What Wealth Is

Every passage, on the record.

1. 00:00Claim

   One of the major points holding back the unwashed masses from understanding the impact that the discovery of Bitcoin is going to have, in the near term and the long term, for the extended order is that they don't understand what wealth is.

2. 00:00Reference

   The definition of wealth as the set of transformations that an entity can capably perform without generating any new knowledge is the best definition of wealth that I have come across, and it belongs to David Deutsch. It allows you to see money in a whole new light.

3. 00:00Idea

   When I say we, again it's the extended order, the collective hive mind of people that generate explanatory knowledge.

4. 00:00Reference

   When I say we, again it's the extended order, the collective hive mind of people that generate explanatory knowledge.

5. 00:00Idea

   Why do we generate explanatory knowledge? Because that's what gives us an advantage over replicative knowledge, which is evolution. We can jump steps in between. We can guess, come up with a conjecture, then criticize it, and we can do it in our mind with very little friction and very little real world energy cost.

6. 00:00Analogy

   We don't have to design 50 different birds all with a slightly different wing. We can guess why one particular design might work better than all the others and we can make that one design instead of the 50, and we can do it in our mind.

7. 00:00Analogy

   We can play make believe in our head and take the best of those, the mempool of possibilities that exist in your mind. You take a snapshot of now, carry that forward into the future, compare that future with the previous snapshot, and ask: is there any phase space that is inaccessible to me now that I could access in the future?

8. 02:36Idea

   We have talked about it in the past, the idea of the jug in clay. What creativity is, is taking all of the information, arranging it in a new order, constraining it so that it doesn't have the option to go anywhere else. And that makes certain areas of possibilities now reachable.

9. 02:36Idea

   That makes certain areas of possibilities now reachable, and reach is the big word there.

10. 02:59Claim

    Once you understand that wealth is the total set of transformations that you can bring about in the physical universe, now we start to understand what we should be optimizing for.

11. 02:59Analogy

    A person on a deserted island with a million dollars has very little ability to transform their physical reality. They might have the knowledge of how to, if they had access to an oven, a shovel, novel arrangements of matter. They don't. Therefore, they are not wealthy.

12. 02:59Quote

    It makes sense why a person on a deserted island with a million dollars has very little ability to transform their physical reality.

13. 03:47Analogy

    It's the same if you had a shovel and you didn't know what it was for, or you didn't know how to use it, or if you had flint or any other technology: if you didn't have the understanding of how to employ it, you're not any better off. You cannot perform any more physical transformations, which means you can't reach any phase space that you couldn't before.

14. 04:07Claim

    You don't want to be limited because we want to persist. We want to persist by maintaining our unique arrangement. I'm a unique arrangement, trying to maintain this unique arrangement and to persist through all of the state transitions, which are time, as long as I can.

15. 04:39Claim

    The longer that I'm able to persist, the more I'm able to filter signal from noise and find explanatory knowledge that allows me to transform the physical universe more.

16. 05:06Claim

    If people don't understand wealth, they don't understand how money makes civilization, and therefore themselves and everyone they know, wealthier. They don't understand that money is a tool. If you don't understand that money is a tool, then you have a very difficult time recognizing the characteristics that would improve that tool.

17. 05:06Analogy

    If you didn't know that a shovel was for digging a hole and you saw a normal size shovel head with a tiny six inch handle and another with a six foot handle, you wouldn't know which one was better, because you wouldn't know what they were for. If I'm actually digging a hole, I understand that the longer handle is going to be more effective, because I have to spend less energy for the same result.

18. 06:28Claim

    The longer handle is more effective because I have to spend less energy for the same result. That means I am able to divert the energy that would have gone into creating the hole elsewhere, and not only that, I have more transitions between blocks now.

19. 06:44Idea

    I found it clearer to think about our own time in block time. So imagine you are setting out to dig the hole. That moment in time is a block.

20. 07:04Idea

    Once your actions are committed to that block, it removes all the future possibilities had you not committed to that particular block. Standing in that exact spot during that block eliminates all the future possibilities that would have happened if you were one step over. Much like it does with a Bitcoin transaction: once it is inside a block, you have eliminated all the routes that branch off had that transaction not been included in the block and just sat there in the mempool as a possible outcome.

