Robert Breedlove: Philosophy of Bitcoin from First Principles | Lex Fridman Podcast #176

1. 0:00 – 2:37

   Introduction

   1. LFLex Fridman0:00

      The following is a conversation with Robert Breedlove, someone who caught my attention and was recommended highly as a rigorous scholar and thinker in the space of decentralized finance and Bitcoin. His podcast, titled What Is Money? is a good representation of the way his mind works. He's willing to talk through ideas for many hours, (laughs) willing to listen, willing to think, which makes him a great companion in conversation to explore the history, philosophy, and future of money. Quick mention of our sponsors: Fundrise, Element, Munk Pack, and Better Help. Check them out in the description to support this podcast. As a side note, let me say that I'll have a number of conversations in the coming months on Bitcoin and other cryptocurrencies. None of these conversations are financial advice. That's not a legal warning, that's a genuine description of my goals and approach with these chats. At least for a while, I personally won't actively invest in Bitcoin or any other cryptocurrencies, except to learn about the technology itself. I don't think this should be a journalistic standard like the New York Times tried to establish, which I very much disagree with. In my humble opinion, I think journalists should be free to invest in Bitcoin if they want to. Luckily, I'm not a journalist. I just know my own psychology and I feel that my thinking will be muddled by excitement if I invest before I understand. I feel the same way about Tesla, for example. I still don't own any Tesla stock and I am still indeed fascinated by Tesla autopilot as an artificial intelligence system. I work hard to be cognizant of the biases that arise in my mind and always try to choose the path that maximizes or maintains a freedom of thought as much as possible. Also let me say that I try to be very careful in selecting guests based not only on the contents of their ideas, but the richness, complexity, music, style of their mind and character. Yes, I will talk with people with whom you and I may disagree, people who some may call bad or even evil human beings. I want to understand them because I believe that, as Solzhenitsyn said, "The battle line between good and evil runs through the heart of every man." I think if you always run from evil, you become blind to the truth of human nature. This is the Lex Fridman Podcast, and here is my conversation with Robert Breedlove.

2. 2:37 – 9:42

   Sovereignty

   1. LFLex Fridman2:37

      Rousseau opens his 1762 book, The Social Contract, with the following statement: "Man is born free and everywhere he's in chains." So, you talk about freedom and sovereignty quite a bit. What do these ideas mean to you, the idea of sovereignty?

   2. RBRobert Breedlove2:54

      Freedom and sovereignty, um, I think they're very closely related. Let's start just focusing on sovereignty, which is a word I don't think we talk about enough. Um, and the general definition of that I would give is the authority to act as you see fit. Um, and it's a word that's etymologically associated with words like monarchy, money, reign. So historically, it's referred to whatever the locus of supreme power is in the sphere of human action. So whether if you go, like, back in ancient Egypt, the pharaoh had absolute sovereignty and everyone else was pretty much operating according to his interests. You fast-forward to today, modern Western democracy, we have, um, more decentralized sovereignty in that we all get to go vote and elect officials that make decisions on our behalf. So the, the theme of sovereignty across history is that it's been gradually decentralizing across our different models of socioeconomics. And, um, it's largely... You could say it's rooted heavily in the money, I would argue, which is something we'll get a lot into here, where if you have money you have the authority to act as you see fit in the world. Um, and even in our current political sphere, if you have enough money, you can actually shape- reshape the rules, right? You can reshape laws, you can lobby Congress. Um, if you're in, in a certain situation like many billionaires, you can negotiate your own tax treaty such that you can get favorable tax treatment with certain jurisdictions in the world. So this concept of, of sovereignty, um, which today we call... It's, uh, common to call states or nation-states or governments sovereign, meaning that they have power over people. Um, but as I argue in a lot of my writing, I actually think that sovereignty inheres within the individual and that we each have our own interiorized space of choice, which is something like Viktor Frankl called the final human freedom, in that we, no matter what our circumstances are, no matter what, uh, exogenous situation we face, we always have this endogenous power to choose how we respond to it.

