The Knowledge War

Every passage, on the record.

1. 00:00Idea

   That leads us to the topic of the war that I have often discussed, which is this knowledge war between the fiat legacy system and the Bitcoin system, and that it exists because well, the war starts when there are two sides. There's one side, there's no war, and as soon as you have an alternate route available to you as a member of the extended order, you can choose to take one of those two divergent paths.

2. 00:46Claim

   It really is the story of life: separate entities locked in an energy competition, traveling on distinct and divergent paths, with the victors being the ones who transform the largest amount of energy from inaccessible, and therefore useless, to accessible, and therefore useful. It's that increase in the utility of energy that allows for information to be generated, and from generating information we begin to develop knowledge and know-how.

3. 00:46Quote

   A society knows more because individuals know different, and I didn't come up with that.

4. 02:06Claim · condensed

   If a hypothesis like a society knows more because individuals know different is true, it's a more accurate representation of the objective physical world, and a clearer picture of that world is good because you are always and everywhere making energy allocation decisions, and every decision is either zero or one: allocate or don't allocate.

5. 02:06Quote

   Every decision is an energy allocation decision, and every decision is either zero or one. Allocate, don't allocate, and you allocate based on the information that you are receiving from the outside world.

6. 03:36Analogy · condensed

   The classic example is the Inuit: everyone in the village can hunt, fish and build igloos equally well, which looks from the outside like a lot of knowledge and know-how because it is general in nature, but everyone has to be self-sufficient or they are dead, and dead people don't have energy reserves.

7. 06:14Analogy

   Imagine human heads being filled with information: if you fill every member of society's head with the same knowledge and know-how, you're limited by the physical capacities of the individual, but if you can fill each bit of compute space with different information, the total amount of information grows much more broadly, which is the emergent property of collective knowledge.

8. 06:14Claim · condensed

   For this dispersed-knowledge system to work at its most efficient, individuals need to be able to share information with one another, because if we break large chunks of knowledge into pieces, we need to be able to restore the original elements together by sharing them and finding which pieces join with other pieces. Communication is paramount in this environment, not so much in the Inuit example.

9. 07:44Claim · condensed

   The story of history, the story of mankind, is the ability of the collective to share information, to disperse it throughout the economy in smaller and smaller bits with more and more individuals, then bring those pieces back together to do a lot more with a lot less. That gives everyone in the collective almost superhuman abilities they couldn't have on their own.

10. 08:39Reference · condensed

    The classic example is that no one has the capacity to understand all the information necessary to make a pencil, which is why improving flows of information, the definition of communication, becomes incredibly important.

11. 08:39Claim

    Every watt directed at communicating information between nodes in the extended order, above the absolute minimum requirement to accurately embody the original message, is wasted energy, and it's an enormous amount of energy being wasted right now.

12. 09:42Claim · condensed

    If a tool came along that allowed for more signal with less noise and drastically lowered the cost of sharing information while making it more accessible to more members of the extended order, early adopters of that tool would experience a massive efficiency gain over those who chose not to adopt it, because people have a hard limit on how much productive knowledge they can generate, but societies can scale almost infinitely by dispersing knowledge more widely.

13. 11:12Claim · condensed

    We can scale infinitely in terms of information just by dispersing more of it across more members of the extended order, but dispersing it means we have to communicate and share it in order to recombine it, and information eventually takes the form of products, which are the crystallization of the imagination.

14. 11:50Reference

    Why information grows, this is the main point of the book, the main concept, and even though it doesn't have Bitcoin in it, it is the most compelling Bitcoin book I have ever read, because it explains why one team is going to win out over the other.

15. 11:50Claim · condensed

    It's going to get good for Bitcoiners and bad for people stuck in the fiat legacy system, because they're going to get out-competed in terms of the information and knowledge they're able to accumulate, and we are so far into this process that almost everything in the modern world requires more than a single person-byte, aggregated across networks of individuals we call firms.

