag published something on this a few years ago, which is like American breakup, I think, “Maybe It’s Time for America to Split Up.” Sarah Silverman has talked about this, and folks on the right have talked about so-called national divorce.

So it’s definitely in the air. And one last thing I’ll say is that all of this stuff, the language is super-important, because secession of course, sounds bad, but independence sounds good. It gets back to that concept of Russell Conjugation. The American Revolution was secession of the colonies from the British, but that was independence from the American perspective. So this also gets that earlier concept of, are winners writing history? So the adjectives I chose were as neutral as possible. I want to make clear that I don’t support any kind of physical conflict, peace-loving, and I’d want to basically buy territory outside of this, however, what I want or what you want, there’s some forces that might be greater than us. So in this sci-fi scenario, this is how I sort of see the Hari Seldon-like, psychohistory happening. So that’s my kind of — 

Tim Ferriss: Clarification accepted, thank you.

Balaji Srinivasan: And you know what psychohistory is? It’s the sort of prediction of the future, and so on. This is just scenario analysis. So why is that scenario analysis important? Well, I assigned some probability to that scenario. There’s also other possible scenarios. Another possible scenario is it’s just a lot of disagreement and just a lot of migration and yelling online for many, many years. And then, it’s something like what happened with the Soviet Union, where it does break up, but it breaks up in almost, basically peaceful/bloodless way. And that’s like a good outcome. And I think that’s likely. That might be the most likely it’s much better than civil conflict. And there’s things like with instate unions, for example, where maybe that’s what happens. But we’ll see, obviously hope for the best, plan for the worst.

So now, to your point on this actually relates to big tech cos and bullish and, and bearish and whatnot, right? So the US big tech companies that I’m the most bullish on, though I’m not, I don’t think I actually, I shouldn’t say I don’t, I don’t know if I actually hold any shares in these companies. I might in some entity of an entity. But it’s certainly not to my knowledge, a large holding. I’m actually most bullish on Twitter/Square and Facebook. And the reason is, Twitter/Square, the reason I put them is they’re going to become, probably merged into something like with Square’s Bitcoin support and the fact that Jack is CEO of both, of course, they’re two separate entities, but he can figure it out and probably offer Bitcoin payments on Twitter for many things, and basically build like a Bitcoin Ethereum into Twitter.

What do I mean by that? A Bitcoin Ethereum, meaning it’s like a lot of the functionality or copied functionality of Ethereum, like Rootstock sort of, I think cloned the Ethereum EVM. So it might have a lot of the functionality of Ethereum or Solana or some of these other chains, but that is sort of Bitcoin-backed. And there’s different ways of doing that. There could be basically, essentially a centralized version that says like a minimal decentralized component, which is one way of doing it. And you just like load Bitcoin onto it and the rest of it’s centralized. There’s ways of doing it with zero knowledge. There’s a number of different engineering trade-offs that could be made. But essentially I think that’s one direction, Twitter/Square. And then Facebook, because Zuck is also a founder, and he’s just like his, I do respect him. I really do. And the reason I do, is the number of hits that he’s taken over the years to start as a 21-year-old kid in his dorm to build what he’s built. And from that to this three-billion person network.

I mean a lesser founder would’ve backed down after the mistake on what’s it called? Libra. But Libra and then Diem, and now he’s doing Novi, which actually I think has a much better chance of working, because it’s natively crypto. I mean, look, it’s hard. It’s easy to say, I did actually say this at the time, that what they should have done is start with Bitcoin and Ethereum payments in WhatsApp, and do remittance corridors rather than doing this. I think there might be some public record of it, but I definitely talked about it. Rather than doing a new coin start with the existing ones, build up, experience on that, rather than doing Libra. And that wasn’t their first job, but you know what? That looks like what they’re doing now in Novi and very, very few people would’ve had the conviction to persist with something in the face of that level of resistance.

I mean, we were talking congressional hearings, most people would’ve quailed okay. Same with all the negative press. Same with, I mean like the Oculus bet that’s two billion for something where they had to go through multiple iterations to get the product to work. But now, they’re going to maybe rebrand the company around the metaverse or Instagram. I made this comment on, basically Instagram was not an easy call. This somewhere it’s being retrospectively litigated, because it’s worth a lot. But just to bullet point this, Instagram raised a $500 million valuation the day before Zuck offered a billion for the company. One billion was like 25 percent of their cash in hand. They had about four billion at the time, so it was actually a lot of money. It was weeks before the Facebook IPO, the board wasn’t consulted, they were just informed and Instagram had no revenue.

Tim Ferriss: Yeah. That’s not an easy call.

Balaji Srinivasan: That’s not an easy call. And in fact, Jon Stewart mocked it at the time. He’s like, “A billion dollars for Instagram. The only thing that’s worth that is something that instantly gets me a gram of cocaine.” Everybody mocked it, made fun of it. They said, “Oh, this is such a bubble purchase. They’re so stupid.” It endangered the IPO potentially. I mean, there were so many aspects of that where that was a highly, highly non-consensus call that has now been turned into, “Oh, it was an obvious buy.” And the thing about this, the problem is that people who are wrong will not admit they are wrong. The only way to show that you were not 2X righter than somebody, but 10,000X righter than somebody else is an investment where you’re 10,000X righter, 10,000X more correct. And by the way, this is very common. Google’s top search is for a business model, or the internet is not going to be a thing. So many articles on the early internet were like this. Or of course, Bitcoin is going to zero. Or COVID-19 is not going to be a thing.

These journos are not off by 50 percent, you can’t just read their article and think you’re being sophisticated by discounting it, their mental model of the world is often off by 10,000 or a hundred thousand X.

Tim Ferriss: Now in fairness, just to set a counterpoint, there are some journalists who are incredibly prescient, there are good and bad and ugly within the world of journalism. Just to be fair.

Balaji Srinivasan: Sure, sure. But many of them are becoming VCs and angel investors or going to Substack.

