Patrick McKenzie — Money laundering, big tech censorship, SBF & Japan

1. 0:00 – 18:09

   Why hackers on Discord had to save thousands of lives

   1. PMPatrick McKenzie0:00

      California had the most desirable object in the history of the world-

   2. DPDwarkesh Patel0:04

      Yeah.

   3. PMPatrick McKenzie0:04

      ... and rather than adopting any sensible strategy for getting it into people's arms, was bickering over who should get it first. We should be outraged about this and we're mostly not. If you Googled, "Vaccine near me," before a certain day there was no answer. After that day, there was an answer and that answer came from us. The successful (laughs) project plan was made by a bunch of rank amateurs at this topic on Discord in the course of a couple of hours. Society (laughs) should not rely on-

   4. DPDwarkesh Patel0:29

      (laughs)

   5. PMPatrick McKenzie0:30

      ... on us as plan A. (laughs) How did this happen?

   6. DPDwarkesh Patel0:32

      (laughs)

   7. PMPatrick McKenzie0:34

      It is enormously to the United States' credit that we have a extremely functional, extremely capable tech industry. Maybe we shouldn't treat it like the enemy.

   8. DPDwarkesh Patel0:44

      Today I'm chatting with Patrick McKenzie. He is known for many things on the internet. He's known as Patio11. Most recently, he ran Vaccinate CA, which probably saved on the order of high four figure number of lives during COVID. He also writes an excellent newsletter called Bits About Money. Patrick, welcome to the podcast.

   9. PMPatrick McKenzie1:02

      Thanks very much for having me.

   10. DPDwarkesh Patel1:03

       So what was Vaccinate CA?

   11. PMPatrick McKenzie1:05

       Uh, in early 2021, we were quite concerned that, uh, people were making 20, 40, 60 phone calls to try to find a pharmacy that actually had a dose of the, uh, COVID vaccine in stock and could successfully deliver it to them. Uh, I tweeted out randomly, you know, "It's insane that, uh, every person or every caregiver is attempting to contact every medical provider in the state of California to find doses as a vaccine. California clearly has at least one person capable of building a website where we can centralize that information and send everybody to the website. If you build that website, uh, I'll pay for the server bill," or whatever. And, uh, Carl Yang took up the gauntlet and invited 10 of his best friends and said basically, "All right. Get in, guys. We're gonna o- open source the availability of, uh, the vaccine in California by tomorrow morning." This is at, like, 10:00 PM at night California time and so I looked on into the Discord where, of course, all medical infrastructure is built-

   12. DPDwarkesh Patel1:51

       (laughs)

   13. PMPatrick McKenzie1:51

       ... and, uh, gave a few pointers on, you know, making scaled calling operations. And then one thing led to another and I ended up, uh, becoming this- the CEO of this initiative. At the start, it was just, like, this hackathon project of a bunch of random tech people who thought, "Hey, we can build a website, make some phone calls, uh, maybe help, uh, some people find the vaccine at the margin," and, uh, it grew a little bit from there. We ended up becoming essentially the public-private partnership, uh, which was the clearinghouse for vaccine location information-

   14. DPDwarkesh Patel2:16

       (laughs)

   15. PMPatrick McKenzie2:16

       ... for the United States of America. That felt a little weird at the time and continues to.

   16. DPDwarkesh Patel2:20

       (laughs) Okay, so the obvious question is, why was this something that people randomly picked up on a Discord server? Why wasn't this an initiative either by an entity delegated by the government or by, you know, the White House ha- ha- has, uh, uh, or the pharmacies have a website where you can just sign up for an appointment?

   17. PMPatrick McKenzie2:40

       Oh, there are so many reasons-

   18. DPDwarkesh Patel2:42

       (laughs)

   19. PMPatrick McKenzie2:42

       ... and a whole lot of finger pointing going on.

   20. DPDwarkesh Patel2:44

       Yeah.

   21. PMPatrick McKenzie2:44

       Um, one of the things was that there were almost no actors anywhere in the system who said, "Yes, this is definitely my responsibility." Uh, various parts of our, uh, nation's institutions, county level public health department- uh, uh, public health departments, governor's offices, the presidency, two presidencies over this interval-

   22. DPDwarkesh Patel3:02

       Mm-hmm.

