0:07

Welcome to Bankless, where we explore the frontier

0:09

Internet Cowen and Internet finance. This

0:11

is how to get started, how to get better, and how to front

0:13

run the opportunity. This is Ryan Sean Adams.

0:15

I'm here with David Hoffman, and we're here

0:17

to help you become more Bankless

0:20

guy special treat today. We have Tyler Cowan

0:22

on the podcast. Tyler is an economist. He's

0:24

a columnist. He's a polymath. He makes the case

0:27

for why crypto is underrated.

0:29

I feel like we need this case right now as

0:31

we enter twenty twenty three. Three things

0:34

to look for in this episode. Number one, why

0:36

Tyler thinks regulators should pause? And

0:38

wait before passing crypto regulation,

0:40

especially in the wake of FDX. This would be

0:42

the absolute worst time to do it. Tyler

0:45

makes that case. Number two, We talk about

0:47

how FTX and Enron are similar

0:49

and the lessons we should all learn from

0:51

those two events. Number three, why Tyler

0:53

thinks Crypto is underrated. Why he

0:56

calls himself a crypto hopeful

0:58

even though he thinks Balaji's network stake

1:00

idea is utterly wrong, a complete far

1:02

And finally, we play Tyler's favorite game

1:04

near the end, overrated, underrated. We

1:06

talk about everything. That's relevant right now.

1:08

AI, in deflation, America, China, social

1:11

media, wealth inequality. These things overrated

1:13

or under

1:14

rated. Mhmm. David, we had a lot to talk

1:16

about during the debrief. What do you wanna focus

1:18

on? I really wanna focus on

1:20

why polymath seemed to understand

1:22

crypto better than everyone else. And that was one of

1:24

the big questions that we ask Tyler is

1:27

people that are siloed inside of their one

1:29

institution be it government or academia

1:32

or the banking sector, they never

1:34

really understand crypto. They kind of just treat

1:36

it with resistance. But people that operate

1:38

across these verticals, across these sectors

1:41

do seem to get crypto, and that seems

1:43

to be tailored. And just the nature

1:45

of pilots, very punchy, concise

1:47

answers about almost anything that we ever

1:50

would want to ask. He's Cowen answer for.

1:52

This type of persona, this person, I think,

1:54

is worthy of x exploration that I wanna unpack in

1:56

the debrief. And also why this episode, Bankless

1:58

Nation is faster. It's a very fast paced

2:01

episode in comparison to other podcasts

2:03

that you would listen to. Guys, if you wanna

2:05

get that episode, the one we released. Right after

2:07

this episode, it's our thoughts on

2:09

the episode Tyler then stick

2:11

around for the show, which is called the

2:13

debrief. Premium subs have access to that. If

2:15

you're not a premium subscriber, you can upgrade

2:17

now by clicking the link in the

2:19

show notes. Okay? We're gonna get right

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cents a day and provides a wealth of knowledge and

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support on your journey west. I'll

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see you in the discord. Bankless nation

4:52

want to introduce you to Tyler Cowan.

4:54

Tyler is an American economist. He's a columnist.

4:56

He's a blogger as well. He's also a professor

4:58

at George Mason University. Where he

5:00

also produces a fantastic podcast

5:03

I think you should go subscribe to called

5:05

conversations with Tyler. He interviews many

5:07

thinkers across many walks

5:09

of life. He's had guests from Crypto,

5:11

like Fetek Beauty, and he's also had

5:13

people like Mark Anderson, Raydalo, even

5:15

had SBF on, I believe, at

5:17

one

5:17

point, maybe the last year or so. Tyler,

5:20

welcome to Bankless. Yeah. How are you doing? Brian Armstrong

5:22

too. Brian Armstrong. Hello. Thank you. Can

5:25

we just start here? Alright. So twenty

5:27

twenty three, what do you think of crypto?

5:29

What is this crypto thing? How do you explain

5:31

it? What is crypto now? I think

5:33

we're at a margin where crypto has

5:35

become underrated by most

5:37

intelligent, honest observers So

5:40

the collapse of FTX has led to

5:42

a lot of bad publicity. Whatever

5:44

you think of that episode, I don't

5:46

feel it matters for the long run prospects

5:49

of crypto. The decline

5:51

in prices has cleaned out a lot

5:53

of the

5:53

fraud. There are serious people

5:55

building things. I think we should be

5:57

genuinely uncertain as to what will

5:59

exceed. But I would say I'm cautiously

6:02

optimistic. Tyler, there's one thing

6:04

we noticed frequently as representatives

6:06

of the crypto industry is that people outside

6:08

of the crypto industry have a really hard time

6:10

understanding what crypto

6:12

is all about. But you seem to have not

6:14

exhibit that Like, people that are inside of

6:16

one institution, whether they're an

6:18

economist or they're in government or they're

6:20

in banking. They don't really seem to

6:22

get crypto, but the more that people span

6:24

many walks of life and are skilled

6:26

on many different areas of

6:28

knowledge. Seemed to get crypto a little bit more and that's kind

6:30

of how I place you. Why do

6:32

you think crypto is so confusing to people on the

6:34

outside? Well, I'm not sure anyone gets

6:36

crypto. There are plenty of people on the

6:38

inside who get some part of

6:39

it. But if you think of crypto as

6:41

photonic does, as a new kind

6:43

of computer, more fundamentally than

6:46

being any sort of

6:47

money, or being a new way

6:49

of programming contracts.

6:52

It's

6:52

one of the few truly new ideas

6:55

in many decades

6:57

So you could throw all Einstein. That was like

6:59

a very new idea that

7:01

as you approach the speed of light, your mask

7:03

becomes infinite. That's insane. Right? Does

7:05

anyone understand that today? So

7:08

crypto isn't that weird, but

7:10

it's deeply weird, it's counterintuitive,

7:13

It's perhaps misleading to call it

7:15

cryptocurrency. You

7:17

know, it's not necessarily a money

7:20

and we still don't know which are

7:23

the use cases that really will succeed.

7:25

You say deeply weird like it's a good thing. Aren't

7:27

things that are deeply weird good? Some

7:29

are very good and some are very bad.

7:31

I think with crypto for instance,

7:33

is there the potential to take

7:35

remittances and rather have the fees

7:37

be often as high as seven percent

7:39

make those fees one or two percent, that

7:42

quite possibly will happen. That will

7:44

help poor people around the world To

7:46

a great extent, are we

7:48

convinced it will happen? No. Is

7:50

there another scenario where simply

7:52

competition from crypto makes

7:54

the current suppliers of remittances lower

7:57

the fees through competition, and we

7:59

never see Crypto have a major role

8:00

there, but it's still been very beneficial.

8:03

Absolutely. But is there a potential

8:06

for danger in crypto? That's true as well.

8:08

You said earlier that you think crypto

8:10

is underrated at the current moment. Is that

8:12

sort of new? Would you have said that last year?

8:14

Have you said that at other points

8:16

during your observation of crypto that it's

8:18

under

8:18

rated? Or have there been times where it's been overrated?

8:20

And if so, how? Well, one

8:22

has to be very careful with the exact dates

8:24

here when you asked last year. But

8:26

if you take whichever date was the

8:28

highest, say, Bitcoin price, At

8:30

that point in time, I believe

8:32

crypto is overrated, not by everyone,

8:34

but by a significant contingent

8:37

of people. Who simply thought it

8:39

was an almost automatic way to

8:41

riches and it was gonna do everything and

8:43

revolutionize the nation state. That

8:45

was never a majority opinion.

