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Masa Foundation 7

A

Welcome to the debrief after episode with Luke Groman. I think we call this maybe the end of the petrodollar or something to do with something. Energy. Energy. So maybe, David, because of your extensive bitcoin training, you have looked at money through the lens of energy a bit more than I have. I certainly feel like I've looked at money through a lot of different lenses, like history, kind of like commodity, how money rises from commodity and barter. Of course we've talked about that, how it rises from credit economies and societies and as a debt instrument. But I think one area we haven't explored extensively, at least I haven't in any episode I've been present for in bank list, is just the energy lens to money, which is just like we often say, money is a store of value. You have account mutative exchange, but for money as a key thing. If you can't buy store. Sorry. For energy. Rather, if you can't use the money to buy energy, to store that energy, if it doesn't retain its value in energy over some time horizon, if it's not a unit of account for energy, it's kind of like a weak ass money. And it almost doesn't matter. And so I actually feel like I've been maybe under indexing the energy lens on the history of money. And that's why I really enjoyed this episode and wanted to cover this with. With Luke. But maybe. Maybe you're different than I have. Maybe you've looked at like money extensively through the energy lens.

B

Not narrowly through the energy lens, but I think we've looked at the banquet programming has looked at it money through adjacent topics that I think are super relevant here. The episode with Joel Minegro and governance and capital comes up long time ago. Long time ago. Like that's episode number 47. 42, something like that. In the forties. We're in high 200s now. Christ world. So the TLDR of that episode was an attempt to define capital, of which money is highly synonymous with. And capital is basically the measure of your ability to impart change upon the world.

A

I see.

B

And that is energy. Right. If I had a $20 bill, how many pushups could I get you to do? If I gave you a $20 bill? Like some. Some. I could get you to exert some force upon the world. And so like just in raw terms of like potential energy, then we can kind of start to like measure out like money in that. That particular way.

A

Because capital is like stored work, basically. And stored work.

B

Yeah.

A

Is expenditure of energy.

B

Yeah. I mean, I gave it this super old talk back to back in 2018, 2019, and I kind of defined money as just tokenized favors. And so you do a favor for the meme of how to get out of the barter economy is, like, the fisherman wants shoes, but the apple dude wants something else. But basically, you create a symbol that represents a favorite that you've done for someone. Well, like, the apple guy gave me apples, and in turn, he gave me this symbol of just, like, you know, work, the work that he did to, like, pick those apples. And now I'm gonna give it to the fish guy, and he can have the symbol, and he can give it to the Apple guy whenever he wants apples, or he can give it to the blacksmith guy whenever he wants a sword, something like that. But, like, that's all, like, money has always, ever been, is, like, a rep. A tokenization of, like, the work that other people have done for other people, I guess.

A

Michael. I've heard Michael Saylor talk about, like, energy. Um, yeah. Being, like, just, like, most, most ardently and most, most passionately. By the. By the way, I think it's not an accident that people who are very excited about proof of work also very much.

B

Yeah.

A

Yeah. Because they see proof of work as some sort of, you know, like, memetic manifestation of just, like, energy. It's energy. Yeah. We've already had discussions as to why that's not really connected in the way that people think. And Luke actually said that thing?

B

Yeah, he says. He says it once per episode with us, which is.

A

Which is basically what he said that, you know, like, what did he say?

B

You know, energy in bitcoin, expending energy.

A

Like, drives the cost of bitcoin. And it's not the driver of cost for bitcoin.

B

Well, there's, like, some, like. Yeah, because you expend energy, it, like, legitimizes bitcoin.

A

We're.

B

We're getting off on the tangent.

