Exploring Scarcity

Every passage, on the record.

1. 00:00Claim · condensed

   He opens by restating the previous episode's conclusion: for Bitcoin to become the next global reserve asset, only two things need to remain true, that the 21 million hard cap stays credible and that Bitcoin remains transferable between market participants.

2. 00:32Prediction · condensed

   If the 21 million hard cap stays credible and Bitcoin remains transferable, Bitcoin eventually will win, and the important part boils down to scarcity.

3. 00:32Idea · condensed

   Bitcoin discovered, invented, found absolute scarcity for the very first time, which he calls the ultimate value proposition and the zero to one moment for Bitcoin; everything before it had only relative scarcity.

4. 01:05Claim · condensed

   Gold was scarce relative to other elements, while Bitcoin is absolute scarcity, and the gap between it and its nearest monetary competitors is almost unfathomable once laid out.

5. 01:39Claim · condensed

   Money is in constant competition: every transaction has competing candidates for the money used in it, and there are winners and losers in every exchange, even between people using different money inside the same transaction.

6. 02:13Claim · condensed

   Absolute scarcity is Bitcoin's step function improvement for energy unlocking, on the premise that money represents energy and the more energy a society can unlock, the better off it is.

7. 02:13Idea · condensed

   He sets out the assumption underlying the whole episode: money represents energy, so unlocking more of it makes society better off, and scarcity is essential for a store of value because something that isn't scarce takes little energy to procure.

8. 02:46Claim · condensed

   If it doesn't take energy to release something, the other side of a trade can more easily acquire it themselves rather than trade their own time or energy for it, so anything easy to get cheaply has no use as the thing offered in exchange.

9. 03:27Claim · condensed

   It takes more energy to get something the more scarce it is, so in any trade each person is incentivized to hold on to the scarcer item and hand over the less scarce one.

10. 03:59Claim · condensed

    Because a scarce item is more desirable, you need to be persuaded by value before you'll exchange it, and that need for persuasion is what makes scarcity give individual actors a framework to judge value in the first place.

11. 04:30Claim · condensed

    Being aware of energy outputs is good for the human species because it allows the most efficient use of energy coordination in an economy, since no energy gets devoted to causes humans don't actually prefer or find useful.

12. 05:00Claim · condensed

    If exchange between two people is positive sum for unlocking energy that would otherwise have been required, then humans will trend toward specialization to unlock more savings, which he calls the whole goal of human action: more savings, more access to stored energy, more resilience to the future.

13. 05:38Quote

    Sharing is caring.

14. 06:16Claim · condensed

    As specialization makes people ignore other areas of energy production they need to survive, they must exchange, which means they need to save their stored energy in the asset that holds its value the longest to ensure, in his words, apex optionality in the future with minimal bleed.

15. 07:34Claim · condensed

    There is no advantage to holding a lesser store of value because it limits your options as an individual and as a society; the vessel that stores energy with the least bleed becomes the most highly desired item in trade and the benchmark used to price everything else.

16. 07:34Quote

    There is nothing it can't contain.

17. 09:23Claim · condensed

    Humans are incentivized to seek out and find the best store of value, because using a subpar one cancels out the efficiency gained by being specialized in the first place.

18. 09:58Claim

    Bitcoin makes the total supply of accessible energy a constant of 21 million, so the entire supply of accessible energy human beings have access to can be summed up in that number.

19. 10:29Claim · condensed

    Over time the total supply of accessible energy increases because more exchange means more efficiency, more efficiency comes from specialization and division of labor, and technology cannot be stopped from unlocking previously required energy.

20. 11:34Analogy · condensed

    He describes building a pyramid one block at a time: the first stone takes months of solo effort and enormous energy, the second is easier once a helper joins, a third helper is an engineer who invents a machine to move blocks more efficiently, and by the 700,000th block a new person's contributed energy is worth far less than that first stone because it is built on top of everything that came before.

21. 13:08Claim · condensed

    Over time, as technology advances and leverage grows, human time and energy become less valuable, because the people who invested earlier required a larger sacrifice when there were greater demands on their energy for survival.

22. 13:43Claim · condensed

    Putting energy into the system earlier and not immediately consuming it rewards that sacrifice with more energy claims in the future, and the people who do consume it are only able to because they can use it to generate more; if they generate less, they are eliminated from the system.

