85. Hyperbitcoinization with Knut Svanholm

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October 13th 2021.

In this episode Saifedean talks to Knut Svanholm, author of Bitcoin: Sovereignty through mathematics and Bitcoin: Independence reimagined. They discuss what a “hyperbitcoinized” world might look like, to what extent it might reduce the need for human labor, and how quickly its economy might grow. Both Saifedean and Knut also talk about Austrian School economists Mises, Rothbard and Hoppe, and how key concepts in their writing – such as time preference and scarcity – can be applied to bitcoin. In the Q&A, Knut shares his views on the likelihood of greater sovereignty on the high seas, whether global government control is increasing or decreasing, and why the next big battle within the bitcoin community could be over the design of the satoshi symbol!


Podcast Transcript

Saifedean Ammous: [00:05:10] Hello, and welcome to another episode of The Bitcoin Standard Podcast seminar! In today’s seminar our guest is Knut Svanholm who is the author of Bitcoin: Independence reimagined and Bitcoin: Sovereignty through mathematics.

He’s also created several nice educational videos on Bitcoin, such as Bitcoin and the separation of money and state, Bitcoin’s price curve will not be S-shaped and Everything divided by 21 million, which is Knut’s forthcoming book. So we’re here to discuss Knut’s books and his ideas on Bitcoin, and I’m sure he’s going to offer us a lot of very interesting insights. Knut, welcome!

Knut Svanholm: Thank you Saifedean! Nice to have a chat again, I believe last time we spoke face to face was in Riga in [00:06:00] 2019. DM’d a bit since then but not like this, so good to see you again! I’m happy to say that I have a mission, I’m the editor of the Swedish translation of The Bitcoin Standard as well. So I’m also working on that now.

Saifedean Ammous: Yes, thank you for that! I hope it turns out very nice. And I have no doubt you’ll put in great effort into it.

Knut Svanholm: I have doubts about that. No doubt about it turning out great anyway because yeah, it is one of my favorite books.

Saifedean Ammous: Well thank you sir. All right, so let’s get straight into it.

Tell us, first of all, in your book Sovereignty through mathematics, before we get into that, I wanted to learn a little bit more about your background and what got you into first of all Bitcoin, but also this kind of unique mathematical and scientific lens you apply to analyzing Bitcoin.

Where did you [00:07:00] come from?

Knut Svanholm: I come from a different background to most other people in Bitcoin because my education is like merchant marine sea captain. I was sailing a tall ship for most of my career or for at least eight years I was on this tall ship sailing the world and seeing around 40 different countries.

Let’s do the entire story. After I graduated high school, I got into a university studying electronics engineering, but I was very tired of school at that point, about the bureaucracy and how lame everything was, the term wasn’t invented yet, but in fiat education.

 I dropped out after a year having done the maths courses and basically nothing else [00:08:00] and I went out to sea instead and worked as an AB and later on got into the merchant marine academy and became a sea captain, or at least on paper. Wound working as a second officer and a chief officer on this tall ship, sailing around the world.

And after that, I’d been working for seven years in the offshore wind industry, first as a captain on one of the crew transfer vessels, small catamaran vessels and then went to shore like four years ago and started as a crew coordinator. My last job was as crew manager for that company, managing around 250 seafarers on Danish contracts all around Northern Europe. But I quit.

In May, I sent them a letter saying, I’m tired of this, I’m not doing this anymore. And I did my [00:09:00] last day of fiat work like 10 days ago. I’m doing Bitcoin philosophy or whatever full-time now, whatever you may call it, I haven’t really thought out a coherent plan yet.

Saifedean Ammous: Bitcoin philosophy and shitposting, like basically all of us!

Knut Svanholm: Yes! Shitposting is not a crime, it’s a vocation.

Saifedean Ammous: It’s a mission!

Knut Svanholm: It’s a mission, that’s the word.

Saifedean Ammous: I think every one of us at some level was saved by an older generation of shit posters. Like for me, getting on Twitter and seeing people like Pierre Rochard and Michael Goldstein trolling the nocoiners and laughing at them was arguably most influential in me taking Bitcoin seriously and digging into it and trying to learn it and understand it.

The power of these ideas is really strong. [00:10:00] So don’t knock yourself out. It’s not exactly sailing ships around the world, but it might even have more of an impact.

Knut Svanholm: It’s smoother sailing and yeah, I have to give it to you, you’re a great shitposter and a great inspiration in that regard as well. And Gigi is a good one too.

Saifedean Ammous: Yes, Gigi is phenomenal about that.

So how do you go from, I guess the link that I like to focus on is the engineering part. I think there’s something about engineers being drawn into Bitcoin. There’s a lot of engineers in Bitcoin and I think a lot of engineers have managed to really grasp how it works, I would say better than any other demographic, any other job. I think computer programmers and computer software engineers are at a specific advantage here because they have the engineering mindset and they come from a computer background that allows them to understand it.

But I think engineers in general, even if you’re a mechanical engineer or [00:11:00] electrical engineer and you don’t have to know much about coding and programming, I think there’s something about Bitcoin that fits with that worldview. I think the corollary to that is that engineers are the people that have the hardest time understanding fiat economics.

I remember when I used to teach at a university, I used to teach undergraduate basic macro and micro nonsense and give them all these equations. And I’d explain all of this absurd stuff and usually I would give them an alternative perspective, but before I give them the alternative perspective, I’d look at them and I’d tell them, does this make sense?

And there’s always a couple of smart kids looking at me and being like, is this a trick question? Because this really doesn’t make sense. And then they look at me and they say, sir no it doesn’t make sense. I’m like, exactly. You must be an engineering student because this does not make sense. You are correct.

If you think it doesn’t make sense, you’re beginning to get it. You know, the business administration [00:12:00] students, they don’t have as much critical thinking in general, on average obviously as engineers. But engineers, it’s like the system has to click together and it has to make sense.

All the moving parts have to fit together in order for me to accept it. When you put a bunch of Keynesian equations and telling them yeah, we’re just going to print money and give it to people and then they’ll spend more and then there will be more jobs and then we will have prosperity. It doesn’t fly.

On other hand, Bitcoin, when when they see it, they manage to get it quickly. I think this is the part, but do you think your sailing career helped you in getting into Bitcoin?

Knut Svanholm: Maybe seeing a lot of different countries and a lot of different flawed systems, like flawed in different ways.

And I noticed that I came to other conclusions than my fellow Swedes did about Cuba and the U. S. for instance. People really fell for the propaganda in [00:13:00] Havana. And they thought that people really loved the government there, which they said that they did. But of course they did because they were under threat all the time.

So I came to different conclusions. Funny thing you say that’s about engineers because for me it was always like the harder the science was, the easier it was for me to buy into it. It made more sense, the harder it was. Mathematics made the most sense and the social sciences made the least sense until I found Austrian economics, which was like the missing piece of the puzzle to make sense of the world.

And to me, Austrian economics is to the subjective what mathematics is to the objective reality. You have to see it through that lens to really get it and to realize why economics as a form of science is just really a big joke. And this was never supposed to be about [00:14:00] economics per se, but about studying human behavior and why people do stuff at all.

That’s the core thing you have to get at. Your book helped a lot. I’m rereading human action at the moment and I’m reading Hoppe’s Democracy – The God That Failed and I’ve really read up on the Austrian stuff. I read Human Action almost twice and Man, Economy, and State by Rothbard and some other shorter books by him as well, and now Hoppe.

And I’m listening to Austrian economic stuff all the time. Haven’t taken your course yet though. So I guess that’s still on my list of stuff to do. I’m sure we can have some great conversations there too.

Saifedean Ammous: Yes, we’ll give you a complimentary membership for coming on the show. Remind me Peter.

The next question I wanted to ask is on [00:15:00] your book Sovereignty through mathematics, can you give us a brief summary of the main thesis of that book for the listeners?

Knut Svanholm: It’s sort of The Bitcoin Standard lite, it’s only a hundred pages long, but it touches on many of the same, I think we wrote them at about the same time and released them at about the same time. You released yours in 2018, right? Or was it even 17?

Saifedean Ammous: I wrote it in 2017, but it took the publishers forever to get it out, so it came out in March, 2018.

Knut Svanholm: Yeah. I wrote mine in 18.

I started writing a new ERC between 17 and 18 and released it in 2019 I believe. It didn’t really take off until I brought it to Riga and gave it to some key people in the Bitcoin space.

Saifedean Ammous: I remember you gave me a copy in Riga.

Knut Svanholm: Yeah, yeah. You’re one of those key people. Well, the first [00:16:00] chapter is about how everything we do is really a trade. When we when we talk to each other, we exchange information with each other and we do that because there’s a mutual benefit somewhere. We do it because we want to. I don’t have to threaten you and extract the information that way, I can talk to you instead and we can give each other something of value.

Not only do we trade with each other, but we trade with ourselves as well, since there’s always a time trade off. So that chapter focuses on how everything can be viewed as a trade and not only goods and services, which is really the same thing, but also speech. You trade with yourself all the time, that ties into the whole time preference thing.

Then there’s 10 chapters in the book about different aspects of Bitcoin. And it’s like trying to capture people’s interest and trying to provoke thought [00:17:00] in the reader, in different ways. It’s not giving any answers to anything really, but trying to tickle people’s brains is what I set out to do with it.

