Why Deflation is Key to an Abundant Future w/ Jeff Booth (MI134)

Why Deflation is Key to an Abundant Future w/ Jeff Booth (MI134)

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Clay Finck (04:34): Hey, everyone. Welcome to the Millennial   Investing podcast. I'm your host Clay Fink. And on  today's episode, I have the great honor of being   joined by Jeff Booth. Jeff, welcome to the show. Jeff Booth (04:45):   Thanks Clay. Thanks for having me. Clay Finck (04:47):   So you wrote a wonderful book called the Price of  Tomorrow. Why Deflation is the Key to an Abundant   Future, and you have been on a ton of podcasts  talking about this exact topic. And I must say  

that your book has had a huge impact on how I  think about my own portfolio and how I think about   the current market environment that we live in  today. So before we dive to talk about the ideas   behind your book, tell us a little bit about your  background and the companies you're working with   today to give the audience some sort of vantage  point for what you've done up to this point.   Jeff Booth (05:21): I've been the technology entrepreneur most   of my life, and starting out as an entrepreneur,  but then seeing how in the building industry   largely... But then seeing how technology could  play a huge role in our lives and moving into the   technology space and created numerous technology  companies throughout that ride. Today, I sit on   10 different technology related companies' boards,  and founder of probably five of them. So all  

different spaces, largely technology. And from  that vantage point, have been able to see a front   row seat of what is happening in technology to  change our world. And so effectively technology   is being utilized to deliver more value to people.  And as a result of that, you would think that more   value would be driving lower prices all over the  world. So that's what led me to write the book.   Clay Finck (06:10): You talked a lot about the macro   forces that are at play in the economy, and the  force is of inflation versus deflation. And you   just mentioned the force of technology should be a  force that is forcing lower prices, but that's not   really what we're seeing in many industries today.  So could you give an overview of what's happening  

in our economy today and why it's important? Jeff Booth (06:34):   It's probably the most important thing. Most of  the other things people are talking about are   second order consequences of two systems colliding  against each other. And those two systems are one,   exponential technology moving faster and faster  and faster wanting to deliver us more value. And  

if anyone looks at their phone, they could see  all of that value, that it's getting cheaper   and cheaper and cheaper in apps coming to them.  And what a lot of people falsely believe is that   that is being driven specifically because of  advertising. And that's why the apps are free.   That's not what's happening. What is happening is  when you enable something with technology because  

of the competition, it moves to its marginal cost  of production. And the marginal cost of production   is essentially free. Nobody is going to create  another new calculator app because you can't sell   that calculator app and you can't make money. Jeff Booth (07:28):  

So the trend moves these things to free. And  that's happening in a base layer of, it's not just   on your phone. It's everywhere. Energy is moving  into that space. Our base layer of everything is   moving into embedded technology. And on top of  that, you're moving into AI and robotics that  

change the meaning of work forever. As technology  enables more and more industries you would think   would be happening against that force. You  would think prices would be dropping everywhere.   Our time would be going up. We wouldn't  need to work as hard. That's what you would   imagine would happen if the natural forces, if  that would be allowed to happen. And keep in mind.   Most of the deflation, most of that natural force  of technology isn't behind us, it's in front of   us. So most of it is in front of us. Jeff Booth (08:18):  

The technology's moving faster and faster. It's  an exponential function. So now let's look at   the other system, the one competing against that  technology force, and what it's doing. So you have   one force trying to drive prices down. And the  world we live in based on a credit-based system  

must drive prices up forever. And because if it  allows deflation to happen, you can't pay back,   and the credit unwinds. And if the credit unwinds  and every bank is based on that same credit,   and every system we use today is based on that  credit, everything fails. So what you have is   these two giant forces colliding against each  other. One, a natural force driven by essentially  

entrepreneurs, people... Jeff Booth (09:04):   Actually ourselves as well as we vote with our  time to get more value in our lives. So we vote   for technology, giving us more value with  our time and a different force, essentially,   a monetary policy that must create inflation  against that force, or you have a system collapse.   And so why house prices are going up? Why  prices are going up? Why we see inflation is   that monetary force essentially is stealing your  time or stealing money from you through inflation.   Creating more monetary units is fighting against  that technology. Because we measure the system   from the system, most people believe that you  require inflation for a productive economy.  