8:47

But large block of people believing those

8:49

things, which I have never believed

8:51

in, I think having

8:53

crypto be cheaper is healthier

8:55

for crypto, There's a bunch of things you

8:57

can do with it that will work. But

8:59

the key event here really is

9:01

SPF and FTX, big

9:03

headlines, a celebrity figure, Everyone

9:05

can damn and criticize him,

9:07

and crypto bears a lot of the brunt of

9:09

that, and now crypto to me clearly is

9:12

underrated. But, yes, it was overrated. When

9:14

Bitcoin hit its peak

9:15

price, what was what? December of twenty

9:17

twenty Cowen? was that November? November I think

9:19

was when we hit, yeah, all

9:21

time highs. Yeah. So you feel like we're

9:23

much more grounded with the reality of what

9:25

crypto can do. Let me ask you this though, Tyler.

9:27

There are some critics who say that

9:29

this whole crypto thing that you guys talk so

9:31

much about might potential future use

9:33

cases such as remittances of the type that you

9:35

said. They also say this technology

9:38

and you just mention that, you know, weird

9:40

things can have the capacity for good or bad, but this

9:42

particular one increases the

9:44

surface area for scammers, for

9:47

fraudsters. For people like the SBS

9:49

of twenty twenty two. Maybe this

9:51

starts to get into your regulatory post, but let me

9:53

ask the more general question. Are

9:55

sure worth it? Is crypto worth it when

9:58

you have greater surface area

10:00

for the frogs and the scammers? And

10:02

anyone can launch their own coin

10:04

and send it to the moon with populist

10:06

use of social

10:06

media. What do you think about this

10:09

argument? Well, I don't think you can send your own

10:11

coin to the moon anymore. It

10:13

was a bad state of affairs when you could.

10:16

On the issue of scammers, I view it this

10:18

way because of the Internet plus

10:20

AI, The supply of

10:22

scams is now infinitely

10:24

elastic or it will become so

10:26

rather quickly. Wow. Especially with

10:28

AI. Now crypto was a kind of

10:30

intermediate step in the

10:32

amazing proliferation of scams and

10:34

ability to reach people with mobile

10:36

devices. So you can blame

10:38

crypto for that, but with or without crypto,

10:40

it was headed toward infinitely

10:42

elastic supply anyway. So

10:44

I don't think crypto will have made a difference

10:47

in the ongoing trajectory

10:50

really. So cryptocams

10:53

obviously are bad, but I think you're

10:55

picking out one thing from the universe.

10:57

It would be as if you said,

10:59

well, horse races. Are there scams

11:01

related to horse races? Well, I'm

11:03

sure there are. But in the final

11:06

whether those are there or

11:07

not, you the final scamming equilibrium

11:09

will be what it is. Tyler, you recently

11:11

wrote an article which is actually how we

11:13

ended up recording this podcast with

11:15

you today. And the article was beware

11:18

the dangers of crypto regulation where you

11:20

urge caution on over regulation, and I wanna

11:22

read a quote from that article that you

11:24

put down With systemic risk currently low,

11:26

perhaps it's better to wait and learn

11:28

more before moving ahead with

11:30

regulation, I am not arguing by the way

11:32

for zero regulation of crypto. I

11:34

merely say saying that a hurried bipartisan

11:36

move against crypto following

11:38

a highly visible public event with an identifiable

11:40

villain, SPF, of course, would be

11:42

a mistake. Tyler, can I get

11:44

you just to elaborate and unpack that

11:46

statement? What's motivating this

11:48

pause for reflection among regulators

11:50

in the crypto industry? I don't think the regulators

11:52

know yet what they're doing, and I

11:54

give them credit for at some level

11:56

realizing this. They actually

11:58

haven't passed truly

12:00

systemic crypto regulation.

12:02

I don't know that there is a

12:04

way to do it without shutting

12:07

down good crypto. Now

12:09

if you focus on exchanges, I

12:12

do think regulators can regulate

12:14

exchanges in a more or less

12:16

sensible way. And could do that

12:19

now if, say, FTX had

12:21

been a legitimate institution and,

12:23

you know, had done more in the United

12:25

States But I, myself,

12:27

doubt if exchanges are the future of

12:29

crypto, I think Cowen

12:31

base, which is already regulated, will end

12:33

up regulated more We won't

12:35

treat it exactly like a bank, but

12:37

our regulators are quite good at

12:39

imposing restrictions on well

12:42

identified third party institutions. And

12:44

Coinbase is one of those. And a

12:46

lot of those institutions want

12:48

regulation, so the environment can be predictable.

12:50

But crypto as a whole, how we classify

12:53

it, Again, I don't think there's anyone out

12:55

there who knows what they're doing at all.

12:57

And the fact that we don't currently

12:59

know the sustainable use

13:01

cases of crypto is the flip

13:03

side of that Right?

13:05

Like are we regulating remittances?

13:07

Is it, you know, online

13:09

identification? Is it

13:11

prediction markets? Is it web

13:13

three point o? Whatever

13:15

your opinion might be, I

13:17

don't have the concede of knowledge to

13:19

think that I know, and I'm quite sure the

13:21

regulators don't

13:22

know. Yeah. And certainly, crypto as

13:24

a concept as an industry is so incredibly

13:26

broad that a

13:28

single global bill that tried

13:30

to regulate everything about crypto would probably

13:32

be miss the mark to your point. I agree with

13:34

you that I don't really trust regulators to

13:36

understand what they're really getting into. Do you

13:38

have any sort of, like, roadmap or

13:41

suggestions for how because people

13:43

do want to regulate crypto, and to some

13:45

degree, we also want good and fair

13:47

regulation from inside of the industry as

13:49

well. Do you have any thoughts or

13:51

for a potential roadmap for how we go

13:53

from where we are now with the lack of

13:55

current regulation to where we need to

13:56

go, which is having some semblance of good

13:59

regulation? Well, assuming we're talking about the

14:01

United States here -- Yes. -- I would

14:03

say simply wait for now

14:05

and see which use cases are sustainable.

14:07

There's some chance it's none of them.

14:09

I mean, it's not it would not be my

14:11

bet. There's some chance crypto just

14:13

ceases being a thing and you can

14:15

forget about the whole problem. The better

14:17

guess is some of the use cases

14:19

will stick See which

14:21

those are, and then see what

14:23

are the appropriate bodies of law for

14:25

regulating those use cases. So

14:28

that to me makes perfect sense. I

14:30

just don't see that we're there yet. So

14:32

one taker, one reply to you, Tyler,

14:34

and this might be say, you said, Regulators

14:36

can't regulate crypto without regulating

14:38

out good use cases. A reply

14:40

might be, there are no good use cases,

14:42

Tyler. We could just eliminate crypto and

14:44

nothing of value will have been lost. I

14:46

wanna get back to that question but read a

14:48

quote from your article where you say,

14:50

yet up primary use case for cryptos to get

14:52

capital out of China, Russia, Venezuela,

14:55

and other financially repressive

14:57

countries. That is one reason for

14:59

the US to support rather than to undercut

15:01

the current crypto ecosystem.

15:03

This starts to make a case almost

15:05

of like a western

15:07

liberalism sort of democratic

15:09

free case for

15:11

why the US should be

15:13

supportive of crypto. Can

15:15

you talk about that? What about the lawmaker who

15:18

says, look, Tyler, there's

15:20

actually no good coming from crypto when you say

15:22

good use cases. I haven't seen

15:24

them yet. What's your reply to that?

15:26

There are tyrannical governments all

15:28

over the world. They try to

15:30

control their people's capital movements

15:32

and how they deploy their wealth and

15:34

their money. Crypto is a

15:36

partial antidote to that. I

15:38

think if it weakens the governments of

15:40

Venezuela, China, Russia,

15:42

You can debate exactly who else

15:44

belongs on that list. That's a

15:46

good thing. Another example would be

15:48

Argentina, which is not a tyrannical

15:50

government, but it's not a well run government.