There’s one chapter about Bitcoin can be viewed as financial atheism, which is like the the opposite of this Bitcoin is a religion theme that is going through the Bitcoin space now. And it’s more like this is a monetary system that doesn’t require a belief. All the other monetary systems require belief and require a belief in a higher power, especially in authority.

So that can be viewed as, I compare that to organized religions and Bitcoin is like the antithesis of that. You don’t really need to believe in anything, you just need to understand the [00:18:00] mathematical and the game theory of physical like foundation of it.

Saifedean Ammous: Yeah. I mean it’s a astate-ism if you want, which is really the modern version of atheism. In a sense, the state has replaced religion.

Knut Svanholm: Yeah, it’s another religion. To me it’s just natural, it’s on a continuum. It’s another way of organizing and controlling people.

Saifedean Ammous: Yeah. I think the conclusion that I’m arriving at is that it’s a far more destructive and harmful mechanism of organizing religion because when religion is some guy in the sky, I think the main advantage of that is that it’s not some guy on Earth and that’s what matters. So if everybody agrees that omnipotence, omniscience and omnipresence are only properties of [00:19:00] somebody in the sky, this entity we call God, it means that nobody else can be God on Earth.

It means that if you tried to be God on Earth, everybody around you is going to think that you’re a weirdo, but with modern stateism the God is the state and the God is whoever happens to be in power in the state. A lot of people think they’re being edgy by being atheist and not believing in God, but the real edginess today is not believing in the state.

Like not believing in the legitimacy of the state, that’s what a heretic is. If you want to be a hero, go and try and figure out the intellectual case for why you are able to live your life without having the state tell you what to eat and what to drink and how to behave and who to marry and how to do it.

Knut Svanholm: But I take it one step further. I don’t believe in any of it and I think the very notion of omnipotence, it’s [00:20:00] dangerous in itself that you need guidelines to form a morality and everything. I think the more people can think for themselves, the better off we are. And come to their own conclusions about, I hope that’s the case at least.

And it works for me, I’m a skeptic by nature. So I have a very hard time believing in stuff without seeing like hard evidence for it, or at least hard evidence to the contrary that the other thing does not work. You need to really convince me in order to convince me. And it took a while to swallow the Austrian economics pill, but when you do, you really do.

Human Action is the best book I ever read by far. It’s sort an epiphany reading that book because you’ll get a [00:21:00] different lens on things. That was a while back so let’s get on where we are today.

Saifedean Ammous: Yes. So you were saying, Sovereignty through mathematics and in that book you discuss time as the ultimate example of a scarce and tradable resource.

Yeah that’s something I also discussed in The Bitcoin Standard. What is it about Bitcoin that gets all of us to start thinking about time? Gigi as well in his book and his articles, he does a lot of thinking about time and he says Bitcoin is time as well.

Knut Svanholm: Yeah. If you haven’t read Gigi’s article Bitcoin is Time, please do because it’s one of the best articles. It’s probably my favorite article in the entire space, article wise. It’s really spot on about what Bitcoin is and Bitcoin really is time. Time is such a fascinating concept. First to tie back to atheism, [00:22:00] if I think that my lifetime is scarce, like I don’t believe in an afterlife that’s a perfect fit for Bitcoin.

Then I have my lifetime and my Bitcoin, they match so to speak. This is a scarce resource and I should be careful with it and I should cherish every moment. That can give you a more fulfilling life if you will, because you cherish each moment. The thing about time, reading Hoppe at the moment, he’s got a lot of good insights about it from an Austrian perspective.

He talks about being taxed is slightly worse than being robbed. Because if you’re being robbed of something the robber will probably just choose you as the target once because attacking you again poses a risk to the robber because you might be more prepared for him the next time he comes.

You might’ve bought some [00:23:00] security equipment, like a dog or a gun or whatever, an alarm system. But taxes on the other hand, they rob you every month and like inflation robs you all the time, every microsecond of your life. And that’s much worse because for the victim of a robbery or theft, we react in the same way.

The thing that happens to our psyche is that we have to think in more high time preference ways. We can’t plan ahead for the future as much as we would have if we hadn’t been robbed. So if someone steals all your possessions, All you can think of is short-term decisions. Like how do I get food? How do I survive? How do I acquire food for the next day?

That’s the ultimate form of high time preference, right? And if you can keep all the fruits [00:24:00] of your labor, then you can have ultimate low time preference. Then you can think across generations and build things that last and in that sense taxation and inflation do the same thing and worse than being robbed does to us.

And we’re all victims of that. And that’s part of why so many resources around the globe are misallocated all the time. I was walking with my mother today and like the streets of Spain here, you have these little nature areas where, where people throw, everyone is a tourist here, so they throw away plastic bottles and stuff, and she thinks the problem is with the recycling in Spain, they don’t do enough recycling.

But the underlying problem, I tried to explain to her, it’s not recycling, it’s consumerism and how we buy frivolous [00:25:00] bullshit all the time and how we’re incentivized to make short-term decisions like that. And if we were forced to learn from our own mistakes and clean our room we wouldn’t be as wasteful.

And that’s a huge part of this revolution and it ties into time. All of it.

Saifedean Ammous: Yeah, absolutely. I agree entirely. And I think the point that Hoppe makes us very powerful, which is robbery as like an actual disaster. It’s an unexpected thing that happens to you, it befalls you, it may devastate you financially, but you don’t live with the expectation that it’s going to happen every day.

And so then you may recover and you may go back to how you were before, but with taxation and inflation, because they’re legitimized because the majority of the population generally is essentially brainwashed by government propaganda to believe that these things are legitimate, then [00:26:00] you need to factor them in into your future.

You got robbed of 30% of your income this year, and you need to remember that you’re going to get robbed of 30% of your income every year for taxes, for instance. And then of course with inflation you may be getting a much higher degree of robbery over time. And that just means that that your reward for everything that you do is 40% off.

I get X in return when I’m getting actually is 0.6 X because X is always getting robbed. The likelihood of you investing for the future declines, the likelihood of you working for the future declines, the amount of work that you put in will likely decline all of these things.

All of your discounting on the future rises, time preference rises. Your book touches on [00:27:00] that very nicely. So you also in Sovereignty through mathematics, you discuss how Hyperbitcoinization is likely to progress exponentially at some point. That we can’t grow at a slowing rate. Why do you think that is the case?.

Knut Svanholm: Yeah, this is a really interesting part because this is the part that I really wanted to discuss with you Saif, because we’ve made a video called, you mentioned that there, Bitcoin’s price curve won’t be S shaped. In that video, in Sovereignty through mathematics, but even more in that video, I talk about Hyperbitcoinization and first and foremost its inevitability. Because everyone’s incentivized to be Hyperbitcoinized themselves.

There’s very few people on Earth that wouldn’t gain from adopting this thing in some shape or form. And what happens then, most people [00:28:00] imagine Hyperbitcoinization as an S curve, like the TV had or radio or the internet or Facebook and Google.

They all had an S-shaped adoption curve where nothing happens in the beginning and there’s a catch up effect phase where everyone’s onboarded. Remember when smartphones happened for instance, it took a couple of months and then the entire globe had a smartphone, including all the poorer countries as well. People flee from countries, but they flee with with an iPhone most of the time or an Android. But money is a different beast, when everyone on Earth has some Bitcoin, that’s not the endpoint because when everyone’s onboard, there’s still more money to put into Bitcoin.

And those people that get it like Michael Saylor is doing now for instance, the more that you understand Bitcoin, the more of your wealth you want to allocate into Bitcoin and not into other stuff because Bitcoin will perform [00:29:00] better over time. And say when we’re fully hyperbitcoinized and every dollar and euro and yuan and every other shitcoin is in Bitcoin and there is no more shitcoins.

We really share the world among these 21 million tokens. I don’t see an endpoint there either, because what we have then is a global sound money free market without interventionism, which is a much, much more well-oiled mechanism for human progress than what we have now. We have to remember that what we’re living in now is a handicap system.

It’s severely handicapped. It’s like a dog on three legs, the world economy. And it doesn’t really do what it’s supposed to do and resources get misallocated en mass all the time. I see a world where you get the velocity of money from necessity because people will crave to be paid in Bitcoin.

So all [00:30:00] the whales will have to spend there, if they want to buy something for their Bitcoin, they will have to give it to those that have less. It’s doing that right now. It’s really spreading the resources, spreading the wealth across the globe. This is also a fascinating aspect, that it’s actually redistributing wealth by doing the exact opposite of what socialism does.

So Bitcoin is actually in reality redistributing wealth. But at that point my, my point being that that world looks very different from what we have now. Because no resources get misallocated, no resources get wasted or, maybe that’s your topic, but a lot less resources get wasted.

Fewer resources get wasted, that’s the proper grammar. And we will have not only a steady expansion every year, but an [00:31:00] accelerating one I don’t see an answer to this. This invention or discovery could be weirder than we think.

It could be something that we truly can’t wrap our heads around. If there’s no endpoint to Hyperbitcoinization, what does the world look like in a hundred years from now? That’s impossible to predict and yeah, I’m looking forward to it. The next 10 years are going to be weird. And then the 10 years after that are going to be even weirder.

What do you think about these things?