So let's look at inflation for a second. What  is inflation? And nobody votes for inflation.   Jeff Booth (09:52): So inflation is   theft really, that somebody can print money and  destroy your money over time. And when you realize   it is actually a theft and it has to grow greater  and greater, most people, they don't question the   theft, they question the rate of theft. 2% theft  is good. 5% is bad or 10% is bad. But when you   have theft built into a monetary layer that has to  expand to offset the natural force of technology,   you can see every derivative around the world, all  of the second order effects playing out naturally.  

Because when you have corruption and money  itself as a byproduct, you must have corruption   everywhere else in society. Clay Finck (10:37):   Could you briefly explain to the audience why,  if deflation were to take hold in our economy   and the government and central bankers  didn't act on that in force inflation,   why would there be a system collapse? Jeff Booth (10:51):   So when people think they have money sitting in  the bank, it's actually not money sitting in the   bank. It's a credit facility and there's  a counterparty on the other side of that.   And if you allowed deflation to  happen, you can't pay back the interest   on the money. So it needs an interest rate  to be able to pay back. You need to grow,   to be able to pay back your interest  rate. Maybe a simpler example is this.   If you have a huge mortgage and you lose  your job and you can't pay back mortgage,   then this mortgage goes into default and they  take your home. If you allow credit to fall,  

if you allow deflation to happen, all of those  debts become unpayable because they explode in   value because you don't have enough growth to  be able to offset them. So they are already   defaulting. That whole system is defaulting, but  we're pretending it's current by changing the   monetary units to be able to cause inflation. Jeff Booth (11:44):  

So what that does is if you can change the  monetary units and nobody notice, and if you can,   real rates are negative for a long time. So you  drive inflation, then you're paying back the debt   in cheaper terms. And so that's what governments  are trying to do to try to offset this. And it has   disastrous consequences around the world. Clay Finck (12:07):  

So some industries have continued to get cheaper  and cheaper and avoided this massive inflationary   pressure, such as TVs, cell phones, and software.  While other industries have continued to get   more and more expensive, such as healthcare and  education. Why do you believe there is such a huge   disconnect between certain industries? Jeff Booth (12:27):   Yeah, and that's really important question that  I think a lot of people have confused as people   because they're measuring a system from a  system. And so what is happening in these   technology embedded industries is this, they are  still going up based on the inflation, but they're   automating so fast that they're offsetting it.  When what's happening with housing and things   that are more scarce, they're going straight up  with it. Now, all of those industries, eventually  

housing will be probably last to happen. But  all of those industries will be automated as   well. What you're having is fewer and fewer areas  to push on inflation, and you're driving this.   Jeff Booth (13:03): And so what are those areas that you're   driving inflation in? The things we need most. So  when you have inflation, if you just look at it,  

two sides of the same coin, inflation is the same  thing wage deflation, or you're losing money in   your savings. So when you drive inflation and you  drive... And let's first look into the numbers to   prove that thesis, and you know this from my  book. So I wanted to know why prices weren't   falling everywhere. And so I looked at, it's  because you'd expect that there had to be an   offset number on the other side of the ledger  to stop that a great force of technology,   delivering us more value in our lives. Jeff Booth (13:39):   And so when I looked in the 20 years preceding  COVID you had $185 trillion of stimulus   to grow global [inaudible 00:13:51]  by 46 trillion. So $4 of every debt   for an extra debt to of GDP by $1. Imagine you're  a homeowner trying to do that. And then you're  

trying to pay back your debt with more debt, more  debt, more debt. It wouldn't seem to work. Could   you get a loan like the federal reserve? Probably  not. And so something has to collapse at some   point. And again, these are just offsetting  formulas. One system's trying to push down,   and in counter balance to that, the other system  has to print more money, and they feed back   against each other. So if prices are moving up  because they're unnaturally caused to move up, and   us as population needs lower prices because prices  are moving up. Then what would a business do   in that environment? Would they automate  faster? Because if they don't automate faster,   they'll go broke. Jeff Booth (14:39):  