Tim Ferriss: Yeah, yeah, yeah, yeah. A lot of them are defecting because the ecosystem is just full of vitriol. It’s like everyone’s pissing in the pool, so a lot people are getting out of the pool.

Balaji Srinivasan: Yeah. Because the thing is, look, what I’m talking about is really, I should preface it with the corporate journalist, the one who’s employed by a legacy media corporation. And that legacy media corporation will — Sulzberger’s company, the New York Times, will literally run billboards advertising itself as the truth, Fox will run billboards advertising itself as fair and balanced. The Washington Post will literally equate itself to democracy itself.

Now, Facebook doesn’t do that. No tech company has the balls to do that, say that you’re equivalent to truth or fairness or democracy itself. But yet that’s a for-profit corporation that has the arrogance or the lack of self-awareness or something to come out and say, “I determine what is true for the world. I am the paper of record. I am the first draft of history.”

Whoa. The monopoly of truth is upstream of the monopoly of violence. The monopoly of truth, you say that WMDs are in Iraq and then people go and invade. You say that somebody is guilty, you prosecute them in the court of public opinion, and then they get prosecuted. And so that’s a super important power that some privately held media corporation shouldn’t have.

And so what’s happening now fortunately is that power is being decentralized. First, in the most important way, which is on chained truth, cryptographic truth. Not argument from authority, but argument from cryptography. Not NYT, but BTC. So that’s power being taken away.

And what’s funny is, look, as you know, I’m not the kind of person who thinks White is an insult. But these folks are. And for some rich, white nepotist like Sulzberger to be determining what is true for the whole world is simply not applicable. One might even say it’s quote “white privilege.”

And so instead what we should have is something that is a global decentralized network where people of every group, including of course White Americans, can participate and determine what is true through a mathematical process that starts with us figuring out who has what Bitcoin. And then it goes to who has what asset. And then it goes to who made what assertion. And that’s like the ledger of record concept that we talked about before.

So there’s a root and branch thing where corporate journalism has also lost that they don’t understand it, just like CCP is hard power and BTC is hard money. Cryptography is hard truth, and corporate journalism has actually lost control over hard truth. Just to give you one example of this from earlier this year. Vitalik Buterin made a large donation to India for COVID. And do you know how people knew that it was real?

Tim Ferriss: Looked at the blockchain?

Balaji Srinivasan: They looked at the blockchain. That was ground truth. That’s really important. Because what is the other thing that you tend to do nowadays? If something’s real, let me see if it’s on Twitter. Did that guy actually say that? And the thing is, that’s actually not perfect nowadays because Twitter deplatforms a lot of people, so their record is gone. Or last year Twitter was hacked, if you remember that, and Bezos [Jeff Bezos] and other people were posting things.

So while it’s imperfect, in the not too distant future, there’s things like DeSo, there’s various kinds of decentralized social networks out there, Capsule, all these things that are coming or are out there. In the not too distant future, that backend is also on chain. So to show that somebody said something you won’t link to Twitter, you’ll link to the crypto Twitter version, the on-chain record that shows they posted this or said this.

And because it’s protected by proof of work or a similar consensus algorithm, you can compute how much money would be required to falsify that. How much computation, how much energy would have to go into falsify that. That is really interesting. Because you also have multiple confirmations, it’s not just one source.

The thing is, I don’t care if something has a thousand retweets, what I care about is if it has two or three independent confirmations from economically dis-aligned actors. This is the same as academia, by the way, everybody’s optimizing citations. What you actually want to optimize is independent replication. That’s what true science is. It’s not peer review. It is physical test.

So anyway, this leads to kind of worldview stuff like, what am I interested in? So the reason I was interested in, I said Twitter, Square, and Facebook is they’re still founder-led. Because they’re founder-led, they’re getting into, respectively, Bitcoin and Web3. Whereas Google, for example — 

I respect Sundar and it’s very hard to run an organization like the one that he does. But with the big exception of AI, under DeepMind, thanks to the DeepMind acquisition, Google really hasn’t innovated that much. There were some promising things like tried to integrate robotics, that was taken down by scandal. But basically conceptually, technologically, economically, it was sound to put that all under one roof and actually advance state of the art robotics.

They had Boston Dynamics, they acquired all these companies, they were going to knit them all together. Unfortunately, scandal took that down. They had all these messaging apps, basically there’s been a drift. They’ve got too much money and they don’t have enough focus or what have you, it’s all the same big company stuff.

That thing, remember I said before, about how if there’s a lot of money within a company, people can do the off diagonal, they can loot. They’ve formed those coalitions, the win-loss and loss-win as opposed to everybody wins. So that’s definitely happening there.

And just to show why I’m not bullish on them. I mean, it’s 2021, you know what they don’t have, it’s a core thing for search, that they would’ve had seven years ago if probably Larry Page was still in charge?

Tim Ferriss: I do not.

Balaji Srinivasan: Block explorers. Why don’t they have and Etherscan, those are — I mean, people don’t get this, but block explorers are actually the stealth threat to search. That is to say, we’re not used to thinking of them as a threat to search because financial data of the blockchain type being indexed on a website like or Etherscan where you’re looking through smart contracts and so on, that seems like categorically distinct from text and media information that’s on the internet, that you go through web search.

But guess what? The internet of money and the internet of information eventually merge together. Because with something like DeSo with what was called Bitcloud, but DeSo, if you go to their block explorer, you can see that every post and like and so on is on chain.

And that shows that actually more than just financial data can be represented on chain. Social data can as well. And if social data can, pretty much everything else can, because social networks include media and all this other type stuff.

So it’s all going to go on chain, eventually. And some of the zero knowledge stuff like what StarkWare has done is solving some of the scalability issues. So if it all goes on chain, that actually is a threat, not just to Google, but also Facebook and Twitter because indexing the web is hard. Indexing a social media company’s database is even harder because it’s closed and corporate. But indexing a public blockchain is easier than both.

Just to give one example. With indexing the web, you have to go and have a crawler that has to guess when to recrawl one of a million sites. When is it going to refresh? You don’t know, they’re not going to ping you. So you have to guess, and you have to spend, you have to do a whole fiscal model on this kind of thing. That’s just one piece of the whole web crawling problem.