Saifedean Ammous: Yeah, I definitely agree with you on the fact that we have no idea just how much better life is going to be once we take money out of the hands of the state. I think the example that I always like to use is compare the average Soviet citizens experience with potatoes under communism versus under the free market.

So right now, if you’re in Russia or in Poland or an [00:32:00] ex-Soviet country, you walk into any supermarket you find potatoes, you buy them whenever you want and it’s there year round. You find mangoes year round in Poland these days. Back under communism, I had a friend who grew up in communism in Poland, she told me once that she would get an orange for Christmas. That was what life was like when the government handled fruit production and distribution.

Knut Svanholm: Now at least the color was right!.

Saifedean Ammous: Yeah. I didn’t check who knows, Polish oranges may have been blue under communism.

Knut Svanholm: It’s all subjective man.

Saifedean Ammous: Yeah. But you think about the degree of improvement that has happened to the market for apples and oranges and potatoes when we’ve moved from a system of central monopoly provision to a system of [00:33:00] freedom of provision, and it’s just completely unfathomable.

If you’d taken the average Russian who was not very familiar with the outside world, who was a little bit parochial and just grew up under Soviet system and just imagine this would be Soviet system, if you told him we’re going to move to a system where there’s not gonna be a potato board any more, there’s not going to be a government agency responsible for potatoes, their first reaction would have been, oh my God, what are we going to do? We’re all going to starve.

And they wouldn’t have noticed that they have an agency for potatoes, but they don’t have actual potatoes in their supermarket or they rarely have them. And it’s the same exact thing with fiat.

I think one of my most shocking experiences when talking to people about it is particularly in Lebanon. In Lebanon, you witness now the currency’s collapsed, the banking system has collapsed, everything is in shit. And you talk to people, because they are prisoners of the system, they’re mental prisoners of the system, they believe [00:34:00] in it, they believed in the banking system and they had their money in the bank and they have a vested interest in that backend system functioning, their reaction to Bitcoin is that can’t work because there’s no central bank behind it. Like your central bank has really helped you.

And that’s really worked for your lira which has lost 95% of its value over two years. But I think this is the same thing. It’s unimaginable for people living in a mental prison to think about how much life would be better. We can imagine, people like us who are into Bitcoin, who have taken the orange pill, we can imagine that things will be better under Bitcoin, but we have no ability to imagine what they would actually be like.

Imagine the world after 150 years, 120 years or 110 years from the gold standard, it’s the first time that we have hard money in 110 years, but we have a lot more technology because [00:35:00] we’ve developed. All of the technology that we developed under the gold standard, has developed under fiat. fiat wasn’t all hyperinflationary death and destruction and war, we did have years of relatively low monetary inflation.

And so there has been development and some capital accumulation and it’s been amazing. Now to imagine what would happen with Bitcoin, it’s amazing. But I think one way to think about it is that we’re probably not going to have these things called GDP statistics. There was no such thing as GDP statistics under the gold standard.

And I don’t think we’ll have this nonsense under a Bitcoin standard because this is a function of fiat. This is one of the paraphernalia of government control of money. The government promotes its control of money as being for the good of the people, as being for the good of society.

And then they need to manage it and they need [00:36:00] to run the money supply with the pretense of it being for the good of society. And therefore they need all of those statistics and they need to spend all of your money on collecting statistics on how they’re doing with managing your money.

But I think in a world with hard money, I think everybody will have more pressing things to do with their life then look at aggregate numbers that don’t matter. This is I think the key conceit of macroeconomics is just because you can construct a metric like GDP or unemployment or aggregate demand, immediately it follows in the nerd brain and in the brain of people educated in the 20th century, it immediately follows that since we have those metrics, let’s make a relationship between them.

And that relationship is causal. And this is basically the big methodological Gulf between the mainstream and the Austrians. For the mainstream, we have macro aggregates and therefore those macro aggregates are the causal forces. The [00:37:00] unemployment rate went up and so GDP is going to go down and then inflation is going to do this.

And if we do this with inflation, then we can get that one up. It’s like you’re a pilot clicking at controls on an airplane and you press this button, the airplane goes up and it goes down. But Austrians, and this is the powerful realization that you get when you start understanding Austrian economics is they’ll tell you this isn’t you being very educated and smart and intelligent when you’re looking at these statistics, you’re basically just falling for the conceit of knowledge.

This is the fatal conceit of imagining that just because you can measure something, then that thing is the explanatory and causal factor.

But in reality for the Austrians, what causes things to happen is human action, it’s individuals, it’s micro foundations. It’s individuals acting and individuals act and then these [00:38:00] statistics are like epi phenomenon on the top that we measure with it. And a little bit of long detour, but I was trying to get at is that, yeah, I would imagine life will continue to keep getting better, but I’m not so sure that we’d be able to measure it in the same way that we can measure it now, in terms of Bitcoin going up, because once we’ve killed all the other monies, how you measure the growth in GDP?

Knut Svanholm: Yes. And this ties into the rest of my thought thread here, because I’ve been thinking a lot about this lately. For first of all, to tie into your points, I think that the word is arrogance. People who think that they can outperform the free market in calculations, they’re just arrogant. As I view it, the sound money free market of the Bitcoin economy is the only defense human minds have against the AI revolution, because that’s how we can learn how to cooperate and make something good of it.

Instead of [00:39:00] it being a self destruction mechanism, which it will become if someone is arrogant enough to think that they can control the economy. But anyway, this about the Bitcoin standard and how do you measure it post hyperbitcoinization, I take it so far that I don’t think that Bitcoin will ever be a good unit of accounts.

And I base that on the never-ending hyperbitcoinization. A ruler is good because it’s a meter long, or 12 feet long or whatever. But a Bitcoin ruler would be from zero to 21 million, but it’s still a ruler that approaches infinity in purchasing power.

So it’s not really that useful. We have to remember that during golden years of the gold standard and the, like the Belle Époque that you talk about in The Bitcoin Standard, [00:40:00] the inflation of gold matched the progress of human ingenuity.

The prices became quite stable, but Bitcoin doesn’t have that inflation in the future. And you could argue that it doesn’t have that inflation even now, because everyone knows that there will never be more than 21 million. So you have constantly declining prices and constantly increasing purchasing power.

Chances are that we might never be able to use it as a good unit of account. It might make more sense to use like kilowatt hours, for instance, or something tangible like that. Because Bitcoin is so abstract that it might never be useful as a unit of account, even though everyone will want it as a payment. As you say, it might be very hard to measure things in Bitcoin terms.

Saifedean Ammous: No, I think I disagree here. I [00:41:00] think it’s hard to measure something like GDP growth because value is subjective and therefore you can’t really measure the total amount of production that’s taking place because it’s also another aggregate measure and aggregate measurements are just ridiculous.

But I think I disagree with you on two things. First of all, I think right now we’re at a very fast phase of Bitcoin growth because Bitcoin’s going from zero to 100% of global balance sheets, global cash and balance sheets. So currently Bitcoin is about 0.5% of the world’s balance sheets.

If you looked at all of the amount of cash and cash-like assets, which people hold, which we can argue about what counts as cash and what people hold as a cash substitute. I’d say it’s government money, checking accounts, savings accounts, but I think the major one is bonds.

The majority of people have money, the money that they want to sit on, the money that they want to save for the future, the one that [00:42:00] they think of as being low risk, they put it in bonds. Let’s take a moment to laugh at that. So if you think about it, then that’s maybe something like 200 trillion, $300 trillion.

And I discussed this in detail in The Fiat Standard. So there’s about $200 trillion out there that are in bonds and government money and checking accounts and saving accounts and similar instruments and maybe you could add the stock indices. All of it is money that people just want to hold on for the long-term and they don’t want to take a risk with it.

And the notion to go to somebody who has any of that money and to tell them actually what you should do if you want to really keep that money for the future is put it in this new digital currency that’s out there. You’re going to get laughed at. And we’ve all gotten laughed at many, many, many times, and it’s going to be a lot of years of people laughing at this.

But then eventually reality will catch on because we’re seeing what’s happening with the bond market all over the world. Bonds [00:43:00] are getting destroyed as a mechanism for saving and Bitcoin is just continuing to go up. You know, the trend of the last 10 years, it’s very hard to see it reversing either in bonds or in Bitcoin.

The governments are not going to learn fiscal responsibility. Bonds are not going to go back to being good stores of value. And Bitcoin is not about to become hyperinflationary and its supply is going to continue to remain fixed. So because of this, we’re going from zero to a couple of trillion, a couple of hundred trillion dollars.

We were at about a trillion right now, a little more than a trillion at the time of recording. You think about it this way, the potential for fast growth is enormous right now. But then once we get to a world in which everybody’s cash balances are in Bitcoin, there’s no longer any such thing as a government bond, nobody holds government bonds, nobody holds stock [00:44:00] indices.

If you want to make an investment, you make an actual investment. Maybe there will be stock indices, but they would be used as investment rather than as cash, which is what people use them as right now. If we lived in a world like that, where the majority of wealth was in Bitcoin, there’s not going to be the ability, I think, to double everything by 100% per year. I don’t think that’s likely. We’ll continue to make marginal improvements and make things better.

Knut Svanholm: So how many percent per year?