So what you have is both trends are  accelerating against each other,   causing for an exponential movement on the trend.  So you could predict the response if you saw   the hundred 85 trillion to 46 trillion growth  preceding 20 years, otherwise you would've   massive deary spiral. So you're constantly  injecting more and more and more, and you   have to do it exponentially. So you could predict  what was happening out of COVID, and you could   predict what's yet to come. And then, because  people were measuring a system from a system,   underneath that people don't ask the question. Jeff Booth (15:16):  

They think their house is going up forever, but  they fail to ask the question, would my house have   gone up in the last 20 years without $185 trillion  of stimulus? And the answer simply, no it wouldn't   have. Or would education go up at that rate  without a hundred or $185 trillion of stimulus?   And answers simply, no, it wouldn't. So if you  think houses are going to go up at that rate,   then you must believe there needs to be that  much stimulus to get way more exponentially,   more stimulus, to keep them going up. Clay Finck (15:45):   As well as these two trends, colliding and  fighting each other in an exponentially   increasing manner, things really started  to click for me when I realized that   they're keeping interest rates artificially  low, which allows these mega corporations   like apple and Amazon and Tesla to borrow  billions of dollars at say 2% interest,   which allows them to invest just massive amounts  of money into new technology, which feeds on the   deflation that you're talking about. Jeff Booth (16:14):   And it is creating those monopolies,  making them bigger and bigger and bigger.  

And those monopolies are essentially today in  control of artificial intelligence and the growth   of artificial intelligence. And so when you think  about that trend and that artificial intelligence,   eventually, if you looked at Boston robotics  10 years ago, versus Boston robotics today,   and you see these robots doing incredible things,  you would've never predicted that 10 years ago.   If you run the trend of artificial general  intelligence and emerging of those two trends,   it won't look like the Boston robotics  dog. It could be miniaturized, it could be   the trend. Those things merge, and you have to ask  yourself what jobs are protected from that trend.   If you cascade all wealth and power in  very few organizations, because of a   system that's doing it, who controls artificial  intelligence and robotics controls all of us.  

Jeff Booth (17:07): And so you start to see these mega trends on where   the world's going and underneath the existing  system, it turns into a very dystopian world.   But also, a lot of people would go and blame  people in the system, which is pretty natural.   And in the book I talk about game theory and  why that's natural. Because when people look   at somebody else that has everything, and  they wonder why they don't. And more and   more of the population is losing out, because  you're transferring wealth to those companies,   you're transferring wealth from the middle class  and poor to those people. And the other people,  

their rents are going up, food prices are going  up. They're working two jobs to try to stay   solvent. They're getting more and more mad. Jeff Booth (17:48):   You can see what ends up happening around  the world through that lens. And essentially   they're going to either tear the game board down  through Revolution or war. That's what typically   happens. Or you need a new system that can  transfer value to a new system. If you just say,  

"Let's use doors." Door number one on the existing  monetary policy is it has to keep inflating. No   one will get elected. And remember, nobody gets...  Most of the government's revenue comes from   inflation. It doesn't come from taxes. And nobody  tells you that. Nobody says, "Most of government's  

revenue comes from a theft from people." And there  is no one that's going to stand up and say, "I'm   advocating for truth." So ask any politician to  say, "Will you advocate for stopping inflation?"   And they can't because the whole system would  collapse if they did. So they advocate for, "I'm  

going to promise you more things and steal more  from you by doing this." That's door number one.   Jeff Booth (18:47): And that corruptions spreads through society. And   if you're closer to that corruption, you gain more  of that. If you have more assets, you win more   from it. But there's lots of losers from it who  then typically go back to government and say,  

"This new person can solve this. I'm going to  take it back through a new person who's going to   tell me something different, but  still continue the same theft."   So that's door number one. And if you look through  the long arc of history, it leads to revolution,   war, global conflict. But again, wealth inequality  is first. You can see it around the world today.  

