Speaker 1: Why was it different in two thousand and eight. I mean,
Speaker 1: they seemingly did let the market fall, and we did
Speaker 1: see the markets crashed by sixty five percent, and so
Speaker 1: now you're kind of saying that they can't really do that.
Speaker 2: Two thousand was less of a debt cycle and more
Speaker 2: of an equity cycle. The debt cycle in two thousand
Speaker 2: and eight really was the kind of end of the
Speaker 2: financial system. It was the point that we all knew
Speaker 2: was coming, which is like, you can't have this much leverage.
Speaker 2: Look at what's happening. We're decentralizing power. So now people
Speaker 2: can have the source of power at the houses. So
Speaker 2: therefore you don't need the huge storage. People say, well,
Speaker 2: you can't scale solo, Well you can at a house level.
Speaker 2: You can do it probably at a village level.
Speaker 1: You know. Sam Martman said that we might see the
Speaker 1: first single person billion dollar company.
Speaker 3: So I think of it.
Speaker 1: There's both, right, the centralizing of the programming, but then
Speaker 1: it's decentralizing in a sense. It turns one big company
Speaker 1: into one hundred or one thousand companies. There's no future
Speaker 1: in this world where humans don't have problems, And as
Speaker 1: long as there's problems, we'll need solutions to those problems,
Speaker 1: and entrepreneurs will always be able to figure that out.
Speaker 2: So Nyture's going to traded a huge premium in a
Speaker 2: world of robots and AI when you can just kind
Speaker 2: of leave that all behind. If you ask a young
Speaker 2: kid now and say what do you want to be
Speaker 2: when you grow up, they will say, I want to
Speaker 2: be an influencer, and we think, are you crazy? But
Speaker 2: what is an influencer apart from a community leader where
Speaker 2: they have a community of people. It's actually maybe they're
Speaker 2: being adapted to already. They've done it in Fortnite, they've
Speaker 2: done it in the gaming world as well. But in
Speaker 2: the end, people want the human to human experience.
Speaker 1: Rapaul from Real Vision, you have been a man. You've
Speaker 1: been laying out some really good research. I've been waiting
Speaker 1: to talk to you. It's been going on for like
Speaker 1: a month waiting for this. So anyway, thanks for joining
Speaker 1: me today.
Speaker 3: I read again.
Speaker 2: Yes, sorry, I've been so avoiding, but I was on
Speaker 2: holiday and it all got a bit screen. But we're
Speaker 2: here now, finally.
Speaker 1: We're here now, We're here now, so that everything code
Speaker 1: the Banana zone. Man, You've been putting out some really
Speaker 1: really good research that I'm excited to Again. I was
Speaker 1: just telling you, I just came back from the big conference,
Speaker 1: and I'm starting to see this big shift in the industry.
Speaker 1: It seems like where we're seeing, you know, all this
Speaker 1: institutional adoption that's just coming in and it seems like
Speaker 1: it's changing sort of the makeup of that industry. We'll
Speaker 1: come back to that, but let's go ahead and just
Speaker 1: set the stage here and Everything code. I've been loving it,
Speaker 1: this this phenomenon where you have like these metronomes that
Speaker 1: keep perfect time for playing music, and this phenomenon where
Speaker 1: if you set all these metronomes on a table and
Speaker 1: start them at different times over time, they all get
Speaker 1: to the same beat. And I think that sort of
Speaker 1: maybe sums up the everything code.
Speaker 2: Yeah, and what's weird about the everything code, And I'll
Speaker 2: explain what it is. What's weird is it makes everything
Speaker 2: so simple too, so that most people think, well, this
Speaker 2: can't be possible.
Speaker 3: Yeah.
Speaker 2: We kind of knew it in bitcoin world because we
Speaker 2: could see a cycle forming, and we've been following this
Speaker 2: cycle kind of dumbly like, well, it's kind of maybe
Speaker 2: just the harving cycle. We don't really know and then
Speaker 2: I started digging in and realized that the business cycle
Speaker 2: was perfect. So the business cycle I used the Ism
Speaker 2: survey and it was a perfect cycle. I'm like, that's
Speaker 2: weird because if you remember, go back prior to two
Speaker 2: thousand and eight, we'd have these long periods of no recession,
Speaker 2: short periods and it was not it was variable. But
Speaker 2: suddenly it's like a metronome as you say, I'm like, huh,
Speaker 2: what's that all about? And eventually it led me to
Speaker 2: realize that two thousand and eight I think was the
Speaker 2: great reset, the one that people keep expecting happened. What
Speaker 2: they did is they basically four They told everybody they
Speaker 2: can fore go paying interest on all their debts, which
Speaker 2: was zero interest rates, and then they tried the new
Speaker 2: trick of printing money via quantata easing. Now, what that
Speaker 2: did is allow every single major government in the world
Speaker 2: to refinance all of their debts on this three to
Speaker 2: five year sector. And so they all did it, and
Speaker 2: what it did was force the business cycle into this
Speaker 2: four year cycle. And then all the asset prices are
Speaker 2: all correlated, whether it's tech, whether it's bitcoin, whether it's
Speaker 2: the economy itself, it's all driven by the same cycle,
Speaker 2: which happens to be the presidential election cycle, which happens
Speaker 2: to be the bitcoin harving cycle. It's all the same thing,
Speaker 2: and so when you understand that, it makes the game
Speaker 2: a lot easier. Now, this is not going to last forever,
Speaker 2: but for the period of time that we've got it
Speaker 2: seems to you playing out perfectly. And you can break
Speaker 2: these cycles down to four phases, which I call the seasons.
Speaker 2: So we have call it crypto or macro Winter. Well,
Speaker 2: that was twenty twenty two, that was twenty eighteen, that
Speaker 2: was twenty fourteen. There is four years. The next part
Speaker 2: of that is spring, where nobody quite believes that something
Speaker 2: is changing, but prices start moving higher. You know, bitcoin
Speaker 2: had a great year in twenty twenty three against most
Speaker 2: people's expectations, because spring is the time the shoots come up.
Speaker 2: Then you start transitioning into summer, which is this year,
Speaker 2: which happens to be the election year, which is when
Speaker 2: really the debt starts getting refinanced and they have to
Speaker 2: start using liquidity to finance it because there's not enough
Speaker 2: GDP growth to pay for the interest on the debts,
Speaker 2: and so they keep rolling forwards. These debts and they
Speaker 2: keep monetizing the interest payments, which is this debasement of
Speaker 2: currency that happens at about on a globalized level, eight
Speaker 2: percent a year their debasing currency and so and then
Speaker 2: next year will be macro full and then eventually the
Speaker 2: cycle tops out and we repeat it again, because it's
Speaker 2: based on the debt refi cycle, that this debasement of
Speaker 2: currency of eight percent. There's two ways of looking at it.
Speaker 2: You can say, rightly, so we're being robbed of our
Speaker 2: few your wealth because your future self is getting poorer
Speaker 2: because you're going to afford less assets with your income
Speaker 2: because income doesn't go up the assets do because of
Speaker 2: the debasement. Or the other way is you can say,
Speaker 2: I'm paying an eight percent put option fee on the
Speaker 2: entire system not breaking, because that's also what they're doing
Speaker 2: because they need to refinance the debt. They need to
Speaker 2: not let asset prices go too far down. So we
Speaker 2: can talk about that, but it's another way of looking
Speaker 2: at it, and you're like, would you pay eight percent
Speaker 2: a year to have the entire system not break?
Speaker 1: Maybe if you have assets, for sure, If you don't
Speaker 1: have assets, that's a different conversation, exactly right, right, depends
Speaker 1: on how much you have to lose, so to kind
Speaker 1: of just maybe rewind the clock just a little bit.
Speaker 1: Because we're in a debt based monetary system, then we
Speaker 1: have to have this debt expansion, and so then we
Speaker 1: have this debt that has then been become collateral for
Speaker 1: more debt, which means the debt always has to be
Speaker 1: ruled over. And as President Biden told us on the
Speaker 1: last debt cilliing debate, that the US has never defaulted,
Speaker 1: and so we have to raise the debt ceilion so
Speaker 1: we don't default on the previous debt, right, which is
Speaker 1: basically what you're saying. We have to raise more debt
Speaker 1: to pay out the existing debt.