   3. LFLex Fridman5:07

      That's one of my favorite books is, uh, Man's Search For Meaning.

   4. RBRobert Breedlove5:10

      Mm-hmm.

   5. LFLex Fridman5:11

      Maybe you can break that apart a little bit. (sighs) So you've kind of spoken about sovereignty as, uh, closely linked to power, but is there something about your own mind being able to, uh, achieve sovereignty no matter what the monetary system is, no matter what, who has the control over centralized power, the money, or whatever the mechanisms of, uh, sovereignty on the societal level? You as an individual, isn't ultimately all boiled down to what you can do with your mind, how you see the world-

   6. RBRobert Breedlove5:42

      Yes.

   7. LFLex Fridman5:42

      ... how you interpret it?

   8. RBRobert Breedlove5:43

      Yeah, I agree. And as we get a little bit deeper into this, uh, you'll, I think we'll come to see money as an extension of your mind, so there's a feedback between money and mind. For instance, you think in dollars today, almost guarantee it.

   9. LFLex Fridman5:55

      Yes.

   10. RBRobert Breedlove5:55

       Most of us do here in the US. (laughs)

   11. LFLex Fridman5:57

       Yes, yes.

   12. RBRobert Breedlove5:58

       Um, and it's, it's a tool, right? It's a tool we're using to de-complexify the world around us, to deal with it, to...... understand the sacrifices and successes across an entire history of economic transactions. We can boil that all down to the price. So it's data compression. And if you can change... I- if there's a central body or central governance mechanism that can manipulate that money, it can have an impact on your mind. Um, for instance, today... So, I agree with you on the firsthand say that I do believe, uh, in free will. I do believe in individual autonomy. But I also think that, um, there are certain devices and powers in the world around us that can actually influence how we think.

   13. LFLex Fridman6:42

       And it's fascinating to think about the fact that money might be actually deeply integrated into the way we think and into our mind. Like, this is, uh, you think about what are the core aspects of the human mind? What influences cognition abil- the way you reason about the world?

   14. RBRobert Breedlove6:57

       Mm-hmm.

   15. LFLex Fridman6:58

       You have the Chomsky, like, language is at the core of everything.

   16. RBRobert Breedlove7:01

       Mm-hmm.

   17. LFLex Fridman7:02

       But you're kind of placing money as pretty close to the core of what it means to be, uh, an intelligent, reasoning human.

   18. RBRobert Breedlove7:11

       Mm-hmm. I think money is a direct derivation of action and speech, actually. It's another expression of the logos. Um, if we even think of what it means to think is that we are generating two different courses of action, potential courses of action, and we're populating them with avatars, right? Maybe ourselves or others. And then we're comparing how we may act in each situation and what we think the result would be. So, actually, it's comparison. Basically, it's comparison and contrasting of possible courses of action. And that's the same thing with words themselves. Like, you know, most words, uh, uh... The vast majority of words only have meaning in relationship to other words, right? It's all contextual. Definitions of a word are more words. Now, people have argued with me about this because there is a first word, right? Where you pick up rock and say, "Rock."

   19. LFLex Fridman8:04

       Mm-hmm.

   20. RBRobert Breedlove8:04

       But most other words and much, uh, in, in higher abstraction tend to be relative. And what's funny about action and speech, and this gets... I got into a bit of this in our, our paper here, is that it's linked to evolutionary biology, and that once human beings adopted upright stance, we freed our hands. We no longer needed our hands for locomotion.

   21. LFLex Fridman8:29

       Mm-hmm.

   22. RBRobert Breedlove8:30

       So, we started to evolve more dexterity, um, and notably, we have opposable thumbs. So, this gives us an ability to manipulate and particularize the environment in a way that most other animals cannot. And what's interesting about this is that as we gain this ability to, um, manipulate natural resources and, you know, count, point... Pointing was a big deal and that we could indicate, uh, prey or, or items at a far off distance and we could organize ourselves. Um, we... At the same time, we co-evolved this fine musculature in the face and tongue. So, it's as if speech developed, co-evolved really with our dexterity. And as a natural extension of that came us making tools, right? We started to create things to better satisfy our wants over time, and the most tradable tool in any society or the most tradable thing is money. So, I really... I argue that action and speech are quintessential modes of self-sovereign expression, and that money is just sort of a tech layer we've put right on top of that and that it's a natural derivation of action and speech.