Because of that wealth inequality, they haves  get everything and the have-nots get nothing. And   there's more have-nots that leads to them electing  different people to take that back. So even though   the wealthy think they're safe from this system,  and they're getting wealthier from this system,   they are not safe from this system at all. Jeff Booth (19:41):   And if you want to see a recent  and historical example of that,   look at Germany in the '30s. What happened  out of that does not stay like that for long.   Door number two, governments allow deflation and  everything resets, and into that void there would   not be food on the shelves, banks would close.  It would look horrific. There is no escape from  

it. So you have a system that there is no  escape from, unfortunately. And that's why   I think about in Bitcoin specifically is a door  number three. It provides a transition from one   system that has to fail in one of two ways, to  a different system that allows the productivity,   or gains to be transferred broadly to society.  And that transition is still going to be messy.  

People that are actually in Bitcoin and actually  driving Bitcoin, it's an emergent phenomenon,   getting stronger and stronger all the time. Jeff Booth (20:30):   Effectively what they're doing and whether  they know it or not is they're building a   bridge to the other side. And as that bridge  gets stronger and stronger, more people are   walking across that bridge. And that's what's  happening into a new system. It's more congruent  

with where we're going with humanity. Clay Finck (20:48):   Incredible explanation. Could you give the  audience one or two modern day examples   of deflation actually happening today. Jeff Booth (20:57):  

Within the iPhone? So think about the cost  structure of what it looked like for cameras,   film, developing film, and how many photos you  took 10 years ago, 20 years ago. So I drove to   the store, I bought film, I drove back to the  store to develop film all of this processing.   Then I looked at my 12 photos on my camera roll,  and like, "Ah, I didn't get any decent photo.   And I missed that window." And we took a very  small number of photos and there was scarcity   in photos. And the whole thing drove because of  that scarcity. And there was a cost, an entire  

infrastructure of people, supply chains, people  around physical goods, and a photo was physical.   And then it changed. By the way the camera on the  iPhone, now 3D enabled everything that used to be   effectively as $600, you couldn't buy that  with an artificial intelligence that makes   that sharper and sharper and sharper today. It's  now a technology solution. And that is a $5 bill   of materials on the new iPhone. Jeff Booth (21:59):  

So all of that power is dropped in costs by a  staggering amount. And now we take billions or   trillions of photos. We don't even think about  it. There's no cost to it. The marginal cost of   production has come to zero, and a lot of the  jobs it used to... Kodak was a monopoly for a  

long time. It no longer exists, but photos still  exists. Editing software is free. We can do with   those, and we can take as many as we want for  free. And so thing is happening. The same thing   is happening in music. Same thing has happened  in a whole bunch of different industries. Yet,  

and this is a problem with most people that is  really hard to predict where technology is going   forward because it's on this exponential trend. Jeff Booth (22:44):   So what we typically do is we predict our  present forward. So a lot of people, even Bitcoin   are predicting what Bitcoin looks like right now  forward, instead of what it will look like. Same  

mistake a lot of people made when the internet  came into existence. It was in 1997, and you had   a dial up modem that went [inaudible 00:23:02],  and it took 10 days to download a cat video.   So people in that time in 1997... Remember,  1997, there was no Google. There was no Facebook.   There's no YouTube. People made that same  mistake. And a lot of the monopolies at the time   don't exist anymore because technology changed  the rules, technology advanced and advanced   and advanced and all that innovation came on  top of it. So that's what's happening today,   and it's everywhere. Clay Finck (23:29):  