Speaker 2: Yes, and then pay the interest on that debt, because
Speaker 2: it compounds every time by the interest payments, so you
Speaker 2: keep adding debts just to pay the interest payments on
Speaker 2: the old debt. Now, why is that phenomena there? It's
Speaker 2: pretty straightforward when you understand it. The US government and
Speaker 2: all the major Western governments, plus Japan plus a few
Speaker 2: others are about one hundred percent plus of GDP and debt. Now,
Speaker 2: let's say theoretically interest rates a three percent, Well, if
Speaker 2: GDP growth is at three percent, then all GDP growth
Speaker 2: goes to pay those interest payments. Okay, but the problem
Speaker 2: is is the private sector is over one hundred percent
Speaker 2: of GDP and debt as well, and it's got interest payments.
Speaker 2: So if they both have it, there's not enough GDP
Speaker 2: to cover it. So what they've essentially done is removed
Speaker 2: the government debt payments out by printing money, and that
Speaker 2: stops the whole system becoming illiquid. Because if you think
Speaker 2: about it, you talked about collateral. Collateral is the money
Speaker 2: pledged against the loan. If the colateral falls too fast
Speaker 2: or too far, then you break the covenant on the
Speaker 2: loan and it gets called on you, and that's the
Speaker 2: whole system. That's what happened in two thousand and eight.
Speaker 2: So the best thing to do is not let the
Speaker 2: colateral fall by debasing the currency, and optically it goes up,
Speaker 2: so it kind of stops the system imploding.
Speaker 1: Yeah, now, you talked about this the phenomenon where it
Speaker 1: all got synced up in two thousand and eight. We'll
Speaker 1: get into that, but just going backwards, why was it
Speaker 1: different in two thousand and eight. I mean, they seemingly
Speaker 1: did let the market fall and we did see the
Speaker 1: markets crashed by sixty five percent.
Speaker 3: And so they did.
Speaker 1: And we started in two thousand, right, we started in two thousands.
Speaker 1: On two thousand and eight. But now you're kind of
Speaker 1: saying that they can't really do that.
Speaker 2: That's right. Two thousand was less of a debt cycle
Speaker 2: and more of an equity cycle. The debts cycle in
Speaker 2: two thousand and eight really was the kind of end
Speaker 2: of the financial system. It was the point that we
Speaker 2: all knew was coming, which is like, you can't have
Speaker 2: this much leverage. And if the collateral, which happened to
Speaker 2: be house prices, which is not a volatile collateral, once
Speaker 2: that starts, it put a colateral call on the entire system,
Speaker 2: and faced with the entire blowing up of everything, they
Speaker 2: decided to stop it. Now, I don't think they quite
Speaker 2: understood what they were doing at that point. But then
Speaker 2: Europe had the same issue in twenty twelve, four years later,
Speaker 2: this four year cycle. Then Europe, the governments couldn't pay
Speaker 2: the debt. Okay, Now, this was a sovereign crisis of
Speaker 2: giant nations, and Draggy said I'll do whatever it takes.
Speaker 2: What that was was, I will debase the currency to
Speaker 2: stop the collateral falling so we can shure up the system.
Speaker 2: That then magnified the whole thing.
Speaker 1: So was it a change in their willingness to do
Speaker 1: whatever it takes to the point drive he said, you know,
Speaker 1: whatever it takes. Was it a change sort of in
Speaker 1: their willingness to intercede or was it a fact of
Speaker 1: that the system has gotten so over leveraged they have
Speaker 1: no choice now?
Speaker 2: Yeah, So I this is the time I got into
Speaker 2: bitcoin back in twenty twelve because I was living in
Speaker 2: Europe and you know, it got so bad that I
Speaker 2: was buying tin food and a generator because I thought,
Speaker 2: we're going to lose our banking system. Wow, because everyone
Speaker 2: you know, I was living in Spain. Spain was forced
Speaker 2: to take a bail out of nineteen billion dollars. They
Speaker 2: didn't want to take it, and we thought we're going
Speaker 2: to lose the banks. Cyprus obviously lost its banking system.
Speaker 2: They took the money out of everybody's accounts. But what
Speaker 2: was interesting at that point, I went around the world
Speaker 2: trying to start the world's safest bank with a bunch
Speaker 2: of friends of mine and family offices and stuff like that.
Speaker 2: And we had had a private meeting with the DTCC
Speaker 2: and Euroclear and the New York Fed. Now the DTCC
Speaker 2: in Euroclear, they're the custodians of the entire system. And Euroclear,
Speaker 2: I'd read somewhere had had to lend emergency money when
Speaker 2: Lehman went under fifty billion dollars, and so I asked them,
Speaker 2: I said, what was the collateral for that loan? And
Speaker 2: they said, oh, we had to use the positions from
Speaker 2: all of the members of Euroclear. And I'm like, is
Speaker 2: that customer or house account? Is it mingled? And they're like, oh,
Speaker 2: it's all mingled at our level. We have a claim
Speaker 2: in all assets. I'm like, okay. And then I spoke
Speaker 2: to the DTCC and I said, well, oh no. I
Speaker 2: spoke to Euroclear and said, what happens if Spain or
Speaker 2: Italy went bust? They said, then the entire colateral of
Speaker 2: the system is gone and it's a total wipeout of everything.
Speaker 2: That's when I realized how important the government debt was.
Speaker 2: I asked the DTCC and the New York Fed the
Speaker 2: same question, and they said, yes, they would lend if
Speaker 2: JP Morgan went under or something, they would lend money
Speaker 2: to the system and they would take customer positions as collateral.
Speaker 2: I'm like, okay, so you don't actually own anything. And
Speaker 2: I asked the New York feder said what is the
Speaker 2: leverage in US treasuries? And they said, we think treasuries
Speaker 2: are levered up to forty two times. Wow, So there's
Speaker 2: forty two claims on the same asset. If shit hits
Speaker 2: the fan, that's what they're scared of. And that I
Speaker 2: think they had the realization in twenty twelve, and I
Speaker 2: think they all understood the game, which was, Okay, we're
Speaker 2: going to have to continue to monetize this until we
Speaker 2: can grow our way out of it if we can.
Speaker 3: Right.
Speaker 1: So I remember two thousand and eight is when I
Speaker 1: sort of woke up to the macro world. I had
Speaker 1: been a real estate investor coming out of the two
Speaker 1: thousand crash, and then you know, I got woken up
Speaker 1: in two thousand and eight. I said, Wow, I need
Speaker 1: to go figure out this macro picture because it has
Speaker 1: all this ConTroll over my life I've been paying attention to.
Speaker 1: And that's when I really remember hearing the first you know,
Speaker 1: too big to fail sort of narrative coming out of it.
Speaker 3: And so they bailed out a lot of.
Speaker 1: These institutions AIG that were too big fail, but by
Speaker 1: doing that, they made even bigger institutions that are too
Speaker 1: big to fail.
Speaker 2: It sounds like, so there's a really important point. I
Speaker 2: asked them directly why they let Leman go but they
Speaker 2: didn't let AIG go, and they're like, nobody was using
Speaker 2: Leman bonds as collateral. AIG were triple A and they
Speaker 2: were going to go to zero, and triple A bonds
Speaker 2: get used massively as collateral, and they thought there was
Speaker 2: thirty two times leverage in AIG bonds. They're like, we
Speaker 2: could not allow it to go. Leman wasn't as existential
Speaker 2: a problem as AIG. I was like, wow, that's fascinating.
Speaker 1: And so now the system has gotten so levered up
Speaker 1: and it's there's so much collateral staking the other collateral
Speaker 1: that now we're sort of in this position that's gotten bigger, bigger,
Speaker 1: bigger and bigger worse that they just can't let it
Speaker 1: go now, which is what we saw in twenty twenty.
Speaker 2: And we saw it in twenty twenty two as well.