15:52

And for whatever reason, people

15:54

use crypto in addition

15:56

to US dollars as a hedge

15:58

against Argentinian inflation That's

16:00

also a valuable use. So those

16:02

are proven by the market. Now they're not

16:04

USA functions, so

16:06

I understand from the perspective of

16:08

the regulators, There's a nervousness

16:11

that the main benefits right now are

16:13

overseas, but you want to

16:15

keep those benefits. They're international

16:17

security interest, I think it's

16:19

quite possible there will be more

16:21

tyrannical places in the world five to

16:23

ten years from now. So the notion

16:25

that you want to either crush this ecosystem

16:27

or severed from the United States, when

16:30

the one for sure use it

16:32

has is, in my opinion, a net

16:34

good I think we should let it

16:36

rip along those dimensions. Tyler, it's

16:38

not clear to me that the US actually wants

16:40

to support anti

16:42

tyrannical technologies. Can you make the

16:44

case that they do? Why would they want to support

16:46

these things? Isn't there an authoritarian

16:48

bent to the US? And it's your financial

16:50

policy as well? And I

16:52

can understand why it might not want China to

16:54

take the lead here. But is the US

16:57

coming from a place where it can really say?

16:59

We are pro anti authoritarian

17:02

technology? The US, the United

17:04

States government, is a big complex

17:06

entity. Different parts of it want

17:08

different things. It often in the

17:10

aggregate acts in a very clumsy way.

17:12

I don't think it is mainly

17:14

aimed at, you know, stamping out all of

17:16

our liberties but sometimes it does

17:17

that. To the extent crypto is a

17:20

protection against that, so much

17:22

the better.

17:23

But there are legitimate concerns about

17:26

funding terrorists tax evasion, black or gray market

17:28

transactions. The people worried

17:30

about those issues aren't

17:32

crazy, but as you know, at least as

17:34

well as I do, you

17:36

simply, in a superficial way, quote

17:38

unquote, crackdown on current crypto, that

17:40

will encourage people to move into truly

17:43

anonymous forms of crypto. That will

17:45

be harder to control. That may happen

17:48

anyway. So if I thought there were a simple

17:50

regulatory button I could press

17:52

that would get rid of the bad sides of crypto.

17:54

I would at least think about doing it,

17:56

but I don't know that there is. It seems to

17:58

me it would simply speed,

18:01

harmful innovation in the crypto space.

18:03

Once you take Tyler on privacy, on

18:05

chain privacy, for example, we have seen

18:07

some US action that has to

18:09

some in the cryptospace seemed somewhat repressive

18:11

in the adding a

18:13

smart contract. This is the tornado cache

18:15

privacy mixer, which is a smart contract

18:18

on Ethereum to the o sanction list. So effectively,

18:20

US citizens cannot use

18:22

on chain privacy, this tool

18:25

on Ethereum. Do you think

18:27

that privacy is an area that

18:29

crypto and kind of US

18:31

foreign policy and domestic

18:33

policy can coexist? Or do you think

18:35

privacy on chain privacy is completely off

18:37

the table for the US to

18:39

sort of accomplish its goals. How do we balance these things?

18:41

I don't think you can have a

18:43

tax system and a complete right

18:45

to financial privacy. That

18:48

said, you don't want to ban people

18:50

from innovating with Ethereum and

18:52

other crypto ecosystems. Do

18:55

we have a good way now of writing regulations that

18:57

I know of that will achieve all

18:59

of those ends? I would say

19:01

no, but I think it's unrealistic

19:04

to expect that simply

19:06

citing privacy will turn over all rights

19:08

to people who wanna do anything they wanna

19:10

do with crypto. One way or another

19:12

that will be regulated to

19:15

make sure people pay their

19:16

taxes. Do I think we're in an ideal

19:18

place with that Now

19:20

I would say no, but I genuinely don't

19:22

know what we should do. Tyler, are you saying

19:24

that as crypto people who

19:27

frequently use Ethereum and other blockchains

19:29

that in order for really progress

19:31

with a relationship between nation

19:33

states and crypto that the individuals are gonna

19:35

have to compromise on our ability to

19:38

privacy tools and crypto for the nation state to

19:40

really be accepting of this industry?

19:42

It depends on the country. In the United

19:44

States, I certainly think that's

19:46

true. I think we are by and large a legitimate government,

19:48

and some of the governments I

19:50

mentioned earlier are not. So

19:53

I hope the United States is able to continue

19:55

collecting its taxes. I

19:57

hope we don't have to go too far to

19:59

maintain that state of

20:00

affairs. But again, I think the technology

20:02

is evolving so rapidly. It's very

20:04

hard to get a good sound prediction

20:06

from someone that's still gonna be true two

20:08

or three years from

20:09

now. Mhmm. But what you

20:10

don't want is for

20:12

the United States government to decide it

20:14

needs to regulate everything about

20:17

your life and somehow try to look into

20:19

your wallet in every single thing you

20:21

do and move to total surveillance.

20:23

And if we're too relaxed with crypto,

20:25

the risk act leads will get this much bigger overreaction,

20:28

and that I think would be much worse.

20:30

So the fight for some kind of absolute

20:32

privacy of all crypto, that makes me nervous

20:35

too. Are we de facto headed

20:37

towards that more surveillance state

20:39

though in this digital world? Is

20:41

crypto not kind of in your mind

20:43

against that or a counterbalance against

20:45

that? It seems Tyler, not sure if you share this opinion, but

20:47

it seems to me with the digitization

20:49

of everything. We're kind of de

20:51

facto heading in that direction

20:54

Anyway, because all of this information is available and

20:56

because the government or social media for that

20:58

matter can peer into your wallet at

21:00

any point in time, and

21:02

they seem to be sort of just claiming that as

21:05

their territory and as their right.

21:07

There's really no counterbalance against

21:09

that. What are your thoughts on that statement? Well,

21:11

there is a big ally on the side of

21:13

individuals. You could call it a counterbalance,

21:15

and that's what I would describe as

21:16

indifference. Most

21:19

the rest of the world, maybe all of the rest of the

21:22

world doesn't care. And

21:24

so there's some abstract sense in which your

21:26

privacy levels are

21:28

quite

21:28

low. But de no one knows what you're doing.

21:30

And

21:30

that may be

21:31

the most comfortable equilibrium we can achieve.

21:33

We Not

21:34

everyone has that now, but a lot of people have

21:37

that now. I worry that balance will

21:39

be disturbed, and we'll have to make more

21:41

of these extreme choices, or

21:43

either it's very hard to collect tax

21:45

revenue or the government in a very

21:48

hamfisted way is just controlling

21:50

and

21:50

observing, literally observing all of your

21:53

life.

21:53

So we're in this funny intermediate space

21:55

right now, where most people do in fact

21:57

have a lot of privacy, and the

21:59

violators of their privacy tend to

22:02

come in you know, small village

22:04

settings and not on the Internet. Mhmm. Or it's

22:06

your best trend to your relatives who

22:08

gossip about

22:08

you, not that, you know, meta or the

22:11

CIA discovers your big

22:13

secret and puts it on the billboard, we've

22:15

moved forward in this conversation to talk

22:17

about, like, the long term collisions

22:19

between what crypto promises, which is things like

22:21

privacy and what the nation says wants, which is

22:23

to collect taxes. But I wanna actually kind of

22:25

roll back to one of the main points that you

22:27

were making in your article that

22:29

you wrote which is to not have this

22:31

gut spinal reflex to

22:33

regulate crypto as a result of FTX.

22:35

And one of the examples you

22:37

used was Enron. So, Tyler, could

22:39

you walk us through some of the similarities that you see

22:41

between FTX and

22:41

Enron? And what lessons can we really pull

22:44

out between these two events? There was a big

22:46

Enron scandal or

22:48

roughly twenty years ago. The

22:50

firm collapsed. It was based on a

22:52

certain amount a fraud. It was

22:54

worth zero. Many people

22:56

lost a lot of money. There was a trial.