Why do you think so many people, including all  the governments around the world are missing   the fact that deflation and this technology  deflation is too big of a force to be stopped?   Jeff Booth (23:41): Because all of the interests of   the entire world rely on a different system. And  that monopoly over money is a different system,   and it's a credit-based system. And so they cannot  see... And by the way, it's normal for people not   to see where technology moves. It's normal not to  see how fast technology is moving. If you looked   at most of the government officials, most central  bankers, are they technologists, or are they   old white people that have seen a different movie?  Even in technology, a lot of people can't see   how fast technology is moving. And so how would  somebody understand how fast technology is moving  

if they've seen a different system than your  entire lives and their beneficiary of that system?   They probably wouldn't see it. And it's not bad  people, again. It's a system that is literally   unstoppable. Because what does technology do? Jeff Booth (24:31):   And by the way, this is actually probably a  good framework for where we are in the system,   in comparing technology to any other system. What  technology does to monopolies is it changes the   order of magnitude so much in cost and value  that the monopoly has no way to compete.   So if you think about Blackberry at the time, when  everybody thought a phone needed buttons, many   people listening to this podcast wouldn't even  remember Blackberry. But everybody had a sense of   a phone competing against a phone. And then iPhone  came out. And iPhone was way more than a phone.  

It was an everything device that everything moved  to the phone. But when iPhone first came out,   Blackberry thought it was a toy. A lot of people  wouldn't get rid of their phone because they liked   their phone with buttons. Jeff Booth (25:15):  

And that's what I'm getting at. We don't see  where this is going. And if we don't see where   this is going and how fast these new ideas  change in industry, by giving way more value,   how would any central banker see it? Clay Finck (25:29):   I think many people today, maybe the common person  would tell you that inflation is a good thing   and necessary for a healthy economy. Why do  you believe that inflation isn't necessary   and maybe give a counter to that idea. Jeff Booth (25:46):  

At first, again, these things are  really hard to deprogram in our brain,   because if you believe that I keep asking why. And  so if you believe inflation is critical, then why?   And people won't even think about why, because  what you're saying is there needs to be a theft   of money that's hidden from me for a society to  function. Why? And what likely is the next answer   is, "Because people won't buy things." And then so  let's investigate why people won't buy things. And   let's investigate that today because there's  a lot of industries where you get more value   each year, if you wait. So there's a lot of  industries that are deflationary right now,   like entire computer industries, phones. If you  wait five years, don't buy a phone, you'll get   more value five years from now in your phone. Are  you going to buy it today or wait five years?  

Jeff Booth (26:36): So I don't buy that people won't purchase   and everything else. We purchase, we decide based  on value. We make a decision based on value over   and over and over. So we used a phone example, a  TV example, a whole bunch of different things. So   we would still purchase. What about food? Would  you still purchase if food got cheaper next year   but it was more expensive this year? I think you'd  still purchase. You wouldn't change those habits.  

You might not purchase a whole bunch of trinkets  that you don't need, you might save more. But if   you believe in inflation, the only reason  you purchase more is because of inflation.   Then you also, consequently must believe  that, "I should lose money all the time.  

And the only reason I'm purchasing more stuff  is because governments destroying my money."   Jeff Booth (27:24): And so when you look at   that argument through that lens and you keep going  down to why? Why? Why? You realize it's not true.   We believe it's true, but there's nothing, nothing  that says a productive economy needs inflation,   nothing. Now from a financial architecture system.  And this is, if you go a little bit deeper on   this, I understand why that belief is persistent.  Because in historic times, if you had gold,   if you had hard money in the centralization of  that gold, you typically built a credit system   on top of that so you could get velocity of money.  And that credit system had to expand and expand.  

And that's what ends up happening. It expands and  expends, and it then it has to reset and collapse.   That's historically through the lens of war  and revolution. And then there's a new monetary   standard where people say, "We promise we won't  do it again." And it gets away on itself again.  