   23. PMPatrick McKenzie3:02

       ... which will become relevant, uh, you know, they all said, "Well, I have a narrow part to play in this, but someone else has to do the hard yards of actually, like, putting shots in people's arms, uh, and someone else is clearly, like, dealing with the logistics problem," right? And it- the ball was just dropped comprehensively and, uh, no one at the time really had a plan for picking it up, uh, or, uh, didn't feel like it was incentive-compatible for them specifically to pick it up right now. "It would have been great if someone could do this, but just not me."

   24. DPDwarkesh Patel3:29

       The, uh, o- okay, so to explain the context and how important it was that people get vaccines at the time and how much these delays mattered, you can account for it obviously in the amount of lives saved. You can even look at it in terms of wh- when vaccine news was announced, how much the stock market moved. It was clear it was worth trillions of dollars to the economy-

   25. PMPatrick McKenzie3:47

       (laughs) Yep.

   26. DPDwarkesh Patel3:47

       ... that the vaccine be delivered on time and so it should be priority number one that people know where the vaccine is. A sort of meta question is, why are... I kind of heard about this problem for the first time when I read your article about this.

   27. PMPatrick McKenzie4:00

       Mm-hmm.

   28. DPDwarkesh Patel4:01

       Why is this... There's- there's a bunch of controversy after COVID about people pointing fingers about masks or different kind of protocols. Why was this not... People are h- getting hauled in front of Congress. Why were we not ge- able to deliver the one thing that was needed to arrest the pandemic as fast as possible?

   29. PMPatrick McKenzie4:19

       Oh. Well, if folks want me, 27,000 words on this, uh, my article in, um, Works in Progress, uh, called The Story of Vaccinate CA goes into some of the nitty-gritty. Uh, broadly, I think a matter of incentives more than a matter of people choosing to do evil things, although I will say we did choose- choose to do evil things and we can probe on that if you want to. But, uh, the, um... If you look at, like, the federal government specifically, the federal government institutionally learned one, um, I believe, wrong lesson, which has terrible consequences from the Healthcare.gov rollout a number of years ago when Obamacare was first debuting. And the thing which many actors in the federal government and the political parties came away from is that a, uh, president can doom their legacy of their signature initiative-

   30. DPDwarkesh Patel5:03

       (laughs)
2. 18:09 – 39:02

   How politics crippled common sense vaccine distribution

   1. PMPatrick McKenzie18:09

      used the same names for these tiers for, uh, different people. But, uh, uh, the, in the state of California, uh, tier 1A comes before 1B comes before 1C comes before the-

   2. DPDwarkesh Patel18:19

      Yeah.

   3. PMPatrick McKenzie18:19

      ... tier two, uh, etc., etc. So 1A was descriptively speaking at the start, and this changed over time on like a day-to-day, week-to-week basis, sometimes in mutually incompatible ways at the same time. It was an entire mess. But descriptively, tier 1A was, uh, okay, healthcare professionals and a few others and, uh, people above the age of 75. No, wait, we'll change that to 65. Tier 1B was, uh, we're going to put a few favored, uh, uh, occupational groups here and some o- uh, other folks. And tier 1C was people who doctors think will probably die if they don't, uh, get the vaccine, uh, if they, uh, contract COVID, uh, but who have not a- appeared in group 1A or 1, uh, 1B yet. And so, uh, who got 1A? Uh, well, healthcare professionals, so like doctors administering the vaccine. That sounds like pretty reasonable. Also, uh, veterinarians, because veterinarians are like urgently required by society at the time. Mm, not so much, because the California Veterinarians Association is good at lobbying, and that isn't just me alleging that. They sent a letter out to their membership, uh, uh, saying, "We are so good at lobbying, we got you guys into 1A. Congrats, and go get your vaccine now." Um, I have that on my website. Uh, okay. So like tier 1B, school teachers were classified as, uh, uh, uh, tier 1B. Why? Because, uh, go figure, t- teacher humans have political power-

   4. DPDwarkesh Patel19:35

      Yeah.