With the blockchain, it’s the opposite. Every update is pushed to you. You just subscribe to it and you just get a block push to you and then you re-index it.

So enormous parts of the entire infrastructure are solved by different abstractions that take millions of lines of code and reduce it to nothing. And then the question is, can blockchains themselves scale? And why would people put everything on chain? Well, it would seem insane in 1990 to say you’re going to stream movies over the internet. That was crazy. And people thought it wouldn’t scale, but it did.

And one of the other reasons, by the way, that we’re going to get blockchains as a backend for everything, do you know who sucks at information security?

Tim Ferriss: I can think of a lot of people, but what is your answer?

Balaji Srinivasan: Government IT developers. Do you know who’s actually awesome at security?

Tim Ferriss: Tell me! Balaji?

Balaji Srinivasan: No, I’m okay, whatever. But crypto developers. So there’s this website, so most people don’t understand this, there’s a website called Rekt.News. And it essentially documents every major hack in crypto. I’m talking — 

Tim Ferriss: It’s like the Fucked Company of crypto.

Balaji Srinivasan: Yeah. So millions of dollars get stolen. But here’s the thing. That’s why people are like, “What are you talking about, crypto is secure? There’s all these hacks.” Here’s the thing. We’re churning out the equivalent of combat veterans. This is a live fire environment because, see, the thing is in Web2, your systems can get hacked without you knowing about them. Someone can just get onto your computer and they’ll just hang out there, slurp up information, sit there.

And the reason is, it’s not a negotiable instrument, the data in your database, they don’t know what the price is on the open market. They might want to sit there and slurp up more information. They might want to escalate their privileges and so on and so forth.

If, however, there are cryptocurrency private keys in every directory. You’ve now given that attacker an incentive to just take the money right now, because who knows, you might move it in 10 minutes. So that suddenly makes intrusions tangible.

Now, you might still have a politically or ideologically motivated attacker, but once intrusions become tangible, and you can see the damage that is done, you basically capture the flag on everything in security. One of the hardest things about computer security is, it’s like, oh, my data was hacked. All right, guess that happened again. There’s this website called Have I Been Pwned, where you can type in your email address and find how many different hacks you were subject to. But the thing is we don’t have a — go ahead.

Tim Ferriss: No, I’m just wondering who owns that site, just enter your email address.

Balaji Srinivasan: Good guy. Troy, I forget his last name, but he’s a good guy. He’s a security guy who’s legit. But yes, good question.

But Have I Been Pwned, the thing is companies now subscribe to Have I Been Pwned to run their users’ emails through to make sure that they’re not reusing a password that was already hacked. Now, think about what’s going on there. That’s like a shared database between companies that they’re using, so like your login to X site depends on your login to Y and Z and W site. That’s like the concept I have in this post. Yes, you may need a blockchain on how blockchains are effectively a primitive for shared state between companies, where I can write to it and read from it in such a way that I can’t interfere with your reads and writes.

But, point is, that gives a shadow of what a shared login system looks like. The point is this: the current hacks of crypto things obscure the fact that in Web2, you can set security to zero and just focus on utility. Because if you have utility, you have customers. And if you don’t have utility, you don’t. But security is orthogonal to that, at least at the beginning.

In Web3, that’s not the case. If you don’t do an audit of your contract, if you don’t think about formal verification, if you don’t use a type safe language, if you don’t really think through all of your error modes, and maybe use audited contracts, and be extremely defensive in what you’re doing, your contract gets hacked on the first day.

So minimum necessary security is much higher. It is a requirement for making money. And they sweat it. People sweat it for real. They know that one compromise, you lose the money. And people do die in the digital realm. And best practices come about and new tooling is coming about.

Tim Ferriss: What do you mean by people die? You mean initiatives, projects, companies?

Balaji Srinivasan: Yes, exactly. In virtual war, in this virtual cyber war, companies do die. They get all their funds sacked. They’re dead. Reputation killed.

So the thing about this is, when people look at ransomware and so on, ransomware is actually — so how that works, basically there’s an undetected security hole on something like an Epic software. And then there’s a thing that appears, and it says, pay me some Bitcoin or pay me some Monero in order to unlock your computer.

Now, if — okay, this is not yet feasible, but it’s going to happen, do you know where that would be actually extremely hard to do, would be to run that ransomware on the Bitcoin, Ethereum blockchain itself. Why? Because if they could have hacked it, they could have awarded themselves a billion dollars, they don’t need somebody else to do it. So the thing is that blockchains will become by dint of their built-in bug bounty, by dint of the fact that they’re not just open source, but open state, the most secure backend platforms in the world.

Tim Ferriss: Now, don’t you think that’s also going to be a Cambrian explosion of social engineering? I mean, I would imagine that all sorts of, sort of Kevin Mitnick, the art of deception type social engineering will explode to sort of not skirt, but on some level, circumvent very tight technological precautions.

Balaji Srinivasan: Yes.

Tim Ferriss: And we’re seeing that in Discords. Certainly, I mean, I have to imagine this is happening, although I haven’t read any accounts. But one of the crazy things in the NFT world, is if someone gets hacked because they accidentally give someone a QR code or, God forbid, their passphrase, they can see exactly where their stolen stuff is. They can look at an unidentified wallet holding their stuff and watch someone selling their stuff. 

It might not be plausible or sensible now, but at some point in the future, I could foresee there being greater value of some NFTs to the person who had them stolen than the person who did the stealing. In which case you would have ransom-like circumstances. I don’t know, but I would — 

Balaji Srinivasan: Every crime we can possibly think of will happen in that sense. Might already have. Jameson Lopp has this GitHub of I think Bitcoin physical attacks, so physical plus virtual will be combined, social engineering.