22:58

People went to jail. It

23:00

was decided that US corporate governance is not

23:03

regulated tightly enough

23:05

so we passed something. Bipartisan,

23:07

the Sarbanes Oxley Act

23:10

which made it much harder for companies

23:12

to be publicly traded because

23:14

the disclosure requirements and the bureaucratic

23:16

and legal requirements were much tougher

23:19

And that set off a twenty year period where in essence we

23:21

have many fewer publicly listed companies.

23:24

Equity markets are thinner and

23:26

less liquid. And if

23:28

you're, you know, the proverbial little

23:30

guy, it's harder to get in on the big money

23:32

in the early years, those returns are

23:34

reaped by venture

23:35

capitalists. Some amount of the rise in income

23:38

inequality actually stems from the Sarbanes

23:40

Oxley

23:40

Act. You have venture capital firms getting

23:43

returns that otherwise in

23:45

public markets, might have gone to some degree

23:47

to ordinary investors. So

23:49

that was just a big mistake.

23:51

It passed by some, you know, very strong

23:53

vote. Both parties everyone, Raw Raw, we gotta do this. There

23:56

were villains, news stories.

23:58

When America acts in

24:01

that impulsive bipartisan kind of

24:03

way, I get very nervous. And

24:05

there's a chance we'll do that right

24:07

now with the new villains being SPF

24:08

and, you know, the FTX collapse.

24:11

And so your fear is that our lawmakers and regulators

24:13

have this just like gut overreaction

24:16

that does impose some similar

24:19

regulation that limits the expression of

24:21

crypto moving forward, which I really want to

24:23

drill home. It's that would be bad, but also that

24:25

would be critical as it relates to crypto because we

24:27

need our network to be

24:30

decentralized. We love that word in the cryptospace. And

24:32

when you tell me that the net effects of this

24:34

Sarbanes Oxley regulation the

24:36

funneling of capital through the hands of

24:38

VCs and not the public. To me,

24:40

that represents a failure case for this

24:42

entire crypto experiment. Do you share

24:45

these concerns

24:45

Yes. I just see in American history,

24:47

we often blunder and react

24:49

too quickly before we thought through

24:51

the secondary consequences of what we're

24:54

doing. There's one big news story. We address the

24:56

problem in that news story. So

24:58

in the case of FTX, it's an

25:00

exchange taking your money and defrauding

25:03

you. That sounds like a perfectly

25:05

reasonable thing to regulate against, and

25:07

it is. But if you

25:09

do that and you do twenty other

25:11

things, that squash good crypto or crypto innovation.

25:13

In fact, you've made a big mistake.

25:15

We're now in a situation where through the

25:17

lame ducks session of congress, we have divided

25:20

government It's not even entirely

25:22

clear where the two parties will

25:24

fall long term with respect

25:26

to crypto regulation. But the chance

25:28

of something being done immediately

25:31

seemed a bit lower than, say, even

25:33

a month ago. So Tyler just

25:35

wanna double click on the comment about Sarbanes Oxley. Right?

25:37

Because you said some amount of the wealth

25:40

inequality in America right now is actually due to

25:42

Sarbanes Oxley, which was

25:44

legislation passed to stop the next

25:46

enron. Right? It was, for all intents and

25:48

purposes, supposed to be a pro

25:50

public kind of legislation.

25:52

Can you just walk people through the

25:54

link between that and wealth inequality?

25:57

If I were to try to explain that, I might talk a

25:59

little bit about accredited investor

26:01

laws. For instance, or I know you mentioned

26:03

it, but the kind of the lack of companies

26:05

going public until much later

26:07

in their life cycle and their higher valuation.

26:09

So all of the returns going

26:11

to private investors who are already

26:14

wealthy, multimillionaires to begin

26:16

with. Can you just talk about this in a little

26:18

detail? Because I don't know that that is happened

26:20

in the two thousands. Right? I don't know it's necessarily

26:23

clear to folks in crypto. What actually

26:25

happened, what you're talking about with respect to

26:27

wealth inequality and Sarbanes in

26:29

that legislation? Well, for much of the last twenty

26:31

years or part of the last twenty years, we

26:33

had this tremendous run up in

26:36

equity values. Some of it was

26:38

driven by tech companies doing very

26:40

well. Some of it was driven by lower

26:42

real interest

26:42

rates. But if you were holding those

26:45

companies, both intact and just more

26:48

generally, you had some pretty phenomenal rates of

26:50

return during a lot of those

26:51

years. Now that was not

26:54

anticipated when we passed Sarbanes Oxley.

26:56

It was simply thought this would rain in

26:58

fraud, but it imposed a lot

27:00

more accounting requirements on

27:02

publicly traded companies, and the result was you

27:05

had many fewer of those

27:07

companies. The valuation still

27:09

went up a great deal. But

27:12

most individuals did not have the

27:14

opportunity to buy into those companies at

27:16

their earlier stages. And so Tyler,

27:18

this also has to do with kind of a

27:20

credit investor laws as well because non public

27:22

companies, you know, there are securities

27:24

laws around purchasing equity in a

27:26

non public company. And

27:28

in particular, there's a certain kind of

27:30

threshold of income that an individual

27:32

or a couple needs to make or a

27:34

certain amount of assets that they need

27:36

to hold. Think the something million dollars or

27:38

something in net assets that

27:40

they have to hold in order to invest in

27:42

these private assets. And that's why they can't

27:44

buy them before assets

27:46

hit the stock market and go public. What do

27:48

you think of these sorts of

27:50

accredited investor laws? Some

27:52

people have talked about maybe making

27:54

them education based rather than income based or

27:56

rather than, you know, net worth based. Do

27:58

you think it's a fair system that we have in

28:00

place in the United States?

28:02

That's all absolutely correct. I think those

28:04

are terrible laws and we shouldn't have

28:07

them. There's plenty of ways you can

28:09

waste your money you think lower income or

28:11

lower education people have no way of wasting

28:13

their money right now? Obviously,

28:15

that's untrue. I mean, one such way is

28:17

the most dubious of crypto assets.

28:20

What about sports betting? What about going to

28:22

Las Vegas and so on and so on and so

28:24

on. So the notion that, oh

28:27

my goodness, We can't let these individuals invest in an

28:29

early stage tech company. That's too

28:31

dangerous. That's one of the

28:33

better ways they can take risk.

28:35

So I think there should be no such

28:36

laws. Tyler, why do we still have these laws

28:38

in the books? Like, I mean, some people would say

28:40

it's because the wealthy and they want to stay in power.

28:42

I'm not sure if it's that or something

28:44

else. I think in general, conspiracy in our

28:47

world is overrated, and

28:49

bureaucratic inertia is underrated.

28:51

It's very hard to get rid of laws and regulations

28:53

on the books. There's a lot of

28:56

steps. People have all sorts of

28:57

misgivings. We have divided

29:00

government often. There's some amount

29:02

of polarization.

29:03

Things move slowly in government. The people

29:05

who would benefit don't understand all these

29:07

mechanisms, who add all that up. The thing just

29:09

doesn't

29:09

happen. I don't think it's a conspiracy. Okay.

29:13

So that answers my question, but I'll ask it

29:15

anyways. Is between Ryan, my cohost,

29:17

and I, the conspiracy hat probably fits

29:19

a little bit better on my head than his So

29:21

you're saying that the notion that

29:23

accredited investor laws are

29:25

a secret way to protect the wealthy

29:27

and keep the poor poor you're saying that

29:29

that whole take is

29:30

overrated? Well, I think that has turned

29:33

out to be the case, but I don't

29:35

feel there's been a conspiracy to

29:37

put them in place for that reason.