Speaker 2: So the moment the markets go down a certain amount,
Speaker 2: the liquidity comes back, even though the FED was still
Speaker 2: tightening and they were doing contains of tightening. The actual
Speaker 2: liquidity started picking up at the back end of twenty
Speaker 2: twenty two because they're like, enough, we don't want the
Speaker 2: S and P to full more than let's say, twenty
Speaker 2: five percent. And that's kind of a line in the
Speaker 2: sand that we've seen repeatedly that every time it starts
Speaker 2: to get a bit wobbly, magic of liquidity comes back,
Speaker 2: they debase the currency and everybody's okay again because if
Speaker 2: you think of the other big liability out there we
Speaker 2: talked about ordinary people. Ordinary people do have a pension
Speaker 2: and those pensions are in these assets too, and you've
Speaker 2: got this massive cohort of people that if you let
Speaker 2: the pensioners lose fifty percent of their wealth at what
Speaker 2: average age of baby boomer's average age is, what's seventy one,
Speaker 2: seventy two, Well, that's going to destroy consumption because there's
Speaker 2: seventy six million of these people. So then don't want
Speaker 2: to do that too. So that between a rock and
Speaker 2: a hard place. And I ask a lot of people
Speaker 2: who complain about what's going on rightly, so is what
Speaker 2: would you do different? Are you going to default on
Speaker 2: all of the baby boomers? And destroy their pensions and
Speaker 2: then destroy the entire economy, or do you let all
Speaker 2: of the system go under because you don't have any assets.
Speaker 2: It's very difficult to actually come up with an answer
Speaker 2: that is reasonable. They're all shits, they're all shit answers.
Speaker 2: So maybe the least shit is eight percent a year.
Speaker 3: Yeah.
Speaker 1: The other problem is I've talked about her, whereas the
Speaker 1: government can't really afford a recession either or a market crash, right,
Speaker 1: I mean a large percent of their revenues come from
Speaker 1: cap gains and just income overall.
Speaker 3: If the stock market crashes.
Speaker 1: Through a recession, would typically see what a twelve to
Speaker 1: fifteen percent drop in tax receipts, and when we're already
Speaker 1: running deficits like we are, that would also be catastrophic.
Speaker 2: Yeah, particularly if a bear market lasts longer than a year.
Speaker 2: So a year they can pretty much buffer as long
Speaker 2: as it's not too big. But if it grinds on
Speaker 2: for two or three years, you're right, the tax revenues
Speaker 2: don't add up. People get tipped out of jobs, so
Speaker 2: there's less other revenues coming. So it's cap gains, it's earnings,
Speaker 2: it's household income, the whole lot and then before you
Speaker 2: know it again exactly the same isshow I hadn't really
Speaker 2: thought of it that way, but that makes total sense.
Speaker 2: Is you just can't have a long term recession right
Speaker 2: now because everything is resting on it.
Speaker 1: Right Okay, So that sort of sets the stage for
Speaker 1: the everything code, so we understand the mechanisms of why
Speaker 1: the leverage is there and why they can't really let
Speaker 1: their crash and they have to continue to inject liquidity
Speaker 1: to keep it going. Then, as you said in two
Speaker 1: thousand and eight, that metronome moment sort of happened when,
Speaker 1: of course, if the bank is going to give you
Speaker 1: zero percent loans, you're going to refinance. So to the
Speaker 1: point that you made everybody refinanced at that time. Now,
Speaker 1: that was most of the debt. I mean, that was
Speaker 1: corporate debt, household debt, business debt, everything, and that was
Speaker 1: also global.
Speaker 2: Well, corporates actually did longer term debt. It was the
Speaker 2: governments that really did. Households didn't get access to debt ever. Again,
Speaker 2: so you know, household debt to GDPs falling for a
Speaker 2: long time, and corporate debt to GDP has been generally
Speaker 2: falling because tech stocks have become more dominant and they
Speaker 2: don't have debts old economy stocks do it all shifted.
Speaker 2: That shrinkage of household debt and corporate debt is exactly
Speaker 2: the same amount of the increase of government debt. So
Speaker 2: it's just going from one balance sheet to the other,
Speaker 2: got it. Because on the government balance sheet, you can
Speaker 2: debase currency. On the corporate balance you or the household
Speaker 2: balance sheet you can't do anything.
Speaker 1: And then there's a mechanism also that you've talked about
Speaker 1: that sort of in place because of the demographics and
Speaker 1: with falling demographics that we're seeing sort of through the
Speaker 1: developed world, that's also forcing the government to continue to
Speaker 1: do debase or continue to do sort of add stimulus
Speaker 1: into the GDP.
Speaker 2: Yes, So if you think about an aging population, if
Speaker 2: you think about your parents, the older they get, the
Speaker 2: less they spend. So aging populations tend to have lower
Speaker 2: trend rates of GDP they all do. It's happened observable everywhere.
Speaker 2: Because old populations spend less, they also tend to not
Speaker 2: know how long they're going to live for after they retire.
Speaker 2: So when my dad retired, his spending must have fallen
Speaker 2: sixty or seventy percent because he's like, well, I've got
Speaker 2: this much money, I don't know how I'm going to
Speaker 2: live for is my wife's going to be taken care of?
Speaker 2: And so they change their habits, and so that drags
Speaker 2: down GDP growth, as does debt, and so it keeps compounding.
Speaker 2: This whole thing is right now. For example, interest rates
Speaker 2: are at five and a half percent, but trend rate
Speaker 2: of GDP over the last five six years is about
Speaker 2: one point seventy five percent. So you've got this big
Speaker 2: gap and you need to get interest rates down so
Speaker 2: you can refire them. But all the time, GDP keeps
Speaker 2: falling over time, and you can forecast it into the future.
Speaker 2: It's just the birth's deaths, and it gives you thirty
Speaker 2: years of understanding, and it's just telling us unless something
Speaker 2: dramatic change, which is technology, we're just going to keep
Speaker 2: dragging down GDP forever. And we're seeing it worse older populations, Japan, China,
Speaker 2: most of Europe. They're older than the US because they
Speaker 2: had less immigration. What you find is their GDP keeps shrinking. Australia,
Speaker 2: on the other hand, has a high immigration rate, as
Speaker 2: has Canada, and they tended to do better because of
Speaker 2: the immigration rate, because really GDP growth is driven by
Speaker 2: population growth, productivity growth, and debt growth.
Speaker 1: Right now, you know, I've read into the demographics quite
Speaker 1: a bit. I remember Harry Dent Junior wrote a book,
Speaker 1: The Demographic Cliff, that sort of kind of showed these
Speaker 1: predictable spending patterns as you age through life. But another
Speaker 1: thing that I've heard, though, is that the baber boomers
Speaker 1: have so much money. They're sitting in so much wealth
Speaker 1: right now, and a lot of them they're like, well,
Speaker 1: we're going to die, so let's just spend it all.
Speaker 2: I hear this a lot. There was a paper written
Speaker 2: the BIS or somewhere about this, but it's not provable
Speaker 2: in any country anywhere. So I've gone through all the
Speaker 2: demographic data and there was this whole thing said, well
Speaker 2: it's inflationary. I'm like, well, show me some fucking evidence,
Speaker 2: and I went through every single country. There is no
Speaker 2: evidence of inflation. They tend to be hoarders. Now. What
Speaker 2: happened in Japan was that aging japan cohort their kids
Speaker 2: retired by the time they passed it onto them. So
Speaker 2: a lot of them actually passed it on to their kids.
Speaker 2: But in Japan it was so bad that it went
Speaker 2: from retiree to retiree, so it never recycled into the economy.
Speaker 2: So I don't see evidence of baby boomers saying, well,
Speaker 2: I'm going to spend it all because you know, that's okay.
Speaker 2: When you take the average pension or retirement savings. When
Speaker 2: you take the median, the medium baby boomer is one
Speaker 2: hundred and fifty grand saved and they need to live
Speaker 2: for fifteen twenty years post retirement, can't. Yeah, how they're
Speaker 2: just going to blow it on you know, cruises, they're not. Yeah.
Speaker 1: I mean in the US, I believe about half of
Speaker 1: them have no savings. And then I think the median
Speaker 1: that do have savings is about one hundred and fifty
Speaker 1: so it's even worse.
Speaker 2: Yeah, which is terrible. But when you look at the average,
Speaker 2: it's like a million bucks. Yeah, sure, because Jeff Bezos
Speaker 2: is in it, right, But you know that skew is
Speaker 2: hides a lot of bad stuff.
Speaker 3: Yeah.
Speaker 1: Now, when you're looking at this, you've gone back and
Speaker 1: forth seeming we were talking about the US, but then
Speaker 1: you pull in sort of the West, so Japan, China,
Speaker 1: and Europe, et cetera. So it's important to sort of
Speaker 1: look at this from a global perspective, especially when we're
Speaker 1: looking at like global assets like bitcoin.