21. 07:04Analogy

    Standing in the spot to dig the hole, rather than one foot over, eliminates all the future possibilities that would have happened if you were one step over, much like a Bitcoin transaction once it is inside a block.

22. 07:04Quote

    Once your actions are committed to that block, it removes all the future possibilities had you not committed to that particular block.

23. 08:01Analogy

    You dig the hole and it takes you three blocks instead of six blocks by hand. Now you have three blocks of opportunities to perform other transformations in your physical reality that you would have missed out on, coupled with the energy to actually input. It's the time, plus it's the energy.

24. 08:29Claim

    The vast majority of the knowledge that you employ every single day, myself included, was inherited. Somebody else found a way to become more efficient.

25. 08:43Idea

    You inherit that knowledge because it managed to stick around. It managed to persist. Knowledge, especially explanatory knowledge, is states that travel. It has to travel from one medium to another. We've done entire episodes on that in the past.

26. 08:43Quote

    Knowledge, especially explanatory knowledge, is states that travel.

27. 08:43Reference

    We've done entire episodes on that in the past.

28. 09:04Claim

    How does knowledge survive? By making itself easy to replicate and hard to vary. If it's easy to vary, it's not going to last.

29. 09:04Idea

    If you optimize for increasing the number of ways that you can transform the physical universe, you have increased your optionality to decide how you are going to persist. Because the world is uncertain and ever-changing and you're going to be up against obstacles, the thing that you want most of is optionality and the ability to change the world that you are in.

30. 09:04Claim

    Once you understand that wealth is what we should be optimizing for, that's what you personally should be optimizing for, and your life will be better.

31. 09:57Claim

    Does that mean all we need is more money? No. Money is just a tool inside of that system to get access to other people's knowledge.

32. 10:04Quote

    Money is just a tool inside of that system to get access to other people's knowledge.

33. 10:10Idea

    David even says it in his definition: wealth is the set of transformations that the entity would be capable of performing without generating new knowledge. If you're generating new knowledge, that's an act of creativity. Wealth isn't a number, it's a set.

34. 10:21Quote

    Wealth isn't a number, it's a set.

35. 10:37Analogy

    I think it was Calvin Coolidge whose kid died right before, what was it, before penicillin? I can't remember. You're talking about one of the richest people in terms of wealth in the world at all, and they couldn't save their son. A week later somebody figured out the jug that made that particular area of accessible phase space available. No amount of money could have bought it the week before.

36. 10:37Reference

    I think it was Calvin Coolidge whose kid died right before, what was it, before penicillin? I can't remember.

37. 11:00Quote

    No amount of money could have bought it the week before.

38. 11:14Analogy

    So someone has created the road to that accessible phase space, the channel to that accessible phase space. Now that it exists, using money you can take advantage of the resources necessary to get you to that point. But you couldn't have bought your way there.

39. 11:29Quote

    But you couldn't have bought your way there.

40. 11:29Claim

    You can think of wealth as describing existing possibilities, and creating new knowledge expands those possibilities, or at least it can.

41. 11:45Claim

    Holding Bitcoin makes you wealthier because other individuals out there somewhere that you don't know are, in real time, generating solutions to problems.

42. 11:45Quote

    Do you want to know how to make money in the extended order? Is you solve other people's problems.

43. 12:01Analogy

    You solve people's problems and they give you a small slice of the amount of energy and state transition blocks that they saved, and they do so willingly. If it's going to take me three blocks and a certain amount of energy to do something and you can do it in one block, I'm better off, you're better off, I give you that share.

44. 12:25Claim

    Ideally you want to do that in a form that doesn't require your physical work every time. You want to generate a piece of knowledge that has maximum reach inside of the system, so it can solve problems and outlast you because it is embedded in a state that can travel from one piece of matter to another, from a book to a podcast to a YouTube video to a conference by somebody that you've never met explaining an idea.

45. 12:25Claim

    In order to maximize wealth, we need to maximize the knowledge generation opportunities. Knowledge creation has to be at the forefront, always and everywhere. We want to be encouraging individuals to generate explanatory knowledge because it makes us all wealthier.