16. 12:40Analogy · condensed

    It's like the cartoon Captain Planet: five rings each held individual power, fire, water, wind, heart, and were okay on their own, but when the bad guys got too strong the heroes would combine all their rings into one superhero, Captain Planet, who could then save the day. That's what's happening with information dispersed throughout the extended order: firms bring it together by facilitating exchange, capitalizing on it, and crystallizing that knowledge into a product.

17. 14:00Claim · condensed

    A product lets everyday people use the efficiency gain provided by someone else's knowledge without needing that knowledge themselves. They don't need to know how to build it, they just need to know how to use it, which is a huge time and energy saving because now not everyone has to be an expert; we only need one expert and everyone else can embody that knowledge.

18. 14:36Reference · condensed

    Think back to the building blocks episode: every single firm, if the system is efficient, should be adding another piece, its knowledge piece, to the pre-existing structure until it's their turn to take over the process.

19. 15:28Claim · condensed

    Once it's your turn in the production chain, you only need to know how to do your bit, which significantly diminishes the requirement for overall knowledge invested before that point. It isn't really a question of scale: you can swap in different people with the same knowledge and get bigger transformations without disruptions in output.

20. 16:03Analogy · condensed

    In a factory line or processing plant, you can take one person out and put in another who knows the same job and scale that way, but you couldn't do that with an orchestra. Mix up the musicians and the final song, which is only possible because of everyone's own unique knowledge and know-how coming together, is gone.

21. 17:26Idea

    This parallels the idea we touched on in the last episode, which again is this information Lego theory: you can add complexity simply by adding new blocks to an existing structure, and that really is the low-hanging fruit in the efficiency gain game, because you already have the individual blocks.

22. 18:39Claim

    Adding new blocks to an existing structure is not energy intensive: does this work, yes or no. If no, add another block at a different piece; if yes, make the product. Every attempted configuration leaves clues as to the next best path forward for product development.

23. 19:17Claim · condensed

    The more existing blocks a system already has, the more places a new block can fit, so the likelihood of that new block making the system more efficient is significantly higher than in a system with only a few blocks. Complexity actually makes it easier to find efficiency gains.

24. 20:47Claim · condensed

    As the knowledge embedded in products around the world becomes more complex, inequalities pop up between places that are better positioned to work on some products than others, and it turns out historically that this inequality traces to place rather than to people, because information exchange in the physical world is costly and compression is extremely energy intensive.

25. 23:07Analogy · condensed

    You can transport energy by a steam-powered train carrying tons of coal, or by electrical power lines. Both get energy to a destination, but the more complex system, the one with less friction, ends up with more energy at the end of the pipe.

26. 23:07Claim · condensed

    Inequality stems from a lack of connection to others with different knowledge pieces than your own, not from being connected to people with the same pieces. You can deal with it either by redistributing energy reserves to compensate, or by improving inclusion, removing the friction between the haves and have-nots so they can exchange.

27. 24:37Claim · condensed

    Economic development is the result of adopting technology, which is tools, code and know-how. The tools and the code, the physical machinery and the plans, are easy to move; the actual know-how, which only comes from experience using the tools and the code, is the hard part to transport and rebuild.

28. 26:01Claim · condensed

    Competing teams are locked in an energy battle every time a new product combines existing blocks or adds new ones, and whichever side secures more energy at a lower cost wins that battle. You don't win a little bit of the total supply, you win it all, and in a very short time period.

29. 26:51Claim

    The more connected the extended order, the higher the likelihood of novel information collision, so a tool that removed physical limitations from connectivity would be well suited to overpowering a pre-existing system without that capability. Bitcoin exists, and that means the energy war is being fought right now.

30. 27:27Claim · condensed

    Early adopters of Bitcoin have a significant energy advantage because the protocol's connection is more reliable, with a larger total net of possibilities, and it's free from control: there's no way the fiat system can out-compete Bitcoin in the exchange and connectivity of end users because Bitcoin is permissionless and filters real-time energy needs.

31. 28:01Quote

    There's no way if you're not real-time you cannot compete with real-time. If you are permissioned you cannot compete with permissionless.