But I think in some ways there’s — okay, there’s good and bad. The bad is you get more — with the state receding, with decentralization winning, the American anarchy that may follow — remember the thing we were talking about with tensegrity and the rubber band? So right now we’re in this weird phase of an anarcho-tyranny, where there’s a crazy guy who is smashing windows or pooping on the street in San Francisco. That’s the anarchy. But the tyranny is that the Uber driver who parks next to him gets a $200 ticket for being on the wrong side of the road. So the guy who smashes the window of the car, nothing happens to them. The poor working class guy who parks inside a road gets whatever, a hundred dollar ticket. So it’s a combination of anarchy and tyranny.

That I think is — so the new information to me over the last eight or nine months is I think that the tyranny doesn’t have enough state capacity to sustain for long. And that’s different than the Soviet tyranny. That’s different than the 20th century top down sort of states.

What I’ve realized is in the 20th century, the big problem was tyranny because you had left authoritarian and right authoritarian extremists, and what was precious was freedom and equality, in the sense of being treated as an equal member of society, rather than some equal protection under law, all that stuff.

In this century, I think after that rubber band snap happens, which I think is going to happen, and the tyranny vanishes, and we just have anarchy, what is scarce is not freedom, but leadership. That’s to say, in a time of tyranny, what’s scarce is freedom; in a time of anarchy, what’s scarce is leadership.

And so what happens I think is — like Russia in the ’90s, there’s this book, I think — 

Tim Ferriss: May I posit something while you’re looking for that? And that is, I would imagine human nature being human nature, doesn’t seem to have changed all that much over the last few millennia, that if we have, say, centralized social networks, while it may be true that no central authority can deplatform you, you will have Lord of the Flies dynamics whereby someone accrues incredible reputation/power/societal sway, and can effectively force exile by just causing so much vitriol and acid to be thrown at any individual player. In the sense that I expect it will see deplatforming by other means than some central order.

Balaji Srinivasan: Yes. I think what happens is you get recentralization. So yes, I do agree with that. Basically, for example, what’s happened in the US is, if China has centralized censorship by the state, in the US, because the First Amendment prevents that, you have decentralized censorship by corporations. Where it’s technically compatible with the First Amendment, but it’s spiritually not compatible.

And then the response to that is the third order, which is decentralized censorship resistance. See, because the Western form of censorship is this retrofit. It’s not like the Chinese where they set out and they’re like, we’re going to take the hit, we’re going to take the PR hit, the reputational hit, whatever, international hit, we’re just going to censor.

Because this was a retrofit on the system, it is — retrofitting this tyranny on top of a previously free system, when Twitter was the free speech wing of the free speech party, it started out with that, is a bad fit. And there’s still enough people with living memory of what that freedom looked like.

And it is now becoming apparent, which it was not to me I think a year ago, that the state capacity for really exercising that in a coordinated way is not there. That is to say, if the Chinese state — do you know what lawful evil versus chaotic evil are?

Tim Ferriss: From Dungeons & Dragons?

Balaji Srinivasan: From Dungeons & Dragons, yes, exactly.

Tim Ferriss: I do, I do. You should probably describe what they mean, but yes.

Balaji Srinivasan: Yeah. So lawful evil is methodical, careful evil. And in some ways, I mean, I think it’s a caricature to say this in some ways, but in some ways the Chinese state, you can think of it as lawful evil. When they set out to censor you — every switch is flipped, the guys all fan out. Like Bitcoin mining banned, boom, they actually just go and execute on it ruthlessly like a corporation. The top guy gives the order and they all go and do it.

If you watch the Chinese military parades under Xi Jinping, they don’t even salute the seven person CCP standing committee anymore. It’s not a salute of an oligarchy, it’s a salute of one guy. And that one guy gives an order and all these guys go — there’s a little like robotic like this. That’s the whole point of the military parade by the way, is to show that in peace time, if they can do this, and in war time, they’re just completely coordinated, like ballet of violence basically. That’s the whole point of the military parade.

So they’re like lawful evil. Whereas the American state in many ways is chaotic evil. Oh, Afghanistan, just this total catastrophe. And we have stores being burned down and people storming the Capitol and states doing this and money being printed. And look, there’s a butterfly, I’m on Twitter yelling at this person. And there’s no coordination of any kind. There’s no strategy.

This AUKUS thing is a great example. Did you follow this at all?

Tim Ferriss: I did not.

Balaji Srinivasan: Okay. By the way, as a sidelight, some people would be like, “Oh, tech bro, why are these crypto bros/tech bros getting into foreign policy or politics?” On the other hand, they’ll also say, “Why don’t these tech bros or crypto bros, why don’t they learn some history and humanities?” These are mutually contradictory criticisms of course.

But my response to that is twofold. First is, as I mentioned before, just like after the 2008 crisis, it was obvious that the Federal Reserve, the bankers, didn’t have it under control.

In fact, like Bernanke in 2004 had given the speech at Jackson Hole, Wyoming, I believe on the great moderation on how macroeconomic volatility had been solved and they had it all under control. And it was no big deal, basically meaning no more depressions, nothing.

Of course, a few years later the financial crisis happened. So they obviously didn’t know what they were doing, even if they had control of the system. Hence FinTech, hence crypto, because of that distrust.

And now what we’re seeing in 2021, if it wasn’t apparent before, but it’s really apparent now, is that the foreign policy establishment of the US, the national security, the military establishment, didn’t just blow COVID, they blew Afghanistan, despite $2 trillion and 20 years, they basically blew the largest lead in human history arguably over the last 30 years. An empire at its absolute zenith is now losing to the Taliban.

And by the way, it’s not even like Vietnam. The Vietnam defeat was actually more excusable because they had a superpower sponsor. The Soviets were on the other side, the Chinese were on the other side, supplying arms. Those were serious states.

Who’s backing the Taliban? China isn’t putting in weapons, to my knowledge. Russia isn’t. Maybe Pakistan. So it’s not like Vietnam. It’s actually much worse than that as a defeat.

So the point is, just like the bankers obviously didn’t know what they were doing, so time for other people to come in, new, fresh blood.