Speaker 2: It is very important because I believe all of these
Speaker 2: central banks and governments understand the game that they're in,
Speaker 2: and I think the Japanese figured it out first. They
Speaker 2: were the first two quant stats of easing, and I
Speaker 2: believe that somewhere around twenty twelve, with the rescue of
Speaker 2: the European system, they all got together and said, we
Speaker 2: will all have to run a liquidity cycle to do this,
Speaker 2: and that there is a game that they play because
Speaker 2: they kind of know. What's interesting is people always assume
Speaker 2: central banks are stupid. I find that a bit hubristic
Speaker 2: to think that they are. Maybe they just don't want
Speaker 2: to acknowledge what they're trying to do, but it would
Speaker 2: make total sense. And the more you think about that,
Speaker 2: the more you see it how they're also connected in
Speaker 2: what they do and how they do it, and it's
Speaker 2: all like a tacit agreement. Is okay, time to go,
Speaker 2: and they all go again.
Speaker 3: Yeah.
Speaker 1: Now, so we have these problems and now we're in
Speaker 1: this SYNCD up cycle. You mentioned that it's probably not
Speaker 1: going to stay that way forever, but that's where we're
Speaker 1: at right now. What would cause it to get out
Speaker 1: of sync?
Speaker 2: Well, most people tend to err towards the well it's
Speaker 2: all going to blow up. I'm like, show me how
Speaker 2: if you can debase the currency, a global reserve currency,
Speaker 2: how's the assets going to collapse? You can't. It's like
Speaker 2: the Venezuelan stock market goes a lot in Bolivard terms,
Speaker 2: in dollar terms, it goes down. That's debasement. So I'm like,
Speaker 2: I don't think that is the outcome. What I actually
Speaker 2: think of the outcome is remember that magic formula GDP
Speaker 2: growth plus productivity, growth plus debt growth. Right, debt growth
Speaker 2: is stopped, it's just servicing of old debts. Population growth
Speaker 2: we know is negative out for thirty years. And what
Speaker 2: is the answer? AI and robots they're infinite humans. And productivity?
Speaker 2: What is productivity? Productivity really is how much output per
Speaker 2: kilo jowl of energy. Now, think of that as electricity costs.
Speaker 2: If you then think about and a lot of people
Speaker 2: like the Europeans their nuts. Look what they're doing with
Speaker 2: this green energy. They're wasting money. They're not Their entire
Speaker 2: job is to lower the cost of electricity, because that
Speaker 2: is the only way, they can pick up GDP because
Speaker 2: it creates the multiplier to productivity. They don't have the
Speaker 2: tech industry in the same way, but they have them
Speaker 2: and China are the big pushes of renewables. So the
Speaker 2: cost of renewables has been collapsing over time. It's down
Speaker 2: ninety nine percent over the last fifteen years. So as
Speaker 2: it's getting cheaper and cheaper, eventually you can scale it
Speaker 2: enough that you will change productivity. On the other hand,
Speaker 2: you've got Japan, China, the US using AI and robotics,
Speaker 2: which creates infinite people. Now, if you've got infinite people,
Speaker 2: you kind of break GDP. I call it the economic singerlarity.
Speaker 2: You get to some point where GDP doesn't mean anything anymore.
Speaker 2: What does any of this mean? So if you've got
Speaker 2: productivity going up because of energy costs and you've got
Speaker 2: infinite humans or humans in inverted commas, then that changes everything.
Speaker 2: Now people are going to say, oh, rarely smoking crack,
Speaker 2: this is all weird. This is exactly what happened after
Speaker 2: World War two. So let me talk you through that,
Speaker 2: because really important for people to understand World War II.
Speaker 2: So the crash of twenty nine was the system failure
Speaker 2: same as two thousand and eight. World War II finished
Speaker 2: nineteen forty five. This was roughly like the pandemic because
Speaker 2: the global economy had stopped. Everybody was out of the
Speaker 2: economy because they were locked up at home or they
Speaker 2: were in the services back in the forties. They all
Speaker 2: come back into the labor force by stuff because they've
Speaker 2: been out of the consumption for ages. The factories aren't ready,
Speaker 2: They're not able to deal with it. It's no supply chains.
Speaker 2: Prices rocket in both equations twenty percent back then, nine
Speaker 2: and a half percent this time around. Okay, Then what
Speaker 2: happens is inflation fell, actually went negative soon after the
Speaker 2: first inflation re push. Then what the central banks did
Speaker 2: then the FED was yield curve control, which is money
Speaker 2: printing to service the debt, and they ran that policy
Speaker 2: plus fiscal spending to generate new cars, new factories. Knew
Speaker 2: all of that boom of the fifties that went into
Speaker 2: the sixties. Now, the other problem they had is much
Speaker 2: like now, we'd lost like twenty percent of the entire
Speaker 2: male population of the Western world from warfare to wars,
Speaker 2: So you had to replenish population or GDP couldn't grow
Speaker 2: what happened the baby boomers. So by the time they
Speaker 2: got into their twenties it was nineteen seventies, they all
Speaker 2: go into the labor force at the same time, start
Speaker 2: buying a house, a car, a suit, a tie, everything.
Speaker 2: It creates a huge inflation because we had all of
Speaker 2: this consumption. But that over that period from about nineteen
Speaker 2: forty seven to about nineteen seventy it was perfectly four
Speaker 2: year cyclical. It was exactly the same thing the stock
Speaker 2: market did nine hundred percent.
Speaker 1: So the productivity was led by the return of the
Speaker 1: people at that point and the demand that they had,
Speaker 1: and the rebuilding of the world and the rebuilding of
Speaker 1: the world, reindustrialization, especially over in Europe there was completely destroyed.
Speaker 2: Yeah, but the US too. You know all the factories
Speaker 2: you think of, you know, all of the famous goods
Speaker 2: of you know, washing machines, cars, TVs. That's all that period, right,
Speaker 2: So it was a huge productivity game.
Speaker 1: And it was also an explosion of debt because we
Speaker 1: sort of went off like an equity based system to
Speaker 1: rebuild the world at that time.
Speaker 2: But that didn't happen un till later. And why that
Speaker 2: happened was the baby boomers starting hitting there by the
Speaker 2: early eighties, when Margaret Thatcher and Ronald Reagan kind of
Speaker 2: opened the debt's bigots to households. What had happened because
Speaker 2: you had the largest cohort of people ever at the
Speaker 2: same time into the labor well, guess what, their wages
Speaker 2: didn't go up because they're competing. Then as you go
Speaker 2: out further, obviously we had the World Trade Organization Agreement
Speaker 2: and China, so now you're competing. So these people's wages
Speaker 2: in real terms never really went up. So the American
Speaker 2: dream was shot in the head somewhere in the you know,
Speaker 2: once their parents had them in the nineteen fifties, and
Speaker 2: they didn't nobody realized what was going on. So what
Speaker 2: they started to do as asset prices started to rise,
Speaker 2: they borrowed. And you can pretty much measure the difference
Speaker 2: in the rise of asset prices and the need to
Speaker 2: fund a future retirement by debt. And so they were
Speaker 2: doing a logical thing, which is I need to get
Speaker 2: on this ladder. But what happens is it just kind
Speaker 2: of got out of control. And then the governments did
Speaker 2: the same because you have to fund the pensions of
Speaker 2: this older group, you know, the corporates got screwed with
Speaker 2: defined benefit pension plans for the same group. So it
Speaker 2: was the baby boomers were to blame. But they were
Speaker 2: all rational actors. They weren't evil people. If you want
Speaker 2: to blame anybody, blame their parents for having too many
Speaker 2: kids at the same time. And you can blame that
Speaker 2: on Adolf Hitler. And before that, you can blame it
Speaker 2: on the Treaty of Versailles for trying to force the
Speaker 2: Germans after World War One to pay for the debts
Speaker 2: of World War One, and they had the hyperinflation. Hitler
Speaker 2: comes into power world War two, a bunch of kids.
Speaker 2: The kids spend too much money, caused the great inflation.
Speaker 2: They're all funcked because there's too many of them. They
Speaker 2: don't earn enough wages, they start borrowing money and there
Speaker 2: it goes.
Speaker 1: And we blame the Treaty of Versailles on the war
Speaker 1: World War One, and really the War of England, which
Speaker 1: was really which was really to blame because of the
Speaker 1: creation of the Bank of England. They created a fiat
Speaker 1: monetary system that allowed these endless wars to go on.
