This week’s episode is another installment of “The Re-Readables”, a series in which we revisit some of our favorite business books to find out if they stand the test of time.
Greg is the founder of BitLift, and is our go-to person for all things blockchain and cryptocurrency.
Greg joins us this week to talk about a book that has become eerily prescient, and is popular among the cryptocurrency crowd.
The Sovereign Individual by James Dale Davidson and William Rees-Mogg was published back in 1997, but the insights and topics in the book were not only far ahead of their time, but remain relevant today.
In today’s podcast, you’ll hear our thoughts on why this book is significant, why it’s important for entrepreneurs to try to envisage the future, and how we can consider the ideas within The Sovereign Individual today.
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Greg: I couldn’t read this book before I went to bed. I couldn’t read it in my car. I couldn’t read it while I was working out. I could only read it in the middle of the day, sitting down taking a deep breath and being, ‘here we go’.
Dan: Yeah, buddy, I am excited for this one. We are not talking business updates this week. No, we are talking business philosophy, vis a vis ‘The Re-Readables’, our regular recurring format where we revisit a book that has, in some important ways, stood the test of time, and also has lessons to teach us as entrepreneurs. I gotta say today’s book was a little bit of a ‘mind blown’ moment. But don’t worry, you don’t have to have read it. Part of the point of these episodes is to cover the key concepts and themes using categories, like ‘what’s aged the best, what’s aged the worst, nitpicks’ and so on. So, if you don’t have the time to read the book because you’re busy hustling, we’ve done the heavy lifting on your behalf. And today’s book was quite a tome. So there was some heavy lifting.
So much of what we do as entrepreneurs, whether it’s like in our everyday lives or in our businesses, is try to live in the very near future, just be a few steps ahead. And this book is really a case study in the process of defining the future, of predicting it, of looking at the past to project what’s going to happen in the future. My mind was blown by this one. The title is ‘The Sovereign Individual’. It is epic in scope, it talks about so many things that have been long term themes here at the podcast. In fact, they kind of cover everything we’ve been covering in our 10 year journey, so much so you could call this podcast just ‘The Sovereign Individuals’. It’s sort of on the theme of what our lives are going to look like, during and after this informational revolution that we are currently witnessing and living in.
The book came across my desk because there was a new edition where Peter Thiel wrote the intro, and it’s just really been popular in the Bitcoin community. I think philosophically, I’ve drank the crypto Kool Aid a lot harder than I’ve represented on the show. And something I’ll try to introduce a little bit more into episodes in 2021, I believe the future of quote multiple currencies, something we’ve talked about for a decade on the show, probably has its end in crypto and today’s authors feel the same, but it’s not limited to crypto or currency. They really talk about all aspects of life. And really human history. It’s quite the read. So to join me on this epic, Re-readable journey, I’ve invited someone who has always done a lot of heavy thinking, and entrepreneurship, and crypto, and has consistently provided tremendous value to me and the listeners of this show. So I’m really excited. I hope you are really excited. Let’s roll the conversation.
Greg: My name is Greg, I’m the founder at Bitlift dot com. And I’ve been doing crypto investing and crypto stuff since 2013.
Dan: You’ve been stacking SATs since 2013, regular guest here too, one of our go to contributors, we appreciate your knowledge. Do you remember when you first heard about this book, Greg?
Greg: This book comes up a lot in crypto circles. A lot of people talk about the fact that Satoshi has very likely read it. And there’s no evidence of that. But since they … we will get into the fact that they talk about cyber currencies and cyber money a bit and cybercash. They actually made some pretty interesting predictions about how that would unfold.
Dan: So let me just do a quick introduction – published in 1996. I was a freshman in high school, Greg, you were 10 years old?
Dan: You were 11 years old. A quarter of a century ago, we’re digging into the archives. Author, William Rees Mogg, who died in 2012. And, importantly, I think was born in 1928, for some context. And James Dale Davidson, co author of the newsletter ‘Strategic Investment’, they also authored two other books one entitled ‘Blood in the Streets’, which predicted the 1987 financial crash, and ‘The Great Reckoning’ that analysed, among other things, the forthcoming collapse of the Soviet Union, not a bad track record, Our first category here is your general impression of the book. And when I first dug into this book, you know, there’s this preface by Peter Thiel saying this is one of the most important … of course, Peter Thiel is the founder of PayPal, he’s he made the best investment of all time in Facebook, I’m pretty sure he’s still like the all time investor leader. And he writes this preface to this book that’s basically like, these guys are gangsters. Like, you got to read this book. This is one of the best books I’ve ever read. I was like, This must be like some person that went to MIT. And they built like the original internet protocol or whatever. And no, it’s, it’s some guy that was born in 1928, wrote this book. This book is broad minded. It’s intellectual, it’s erudite. It’s incredibly expansive, and predictive. And I thought, ‘Here’s a person who lived through some big, big time stuff. This person has seen a lot and is simultaneously not a Luddite, not scared of technology, but had lived through the effect of technology in the 20th century and what we saw in the middle of the century with World War Two’. My sense is that there was a lot of that influence about the revolution that happened in the mid century, on the revolution they’re predicting in ‘The Sovereign Individual’. What were your first impressions of the book?
Greg: When I first read their sort of thesis about micro processing, subverting and destroying the nation state, I scream BS.
Dan: Straight up, this book is at that level.
Greg: They’re just completely convinced that the fall of the nation state is upon us and that microprocessing, the internet is just going to subvert it entirely. And that is, this is the beginning of a new, like human existence on the internet. And at first, it’s just too unbelievable. But then what happens is they start going to first principles, they immediately backtrack to 1500 and just start from there.
Dan: They even go further, they go back to ‘here’s when they invented the tool’. (Laughs)
Greg: That’s my favourite part of the book is how far back they go and how really they kind of build this case that this has happened before and we’re seeing it happen again. So, I was screaming BS up front, then I was totally convinced and then I started to fall off again towards the end of the book. So that was my trajectory.