3. 9:42 – 14:19

   Territorial imperative

   1. LFLex Fridman9:42

      Okay, that's fascinating to think about sovereignty from the evolutionary perspective, and then ultimately money is the technology layer that enables sovereignty. So, you know, it's really fascinating to think about our modern human society as deeply rooted in, in these like evolutionary roots-

   2. RBRobert Breedlove10:03

      Mm-hmm.

   3. LFLex Fridman10:03

      ... from the very origins of life on Earth. So, what... You know, some of the ideas you just mentioned, what do you see are some interesting characteristics of just life on Earth that propagated to us humans? Like, what ideas propagated through or have roots in the evolution?

   4. RBRobert Breedlove10:23

      Yeah. I think one of the deepest impulsions in life is the territorial imperative. So, all life is seeking to expand its dominion over space and time.

   5. LFLex Fridman10:36

      Mm-hmm.

   6. RBRobert Breedlove10:37

      And we think about, you know, again, physically with space, uh, it's advantageous to an, to an animal or an organism to have more territory under its control to ra- to raise offspring. So, it's all about reproductive fitness at the end of the day. And then we can also think of reproduction itself as the genetic impulse to have more... To replicate oneself across time. So, it's territoriality across time in a way. And this is very common in most animals. Not all animals are territorial, but many are. Um, and you see very interesting behaviors resulting from territoriality. This is like, uh, animal combat, you know? The reason birds sing is territoriality. Um, a number of other things. And it's my hypothesis and others have shared this hypothesis as well, that mankind is clearly, I think, would argue a territorial species, and that he expresses this territoriality in property rights. So, property, when that word... We hear that word, we typically think of an asset. We think of, oh, this house or the stock or whatever. But property is actually the socially acknowledged relationship between a human and an asset such that you have exclusive rights and responsibilities to a particular asset. Um, it is not the asset itself. So, property, it's information. It's a relationship.

   7. LFLex Fridman11:59

      By the way, my mind was just blown.

   8. RBRobert Breedlove12:01

      (laughs)

   9. LFLex Fridman12:01

      Property is information. It's not the actual asset. That's really important.

   10. RBRobert Breedlove12:05

       Very important.

   11. LFLex Fridman12:06

       That's, that's really interesting.

   12. RBRobert Breedlove12:07

       Yeah. And then it, it comes down to how do we organize, organize ourselves such that, um...... property that, that the contributions people are making are commensurate with the consideration they're receiving. So, if you're adding value to a piece of property, you're developing a piece of land for use, in theory, like, to be fair, you should have the rights, um, to that fruit, right? If you go out and plant a garden or whatever it may be. Um, and, and this is very, uh, this is rooted in, in natural law, where we have rights to life, liberty and property. Those are kind of just the base, the fundamental layer of, of morality and capitalism, frankly. Um, and you could think of, to get really primordial with it, the, the first capitalist in the world, just to kind of get some definitions out here, I'll say capitalism versus communism or socialism as the spectrum I'll, I'll speak on. The first capitalist in the world would be the guy, the caveman that maybe dug a little hole for himself to shield himself from the elements, right?

   13. LFLex Fridman13:14

       Mm-hmm.

   14. RBRobert Breedlove13:15

       Maybe it was a rainstorm or snowstorm, and he dug a little enclave and he protected himself.

   15. LFLex Fridman13:20

       I thought you were gonna go... 'cause you said primordial, I thought you were gonna go back to like earlier biological systems.

   16. RBRobert Breedlove13:26

       (laughs)

   17. LFLex Fridman13:27

       (laughs)

   18. RBRobert Breedlove13:27

       I guess, I guess primordial for human, perhaps. (laughs)

   19. LFLex Fridman13:29

       For humans, yeah. Okay.