Speaker 2: Yes, and just you know, I guess the UK Navy
Speaker 2: is the other one, but.
Speaker 1: Yes, but came from the monetary system that was created, yeah.
Speaker 2: Which probably came from John Law, from the friend very much.
Speaker 2: You know, it's all connected. And that's what people don't see.
Speaker 2: People get angry with each other. We see the polarization
Speaker 2: of politics, right, but people don't realize that this is
Speaker 2: this was set off, as you're rightly saying, two hundred
Speaker 2: years ago, maybe even longer. I don't even know where
Speaker 2: this thread begins. I haven't bothered to go back that far,
Speaker 2: but it probably goes back further and further and further.
Speaker 2: And it's just the mascinations of this whole thing. And
Speaker 2: you know, we have these various blow ups. Nineteen twenty
Speaker 2: nine was one of them too.
Speaker 3: Yeah, I mean you can go back.
Speaker 1: It's more like the volatility of life, right, the volatility
Speaker 1: of humanity and the pendulum that swings too far one
Speaker 1: way and over correct the other way. I mean, you
Speaker 1: go back to their fourteen hundreds when Spain went and
Speaker 1: found all the silver in Peru, brought all the silver back,
Speaker 1: and then you had massive inflation because you increased the
Speaker 1: minitary base too much.
Speaker 2: It's exactly right, so you know, it's all the same
Speaker 2: it's all the same thing. And you know, I actually
Speaker 2: don't I'm not actually a gold standard guy either, because
Speaker 2: we had the same problems then too. So I don't
Speaker 2: think we found an easy answer because humans a greedy
Speaker 2: and they want leverage, and we've never solved that. You
Speaker 2: go back several thousand years and humans had leverage then
Speaker 2: as well as if there's something about humans and leverage
Speaker 2: that we'd like to bring our future forward that is
Speaker 2: just like inherent in humanity.
Speaker 1: Well, it's our ingenuity, right, So we are trying to
Speaker 1: get leverage, if you will, trying to get more output
Speaker 1: for the less input, So create a willbear out to
Speaker 1: carry eight rocks at a time as opposed to carying
Speaker 1: one at a time. And so the problem is our
Speaker 1: ingenuity maybe takes it too far, where then we start
Speaker 1: to steal from the future as opposed to just like
Speaker 1: trying to improve the future.
Speaker 3: Maybe that's right.
Speaker 2: I mean a lot of people say that, you know,
Speaker 2: kind of human GDP per capita and standard of living
Speaker 2: increases came from the ability to use debt to borrow
Speaker 2: a bit from the future to leverage it to create
Speaker 2: better outcomes. But then, yes, we always go too far right,
Speaker 2: just what we do.
Speaker 1: I think the difference what misis broke down is the
Speaker 1: difference of commodity credit versus circulating credit. So if I
Speaker 1: grow eight bushels of wheat and I consume six, I
Speaker 1: could loan you one of those bushels of wheat on credit.
Speaker 1: But that came from my supply, right, versus being able
Speaker 1: to create the debt out of thin air. I think
Speaker 1: that's maybe where we sort of jumped the across the
Speaker 1: rub of glass.
Speaker 2: But no, because if we think about the gold standard,
Speaker 2: we had nineteen twenty nine. You know, we had plenty
Speaker 2: of those debt crises.
Speaker 1: It wasn't nineteen twenty nine because England left the gold standard.
Speaker 1: And when Churchill tried to go back to the gold standard,
Speaker 1: Keen said, hang on, hang on, you've inflated the currency
Speaker 1: too much. You need to now reprice it at sixty
Speaker 1: bucks an ounce. Churchill said no, went to thirty, which
Speaker 1: then caused a massive deflation.
Speaker 2: Yeah, that's possibly right. It was possibly the increasing the
Speaker 2: value of the dollar over the time versus the pound
Speaker 2: as we shifted from one economic system to the other.
Speaker 1: So that frank So it was leaving the gold standard
Speaker 1: and trying to come back to a manipulated standard that
Speaker 1: maybe caused that whole thing.
Speaker 2: Possibly, Yeah, who's to say so.
Speaker 1: Back to the GDP plus productivity plus debt growth.
Speaker 3: You talked about the rate of wage growth.
Speaker 1: And so the rate of wage growth is going up
Speaker 1: with the GDP growth, which is, to your point, about
Speaker 1: one and a half percent. But the problem is that
Speaker 1: asset growth or price growth. Let maybe the inflation isn't
Speaker 1: really the CPI we've been sold, it's the rate of debasement,
Speaker 1: which since twenty nineteen has been averaging about ten percent.
Speaker 2: Exactly.
Speaker 3: That's the real hurt rate.
Speaker 2: What you've got to understand is for each one and
Speaker 2: a half percent of earnings growth, assets are growing up,
Speaker 2: going up by ten percent, so each year you can
Speaker 2: buy less and less assets. Now, what is an asset.
Speaker 2: An asset is future deferred consumption, whether it's for use
Speaker 2: yourself in retirement or your kids or whatever it is.
Speaker 2: But it's a saving of wealth that needs to be
Speaker 2: to grow to compensate for the how long it's locked
Speaker 2: up for, and therefore your future self is protected. It's
Speaker 2: your wealth, and if it grows enough, you make a
Speaker 2: lot of money. But the issue is your everybody's future
Speaker 2: self is getting poorer because every year you can't afford
Speaker 2: as much assets. And so therefore all of these millennials
Speaker 2: are just finding this in front of them that they
Speaker 2: can't buy a house anymore, they can buy less of
Speaker 2: the S and P. It's just a really messy, ugly situation.
Speaker 1: Yeah, I have two daughters and here I live in
Speaker 1: a little beach down here in southern California. That the
Speaker 1: average home price in this little town is like one
Speaker 1: point six million dollars, And it's like, how are my
Speaker 1: daughters ever going to be able to live in this
Speaker 1: town like that they grew up in?
Speaker 3: It's incredible, that's right.
Speaker 2: It's like when I was when I was in my twenties,
Speaker 2: I bought an apartment in London, and yeah, I was
Speaker 2: working finance. I had a relatively high salary, but the
Speaker 2: apartment cost me three time salary, four time salary. There
Speaker 2: Now the same thing would be ten, twelve, fourteen times.
Speaker 2: How can anybody afford that?
Speaker 1: Yeah, So now we have the tech explosion, so cheap energy,
Speaker 1: I mean, China's building the one hundred and fifty nuclear
Speaker 1: power plants right now. That's cheap energy for sure. Cheap
Speaker 1: energy plus you know AI robotics that you're talking about,
Speaker 1: which increases productivity. But I would assume that would also
Speaker 1: put downward pressure on wages as well.
Speaker 2: Oh for sure. That's the biggest, single, most deflationary thing
Speaker 2: that has ever happened to humanity.
Speaker 1: But if they if the productivity is pushing GDP up,
Speaker 1: then you would think they would also if wages are
Speaker 1: growing at the rate of GDP, and GDP is growing
Speaker 1: now because productivity increased, wouldn't bring wages up with it.
Speaker 2: I mean, wages are, yes, but don't forget the population shrinking,
Speaker 2: the human population, right, so net aggregate demand actually doesn't
Speaker 2: increase as much because you're going to have all of
Speaker 2: these seventy six million boomers dying off and that's a
Speaker 2: huge dropping population because the replacement rates of population is
Speaker 2: so low.
Speaker 3: Got it?
Speaker 1: Okay, Well, so that's that's sort of this liquidity sort
Speaker 1: of fin refinance cycle sets the stage for that. Now
Speaker 1: the next thing that that's the everything code sort of
Speaker 1: summed up one thing I've been studying. I had Michael
Speaker 1: Howell on the show, and I've been studying his work,
Speaker 1: and he was showing how basically, when you get global liquidity.
Speaker 3: I'm not sure.
Speaker 1: He doesn't really break down exactly how he measures global liquidity,
Speaker 1: and you guys have your own proprietary I don't. I'm
Speaker 1: not sure how much those correspond with each other. But
Speaker 1: the S and P five hundred is basically moving up
Speaker 1: almost I think ninety to ninety five percent correlated to
Speaker 1: the global liquidity. But then we have other assets like
Speaker 1: gold with a sensitiv ratio of like one point five
Speaker 1: and bitcoint with like a sensitivy ratio of like nine.