   5. PMPatrick McKenzie19:35

      ... in the state of California. Uh, and they said, uh, "Well, we'll accept not being in 1A, but we are going no low- uh, lower than 1B." And probably no one in that meeting ever said, like, "I definitely think that 25-year-old teachers who are currently under stay-at-home orders should be in char- uh, should be like in front of the line of people who will die if they get COVID."

   6. DPDwarkesh Patel19:53

      So, so the, uh, the-

   7. PMPatrick McKenzie19:54

      But like, we made that choice.

   8. DPDwarkesh Patel19:56

      So then, uh, uh, in your article you discussed that the consequence of that was not only the misprioritization of the vaccine-

   9. PMPatrick McKenzie20:02

      Mm-hmm.

   10. DPDwarkesh Patel20:02

       ... but the bureaucracy around allocating it according to these tiers-

   11. PMPatrick McKenzie20:07

       (laughs)

   12. DPDwarkesh Patel20:07

       ... resulting in 75-year-olds not having the capacity to fill out the, the w- the page-

   13. PMPatrick McKenzie20:12

       Oh, goodness.

   14. DPDwarkesh Patel20:12

       ... of paperwork that required (laughs) you to decide what tier you were in.

   15. PMPatrick McKenzie20:14

       Uh, the state of New York commissioned a consultancy to administer to 75-year-olds a 57-page web application, which required e- uploading multiple attachments to check for their eligibility. And like, talk with a technologist if you don't believe me. We tried to remove everything from a web page that people successfully get through it. Like if you can make it, you know, two to four form fields-

   16. DPDwarkesh Patel20:34

       Yeah.

   17. PMPatrick McKenzie20:34

       ... that's already taxing people's patience. And you are asking people who might be like suffering from cognitive decline or be less comfortable in using computers to do something which would like literally tax the patience and, uh, cognitive abilities of a proffes- professional software engineer.

   18. DPDwarkesh Patel20:49

       Yeah.

   19. PMPatrick McKenzie20:50

       Uh, and that wasn't an accident. We wanted to do that. Why did we want to do that? Because it was extremely important to, like, uh, to successfully implement the tiering system that we had agreed upon. Why was it extremely important to implement the tiering system? Because that was society's prioritization. Was that the correct prioritization? Hell no.

   20. DPDwarkesh Patel21:08

       Right. Okay. So c- can we just count off everything? I, I, I, it just bef- uh, so it, it's, it's enraging not only because obviously people died, but because like nobody talks about it. It's, it, it was, um... There's all kinds of controversies about COVID, about whether, I don't know, uh, uh, vaccination and, um, uh, side effect kind of things and whether the masking orders were too late, too early, whatever. And then the main thing about whether we got vaccines in people's time on, uh, arms on time because of these political considerations. So you're not allowed... Yeah. W- go ahead.

   21. PMPatrick McKenzie21:42

       Can I, can I jump in with one bit of optimism?

   22. DPDwarkesh Patel21:44

       Yeah.

   23. PMPatrick McKenzie21:45

       We achieved something incredible, which was getting like the first cut of the vaccine done in two days as a result of, uh, you know, many decades of science done by, uh, very incredible people. And we successfully got that vaccine, uh, productionized in a year. We should have gotten it productionized in far less than a year, but-

   24. DPDwarkesh Patel22:00

       Right.

   25. PMPatrick McKenzie22:00

       ... uh, the fact that we were able to do it in one year and not three was enormously consequential. And so we should feel happy about that. A little annoyed that we didn't have, you know, better protocols at the FDA and places to get that vaccine, uh, prioritized for testing much faster than was, quite annoyed at the fact that like, uh, that was a political football and people probably made decisions that-

   26. DPDwarkesh Patel22:21

       Yeah.

   27. PMPatrick McKenzie22:21

       ... uh, pessimized for human lives and optimized for like defeating a, uh, non-preferred political candidate. Um-

   28. DPDwarkesh Patel22:26

       Are you talking about the fact that the va- vaccine was announced the, after the, um, el- election results or something, right?