   20. RBRobert Breedlove13:31

       And then the first communist or socialist would be someone that decided the fruits of his labor belonged to him. So he would have violently encroached on that individual and taken his plot for himself, for his own use. And that's, um, that's the spectrum across which capitalism in the pure sense and communism in the pure sense operate, in that capitalism, each individual has the exclusive rights to the fruits of their labor. So anything they spend their time, effort, energy creating in the world, they own the rights to that and they can trade those rights with others, other self-owned people that have done similar things. Communism or socialism would imply that other people, typically the state, have the rights, at least some rights to your... to the value you've

4. 14:19 – 20:24

   Property

   1. RBRobert Breedlove14:19

      created.

   2. LFLex Fridman14:19

      So there's this interesting moment when that first caveman, that first capitalist drew a line, a circle in this cave and said, you know, "This is mine." You could say it was free to be claimed-

   3. RBRobert Breedlove14:32

      Mm-hmm.

   4. LFLex Fridman14:32

      ... at the time he claimed it.

   5. RBRobert Breedlove14:33

      Yeah.

   6. LFLex Fridman14:34

      But it's an interesting moment when, uh, asset becomes an asset, when spacetime, as you're referring to it, becomes something that's now can be possessed by a human being.

   7. RBRobert Breedlove14:48

      Mm-hmm.

   8. LFLex Fridman14:48

      Is there something special about this moment? Because it feels like, first of all, in terms of space and time, it feels like there's a lot of available spacetime yet to be claimed.

   9. RBRobert Breedlove15:02

      (laughs)

   10. LFLex Fridman15:02

       So if we just look at like the universe, right? We're talking about, there's a funny thing with, uh, with Elon Musk and Mars, I think they s- sneaked in there for SpaceX, that, uh, nobody on Earth has any authority on Mars or any-

   11. RBRobert Breedlove15:17

       (laughs)

   12. LFLex Fridman15:17

       This is a very interesting question. It seems almost like humorous at this time, but perhaps not. Perhaps there'll be sections of space, not just on planets, that are gonna be even fought over. So is there something special about this moment? Because in discussing sort of violence and respect for property-

   13. RBRobert Breedlove15:36

       Mm-hmm.

   14. LFLex Fridman15:36

       ... it feels like this is a special moment, uh, because, uh, ultimately conflict arises when you make claims, uh, on a particular territory. It's, you know, it's not always in conflict where people say, when you look at Hitler or something, for example-

   15. RBRobert Breedlove15:52

       Mm-hmm.

   16. LFLex Fridman15:52

       ... his claim would be in many of the lands that he attacked and invaded, that this is ultimately... this has always belonged to Germany.

   17. RBRobert Breedlove16:01

       Mm-hmm.

   18. LFLex Fridman16:02

       So, is there something you could say as to like what it means to own an asset or a property?

   19. RBRobert Breedlove16:09

       Yeah. So, in the ancient days of hunters and gatherers, we could say that property was mostly a lordial title, which meant it's just whatever you can defend, right? So if you've got knives and daggers and satchels and, you know, maybe some pelts you've, you've hunted, whatever you can hold and defend is yours. That's... And, and there's not like there's a government to appeal to, you know, you're just sort of a free agent operating in the wild, defending the assets you can protect on you, more or less.

   20. LFLex Fridman16:43

       Yeah.

   21. RBRobert Breedlove16:43

       Um, and what really changed the nature of property is when we get into the agricultural age. So, there, there's a big flip where we went from just foraging and hunting all the time, constantly moving, trying to stay alive, to deciding we're gonna settle here.

   22. LFLex Fridman17:00

       Mm-hmm.

   23. RBRobert Breedlove17:00

       We figured out how to cultivate crops. We can create, uh, you know, we can increase the population 'cause we get, we can harvest more energy from the sun, and we can establish a longer term civilization. What happens in that transition is that we s- begin creating economic surplus. So for the first time in history, we have, you know, grain, uh, uh, stock houses of grain to defend, or maybe meat or cattle, or whatever it is we're creating, we now have savings.

