Where’s the Value?

Every passage, on the record.

1. 00:00Claim · condensed

   The podcasts have moved from proving Bitcoin technically and economically to a different question: once you understand Bitcoin can't be broken, the difference between winners isn't just holding the superior asset, it's understanding how to allocate energy on top of that to keep delivering results. That's ultimately what pays the most in Bitcoin.

2. 00:45Idea

   Apart from just owning Bitcoin, because it's the tool that's superior to anything else for transforming energy, that's a given, that part you get with just buying Bitcoin. Then what can you stack on top of that? Where is there space inside the network to add value and increase whatever those energy flows might be in the end?

3. 01:29Claim · condensed

   The one question you have to keep asking is: has anything changed that would override the system I already know is in place? If the answer is no, you continue down the same path.

4. 02:39Reference

   This sort of hearkens back to the book I've mentioned on the podcast before, the missing billionaires. If the energy allocation game is as easy as what Warren Buffett has done, why aren't there more billionaires in the world?

5. 02:39Claim

   Where are the returns these people are missing? What is the link in the chain causing all these billionaires that should exist mathematically, given how easy it appears in hindsight, not to exist?

6. 02:39Reference · condensed

   In this process I came across Monish (Mohnish) Pabrai, an investor famous for basically cloning Warren Buffett and Charlie Munger.

7. 03:17Claim · condensed

   Pabrai recognized the game is about energy allocation: find the best energy allocator you can, put someone else's excess energy into their hands, and let them return more than you could alone, taking a cut in between as the middleman.

8. 04:19Reference · condensed

   I saw an interview with Monish where he talks about the ideal investor, and I'm going to play a clip from Seinfeld: this is Putty, Elaine's boyfriend, who sits down on a flight and stares at the back of a chair the whole time. Monish thinks Putty is the ultimate investor.

9. 04:50Analogy

   The ultimate investor is the one who has the ability to do nothing while everyone else is doing something. In the doing something, they think they're adding value when in fact they're taking it away, because they aren't maximizing efficiency by just putting everything into the best tool they can find.

10. 06:24Claim

    The most valuable thing you can do is nothing. Nothing is a very hard skill; not many people can do it, because not many people are psychopaths. They think doing something is better.

11. 06:55Claim · condensed

    This is the first time it's possible to no longer need the best idea at the time the idea didn't exist. You no longer have to be at the initiation stage; you can recognize the best idea now and allocate toward it, receiving the benefit going forward as if you'd been there at inception.

12. 07:35Analogy · condensed

    Think back to 1920: you're tasked with making as much return on capital as possible from knowing what future oil demand would be, because the extended order is going to demand more oil to make information generation more efficient. You know that to be the case, but you're not guaranteed to win that game.

13. 07:35Reference

    The extended order is going to demand a certain amount of oil in the future to make life better, to make information generation more efficient.

14. 08:07Analogy · condensed

    In the missing billionaires book, the example is people who had tomorrow's copy of the Wall Street Journal, the headlines of what actually happened the day before, and they still traded worse than those who didn't have that information.

15. 08:38Quote

    The danger at this stage of Bitcoin isn't the question of does Bitcoin work, it isn't not knowing what a UTXO is or how multi-sig actually works or where in the code you can find the hard cap of 21 million. The danger at this stage is if people properly value Bitcoin.

16. 09:12Claim

    If there's no discrepancy and price is 100X where it is now, that's no good to folks looking for an energy advantage. To win big, we need to be right and have everyone who can possibly be against us, against us.

17. 09:49Idea

    The largest flows of energy in the fiat system don't come from the individuals inside the system. The energy pools, and as it pools it's directed by allocators, and those allocators are the ones who have the power.

18. 10:23Analogy

    The upper middle class no-coiner's energy is being sucked out of their assets and misallocated into a thousand different government programs and zombie companies, an unknowable number of times, until it hits a one-way release valve, otherwise known as a Bitcoiner.