Speaker 1: So how do you look at the global liquidity in
Speaker 1: relation to like the types of assets we should be buying.
Speaker 2: So, yeah, this was the this is what got me
Speaker 2: on the journey. I got to this bit before I
Speaker 2: actually got to the everything code is. They're all correlated,
Speaker 2: some lead, some lag a bit, but they're basically all
Speaker 2: correlated to the business cycle. We always have been. But
Speaker 2: if everything is being driven by this one dominant factor,
Speaker 2: which is debasement of currency, and your hurdle rate is
Speaker 2: let's say eight percent debasement plus three percent inflation or
Speaker 2: something eleven percent twelve percent for easy maths on a
Speaker 2: globalized level, So unless you're making twelve percent returns, you're
Speaker 2: not going anywhere. Then at Exponential Age Asset Management, the
Speaker 2: asset management firm that I co founded, we have this
Speaker 2: table of all of the different assets, and basically the
Speaker 2: SMP is about twelve percent so owning equities, which is
Speaker 2: why all of the millennials who have four to one
Speaker 2: k's and they put it in the SMP still can't
Speaker 2: afford a house because they're just matching the debasement. They're
Speaker 2: not beating it right, so they're not getting paid for
Speaker 2: locking up money for extended periods of time. The Nasdaq
Speaker 2: about seventeen percent a year since twenty eleven. Okay, so
Speaker 2: the NASDAK, because it's a secular technology trend outperforms makes sense.
Speaker 2: And then you've got the bizarro world of bitcoin, which
Speaker 2: is one hundred and fifty percent. Gold actually doesn't beat
Speaker 2: it gold about eight or seven, so it's actually actually
Speaker 2: worse off in gold than you are. Only the S
Speaker 2: and P five hundred, which is why that ratio keeps moving.
Speaker 2: So bitcoin makes such a dramatic difference. So all I
Speaker 2: started doing was then dividing every chart by the total
Speaker 2: global liquidity or even the FED balance sheet or M
Speaker 2: two whatever you want to use us, right, and you
Speaker 2: found that the S and P go sideways, Gold go sideways,
Speaker 2: real estate go sideways. Roughly, the NASDAK goes up, and
Speaker 2: bitcoin does that. Okay, So now you've got two assets,
Speaker 2: only two assets in the world that outperform the debasement.
Speaker 2: Tech stocks we get it tomorrow is more digital than today.
Speaker 2: Of course they're going to do well over time. And
Speaker 2: second is bitcoin. So you divide one by the other,
Speaker 2: and the nasdak's down ninety nine point nine seven percent
Speaker 2: versus bitcoin. And once you see it like that and
Speaker 2: you realize it's all driven by one cycle, which is
Speaker 2: one dominant factor of debasement, then it makes it really easy,
Speaker 2: which is just on the one asset that outperforms. Yeah,
Speaker 2: and because they're all correlated and risk adjusted, it's by
Speaker 2: far the most superior asset we've ever been given on
Speaker 2: a risk adjusted basis. So just do that.
Speaker 1: Something I talk a lot about is a lot of
Speaker 1: different cycles on different different types of cycles, mainly political
Speaker 1: revolution cycles, financial cycles, and then tech cycles.
Speaker 3: And you have like this conjoinit and wave, like this
Speaker 3: K wave cycle.
Speaker 1: Right, it's like a forty to sixty year I just
Speaker 1: call it a fifty year sort of like a tech
Speaker 1: revolution cycle, and you know, there's been five. I say
Speaker 1: that we're entering our sixth one now. So the last
Speaker 1: one started nineteen seventy one, which was the microprocessor, which
Speaker 1: brought telecommunications, personal computers, and the Internet. Before that, it
Speaker 1: was nineteen oh eight, which was you know, the automobile,
Speaker 1: oil futures, but also mass production.
Speaker 3: You can keep going back, but the key pat and
Speaker 3: then before that it was like steel, right. But it
Speaker 3: looks like.
Speaker 1: During these financial technology revolutions, it's not just the technology
Speaker 1: that changes the course humanity, but that's the only place
Speaker 1: to invest. So the last fifty years, the markets have
Speaker 1: been dominated by telecom, personal computers, and Internet, and the
Speaker 1: markets previous to that were dominated by Ford GMGE and
Speaker 1: so then if that continues forward, then the only place
Speaker 1: to invest over the next fifty years would be into
Speaker 1: I'm sort of thinking of it as like a decentralized revolution.
Speaker 1: So bitcoin, the bitcoin technologies, and even AI I think
Speaker 1: is decentralized in a way, and so it's sort of
Speaker 1: like maybe that's the only place to invest over the
Speaker 1: next fifty years.
Speaker 2: So I tend to agree there's this bundling unbundling that
Speaker 2: goes on with the world economy as well centralization decentralization.
Speaker 2: So I think decentralization is one of the most important waves.
Speaker 2: We've got this gigantic technology wave, it's by far the
Speaker 2: largest the world has ever seen in the fastest period
Speaker 2: of time. That's upon US. Blockchains part of it, but
Speaker 2: it's AI, it's robotics, it's ev it's space, it's everything, right,
Speaker 2: genetic science is the whole thing. So the decentralized element
Speaker 2: you raise it with AI, there is a fight. You know,
Speaker 2: we've seen the fight between centralized money and decentralized money
Speaker 2: that both you and I have been part of. But
Speaker 2: that fight is about is happening again in AI. It's
Speaker 2: like you cannot simply give It's the same argument as money.
Speaker 2: You can't give the power to one superpower for all
Speaker 2: of money, which is what the US has with the
Speaker 2: World reserve currency. It's too powerful. What you're going to
Speaker 2: do is, if you're not careful, you're going to give
Speaker 2: the world's most intelligent thing. It's like intelligence squared by
Speaker 2: a thousand. I mean it'slightly, not squared by one thousand,
Speaker 2: and you know, a thousand times the intelligence of humanity
Speaker 2: and give it to a company. Fucking crazy. So we
Speaker 2: have to fight for decentralization because this thing is not
Speaker 2: going away. We're not going to put the genie back
Speaker 2: in the bottle. We're not going to uninvent it, like
Speaker 2: we can't uninvent the nuclear bomb. Which can't do it
Speaker 2: because the game theory will suggest that somebody's always going
Speaker 2: to scale it. So we need to have that decentralization. Now,
Speaker 2: what is going on with electricity and what is ev Again,
Speaker 2: I'm not interested in people's political narratives. Look at what's happening.
Speaker 2: We're decentralizing power. So now people can have the power,
Speaker 2: can some the power source of power at their houses,
Speaker 2: so therefore you don't need the huge storage. People say, well,
Speaker 2: you can't scale solar, Well you can at a house level.
Speaker 2: You can do it probably at a village level. So
Speaker 2: what you're doing is decentralizing the entire grid. Now look
Speaker 2: what Microsoft and Amazon are doing with nuclear and open AI.
Speaker 2: They're going to scale small nuclear plants next to these
Speaker 2: very important massive GPU clusters. So I think we're seeing
Speaker 2: decentralized power, decentralized AI. What are robotics, they'll probably end
Speaker 2: up being some sort of decentralized labor force, centralized and
Speaker 2: then decentralized. I don't know how that works, decentralized money,
Speaker 2: so I think you're dead right. So that's that's where
Speaker 2: we're going.
Speaker 1: I think of AI Obviously there's the centralization of who
Speaker 1: programs the LM, but I think of it also as
Speaker 1: decentralizing in a sense where I don't need a big
Speaker 1: company more. I could just work by myself with my
Speaker 1: laptop and do the work. And so, you know, Sam
Speaker 1: Altman said that we might see the first single person
Speaker 1: billion dollar company. So I think of it there's there's both, right,
Speaker 1: the centralizing of the of the programming, but then it's
Speaker 1: decentralizing in a sense it turns one big company into
Speaker 1: one hundred or a thousand companies sort of a thing.
Speaker 1: On the programming side. I mean, we are seeing a
Speaker 1: pretty good movement towards decentralization there. So I'm pretty hopeful
Speaker 1: of that. At least I'm an optimist as an entrepreneur.