Saifedean Ammous: Well, under gold we probably had something like one or 2% decrease in the price of the majority of goods per year on average. So maybe it’ll be 10, maybe it’ll be 20. But I can’t see it going much much, much higher.

Knut Svanholm: Okay. Let me try to argue against that, first and foremost, because it’s fun. [00:45:00] If you think about the AI that figured out chess or figured out go, it took that algorithm like four hours to beat the previous computer, DeepFritz and DeepBlue and whatever they’re called.

I don’t remember which one is which now but it taught itself how to play chess in four hours and then it beats every other player on Earth in that short amount of time. And imagine now we’re post all the fiat currencies, we’re post post all the shitcoins, we live in a hyperbitcoinized world and we have the collective brain of the free market, like human intelligence utilized in its most efficient way possible because of this global sound money free market, which enables us to use these tools of AI and robotics and whatever.

So all the production costs [00:46:00] of everything are approaching zero. All the transportation costs of everything are approaching zero, especially denominated in Bitcoin and they’re approaching zero fast.

And at the same time, Bitcoin gets distributed over a population of at least 8 billion people. And when you have 8 billion people holding some amounts of Bitcoin, but the chances of them losing some of that Bitcoin somehow is greater. And people die all the time and most people will probably die with their Bitcoins and they are not recoverable after that.

Hodling is a human action in a way, but it’s also the lack of an action at all. Because dead people can hodl objects can hodl Bitcoin. You don’t need to be alive to hodl Bitcoin. And if you think about it, I think that these forces are so powerful that, maybe not a hundred percent per year, but I [00:47:00] think 15 to 20% per year in just human progress or purchasing power is too low.

I think there’s an even more optimistic way of looking at this. Mainly because I think it underestimates how bad the system we live under now is. Because as you said we utilize like 0.6 out of one work week, because the rest of the 0.4 we work for the government, right? If we count taxes and inflation, and if you live in Sweden, you work like 0.3 for yourself and the rest for the government.

Saifedean Ammous: Sounds fair because at least they don’t make you cover your face with a diaper.

Knut Svanholm: Yeah. But anyway, I’m trying to make the argument that we might all be underestimating the power of this. Even the [00:48:00] most bullish among us might still be underestimating it. And of course there might be, as you say, it might level out some in the beginning of the hyperbitcoinized era so that we just have 5% to 10% growth per year, but then that might increase again and we might have another J shaped curve going somewhere else.

It’s very hard to think hard about these things without coming to these conclusions that, that this is. At least possible for it. When you count things like AI and progress in general and 8 billion people truly cooperating with each other and not like leeching off each other, but truly cooperating.

It’s hard not to see it be even weirder than we think.

Saifedean Ammous: Let me counter to that. I think one useful way of thinking of this which I discussed in The Fiat [00:49:00] Standard is Michael Saylor’s way of explaining inflation, which is that inflation is a vector, which is an absolutely brilliant insight, which I hadn’t heard anybody mention before him.

Most people like to think of inflation as a number. CPI came in at 5.4 or 3.2 or 7.8 or whatever. And that is this number. And of course, governments want to have these numbers because if you reduce reality to a number it’s very easy to manipulate one number, as opposed to manipulating all of reality.

And then you end up with, we’ve had 50 years of inflation destroying the American economy and 50 years of idiot Keynesian economists study that actually inflation is only 2% and 2% inflation is actually good for you. Putting that aside, the point is that there will be different goods. So for instance when it comes to processing power, when it comes to hardware hard drive capacity on your laptop, these things can probably grow at something like [00:50:00] 50%, 100% per year.

You might end up with this massive amount of improvement. In fact we may not even need Bitcoin to get to these kinds of levels of improvement in these industries. Perhaps if we just didn’t have the cancerous state leaching on all of our resources, perhaps we’d already have that now, but then you look at the things that require labor, that require human attention.

I don’t believe we will ever be able to get rid of that. So there’s always going to be some element of value that other human beings bring. You can’t just live off robots all your life. Even though Bill Gates’ vision for the future seems to be that we’re all going to be stuck in front of a screen watching all of the lives that others used to experience.

We’ll watch it mediated through a screen. I still think there’s value for personal [00:51:00] interaction. There’s always going to be value for taking a class with the best teacher, sitting in the same room with the best teacher, getting to meet them, getting to know them, getting their attention, that’s the key thing.

There’s not going to be a million best teachers, so we can’t continue to make that infinitely. There’ll always be the best musician, the best violin player. So we can’t witness a 100% improvement every year in the quality of violin players or in the quality of school teachers or university lecturers. These things, I can’t see them increasing and becoming more and more popular to the point where we would get 100%.

Knut Svanholm: Okay, just for the violin player, we can imagine a world where it’s infinite cheap to see this violin player perform on a augumented reality type of thing, the thing Bill Gates is talking about. Regardless of whether you call it an improvement or not, maybe the [00:52:00] tickets were actually being close to the violin player will be more expensive, but the experience of seeing and hearing the violin player play might be a lot more accessible, like everything has become like the digital revolution.

 Just an MP3 file proves that.

Saifedean Ammous: Perhaps, but I think I like to go back to something I read on Mircea Popescu’s blog, which is this kind of mentality will one day replace building a house and having a marriage with buying a sex doll.

Knut Svanholm: That’s not what I’m saying. I’m saying if you have enough Bitcoin, you can find a place to stay where you want to stay and you can have ribeyes every night and you won’t even have the urge to buy any other frivolous shit because that’s all you need basically.

And so it takes away the [00:53:00] need for buying frivolous shit. But then again, experiences can still be cheaper and cheaper. Yeah, it’s hard to imagine something going up forever, but okay. Let’s get onto the next point.

Saifedean Ammous: Yeah, it’s just that I think that some products are by their very nature scarce and by their very nature, they’re desirable for the fact that they’re scarce.

There’s only going to be a few people that will ever be able to say, I watched this guy in concert live. And I don’t think that sitting in an augmented reality place will ever really compare. I can’t see that.

Obviously it will compare, maybe it will be better than just listening to an MP3, but we’re not going to be making masters violinists every year at 100% increasing rate.

Knut Svanholm: Yeah, but now we’re getting back to the core of Austrian economics. [00:54:00] Economics does not apply to things that aren’t scarce like air, for instance. If air is not scarce, it does not have a price and we do not need to negotiate about it.

And that’s what I mean. We might get a future where all the things that we spend our money on today are so abundant that we might have very few real needs. Of course there’s space on the Earth and like houses and ribeyes because you can’t really reproduce the experience of sleeping in a bed and eating a ribeye.

But other than that, everything else can still be a lot better than it is today. And I think post hyperbitcoinization will see all that play out and we’ll really have a very much better future experience wise.

Saifedean Ammous: Yeah, I think we don’t disagree on that. But going back to the point on the unit of [00:55:00] account, I think where I disagree here is that people seem to confuse the idea of something being used as a unit of account with it having to remain stable. And I think this is something that Mises addresses specifically, which is back in Mises’ day the Keynesians were obsessed about making money’s purchasing power stable. Because suddenly the Keynesians discovered this crazy mysterious unexplainable phenomenon, like the Lochness monster, where prices were rising for some unexplainable reason, even though their theories clearly predict that their money printing is not going to raise prices, it’s only going to make the economy better.

And one of the ways in which they try and gaslit and rationalize this is to say, well we can’t just have gold because then with gold prices won’t be stable because we don’t have a central bank who’s able to stabilize prices, because what if people want to buy more money?

People want to dump [00:56:00] stuff and buy gold, then the price of gold goes up. And then if they want to start spending the price of gold goes down, oh no, we need a central bank. And Mises says, being a unit of account, being a unit of measurement does not mean money’s value is stable. Because things are always changing in value and money is what you use in order to measure it.

The value of money cannot really be stable, that’s the key point. So what Bitcoin allows us, which I think didn’t exist in the time of Mises, which I find to be a fascinating point is that it’s the first constant in economics. It’s something that is in itself constant, in that there’s only going to be 21 million.

So we always know that we’re measuring this against a ruler that is this long, we have a constant ruler for all value, which is 21 million Bitcoin. And everybody in the world can find out where they all are by just running their own Bitcoin [00:57:00] node. I think it would still function as a unit of account, even if it was rising in value at 10 20, maybe even 100%, that’s its job.

It’s the best unit of account we have because it’s the one thing that is constant in its quantity. And then that gives us a very good idea about what is happening to the scarcity of other things. So we’ll notice that, apples are becoming 2% cheaper every year. Computers are becoming 50% cheaper every year and we’ll see these trends reflected and we will be able to measure them.

So I think we can still use it as a unit of account, even if it continues to go up.

Knut Svanholm: Yeah my concern is really not about that, if it really turns into a gold 2.0. Which most people think like post hyperbitcoinization looks like. But if apples are dropping in price by 200% per year, it’s a different matter I believe because then it’s really not more useful as a unit [00:58:00] of account than the Venezuelan Bolivar.

Saifedean Ammous: If it drops by 200% per year, that means it goes up by, it can’t drop by 200%, it means they pay you to eat apples.

Knut Svanholm: Okay. Maybe I got the linguistics wrong there, but I think you get my point.

I know the price stability is the biggest lie ever told to man and I think that the rise in Bitcoin’s price right now is a reflection of that. How fooled we’ve been by these by prices remaining stable, or going up over time when they really should have been going down at a faster and faster rate because of how much cheaper production really is now and how much cheaper transportation is compared to 1971.