29:38

Okay. In

29:41

your article, you wrote a line that I really, really

29:43

liked and I'll read it here.

29:45

It's hard to imagine satoshi Nakimoto or

29:48

Vitalebutrin at Goldman Sachs. And I think

29:50

that's a pretty easy thing for all the

29:52

listeners to imagine or not be able

29:54

to imagine message do you have to

29:56

regulators and lawmakers about the risk to

29:58

reward of crypto regulation as it

30:00

relates to

30:00

innovation? You don't want to make your

30:03

crypto firms more like Goldman Sachs.

30:05

So nothing against Goldman. You

30:07

know, I'm an admirer of

30:09

certain things they do. I have zero

30:11

against them. are the

30:13

financial establishment. Someone is gonna

30:14

be, if it's them, well,

30:16

okay. But at the same time,

30:19

you need crypto innovators

30:21

to be nimble, low cost,

30:23

willing to think outside the box,

30:26

dynamic not concerned about

30:28

cannibalizing their previous revenue

30:30

models that worked for them, you

30:32

know, probably not regulated by the Fed

30:34

and the FDIC. And

30:36

that's not Goldman. So you need

30:39

something different. Goldman is not gonna

30:41

drive this kind of change. That's okay.

30:43

Not a complaint. But

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33:32

older generations and it's pretty obvious

33:34

why that's true. that were born with

33:36

the internet just understand crypto a little

33:38

bit better. And so when you say that we don't want

33:40

our new crypto institutions to look

33:43

like Goldman, It seems to be of a similar

33:45

vein as just a movement and

33:47

industry that resonates with younger people

33:49

much more than it does older people

33:51

I'll be cognizant of the fact that regulators tend to be

33:53

of the older generations. And

33:55

so is this a fair perspective to

33:57

take that the regulators might

33:59

be overbearing on crypto because they are of an

34:01

older generation who doesn't understand it as well as

34:03

younger

34:03

generations. I believe that is true. If you

34:06

look at many innovations, take

34:08

something simple like the automobile in its early years

34:10

and really for quite a while automobiles

34:13

were very dangerous. Airplanes

34:16

were very dangerous. If you

34:18

had our current regulatory

34:20

apparatus and applied them to

34:22

automobiles and

34:24

airplanes, I'm not sure they ever would have succeeded. So, oh,

34:26

that's it's too risky. You know, have

34:28

you passed all of these tests, all

34:32

these regulations? And that's insane. Right? At some point, you have to wake up, pinch

34:34

yourself and say, hey, wait, in the

34:36

early stages of change that

34:38

are in fact a lot of costs, a lot

34:40

of risks, you

34:42

know, we do get through it. And fortunately, when

34:45

automobiles and airplanes came around, we

34:47

didn't have as much regulation as

34:49

we do today. Part of what I'm curious about on

34:51

this question is, I mean, what's at stake

34:54

for the US here when you talk about innovation

34:56

and losing someone like a

34:58

metallic butyrin? You know, in kind

35:00

of the jurisdiction of the US.

35:02

Is it even possible for regulators and

35:04

lawmakers to kind of choke crypto

35:06

out or at least damage

35:08

its potential? Or maybe

35:10

damage its potential for being

35:12

located in the United States. What

35:14

is actually the threat here? Some crypto

35:16

people would say, doesn't matter what

35:18

the US says or does about

35:20

crypto. Crypto will continue to exist Cowen

35:22

block at a time. They don't have

35:24

jurisdiction over this decentralized technology. What's your

35:26

take on that? I don't think

35:28

the US can choke off crypto globally

35:30

no

35:30

matter what it

35:31

does. But look, the

35:34

US is the world's financial center. Along with

35:36

London, parts of China,

35:38

formerly Hong Kong, tiny

35:42

bit Singapore, And you want

35:44

your world's financial center in some way to integrate with what might be a significant

35:46

innovation. So the US

35:50

could defacto

35:52

drive enough crypto out of the United

35:54

States so that doesn't happen. It's

35:56

not that it all can be banned, but

35:58

if you make it such that

36:00

very wealthy individuals feel they're taking a significant risk

36:03

if only reputationally by

36:05

dealing with crypto, We

36:07

could eradicate the US as a place where

36:10

crypto innovation happens and is

36:12

adopted and integrated into other

36:14

things that go on. That our regulators

36:16

could do. Globally no. How did we

36:18

avoid doing that with the Internet, Tyler?

36:20

Like, I don't remember. I was a kid in

36:22

the nineties but it seems to me that this is transformational

36:24

technology in some ways

36:26

similar to aspects of the Internet. Yet,

36:28

the US

36:30

was very quick to adopt the Internet. Why hasn't that story played

36:32

out with crypto? Some of the

36:34

Internet story is that

36:38

things developed so quickly the regulators couldn't keep up, but

36:40

some of it was that we had a series of

36:42

telecommunications, deregulation,

36:46

acts, that were genuinely wise and well thought

36:48

out in the nineteen

36:50

nineties. And, you know, liability of

36:52

people who

36:54

put up sites on the Internet is limited in the proper way. We

36:56

just made a bunch of good

36:58

decisions. And right now, the EU is

37:00

making some bad decisions on AI,

37:02

the US, doesn't show

37:04

signs of making those bad decisions,

37:06

so we still can get it

37:08

right. But there's

37:10

no guarantee. And one reason AI has been lucky

37:12

so far is there's no, like,

37:14

AI demon in the news. But now

37:16

with SDF, you have a kind of

37:18

crypto demon Cowen though

37:20

a scandal was not at all unique to crypto, it

37:22

was just misallocating funds, which can happen

37:24

in all, you know, all sorts of different sectors. You

37:26

can do it in a life insurance company. So

37:30

that's why we have a bigger

37:32

risk with crypto right now. Another thesis

37:34

is that in the nineties, our governments

37:37

were more competent do you buy that? Some parts of

37:39

our governments were more competent. I wouldn't say they all were,

37:41

but yes. At the same time,

37:44

regulators might say people are looking

37:46

for us to help

37:48

them in situations like SBF. And

37:50

in fact, they're blaming us for the

37:52

events of SBF. And so if you're

37:54

counsel Tyler, coming from a

37:56

regulator's position is that we shouldn't do

37:58

anything more. What about the

38:00

public who's asking us to do more, to

38:02

protect us from the SBS. But they want some blood. Right? Who

38:04

is that fault for the

38:06

FTX fiasco

38:08

actually? How do you respond

38:10

to something like that when the public is

38:12

the one actually, in some cases, seeking

38:14

regulators to step in and help them?

38:16

Well, I think you have to blame

38:18

the governance structure at FTX above all, public

38:21

quants all kinds of

38:24

things. Right? We shouldn't always do with the public

38:26

wants. It's not that I have no

38:28

sympathy for those who

38:30

lost money. But it's

38:32

remarkable to me how

38:34

few sob stories have come

38:36

out, the widows and the orphans who

38:38

put their life savings and FTX, and

38:40

now they're the bread line. You haven't seen much of that.

38:42

So, you know, probably fair amount of

38:44

it was pretty wealthy

38:46

people. And if

38:48

in fact, you put

38:50

a lot of money in

38:52

a non US regulated

38:54

exchange that deliberately located

38:57

in the Bahamas I don't wanna say

38:59

it's your fault. But to me, it sounds a bit like saying, well, you

39:02

lost a lot of money betting on NBA

39:04

games.