46. 12:25Claim

    All of those things ultimately flow through to Bitcoin because it's a fixed asset and it can't be debased. They would flow into fiat too, but in fiat someone is siphoning those things off.

47. 12:25Quote

    It was the perfect tool for me. It's not the perfect tool for the masses.

48. 12:25Quote

    They don't want the perfect tool because they can't organize breakfast.

49. 14:18Claim

    They are underwater. They are drowning, and they don't want to think 10 years out. They don't want to think 10 days out. They need to worry about today.

50. 16:10Reference

    It's going to be Saifedean Ammous's take: it's going to be like gunpowder. You're not going to have the option.

51. 16:21Prediction · condensed

    Governments will keep printing, because that's the Lindy effect of fiat currencies that we are betting on. That, in fact, will happen. So then you pick the fastest horse in the race that's going to benefit from that, which just so happens to be Bitcoin.

52. 16:21Reference · condensed

    Governments will keep printing, because that's the Lindy effect of fiat currencies that we are betting on.

53. 16:21Idea

    Bitcoin has all the characteristics of a piece of information, a piece of knowledge, really, because it is information that has causal power. It certainly has causal power in being able to transform the physical universe without generating new knowledge.

54. 16:58Claim

    Try keeping even modest amounts of money. If you've got 50 grand in a fiat bank account and you want to move that money, try it. See what the friction process is like versus using Bitcoin. It's a no brainer. That ability is phase space that was previously inaccessible, and now it is accessible and people will pay for it.

55. 16:58Claim · condensed

    The thing is nobody has any money. Poor people don't understand that moving money is a huge pain in the ass.

56. 17:43Prediction

    These people won't catch on. They don't want the volatility. They don't want to learn something new. They want to stay in the system, the cocoon, the bread, the circus, and it's not going to change and it's not going to be quick. It's not going to take the masses coming to Bitcoin. It's going to take a few select individuals realizing, oh my God, this is as bad as they say it is, and they are going to look for the exits.

57. 17:43Prediction

    Bitcoin holders are going to continue to increase their wealth, because somewhere else in the world someone else is coming up with a more efficient way to do something. Someone out there is generating explanatory knowledge.

58. 17:43Claim · condensed

    The chances of you having generated brand new explanatory knowledge in your entire life is almost zero. It's just there's a fuckload of people, and one person in one category making phase space that was previously inaccessible accessible, that expands very, very quickly.

59. 18:55Claim

    Ultimately that all flows into Bitcoin at the bottom of the gravity well. Bitcoin soaks up all those advantages, all of that new capability, because it can't be debased.

60. 18:55Idea

    If you think about the total accessible supply of energy, TASOE, I used to use that analogy or that concept, that's the pie. The wealth of the extended order is the set of transformations that we can actually reliably perform in the physical universe, and that is constantly growing and growing.

61. 18:55Claim

    If you have a ledger that is fixed, that tracks the set of transformations as it grows, the number of Bitcoin that you have does not grow. That's not the way the system was designed. Your percentage stays the same. What increases is the capabilities within that.

62. 19:44Quote

    Your percentage stays the same. What increases is the capabilities within that.

63. 20:01Claim

    How do we get more wealthy? By optimizing for knowledge generation. How do we do that? Conjecture and criticism. You have to have property rights. Property rights encourage that because that leads to conjecture and to more criticism. And you have to be able to criticize that with free speech.

64. 20:29Claim

    It's just very rare that it happens because lock-in occurs. You get institutions where you are not allowed to criticize, and that delays knowledge generation. It doesn't completely stop it, but it certainly makes it harder. Any friction that is put in place between knowledge generation and the extended order, we are worse off for it.

65. 20:29Claim

    Not only do we have to optimize for that generation, at the same time we have to make sure that the knowledge that allows us to transform the physical world survives, survives without the people who discovered it.

66. 21:07Event

    AI and LLMs are starting to really make a dent in the amount of transformations that you can make in a series of blocks. Never before has it been easier, and never before have you had more capabilities to generate transformations inside of a single block of time.