A

We are. We got on the tangent. What I wanted to show you is, is that the hockey step stick graphic of, basically, like, this is on the left axis. It's terawatt hours over time. And look at this hockey stick growth beginning with one, they're all hockey sticks, 18 hundreds. And you see this kind of measure, and you can map just about anything to this, like, world gdp. You can map population growth. It's all kind of based on our civilization, society's energy expenditure, isn't it? And so, like, at the end of the day, I think people like Luke are very much right that basically, the thing that we're doing here is expending energy, and that's the basement level. And even the thing that empires are doing, it has to be within their mandate to find and secure cheap sources of energy to fuel their economy and their population. That's kind of why they exist. It's almost why at some level, why violence exists. Right. Monopoly of violence. And Luke certainly used this to explain some of the worse that the US has found itself in, which is like, securing cheap cost to energy. It's just such a basement level driver of everything else that, um, I don't know, it's just really important to kind of like, to, uh, to step back.

B

And realize, yeah, um, I remember going on this one, like, camping trip forever ago, like, just when I was getting into crypto, and we, like, we had our tents and sleeping bags, but we were, like, all out outdoors and we're not ready to go to bed yet. And we all were, like, cold. So they put on jacket, but, like, you could only do so much to, like, uh, make yourself nothing, not cold. So we started a fire, but, like, the campsite was such a, well, like, trodden campsite that all the good firewood had already been consumed by people that came the weekend before, or the weekend before, or the weekend before. So it was basically all like, rotted firewood. And so, like, you kept on having to throw firewood into the campfire, and the campfire would just, like, suck it down. Cause there's no carbon in there, right? There was no heat coming in.

A

Biomes had already been burned.

B

Exactly. Yeah. And it was just like, very, like, it was very, like, instructive, I think, of just like, oh, if you're cold, you need energy. And this is how humans started. Like, humans started around the campfire, and they needed more energy to stay warm, and they also needed energy to, like, cook their food, and then they grew a little bit, and then they needed energy to, like, bake their bread, and they made, like, windmills. And like, the arc of human humanity has always been about just, like, cheap energy, how to produce energy, starting with, like, oh, are you cold? And you're going to shiver and die. Like, oh, you need, you need more energy.

A

Well, maybe this is a plug for your food list podcast, David. Finally time. Because, like, life is, what are calories, right? I mean, calories are just metabolism.

B

Metabolism is your internal furnace, baby.

A

Yeah, we're just, I know we're consuming, like, food, and that's the energy that fuels us. I mean, it's just the core ingredient to life, apparently. It's the core ingredient to money. And your ability to buy something, buy some unit of energy, is kind of the ultimate use case for money. And if your money fails to do a good job of that, if it fails to be a good energy money, it kind of dies or gets out competed by a better energy money.

B

Yeah. Gresham's law is a term in economics, but I feel like it's also a term. It can be also a term of thermodynamics.

A

Yeah.

B

Or just, like, physics.

A

It's very interesting how he's actually pretty bullish on gold right now, because he just thinks that with the petrodollar going away, other economies will try to have energy priced in their local fiats. Every empire, every country is sort of, it's in their best interest to have a yuan exchange for energy or ruble exchange for energy, or rupee exchange for energy, they'll do that, but it'll be hard to create the critical mass that the petrodollars had. There's not going to be one dominant block anytime soon. And so when you have that multiplayer environment, multipolar environment, you kind of collapse back to gold, money for energy, gold, incredibly neutral. And, like, I guess there's a question of, like, why gold? Why not crypto? Like, why not bitcoin?

B

Through my mind, I do think we'll.

A

Get some of that. So I actually think it'll be a little bit more of a mix, maybe, but probably an answer to, like, why not immediately? Bitcoin and gold is, like, still the major powers around the world are comfortable with it, yet they're comfortable. Yes. They're not comfortable with it. And they also, I mean, the US has the biggest gold store in the world, so if they're going to pick something to revert back to, they're going to want to pick something that they own. A lot of China's amassing it. Russia's, like, all of these countries have been amassing it.

B

Yeah, I think buying up a bunch of gold and pumping up the gold price actually doesn't, like, defame the United States. It just protects you, which is something my understanding of why they would go to gold first is it's kind of just like. It's the security that, you know, like, bitcoin is security, like, with hundreds and hundreds of years of Lindy. Like, you can't just skip to gold is.