If you take a look at my fellow “tech bros” in finance and VR, Palantir and Anduril. Thiel and Palmer Luckey, waltzed in with no background and advance the state of the art of the intelligence in military communities. And that kind of shows a shade I think of what is possible if we do decide to get involved in this.

And obviously in cryptocurrency, guys like Vitalik, people who are running these coins are running economies, they are running monetary policies of large countries. It is a step up from simply running a company, you’re running a community, you have to think about things. You can’t control people’s actions. You can nudge maybe by pushing through an update. But even that update may be pushed back on. It is actually like the executive, legislative, and judiciary, the President and the lawyer congressmen who edit text and then the judiciary that enforces it, that fallible and highly unreliable and irregular judiciary.

Rather than that, you have the executive of the CEO or the founder, you have the legislature, which are the coders that propose the edits and changes. And you have the judiciary or the nodes that interpret the code, but do so in an extremely faithful way.

So in a sense it’s a violation of equal protection, every time somebody with the same facts walks into a Wyoming court and gets different justice, for example, than a Milwaukee court or a Minnesota court, whatever. Every time that happens on something that’s supposed to be uniform, the same input should give the same output. That’s what rule of law should mean. And I’m not saying, I’m not beating up, I’m just using Wyoming, Minnesota as an example, I’m not beating up any particular state.

I’m saying that the concept of a judge changing their decision making based on anything other than the raw inputs. Judicial discretion in many ways is actually often bad because you have things where people start going jurisdiction shopping. Not because the law is different, which is fine, but because the judge likes this or likes that, and has a certain attitude towards this.

It’s like, there’s an apocryphal Israeli study where people get lighter sentences after the judges have eaten something, and their blood sugar is up. So they’re more merciful. That’s bad. Instead you should have this alternative.

So my point is though that founders are now getting into rule of law currency, like with Palantir and Anduril into military and foreign policy stuff. So that preface is why we’re starting to think about all of this stuff.

Another preface, I know, preface, preface. Well, actually let me talk about France AUKUS and then come back to that. So with France AUKUS, that is this amazing thing that shows, we talk about chaotic evil, at least you don’t know what they’re doing. So here is the sequence of events. Basically after the whole Afghanistan withdrawal thing where it was just so televised, so everybody saw the images of this catastrophe. And it wasn’t just obviously people within the US who saw it, all American partners saw it.

And they were like, whoa, that military that we saw in Hollywood beating up aliens and so on is unable to manage a withdrawal without any gunfire. The Taliban wasn’t even shooting at them. 

I do support, I think the withdrawal overall probably was a good idea in the sense of, at least necessary, it’s complicated, but the execution was catastrophic. That’s kind of the conventional wisdom. It is how the second order consequences I think are important. So one is that the admin wanted to, I believe, turned the page on this from a PR standpoint, and that’s why this AUKUS announcement was teed up. The thing about it is, it’s very unusual. When is the last time you’ve seen the President and the Prime Minister of the UK and the Prime Minister of Australia in a simulcast? 

Tim Ferriss: Can’t remember.

Balaji Srinivasan: Can’t remember, right! Intentionally, it could have been something that was signed to some deal of a million things that happen in government that are not a prime time announcement. This was intentionally, the goal was to like, hey, turn the page, “I know you thought we screwed up in Afghanistan, but we’re pivoting to Asia and we’re totally serious about it, ha ha, China.” The problem is though that, it actually revealed a bunch of issues. First is, the fact that it is Australia, the UK, and the US.

Well, there’s something called the Five Eyes. And that is, Australia, UK, US, New Zealand, Canada. There’s this Canadian newspaper that said, what is it, the three eyes now, because why were the other two excluded? Well, New Zealand because they don’t have some nuclear, they have something about nuclear subs can’t operate in their territory or their maritime region and Canada, because evidently they are such wimps militarily. They don’t have anything. But the thing about that is, it showed to the external world something they’d never seen before, which is internal division among the Five Eyes. Number one.

Similarly, the Quad, which was this much [inaudible] thing of India, Japan, Australia, and the US, which actually did make some sense in the sense of, India, Japan are, I think, serious countries versus China. If you wanted to make an alliance, that would make sense.

India and Japan were left out of this and the UK, which is on the other side of the world, was brought in. Now, who is more concerned with China than India and Japan, which are real countries that border them? They’re not going anywhere. The UK doesn’t really have an empire anymore. It doesn’t really have stuff in the Pacific, Hong Kong went away. So what the heck? It also, just like it showed the five eyes were really the three eyes, it showed internal division in the Quad. India and Japan made polite murmurings in public but, within India, within Japan, if you read the newspapers there they’re like WTF. Then France itself, because they had this sub deal with Australia that evidently, by old reports, wasn’t going that great. It was taking a long time, et cetera.

Australia had recommitted to their relationship. Now, all the stuff’s being aired in the public because here’s what happened. France got annoyed and France isn’t just France. France is basically one half of the EU with Germany. So they got the EU to denounce this and they pulled their ambassadors. And part of it is that their pride was wounded because they actually have islands in the Pacific. They have actually a significant, I think million plus population of actual French citizens in the Pacific, near Australia more than the UK does. So they actually had a reason, they still think of themselves because they’re on the UN security council is like a great power. Now they were just sort of, kind of lied to and backhanded, that’s how they think about it, even if they were screwing up on the sub aspect.

The thing about it is, they got really mad, pulled their ambassador, the EU, and the US are now actually largely split on China. Because I said, France isn’t just France, France is the EU. Even if I think the EU is declining and Britain will break or has broken off from it, of course. Scotland might break off from Britain and Catalonia and the [inaudible] countries, they may all break off from the EU. Still, the EU is a thing, even if it’s declining. The EU is now kind of split and they’re like, “You know what, US? Why don’t you go and do your thing in China and we’ll do our own thing?” South China Morning Post had actually something on this. Then what did Australia get? Australia got subs, but you know what the fine print is, the first nuclear submarine that Australia builds is going to appear? Do you know what the date that they’ve got is? 

Tim Ferriss: What is that?