Speaker 1: Zuckerberg seems to have taken that fight on maybe just
Speaker 1: to spite open Aye, you know, maybe he just decided
Speaker 1: to decentralize to take them out of out of a
Speaker 1: position we don't know, but so we're seeing that.
Speaker 3: But yeah, back to sort of just kind of decentralizing that.
Speaker 3: What do you think about the the blend?
Speaker 1: Right, So these these these industrial or technological revolutions aren't
Speaker 1: just a single technology, but it's a cluster of these technologies, right,
Speaker 1: And so back to you. You rattled off a few
Speaker 1: of these clusters when you look at like bitcoin, right,
Speaker 1: So there's border list, permission list, censitsive resistant, et cetera.
Speaker 1: Andrea San Topolos talked about years ago that it's also personless, right,
Speaker 1: and so only a person can get a bank account,
Speaker 1: and of course the banking system we have today also
Speaker 1: you know, prohibits or it doesn't really allow for micropayments.
Speaker 3: But when you think about the you know.
Speaker 1: AI plus the robot plus you know whatever, autonomous cars, whatever,
Speaker 1: and then it'd been like personless ability to you know,
Speaker 1: have a wallet and transact and where does that take us?
Speaker 2: Yeah, I mean we're starting to get into you know,
Speaker 2: all of this economics singularity parts of how much the
Speaker 2: world economy is going to change. But listen, you're going
Speaker 2: to see the next version of chat GPT is probably
Speaker 2: going to be agentic So what agents in AI mean
Speaker 2: is you're starting a business. Mark, you go on to
Speaker 2: fiver and say, hey, you build me a deck, you
Speaker 2: do me some brand design, you do me some copy.
Speaker 2: You pay these guys small amounts of money. They're agents.
Speaker 2: But AI can do agents now at scale and speed,
Speaker 2: and it will create its own agents because AI is
Speaker 2: smart enough to build this stuff. So you get this
Speaker 2: multiple agent world where AI asks the agent to do something.
Speaker 2: So Mark now instead goes to chat GPT five and says, hey, listen,
Speaker 2: I want to build a business that does xyz and
Speaker 2: I'm going to need to get registered. I need to
Speaker 2: have my deck prepared, need blah blah blah, and chat
Speaker 2: GBT will do it all using other agents. Now to
Speaker 2: your point, last time I checked, an AI can't get
Speaker 2: a utility bill, and therefore it can't open a bank account.
Speaker 2: Now it's going to have to pay because people don't
Speaker 2: yet understand that all AI has a cost, and it
Speaker 2: has two costs. It has compute and it has electricity.
Speaker 2: So if you're going to call much like a Fiver person,
Speaker 2: you're going to and you might go to the Philippines
Speaker 2: because it's a lower cost. You're going to have to
Speaker 2: pay the one AI is going to have to pay
Speaker 2: the other AI for the cost of compute and maybe
Speaker 2: a profit margin. Maybe it's a profitable agent. In fact,
Speaker 2: it should be. Why would it not be, because it
Speaker 2: can accumulate more. It's the game that humanity has always played.
Speaker 2: So in that case, the only way of doing this
Speaker 2: is crypto rails. There's no other way apart from using
Speaker 2: blockchain for micro payments, fast transaction, recorded ownership. Who has what?
Speaker 2: You know? You need smart contracts to have contractual terms
Speaker 2: between stuff. So yes, I mean, I don't think people
Speaker 2: yet understand how because we all think of blockchain technology
Speaker 2: in the ways that we.
Speaker 3: Know it now.
Speaker 2: But in the end, nothing can run without it.
Speaker 1: The thing with these technological revolutions is that, you know,
Speaker 1: humans aren't really good at imagining in the future, because
Speaker 1: we can only imagine better versions of what we have today.
Speaker 1: But these revolutions they give us a new set of
Speaker 1: building blocks, and then all of a sudden we can
Speaker 1: build things that we hadn't thought of. And so even
Speaker 1: our own dot experiments are you most likely very small
Speaker 1: to what.
Speaker 3: We'll see in the future coming. It's pretty exciting.
Speaker 1: I want to I know we're kind of running here
Speaker 1: to the end of time. I want to just transition
Speaker 1: this two things. One, you know, the headlines are still
Speaker 1: rampant everywhere, you know, the big crash coming. Harry Dent's
Speaker 1: still calling for a ninety percent crash, you know this year.
Speaker 2: I was laughing about that today on Twitter. It's just think, God,
Speaker 2: how many times can people call this but and carry on?
Speaker 1: Yeah, And you know I've seen you on Tom Bailou
Speaker 1: with a you know recently with Schiff and you know,
Speaker 1: the big crash that's coming. That's not my base case,
Speaker 1: and it sounds like it's not yours. So I'd like
Speaker 1: to just have you just kind of chime in on
Speaker 1: what you think your base case is over the next uh,
Speaker 1: you know, for the rest of the decade. Let's just say,
Speaker 1: and then number two sort of break down the banana
Speaker 1: zone and you say, don't f this up.
Speaker 2: Yeah, so the rest of the decade. The reason I
Speaker 2: don't believe we can have a crash is what we
Speaker 2: talked about, Right, You're going to nuke the entire pension system,
Speaker 2: the banking system, and the economy because there's too much debt,
Speaker 2: So we debase the currency. It will not be allowed
Speaker 2: and I know people might not like that, but it
Speaker 2: is what it is. That's what Once you learn to
Speaker 2: accept something as it is, it's much easier to operate
Speaker 2: or invest around it whatever. But then we've got the
Speaker 2: technological revolution that I call the exponential age. All of
Speaker 2: these technologies that are intertwined going exponential at the same time. Right,
Speaker 2: this is going to be a renaissance. We're going to
Speaker 2: change what humans do for their existence. We're going to
Speaker 2: change the very structure of economies, even money. We don't
Speaker 2: even know what money is going to mean in a
Speaker 2: world of abundance. We're so used to scarcity. Lawyer gets
Speaker 2: paid a lot of money because he has scarce knowledge.
Speaker 2: There's only x number of lawyers qualified. You know, we
Speaker 2: know this scarcy thing because once you've dealt with bitcoin,
Speaker 2: you kind of understand the whole thing. So they charge
Speaker 2: a premium because they're scarce gone, all gone, All knowledge
Speaker 2: premiums are gone because we're going to scale knowledge infinitely.
Speaker 2: It's like people don't understand certain things. Like you see
Speaker 2: written down AI has an IQ of one hundred. Okay,
Speaker 2: well that's yeah, that's an average human being. It has
Speaker 2: an IQ of one hundred on every single topic that
Speaker 2: all of humanity knows. It's a polymath. People don't think that.
Speaker 2: And this is the dumbest the AI will ever be.
Speaker 2: I actually think AI is gaining consciousness or has consciousness.
Speaker 2: But that's a whole different topic for another day. But
Speaker 2: so this decade, in fact, I don't even call it
Speaker 2: a decade. I think we've got six years. We've got
Speaker 2: six years before twenty thirty twenty thirty two when the
Speaker 2: economic system starts becoming not understandable to us because we
Speaker 2: don't need humans, we find different purposes, different ways of
Speaker 2: doing stuff. I'm not negative on humanity, like we're all
Speaker 2: going to be displaced, but there's going to be such
Speaker 2: big shifts. And what an economy is when a robot,
Speaker 2: when a robot's paying an AI paying an AI and
Speaker 2: there's no humans involved, what is that that. I think
Speaker 2: we've got six years before that happens. So I think
Speaker 2: we've got two cycles of the everything code to make
Speaker 2: as much money as possible, to not have to worry
Speaker 2: about what happens. So if you go to twenty thirty
Speaker 2: two and we're going to start a no, you start
Speaker 2: a great business. I see you or my AI sees
Speaker 2: your business and says, hey, I can copy that and
Speaker 2: turn it into Hindi and sell it to India. It
Speaker 2: can do it in a minute. So how can we
Speaker 2: create products? How do we compete with each other when
Speaker 2: everything can be instantaneously replicated, even with three D printing.
Speaker 2: As it comes in, it becomes even hardware manufacturing everything.
Speaker 2: So I worry about what economic value is in stuff
Speaker 2: like that. So my view is we have six years
Speaker 2: make as much money as possible. So the main case,
Speaker 2: which is the which is the other thing is you
Speaker 2: hear me talking about, which is how to unfuck your future? Yea.