Dan: Interesting. So hopefully during the categories in today’s episode, we can see what arguments you found really compelling. And which ones were a bit of a turnoff. Because for me, there are some arguments in this book, too, that, you know, might not have been corroborated by our experience in the last 25 years. Most of all, though, they’re bringing the heat. So some quickly some half assed internet research – the sovereign individual has been rated 4.25 by the community over at Goodreads, and 4.6 by the less credible community over at Amazon.com. The ‘too long didn’t read’ summary, ‘The Sovereign Individual’ tries to predict the effect of the informational revolution, which they see as the fourth stage of human society evolutions following hunter gatherer, agricultural, and industrial. So essentially, we’re sitting on that precipice of the transition from an industrial over to informational, and that will require a new type of individual, a new type of politics, a new type of nation state, all the power systems will potentially change.
Quote, ‘the transition from one stage of economic life to another has always involved a revolution, we think that the information revolution is likely to be the most far reaching of them all. It will reorganise life more thoroughly than either the agricultural revolution, or the Industrial Revolution. And its impact will be felt in a fraction of the time’. Just a few of the key arguments they make to lay out this case. For this to happen, the institutions have to leverage capital. And this often meant power through control and violence, aka a gunpowder revolution. And information, often in the form of myths, and, occasionally language. The move from church to nation state was propelled in large part by the printing press. The printing press up ended the church’s power. One of the statements the author’s make for us today is, look, if you think this idea that nation states are going to get up ended, let’s take a look back at the church’s position in the Middle Ages which was in many ways, much more entrenched, and delivering a lot more value than many of today’s nation states.
So finally, just this transition from industrial to post industrial informational, basically sovereign individuals like myself and you, Greg, we’ve already experimented with this idea of opting out of the, quote, protection of the state which basically allows it to collect taxes, to coerce us, through offshore tax jurisdictions, cryptocurrency and potentially even taking on these services from other nations. This will fuel disparity between the two, importantly disparities even between our own societies. We’re already seeing this sort of digerati divide between the haves and have nots. I know we see it here locally in America, but it’s obviously a global phenomenon as well.
The author’s predicted transition to competitive territorial clubs, aka golden visas and stuff like that, instead of nation states. The myths that we see emerging, especially nationalism, and group based conspiracy theories, are a result of the shrinking of the myths tied to capitalism. So there’s a lot of ideas thrown against the wall here, Greg, about these, like individual little idea pellets that are coming out from politicians and stuff that don’t have this big history of like religion, or this is who we are as a people, but rather these little kind of memes that go out and get remembered, and all of a sudden, like, inspire this weird, strange reaction in a group of people. So a lot to cover. Let’s just start with the categories and we can loop back whenever you want, stuff will come up. So the first category is just a reflection on the title. What do you take a sovereign individual to be after having read the book?
Greg: What I think the authors believed the sovereign individual to be is this idea that our beings, as we live today, in our nations that we live in are becoming more and more free. But my takeaway after reading it is more than that we almost all have a separate sovereign individual now, which is like our internet identity and the way that we live online. And that is free in all of the ways that they’re explaining. I’m just not sure that our physical meatspace presence is as sovereign as they think it is.
Dan: Yeah, and certainly the dream of citizenship as a service. It’s in the seedling phase right now. They’d bring up the example of Malta. And we’ve all gotten like long term visas to other countries, and we have friends who’ve renounced their citizenships. And, basically selected their nationality based on the services that that nationality, that passport, was willing to provide them. The prediction is that that system is going to become much more robust. Historically, this stuff has been problematic. Like you said, where you can be online, You can have all these anonymous personas. In the real world, there’s real issues that we have to contend with. I can see a direct parallel there where like, I grew up in a very working class neighbourhood. And there were a lot of people in the two generations above me that had what we call like a good job, which, in the industrial economy, you’d have these like large organisations responsible for monopolies. There were a lot of examples in the book about unions and strikes and the two big poles trying to extract value from each other. And the reality is these large firms were able to provide, basically, like really good payment, relative to what specific value a lot of untrained workers were bringing to the firm. Fast forward to our generation and now you’re seeing Amazon drivers, for example, that have cameras on them all day. And they’re complaining that essentially, ‘I’m not being treated like, quote, a human anymore’. And that might be the reality for people basically executing pretty low level skill sets in our generation. And there’s basically this injunction in the back of the book, which is get on board with this informational stuff, or else you might be followed around with a camera all day, like operating a vehicle that you might not even be able to operate that vehicle in a few years, because it will just drive itself.
Greg: Yeah, this idea that like the internet was this giant new opportunity that came in and caused a lot of the inequality that we have today. I like to kind of think about it through that lens because it really has, our entire community has been born on this idea of working through the internet. And are we, I don’t know, racing ahead at a faster speed than people who are not leveraging the internet at the same rate? I think so. It does feel that way.
Dan: So we just reflected on the title? What does this book whisper to you? The idea of course is that there’s things that books don’t say explicitly, but you kind of walk away thinking – is there anything in this book that you sort of walked away and couldn’t help yourself but to think.
Greg: Yeah, the first thought I had was more the sub title that I would have written, which is ‘how we got into this mess and the messes to come’. And not only is it a mess, but how so few people actually understand or know the history of how we got into this mess. And I think that’s what really lays the foundation for this book. Things are messy today, man, in every in every category, every industry, every way of life. Things are really really messy and they’re seemingly getting worse.