23. 14:16Claim · condensed

    As technology advances and it gets easier to contribute more energy, the rewards for contributing diminish over time, though they never stop entirely, which is why he calls the entire system deflationary.

24. 14:16Quote

    The great part is that as we do more with less, we need less in the first place.

25. 14:50Reference · condensed

    He credits Jeff Booth with the idea that technology is inherently deflationary because it lets people leverage energy usage more efficiently.

26. 14:50Analogy · condensed

    Moving a heavy box across a room might take 100 calories of organic human energy, but a machine can do it for a small fraction of electricity, a net positive for energy totals worldwide, and he notes you can multiply that saving by the billions of actions happening every day.

27. 15:24Prediction · condensed

    The coins held by early adopters, the whales, will eventually make their way to all the other users in the system and become more equalized, though it might take generations.

28. 16:28Open question · condensed

    Running his chain of why questions all the way down, he lands on the idea that humans are entropy destroyers of the universe seeking order to survive, then leaves open the next question in the chain: why is there this need to lower the entropy in the systems around us so that we can survive.

29. 17:02Claim · condensed

    As the world gets more specialized, energy becomes less valuable because it is more accessible, and eventually the world becomes so specialized that gold's divisibility becomes impossible relative to the leverage of our tools, which is where gold falls over and the path leads first to the fiat standard and then, tracing the same logic, to the Bitcoin standard.

30. 18:13Claim · condensed

    The curve of unlocking energy faster and faster is exponential, so money needs to be divisible more and more as efficiency grows; scarcity is what makes it possible to store value in something with no physical presence and infinite further divisibility.

31. 18:47Claim · condensed

    Bitcoin removed all the non-monetary trade from money, leaving only the components of what makes a perfect money; winning with it doesn't require stock pickers or analysts, only contributing to the protocol, delaying consumption as long as possible, and letting the network find and capitalize on inefficiencies.

32. 18:47Quote

    All you have to do is change your time preference.

33. 19:18Claim · condensed

    Delaying energy consumption to maximize your own return is incredibly selfish, but that selfishness becomes altruistic because the energy you don't consume can be used by others who believe strongly enough in an innovation to spend it now; if they are right, both sides win, and if they are wrong, they are eliminated from the system.

34. 19:18Quote

    It is incredibly selfish, but it makes being selfish altruistic.

35. 20:20Claim · condensed

    If money is the objective measurement of an intersubjective exchange, then price reflects that objective reality, and getting the highest quality price information requires a common denominator for every transaction; even the Federal Reserve, whose job it is, has given up trying to track how many dollars are in the system.

36. 20:52Claim · condensed

    Because no one knows the total supply of dollars, prices are bound to carry inefficiencies, which means energy is being wasted in the process of unlocking it and then failing to store or use it efficiently.

37. 21:23Open question · condensed

    "This is the biggest unknown. In my eyes, this is the biggest...we don't know how inefficient we are being, because we've never had perfect price, because we've never had a fixed supply." He leaves open exactly how much this inefficiency has cost the human species in energy and how poorly resources have been allocated because of a lack of information, calling it the great unknown.

38. 21:56Claim · condensed

    Fiat economists argue against scarcity on the grounds of inelasticity, that a hard supply leaves the system vulnerable to black swans and needs an elastic money supply to respond to crazy events, but Bitcoin has proved, most recently in March 2020 and when Chinese miners all shut down, that the system is anti-fragile and can handle large swings in market sentiment.

39. 21:56Event · condensed

    He points to the Chinese miners all shutting down as a second recent shock that Bitcoin absorbed while proving the system's anti-fragility.

40. 22:30Claim · condensed

    With no federal bailouts needed, the system just absorbs information and actors process it, moving ahead with an accurate read of the true level of economic output; as demand increases it isn't possible to increase Bitcoin's supply to meet it, which is why the halvings are so critical.

41. 23:00Claim · condensed

    Scarcity is important for a store of value, you can't have one without it, and Bitcoin is the most scarce thing to ever exist, with the upside of that fact still unknown because nothing this scarce has ever existed before.

42. 23:00Quote

    Bitcoin is the most scarce thing to ever exist.

43. 23:31Open question · condensed

    He previews that the show will keep working down the rabbit hole of the objective measuring sticks for what makes a great money, promising dedicated episodes on divisibility, durability and portability.