67. 21:31Analogy

    The context window holds the information that an AI, or you or I, has available at any given moment. You can think of a person's lifetime as this analogy: we build understanding, make conjectures, criticize, learn and generate new knowledge, and if we do not put that knowledge into a form that is constrained and hard to vary, it's lost when we die. That unique novel arrangement goes away, and somebody else has to do it again.

68. 22:13Claim

    Somebody else having to do it again is a waste. That area of inaccessible phase space was already made accessible. It puts that civilization, that hive mind, which is battling some other hive mind for supremacy and for resources, at a disadvantage, which means the likelihood that they are going to persist is lower than it would have been had that knowledge persisted.

69. 22:13Quote

    And somebody else having to do it again is a waste, right? It's already been discovered.

70. 22:45Claim

    Had we found a way to constrain that information so that it was not easy to vary, so that it required less energy to remain than it did to change.

71. 23:21Analogy

    There's the Adam Sandler movie, 50 First Dates, where every day you're starting again. That's essentially where we're at right now with LLMs. Every single conversation, unless you point them to a second brain where the context is held from conversation to conversation, you're starting fresh and you have to keep answering the same question.

72. 23:21Reference · condensed

    There's the Adam Sandler movie, 50 First Dates, where every day you're starting again.

73. 23:21Claim

    You need to develop a system where nothing that is valuable, and by value it has utility at allowing us to persist because it is useful at constraining the physical universe, gets away. We don't want to let any of that get away.

74. 24:20Claim

    If you were in the LLM business, the larger the context window, the more useful. It would be great if you didn't forget anything, the failures as well as the successes that were imperative to getting you to the place on the map where you have the most ability to transform the most amount of the universe.

75. 24:35Open question · condensed

    It's a time of pessimism on the one hand and optimism on the other: optimism that Bitcoin works, exists and is the hardest thing to vary; pessimism that fewer and fewer people will be able to recognize the characteristics that make it so impactful.

76. 24:35Prediction

    Bitcoin works, it exists. It's the hardest thing to vary. And I have no doubt that it's going to continue to stick around and to operate as it has since inception. That's not a question.

77. 25:12Prediction

    I think fewer and fewer people, much more than I thought at the beginning of finding Bitcoin, are going to be able to understand the capabilities, or even recognize the characteristics that make this thing as impactful as I believe it is. And I think they're going to suffer because of it.

78. 25:57Claim

    It's so far out there to understand the importance. You've got to understand computers. You've got to understand wealth. You've got to understand money. You've got to understand information. All of those things to recognize that what appears simple on the outside is a solution with enormous reach inside the extended order.

79. 26:36Idea

    From the dawn of the universe until now, the vast majority of constraint and building and order generation has not been explanatory knowledge. It's been structural knowledge: the forming of stars, the interaction of matter, the physical laws. All of that then led the opportunity for replicative knowledge to be generated, through evolution, where every single iteration along an evolutionary path has to be strong enough to survive.

80. 27:26Claim

    You can't learn from a branch that doesn't survive. What explanatory knowledge allows you to do is make those leaps with significantly less friction and significantly less input in energy and block time.

81. 27:42Prediction

    Now we can look for the novel arrangements that have the most amount of reach, that are the hardest to vary, and that will only increase. As we accumulate more ways to physically transform the universe, we're going to generate more order in the universe, and that is not going to slow down. It's going to get faster and faster and faster.

82. 28:17Prediction

    Who is the person that is opening up closed off phase space to us now? Who are the people that are generating those connections? Those will be the people that have the most Bitcoin, because people will happily hand it over to perform these new transformations that were not possible before. And it will take time to cycle through imposters.

83. 28:59Prediction

    This is not going to go away tomorrow. It's not going to go away for a long time. But in the long run, we know where this is going. In the short term, man, it's going to be volatile. It's going to be crazy.

84. 29:11Prediction

    Debasement will continue. They will not know. They won't have the resources to figure it out. They will look to people who are increasing their wealth for answers, and even if they don't look to them for answers, they will not persist.

85. 29:52Claim

    If they don't persist, then the information and the knowledge that they were acting on will also not persist, because it has been easier to vary than the alternative.

86. 30:03Claim

    Most people don't want to be out of that system, and most people don't want 40 percent a year. They don't want to put in the work. And ultimately that means that if you are willing to do it, the opportunity is there.