   24. LFLex Fridman17:27

       Mm-hmm.

   25. RBRobert Breedlove17:28

       And it's at that time when government emerges as well, because once you have savings or you have an economic surplus, you have something that other people want to steal, right? This, this one thing we'll touch on a lot today is people always want something for nothing. There, there's alwa- people are always seeking the path to get something for nothing, and I think that drives a lot of our decision-making, and it actually encourages us to be innovative in a lot of ways, right? We're trying to, um... It's, it's, you could say it's our laziness that's helping us be inventive in a way, in trying to accomplish greater results with less efforts over time. But the- we can cross that line in seeking something for nothing where we start to violate the life, liberty and property of others, and that's where we shift from kind of capitalistic society to, to something more communistic. And...So that's what government is, it's a protection producing enterprise for the economic surplus generated by a trading society. So when people begin to trade, uh, they create what's called the division of labor, which is a very common economics term, basically means you're better at making hats, I'm better at making boots. If you and I... if you specialize in hats, I specialize in boots, and we trade, we've created a positive sum game where you and I both benefit. So we become collectively more than the sum of our parts through trade. And that's why human beings do trade, because we become more energy efficient as a result. We create more outputs per unit of input. And you can think of government in that respect, if we're looking at it maybe in a tech sense, that the economy is the trade network that generates wealth, generates innovation, generates all... this whole lap of luxury we live in today that we've inherited from our forebears is from the market. It's not from a government. The government is the network security, if you will.

   26. LFLex Fridman19:17

       (laughs) Yeah.

   27. RBRobert Breedlove19:17

       So we're ex- we're, we're paying expenses to a vendor to protect peace, to preserve life, liberty, and property in that network so that we can have, you know, when there's inevitably disputes over private property, we can have non-violent dispute resolution, uh, in the rule of law. Um, and we can have a reasonable expectation of, of being able to conduct commerce without violence. The problem has been that the protector tends to, you know, they're in a monopolistic position, we would say, they tend to start abusing that position to obtain, uh, property for themselves. Again, trying to get that something for nothing. When you control, you know, you are the security guard for the economy, the first thing they tend to monopolize is money 'cause if you can control the money, you're effectively controlling people, their energy, their perceptions, um, and that becomes a, you know, particularly through inflation, becomes an avenue to get something for nothing, in that you can just print more money that everyone else is forced to sacrifice their time and energy to obtain.

5. 20:24 – 23:03

   Anarchism

   1. RBRobert Breedlove20:25

   2. LFLex Fridman20:25

      What, what are your thoughts about anarchism? So, um, I talk quite a bit, he'll be here in a few days actually, Michael Malice, a- about ideas of anarchy, and his idea, or the idea of anarchists is that any amount of government will eventually become the very kind of thing that you're referring to.

   3. RBRobert Breedlove20:45

      Mm-hmm. Mm-hmm.

   4. LFLex Fridman20:45

      So there's almost no way to have a government that doesn't then try to m- uh, monopolize power-

   5. RBRobert Breedlove20:51

      Mm-hmm.

   6. LFLex Fridman20:52

      ... money, and all those kinds of things.

   7. RBRobert Breedlove20:54

      Mm-hmm.

   8. LFLex Fridman20:54

      Do you think it's possible to have a government sort of on that spectrum of like anarchy, maybe libertarianism, I'm not sure how exactly the spectrum goes, but where do... you have a small government that protects the liberty and property rights and those kinds of things, and doesn't expand to then also control the, the monetary system and all those other, uh, things? Is it possible?