Jeff Booth (28:18): But that's actually why Bitcoin's such an   incredible innovation as well, because you can get  the velocity of money through 10 minutes window.   You can over and over and over again,  it doesn't need a system on top of it   managed by humans to be able to get velocity  of money and have the world to function. So I   understand how if that credit-based system  on top of gold needed to keep expanding,   then you had to have a whole bunch of people  telling other people that inflation was a must   for that credit-based system. Because inflation  is a must for a credit-based system otherwise you   have that inflation on spiral. Clay Finck (28:55):   You've been very vocal about climate change as  of late, and the inflationary environment that we   currently live in essentially requires growth for  ever to continue to operate, which isn't good for   someone that is an advocate for climate change.  And on top of that, when you have money that's  

losing value, whether you realize it or not,  essentially everyone is incentivized to spend   that money because they're going to be able to buy  less a year from now than they are today. Whereas   on the flip side, if your money's deflationary,  you're only going to consume what is necessary.   Jeff Booth (29:32): And remember the existing   system couldn't just do that because you'd have a  system collapse. You need a new system to be able   to allow that transfer to happen. If you believe  in climate change, then there is no way to solve   climate change through a system that must grow  forever. And think about that growth forever and   what it does to huge parts of the population.  People are working two jobs, driving two cars  

back and forth to the two jobs, all to try to take  their money, to be able to save enough money to   escape the system so they don't have to work so  hard. Well, the system is constantly making their   money worth less and less and less. So you're  trapped. Everybody's trapped inside the system,   working harder and harder and harder. It's  on an ever expanding wheel, but inflation   equals climate change. Jeff Booth (30:20):   It is climate change, in a different system.  But again, the problem is that existing system   can't be stop it. And by the way, some you  asked earlier on about some of the companies  

I'm involved in. I'm involved in agriculture  technology companies. I'm involved in a bunch of   different technologies that I cannot believe...  Or what's happening from that point of view.   I'll give you an example of one of them.  One of called CubicFarm. It produces greens,  

lettuce and others at a way lower cost and allows  it to localize. It is containerized farming. So   it's already priced to the point where it's way  cheaper at massive scale production. And what's   happening is now instead of having agriculture  travel from us buying in Canada, us buying lettuce   from California, you can put these facilities in  and you can have way higher quality lettuce that   last for a lot longer, more nutritious. Jeff Booth (31:10):   So it is essentially abundance. It allows prices  to come down. Now let's just look at that in the   overall climate example that you [inaudible  00:31:21]. So it's localized, it's technology,  

it gives us abundance, and it brings prices  down. Higher quality, more, more. But what ends   up happening to that innovation is in the macro  picture because it gives us so much value and   brings prices down, the offsetting system  has to print more money to be able to offset   that innovation. Now, what does that do? That  innovation gets stronger because transportation   costs go up, labor costs go up. In the existing  system everything goes up in price and this   innovation moves faster because of that delta.  So that's just an example of this. And so when I   say inflation is climate change, you can see  through that example, that happening. And all of  

those things have to keep on reinforcing against  each other. They're opposite sides of the coin.   Clay Finck (32:09): I wanted to talk a little bit about   the Federal Reserve's recent announcement.  They essentially stated that they'll be doing   more quantitative tightening in 2022, which means  that they'll taper off their asset purchases   and raise interest rates. My question to you  is, can the federal reserve take these actions   without crashing the markets? Jeff Booth (32:33):   It's what I talked about in the deflationary  spiral. You're going to start to see a sell   off in equities if they try. You're going to  start to see it a sell off on equities. After   the selloff in equities, the US dollar will  get stronger, or it will get along the way.  

Other currencies will start to fail  like what's happening in Turkey today,   as this explodes around the world and the Fed will  have to come in with more easing. Because if they   don't, they'll have to nationalized banks. Jeff Booth (33:00):   And when I say that, it is a cascade  of errors. But if this got too far away   on itself, that credit collapse that  would happen and that credit collapse   is everything. It is the economy that we live in  today. It would keep on spiraling. It would make  

The Great Depression look like it was on steroids.  It would be so cataclysmic. So there is no way   they will keep tightening. Clay Finck (33:22):   Now let's talk a little bit more about Bitcoin  specifically. You've stated that Bitcoin is both   an asymmetric bet and one of the safest places to  store value. Could you expand on why you believe   both of those to be true simultaneously. Jeff Booth (33:39):  