Dan: I wrote down three things like, ‘Shit is gonna go down’, number one. The second thing is to buy Bitcoin. And then number three is simply that there is an unprecedented amount of value on this particular frontier that they’re talking about. You think about previous prompt frontiers, this one is the all time frontier to be a part of, and so live in the future. It might not be good for your health, it might not be good for your relationships, who knows about regular life, but it sure will be good for your career, to live in the future. So let’s just jump into some of our favourite quotes, did you pull out any quotes from this book, Greg, that you thought were thought nuggets that you just want to share before we go into the categories.
Greg: One of the things that kind of hit me was the way that they explained the difference between welfare states and like the Soviet Union, and they kind of compared the two, and how this idea that in a democracy like, like the welfare state and democracy ended up winning, because it allowed the people to flourish for a while before it pillaged them, and that the Soviet Union just pillaged the resources immediately. And that was an interesting way of thinking about things. One quote that I pulled that it wasn’t actually their quote, but they quote, Alan Greenspan, in the book. And his quote is, ‘the financial policy of the welfare state requires that there be no way for owners of wealth to protect themselves’.
Dan: What is the implication of that in the context of the book, by ‘protection’?
Greg: There’s a lot of talk in this book about how the government came to be as a sort of protection system, before in the hunter and gatherer days, no one had anything that they needed to protect, and everyone and so there was no need for government. And there was very little violence, because there was nothing even to steal from, like neighbouring tribes and whatnot. And then as it evolved into the agricultural age …
Dan: Or violence at scale to be clear, tribes weren’t necessarily decimating each other based on the information we have.
Greg: Fair. And then as the agricultural age kind of came to flourish, people began to build private property. And as that private property grew, they needed a way to protect themselves from these bands, or gangs, essentially, that were around stealing and plundering people’s plots. And whenever they were growing up there, they’re bit corn. So this idea that the government came to rise because it was the security system for the agricultural age and how that has evolved over time, that kind of hit me a lot.
Dan: So one framework, I can borrow from a wonderful book called ‘The Fourth Economy’ by Ron Davidson, which echoes a lot of the themes in this book. Essentially, that the modern nation state, their source of power is land. And they divvy out the land, they control it, they protect it, and then they go to you, and they collect a little bit of money in return, also the debt and the currency they issue. So this is how the nation state arises. And for a long time, we’re operating in such huge scales, we’re working on these good jobs with 10,000 people in the army, there’s 10,000 people at the Auto plant, you know, it kind of all works out, because now I can take my money and like, own my land, and now you’re protecting me because there’s people legit attacking us, like they want to take our land. And there is kind of this idea in the background, which is an unchallenged assumption, which is a common contemporary thought, which is Modern Warfare is outdated – US armies fighting the last war, like nobody cares to take your land anymore, like Chinese people can just move here. And we can’t really move the China’s as easily, but we can move to wherever. And there’s this kind of porousness of borders.
And it’s this idea that in the 21st century, we don’t really value 200 cattle the same way that a New York City apartment might be the industrial version of that. It’s like now what we want is to own digital platforms, digital currencies, tokens, ideas. And that these are the things that will be warred over in the next century. And now as an individual, you’re realising that the state really can’t help you. Because I know a lot of us felt last year – well, what did the state do with all my money that I worked for for 20 years? Well, they devalued it on my behalf. And now I’m operating as a global citizen. So I don’t like that deal. So there is this kind of idea, with an eye to the future, that basically this the government isn’t offering these digerati, the wealthiest, or the information inclined citizens that much value anymore and that causing sort of a crisis of consciousness.
We all have friends who are sort of wondering when to bring, like certain crypto trades back into the fray of their, quote, nationality. And there’s this ultimate question: ‘Well, why would I ever do so, what role did the state have in this?’, whereas if you drove to a job on an interstate, that was not being bombed by a foreign enemy, and you deposited that money in a bank that was insured by that same government, you might be able to make the case that yeah, paying a great deal back to this government in return for these services does make a good deal. And I think our generation is just starting to get the sense that not that, not that it’s completely useless, but that it’s getting complicated.
Greg: There’s this great part in the book where they talk about $55 rather than $55 million as your fee for being protected by your nation state. And basically their point is that through income tax and through the lifetime of your job and through taxation, you’ll essentially pay $55 million if you have a well paying job in taxes towards the protection of the nation state. And that today, it’s crazy that they say I’m saying today because it didn’t actually exist when they were writing this. But they foresaw this idea that for $55, you could protect your private property using cryptography. In a world where you can spend $55 or $55 million, you can’t make that decision. It’s too easy.
Dan: My two favourite quotes that jumped out to me, one because I run a job site where I have this perspective. So one of my favourite things is when you say, Oh, that’s it, and they said, ‘in the future, you won’t have a job, you’ll just have tasks’. And I was like, that’s it. That’s what’s happening to organisations, they’re getting fractionalized. And the other one that jumped out to me, ‘in an environment where the greatest source of wealth will be the ideas you have in your head, rather than physical capital alone, anyone who thinks clearly will potentially be rich’. So there’s a lot of things to worry about when you read ‘The Sovereign Individual’. But there’s a lot of inspiring things in here as well. You definitely get the sense that you can be a part of this revolution, because you already have been a big part of it.
Greg: I thought of you guys too, when they go into this concept of the firm and why the firm exists. And they make this analogy about imagine if like a car assembly line was made up of contractors instead of employees, and everyone was standing on the line bidding as to what whether they wanted to weld the next wheel or attach the next thing and how overly complicated and ridiculous that would be, That’s what we do in our in our businesses, in our online businesses. If I need an image, I fling it over to a graphic designer, if I need some copywriting I get it over there. And that’s my assembly line. But it’s all digital and it is not so complicated. But just imagine that in the physical world, it’d be impossible.
Dan: Even the promise of how fast some of those transactions are going to go down in the future, particularly with financial stuff, using smart contracts. And in crypto, it’s ..
Dan: Yeah, it’s just gonna happen. And, you know, it might not, you know, happen in your business or the sort of online business as we imagine them right now. But there will be businesses that create value for the world that are just a snap instant chain of value being created between a bunch of computer programmes, smart contracts that ultimately create things that people value.