My concern about the unit of account is just that we’re so used to [00:59:00] thinking of prices as relatively stable. So if we get something that’s literally opposite to the Venezuelan Bolivar or the Turkish Lira, post hyperbitcoinization because Bitcoin’s value goes up or purchasing power goes up so fast that it becomes hard to measure.

Even in El Salvador today, you buy a hamburger at McDonald’s and use your Chivo Wallet, the unit of account used is the dollar and not Bitcoin. And it converts it into Bitcoin because people are so used to thinking of things in stable prices. And Mises argued, as you say, he argued that this was a fallacy and that it would be possible to do another way, but we have to remember Mises never experienced Bitcoin. He never imagined a monetary good that was absolutely scarce and absolutely finite.

Saifedean Ammous: Rothbart did though, there’s a piece [01:00:00] called The Austrian Theory of Money by Rothbard, I’m not sure if it was in that piece or somewhere else, about 90% sure it was in that piece where he says, if we could, by some magical way, invent a money whose supply was fixed, that money would work perfectly fine. That was one of my very formative moments. I read it maybe 2008, 2009, and it completely blew my mind and there was no coming back to Keynesianism after it.

This was like one of the knockout punches.

Knut Svanholm: Yeah, really interested in that because what I think of when I think of an absolutely scarce thing other than Bitcoin, I always throw the comparison to the Salvador Dali paintings of which there are 13 left in the world. Try to imagine pricing things in parts of the Mona Lisa.

Like if Mona Lisa is 21 million Bitcoin, [01:01:00] like there’s one MonaLisa. It doesn’t really matter if it’s one or 21 million, as long as it’s infinitely divisible. So if you tried to divide the entire world economy in parts of the Mona Lisa, or parts of the Salvador Mundi or whatever the other really expensive painting is called.

You run into the same problem, but I’ll have to read the Rothbard piece before I dig an even deeper hole here for myself.

Saifedean Ammous: I got to say, Rothbard is like a great cheat sheet. It’s a great shortcut, a productivity hack. There’s a lot of you know, Mises is a great mind, but Rothbard has this incredible ability, first of all he has the advantage of being more contemporary. Rothbart was much younger than Mises and English, was his native language, so it’s easier for English speaker to get Rothbard. And he writes in English as opposed to Mises, who even when he wrote an English was really writing in German.

But [01:02:00] Rothbard had an incredible ability to summarize very complex ideas very briefly. So there are a few Rothbard articles that if you read them, 10, 20, 30 pages, they will give you a very, very good understanding that you would otherwise require many hours of reading very dense texts to glean.

I think this paper is one excellent example, Austrian Theory of Money. There’s another great paper on The End of Socialism and the Calculation Debate Revisited. I think this is an absolute masterpiece of a paper. It’s also brief, maybe 10, 20 pages or so, maybe 11 pages. I may be mixing it up with another one, but it’s pretty brief.

And it was written in 1992, I think right after the collapse of the Soviet Union. And in it Rothbard goes through one century almost, well 70 years at that time, 70 years of debates on socialism from Mises’ first paper. And then the responses and then the counter responses, and then what Hayek said and [01:03:00] how Hayek is different from Mises.

He summarizes it all so clearly that you come up with an excellent understanding of the topic, which if you want it to really develop that without Rothbard’s help, you’d need to read a lot more. I highly recommend these pieces.

Knut Svanholm: Yeah. I really love The Anatomy of the State which is another, it’s a book but it’s a short one.

Saifedean Ammous: Yeah. We wanted to talk about your idea of digital scarcity. This is an idea that I really like in your work. How is Bitcoin digital scarcity and what does this tell us? What does it mean?

Knut Svanholm: I tend to avoid the term digital scarcity nowadays, I like the term absolute scarcity or absolutely finite a lot better because the digital part of it is not the most interesting aspect of it. [01:04:00] It is interesting in the sense that it can utilize the internet for faster communication, but that’s not the real discovery here.

The discovery is something mathematically finite that we can that we can subdivide infinitely into smaller parts and via like layer two solutions, like the lightning network, we really can base layer it a hundred million Satoshi per Bitcoin but they are really more divisible than that if you take them off chain.

 I believe that this is a discovery rather than an invention. And I believe that Bitcoin is an agreement first and foremost, it’s an agreement between us Bitcoiners on a fixed set of rules. And we all believe that these rules are fair. And you may disagree about [01:05:00] these rules and you may disagree that we actually found absolute scarcity and all these things, but then you can’t have any of the benefits.

So Bitcoin is for those who can see the mathematics and the game theory behind it and buy into that. And if you do, you can also enjoy what Bitcoin can give you. It’s like sailing against the tide or trying to prevent the Sun from going up the next morning. If you instead view this as what it is, an emergent natural phenomenon that is happening and you work with it instead of against it, you can get something out of it.

But if you work against it, good luck. Because what are you going to do about it? And this is why I believe it’s inevitable that everyone will hop on board sooner or later because it’s just an agreement and it’s just an idea. [01:06:00] And how do you stop that? How do you stop people from agreeing with each other?

It’s practically impossible. And this is how I try to explain it, but when people ask me the question, what is Bitcoin and what is absolute scarcity these days? Or like, why is it important? My first thing is we’ve all agreed that this works and that it’s finite, and this is how we ensure that it’s finite.

And as long as we agree upon that, there’s no stopping. There’s no stopping Bitcoin.

Saifedean Ammous: Yeah, and this is the thing, this is where it can appear like it is being just a bunch of Marxist socially constructed stuff. We agree that Bitcoin is money and therefore Bitcoin is money. You know what Harari or David Graeber say that money is just a collective hallucination where we all agree that toilet paper is money and then we all start using toilet paper as money.

And I think [01:07:00] there’s a very important distinction here with the point that you make and that I make in The Bitcoin standard, but also in Principles of Economics, my next textbook on economics, which is that it’s not about just agreement. If everybody got together and agreed that let’s use toilet paper as money, we’re not going to have a monetary system.

Toilet paper is not functional and as money, it won’t work. No matter how hard we hallucinate that toilet paper is as good as money, it’s not going to work. We’re going to end up with having, each house is going to be 70% toilet paper, and it’s still going to continue to lose value.

And it’s going to be absolutely terrible. And people who would use it will just simply destroy their wealth. On the other hand, Bitcoin can work. So it’s not about hallucination. That’s why I love your term discovery, we discovered this thing that works in that way. And it’s not because we decide to hallucinate that we’re going to use it in this way that it works. It’s because it can actually work.

It’s because of the people who do hallucinate, to borrow a stupid Marxist [01:08:00] term, the people who do hallucinate that Bitcoin is money end up achieving the ends that they want to achieve from using money. It holds its value. You can send it across the world. And five years later, you find yourself with a big smile on your face, because it has done much better than your local governmental shitcoin.

Whereas people who hallucinate that toilet paper is money or people who will hallucinate that, let’s use fish as money, or let’s use water as money. They just end up with no money. They won’t have the function of money fulfilled. So it’s really the discovery, that’s a term that I like that you’ve put in that it’s not that we invented digital scarcity as much as it is discovered.

And it’s not so much that it’s just because we will it to be that way, because it can work that way. And that goes back to the, yeah, go ahead.

Knut Svanholm: The agreement part is that we [01:09:00] agree on a fixed set of rules. We don’t agree on that this is money.

We agree that this is a fair set of rules for expressing value. And that’s a totally different thing. It’s not like agreeing on toilet paper. It’s agreeing on a fixed fair set of rules. And if we want to upgrade it or changes in some way, shape or form, we all need to agree that’s a good idea.

So that’s how I view it. I don’t view it, as as you say, those people that think that it’s just a collective hallucination, it’s much more of a discovery as you say and that ties into like how showering first and then using a towel differs from using the towel first and showering afterwards because the order of things matters a lot.

Saifedean Ammous: Yeah, it’s not because we have a social hallucination that we collectively [01:10:00] agreed that we have a social norm that we use the towel after we shower. That’s not why it’s different.

Knut Svanholm: No, exactly.

Saifedean Ammous: The example that I like to give to Marxists when they tell me this is, everything is socially constructed, okay everything is socially constructed. Yes, of course, we can say that everything is socially constructed, but you know, you could say there are real properties. If everybody decided to hallucinate that they’re going to use sandpaper instead of toilet paper, you can choose that hallucination but there are consequences to using sandpaper instead of toilet paper.

And it’s the same thing with money. If you are going to use less hard forms of money when other people have the hardest form of money, you’re just not using money. And this I think is an excellent, very powerful argument against altcoins.

If you accept that altcoins are similar to Bitcoin, then you are opening yourself up to a world where all of these new shit coins continue to increase in supply individually, and then [01:11:00] more and more shit coins are being introduced, and then they increase in supply collectively. So if you have that situation, Then you don’t have digital scarcity, but the good thing about it, the reason why it’s not like we’re just saying this because we don’t want people to do shitcoins and please, don’t shitcoin, if you start shitcoining then our Bitcoin won’t work. It won’t be scarce anymore.

