Signal vs. Noise

Every passage, on the record.

1. 00:00Claim · condensed

   Price distortions in markets lead to the misallocation of energy, and this episode shifts from the Eurodollar's mechanics to how energy is more efficiently transformed under a Bitcoin standard.

2. 00:40Claim · condensed

   Every occurrence of misallocated energy leads to less total energy reserves, and less energy reserves means human suffering that did not need to happen, because the misallocation came from a misunderstanding or a manipulation of the language of value, which is price.

3. 00:40Idea

   And Bitcoin eliminates the noise in markets by peing purely signal.

4. 01:11Claim · condensed

   Bitcoin does what it does and cannot be tampered with, and the trust that emanates from the protocol is what lets you eliminate the noise and the misallocation of energy at a scale that is almost impossible to wrap your head around.

5. 02:16Idea

   An economy is simply a group of participants who have decided to share or pool their energy reserves.

6. 02:16Claim · condensed

   If an economy gets so specialized that it ignores the other aspects of energy transformation it needs to survive day to day, it is not going to survive.

7. 02:50Claim

   An exchange is not going to take place unless both sides come out the other side better for it, and better for it means access to more energy reserves than they had previously.

8. 03:23Analogy

   You're storing, you're using the other individuals in the economy as external batteries where you can keep that energy until you deem it necessary to use that energy yourself.

9. 03:56Claim · condensed

   Larger economies out-compete smaller ones because they generate more exchange and specialization, more transformation of energy, and the ability to store that energy in a more decentralized fashion: safety in numbers.

10. 04:31Reference

    If you are familiar with Lynn Alden, she has been on a recent kick talking about this very fact of the bearer asset, right? The money being limited to the physical laws of the universe.

11. 04:31Claim · condensed

    Money as a bearer asset was historically limited by the physical laws of the universe: you can only exchange a bar of gold by physically moving it to a place and handing it over, which is an impediment to the exchange of information.

12. 05:06Claim · condensed

    Information, ideas, is the key thing needed to transform energy reserves, and money is simply the representation of that energy; as telecommunications let information move faster than the bearer asset, more energy reserves get unlocked through transformation.

13. 05:47Claim · condensed

    The need to move information faster than the bearer asset led to the buildup of ledgers, and this ledger system leads to the manipulation found in the Eurodollar system; it eventually produced the central bank gold-backed system, which fell apart because it was outcompeted by the more efficient Eurodollar network, a decentralized system running a virtual currency on a digital ledger.

14. 06:22Claim · condensed

    One advantage of the Eurodollar system is that it is not bound by the regulatory compliance of operating on U.S. soil, so it has the ability to experiment and test what the market needs and wants more rapidly.

15. 06:55Claim · condensed

    The value of the Eurodollar system is the trust built up within it, which lets information move quickly with the presumed value of collateral following at the same speed; it is not nearly as efficient as the Bitcoin system, but it is quicker than the legacy system.

16. 07:27Claim

    Bitcoin removes the cartel system: it removes the need for trust because if you can sign for the keys, you can be trusted. There's no permission to join the network. Anyone can do it. The trust is built into the protocol.

17. 07:27Quote

    If you can sign for the keys, you can be trusted.

18. 07:27Claim · condensed

    Bitcoin increases options for people in poor jurisdictions, and even in Western jurisdictions with access to banking facilities, individuals are still not operating on the same level as the banks and financial institutions themselves.

19. 08:05Claim · condensed

    There is no limit on transaction size, large or small, and it works the same on the system for anyone; as these barriers are removed, energy that was previously inaccessible becomes accessible, and that transformed energy then needs to be stored somewhere.

20. 08:38Claim · condensed

    The safest place to store energy is the most liquid good; the Eurodollar system uses US Treasuries not because of loyalty to the US government but because Treasuries are the largest market and can be liquidated fastest in an emergency.

21. 08:38Prediction

    So that's exactly why Bitcoin is going to win.

22. 09:12Analogy

    That currency is then used in prices so that we can understand as a hive mind, the hive mind of the economy, where does energy need to be allocated towards to be as efficient as possible.

23. 09:45Claim · condensed

    The Bitcoin market lets anyone in the world put in the highest bid for energy and transfer that energy to the highest bidder over Lightning in seconds, or on the Bitcoin main chain in 10 to 20 minutes on average.

24. 10:25Quote

    All you have to do is feed it energy and it will continue to live.

25. 10:25Claim · condensed

    The Bitcoin protocol is completely contained and knows nothing of the outside world; all it does is keep time and put out block subsidies on average every ten minutes until the havings (halvings) are over.

26. 10:57Quote

    It doesn't matter what the price is. It matters how much efficiency we are gaining on the legacy system.

27. 11:28Quote

    If there is noise, we misallocate resources. The result is less energy reserves and a lower quality of life. If there is only signal, we increase energy transformation.