39:05

Like, A lot of the time you win,

39:08

a lot of the time you don't

39:08

win. And if you're putting money in a crypto exchange in the

39:11

Bahamas, even without fraud, you should

39:13

be prepared to lose that

39:16

money. So again, if you worry victims,

39:18

that's very far from

39:20

where I would wanna start UN

39:23

article statement. It would be nice if there was a simple

39:25

way to give more regulatory clarity to the

39:28

crypto market as many crypto participants

39:30

themselves desire. Without further

39:32

market evolution, there isn't.

39:34

For now, the best option is to tie your

39:36

hands to the mast and

39:38

hang on tie your hands to the mask and hang on. That's what I feel like I'm doing

39:40

every day with Crypto.

39:42

And Tyler, I guess my question

39:44

you is, do you

39:46

actually think this industry

39:48

can self regulate? Is that a

39:50

pipe dream? Does self

39:52

regulation ever actually work? don't know I

39:54

would

39:54

call it an industry. It's

39:56

something weirder than that.

39:58

I don't think complete self

40:02

regulation in the long

40:04

run is enough.

40:06

But again, I think until one knows

40:08

which are these sustainable use cases,

40:10

you literally don't know what to do. So

40:13

let's let people experiment more

40:15

and sit tight in weight.

40:17

That is somewhat underrated,

40:20

and it's psychologically a difficult thing

40:22

to do. You know, like something must be

40:24

done. This is something, therefore, it must

40:27

be done. But often it's better to wait and I feel

40:29

right now we're in that situation. Do I

40:31

think we should wait forever now?

40:33

I think there will

40:35

come where the demands of legitimate

40:38

institutions for regulatory clarity for

40:40

what they're doing, which is already

40:42

working, will be

40:44

more important than keeping it

40:46

completely unregulated. But I don't

40:48

see that we're close to that point today. So your

40:50

basic message is just hands off till we know what

40:52

this thing is?

40:53

Yes. We're in this three way standoff

40:56

between the crypto industry, the

40:58

CFTC, and the SEC, where the

41:00

SEC is

41:02

going after people that they have deemed to issue securities, but then industry

41:04

raises the flag and being like, well, you guys

41:06

haven't even helped us define where the security

41:10

is. And more or less similar relationships are coming which between the

41:12

crypto industry and the CFTC where the

41:14

CFTC recently went after

41:16

a Dow to

41:18

charge them with commodities fraud. And then in the middle,

41:20

you have the crypto industry. And what Ryan's saying

41:22

and the question I have for you is

41:25

Like, is self regulation even

41:28

possible? Is the concept of self regulation where

41:30

we say CFTC

41:32

SEC pause we'll figure

41:34

this out. We got this. Is self

41:36

regulation? Is that too hopeful of

41:38

us for aspirations for the

41:40

crypto

41:40

industry? I think it's too hopeful, but

41:42

let's put aside crypto for the moment.

41:43

I know this is a crypto podcast, but a

41:45

number of

41:45

other innovations are coming

41:47

and you can disagree what

41:50

they'll be.

41:50

You know, it may or may not be Mark Zuckerberg's

41:53

metaverse, but there will be all kinds of other

41:55

new transactions on their Cowen,

41:57

maybe between AIs, might

42:00

be with crypto, doesn't have to be, and we will need

42:02

over time a whole new set of

42:05

regulations for things other

42:08

than crypto crypto. It's not just a crypto issue, but we don't

42:10

know what in the metaverse will work or what

42:12

not or what in

42:14

virtual reality. Or

42:16

like how AI's might trade, you know, GPU space

42:19

with each

42:19

other. So I don't

42:21

think it's even primarily a crypto

42:23

issue. Crypto could be

42:26

like only modestly sized part of this elephant.

42:29

Eventually, whether we like it or not,

42:31

it will end up being regulated. You want it done in

42:33

a clear way that's not too

42:35

terrible. mistake to hold out hope for all

42:38

this staying unregulated forever.

42:40

But I don't think it's just about

42:42

figuring out the one thing crypto

42:45

It's about figuring out how is

42:47

the Internet revolutionizing finance more generally

42:49

and it will be, I think, a pretty

42:51

long and significant story. Tyler, we

42:53

are pretty laser focused on crypto at times. Can

42:55

you update us on, like, what are regulators

42:58

thinking? What are some of the issues that play

43:00

for AI? For example.

43:02

I mean, in our our

43:04

systems of governance at the

43:06

nation state level actually

43:08

able to keep up with the pace

43:10

of innovation, is we're you're making the case that they're not able to keep up with the pace innovation

43:12

in crypto. Therefore, they shouldn't touch it.

43:14

Is basically AI going through the same

43:16

thing? Absolutely. What are some of the

43:19

stakes there. And that is arguably

43:21

harder to understand than a

43:23

lot of crypto. And it might

43:25

move more rapidly, especially once it's teaching itself.

43:27

It has in some ways much

43:29

more dynamic potential than

43:31

crypto. And the notion you hear, like, oh,

43:33

we pass a law to make

43:35

the algorithm

43:36

transparent. For most AI that's absurd, it's not even a well defined concept.

43:38

Mhmm. What it means to make the algorithm

43:40

transparent or transparent to whom?

43:42

Or what are you hoping to accomplish?

43:46

Somehow you get sent a big zip file and you stare at it, and

43:48

then you feel you know how, like, the boss,

43:50

the man is screwing you over, and it's

43:53

just it's incoherent. So

43:56

again, I think the problem goes well

43:58

beyond Crypto. You're the kind of

44:00

carrier of the message

44:02

like, oops. Like, there are new pieces of this world that don't

44:04

fit with the old pieces. That's the

44:06

fundamental thing going on. It's

44:08

easier to see with Crypto. You see it because

44:10

you're focused

44:12

on

44:12

Crypto. Though. But again,

44:13

I think it it will be if anything more of an

44:15

AI issue, possibly a metaverse issue. Mhmm.

44:17

So I'm skeptical on the

44:19

metaverse than crypto. Tyler. I'm trying

44:21

to imagine, you know, how AI would have

44:24

its SDF moment. Is this some kind of,

44:26

like, rogue AI creating

44:28

deep fix? And some technology that the government says nope. You

44:30

know, this is too dangerous for the

44:32

population to hold. Like, do you have any

44:34

scenarios here? You know,

44:36

possibly that will happen, but keep

44:38

in mind what you need for these moments

44:40

is an identifiable villain, not

44:42

just bad

44:44

things happening. When there's no villain, it gets processed very

44:46

differently. So whatever bad

44:48

things AI might end

44:50

up doing, which of

44:52

those will be connected to a villain? I don't really

44:54

have a prediction, but I would say until

44:56

there's a villain, the stories will

44:59

resonate in a bit of a flatter manner

45:01

with the public, at least for a while. Davila

45:03

needs to be a human being. It has to be

45:05

a human being. In my opinion, Davila wants to be able

45:07

to sit

45:07

down in court. Okay. If you have this

45:10

one evil person who,

45:12

like, buys up, you know,

45:14

an AI company and he is a

45:16

sinister look and some bad thing happens. Like, then you're approaching those moments. It

45:18

has to feel like a movie so we can all

45:20

relate to it. In my

45:22

opinion, yes. And

45:24

the FTX scenario was perfect for that. Mhmm. Right? There's

45:26

a clear reveal The movies are already in

45:28

progress there. Yeah. Yeah. That documentaries They're

45:30

having to rewrite the script.

45:33

That's right. We definitely see in the crypto industry,

45:36

people who are in crypto tend to be futurist.

45:38

We like to explore the frontiers of

45:40

things, be it crypto or maybe AI. So there's

45:42

a lot of

45:44

AI chatter around the crypto communities these days. And

45:46

my mind goes back to Kathy Woods

45:48

fundamental thesis at ArcBest

45:50

is that the future is

45:52

actually closer than it would appear. And

45:54

really all her thesis is is like things like

45:56

AI, biochemical engineering,

45:58

blockchain, like battery lithium battery technology,

46:01

all of that source of innovation is much more

46:03

closer and implying that the future is actually much

46:05

more closer than it may

46:06

appear. Yes. Tyler, I wanna get your take on that. Do

46:09

you think the future is closer than it may appear? Absolutely.