No. Again it’s the market that does this, it’s not a hallucination. If you continue to use the scarce Bitcoin, it’ll continue to be scarce. If your node continues to enforce the consensus parameters where there’s only 21 million Bitcoin, then you don’t care how many shit coins get introduced and you don’t care about how insecure the shit coins are and you don’t care about how many shitcoins get added and what happens to the supply of any shitcoin, you’re stuck with the 21 million. So it works. So it’s a discovery of a system that is self-contained and can work. And it has the scarcity.

Knut Svanholm: Yeah. It’s like the discovery of a new continent. Like Columbus could only make that journey once. [01:12:00] That’s one of the comparisons I draw on, but our latest video collaboration is called Why everything that isn’t Bitcoin will fail. And there I talk about shitcoins and divide them into two subcategories. And one is craptocurrencies, which are all the shitcoin or the altcoins or cryptos.

And the other is kleptocurrencies, which are all the fiat currencies, which are also shitcoins in a way. A shitcoin for me, the definition is basically something that isn’t Bitcoin. Something that is in some shape or form designed to steal your time or can be used to steal your time.

Even if it wasn’t designed, it can be used later on to steal your time by someone. And if it has that property, it’s a shit coin and you shouldn’t use it basically. You should upgrade to Bitcoin immediately. It will be better for you because they’re [01:13:00] finite.

Saifedean Ammous: Very much, very much so I agree. Now moving on to your next book or the previous section in the first book Independence Reimagined.

Knut Svanholm: Now that’s like the sequel.

Saifedean Ammous: Oh no wait that is the second book, that’s right. So now tell us a little bit more about that. What is the main idea in that book?

Knut Svanholm: Th there’s no real coherent thread to that book. It’s more like I wrote that while on vacation here in Spain during Christmas. So I woke up two hours before the rest of the family and I wrote for an hour and I went out jogging for an hour. That turned into that book and more of like I had to make a follow up now that I wrote sovereignty. It’s been very well received and [01:14:00] it touches on different aspects of Bitcoin.

One chapter is about collectivism and why collectivists win elections. And the main thesis in that, and that’s like the last chapter I wrote, but it’s one of the earlier chapters in the book. And I find that in hindsight, I find that one of the more interesting aspects of it, and it’s about how the less individualistic you are and the less independent of a mind you have the easier it is for you to form large groups because you don’t care that much about what that group actually thinks.

So you’re happy with being a sheep and saying baa and walking in line and just doing what you’re told and whatever the great leader tells you to do. And this is an inherent flaw of democracy that I don’t believe how even Hoppe talks about this in a Democracy: The God That Failed, which criticizes democracy in other ways.[01:15:00]

But as I view, it’s very hard for independent thinkers to form large groups because of the individualistic nature of their thinking, that they’re not afraid, you’re not afraid to disagree with people. And the earlier on, if you look at the generations in Bitcoin, like the earlier on you are, the more disagreeable people are. Bitcoiners are getting nicer and nicer generation by generation, I think, and more and more agreeable, but in the beginning it was really horribly disagreeable all the way.

I don’t know where you fall into this, on this scale Saifedean but I’m not saying that it’s a good or a bad thing. I’m just saying the more individualistic you are, the harder it will be for you to form a large political group. And therefore socialists win everywhere.

Because people [01:16:00] like to belong to a group and people like to watch other people, I know you’re a football fan and I’ve tried find it interesting, but I just can’t. I just can’t wrap my head around why I should vouch for the one team rather than the other team, because I think they’re all just chasing a ball. I don’t get it.

Saifedean Ammous: Let me make the counter argument to that. So the counter argument I usually give to that is that is when you say football is just a bunch of men chasing a ball around a grassfield, for me it’s like looking at a book of poetry and saying it is just a bunch of ink on a piece of paper, I don’t understand why people like that.

But then, the other point to go to your idea about, getting excited about a team. I think the case for that is that there is a very strong tribal instinct in us as human beings. And I think modern [01:17:00] sports are an excellent civilized way of releasing that where you go, instead of gathering around with your friends and beating up a bunch of other people, instead of getting worked up about foreigners in another country who do things differently from you and then deciding that we need to take it out on them. Cause like this kind of tribalist mindset, it starts by otherizing by making the other look inferior, think of the other as inferior.

And then you justify atrocities and then you become inhuman for you. And I think the football’s a great way of deflating that because instead of going out and carrying arms and shooting them and killing them and destroying their country, you get excited about 90 minutes and hopefully you get the ball in their net and if they don’t, they get the ball in your net and then you feel like shit for a day or two or a week, depending on how emotionally invested you are.

But then guess what, your home still works. It’s not like you fought a war and then they came and they destroyed your house or you [01:18:00] destroyed their homes. So it’s a very peaceful outlet for this kind of tribal instinct, which I think I don’t have empirical evidence to support this, but I think people would be much more worked up about much more dangerous ways of being tribal if they didn’t have sports as an outlet.

Knut Svanholm: Yeah, I totally agree but I think we have different levels of tribalism in us. Some people are more keen to, of course people are different. Some people need the tribalism more than others. Some people need it for their identity, if I didn’t have this soccer team or whatever, like I identified with the metal music for a long time, and that’s a sort of tribalism as well.

Saifedean Ammous: Yeah but you don’t hate soft rock people and you don’t [01:19:00] make them an enemy. Where’s the fun in that?

Knut Svanholm: Yeah. There might be a styles of music where I do detest the people that like it. But anyway, what I’m saying is that I totally agreed that we need these outlets for those tribal things.

I think most people who listen to metal music are friendlier because of it. Because they get their aggressions out by doing that or by playing metal music. I think that’s a connection there to like vouching for a soccer team.

Saifedean Ammous: Very much so, yeah. I think, just to go back to your original point, I think I agree with you on the fact that collectivism is, I think the scam of democracy is precisely that it presents collectivism [01:20:00] and slavery and control of others. So human subjugation of other humans, it legitimizes it by attaching a popularity contest to it, I think this is really the scam.

All cultures, all religions, all societies all over the world have a moral code, which is pretty constant all over the world, which is don’t steal. And everybody knows what strong. Everybody knows that murder is wrong, that assault is wrong, that theft is wrong, that rape is wrong. There are no cultures which view those things as correct. There are cultures that might justify them in certain conditions where other cultures might not justify them in certain condition in these same conditions. But there’s a very clear idea of what’s right and what’s wrong.

 And the scam of modern democracy is that it has managed to completely subvert people’s common [01:21:00] sense, explanation and understanding of what is right what is wrong, theft versus murder consent versus coercion. Completely subverted that by attaching it to a meaningless, stupid popularity contest for a bunch of actors.

And that’s what it really comes down to because the actors that are in power usually, particularly modern democracies, they don’t rule shit. They’re just puppets. It’s not like there’s an evil cabal of people moving them around.

It’s not conspiratorial. It’s very basic political science, you don’t get to become president unless you satisfy the most important, special interest in the country that have the power to bring about a president. It may be different from one president to the other who the special interests are.

But ultimately the president is just an actor who looks good and can talk properly. Talking properly is no longer one of the criteria anymore. [01:22:00] They’re mostly basically unable to speak these days. That’s the thing, like if you just vote for this one guy, then everything that his team does is not legitimate because democracy is accepted.

And so you end up in a society that is actually far more tolerant of aggression, repression, coercion when you have this stupid popularity contest attached to it, as opposed to a society where people just accept that those things are wrong, regardless of how they’re done. Aldous Huxley makes that point by the way, I’ve seen an interview with Aldous Huxley, who was an incredible thinker. And he says the reason that leftists win elections is that elections are a leftist thing. The idea that we the people can take your stuff if we get enough of us on board, that’s left leftism.

The people who oppose leftists, they run on a platform of we’re not going to take rich people’s stuff, we’re not going to [01:23:00] take anyone’s stuff, we’re not going to destroy capital. And where’s the fun in that? That doesn’t get people excited and worked up, whereas leftists run on a platform of oh, if we win the election, we’re going to take all of the nice things and give them to you. And obviously it’s extremely idiotic, but a lot of people are stupid and so they do vote for this.

Knut Svanholm: For those stupid people out there listening right now, I’d like to,

Saifedean Ammous: they’re not listening, I think we alienated them in this podcast early enough.

Knut Svanholm: If there are any stupid people left listening to this, here’s my attempt at trying to explain it to you. If you take wealth from the rich and give it to the poor, you incentivize being poor and you’re disincentivized being rich, it’s as easy as that.

As a result, you will have a larger, poor population and a smaller rich population. People will no longer want to be rich, they will want to be poor. Because you get [01:24:00] money for nothing by doing that and that is so destructive. And it’s not only about being poor or being rich. It’s about all kinds of disruptive behaviors that get promoted by the pity people take at different groups, small minority groups and stuff, get special treatment and you incentivize them to emphasize on the bad parts.

Like if you have hate crime laws for instance, you incentivize people to separate and to identify with different races. Because if you have a hate crime law it’s good for you to identify as a certain race because then you can claim it was a hate crime law.

And so all of these political measures to mettle with people’s existence are ultimately destructive. And [01:25:00] it’s just awful and it’s very hard to see from within the system.

Saifedean Ammous: I’ll add one point to this, which is generally this is the most common criticism that people think of when they think of the problem of socialism, they think incentives and then you’re destroying the incentive for people to work.