   29. PMPatrick McKenzie22:31

       Uh, yes, I'm basically subtweeting that.

   30. DPDwarkesh Patel22:32

       Yeah.
3. 39:02 – 51:52

   Fundraising for VaccinateCA

   1. DPDwarkesh Patel39:02

      the... Okay. So here, here's, here's another question that's s- s- sort of related to this. You have many rich tech industry friends.

   2. PMPatrick McKenzie39:09

      Mm-hmm.

   3. DPDwarkesh Patel39:10

      And I read your article and you're saying, "We're trying, I'm, I'm filling out these grants for 50K here and that's like taking up all my time and I'm trying to raise, you know, a couple hundred grand here, a couple tens here." And I'm thinking to myself, "How is this not as tr- as trivial a problem as, 'Hey, X, Y, Z, uh, if you give me money that you can find between your couch cushions, we will save thousands of lives and get the eco- world economy back on track.'" Uh, h- how, how is raising money for this hard or why was it hard, you know?

   4. PMPatrick McKenzie39:38

      So again, like trillions of dollars are on the line. The United States is spending, uh, tens of billions of dollars or more on its COVID response strategy. Like the true biggest issue is like why does it come down to like Patrick McKenzie's ability to fundraise-

   5. DPDwarkesh Patel39:51

      (laughs)

   6. PMPatrick McKenzie39:51

      ... in the tech industry-

   7. DPDwarkesh Patel39:52

      That's a, that's a fair point.

   8. PMPatrick McKenzie39:52

      ... uh, for us to like have a system here? Okay. Bracketing that, like the, the tech industry underperformed my expectations for what the tech industry should have, uh-

   9. DPDwarkesh Patel40:00

      Yeah.

   10. PMPatrick McKenzie40:00

       ... should have accomplished here. There were some bright spots and less bright spots s- re- regards to the fundraising project. Um, for those of you who don't know, the total budget of this project was $1.2 million, which is not quite couch cushion money, uh, but is not large relative to the total amount of resources that the tech industry can deploy on problems. Um, and in some cases, uh, I looked at my email this morning to refresh my memory, I sent, uh, a CEO at a particular company... And I'm, I'm not going to name people, but they're welcome to claim credit if they want to claim credit. I emailed the, uh, CEO at a particular company, uh, "Hey, I saw you liked to tweet about this on Twitter. Uh, uh, I'm essentially raising a seed round except for a 501 (c) (3) charity and, uh, you know, we urgently need, need money for this. Here's a two, two-page memo." Uh, and that, I sent that email at 4:30 PM and, uh, 4:30 PM California time and, uh, he got back to me... Uh, there was some internal emails of like routed to this person, routed to this person. He run that by blah, blah, blah. 9:30, uh, the next morning, he said, "I'm personally in for $100,000 out of my own pocket. My banker is going to contact you with the wire cleared the same day." So yay for that. Uh, on the like, yes, l- less yay side, like tech is not exactly a stranger to having bureaucracies and in some cases it was a matter of like, oh, indicatively, uh, we want to support that but we have a process and that process, uh, went on for six weeks and by the time six weeks was over, it was May and, uh, uh, not to the credit of funders, uh, by May, most people in the professional managerial class who had prioritized getting a vaccine for themselves and their loved ones had succeeded at that and they said, "Okay, so vaccination supply problem pretty much solved, right?" I'm like, "No, it is not solved right now. It is solved for the people who are smartest about working, work in the system in a way it was not solved for even them back in January. But there are many people who are not yet vaccinated." And they say, "That's a vaccine hesitancy issue." No, it is not merely a vaccine hesitancy issue. It is still the case that there are logistical problems. It is still the case that, that people don't know that you can just Google the vaccine now. It is, uh, uh, still the case that around the edges of the American medical system in places that are like underserved, et cetera, uh, people, uh, don't have it or they can't get transportation, et cetera, et cetera.

   11. DPDwarkesh Patel42:06

       Yeah.