46:11

Another example would be embryo selection. Mhmm. If you just told

46:13

people what was going on and ask them, well,

46:15

do we need to regulate this? You'd get a lot

46:17

of knee jerk yesses. Like,

46:20

oh, people can just pick.

46:22

But when you actually think about

46:24

how are you gonna regulate embryo

46:26

selection? It's a daunting

46:28

prospect. Most regulators don't understand

46:30

it. It's here already and expanding

46:32

very rapidly. I personally don't know

46:34

what we should or should not do with embryo selection.

46:36

I think about it a Cowen. I

46:40

have a well formulated view, but I know it's not gonna

46:42

be

46:42

easy. Mhmm. Well, that sounds

46:45

like how crypto regulation sounds

46:47

to crypto people where if you tell me that Congress

46:49

is gonna regulate crypto, I would get really scared

46:51

because exactly what you said. I don't really trust that they

46:53

fully understand what they're getting into. If you're telling

46:55

me that that is also true for embryo

46:58

selection, I'm gonna guess it's also true

47:00

for AI. I'm guessing it's gonna be true

47:02

for other technologies that

47:04

are on the frontier of

47:06

progress. It sounds to me that there's many,

47:08

many, many different sectors of technology

47:10

these days that are accelerating

47:12

far beyond our government leaders to be able to get a wrap

47:14

on

47:14

things. How is this gonna play out if

47:16

they can't catch up? Well, we need some

47:18

kind of big regulatory rethink

47:21

the notion that take all these new things and others we

47:24

haven't mentioned and fit them into the

47:26

current boxes, I just don't see

47:28

how that's

47:30

gonna work. Oh, embryo selection. Is that a security or I'm

47:32

like, no. That's their own question.

47:34

You have new stuff in the world.

47:37

And regulation is very slow to

47:40

change, and the mistake

47:42

is to just think you can take the categories

47:44

and institutions you have. I

47:46

don't think that's going to be feasible. Well, I think this kind

47:49

of brings me back to the original question of is

47:52

human self

47:54

regulation even possible. Because

47:56

it sounds like to me, we're going to be going into

47:58

that future where we have to attempt

48:00

to self regulate our own industries because

48:02

we're the only ones who are actually informed on this

48:04

matter. It will happen no matter what you and

48:06

I say to each other. But, you know, as

48:08

outside observers, I don't think we

48:12

should expect it all to go so well. Again, early years

48:14

of cars, people crashed them like crazy,

48:16

died, you'd be driving in

48:18

the road, there'd be some a pothole.

48:20

No one regulated that either. Plain deaths in nineteen

48:22

fifty were scary high. You know, don't

48:24

think this is just a walk in

48:28

the park. Tyler. You've called yourself a crypto

48:30

hopeful, and I think you've shown that in this

48:32

episode at the very beginning. You think crypto's

48:34

underrated. You're also

48:36

an economist. This

48:38

has puzzled me for a while. Why do you think Tyler more economists

48:40

aren't interested in crypto? Here's what I

48:43

see. Something that's a completely open

48:46

source, transparent, economic

48:48

system, much more transparent than, you know,

48:50

the central bank or central banks around the

48:52

world for instance, why aren't more economists

48:55

looking at this stuff? I

48:57

think it reflects an intellectual fouling of my profession that

48:59

you do well by specializing in

49:02

known methods

49:04

that can be readily by your thereby, you

49:07

get promoted and you work

49:09

through established

49:10

channels. Most of academic life works

49:14

that way

49:14

And Crypto is a new thing. Like, who referees your paper? How do we

49:16

tell if you're right or not? It's

49:19

too real world. It's

49:22

a thing for doers more than theorists. There's

49:24

an actual real world past, ultimately, even

49:27

if it's delayed, And that

49:30

doesn't attract academics who by their nature

49:32

are risk averse or grumpy or

49:34

over

49:34

specialized. Maybe you don't always

49:36

have a lot of experience. So

49:38

It's sad. You know, I apologize for my profession.

49:41

At the same time, I mean,

49:43

I think that if you paint

49:45

your profession with a broader brush. Maybe there are some

49:48

economists on the frontier. I mean, Cowen like,

49:50

metallic that he mentioned earlier. Is he

49:52

an economist? And at some level,

49:54

he's designing an economic system,

49:56

isn't he in this Athyrium

49:57

project? So what is he? What are some of the Athyrium

50:00

researchers? If not, some branch

50:02

of economists Well, if it were up to

50:04

me, I would give vitalic a Nobel Prize

50:06

and Economics. I don't

50:08

think he's gonna win one at least not

50:10

anytime soon. He's

50:12

written papers on economics that are not

50:14

crypto per se, and they're very, very

50:16

good. So I absolutely think

50:18

of it as economist but I don't

50:20

try to win that war of semantics. It seems, at

50:22

this point, not worth it. Can I

50:25

ask you just a question about metallic since he's

50:27

been on the show many times

50:29

and he's been on your show. It sounds like, you know, you're part

50:31

of the mutual admiration club

50:33

of Vitalek. Why do you think he's

50:35

not more widely known? Sometimes

50:37

I'm mystified that he is kind of

50:40

just in this niche within crypto and so

50:42

few people know about him. He's not a

50:44

household name yet. Do you have any thoughts

50:46

on that? Well, first, I thought

50:48

he was more widely known. I hear reports that when he walks down the street

50:50

in different countries, he's recognized

50:54

very frequently. How many

50:56

people or economists for that matter

50:58

can say that. Right? Not many, if

51:00

any. Yep. But I'll say this,

51:02

when vitalic writes, he does not

51:04

make concessions to his audience. He's writing for Vitalic, which I

51:06

think is how it should be. I give him an

51:08

a plus for that. And

51:12

most people and I include PhD

51:14

economists, they just can't read

51:16

it. Mhmm. Tyler, one

51:18

thing that we've seen at

51:20

play within crypto in twenty twenty two

51:22

is this force of corruption, this

51:24

corrupting force called greed at play in

51:26

crypto. And I think it's shaped a lot of the outcomes

51:28

in twenty twenty two. Is there

51:30

anything the free market can do

51:34

to thwart the problem of greed and the corrupting power

51:36

that it has? Or do we have

51:38

to always depend on

51:40

regulators and those bigger sticks to

51:42

do this sort

51:44

of thing? I'm not sure I would pinpoint greed problem.

51:46

People are self interested. They want

51:48

to earn more money. That encourages both

51:51

good and bad activities. There's

51:54

plenty markets or for that matter, governments can

51:56

do to educate people about crypto. I'd like

51:58

to see more of that on all fronts.

52:02

Think government of Singapore has, in fact, done a bit of that,

52:04

we could do much more, and

52:06

that would, to some extent, lower

52:09

the quantity fraud. I'm not sure how much. It may not be

52:11

a major improvement, but it would help a bit.

52:14

Tyler, I believe you're familiar with this game that we

52:16

would like to end this

52:18

podcast with It's called overrated or

52:20

underrated. We got a list of things we wanna get your

52:22

opinion on whether it's overrated or underrated

52:24

you wanna

52:24

play? It's

52:24

an underrated game. So let's

52:25

go. That's great. Alright.

52:28

Starting with number Cowen. AI,

52:30

overrated, underrated. It's still

52:32

underrated. It's striking to me. I

52:34

was at a Washington DC dinner

52:36

party last week, and most of the

52:38

people there did not know what Chat GPT

52:40

was. One of them had never heard

52:43

of

52:43

it. A bunch of the others had heard of it, but didn't

52:45

know what it was.