A

Gold is secure.

B

Yeah, yeah, exactly. Yeah. You can't just skip to crypto. I think you have to go through, like, the gold phase. It's like, okay, we're gonna buy gold because of like this shit that's going on. And then everyone is like, okay, cool. Now we have all. Now we're at the gold phase. Now we've taken the gold step, but we know gold's not it. Cause it's fucking gold. So like what's next? And I think gold is just kind of like a placeholder. Yeah, I've always thought bitcoin has actually been a placeholder until like a more mature money comes into the crypto space. But I'm not yet correct about that.

A

Yeah, I mean, I do think this cycle will see more central bankers, like central banks going in and I countries reserves going into bitcoin. Maybe an ether, like mostly gold, but a little bit.

B

Mostly gold.

A

Yeah, we've seen a little bit of.

B

Central bank reserves into bitcoin is still a fuck ton of money.

A

It's so much money because they could just print it. Because you could just like, you could print the dollar and you could buy bitcoin right now if they wanted to. They could, David, they should do that. They could literally print like $100 billion and then just go buy ether and bitcoin.

B

Honestly, this has been the bitcoiner thesis since like the crazy bitcoiners from 2011 to 2015. This is like, yeah, eventually they're going to print dollars to buy bitcoins.

A

Exactly.

B

And my bitcoins are going to be worth bajillions of dollars.

A

Actually a really smart strategy. But like the thing is you have to do that before the other countries do it. So you want to be on the front of that.

B

Yeah. But also you can't do it too much because you also trash your domestic economy.

A

Yeah, but if it's going down anyway, you want to have something to fall back to. Right. You want to like, um, if. If this reset happens, then we're going to go back to a hard, hard money sound money of some sort. And so it's at some. It's not so bad for the US if that hard money is gold, right. Because the US has a lot of. It could be worse. But if that hard money was like silver, it would be really bad for the US. Actually, I don't know what the us silver reserves look like, but I'm assuming they don't have I don't know who.

B

What central bank has been placing their bets on silver, do you think?

A

It's been a long time, right. China had the silver standard, I believe, for the 17 hundreds, 18 hundreds. But if it reverts back to bitcoin and you're a country with a whole bunch of gold, but, like, gold's no longer the thing, then you're kind of screwed. So. Yeah, yeah.

B

It's not enough for one central bank to buy bitcoin. You need at least two.

A

Yeah, it's consensus.

B

Two medium sized ones. You can't have two tiny central banks buy bitcoin.

A

It's consensus. Yeah. So the end of this, Luke recommends 60 40, 60% stocks, 40% commodities, things that retain their value, their energy value. Like energy, bitcoin, copper, just basic commodities. That's the edit to the portfolio. So it's not.

B

I cannot think of a more boring portfolio than owning commodities.

A

I mean, I feel great being, like, even have a JPEG, massively overweight crypto.

B

I've always felt great. Massively overweight crypto.

A

How come all the guests.

B

Not always.

A

How come all the guests we have on only make us feel great about our allocation? Huh? Maybe that's a. That's a filtering problem, but.

B

Well, I don't know if we've ever. Yeah. Which. Whoever are the crypto bears going on podcasts? Like, I don't know who they are. Well, they're not the podcast I listen to.

A

There's Molly White. But, like, Molly doesn't have.

B

She's not bearish. She's just irked.

A

She's just angry.

B

Yeah.

A

Yeah. Are there any crypto bears left standing? I guess. I mean, we were talking about this. We were talking about this earlier, but more, my question to tradfi is, like, if you are a smart investor, like, how do you not hold crypto at this point?

B

Right? Yeah.

A

You have to have some crypto, don't you? Yeah.

B

It's got to be. Yeah. If you haven't really considered crypto, it's like, your bias, bro.

A

If you see this coming, then, like, how. How do you not have some crypto is more the question I want to, like, pose to smart tradfi investors. All right. Anything else?

B

Nope, we're good.

A

All right. This has been the debrief. Thanks, guys. Cheers.