Let me go back to that other question because  I think it's for a lot of your listeners.   If they're looking at that tightening on a  narrow timeframe, they're going to get confused.   Because I understand why the Federal Reserve  is saying that. And you could have some whip  

sawing of asset [inaudible 00:33:56] in this.  So specifically you need to zoom out to see,   what is the larger picture at play here, and can  they tighten for very long? The answer is no. If   they tighten for very long, you're going to want  to hold some cash. You also might want to buy an   off grid house and get out of the cities, but they  cannot tighten for long. You'll see more easy.  

Jeff Booth (34:17): Now to the Bitcoin question,   the greatest asymmetric bet in our lifetime,  and maybe in history, greatest asymmetric bet.   Choose those doors, I said before. Door one,  they tighten. Then Bitcoin is an asset without   counterpart risk. So the entire credit-based  system has counterpart risk all the way down   to the [inaudible 00:34:41], everything. And so  if they tighten and they kept tightening, then  

a new system is going to emerge really quickly  that is on a system with no counterparty risk.   Now, if they kept tightening, Bitcoin will fall  too, at least for now. Because everybody would   be selling anything to be able to get dollars  or whatever they could get to be able to live.   And so if that really got away, which is,  I would say a very low probability option,   Bitcoin would fall in the near term as well. And  actually probably why Bitcoin's falling a little   bit right now is because of that. Jeff Booth (35:15):   On the other side, when the higher, way  higher probably, way more easing comes in.  

It's a safe asset than not. But more importantly  to the whole thing at the larger macro picture,   it is the bridge, it's... Bitcoin is like TCP/IP.  It's the network protocol. It is like being able   to invest in the internet itself. And then on top  of Bitcoin, layer two, is all of the innovation   that's going to happen on top of that network. The  Jack Mallers' Strike, a whole bunch of different   companies and a whole bunch of different ideas of  value exchange that are being built on top of that   is going to happen on layer two. And it's moving  really fast. So you have these two network effects  

that are reinforcing on each other that are  growing faster than the internet was in 1997.   Jeff Booth (36:02): So if you think about that emergent rate of   adoption, and then you zoom out... Remember back  to the internet itself, remember in 1999, there   were a lot of experiments on the internet. Some of  those experiments failed. And then when I'm saying   layer two companies on top of the internet, but  it didn't change the internet itself. All of them   made it stronger and stronger and stronger. And  so what's happening today on Bitcoin is a primary   layer of money. And all of the experiments,  whether you look at El Salvador's bond, whether  

you look at all of the innovation that's happening  on top of it, the Lightning Network and everything   else, those are experiments and every single  person joining that system is actually making it   stronger for every other person. Now that's what  I'm talking about the bridge that you're building,   it's actually... Jeff Booth (36:48):   And while many people wouldn't see that today, but  people should look up in game theory, a shelling   point, it moves the shelling point of humanity  from competitive destruction, essentially nuclear   war, and everybody needs nuclear weapons to  be able to stop somebody else from using that,   to a shelling point based on global cooperation.  And it's a big deal, and that shelling point based   on cooperation. You could yell at Bitcoin all  you want. You could scream at, you could hate it,   but you keep it in the news. And what ends up  happening is every single person, what everybody  

who hates it, every who likes it is actually  making it stronger and stronger and stronger,   and actually bringing more people to Bitcoin.  And those people holding Bitcoin now being able   to trade Bitcoin with each other is getting  stronger. The UX, all of the innovation that's   happening on top of that. Jeff Booth (37:38):   Now imagine zoom this out to say why this system  is so much more important. You hate Bitcoin,  