   9. RBRobert Breedlove21:18

      Agreed, agreed completely. It was not possible until Satoshi Nakamoto. So for the first time in history, we have a money that cannot be monopolized, cannot be corrupted, cannot be changed, um, cannot be weaponized frankly. Our current monetary system is weaponized by those who can print money against those who cannot. Um, and I think when you have, you know, at the heart of every modern economy, which even we could say the US, we pride ourselves as free market capitalists, you know, we out-competed communism in the 20th century, we think that this is the superior model, um, most businesspeople will tell you that the free market is the best allocator of resources, all of these things. But what we have at the heart of every modern economy, including the US, is an anti-capitalistic institution, which is the Central Bank. Um, the temptation to monopolize money throughout all of history has been too strong for anyone to resist. So any, even bene- benevolent, quote-unquote, dictators that have taken over, many dictators have inherited, say, an inflationary regime, where society is coming apart because someone was clipping the coins or someone was printing too much money, and they'll commit to going back to a hard money standard. So they'll keep society on a, a gold standard, for instance, such that they cannot violate, um, the money to benefit themselves. But inevitably over time, because it is a political institution, there's an incentive there, right, for, for again, to get something for nothing, to spend more than you're making through tax revenues. And with that incentive, people typically ultimately end up pursuing that inflationary path.

6. 23:03 – 27:26

   Inflation is theft

   1. RBRobert Breedlove23:03

      So we can, we get deeper into that about inflation is a term that we've been conditioned to think today is just something normal, that prices just go up, and then, uh, it's pertinent to a healthy economy.

   2. LFLex Fridman23:16

      Mm-hmm.

   3. RBRobert Breedlove23:16

      But it's actually, if you look at it from real first principles, it is just theft integrated into the money. It's a technology backdoor, is another way to think about it. You wouldn't buy a cellphone knowing that someone could siphon your data off your private calls and sell it into the market.

   4. LFLex Fridman23:31

      Mm-hmm.

   5. RBRobert Breedlove23:32

      Now, I know we do that with a lot of social media stuff today, and that's something else we can get into, but you wouldn't do it willingly, right?

   6. LFLex Fridman23:37

      Yeah.

   7. RBRobert Breedlove23:37

      You wouldn't... you'd prefer that your cellphone and your data was monetized by you, or if you were gonna sell it, you would be able to selectively sell it. Inflation is that. It's similar. It's a tech backdoor. So it's a money that only a few people can siphon value off of surreptitiously. Uh, typically slowly, but eventually, as we've seen throughout history, that slowly builds up into a rapidly, and then, um, causes the, the monetary system to collapse.

   8. LFLex Fridman24:05

      Do you think there's a benefit to inflation possibly? So, so when you have perfect information, uh, p- perhaps you, you don't need inflation, perhaps it is purely theft, but I think of inflation as like the snooze button on the alarm. Like, you just c- (laughs) so if you have a hard standard, you better wake up when the alarm rings-

   9. RBRobert Breedlove24:25

      Mm-hmm.

   10. LFLex Fridman24:26

       ... but, you know, all of us kind of like...... probably shouldn't but use the snooze button. And it's like, "Okay, well, five more minutes or ten more minutes."

   11. RBRobert Breedlove24:33

       Yeah.

   12. LFLex Fridman24:33

       And then you're saying there's naturally a slippery slope where you g-... you, uh, it becomes a drug that you fall in love with and you abuse.

   13. RBRobert Breedlove24:42

       That's right.

   14. LFLex Fridman24:42

       But nevertheless, the usefulness of the snooze button (laughs) is that you don't know how you'll be actually feeling when the alarm rings. You might be able to ready to pop up-

   15. RBRobert Breedlove24:52

       (sighs)

   16. LFLex Fridman24:52

       ... or you might be like, you really need those few more minutes, right, to psychologically get yourself out of bed.

   17. RBRobert Breedlove24:57

       (laughs)

   18. LFLex Fridman24:57

       This analog- this metaphor is just not working at all.

   19. RBRobert Breedlove24:59

       (laughs) No, no, it- it makes total sense.

   20. LFLex Fridman25:00

       But do you think there's a use (laughs) to, uh, to inflation sometimes from like a economics perspective?