Balaji Srinivasan: 20 years. 20 years! The thing is, this is not a serious thing. This is basically something — it reminds me of the San Francisco $300 million bus lane that took almost two decades. Patrick Collison has a website called Fast. I’ll give you the exact URL. It is He shows that stuff in the past was built way faster. Just as one example — 

Tim Ferriss: Give an example of a nuclear reactor.

Balaji Srinivasan: Yeah, exactly. The first nuclear submarine was built faster in a few years, relative to this one which is to take 20. How is that possible the first sub that’s built 40 years ago is faster than this one? Or like The Empire State Building was started and finished in 410 days.

The Eiffel Tower was built in two years and two months, this type of stuff. The thing about this is, we know that it is physically possible to do that today because China does it. China built a hospital in 10 days during COVID, there’s videos you can see of them building a subway station in nine hours or a building in 10 days. Then of course what people say is, oh, and this is cope by the way, they’ll be like, oh, that’s all, Chinese construction, It sucks. It’s just going to fall down. It’s plastic crap. We have good stuff. I’m like, have you seen the Millennium Tower in SF? Have you seen the SF transit center in SF? Those are also cracking and going to fall over. Even NYT actually did a thing on how SF isn’t actually earthquake proofed and all the building codes don’t mean anything.

It’s not like the US is getting high quality structures for all of that money in time. Moreover, even if you granted and people have seen the photo of a building in China, [inaudible 05:03:01], even if some tiny, tiny percentage of the time, you have some structural issue. When you go from many years to being able to build a hospital in 10 days, or being able to build a subway station in nine hours, it’s like a 100-1000X. The amount of money you save is so dramatic that you can slash rents and crucially, also enable military victories because the military is about the physical world. If China, as a subroutine, can contemplate building a hospital in 10 days, they can also contemplate building a blockade or a bridge or something else in the physical world. And if the US can only build a sub in 20 years, it’s like an older man whose bones don’t heal as fast anymore. Who can’t do the things they used to do anymore. And yet still think of themselves — that’s the dangerous part.

If you’re 80 and you think of yourself as 20, okay, young at heart is one thing. But going and trying to knock out 300 for reps, you might hurt yourself. If you’re trying to bench that much after not doing something in a while. You might never be able to get there again, as that man, you might need your son to be able to do it. That might be the last time you bench that amount of weight, so it might need a new nation to be able to do these things. Like a rebirth of some kind. I’m going a little further, but China, the AUKUS thing, that just made them mad, it didn’t give any results. The US is acting, China is taking actions because — did you see this recent hypersonic missile launch?

Tim Ferriss: I did actually see the news. I haven’t read the coverage, but — 

Balaji Srinivasan: Well, have no worries. The US government’s on it!

Tim Ferriss: That was basically a “Fuck you very much” show of power response? 

Balaji Srinivasan: Yeah and you can argue, why are we hearing about this stuff? You can argue, oh, the military industrial complex is leaking it to get more money for hypersonic weapons. Or the military industrial complex wants us to know, think we’re losing to China. Therefore, we will buy more weapons. That may be true but it’s actually also true that the US is weaker militarily than China in the South China Sea on the specific issue that China cares about, which is Taiwan. It may be possible for someone to have an interest in it, but it also being true. 

It was like, “We welcome the competition.” This is what was — I’m like, you welcome the competition when it comes to — you don’t welcome military competition. That is exactly the kind of competition you do not welcome. You welcome economic competition, that might be fine, you don’t really welcome that, but okay, you can tolerate it. It’s a generalization, but a lot of Chinese people have said Chinese culture generally trusts actions over words and Western political culture today at least is a hundred percent verbal. It’s just all signifying and hashtags and so on, on Twitter and almost zero offline accountability for actually doing anything. Tech culture, I would say, is something of a hybrid, at least, the pre-2019 tech culture, you might call it crypto culture, web three culture now where absolutely there’s a story that you’re telling in a slide deck. But the numbers really, really, really matter. Especially once numbers exist, once you’re at Series A or Series B or beyond, another investment of money doesn’t come that easily. It requires you to actually deliver results. It’s not simply like an election. An investment is much more diligence on it.

What happened was this AUKUS thing made China mad without getting any results. I saw this joke like, hypersonic missiles, it’s a separate thing, the US government is on it, they’ve just banned gifted and talented education in New York, take that China. That’s going to crank out tons of people who understand how out to fly something past Mach 5 and know how to deal with — I’ll trip light material. It’s like, that’s [inaudible] look at that, what a chess move. By the way, it’s not like the federal government doesn’t care about education. They do. They’re actually sending the FBI to stop people from protesting school boards, but not to stop them from banning [inaudible].

Then of course, India was in Japan. We are like, why aren’t we a part of this, this Quad discussion? India also is kind of having it a little bit both ways where they are also a part of something called the SCO. Do you know what that is?

Tim Ferriss: I do not.

Balaji Srinivasan: It’s the Shanghai Cooperation Organization. It’s sort of like a, little bit like a NATO-ish EU thing that most people in the Western know about but it’s pretty important, becoming more important. It’s China, Russia, Iran just became a member, Kazakhstan like central Asian countries and actually India and Pakistan were admitted at the same time, which made me kind of quizzical because, first, India being in anything with Pakistan other than like the UN is pretty unusual. Second, India and China being together is unusual, but India seems to be taking a balancing role, it’s almost the opposite of its cold war role, where it was closer to the Soviet Union than it was to the US but it wasn’t in the Soviet camp. It wasn’t like fielding troops to the Warsaw Pact.

This time, it is closer to the US and the West than it is to China. But it’s not going to be like the UK, which is like, America’s poodle, as people would say, after the Tony Blair thing. So it’s going to actually take its own independent thing. So SCO, people believe maybe that’s just a way for India to kind of hedge a little bit, but being in both the Quad and the SCO meeting is kind of, it’s like you put both the Knicks and the Lakers or whatever, right?