Greg: Whether they’re even considered businesses anymore, I don’t even know that they would be.
Dan: Yeah. And I think that’s an interesting thing. When you look back historically often we think about, ‘Oh, that can’t happen, because this needs to happen’. And well, maybe, it’ll just be bypassed. That’s kind of like what crypto’s doing with banks. We might not need to do online business the way we do, you might not need employees in the future, who knows, you might not need banks, you might not need nation states in quite the same way. And that’s really what this book challenges us to think about. So let’s then jump into this category called, ‘What has aged well’, so it’s just an opportunity for us to look back on a book written in 1996 and say, What are the things that it’s incredible that they’ve sort of held up through those two and a half decades.
Greg: So we were talking about, where we were in 1996 when this book was written, did the internet exist. and we were trying to think of where we were in the stage of technological revolution?
Dan: So you had a pretty good like 3d graphics game set, you probably maybe if you were middle class, upper middle class, you had a 486 computer with a CD ROM drive and a floppy drive. You would maybe have an AOL account. You might have some kind of account too, a specialised social network, like Prodigy where you could have message boards, or the imagination network where you could play games with people online. You could make a web search in Netscape. And there would be nerds that would put up websites that are the exact kind of websites you wish there were more of today, some scientist in California who’s like, really into x kind of plants or gardening, and we just have 25 pages about his garden or something.
Greg: and there was no search engine linking them all together, or maybe there was?
Dan: Oh, yeah, there was search. I remember the days when you’d see repetitive stuff. And it just wasn’t very smart. And then Google got really good, starting when I was in college or my early career, and now it’s basically back to what it was in 1996.
Greg: We were all we were dialling in, right? And so this idea that big images, video, audio, none of that was streaming of any kind, none of that existed. So I think what held up well is they did, in many ways, predict a lot of that. They didn’t really talk about bandwidth that I remember very well, they just said it’s going to just explode. But they didn’t really … like that’s the reason why all their other predictions actually, I think came true. They talked about the fact that we’d be able to just talk to our computers, and they would talk back to us as if that was some amazing future. They talked about how everything’s going to be customised. If you’re interested in gardening, and in astrology, then the information will be customised for you. So instead of having to watch the news and seeing all of the things that the news wants to offer, it will be customised and tailored for you, which is obviously YouTube and our feeds and the things that we have today. I mean, none of this existed at that time. So it’s hard to imagine seeing this as clearly as they did.
Dan: Can you give you a list of predictions? I know you wrote down some that they made
Greg: Yeah, so their first prediction was like international calling and local calling will be one in the same because they were paying. They made an example of how it costs $200 to make an hour phone call over the pond, right?
Dan: And, coming back to 1996, even 2006. That’s a big deal, that changed my life that allowed us to start an ecommerce business. Imagine if you had a $2,000 phone bill to talk to, like it just wouldn’t work. Like, and that was a prohibitive cost. And the fact that Skype allowed us to call you know, Manila, call Shenzhen. That was it was a revolution. It really was. It doesn’t even seem like a big deal in retrospect, you know, and that’s kind of the thing, these things all compound and add up.
Greg: The next idea plays directly into what you just said is that it’s a business without borders that you can operate your business from anywhere, with anyone anywhere. As we know, it’s gone way beyond just talking to people across the world. This idea of instant translation, so you could speak with anyone who speaks any language, customise media and feeds, customised production. If your leg length is a certain size, you’d punch that information into a system, and robots on the other side of the world would craft custom fit pants. It’s so silly how normal that is now, but that was probably a crazy insight back then. This idea that you would shop for jurisdictions on the internet in this way that like different nation states would have these, I don’t know, websites where they would like offer you low taxes and like cheap incorporation, and maybe like an educated workforce and like you to kind of like rate and compare different countries and shop them. Not sure we reached tha it’s a lot more complicated than that.
Dan: Well we certainly do it. We’re in the prototype phase.
Greg: Maybe we should build that website though. This idea that like we would cyber visit our cyber doctor, they use the word cyber, way too much. That word.
Dan: That’s your nitpick.
Greg: Oh, yeah, maybe I should save it for that. But everything is cyber, cyber. So cyber visits to cyber doctors, we’re just gonna talk to doctors and that is going to solve our issues remotely. I don’t remember them actually saying the word remote, even once, but that’s what they were alluding to. They talk about digital lawyers, this idea that like you’ll just bring your issue to some cyber lawyer and it will craft you a custom legal agreement.
Dan: You could have basically taken this book, built a startup behind every of these ideas and you’d be a billionaire right now.
Greg: That’s what I was gonna say – who’s writing this book today? That’s what we need to find, and what would it be talking about? Obviously, that’s an entire topic of its own.
Dan: Peter Thiel does touch on that in the preface. He said it would essentially be talking about cryptocurrency and artificial intelligence, those are the two poles essentially.
Greg: The authors predicted crypto in a way that they had all of the pieces, but they hadn’t quite put them together. And what I mean by that is they understood the internet, they understood cryptography. And they even explain cryptography pretty well in the book. And they describe like decentralisation, in some states, they talk about this one example of there being a server and some guy pulling all the plugs out of the server, and that the information routing around the fact that they just like decimated the server. That’s the concept of decentralisation in a way. But when they then talked about cyber money, they didn’t talk about that ability for it to route around any issue that comes its way.
They also talked about crypto as if it was this thing that was issued by private companies, and they’re like, in the future, you know, private companies will domiciled your gold, and these cyber monies will be denominated in in real assets like gold, and that they’ll be issued by these private companies. But it’ll be all traceable because it’s, you know, bits as opposed to paper. So I thought I found that I thought that was really insightful. And they really did understand the reason why crypto was so important, they talked a lot about inflation. And the eradication of counterfeiting, like crypto will eradicate the ability to counterfeit, they talk about how micropayments can open up a whole new world of opportunity. They even got into NFTs, which surprised me. I’ve never even heard anyone talk about that. But they said like, yet.