   21. RBRobert Breedlove25:07

       I think the drug metaphor is a little more apt in that inflation does provide an immediately stimulative effect, um, when used early on. So but what it's doing is it's... Again, it w-... (sighs) We talk about the balance between incentives and disincentives, right, that being necessary for a system to pro-... to function properly. If... With inflation, you're essentially giving, uh, the people that can print money a way to dampen the disincentives they face. So it- it- it destroys feedback loops, I guess you might say. And another way to look at this is when you... So using inflation, using monit- quantitative easing, you can decrease short-term volatility in the marketplace. So the market is basically this idea, this form of free exchange that's trying to zero in on the best ideas. And the ideas are those that are most fit to reality, to satisfying the most wants. It's gonna overshoot, it's gonna undershoot. You have these little business cycles. But when it's undershooting and you, and you're experiencing, uh, business recession, in a capitalist environment, the market needs to clear that mal-investment, that misallocation of capital. That means someone made a bet on a certain idea that it would satisfy wants in a particular way, and that bet did not pan out. If you then paper over the losses that business is creating, you're now delaying and exacerbating the volatility that that idea created. So this is kind of a Talebian concept where, um, you can dampen short-run volatility, but volatility is truth. Volatility is us matching our ideas to reality, right? We're constantly, again, overshooting and undershooting. So if you delay volatility, you're just amplifying it and exacerbating it in the long run. And that's what central bank is doing. The central bank mandate is low unemployment and, uh, low and expected inflation, basically. Uh, and so they're trying to achieve economic growth in a stable way, quote-unquote stable way. This is their ostensible purpose. Um, and that's just not possible. Growth is an inherently instable process.

7. 27:26 – 32:05

   Volatility is truth

   1. RBRobert Breedlove27:26

   2. LFLex Fridman27:27

      Can you, can you elaborate a little bit about the nature of volatility? Why is it communicating truth? That's something that a lot of people are afraid of, is the volatility, almost like it's a, it's a sign of chaos-

   3. RBRobert Breedlove27:43

      Mm-hmm.

   4. LFLex Fridman27:44

      ... and so they want to escape chaos. But you're saying that that's actually, uh, whether it's chaos or, or not, I don't know, but it's getting us closer to the fundamental, like, reality-

   5. RBRobert Breedlove27:57

      Yeah.

   6. LFLex Fridman27:57

      ... that we should not be trying to escape.

   7. RBRobert Breedlove28:00

      Yeah. So if we consider that (sighs) the universe is pervaded by entropy, right? This is the second law of thermodynamics is that every closed system tends towards greater disorder over time. And that life itself, again, I would argue expressed through the logos, w- we, life, is the anti-entropic principle. It's the only thing that's converting entropy into order, chaos into order. And that's what entrepreneurs are doing, right? We're living at the edges of the known, and we're trying to... We're- we're- we're testing ourself against the entropy of nature, trying to figure out new and better ways of saying, doing, or making things. And then if we do crack a code or, or figure something out, we then have a big incentive... The incentive is to get rich, right? Because then you have a new idea that you could then sell back into the marketplace. So it's this sequence of courageously confronting the entropy of nature and converting it into good and useful order, which by the way is like the ancient idea of God in Genesis, which I think is interesting, um, that actually enables us to construct civilization in these layers of anti-entropy or order, you might say. So today, we live in a bubble of, of anti-entropy or order, you know?

   8. LFLex Fridman29:20

      Yeah.

   9. RBRobert Breedlove29:20

      Like, the, the coastlines are guarded by the nation, and the city has a certain, uh, police force that keeps it in order. Um, even the way we, we talk, like, there... clearly the words matter, but also the non-verbal cues.

   10. LFLex Fridman29:34

       Yeah.

   11. RBRobert Breedlove29:34

       All these things are like order that has been established over many s-... many, many thousands of years of, of human evolution. And I think that's... When I say volatility is truth, what I'm saying is that the experience of uncertainty is something that's ineradicable from, from life, right? Uncertainty, (scoffs) like, it- it's- it's kind of a paradox because it's... we're fighting against it, right?

   12. LFLex Fridman29:58

       Yeah.