But I think there’s a more powerful argument, which is what the Austrians make of it. And that’s the calculation problem, which is you think that you’re just taking money from the rich and giving it to the poor, but what you’re actually doing, and that’s the advertisement, but what you’re actually doing is that you’re taking money from people who are productive and giving it to parasites in offices who then decide what to do with it.

And yes, they might give a little bit of it to the poor, but the most important thing is that they are the ones responsible for allocating it. So you move from a world in which the people who produce things on the market are able to generate money and then are able to accumulate more capital.

And then they control the [01:26:00] productive capital of society. And because they are able to control it profitably, they continue to accumulate more of it and they continue to use it more profitably and more productively. You move from a world of that happening where the market process is constantly increasing the wealth for everybody, because we’re always able to make economic calculation because the calculation is being done by the people who own the capital.

When you try and transfer it, when you’re drawn by silly collectivist ideas, what you end up doing is you’re not allocating the money and the resources in particular. The productive capital is not being allocated by the people who know how to produce it and who know how to use it productively. It’s being allocated by people who have never used capital productively people who win popularity contests.

Knut Svanholm: It’s wasted, that’s what it is. Capitalism has been blamed for so many bad things in the world, but what people don’t realize is that we’ve never really had true free market [01:27:00] capitalism or very few instances like Hong Kong for instance is an example everyone, but even there it wasn’t pure. So people say we haven’t tried real socialism, but in reality we’re trying real socialism all the time and that’s to blame for everything. And not the other way around, what we haven’t tried is really capitalism.

Saifedean Ammous: I think no, to be fair, we also have not tried real, real socialism.

Nowhere has ever actually went out and tried real socialism, but we’ve gotten close. And this the same with markets, we’ve gotten close, the closest I think we got to real socialism was Cambodia. When Pol Pot took over in Cambodia, he banned money and he shut down the cities and he moved people to the countryside and he got everybody to go out there and start working in food production.

That’s the closest we got to socialism. And the result of course, was that he took over Cambodia with a population of 8 million and 8 years later the population was 7 million. So more [01:28:00] than a million people perished from starvation and mass murders and concentration camps, because you had close to real socialism.

If we had gone all the way to real socialism, there wouldn’t have been anybody left in Cambodia. That’s the difference. On the other hand, we haven’t had real capitalism, but we’ve also come close. We have Switzerland on a gold standard up until the 1970s. We’ve seen how that worked out.

We’ve had Hong Kong, we’ve seen how that worked out. So yeah, we don’t have to try the pure 100% unadulterated version of both in order to understand there’s a serious difference here. When capitalists say this isn’t perfect capitalism we still have all of the production, all of the valuable stuff that’s being made is still the function off capitalism, is being produced because of capitalism.

Whereas when we don’t have perfect socialism we just don’t have perfect genocides.

Knut Svanholm: It reminds me of a [01:29:00] Mises quote, comparing capitalism to socialism is a bit like comparing fresh drinking water to potassium cyanide.

Saifedean Ammous: Exactly. And we’ll never have pure 100%, maybe you’ll never drink pure 100% water and you’ll never drink pure 100% potassium cyanide, but we can pretty much tell. 99% is good enough to give us an idea of the impacts.

Knut Svanholm: Yeah, definitely. I have a couple of questions here in the chat. Let’s see. Peter asked this, I’d like to ask Knut on his view on whether the world is getting more centralized governmentally. Yeah, there’s a two-fold answer there.

Hyperbitcoinization is happening, so no, it does not apply to us who are already on board. We don’t care, honey badger doesn’t give a shit. For [01:30:00] those who are still in the fiat system, yes, it is getting more centralized, definitely. And just look at how hard it is for the smaller states in Europe to get out of the clutches of the EU.

I was all pro EU up until my twenties or something, because it was all about a trade union, where we could trade between borders, and I liked that. It wasn’t until later on that I realized that what were the borders doing there in the first place? A free trade agreement is an oxymoron, because that means that someone took away our ability to trade freely between each other.

So to answer your question, yes. Fiat government is getting more centralized but we have Bitcoins and we don’t care. Or we don’t have them, we lost them in a boating accident though.

Coach Kiki, does Knut still [01:31:00] say, does he foresee sovereignty on the high seas? I wouldn’t say no to sailing if someone wanted me to sail. I don’t do it professionally anymore and I choose to do other things most of the times in my spare time, because I don’t consider myself as having that much spare time, even though I’m not working. But I think I already did my fair share of sailing.

I have quite a history in sailing and traditional ships. I was in the tall ships races twice and I can probably say that we ended up winning a prize both times, once in third place and once in second place in the tall ships races, and I’ve sailed around the world and seen a lot of places.

I [01:32:00] feel very done with my sailing career. Sovereignty on the high seas, I liked the seasteading ideas and some of it is a bit farfetched and the waters of the world are controlled by states. Of course you can get out, the further out you get, the more sovereign you get. You feel very free and very imprisoned at the same time when you’re on a tall ship in the middle of the Atlantic, because you know that you can do whatever you want, but then again, you only have this boat to do it on.

But in theory, no one can stop you from doing anything at the high seas. So there’s some aspects of sovereignty to that, but I don’t really know if that’s, I think we’d rather just focus on Bitcoin and hyperbitcoinization and how [01:33:00] to adapt to it and how to think about it and how to use it personally.

That’s more forward thinking than trying to build this futuristic cities in the ocean. Of course I find this interesting, but that’s not where my focus is.

Saifedean Ammous: Yeah, I think perhaps attainable for most people than seasteading, which is difficult to pull off, I think sailing might be a great place to be free because you spend a lot of time in the sea, you leave countries and you go in and out, it allows you the flexibility of moving around between countries and not being tied down to one of them, not having a lot of stuff that ties you down in one particular country.[01:34:00]

So I think sailing across the seas might be a useful way of escaping the current insanity that we see.

Knut Svanholm: The smaller the vessel, the easier it is in regards to countries. It might be harder in the middle of the Atlantic, but that’s another problem, another set of problems.

I love Michael Saylor’s story about he couldn’t get his money out of Argentina. And they had to buy a yacht and sail it and sell it elsewhere. That was like the only way he could get it out of the country, I really love that story.

Saifedean Ammous: I have not heard that one before. Alright, Daniel has a question.

Daniel Prince: I ran down to get a beer on this and hear you guys jam. And as you can see Saif, I even brought my olive tree, my investment here with [01:35:00] me after listening to Taleb’s advice. I take it with me everywhere I go. It’s brilliant investment advice from your old friend, but one thing I want to touch on with Knut is a tweet he put out a while ago and we touched on this already in a different conversation, but I think it’s really important for other people to hear.

 He tweeted out something along the lines of guys you’ve had this wrong all along, it’s not number go up technology is number go down and technology. And that just kicked me in the balls when I read it and over time it’s taken on different meanings to me because yes, of course we have the halving, that’s number go down. Bitcoin is going to be lost and that’s number go down. And then you guys were alluding to this earlier when you’re doing a unit account conversation, everything we’re ever going to want to buy in life is going to be number go down as well.

So I would just love for Knut to expand on that thinking a little bit more, and are we psychologically [01:36:00] ready for this?

Knut Svanholm: That is a great question, Daniel. And a bit insulting to Saif maybe, who came up with the term number go up, but I think we mean the exact same thing. Number go down is what enables number go up. We can only find abundance through scarcity. That’s what I mean by it.

If you’re thinking about it in these different ways than the tweet had the desired effects of provoking that in people. The years that you still have left in your life, that number is going down. As you say, the number of Bitcoins is going down over time.

It’s like everything but the purchasing power of Bitcoin is going down and this is what enables the purchasing power of Bitcoin [01:37:00] to go up. So number going down is an interesting concept. I don’t believe I was thinking of anything specific when I tweeted it.

You know how it is, you see something and you play with words, then you turn it on its head. And people think about things in other ways after you do, and that’s the point of it. But yeah, number go down is as important as number go up. Of course we wouldn’t have number go up without number go down.

Saifedean Ammous: This is the next Bitcoin civil war I think.

Knut Svanholm: Yeah, your citadel versus mine.

Saifedean Ammous: Up or down, that’s going to be the fight of a lifetime. Anybody else have any more questions?

We also wanted to talk about your next book, Everything Divided by 21 Million. So tell us a little bit more [01:38:00] about that.

Knut Svanholm: Yeah, I decided I was, writing is a tedious process and it takes some dedication as you know. And I wasn’t really sure if this is what I wanted to do or not, maybe I should just focus on these little movies I do or something.

I started writing like some mid through two chapters, but I’m not as happy with them as I would like to have been. But then this Saturday, Jeff Booth came over with his family for dinner here, and I was swimming in a waterfall with them yesterday. So we hung out for a couple of days here and he was really, I only have younger brothers and as my younger brother said, it was a good thing he came over because you’ve always needed a bigger brother. Because he gave me like a great pep talk about focusing and trying to [01:39:00] he really thought that I should focus on writing another book and making it accessible to people.

I have the title. And I think I have the opening line, which is this book is about you. Yes, you. And then the rest of the book is about the reader of the book, regardless of who the reader might be. And so I’m doing the opposite of what Alex Svetski is doing, which is discluding everyone that doesn’t understand Bitcoin and just keeping it the remnants.