Dan: So non-fungible tokens, so unique tokens.
Greg: Yeah, they talked about this idea that, as you’re watching, you could download an old baseball game. And as you’re watching it, it would pay the people who appear in the game in micropayments, that’s kind of what NFT’s are proposing.
Dan: They even talked about defi a bit, they talked about the opportunity for more intelligent liquidity for people who deserved it, which is not exactly what’s happening right now.
Greg: Absolutely. And this idea of cybercash, now I’m just gonna want to call it that all the time.
Dan: Cyber cash that’s a great brand.
Greg: They talked about how cyber cash is going to just like cybercash is like the ultimate offshore banking. And didn’t Obama even say at one point that Bitcoin is like offshore banking in your pocket or something. So like, I wonder if he read this book, I bet it’s probably required reading in government. So they really hit the nail on the head in a lot of ways. They didn’t quite predict how the rise of Bitcoin would start and what the fundamental technology behind it was, but I get the sense that they weren’t technologists as much as they’re kind of more like futurists, and they understand where things were going. So I was really impressed by that portion of the book.
Dan: Here’s some things that aged well, for me, hearing about our generation from the last. Something about someone who’s lived a big long, full successful life with lots of different experiences. Seeing this little sapling, this cyber sapling, and then just being so bold about saying, like, ‘Oh, I know where all this shit goes’. I loved that. When I found out that this person had been alive for a great deal of time before making so many predictions that I associate with our generation. I really thought that that was compelling. One thing I wrote down is harping on about taxes. I think this is aged really well. There is a lot of talk about taxation, kind of the classic libertarian, a little bit of that argument about just complaining about taxes. They were very prescient on demagogues, and they have a wonderful quote that said, ‘a system that routinely submits control over to the largest, most deadly enterprises on Earth, to the winner of a popularity contest between charismatic demagogues is bound to suffer from it in the long run’. This is a quote. I don’t think it’s that political to suggest that Donald Trump was a demagogue, I think you can rate his policy or your politics, but I think it’s pretty clear that he’s a demagogue based on his behaviour. And our systems often reward that force. And so that’s a weakness in the system. That’s what they are pointing out like this is legit a problem. A couple other things that age well – narrowcasting, I just love this idea of narrowcasting, rather than broadcasting. And we’re narrowcasting right now, which is, Greg, me and you might have more in common with a computer programmer in Portugal than the person that will work at a restaurant down the street from us. There’s some interesting dynamics about what we share in common: the kind of information we know about the issues we’re thinking about, the culture that’s important to us. That is definitely changing.
Greg: I’m not sure if this is necessarily something that aged well, but it’s part of that history lesson that it gave up front, which I am absolutely seeing play out – which is this idea that after the fall of Rome, lots of power consolidated under the church, and it was amazing hearing, there was a lot of talk in this book about all the positive things the church was doing for everyone at that time. You know, we don’t hear about the church in such a positive light. But they were the ones out there building the roads and helping educate people and helping get them seeds to plant their farms. Then, it came to as as the church grew like it came to this point where it began to slip because of bureaucracy and hypocrisy. And those two things precisely were things I was thinking about today. And Internet entrepreneurs, the amount of bureaucracy and stuff range crap that we have to deal with, in order to run our businesses online is insane. And I have this great example, which is in my state, I have to pay injury insurance for my employees, and the only employees of my business are my wife and myself, and we work from home. And I had to go out there and shop for insurance in case I hurt myself sitting in my chair. And they send me this sign that I am supposed to hang in my workplace.
Dan: You’re holding up a green sign that says ‘warning’ on the top of it, it’s legit.
Greg: I’m gonna get this framed and put it in my office. But the idea is, if you are injured on your job, like written notice that your injury must be given to your employer within four days after the accident. And then it goes on. And like this is a perfect example of red tape and like these things that are getting in the way of progress. And one the more of those things that stack up, the more we just want to push it aside. And I think that’s a great example of it for me because it’s just so real.
Dan: I have this whole list about what aged well. The church parallels, fantastic, just a list of them. They have this whole section where they compare the industrial economy to the informational economy. Information Technology has negligible national resource content. This is something that the American government’s really struggling right now with all these technology companies that were born on our continent are basically saying, we can kind of take it or leave it with some of this stuff, guys. Information Technology lowers the scale of the enterprise. Falling scale in enterprise also implies that efforts to secure above market wages are less likely to command broad social support as they did in the industrial period. And one final thing that really aged well, the jury’s out. But these are the kinds of predictions they make, they quote, the nation state will ultimately collapse in a fiscal crisis. They think that this is what we’re heading for very clearly. And we were on the brink of it not just a few years ago. And, you know, we’ll see.
Let’s talk about the next category, what hasn’t aged so well. My first one, Greg, is harping on about taxes. I thought their chapter about taxes, at a certain point, it was so egregious, all the math they were doing about how much tax you spend with the government, that I just saw some guy in a Panama jack t shirt and a gold chain trying to sell you on the opportunity to move to Puerto Rico or something. Their broad, grand narrative and historical sweep was so heavy and compelling, that I thought to watch them just get a little bit petty about income taxes was a turnoff to me as a reader.
Greg: The tax thing is a cornerstone of their argument for why we’re going to start shopping these different nation states and I agree with you, I’m not sure that’s gonna be what leads to it or if that’s ever gonna happen. I really wish that the first I think it was the first chapter of this book hadn’t started with 40 pages about Y2K like that, because and maybe they were living in fear of that at the time.
Dan: Yeah, Y2K we’re getting to the point where we might have to explain to people what that is.