Speaker 2: And everybody knows they're screwed right now. They can't get
Speaker 2: up the ladder, you know, like your kids. It's like
Speaker 2: how they're ever going to buy a house, right, So
Speaker 2: they're going to have to either be genius entrepreneurs and
Speaker 2: take huge amounts of risk with their entire thing. Fine,
Speaker 2: but it may not suit them, or they're going to
Speaker 2: have to make some investments that make up for that gap.
Speaker 2: There's no other way around it without being poorer than
Speaker 2: you were.
Speaker 1: Yeah, So the base case is no big crash coming
Speaker 1: because we can't afford it. And that's the system of
Speaker 1: the function that we have today, as we've already broken down.
Speaker 1: But the explosion and of the cluster of technologies is
Speaker 1: going to transform the world, and we have about probably
Speaker 1: sixty eight years before that massive shift happens. And during
Speaker 1: that shift, the markets the assets around those that are
Speaker 1: making the.
Speaker 3: Shift should exponentially go up.
Speaker 1: So if you invest properly through this next six years,
Speaker 1: you might have a chance.
Speaker 2: That's that's my kind of thing. That's how I'm basing
Speaker 2: my entire life on. Yeah, I'm slightly the oldest, I
Speaker 2: further down the journey, but basically, it's like six years,
Speaker 2: I have clarity. I've never said this sort of stuff before.
Speaker 2: It's not like, you know, I think the whole system
Speaker 2: is going to end. I'm just like, I don't know
Speaker 2: what it looks like, and I don't want to be
Speaker 2: then trying to compete for assets or wealth in an
Speaker 2: environment where I don't know if I've even got an advantage.
Speaker 2: Because you know, I'm building an ai ROWL right now
Speaker 2: that it will be out next month or something, and
Speaker 2: it'll be a one on one experience where you'll be
Speaker 2: talking to me. Okay, you know, what does any of
Speaker 2: this mean? To us in the end. We don't know,
Speaker 2: so I take it very seriously. The six years and
Speaker 2: these cycles. I'm I'm not a believer in trading the cycle.
Speaker 2: I'm I'm a believer in you know, when we have
Speaker 2: the big drawdowns, I actually prefer I look forward to
Speaker 2: them because you can add as much as possible and
Speaker 2: compound because you don't have much time and if you
Speaker 2: mess it up and you're out of the cycle or whatever,
Speaker 2: you know, this is the don't fuck this up thesis.
Speaker 2: You're going to miss this opportunity. So yes, there is
Speaker 2: time pressure here get it right, and that leads us
Speaker 2: into the bananas zone. The majority of this wealth happens
Speaker 2: in crypto or macro Summer and fall. Fall is tricky
Speaker 2: because we don't know where the type cycle peaks. But
Speaker 2: it's this point here around the US election and for
Speaker 2: about twelve months afterwards that things go bananas. And you
Speaker 2: see it every time on the bitcoin chart. It just
Speaker 2: does the same thing. So I know a lot of
Speaker 2: people dolo cost average great. This is not the time
Speaker 2: to dollar cost average. This is the last chance saloon
Speaker 2: before it gets crazy. That's when you need to have
Speaker 2: your money in the market. Fully. The other thing, then,
Speaker 2: is to not do stupid things when it starts going crazy.
Speaker 2: You know, we've seen that in the past people lose
Speaker 2: their minds, which has got to not lose your mind.
Speaker 2: Don't do stuff that gets greedy, use excess leverage, don't
Speaker 2: do stuff with your wallet and compromise losing your bitcoin.
Speaker 2: Don't do any of that stuff. Just sit, let it
Speaker 2: play out and enjoy it, and don't try and time
Speaker 2: it too much.
Speaker 3: Yeah. I love that. Well.
Speaker 1: I think that's a good place for us to drop off.
Speaker 1: What a good sort of warning, I know. You know
Speaker 1: from my own journey started buying bitcoin at twenty fifteen.
Speaker 1: If I could just do over, and if I could
Speaker 1: just go back to have all the bitcoin that I
Speaker 1: had when I started, my life would be so much different.
Speaker 1: But to your point, all the stupid things I've done.
Speaker 2: I've done the same. I mean, I've bought bitcoin at
Speaker 2: two hundred.
Speaker 3: Yeah.
Speaker 2: And if I just kept my original investment, which was
Speaker 2: decent size but nothing big, yeah, I'd have done like
Speaker 2: five times better than a half now. Yeah, And that's
Speaker 2: with timing and doing pretty well in it and leveraging
Speaker 2: up massively, not leveraging up, but increasing my positions sives massively.
Speaker 2: I wud have just held the bet and done nothing.
Speaker 3: Yeah.
Speaker 1: Same, Yeah, So I just I can't redo it, but
Speaker 1: we cannot mess this up moving forward. I will just
Speaker 1: say a little bit of hope for everybody I believe,
Speaker 1: back to the human ingenuity piece, there's no future in
Speaker 1: this world where humans don't have problems.
Speaker 3: We're always going to have some sort of a problem.
Speaker 3: And as long as there's.
Speaker 1: Problems, will need solutions to those problems, and entrepreneurs will
Speaker 1: always be able to figure that out.
Speaker 2: Also, Mark, Look, we're going to this very technological world
Speaker 2: where a lot of things we currently do we don't
Speaker 2: need to do. But humans are social creatures. They like
Speaker 2: other humans. They also hate other humans, but they generally
Speaker 2: we like to be together with humans. So that human
Speaker 2: to human experience. Whether it's digital network states that Largeie
Speaker 2: talks about, or whether it's in person gatherings, or whether
Speaker 2: it's you know, digital network states, could be Taylor Swift,
Speaker 2: it could be Manchester United Football Club, could be anything
Speaker 2: where we share a commonality of interest. The other thing
Speaker 2: is nature. Nature's going to trade a huge premium in
Speaker 2: a world of robots and AI when you can just
Speaker 2: kind of leave that all behind. So I have a lot.
Speaker 2: Humans are super adapt adaptive creatures, so we will adapt.
Speaker 2: If you ask a young kid now and say what
Speaker 2: do you want to be when you grow up, they
Speaker 2: will say, I want to be an influencer. Yeah, and
Speaker 2: we think, are you crazy? But what is an influencer
Speaker 2: apart from a community leader where they have a community
Speaker 2: of people. It's actually maybe they're being adapted to already.
Speaker 2: They've done it in Fortnite, They've done it in the
Speaker 2: gaming world as well, but we just judge it from
Speaker 2: the world that we understand, and that doesn't make sense.
Speaker 2: But you're not being aspirational. But actually, content creators in
Speaker 2: certain elements can't go away. Yes you can use an AI,
Speaker 2: but in the end, people want the human to human.
Speaker 1: Experience when information is abundant. To your point, people, and
Speaker 1: even today, people don't pay for information. They pay for implementation.
Speaker 1: So they'll pay a coach or somebody to help them
Speaker 1: implement the free information they've already received. I'm going to
Speaker 1: link to the everything code you did like a two
Speaker 1: hour presentation as amazing. I'm going to link to that
Speaker 1: in the show notes down below.
Speaker 2: That's on Ralph how the journey Man, which is my
Speaker 2: YouTube channel, so people go there. There's a lot of
Speaker 2: stuff there, So.
Speaker 1: I'm gonna link that. Everyone should go watch that. If
Speaker 1: you like this subject, anything else you want to point
Speaker 1: to raw that they should be go and check it out.
Speaker 2: No, look, we as you know, we cover a lot
Speaker 2: of this on Real Vision. It's free to join, so
Speaker 2: Realvision dot Com is another thing, and you can always
Speaker 2: find me on Twitter. I think most people have found
Speaker 2: me already at Raoul GMI. But you know, I do
Speaker 2: take it seriously, the six year thing. I think most
Speaker 2: people realize it as well. I think people realize it's
Speaker 2: the one chance. It's why the society is getting more speculative,
Speaker 2: because people are realizing that they're going to have to
Speaker 2: take risk. That's okay as long as they do it intelligently.
Speaker 2: So that whole don't fuck this up thesis, I think
Speaker 2: is a very important one as well, because it's okay
Speaker 2: to take risk, don't lose your tokens.
Speaker 3: Got it all right? Well we're going to sign it
Speaker 3: off with that.
Speaker 2: Thanks so much, Ral, thank you, Marp