But yeah, I should try to explain these hard concepts in layman’s terms for a bigger audience. I think that’s a good way of spending the rest of the year. And I really need to get working on it. I take long walks and my mother is here now, so I’m taking care of her a bit. [01:40:00] Getting old living here in Spain and finding out all sorts of different excuses not to get started writing. But yeah, I bought a grill.

Saifedean Ammous: Excellent! That’s a valid excuse.

Knut Svanholm: Yeah, it is right? Yeah, but the theme of the book will be everything divided by 21 million and then how to explain these concepts in layman’s terms. Drawing from some of the video content, some of the articles I’ve already written and then I will also try to focus on those ideas that are still somewhat original, because I think it’s very hard to be original in this space.

And it’s getting harder and harder by the day because there’s so much great content out there. And there’s so many great articles and great books. The market is getting [01:41:00] flooded. Like all of us are, I’m trying to find my own voice and I know you had the same problem when starting writing The Fiat Standard, right?

You didn’t really know what your next book was going to be about, and then this idea of using the Bitcoin lens to explain fiat comes to you and that’s how I write the book. I think you said something along these lines. Is that right?

Saifedean Ammous: Yes, to be fair I think it was more of just needing to get my head around Fiat and figuring out what to write about it. When I started writing about Bitcoin, Bitcoin was what, eight years old. And it was still relatively small, but fiat is a hundred years old and there’s a lot going on.

So it’s not as easy to wrap your head around it. To be honest, I’ve been writing uncontrollably over the last [01:42:00] three years since finishing The Bitcoin Standard. I wrote The Fiat Standard, which is going to be out next month and Principles of Economics, which I’ve written like 70% of it.

I’ve still got a couple of chapters to finish. Subscribers are getting them, I’m getting a little bit late cause the last chapters are a little bit more elaborate, but yeah. I think you just need to turn up and plug at it and just shut down all those voices that keep coming up with the ideas for you about why you shouldn’t and just go and put your, the secret to writing is putting your fingers on the keyboard.

Knut Svanholm: Yeah, that’s really true. And I really disciplined myself when writing the last book, just like that. And I wrote, as often as I could and as efficiently as I could. I’ll have to get something like that going, I’m thinking I’m switching from my gaming laptop to my ordinary laptop.

That’s the [01:43:00] first step. There are less distractions there. I’ve been playing StarCraft a lot lately. When you were doing all this, Bitcoin Twitter, and meeting all these people and just chatting with a random phone call with Daniel or whatever, like meeting other Bitcoiners in real life or like this, it’s just so great, so you tend to do that a lot.

 But I need to manage my time better. In fiat life that was always sorted out. Like you work from eight to five. So I need to get a similar thing going, discipline myself. But then again, like most of my writing is not done actually sitting by the keyboard, but walking around thinking about things. I [01:44:00] think that’s like at least 80% of the process. It’s just thinking about things and trying to get an idea good enough to fish for while sitting by the keyboard.

And realizing that ideas are like, a fish is a good metaphor. I think it was like, Josh Homme from Queens of the Stone Age said this about songwriting. It’s like fishing, when you catch a nice fish, it’s the fish that is beautiful, not the fisherman. So it’s not about you it’s about what you write. You focus on not letting your ego get in the way of what’s in the text. That’s what I’m trying to say.

Saifedean Ammous: I agree entirely. The [01:45:00] difficult thing about the writing is shutting down your ego, which wants to sound like a smart ass and sticking to the plan of what you want to actually write. Just get to the point. This really was maybe one of the most helpful things I ever heard about writing.

I don’t even remember where I heard it, but it was really transformative. And then it made me a much better writer. Somebody said something along the lines of, when they asked Michelangelo how he carved David, and he said, I looked at the marble and I took out everything that was not David. And I think this is a great way to think of writing.

You can pound the keyboards for a week and you’ll make 100,000 pages of text, but that’s not the difficult part. The difficult part is trying to get the text that gets your point across. And so it’s like chiseling through all of those [01:46:00] letters to get the exact correct letters in the exact correct order to get your point across.

And it’s pretty liberating when you think of it this way, because your job is not to make your language flashy. Your job is not to prove a point to the reader that you’re a good writer. Your job is to communicate the idea. It’s easy to think of this, but it’s extremely hard to stick to it.

It’s just, Nope, focus, get back to the point, just bring out the David. Make the David come out of your keyboard. Just take away everything that’s not there and just be ruthless in eliminating all the little extra details that are not needed.

Knut Svanholm: Yeah, it reminds me of an old saying about engineering, which is like an invention is not done when there’s nothing left to add, but when there’s nothing left to take away.

Yeah. And it’s the same with writing. I agree completely. And I do [01:47:00] believe that Benny Anderson of Abba, this is again about songwriting, but he said like the key is to sit by the piano when the song is in the room, flying by you. If you don’t sit by the keyboard when the idea comes to you, you don’t get the chance to write it down.

Sitting by the keyboard and the actually being there when the thought pops into your head, that’s a huge part of it too.

Saifedean Ammous: Yeah, absolutely. Alright Philippe wants to ask you about the Sat symbol. What are your thoughts on the Sat symbol? He says that’s the next Bitcoin civil war.

Knut Svanholm: Yeah and I am enjoying this civil war a lot because Bitcoin Twitter and shit posting, it’s not about that, like nothing left to carve out. It’s about sounding like a smart ass, it’s just as much about that. And I enjoy that too. Well, there’s been a lot of debate, [01:48:00] I don’t really like the kebab looking thing with the three lines and the line through it.

I think it’s a bit too complicated because I think you should be able to write this in handwriting easily. I like handwriting and oh, we’ll just use keyboards, that’s not the point. It’s supposed to look good.

Saifedean Ammous: And also it’s probably too complicated than not, if it’s difficult to write, it’s difficult to be able to decipher at small sizes. You can think that it’s an E, or you could think that it’s something different, yeah.

Knut Svanholm: Yeah. The same goes for this like the sat that is like an @ like in an email address, that’s not really natural to write either. There was some guy that posted like something, he said it was inspired by me and Gigi. So already there, he had my [01:49:00] my full attention, and it was like the infinity sign. It’s called a lemniscate in mathematical terms, but turned on the side, so it’s actually an eight with a line through it, in the middle of the eight.

And that looks kinda nice because it sort of looks like a an hourglass. Bitcoin is condensed time and this is the connection to Gigi and yeah, I really liked that because it was easy. I don’t know if you saw that, I tried to hand write it, and I had to do it with my thumb on the phone, but it’s easy to write an eight with a dash through it.

If you begin from one side right. Half the dash first, then the eight and then the other side of the dash. So it’s more like writing an S. I kind of like that. But then again, I think this is a non-issue because time will tell what symbol we would use. It’s like the Bitcoin tickers. [01:50:00] Everyone uses BTC like for the ticker for Bitcoin now, no one says BTX or whatever we were using before, when all the exchanges used different tickers.

The market will take care of it.,

Saifedean Ammous: Yeah, absolutely. I think the natural replacement in the long-term is going to be the dollar sign. People are used to seeing that and eventually it’s going to make sense, but I think it’s going to be probably tricky to begin to using it now, particularly I think as I would imagine soon enough, SATs and dollars are going to be in the same range of value, probably within our lifetime.

Knut Svanholm: For a short time.

Saifedean Ammous: yeah, it won’t be very long, but it’s going to make for an awkward transition period. So I think perhaps it’s just going to be as simple as a letter S. An S before a number denotes SATs.

Knut Svanholm: You know we’re getting back into the usefulness [01:51:00] as unit of account rabbit hole here from another angle if we can’t even agree on the actual units and how to write it. Anyway, we’ll see. We’ll see what it turns out to be. I think time we’ll have to tell.

Saifedean Ammous: Okay, fantastic. All right, anybody else have any more questions for Knut?

 All right. Knut thank you so much for joining us today. I had a lot of fun discussing this

Knut Svanholm: Thanks a lot for having me on Saif!

Cheers. Thank you for coming and do take the courses and do start joining us in the seminars now. Yeah I have the time to, so there’s really no excuse.

Saifedean Ammous: No you don’t, you shouldn’t be writing!

Knut Svanholm: Okay then.

Saifedean Ammous: I’m joking, you’re welcome to come any time.

Knut Svanholm: Yeah. I’m sure I’d love them. And I’m [01:52:00] sure it would be even more annoying than Gigi.

Saifedean Ammous: No, he wasn’t annoying, that’s not fair. He was always fun, Gigi was like the best student in the first class. When I first started teaching, he was like the, figuratively we didn’t have a classroom, but if there was a classroom, he would be the one in the first row, the first to come to the class and I have his pencil case lined up and raises his hand to answer every question and always knows the answers.

Knut Svanholm: Not surprised at all. Did he have his green suit on?

Saifedean Ammous: No, he never showed up. He was just always talking from behind a closed camera, unfortunately. All right, thank you so much.

Knut Svanholm: Thank you so much Saif, I really enjoyed this and we’ve been going at it for almost two hours and I think I got the points across.

Saifedean Ammous: Yes, absolutely. Time for us to go grill some steaks now.

Knut Svanholm: Exactly, [01:53:00] take care!

Saifedean Ammous: Cheers man, take care.