Greg: Wow, yeah, I mean, it’s they they went on and on about Y2K being this idea that, you know, computers weren’t programmed to be able to handle the year 2000 in the way that they were programmed. It was a big deal. I mean, maybe only because the news was talking about it constantly for like a year. But it came, it went, nothing happened as far as I can tell, maybe because of all of the amazing fixes that went into place but I highly doubt it.
Dan: One other thing that hasn’t aged so well for me is that, for them, there’s this very clear transition between like, okay, there’s this basis of power for the nation state. And then you’re going to jump if you’re basically tapped into the system, and you’re gonna become a sovereign individual or you’re gonna plug into another nation state that shares your values and you’re going to get your services from them. Well, I don’t think that’s the direction things are going. It’s kind of that thing where it’s getting replaced. There’s meta organisations of people. One example is the internet startup. Not to sound too crazy. But it is remarkable that, for example, Facebook would have technology that our spy services could never develop on their own. There’s a lot of these organisations that are like post national, that don’t get a lot of play in the book really. Like the fact that it wasn’t really foreseen how powerful organisations like Google were going to be. And then also, conversely, the biggest critique of the book, I think, generally on the web, is how powerful China was going to be. And one of the arguments Peter Thiel makes at the beginning of the book is essentially it’s almost as if the Chinese Read the book. And we’re checkmate, we got you, we are going to invest in AI, we’re gonna have more data than any country in the world. Because that’s really the holdup with a lot of AI stuff, it’s the data that you need to process it, not the framework from which you process it. And the Chinese have an incredible amount of data that the Chinese are also innovators on the cryptocurrency front.
Greg: They ignored that fact that nation states would embrace all of those same technologies that would lead to the sovereign individual. And that because of their mass resources, it would empower them even greater than it empowers us in some ways. So I think that that’s a really important point that’s just kind of lost by them.
Dan: Yep. There’s an idea that these competitive territorial clubs will impose exacting moral standards for residents. It’s not really the case. I mean, I got my Thai elite visa, there’s not too many standards to it. And that also this, this revolution, and I don’t think they assert this too, too strongly. But it’s not this thing that’s happening smoothly, universally, in the same way for everyone. And it’s certainly having a great deal of interaction with that previous generation, at least as we record this today. You know, there hasn’t been a wide scale collapse of established nations. And therefore, we’re still very much in the early phase of this revolution that they’re describing.
Greg: I wonder, though, too like the time frames that they were considering these predictions because they’re talking about how a lot of their predictions were based on the fall of of Rome and the church, and going into the year 1000 and how everything was changing, and how going into the year 2000 all of these things are going to play out the same way. Well, that was 1000 years that happened there. So you’re 21 of this and maybe it is gonna end up exactly as they’re talking but the trajectory it’s on now is not quite .. I can’t see it.
Dan: That’s actually where the bacon is, so to speak, because look, at an infinite timescale, they’re going to be right. Nation states are an innovation, they’re a relatively new thing. It’s not difficult for anyone to imagine that, ultimately, there’s going to be a new system of human organisation, whether it be swarms, whether it be language based, whether it be in the cloud, whether it be on Mars, or whatever, who knows, but you give yourself enough time, I think the interesting thing about this book is that they’re suggesting that we’re right on the doorstep of this stuff. And they’re using some of these data points and historical arguments to suggest that it’s better to be there for it.
Greg: And the door it could take 100-200 years to get through the door. And that’s I think the part that it’s hard to judge whether or not these things are gonna play out the way that they predicted because time is not on our side.
Dan: I’ll say this, though, I think it’s implicit in the way that they frame up the industrial revolution to this, that timeframe being so short, that they’re saying this is going to happen very soon, like you are going to live through it. And that’s one of the key takeaways from the book. And I ultimately think that that’s one of the great things about the book is that it is a bit of an emotional read, you can’t help but to be excited, scared, intrigued, motivated. It’s not a dry book at all. For me, it’s hitting you where it counts. It’s suggesting that your life is going to be pretty crazy. And it’s not that hard to imagine, based on the stories and based on the experience we’ve had over the last few years.
Greg: I couldn’t read this book, before I went to bed, I couldn’t read it in my car. I couldn’t read it while I was working out. I could only read it in the middle of the day, sitting down taking a deep breath and being like, here we go.
Dan: Final few categories here, Greg, any nitpicks you have with the book, nitpicks are just like little things, they could be anything.
Greg: The overall tone of this book, it feels doom and gloom, but then when they make their cases. it has this positive angle to it. And I can’t help but feel conflicted by the way that they’re kind of presenting all the information in this doom and gloom way to lead up to like this positive outcome. So that was tricky for me.
Dan: What’s interesting about that, there’s something about like, in this book is all this crap that you’ve heard about from all these tech heads over the past 15 years, all these optimists, the Kurzweils, the Peter Thiels, all the freaking Google in residence people, and they’re just so damn optimistic. And these guys are saying we’re talking about the fall of nation states here, guys, it’s not gonna be pretty. Some people can be big winners and you can be poised to be a big winner and all that. But people are still going to maybe raid the US Capitol and next time, maybe they take it down. There is that kind of tone here where there’s consequences to this stuff and I think, as technology people, we do live in this optimism bubble sometimes where, you talked about meatspace, earlier, there is like this divide in our country happening right now. And speaking about the US specifically, where there does feel like meatspace is like a little bit f-ed right now, people are over leveraged, it’s not really clear when the jobs are coming back. There’s a lot of question marks out there – student loan debt, national debt, car loan debt, mortgage debt, where’s all the money come from? But there is this lingering question that, you know, there’s this revolution that’s going to happen. And in revolutions, there’s winners and there’s losers. And, you know, in our space, we don’t really talk about that whole other side of it. We’re just talking about, oh, my next big startup, my next big investment. And it’s so interesting to see a book that talks about all the same things. But in a context of, you know, there are real consequences to real people in real life.