you can't stand Bitcoin, but the new  system is pricing the free market   and all of the innovation that's happening  on top of it is actually driving price lower   and lower and lower. So if you deliver value to  society on Bitcoin, you collect more of Bitcoin,   but the outcome of your work in time lowers prices  for everything. And so it builds a system where   the incentives are congruent with the best in us  instead of the system today where the incentives   are designed for the worst in us and cheats in  competition. So that competition turns it global   cooperation through this network. Clay Finck (38:22):   Yeah, essentially it comes back to that  idea that the inflationary system benefits   the hands of a few. Whereas a deflationary  system benefits everybody as they experience  

lower and lower prices over time. Now, one of  my favorite investing principles is ensuring   that you stay in the game, and many  millennials, whatever the reason may be,   might not be in a position to have a substantial  portion of their investible portfolio in Bitcoin.   So I'm curious how else might they themselves to  benefit from the current market environment that   we are in? What are their other options? Jeff Booth (39:01):   So dollar cost average in Bitcoin, put  something in every week. You get a hard wallet,   put something in every week, every two weeks.  If you need to start small, start small,  

and then just keep doing it. That's probably  the highest priority thing you could do.   I'm teaching my kids right now  about lightning, about mining,   because any disruption is a crazy opportunity  for entrepreneurs and people to learn where   to take advantage of markets. And we have the  biggest disruption, potentially worlds ever seen   coming to money. Because creative disruption  has come to money and money is just an abstract   concept for our time, right? We actually don't  want more money. We want more of the things we  

think money will get us. And so that's a big, big  idea that has come into what we're talking today.   Jeff Booth (39:47): Now, if you think about   what's available in essentially a network like  the internet that lowered the cost and changed   monopoly power that used to look like... Sears  used to have monopoly power. Walmart used to   have monopoly power. They lost it because the  internet opened the door, and what ended up... I   use this example often. The first suppliers  to Amazon were not the suppliers to Walmart.   And what ended up happening because there were  billions of products that couldn't find the market   and the monopoly blocked those billions from  seeing the market. And so all of those billions  

of products could find shelf space on Amazon, and  we couldn't decide. Same thing happened to music.   Sony used to block access from musicians. By the  internet lowering cost, who were the first people   who went on YouTube or everything else? A lot of  different musicians that couldn't get through Sony   because of the cost structure of that market. Jeff Booth (40:45):   So what ends up happening is when  technology lowers the barrier cost,   it is not the monopoly that join first.  It's everyone else. And there's more of us.   And so when I think about the millennials, when I  think about that group, and I think about my kids,   the opportunity on this network is staggering.  There's so many opportunities on top of this  

network because of that lower access cost and what  it creates. And we're going to have a rebuilding   of society on top of it. Clay Finck (41:10):   Yeah, I agree. It's a fantastic opportunity in  many ways. And my final question is in regards to  

the boards you sit on. You sit on a number  of boards for companies and you're very well   connected and informed when it comes to the  world of business and entrepreneurship. What   are you seeing from private companies in terms of  the adoption of Bitcoin on their balance sheets?   Jeff Booth (41:34): I get asked this question every   day I know some of those boards. It takes time,  just like it takes time to come to this conclusion   for a board to come to this conclusion. But right  now on some of those companies, they're already   putting Bitcoin on their balance sheet. But it's  actually taken longer than I actually thought.  

You can imagine, the companies are thinking  about, "Okay, well, how do I deliver value?"   They're thinking about that. They're so inside  their own business that they don't think about   the greater game that they're playing within very  often until they realize, "Wait, my cash lost 15%   last year. Okay, how do we stop this?" Clay Finck (42:09):   Yeah, it makes sense. They aren't spending a  ton of time studying economic policy and macro   economic forces. Jeff, thank you so much for  coming onto the show. Before we close things out,   where can the audience go to connect with you? Jeff Booth (42:22):   Probably best is just on Twitter  at @JeffBooth on Twitter.  

Clay Finck (42:26): Awesome. Jeff, thank you   so much for coming on. I really appreciate it.  And it's been a great honor to have you on.   Jeff Booth (42:32): Any time, Clay. Thanks for having me.

2022-01-23 06:18

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