   12. PMPatrick McKenzie42:06

       You should continue funding this team for the next couple of months so that we can do what we can around the edges here. And, uh, uh, I was told, um, "We-Again, you know, people can do what they want with their own money and, uh, I understand that charitable founders- uh, funders, rather, have, uh, many things. It's just like, "Okay, relative to the other places we can put money to work in the, uh, in the world, as further investment in the American, uh, vaccine supply situation as of, uh, May and looking forward doesn't make sense for us. Could you do it in another nation?" And, uh, we said like, "Okay, uh, we're the American effort. We have some advantages here. We would not have them in the other, uh, the other nation. We did talk to people there. We, we, uh, tried to see if we could, uh, uh, help a team there or go, or, or go there, et cetera. But we don't find- we don't see that there's a path to, uh, like positively impacting the problem there in a way that there's manifestly-

   13. DPDwarkesh Patel42:56

       Yeah.

   14. PMPatrick McKenzie42:56

       ... a path to positive impact here." And, uh, we lost that argument. We didn't get the money. The, the last $100,000 in was my daughter's college education fund.

   15. DPDwarkesh Patel43:05

       Oh my God. Okay. Look, I, I agree that, uh, it shouldn't be up to tech to solve this huge society-wide problem.

   16. PMPatrick McKenzie43:13

       Mm-hmm.

   17. DPDwarkesh Patel43:14

       But given that nobody else was solving it, I still don't understand, um... Have, have you gone back to any of them or have any of them reflected on, "Yeah, maybe I should have just, you know, wrote you a million dollar check and saved you all this hassle so you could have got back to business"?

   18. PMPatrick McKenzie43:28

       So, uh, you know, ultimately I'm the CEO. Like, responsibility for fundraising, uh, lies with me. And so, uh, like, I've thought any number of things about, "How could I have, uh, done that better? How could I have strategized?" Uh, you know, I- I did not stop fundraising efforts, but I stopped lighting up new conversations for a number of weeks-

   19. DPDwarkesh Patel43:45

       Yeah.

   20. PMPatrick McKenzie43:45

       ... because I thought, "Okay, we've got, we've got the $2 million that we need to run this till the end of August," and that's my sort of internal target for, uh, the point at which it, uh, doesn't quite stop being useful, but it, uh, uh, starts like actually being, you know, a question on the margins where it is not the question until the end of, uh, August. Uh, so could I have done better? Probably. Uh, the- some of the folks in, uh, the broader effective altruist community, uh, I'm not a member, but I've read a lot of stuff that they, uh, uh, have written over the years and I broadly consider them positive. They are the but for cause of VaccinateCA, but, uh, uh, ask me about that in a moment. But some EA funders, uh, uh, talked to me after my piece about it had come out and said, "This is physically painful to read."

   21. DPDwarkesh Patel44:24

       Yeah.

   22. PMPatrick McKenzie44:25

       "We wrote bigger checks with less consideration to projects that had far less incidence of success. Why didn't you just ask us for money?" And, uh, like the answer there was twofold. One, I thought I had high quality introductions and a high quality personal network to people who were likely already going to fund it and so I didn't light up additional funding sources. And two, uh, like this is a true answer. I'm a flawed human who has a limited number of cycle- cycles in their day and was running a very, very com- complex operation and it literally didn't occur to me, "Hey, maybe those people that have been l- making a lot of noise about writing a lot of money for pandemic checks would be willing to write a pandemic check." Which, like, that was not entirely an irrational belief for me because I had to like reach out to people who were making (laughs) a lot of noise about-

   23. DPDwarkesh Patel45:06

       Yeah.

   24. PMPatrick McKenzie45:06

       ... writing money for pandemic checks and they said, "Not in the United States, not in May." And I thought, "Oh, well, it's, uh, you know, if I light up a conversation totally cold with someone now, uh, it's likely to just get- get a no again. I should, uh, try to like scrimp and save and break the piggy bank for my daughter's college education fund." Um, which by the way, she'll go to college folks, no worries, but, uh, uh, it's a, uh, like how far down the list of like plan A, plan B, plan C? We were down to like plan C at that point.

   25. DPDwarkesh Patel45:32

       I, I, I, I'm, uh, just to be clear, I'm definitely not blaming you. I, the, it goes back to the Copenhagen interpretation.