32. 28:01Claim

    Bitcoin users have more opportunity to share knowledge, which means specialization can narrow, which means the Bitcoin economy can expand to hold more total information. It's an information game: who can access more information quicker, the fiat system or the Bitcoin system.

33. 28:59Claim · condensed

    If you discover a more efficient way to transform energy and keep it for yourself, you cap the upside for the extended order; if you share it, everybody is better off because they have excess energy to direct to other activities, and knowledge leads to efficiency, which leads to energy, which leads to prosperity.

34. 29:55Claim · condensed

    Unlike physical wars, users of the fiat or Bitcoin system can simply switch sides if they feel like they're missing out, and every deserter weakens the legacy system while the Bitcoin economy simultaneously increases its own capabilities, which produces more information.

35. 29:55Prediction · condensed

    This is the gradually-then-suddenly phenomenon that we haven't seen play out yet, at least not at the speed I have in my mind, but it's going to take place, and I think it's going to happen sooner than most people imagine.

36. 31:07Claim · condensed

    Putting knowledge into a product or object lets you pass on the practical implications of that knowledge forever without sharing anything else: the end user gets superpowers they didn't have before without doing any of the work, because a product carries explicit, communicable knowledge, while know-how remains tacit knowledge that can only be learned from experience.

37. 32:17Claim · condensed

    The economy is an amplification tool for storing and processing information: once our knowledge structures exceed the person-byte capacity, they need to be chunked into little bits, shared, and have friction removed from the exchange so they can recombine into new items. That's what firms exist to do.

38. 32:48Claim · condensed

    A major friction throughout the history of the extended order is the transaction cost on the buy side of the buy-versus-make decision: if you can buy easier or with less transaction cost, making becomes more expensive by default, so you make less and buy more, which disperses knowledge further because you decentralize the making and the distribution of knowledge through exchange.

39. 34:51Claim · condensed

    If fewer people are making and more people are buying, more people sit below any one person in the product stack, which means knowledge is more dispersed than if a single firm did everything in house and kept concentration of knowledge small.

40. 35:21Claim · condensed

    Every time, always and everywhere, the largest transaction cost in any economy, regardless of country or people, is trust. If you don't trust someone, you invest a tremendous amount of energy relative to the alternative to exchange with them, and a higher level of trust in a society supports a higher level of complexity in exchange.

41. 35:21Quote

    Every time, always and everywhere, the largest transaction cost is trust.

42. 36:38Claim

    Satoshi basically amplified his own knowledge by encoding it into a physical object that then distributed that knowledge. Nobody has to know what Satoshi knew; all we have to do is know how to use the tool he gave us to be more efficient, because that work is already done, like a layer of the pyramid already laid.

43. 36:38Quote

    Nobody has to know what Satoshi knew. All we have to do is know how to use the tool that he gave us.

44. 36:38Claim · condensed

    With a real-time settlement of a bearer asset, we don't have to wait 30 days, there are no clawbacks, no risk of not being paid, and no double spends, so we no longer have to sink energy into trusting other individuals: we don't need the knowledge to build that system, just the know-how to use it.

45. 38:08Quote

    This system is gonna kick the living shit out of the other system because it will out-compete it, because it makes exchange significantly less costly and it's a more accurate reflection of the real world demand for energy.

46. 38:08Claim · condensed

    As the exchange spreads quicker through a system that can't be tampered with because it's permissionless, companies, firms and individuals who embrace Bitcoin get better off, other people notice, and more of them switch to Bitcoin.

47. 39:26Claim · condensed

    Every switch to Bitcoin immediately makes the Bitcoin system stronger and the legacy system weaker, though the legacy system doesn't even need the extra push: it's already crumbling under its own weight as more and more debt gets saddled onto fewer and fewer remaining individuals.

48. 40:03Open question

    The question you have to ask is whether it's easier to generate information in the Bitcoin system or the fiat system. If someone believes it's easier in the fiat system, please let me know what I'm missing, what allows for better knowledge distribution in fiat than in Bitcoin, because I don't think it does.