Greg: It’s like the sovereign individual side of me has all these amazing things going on. But then the meatspace version is just deteriorating. And I mean that’s the thesis of ‘Ready Player One’, basically.
Dan: Two final questions. Would this book work better or be interesting to you in a different format? Would you prefer it as a Netflix series, as a podcast, as video?
Greg: This book was so dense that I can’t really imagine consuming it in any other format, because I quite often had to pause and reflect on what they were talking about. And that’s why I couldn’t listen to it as an audio book even. I have the physical copy, a Kindle copy and an audio book. And I kept going back to just reading it on my Kindle because I couldn’t really listen to it. I was missing too much and pausing too often.
Dan: This is an old school dense book, which is why this episode was quite challenging to do. I sort of agree with you. For me, I listened to it. And then I bought the book and started going back through the book. So it’s kind of a dense book. I think a paperback book is the way to consume this. You’re going to want to earmark, you’re going to want to underline. And the final thing is sort of – who would get the most out of it? And then if you’re just a person who’s not going to read a book like this, what might you take away from this conversation?
Greg: So what’s interesting is this book sat on my shelf for a long time. And I didn’t read it. And it reminds me of another book, which was one of the most important books I ever read. And it was because they had this lead in with this amazing history lesson. And I feel like the history that we got in school in American public education, schooling, it wasn’t practical. And sometimes when people are making these arguments, they lead up with the history that led them to make these decisions. And that type of reference on history makes it a lot more interesting. And I loved the first half of this book, where it really just got into the evolution of society. And how we evolved from hunters and gatherers to hunched over our computers. And I think that if I got anything out of this book, it was that history lesson.
Dan: Well, and that’s part of the interesting thing is – you get to see their method for having made such wonderful predictions by exploring that history. And one of the other topics that they touch on is how essentially, this idea that language is computer programming for humans. And that these stories, myths, narratives, they could be wrong, we could be wrong about a lot of the histories we told today. But that doesn’t mean that they’re not programming, influencing us, helping us to then triangulate and figure out what our futures might look like. If you feel like you’re a little bit behind the ball, you have difficulty taking action on your future. This is the kind of book that I think, if you’re just constantly looking at Twitter, or really pelletized content, they’re talking about this idea in the book that like, you might just be like, not really dedicated to a direction. And one of the things I think, a very strong narrative in history, like this book can do is it can get you set on like, where you’re oriented, what you believe in, what you think, what what what world you think, is coming our way, and how you’re going to be a part of it.
Greg: When I think back to this book, I’ll think the thing I’ll remember most is just all of the talk about how the last 100 years is just such a tiny, tiny sliver of, of mankind, and how all of the things that we know today are have sprung up during this last 100 years. And what that says to me is that this isn’t forever, like the way things are today can still change very, very dramatically in ways that we, even they, probably haven’t even predicted yet.
Dan: Yeah, that really drives my final thought. This idea was just trying to articulate and I’ll leave us with a quote here, that I thought they just nailed it. They said, ‘more information isn’t more understanding’. And the story of the last 100 years is all this information that has been created in our world.
Greg: The rise of complexity.
Dan: The rise of complexity doesn’t mean that we understand it. And I think the sovereign individual was a noble attempt..
Shout out to my guy, Greg Gerber, for joining me on this crazy roller coaster of a ‘Re-readable’ Yeah, that was ‘The Sovereign Individual’, a heavy ass book with some heavy ass themes. And, you know, we asked a lot of Greg. I realised as I was like, going through the book and taking notes, and it’s just so hard to wrap your head around, these ideas are truly epic in scope. And the exploration of history is way, way beyond my scope of understanding or expertise. But that’s part of what makes reading this book really such a pleasure. And it’s awesome that Greg was willing to join me on that. Now, of course, Greg is the founder of Bitlift dot com, a resource for all things, crypto. And we did this recording just as the Coinbase IPO was going live. So I couldn’t resist asking Greg, what he thought about that and a few other general questions about his crypto holdings at this time, certainly a narrative I want to continue to follow in 2021. Like I said at the top, I’m super excited about the possibilities of crypto and decentralised finance and all this stuff. And I’ve been following it quite intensely. So more content on that shortly. These few questions here, we’re just gonna toss them at the end of the TMBA bumper, so stick around for it. Hope you enjoy it. That’s it for this week. We’d love to hear your thoughts on this week’s ‘Re-Readable’, ‘The Sovereign Individual’, any other books you’d like us to cover? Let us know. I love this format. That’s it for this week. We’ll be back as always, next Thursday morning.
Greg: So I write a crypto newsletter that I send out every week and last week’s newsletter title was ‘Coinbase is Doomed’. The reason I put that is, not because the IPO is doomed or that everyone that’s investing in is doomed. I think it’s going to probably crush it. And it’s going to be like this major inflection point in the markets. But the reality is that their business is doomed. Like a centralised exchange. It’s been de-minimised to just a fiat on ramp now. And that’s actually something that didn’t come up in the sovereign individual either was like, yeah, we’ll have all the cyber money, but how the hell are you going to convert your old money into it? And how easily it’s traceable from that point forward. So they talked about privacy and all these things. But if you’re going to turn a US dollar into a Satoshi, well, now that’s Satoshi is traceable for the rest of time, and it’s linked to you. So anyway, Coinbase is the reason why it’s linked to you. And they’re following all the regulatory requirements for doing so. And this I Coinbase, is just being de-minimised to just a bridge from dollars into crypto. And then after you’ve got your crypto, you’ve moved it to your wallet, you’re now an offshore banking in your pocket. You can do everything that Coinbase offers without using Coinbase, using decentralised defi platforms and run by pseudonymous and groups that are voting with their tokens online. So Coinbase is crushing it only because of the sort of adoption curve.