   26. PMPatrick McKenzie45:38

       No, but I should blame me a little bit because-

   27. DPDwarkesh Patel45:39

       No, no, no. But I, I, I think-

   28. PMPatrick McKenzie45:40

       ... I should be rigorous about my performance.

   29. DPDwarkesh Patel45:41

       I, I, I think like, you know, you go back to the commission versus omission. It's like the exact same reason that we shouldn't have blamed Google if they got involved, uh, did this themselves and maybe made a mistake.

   30. PMPatrick McKenzie45:50

       Yeah, but w-
4. 51:52 – 59:41

   Why tech needs to understand how government works

   1. PMPatrick McKenzie51:52

      of.

   2. DPDwarkesh Patel51:52

      Yeah.

   3. PMPatrick McKenzie51:52

      And so have to keep both th-

   4. DPDwarkesh Patel51:53

      Yeah.

   5. PMPatrick McKenzie51:53

      ... both of those parts of the equation in our minds at the same time. Um, I think that people in tech need to become radically more skilled at interfacing with government, uh, uh, to the extent that it is, uh, you know, we have some manifest competency issues in government right now. We can't simply, uh, uh, you know, sit out here and gripe about this on podcasts and et cetera, et cetera. Like, we, we've gotta go out and do something about it.

   6. DPDwarkesh Patel52:17

      Yeah.

   7. PMPatrick McKenzie52:17

      Uh, and there was a, um, uh, I think it's been reported that there was a meeting among, like, uh, tech leaders, uh, in, early in the vaccination effort where a bunch of people got in a room and were like, "This is going terribly. I hope someone fixes it." And, like, "I hope someone fixes it" is no longer a realistic alternative. I think we have to be, uh, be part of that solution there. Um, uh, partly it's like having, you know, higher fidelity models for how Washington works than simply, "Oh, they're bad at everything." Um-

   8. DPDwarkesh Patel52:42

      Mm-hmm.

   9. PMPatrick McKenzie52:43

      ... uh, like, it is important to understand (laughs) that, uh, the government has some manifest competence issues. It's also important when working with the government to understand that, like, telling the government to its face, "You have manifest competence issues," is not the maximally effective way to keep getting invited to the meetings. Um, I was very religious about not criticizing anything about this Californian, uh, response effort in 2021 because we needed to be in the room where it happens.

   10. DPDwarkesh Patel53:07

       Yeah.

   11. PMPatrick McKenzie53:07

       Um, uh, and, you know, that was the choice made. And, uh, uh, am I 100% happy with that choice? No, but we, we kept some relationships that we really needed. Um, the, uh, and I'm not saying don't criticize the government, obviously, but, uh, be, be strategic about these sort of things. Like, play like you're attempting to win the game. Uh, and, uh, you know, on the government side, uh, one, like, dispelling the massive ugh field that surrounds software. This is going to be a part of the future, whether you like it or not-

   12. DPDwarkesh Patel53:34

       Yeah.

   13. PMPatrick McKenzie53:34

       ... and we need to get good at it. We can no longer accept incompetence at this, as the, like, stand- uh, routine standard of practice in Washington. Uh, two, um, you know, it is enormously to the United States' credit that we have a extremely functional, extremely capable tech industry. (sighs) Maybe we shouldn't treat it like the enemy.

   14. DPDwarkesh Patel53:55

       (laughs)

   15. PMPatrick McKenzie53:57

       Just putting that out there. Again, this is something the United States has done before. It, it, like, there are laws in place, there are decades of practice. We could put a colonel's uniform on somebody.

   16. DPDwarkesh Patel54:07

       Yeah.

   17. PMPatrick McKenzie54:07

       Like, think seriously about doing that next time. Um, do I think we have institutionally, like, absorbed all of the correct, uh, lessons from this? (sighs) No. Uh, when I see, like, after-action reports, the after, after ac- after-action reports, uh, praise a lot of the things that people think are, like, very important for maintaining their political coalition-

   18. DPDwarkesh Patel54:29

       Yeah.

