The Shift in Advertising

Every passage, on the record.

1. 00:34Claim

   Investing this much time thinking about Bitcoin is probably the best use of my energy, trying to understand what this new technology is going to bring to the world and how I can best position myself, so that in the end I will be able to control more energy reserves because of the effort I am putting in now, being in front of other individuals in the extended order who have not figured this out yet.

2. 01:38Claim

   Bitcoin is going to be important because it will allow individuals inside of the extended order to exchange more rapidly without the need for trust, which eliminates a whole host of issues that develop when trying to build a network.

3. 02:27Claim

   Network is how we share knowledge and know-how, and knowledge and know-how is built on information, and information is the physical embodiment of order, and order is good, because that is what life is actually doing, that is why life exists in the first place: to push back entropy, which is the natural state of things to continue to get more and more disordered over time.

4. 02:27Quote

   Network is how we share knowledge and know-how, and knowledge and know-how is built on information, and information is the physical embodiment of order, and order is good, because that is what life is actually doing.

5. 03:28Analogy

   You think you know the world, and one of the big impactful things about discovering Bitcoin is you think you know what water is, and then, much like a Russian doll set, a nested doll set, you unscrew one and underneath is something completely different, and the world is built on that structure you have never seen before, so everything about the level above that changes now that you see the existence of this next level, and you keep trying to drill down all the way until you get to the very last doll.

6. 04:10Claim

   The very last doll in my mind was: there's this battle between entropy and order, and it's an energy game, and we want to control as much energy as possible, and the way we can do that, life itself, not just the extended order, is to order it into the most dense form possible; the more energy we have, the more we're able to project out into the future that we have reserves we can call upon when we need to continue to create order.

7. 04:42Reference

   I've been babbling to myself about these things and developing my own words for them, never once coming across any other, outside of the Bitcoin space, outside of the Bitcoin standard.

8. 04:42Reference

   Outside of the Bitcoin standard, the price of tomorrow, every single Bitcoin book that I've read, I haven't delved, apart from the basics, apart from the Feynman books on physics, I haven't really delved out of this world because I've been stuck in it.

9. 04:42Reference

   Apart from the basics, apart from the Feynman books on physics, I haven't really delved out of this world because I've been stuck in it.

10. 05:13Reference

    I came across Why Information Grows, this book is essentially the book that I would have written except much clearer and much better written and much more concise and much more deliberate and laid out in a better fashion than what I was looking for.

11. 06:25Quote

    It is the best book, it is the book outside of my initial sort of aha moment with Bitcoin.

12. 08:05Idea

    What I have been calling the transformation of energy from inaccessible to accessible, accessible energy is information, as Cesar puts it, and not only that, but there's this whole field of study, generations of physicists have studied this thing, and I didn't even know it was a thing.

13. 08:36Quote

    Information is the physical embodiment of order, and all information is physical.

14. 09:47Claim · condensed

    What I have been calling the transformation from inaccessible to accessible energy, accessible energy is information, and information emerges inevitably in a high energy system that is operating in disequilibrium; grasping entropy fully, not just once and forgetting it a week later, is necessary to understand what has to come together for information to stick around long enough to be computed and interacted with.

15. 10:50Open question

    I'm going to do an entire podcast on the book and I do the podcast so that I can regurgitate at least what I think I have taken away, but definitely do yourself a favor and go read it, it gives you the strongest foundation for understanding just how impactful Bitcoin is going to be.

16. 11:24Claim

    Even when you think Bitcoin isn't physical, it's actually happening because of all of the physical elements on the nodes and on the miners in the real world, bits have to be flipped; understanding information here means the physics definition of information, not the sense of meaning, which is why it's so hard to grasp information in the first place.

17. 11:56Claim

    If you get a message, you think the information is the meaning, but it's not, the information is the message, that message is physical order; to create that physical order you need energy organized in a very specific way, and because the universe is operating in a state of disequilibrium, information will emerge.

18. 12:28Analogy

    There is a very specific thing going on locally that is not happening elsewhere in the universe around Earth, we are generating an enormous amount of information, there is more order on Earth than anywhere else, a black hole of information in the known universe, nowhere else; if you could see it in a matrix-like view, the glow of energy and of information around Earth would be the brightest star in the sky.

19. 12:28Quote

    The glow of energy and of information around Earth would be the brightest star in the sky.

20. 13:07Claim

    Human beings, we are the tip of the spear in terms of information generation, we have the ability to create order that would not otherwise be there because it is such a low probability for the arrangement of the matter to be in place.

21. 13:38Claim

    There are building blocks that have to be in place: number one, you need solids, because for a moment a solid pushes back the tide of entropy, it pushes back the natural tendency in the universe to disintegrate things into disorder, into randomness.