28. 11:28Quote

    If anyone can send any value to anyone else any time, then real time markets finally exist.

29. 11:28Claim · condensed

    Noise causes misallocated resources, less energy reserves, and a lower quality of life; signal alone increases energy transformation, and because this compounds, if anyone can send any value to anyone else at any time, real time markets finally exist.

30. 12:03Analogy

    Why is it, if we're just sending information, why does it take so much longer to send money to, even in Western jurisdictions, why does it take so much longer to wire transfer money than it does to send a text message to someone?

31. 12:44Claim

    Every single decision in your life is made on how much it can lower the entropy in the world around you, how much you can gain in energy reserves based on the actions that you take.

32. 13:23Quote

    It responds because the truth responds to an ever changing world.

33. 13:23Claim · condensed

    Bitcoin reacts before every other market because there is no filtration system, no backstop or buffer; the wild price swings come from people interpreting Bitcoin's value on their own, and by a long shot they are underestimating the power this is going to bring.

34. 14:01Prediction · condensed

    Once Bitcoin gets larger, the wild price swings will even out as more people come to understand that Bitcoin is the truth, the system that cannot be manipulated, which is exactly what people will flock to in times of uncertainty.

35. 14:31Claim · condensed

    Looking at signal versus noise, the current system versus the Bitcoin alternative, the easiest way to see how noise gets limited is that Bitcoin limits theft and limits how money is created.

36. 15:03Claim · condensed

    One of the main problems with the Eurodollar system is that the cartel prints more money: it is not that the Federal Reserve is printing money, it is that the Eurodollar system is printing more money, and there is a Cantillon effect where the people who benefit from that are in power and incentivized to maintain that power.

37. 15:33Quote

    So government by its very nature, it creates misallocations of energy. That is that is what it is designed to do.

38. 16:05Reference

    One of my favorite Thomas Sowell quotes is: it's hard to imagine a more stupid, a more dangerous way of making decisions than by putting those decisions in the hands of people who will pay no price for being wrong.

39. 16:05Quote

    It's hard to imagine a more stupid, a more dangerous way of making decisions than by putting those decisions in the hands of people who will pay no price for being wrong.

40. 16:05Claim · condensed

    The government is the worst allocator in efficiency terms ever known: look at dollars spent versus GDP increase, it comes down to incentives, and government workers have zero incentive to increase their own efficiency.

41. 16:40Claim · condensed

    If a government program wants access to more energy reserves, the move is to decrease its own energy efficiency, which signals the market that more energy is needed there for growth; that is the noise in the signal, gaming the system to receive an unwarranted allocation of energy that will not return more energy to the market.

42. 17:17Analogy

    Think about the experience that you have when you go into a Ritz Carlton versus the experience that you have when you go into the DMV, the meeting and the greeting, the look of the place, the attitudes of the employees, they are all motivated through the proper incentives.

43. 17:48Quote

    You want to get the wrong people to do the right thing. That is what we are trying to do with incentives.

44. 17:48Claim · condensed

    At the moment in the U.S. alone, government spending is 41 percent of GDP, and government picks winners because it does not bear the punishment for being wrong.

45. 18:20Claim · condensed

    All the government has to do is keep telling people it will give them money so they vote for it, win the four year cycle, and misallocate resources again and again, while the Federal Reserve keeps purchasing the federal government's debt; it gets worse with every spend, which is why every single round of quantitative easing has been larger.

46. 18:53Claim · condensed

    Quantitative easing does not actually have anything to do with interest rates or money printing; what it actually determines is how much the government can spend yearly, what percentage of total energy the worst allocator of capital controls, and those inefficiencies compound: we are missing energy at an exponential rate every year, not linear.

47. 19:26Quote

    It's not linear. These changes, there is no coming back from these changes.

48. 19:26Reference

    Even if you think about something just as recently as Build Back Better, Build Back Better is the worst allocator of capital ever is going to decide the winners in a marketplace, who's going to get money, who's going to get energy reserves.

49. 19:59Quote

    I mean, it's just ridiculous when you say it out loud.

50. 19:59Quote

    The most basic question for anything is not what is best, but who shall decide what is best?

51. 19:59Claim · condensed

    Bitcoin cures the misallocation problem because the system is built on trust embodied in the software, the consensus rules for Bitcoin, and that is all you have to trust; it cannot be broken.

52. 20:32Claim

    In Bitcoin, that decision is already made: the money creation aspect cannot be altered or controlled by any individual, so you are left with the reality of what actually occurred and who deserves what based on their output; as the rewards for competition increase, the best ideas rise to the surface and energy is allocated where it is needed most and provides the most return.

53. 21:04Claim · condensed

    Over the past 13 years, individuals who recognized this early have been able to outpace the energy reserves of their competitors because the Bitcoin system is more efficient.

54. 21:04Prediction · condensed

    Those efficiency gains will not stop; it may look to the outside world like they are getting slower, but the curve is only just beginning to tilt up.