   19. PMPatrick McKenzie54:29

       ... which were either not productive or anti-productive-

   20. DPDwarkesh Patel54:34

       Yep.

   21. PMPatrick McKenzie54:34

       ... uh, and they fail to identify things that were the, you know, the true issues.

   22. DPDwarkesh Patel54:39

       Yeah.

   23. PMPatrick McKenzie54:39

       And to the extent that they identify things that were the true issues, uh, the, uh-... uh, sort of recommended action is, "Well, I hope someone fixes this next time." And that's no longer sufficient.

   24. DPDwarkesh Patel54:50

       Yeah.

   25. PMPatrick McKenzie54:50

       Like the, the default case is that the ball will be dropped and goodness, those of us who were involved with VaccinateCA kind of dread what we called the bat signal, where God willing, there will not be another like, worldwide pandemic killing millions of people as long as we live. If there is one, like we know what numbers to text to get the band back together. Society should not (laughs) rely on-

   26. DPDwarkesh Patel55:13

       Yeah.

   27. PMPatrick McKenzie55:13

       ... us as plan A. (laughs)

   28. DPDwarkesh Patel55:18

       (laughs)

   29. PMPatrick McKenzie55:18

       How did this happen?

   30. DPDwarkesh Patel55:19

       (laughs) I, I, I mean, m- m- the, the, the point about, uh, gr- griping on podcasts, that's def- definitely what I'm doing. But I just, uh, y- maybe you're, um, too humble to say this yourself, but I- I do wanna commend you for ... There are very few people, I think, who kind of, you- you tweeted it out. There are probably other- other projects that other people could have taken up that were not taken up. In this case, you tweeted it out. You saw that there was a thing that could be done, and you did it. You like, quit your job, and you did this full-time. You even (laughs) went ... This, and the reason you had to dip into your, uh, kids' college fund was because somebody who had promised a donation didn't follow up on it, right?
5. 59:41 – 1:13:50

   What is crypto good for?

   1. DPDwarkesh Patel59:41

      this finance newsletter, which is very excellent called Bits About Money, and you explore the plumbing in the financial system. My first question about this, uh, crypto at its peak was worth $3 trillion or something like that. If you ... By the crypto skeptic perspective that you have, how do we think about this number? What- what does it represent? Was it just the redistribution of wealth from savvy people or from dupes to savvy people or ... To the extent that useful applications didn't come out of this $3 trillion, what does it represent?

   2. PMPatrick McKenzie1:00:10

      So I think I have two broad perspectives on this. One, um, people often treat the market cap of something as like in- implicitly that is some sort of cost on society. And I think the true cost to society of crypto, uh, has been, uh, that any time one engages in attempting to do a productive enterprise, uh, some actor in society has said, "Okay. I will stake you with some of society's resources, which these resources are rivalrous. They cannot be applied to any other thing society needs, in the hope that you'll produce something that is worthy of being staked with this."How much have we spent on, uh, crypto? Not on trading tokens around, but on building infrastructure and spending rivalrous resources that we can't get back, whether that's, uh, you know, GPUs or A6 or electricity that could have gone to other things in China but went into mining, or, uh, the time of talented and intelligent people that could have been building other software products but was instead building crypto? That number is in the tens of billions or hundreds of billions of dollars. What do we have to show for that tens of billions or hundreds of billions of dollars? I am very crypto-skeptical, and I could give you an answer to that question. I think cryptos- crypto, like, fans would not like to hear it from me, so I prefer Vitalik Buterin's, uh, articulation of this question from 2017. He asked, uh, at the time it was, uh, 0.5 trillion, a trivial number, only $500, uh, billion dollars market cap. He said, "Have we tr-" Uh, and I'm paraphrasing a tweet thread, uh, "Have we truly earned this number? How many of the unbanked have we actually banked? How many distributed applications have a meaningful amount of value doing something which is meaningful?" And he has about six other meditations on this. And I think, you know, like, crypto folks certainly aren't accountable to me. In some ca- uh, uh, uh, manner, you're not even accountable to Buterin even though he's a, you know, a, uh, a clearly, like, a leading intellectual in the community. You're, you're accountable to, like, producing positive value in the world. But like, what is the answer to Buterin in, uh, in 2024? How many of the unbanked have we truly banked? What is the best use case for crypto right now? Once crypto has a responsive answer for that that is sized anything like proportionate to the hundreds of billions of dollars, tens of billions or hundreds of billions of dollars of resources that we've staked, uh, staked crypto with, I think crypto people should feel enormously proud of that accomplishment in some future where it hypothetically arrives. And in some future where that hypothetically arrives, you have my sword. I will love your, uh, your initiative. However, for the last many years we have been saying, "You can still get in early. You can still get in early. You can still get in early," because the value has not arrived yet.