22. 14:11Claim

    It's not disorder, entropy, it's an easy way to distill entropy at times but it's certainly not that, the book explains that beautifully.

23. 14:42Analogy

    You can think of it like a tree, the example in the book, a tree is a little computer powered by the sun, it interacts with the energy around it and the information it is receiving from the outside world to change its process; it has a know-how rather than a knowledge, the tree doesn't know how it's doing what it's doing but it knows how to do what it's doing, it knows when to shed its leaves, how to consume the energy around it and change that sunlight into sugar.

24. 15:14Claim

    Basically it comes down to what it means for Bitcoin, is that it generates information by using energy to manipulate matter.

25. 15:14Quote

    It generates information by using energy to manipulate matter.

26. 16:05Open question

    Why is that important and what form of information does it take on and why is that important and what does that mean for everybody else? I'm going to do an entire episode on that.

27. 16:39Claim

    Money is a tool that allows us to generate more information, and we are constantly generating information and sharing it with others through the creation of products; human beings have the ability to imagine a thing that doesn't exist and use the energy reserves that other people had already transformed from inaccessible to accessible, their knowledge and know-how, put into products, which gives you capabilities you would not have had any other way; a person is limited in the amount of actual physical information they can take on board.

28. 17:39Claim

    If I want to do something that requires more information than I'm physically able to hold in my body, we start to break that information down into smaller and smaller chunks and share it amongst the extended order, borrowing from each other; what Bitcoin allows is that sharing, it's basically a bandwidth upgrade for the entire extended order to be able to share information with less friction.

29. 17:39Quote

    Bitcoin is basically a bandwidth upgrade for the entire extended order to be able to share information with less friction.

30. 18:58Claim

    Our little bastion of order, of information, is getting greater and greater because we are building on information that has come before, locked up inside of every physical object, every product, and the products are how we share that information.

31. 18:58Quote

    Am I a fucking space cadet?

32. 19:38Claim

    Knowledge is the ability to link information, so you can do thought experiments and basically fast forward time and energy by linking information without having to physically generate that information in the first place; then there's know-how, which is like the tree example, or like me with Bitcoin, I don't have the knowledge of how Bitcoin actually works, Satoshi has the knowledge, there's lots of Bitcoin core developers who have the knowledge of how it actually works.

33. 20:55Claim

    I couldn't write the Bitcoin source code on my own, if it just went away, that's it, Bitcoin's gone, but I have the know-how on how to take advantage of it, I know how to interact with the network to get the end result I desire, and having that mix between knowledge and know-how is necessary, we share all of those things over networks.

34. 20:55Reference

    The networks, I have been calling it the extended order because that was the first phrase I came across, I think it was Hayek.

35. 20:55Claim

    If we increase exchange, innovation picks up, innovation is building on the technology we already have, technology is the practical application of knowledge, knowledge is gained through linking information.

36. 20:55Quote

    Technology is the practical application of knowledge, knowledge is gained through linking information.

37. 23:42Claim

    The ability to cut out the middleman in advertising is a very big deal, coupled with the fact that you can do microtransactions on lightning at very low fees, almost basically for free as it compares to the legacy system.

38. 25:04Claim · condensed

    The fiat advertising system builds up, and the revenue model around it builds up, because it was the fastest horse in the race, the thing that out-competed every other system because it delivered more energy to the extended order; that is no longer the case, and we're in this golden era where anything you plug Bitcoin into becomes more efficient, and nobody else knows that yet.

39. 26:34Claim

    The conversation really boils down to how this changes the way that producers and consumers interact with one another, and why that's good for the extended order, because it will increase information: if we can remove any part of the process that slows that exchange, that is going to be a positive on every single interaction that exists.

40. 27:38Claim

    The question we have to ask is are sports operating at peak efficiency, are we generating the maximum amount of information possible, information being the physical embodiment of order, which is energy, are we generating the maximum amount of energy reserves and therefore the maximum amount of value; the obvious answer is no.

41. 27:38Reference

    We're going to go through the five whys, which is just a mental framework for being able to get down to the most basic elements of this question very very quickly.

42. 29:09Claim

    Sports do not exist to maximize consumer well-being, it didn't start like that: now the vast majority of revenue, the vast majority of energy entering the system, is derived from sponsors and more precisely advertisers; originally the main source of revenue was individuals showing up to watch the spectacle.

43. 30:39Claim

    The product that sports leagues and teams are actually selling now is not that spectacle, it's selling fan attention, and attention is simply focused energy; you're selling the people who are watching, their attention, and it goes to advertisers.

44. 30:39Quote

    Attention is simply focused energy.