Then of course, Taiwan saw this and was like, “Oh, boy,” because China got more annoyed. So the point is, why do I go into this example in detail? This is just pure, chaotic evil or at least just chaotic, even if it’s not evil. It’s something that pissed off the French, pissed off the Chinese, showed that the three eyes in the Quad were internally disaligned, piss off the EU and split them versus China. Basically did it all for a photo op after another military disaster and essentially achieved the exact opposite of what they even wanted to achieve, which was a pure optical thing. It’s not even, there’s no military gain whatsoever. This is being done at the most senior levels [inaudible 05:09:16] a choice to do this at the leadership of these three countries. Now, this is just one event, but as you can see, it had like ripple effects and so on, but it was like the anti Alliance.

It broke apart alliances rather than putting them together. Because of this, that’s like at the foreign level and domestic, you can give similar examples where, for example, 17 states are now protesting this thing of sending the FBI to local school boards to be mad about protests. 

The rubber band snap that I think is going to happen is that control of the US, the federal government over locals and internationals is just going to contract until only those jurisdictions that elected the current president, listen to the federal government and those that didn’t, just nullify everything and just take it to court and don’t abide by it. The question is, how does that actually play out? Is that purely legal? Is there like national guard staff involved? Who’s actually, if anybody is, prepared to actually shoot somebody over this, and I don’t know, it’s hard to say but I can see the conflict kind of brewing. So that was lawful evil versus chaotic evil.

Tim Ferriss: Let me hop in. I don’t know, but we’re at five hours plus now. I think, I would like to bring this to a close if I may and we can also continue offline on these subjects, but I’ll skip the angel investing or hypothetical angel investing if, unless there’s a fast answer for it, but — 

Balaji Srinivasan: Yeah, I’ll give you my fast answer on it. So my fast answer is that I’m broadly interested in, obviously crypto, obviously startup cities and network states, which I’ve talked about, but if I was going to cut into areas, I’d say crypto, info, bio, robo, astro, and actually Politico. Crypto is obvious — info. Actually, I think that, thanks to wokeness, basically media corporations have abandoned many niches. Sports Illustrated is not Sports Illustrated, Teen Vogue is not Teen Vogue. In fact, if you took these articles, they basically all sound like the same. I can’t even type stuff. That’s like literally if you just strip the branding and you say can I try to distinguish it, I’m not sure you could because they’re essentially all on Twitter and they’re all probably the same sort of conformist group. Now though, with Substack and with Ghost and with decentralized media like Mirror — I’m a small investor at Mirror. Basically, what you’re seeing is independents have the means to go and effectively start their own media company, but they also have an incentive to give a different message than the mainstream.

So you’re seeing Matthew Yglesias and Glenn Greenwald and Matt Taibbi and Bari Weiss and Jesse Singal. This huge IQ drain of some of the best writers from these old outlets, leaving them only with those who were incapable of writing originally enough to become founders. So now just like, for example in academia several years ago, there was a new level above professor and that was founder or investor because you can scrape for whatever, a $100 thousand grant from some stupid bureaucratic committee, or you can make a $100 million company, exit it and then you’re basically able to investigate whatever the heck you want for the rest of your life. If you can build a lab out of spare parts or you can, build a future that you want, like Vijay Pande for example, left Stanford and, was running the Bio Fund, recruited him because he’s a friend of mine.

The level above professor is founder. The level above journal, corporate journal is now founder. And so info is very interesting because all these niches are going to be recolonized by independence. That started from the beginning with a better brand, because they’ve been abandoned, the Sports Illustrated, the Teen Vogue, et cetera. So media, I’m actually much more interested in, and I think you can make a profit in it. Like The Athletic, for example, shows you can, it’s just that you can’t see the same things as everybody else.

You need to have the people who are independently minded. That’s like the new thesis, the new wrinkle. I also actually think that India could become a media superpower. And I know I say that and immediately people think, oh, what do you mean, Bollywood? Bollywood’s going to become really popular, oh, I’m not so sure about that. Look, Bollywood is fine. But what I mean by that is, a lot of animation is done in India. Like if you look at the end of Tenet, a lot of the visual effects were done there, a lot of the computer graphics. There’s something called SAJA, South Asian Journalist Association. Obviously, there is Bollywood. A lot of talent exists there.

The same way that China ascended the ladder from making plastic stuff and iPhones to doing first party stuff like drones with DJI or WeChat. I think India, if China’s a tech and manufacturing superpower, I think India becomes a tech and media superpower and can potentially be like the bright sun to the West’s Black Mirror. Because Western media is sort of declining in revenue with technology. That’s why they have this Black Mirror attitude towards it. Oh, everything is so bad.

Whereas India is ascending the technology, all their stuff has just gotten better over their lifespan. Smartphone has coincided with a huge improvement in living standards rather than a collapse in their old media model. India I think is very underrated in terms of where that replacement media is going to come from. All the folks I just mentioned like Singal and Bari, I like all them, but they’re like defectors from the old, I think we’re also going to get a lot of fresh blood from overseas and genuinely internationalized media, because it shouldn’t just be a bunch of randos in New York. It should be globally representative. People should be able to tell their own stories without being intermediate by some New York media corporation.

So that’s info, then — that’s media, but it’s also movies and other stuff. So mention crypto, info, bio. So like telemedicine is now legal in the US. Thanks to actually some of the things pastoring COVID. What I mean by legal is, doctors can do telemedicine across state lines, that opens up the market in a big way. It is possible now to use that, to unlock medical tourism and start actually, unlocking fee for service medicine, which is actually way better than insurance. In general, you only want insurance for catastrophic things. You don’t want it for routine things. You don’t pull out your car insurance to pay for gas or floor mat. It’s only for emergency things and same with healthcare, you’re basically going to lose money on everything other than emergency insurance.

So it’s telemedicine, it’s medical tourism, but it’s also quantified self. It’s all the true transhumanism, which is brain machine interface and genetic engineering and all that stuff. Then with robo — I think that’s also underestimated because its being done on the industrial side of things, that’s robotic agriculture, manufacturing, farming, retail, supply chain, all of the recent supply chain stress I think is going to cause an acceleration of that. It’s also actually the way to erode China’s manufacturing advantage in the medium to long term, just like everybody has a smartphone, you have a bunch of robots that start making things for you. I think, one thing I’d linked was like, a hundred dollars robot arms. You can start learning this at home and just learning how six degrees of freedom arm works and grasping and all this stuff, build your own robot overlord.