   3. DPDwarkesh Patel1:02:43

      So-

   4. PMPatrick McKenzie1:02:43

      And so that is my, like, capsule summary on crypto for, uh, 14 years in.

   5. DPDwarkesh Patel1:02:48

      (laughs)

   6. PMPatrick McKenzie1:02:48

      We've staked a group of talented people who are very good at giving a sales pitch with tens of billions or hundreds of billions of dollars, and look at what we have built. This would be a failure in any other tech company.

   7. DPDwarkesh Patel1:03:07

      S- so-

   8. PMPatrick McKenzie1:03:07

      Like capital F failure.

   9. DPDwarkesh Patel1:03:08

      (laughs) So, so-

   10. PMPatrick McKenzie1:03:10

       So either, like, radically pivot and unfail it, or maybe we should stop continuing to stake you with money.

   11. DPDwarkesh Patel1:03:16

       So two potential responses, um, if, uh, from the crypto optimistic perspective.

   12. PMPatrick McKenzie1:03:22

       (laughs)

   13. DPDwarkesh Patel1:03:22

       One, I have people who help me with the podcast who are around the world. Not that many, but like the, the couple I have around the world. I have a clip editor in Argentina, I have a shorts editor in Sri Lanka.

   14. PMPatrick McKenzie1:03:37

       Mm-hmm.

   15. DPDwarkesh Patel1:03:37

       And all of these people have asked me, I haven't prompted them, I ask them, "How should I pay you?" And they say, "USDC."

   16. PMPatrick McKenzie1:03:44

       Mm-hmm.

   17. DPDwarkesh Patel1:03:44

       And so maybe there, it wouldn't be that much harder for them to set up a Wise account, but I think it's notable that all of them prefer the, uh, just, "Well, how do, how should I, how should you get paid?" and they, the, their first answer is a stable coin.

   18. PMPatrick McKenzie1:03:57

       Absolutely, that is evidence.

   19. DPDwarkesh Patel1:03:58

       Yeah.

   20. PMPatrick McKenzie1:03:58

       And you know, like some tech-savvy people have a good payment rail, and well, they have a payment rail that they did not have access to fif- 15 years ago, but like at the cost of tens or hundreds of billions of dollars. Uh, you know, like counterfactually, if one had thoughts like, "Okay, we really want to work on that payment rail specifically," another way one could hypothetically have, you know, deployed $10 billion is on like the best funded lobbying campaign in history in the United States to, uh, work on like AML and KYC regulation to allow more-

   21. DPDwarkesh Patel1:04:29

       But, but, why does it-

   22. PMPatrick McKenzie1:04:29

       ... easy transfers of money worldwide.

   23. DPDwarkesh Patel1:04:30

       But why does it have to be compared against the best possible counterfactual use case? It's the s- sins of commission versus omission again-

   24. PMPatrick McKenzie1:04:35

       Right.

   25. DPDwarkesh Patel1:04:35

       ... where it's like on margin-

   26. PMPatrick McKenzie1:04:37

       It's not that-

   27. DPDwarkesh Patel1:04:37

       ... it made things better.

   28. PMPatrick McKenzie1:04:38

       D- don't judge it by, like, hypothetical worlds, just like keep in, keep in mind that hypothetical worlds might exist.

   29. DPDwarkesh Patel1:04:42

       Yeah.

   30. PMPatrick McKenzie1:04:42

       Judging by like the actual realized utility at the moment relative to the amount of resources consumed.

Episode duration: 2:02:17