45. 30:39Reference · condensed

    Anytime I think about this concept I think back to the Batman movie with Jim Carrey, where if you haven't seen it they put that thing on your head and you watch the television and it either beams your thoughts into the TV or the TV beams the thoughts straight into your head, I can't remember what the storyline was, but that's what I think of.

46. 32:09Claim

    Advertisers, through their specialization, think they have cornered the market on scraping off a little bit of excess energy from every product they build, and they think you would benefit from it; if it's true that's great, you win and they win, that's how capitalism works, but they have to get in front of you to inform you whether or not that's actually a good idea.

47. 33:40Claim · condensed

    Television and radio let the potential audience for sports content get very large very quickly without raising overhead, so more revenue came in; but the industry behind these communication networks has needs, investment, return, and as selling this huge pool of energy gets easier and more proven, that starts to centralize power in the middlemen distributing the information, and incentives shift from serving fans toward capturing attention to sell to advertisers.

48. 35:11Claim

    There was a technological barrier, a gap, where there was no way for the makers of the information, baseball or football or soccer, to exchange directly with remote consumers, who turn out to be the vast majority; that vacuum is filled by service providers looking to siphon off that energy, and there's nothing wrong with that, but it changes the sport, for better or worse.

49. 36:41Claim

    There's no way to individually assign a value to each remote consumer's energy levels, and this is the common phrase that if the product is free you are the product; you have to pool that energy together, and anytime you pull anything together there's going to be inefficiency, some people's energy sold for much more than they'd like, some for much less.

50. 36:41Quote

    If the product is free, you are the product.

51. 38:11Reference

    That is made possible with Bitcoin, we can do that right now, a lot of you are doing that over Fountain right now, this is a real thing.

52. 39:41Claim · condensed

    If you were to completely remove advertisers, we don't know how much energy would be left on the table, because their services and products, if they're not dogshit, actually make individuals more energy efficient at some aspect of their life, or else you wouldn't choose to spend your money on them.

53. 41:11Claim

    The shakeup in the advertiser model is universal across all media, not just sports, and has the potential to change the way the extended order allocates energy and attention and prices that, on a massive scale; pooling energy and selling it in bulk lacks nuance, leads to mispriced resources, and both producers and consumers end up worse off.

54. 44:12Analogy

    Just like we probably don't want Elon Musk binge-watching Netflix all day, that's a huge cost to the extended order, a huge amount of energy left on the table, whereas I might not have the same ability, so I could support the team or the advertisers by consuming ads.

55. 44:12Claim · condensed

    Advertisers could pay me to consume their ads, after all they're already doing this in a terribly inefficient way: they pay someone else, who I inadvertently sold my energy to without knowing it, through two layers of abstraction, the content distributors take a cut, who pay the teams or leagues, who take a cut, who then pay the players.

56. 45:42Claim

    The top of the pool of energy, the people who control access to it, have all of the power, they set the price on accessing everyone else in the system, and that's going to hamstring the efficiency of the system, because it's an impossible number to determine how much that energy is actually worth when each individual has their own numbers.

57. 45:42Reference

    The solution would be, as a consumer, if you were able to set either yourself through preferences, or, I don't know if it was Henry Ford, somebody said the quote that people don't know what they want.

58. 45:42Claim

    You're probably going to answer a few questions and artificial intelligence is going to take care of the rest, compiling an algorithm built just for you, and you're going to be rewarded by how much you interact with the advertisements you see.

59. 47:13Claim · condensed

    If I've got ten thousand dollars for an advertising budget, I can either give it to a content distribution platform to spray it out to people who couldn't care less, or I can give a dollar to everybody who views my ad and expresses interest; because of specialization and the know-how in my manufacturing process, there's ten dollars worth of excess reserves on every widget, so I'm willing to give you one dollar to consume the ad, and nine dollars if you buy, leave me one, that's how quickly this thing is going to scale.

60. 48:43Claim · condensed

    As you interact with the advertisements you get more sats in return, because you're more useful to the advertiser, helping them continue the specialization they've chosen; you'll be able to choose whether to consume ads at all, and if not you'll pay for the service some other way, this is already happening with Spotify and YouTube, but the payment will happen in real time as you stream, not up front once a month.

61. 50:13Claim · condensed

    You're basically making the extended order more efficient by sharing your energy with individuals who are making you more capable; this is the future of advertising, paying the consumer directly is simply more efficient, and you cannot do this without Bitcoin, without Lightning, without microtransactions that settle instantly.

62. 51:44Claim

    Is that problem so great that it cannot be overcome, given the amount of energy at stake, at least one joule underneath or lower than the expected return to the extended order because of what that technology allows for? I think it is worth it.

63. 51:44Quote

    People are not fucking clued in on this.