19. 11:05Idea · condensed

    Government pumps the money supply by choosing to keep funding the gross misallocation of information, which wastes the initial energy because you've pulled resources from people positively contributing to the extended order and put them into a program that doesn't return more energy. That pumped energy is gone, and the energy individuals contributed to the cause is also gone.

20. 11:37Claim · condensed

    Misallocation also adds noise to the information market that people who are actually transforming energy have to operate in, so they have to filter through more noise, making the market that's supposed to map energy needs to producers less efficient than it otherwise would be.

21. 12:10Claim

    Each homeowner isn't actively misallocating energy with every decision; they make one bad choice, which is remaining in a system that lets others misallocate their reserves without their consent or knowledge.

22. 12:49Quote

    The default state in the fiat system is that you will be drained. Your energy will be misallocated by others because they can pool it and do it more efficiently than you can stop it, because there's no way out of the system before Bitcoin.

23. 13:19Analogy · condensed

    Your house goes up 20 percent, but because they've increased the money supply, your house actually isn't going up; it's getting worse off in the time you think it went up.

24. 13:58Claim

    They're taking your reserves, diluting them, and investing them in energy-squandering absurdities, knowing they won't generate more energy in return. They're burning reserves, and this happens again and again until it hits someone with a bag to spare who decides to put it into Bitcoin instead.

25. 14:36Claim · condensed

    Where is that energy reserve coming from that one person decided to flow in? Maybe they did something that added value or utility to the extended order, but that's a small probability; it's not the most likely thing to have happened.

26. 15:11Quote · condensed

    You are feeding your energy to me, whether you realize it or not. It's eventually finding its way to me. You can either have ownership of your energy or you can't, or you get none of it.

27. 15:42Claim

    It's fairy tale stuff to think everyone who is rich did it by increasing their efficiency at the extended order and adding value to the system. The vast majority of individuals with excess energy in the fiat world got there by understanding the flows of freshly printed currency, whether they know that's the reason or not.

28. 16:14Quote

    You didn't play the game because you didn't see the game. Other people did.

29. 16:44Claim · condensed

    When a giant pension fund allocates to Bitcoin, the energy goes to whoever already owns Bitcoin, not to the people who actually transformed that energy in the first place, because it's coming through a middleman.

30. 17:15Claim · condensed

    The people who transformed the energy in the first place are the ones taken advantage of at every turn; the returns and fees go to the middlemen instead.

31. 17:50Quote

    Every sat that you leave exposed to the current system is being bled by the current system all the time, right now, every moment. How much of that will you take? The answer is a lot.

32. 17:50Analogy

    You cannot stay still in a system designed to bleed you. Last year you worked five days a week, but in two years' time they will have taken your Mondays, without your permission. Each Monday of the year you worked now appears as though you didn't work.

33. 18:24Quote

    You can have all of your Mondays back. I'm going to give you your Mondays, and I'm going to add an additional day to your year that you get of everybody else's work.

34. 18:55Reference

    It turns very much into a 1984 thing: history is written by those who control the ledger, and that ledger says you didn't do anything on those Mondays. We have always been at war with East Asia, and you don't get a choice.

35. 19:25Claim

    It doesn't end with the Mondays; it goes on to the Tuesdays. In two more years you'll lose your Tuesdays too.

36. 19:57Analogy

    Guess who has your Tuesdays: I do, and I'm not giving them back, because if I did, they'd get them before you. There's somewhere in here, there was a chemotherapy analogy of what has to happen, somewhere in this system where Bitcoin wipes the slate clean.

37. 20:28Claim

    You can opt out before that, but if you choose not to, you'll suffer the same as the most horrendous of the fiat opportunists; there won't be a differentiation between you and them.

38. 20:58Quote

    All you have to do is buy Bitcoin. All you have to do is switch teams, just switch teams, and you get all the benefits. It could not be more low friction.

39. 20:58Analogy

    Imagine you're drowning in the middle of the sea, or in the most violent storm ever with hundred-foot waves crashing around you. To escape, all you had to do was wave a finger or gurgle something, and you're instantly out of danger, perfectly safe, and thriving.