52:46

So I think it's a major development.

52:48

AI is still significantly underrated.

52:50

Cowen about the problem of inflation?

52:53

Overrated or underrated? Well, we're doing

52:55

this, Chad. I think it's

52:58

January ninth. The last two

53:00

monthly reports on US

53:02

inflation have come in at very low

53:04

levels. Ideally, you'd like to see

53:06

three months of that in a row, not

53:08

just two, But my guess is we're gonna have a

53:10

reasonably soft landing. And with a

53:12

huge lag, team transitory will

53:14

turn out to have

53:16

been

53:16

correct. So the problem moment slightly

53:18

bit overrated. Interesting. Interesting. Alright.

53:20

Overrated underrated in the United States of

53:22

America. Oh, underrated. I mean,

53:26

so many parts of the world feel they have to hate on it. Americans

53:28

themselves have the self loathing. They

53:30

think we're on the verge of fascism

53:32

or no democratic government. They

53:35

read all these pieces and periodicals I won't name,

53:37

but they're the famous ones. All the

53:39

bad news gets

53:40

reported. I think our system of

53:42

governments in pretty good shape. And we

53:45

have incredible talent, and I'm super excited to see the

53:47

next few decades. I think we're

53:49

gonna do amazing things.

53:51

Same question for China. China overrated

53:53

or underrated? Because of pandemic,

53:55

I haven't been there

53:57

in four years. And I feel very

53:59

out of touch with it. And with you can't just read media to figure out

54:02

what's going

54:04

on. I've

54:06

actually turned a lot more optimistic about China in the last

54:08

few weeks, keeping in mind this is

54:12

January ninth. So the speed at

54:14

which they dropped zero COVID

54:16

policy has made me more bullish on

54:17

China. A few

54:18

months ago,

54:19

I would have said China

54:21

overrated But now I'm inclined to think China

54:24

underrated.

54:24

Social media, Twitter, Facebook,

54:27

Instagram, overrated, underrated. Oh, they're

54:29

great. I mean, people think they're

54:32

terrible. I don't think they're good for twelve to

54:34

fourteen year old girls. That's

54:36

bad. I don't know what to do about that. I

54:38

think we should change social norms, so that is less bad.

54:40

But for most people, they're fun and

54:42

incredible for learning, and they spread

54:44

science and

54:46

help collaboration. And inform people

54:48

about the world. So I think

54:50

they're way, way underrated. All of

54:52

them. How about classically liberal values

54:54

of rated

54:56

or underrated? Well,

54:56

I'd want you to name the values, but most values

54:58

are underrated. Right? Why are most values underrated?

55:00

There are a lot of people

55:03

who are not very moral So

55:05

those people at the very least are underrating the values. The

55:07

people who are moral presumably are, you know, rating

55:09

them more or

55:12

less correctly on that, that makes

55:14

them underrated. About a follow-up. Our

55:16

friend SDF was a fan of effective

55:18

altruism, and that's taken a hit

55:20

recently. Effective altruism overrated

55:22

or underrated. It's become greatly

55:24

underrated again because there's

55:26

SPF, this demon. It's a

55:28

set of mostly good ideas that try to

55:30

convince people to give to charity

55:32

more effectively. I'm not like NEA person with the big capital

55:34

letters, but I think it's been a healthy

55:36

development, and it's very impressive

55:38

how much young talent

55:40

it attracted So right now, it's

55:42

significantly underrated. Podcasts have

55:44

already underrated. There's still a lot of

55:46

room to capture mind space from people

55:48

with podcasts I'm amazed more of it doesn't

55:51

happen. It stuns me how much people like

55:53

listen to these things and pay attention.

55:55

It's like, what's this? So I'd

55:57

say way underrated. How about the problem

55:59

of wealth inequality we could talk about

56:01

in America and then talk about in the

56:03

world? Well, the problem of wealth inequality

56:05

has diminished radically in the last

56:07

year and a half, a lot of great

56:10

fortunes, Zuckerberg Musk, they're

56:12

really worth much much less

56:14

than they had been. So wealth inequality has

56:16

gone down. I don't see that that's

56:18

helped anyone. I think we'd be better

56:20

off if they still had the

56:23

many more billions and give it to

56:25

charity or do whatever. So wealth inequality is way

56:27

down and I I feel sad

56:29

about that universities education

56:32

colleges, overrated or underrated? There's

56:34

a lot of different stuff

56:37

in there. The US system is

56:39

still the best in the world

56:41

its way to be democratized. It's driving

56:43

out some talent. It's not

56:45

dynamic enough. A lot of the old formulas

56:47

are no

56:49

longer working. I'm

56:50

not sure that's news though, so maybe it's at the moment

56:52

properly rated? This has been

56:54

great, Tyler. Thanks so much. I had

56:57

a note for something you said earlier in this episode that I wanted to

56:59

get back on. Maybe this will be kind of I'll close that

57:01

question, but wanted to get your explanation of

57:04

this in a bit

57:06

more detail. You said earlier in don't going

57:08

to revolutionize the nation state,

57:10

maybe replace the nation state.

57:14

So I don't know if you're familiar with

57:15

Balaji, student of Austin, his idea. Oh, of course. And

57:18

I know him. Okay. And I did a

57:20

podcast with him. Yes. Tell

57:22

me right. Don't agree with any of that. Okay. Tell me about this. So

57:24

the predictions are looking much weaker

57:26

now than when he made them. Okay. So let's

57:28

get into this. This idea of

57:30

the network state, the Balaji

57:32

and network state. Do you think that's overrated

57:34

or underrated? And then just extrapolate. You know,

57:36

tell us why you completely disagree with

57:38

Balaji. It sounds like you think it's overrated

57:40

maybe. Look, nation states can get things

57:42

done. They're big. They have

57:44

weapons. I look at the borrowing rates on

57:46

government bonds,

57:48

which for legitimate governments are quite low, and I

57:50

think these are institutions with the future.

57:52

So am I bullish on

57:54

the

57:54

EU, on France, on Canada, like course,

57:58

do

57:58

I think some weird whatever is

58:01

gonna replace them? I mean,

58:03

in some very very long term,

58:05

but basically, no, I don't. I

58:07

mean, those are the institutions that have

58:09

worked. And

58:10

I think we should all realize

58:12

that and market prices reflect that. Tyler,

58:15

last overrated or underrated, and then we'll bring this to

58:17

a close. But this is called Bankless. Okay.

58:19

This podcast. We gotta ask you banks

58:22

overrated or underrated. Well, by

58:24

whom, I think we now

58:26

take them for granted. We've

58:28

stopped villainizing them, which was

58:30

often the Cowen, two

58:32

thousand Two thousand nine. We should think about them

58:34

more. But at the moment, I think they're

58:36

basically properly rated. Tyler,

58:38

this is great. Thank you

58:40

so much for joining us. It's a pleasure to hear your thoughts. They're always so

58:42

concise and on point. And I'm

58:44

glad you're looking into crypto in the depth that you are.

58:46

It's been a pleasure to have you

58:48

on Bankless. My pleasure, and have a good evening, both of you.

58:50

Exactly. Bank of the station, some action

58:52

items for you. Learn more about Tyler. Read

58:54

his blog. Marginal

58:56

revolution dot com will include a link in the show notes. Also, we'll

58:58

include a link to the article be aware of

59:00

the dangers of Crypto Regulation written by Tyler

59:02

that we talked about in this episode.

59:05

Gotta end with this as we

59:07

always do risk and disclaimers.

59:10

Crypto is risky. You could lose what you put

59:12

in, but we are

59:14

headed west. This is frontier. It's not for everyone, but we're glad you're with us on

59:16

Bankless journey. Thanks a lot.