Dan: They’re providing a service?
Greg: Yeah, but the actual trading and the way that they make their money – it’s free for me to wire my money into them and convert it into crypto, all of that’s free. But then the way that the way they make their money is something that I don’t even use anymore.
Dan: Right. Are you aware of ‘Unchained Capital’? What do you think of them?
Greg: Sure. Based in Austin, they’re doing some cool stuff with multisig protection of your wallets. I think that that’s becoming more and more important, especially as like the rise of institutional adoption of crypto, I think for you and I, we don’t need such an elaborate setup.
Dan: So when you say institutional – the problem is, is like, institutions can’t hold their crypto holdings on Coinbase. But they probably don’t want to keep them in their gun safe either. So there needs to be these kinds of b2b level storage options for crypto?
Greg: Institutions can store their crypto on Coinbase. And that’s actually that’s the biggest rise in Coinbase is revenues over the past quarter. They’re just talking about how they had this blowout quarter more of their money came from institutional …
Dan: Oh,I thought I thought for some reason, some corporations or like SEC traded companies might have to have a higher protocol than just Coinbase.
Greg: Three years ago, it was the case that institutions weren’t allowed to have Bitcoin because there was no legal way for them to custody it. Now the exchanges like Coinbase and whatnot have made that possible. But for an institution that wants to take custody of their own crypto themselves, they can do that with something like ‘Unchained Capital’. And they can do it in a way where the CEO can’t steal it all because it requires multiple parties in order to sign each transaction that occurs. They’ve sort of commercialised some of that tech, as well as allowing institutions to borrow against the crypto that they’re customising. And I think that’s kind of one of their business models
Dan: That’s very cool. One question I wanted to have for you. Just to get an update on the classic question, what percent Bitcoin what percent Ethereum?
Greg: I was just posting this yesterday, um, I’m basically at 70-75% Bitcoin, 10-15% Ethereum And the other category, and what I was talking about was the ‘other’ category is what dominates all of the conversation, which is what’s so interesting about the crypto space and what’s so misleading about people who come into the crypto space They see all of this talk about the other category. But really most people in crypto are very heavily Bitcoin and heavy Ethereum.
Dan: Do you have any thing coins that you would suggest not people invest in but that they look into as interesting projects?
Greg: Bitcoin is a rabbit hole that you can look into for the rest of your life and it might be a worthwhile journey.
Dan: I think the motivation is people have taken that advice and now they want to diversify with funny money into some … because one of the things I’ve noticed emotionally is like there’s a big difference between knowing about something and investing in it. There’s like a skin in the game issue where once you own it, you are motivated to learn more about it and to use it and to converse with others who have invested in all that so, I think that that’s the real driver there.
Greg: Bitcoin is boring once you’ve gotten it. Once you’re convinced that there’s something there and you’ve gone to the next step of taking self custody of it, now it’s just sitting there. And there’s so much action in the Ethereum, smart contract and Ethereum killers … all of these other random projects that are popping up. There’s a lot of action there. And what’s happening there is actually not as crypto related as it seems. What I think is happening, that’s the evolution of startups and of business and business formation, and of products and services. The way I see it is Bitcoin is the money Ethereum may or may not be this new, you know, decentralised internet, where all of the future of products and services are built on top of. Both of them are incredibly valuable and useful today. But if you want to invest in the future of money, I don’t think there’s any other place to do so than in Bitcoin. If you want to get some Ethereum to play around with like startup investing, I think that that’s a good lens to think about it through. Buying some Ethereum on Coinbase, bringing it into your hardware wallet, connect that hardware wallet to MetaMask and then start playing with defi. I know that’s complicated. It sounds complicated. But it’s totally doable. And it’s another very worthwhile thing.
Dan: So can you describe what MetaMask is briefly?
Greg: Yeah, MetaMask is just kind of the de facto Ethereum wallet. It’s a browser extension, for the most part. And any website that connects with Ethereum has MetaMask integration, which means when you go to that website, you connect your wallet with one click. And now that wallet or that website has access to your funds and can see all the information that’s in your wallet as far as the transaction history and the assets that you’re currently holding. And then if you want to utilise that product to either …. maybe it’s a decent set a decentralised exchange, where you want to swap one token for another, maybe it’s a yield producing investment opportunity.
Dan: Provide liquidity.
Greg: Provide liquidity and earn 7% yield plus they juice it with their own token. And you can connect your meta mask to that system, approve a few transactions and the transactions happen inside of your hardware wallet or inside of MetaMask. This idea of needing to go back and forth between an exchange and your bank account is gone. Everything happens in your bank account now. And your identity is not connected to that account.
Dan: And so when you think about the larger exchanges, let’s just say Coinbase, they’re having to do things by the book and so they can’t list these innovative little tokens or defi schemes and stuff like that. So you basically have to go to a place like MetaMask or use a wallet like MetaMask in order to get involved with those sorts of products basically.
Greg: Yeah, and you just go to something like Uniswap which is the decentralised coin base in the cloud, right? And anyone can list a token on Uniswap, literally anyone with a couple clicks. Coinbase can’t ever keep up with that. They also can’t acquire it or buy it either because it’s just not allowed by the rules that they play by. And I think 6% of all transactions today are already done on decentralised exchanges, versus centralised exchanges like Coinbase.
Dan: Binance was centralised as well. Correct?
Greg: Yeah, and Binance does, I think, $30 billion of trading volume a day and Coinbase does $2 billion and Binance instead of IP)ing they released a decentralised exchange to basically disrupt themselves. They’re like oh, DEX is going to destroy centralised exchanges like us. We better release a DEX and that’s what they did. And their token is now, I mean it’s literally vertical. If you look at the BNB token right now. A lot going on but that’s where all the action is.
Dan: Greg Gerber. Always a pleasure.