40. 21:32Claim

    Everyone thinks the massive gains from Bitcoin are on offer when you allocate energy to the system, but that's missing how unproductive you've been up until that point, because you didn't understand money.

41. 22:03Claim

    I think the real value is further still: the real value is in the shift in your networks and your operating source code that comes with the Bitcoin realization that this thing actually exists and is out there. It's the immovable object; I have to shift, I have to adapt.

42. 22:34Analogy · condensed

    It's like immigrating to a utopia where no one can rob you. You can be satisfied just living where you can't be stolen from, or you can also learn the new language the inhabitants speak, so you can exchange freely with people who also can't steal from you.

43. 23:05Claim

    More exchange is better, and exchange increases when information is exchanged with an increase in velocity and a lack of noise.

44. 23:38Claim · condensed

    If you speak the same language as someone, there's less friction, which increases the opportunities for exchange, and we're not going to exchange unless we can find gaps in the energy transformation process, which makes us more efficient at whichever side of the exchange we're on.

45. 24:12Quote

    I've been wrong, and this is how wrong we've been, because it's every single side, it's half of every single transaction.

46. 24:44Claim · condensed

    If you were a random pleb and could rewind four or eight years, the single best thing you could tell yourself is to buy Bitcoin and stop whatever else you were doing to get as much as possible. That's still true today.

47. 25:15Prediction · condensed

    Eight years from now you're going to wish you'd come back and said this. It's been winning 13 out of the 15 years it's existed. Same urgency, same danger, same results, because Bitcoin won't change, the world will adapt to Bitcoin.

48. 25:47Claim · condensed

    Copying what's worked in the legacy system always had some quality loss, but there's no loss here: if it worked for one person, it works for all people, because there are a lot of people that make up all the people.

49. 26:22Claim · condensed

    The best way to allocate energy within the network scales to offer the same return regardless of existing size. If someone wins using Bitcoin, everyone wins using Bitcoin, but not everyone will, even though they want to.

50. 26:22Analogy · condensed

    It's like the last mile problem in public transportation, where everyone goes to their own unique little spot and the wheels fall off; that last little bit is where people screw up finding energy efficiencies.

51. 26:54Claim

    The weakest link in the chain for most Bitcoiners is themselves, whereas in the legacy system the weakest links are the users. Smart users remove themselves from the equation.

52. 26:54Analogy · condensed

    This is the fund manager employing a fund manager: I'm not very good at doing nothing, so I give it to someone who is. What you can offer is diamond hands, not selling, being happy to be overallocated, reminding someone why they're winning even when they're temporarily getting their ass kicked.

53. 27:26Analogy

    I can read a shitload of books and live a thousand times the number of experiences and lives by condensing the timeframes into book format, hearing only the signal while removing all the noise.

54. 28:04Quote

    Be a signal maker. Ignore everything else, all of it. Everyone's talking their book, macro dates, interest rates, all of this, nobody cares. Zero care factor. This tool wins.

55. 28:36Analogy · condensed

    Gunpowder wins. The cannonballs start landing while you thought you were fighting a sticks-and-stones war, and a cannonball takes out the guy next to you before the news has even spread through the army or back to the kingdom, and the people inside the castle walls still believe the gates will hold, except the gates won't stop the advance either.

56. 29:43Claim

    Having an economic constant for the first time is a fantastic ego check for value addition for anybody inside the system.

57. 30:18Quote

    If you didn't beat Bitcoin, you misallocated resources. That's it.

58. 30:18Claim · condensed

    Bitcoin is going to beat everything because it's the vacuum that's sucking up old value.

59. 30:18Claim · condensed

    Even people who've known and held Bitcoin for a decade didn't outperform, because they left energy out of the system at some point; there's some alpha there.

60. 31:21Quote

    Finding an area where you can add value to the system is: I can just be a psychopath, and that actually helps everybody, which is pretty nice.