Astro, I think that’s actually — it’s funny, right? Astro, I think that’s coming down way in cost. It’s not just basics, there’s a whole industry that’s building out there.

And then politico is kind of the startup cities and network states and the media and crypto stuff, but really what does the next postwar order look like? And I think it looks like national stacks and neutral protocols. So neutral protocols are the crypto stuff, but national stacks are not just in American internet or Facebook and Twitter and Instagram and so on, not just a Chinese internet of WeChat and ByteDance, but an Indian internet and a Brazilian and a Russian and a Japanese. And there’s a piece of this already, like Korea has Naver and Russia has Yandex. Going further with that and having kind of equivalence, national equivalence so that local leaders are going to basically demand this so they can’t get de platformed. And it might be that, some countries have the scale to do it themselves, like the US and China, probably India, others — or Russia. Others might be in groups. It might be a bunch of Spanish speaking countries that do it together. But national stacks I think will be important and in collaboration with neutral protocols, that’s sort of like, domestic travel versus foreign travel, domestic transaction communication versus foreign.

So that’s the type of stuff I’m thinking about in terms of angel investments and the thing that’s there that I could probably talk more about is transhuman stuff, but that’s under Bio, that’s very important. That’s reversing aging, that’s bionics, that’s brain machine interface. That’s like limber generation and bio electricity. I think that is — if in the 2010s, what was underrated were crypto and China, I think in the 2020s, what’s underrated are India and transhumanism, and it’ll be more obvious by the end of the decade, but that’s kind of how I think about things.

Tim Ferriss: Offline, we can talk about some scientific studies that you may be interested in supporting. So we should talk about that. Lest we forget 1729, do you want to tell us what the latest and greatest is with respect to 1729?

Balaji Srinivasan: Yeah. I’ve been kind of running it in like alpha-ish over last few months, not posting that much recently, because been kind of working on some new stuff, but on November 1st I’m going to be announcing a lecture series with weekly VR lectures and having them recorded if you can’t attend and the goal is to basically build a community and audience in VR and start putting out the polished versions of what I’ve been working on. Go to my Twitter and you’ll see the announce over there or subscribe at

Tim Ferriss: Perfect. Beautiful. For those who don’t know, just briefly the origin story, 1729.

Balaji Srinivasan: Oh, sure. It refers to the — it’s sort of like the E = mc^2 of India, just like E equals MC squared came from Einstein, a genius Western physicist. 1729 comes from Ramanujan who’s a genius Indian mathematician. And what it represents is the first number, that’s a sum of two cubes in two different ways. It’s one cube plus 12 cube, and it’s also nine cube plus 10 cube. It’s famous because when Ramanujan was very ill on his deathbed, a mathematician who was a friend was trying to cheer him up and he came by and he said, Hey, this taxi that I came in on has a very boring license plate. It’s 1729. And Ramanujan said, “Oh, no, it’s actually a very interesting number. It is the sum of two cubes in two different ways.”

It’s something that everybody can understand, cubes and sums are, but it also illustrates that Ramanujan was on a first name basis with every number. And it has a couple of other kind of things, which is, it’s both Indian and international and spending a lot of time in India now, but it’s also universal. Like Google was both an American company and a global company and it is — it’s also something that has a number theory, kind of connotation because Ramanujan studied prime numbers and number theory, and that underpins cryptography and crypto, which is also something I think about. That’s kind of a fun thing.

Tim Ferriss: It’s a nice tie in., people can check that out. They can follow you on Twitter @balajis

Balaji Srinivasan: B as in boy, a as in alpha, I as in Lambda, a as in alpha, j as in joy, I as in India, S as in Sam.

Tim Ferriss: Nailed it.

Balaji Srinivasan: I’m not sure that was all the call signs. I should have said like Bravo, Fox Trot or something.

Tim Ferriss: I usually just make it up as I go if I need to spell it out, that type of way. Balaji, once again, I don’t know how you sustain this level of output. It is remarkable and I appreciate you taking so much time on the other side of the planet to have a very wide ranging conversation. Thank you very much. Is there anything else that you would like to add in brief or requests that you’d like to make to the audience, anything at all, before we close out this conversation?

Balaji Srinivasan: I think that was great. I think that I’d like to see you all in VR. So come by.

Tim Ferriss: Lots of exciting things ahead. Well, thank you, Balaji. For everybody listening, we will have copious, copious show notes. I will need a small stadium of my own full of show notes experts to help assemble everything, but we will have lists to all of the books and people and so on mentioned in this episode. You can find that at, and I’ll probably create a short redirect so you can just go to, b as in bravo, number two. That stands for Balaji second episode, of course. So will take you to all of the show notes. And until next time, thank you for tuning in. Be safe out there.

The Tim Ferriss Show is one of the most popular podcasts in the world with more than 900 million downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.

Leave a Reply

Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration.)

4 Replies to “The Tim Ferriss Show Transcripts: Balaji Srinivasan — Centralized China vs Decentralized World, The DeFi Matrix, Ascending vs Descending Trends, Bitcoin Mining as Energy Storage, Reputational Civil War, and Maximalism vs. Optimalism (#547)”

  1. Wonderful interview Tim. Thanks for making the extra time for Balaji. He has a very unique and informed perspective that offers us all a new lens and set of paradigms to consider. Hope you have him back next year!

    1. Really appreciate the immense effort of writing these transcipts, this was a great interview with a wealth of information. Looking forward to the release of Balaji’s book.

  2. Amazing conversation! When you’re pushing the conversation forward on
    such a diverse array of issues it can be easy to lose the thread. I
    think a conversation similar to this but concerning the incredible
    energy demands of crypto and other clean tech solutions we should be
    employing aggressively would be fascinating.