   13. RBRobert Breedlove29:59

       We're trying to innovate our way away from uncertainty to give us... to create more capital, which capital is very simply, uh, a way of mitigating uncertainty. So this is why you might have like a stash of food in case, you know, the power goes out, or a generator. Like, it helps you overcome uncertainty over time. But uncertainty is also where all the sweetness of life is.

   14. LFLex Fridman30:20

       (laughs) Yeah.

   15. RBRobert Breedlove30:21

       So there's gotta be this balance with one foot in, one foot out. And-

   16. LFLex Fridman30:25

       So, human society is this kind of bubble of water that we've constructed and it's-

   17. RBRobert Breedlove30:29

       Yes.

   18. LFLex Fridman30:29

       ... slowly expanding. But at the edges, you're always going to have that chaos, that volatility. And that the entrepreneurs, uh, are kind of like jumping into that, uh, chaos-

   19. RBRobert Breedlove30:39

       Yes.

   20. LFLex Fridman30:39

       ... and some of them die, uh-

   21. RBRobert Breedlove30:40

       Yes.

   22. LFLex Fridman30:40

       ... and some of them succeed. And so, like, if you want to grow this bubble of water, you, we have to be embracing the volatility at the edges.

   23. RBRobert Breedlove30:51

       Yes.

   24. LFLex Fridman30:52

       It's th- the, the, the... (laughs)

   25. RBRobert Breedlove30:53

       And reverence for entrepreneurship because-

   26. LFLex Fridman30:55

       Yeah.

   27. RBRobert Breedlove30:55

       ... these are the people putting their neck out, so to speak, risking themselves, and they're gonna contribute to society, by the way, whether they go up in flames or not. If they go up in flames, society has witnessed their experience as something not to do, or something that doesn't work in a particular time and place. So that you could say they're, them going up in flames is a way of enlightening the rest of us.

   28. LFLex Fridman31:16

       (laughs)

   29. RBRobert Breedlove31:16

       Or, if they figure something out-

   30. LFLex Fridman31:18

       That's poetry. (laughs)
8. 32:05 – 36:13

   Taleb and Bitcoin

   1. RBRobert Breedlove32:05

   2. LFLex Fridman32:05

      As a small aside, maybe you can guide me through it, I don't know if you were paying attention, but there was some chaos around, uh, Taleb and the Bitcoin community. I wasn't quite paying attention, uh, but from my outsider's perspective, I thought, uh, Nassim Taleb was a supporter of Bitcoin, and then a lot of people were very upset about something. I'm sorry if I don't know the details, but it-

   3. RBRobert Breedlove32:28

      (laughs)

   4. LFLex Fridman32:28

      ... can you, can you, uh, pull out some profound philosophical ideas from the disagreement of the chaos?

   5. RBRobert Breedlove32:34

      (laughs) I admittedly don't know too much about it either. I- I've ... a big fan of his writing.

   6. LFLex Fridman32:40

      Mm-hmm.

   7. RBRobert Breedlove32:41

      Um, he's always been a little different in person. Like, I actually, uh, he signed one of my books. I met him in person. He's just, he's got a very abrasive personality. He's kinda known for it. It's not ... I don't think I'm passing any judgment here. He sort of embraces it. (laughs)

   8. LFLex Fridman32:55

      (laughs) Yeah.

   9. RBRobert Breedlove32:56

      But he had written, um, the forward to a really important book in Bitcoin called The Bitcoin Standard, for Saifedean Ammous.

   10. LFLex Fridman33:03

       Mm-hmm.

   11. RBRobert Breedlove33:03

       And then I think they had a little Twitter beef because Saifedean-

   12. LFLex Fridman33:08

       Got it.

   13. RBRobert Breedlove33:08

       ... uh, was, is very much against COVID mask and-

   14. LFLex Fridman33:11

       Got it.

   15. RBRobert Breedlove33:11

       ... state intervention.

   16. LFLex Fridman33:12

       Got it.

   17. RBRobert Breedlove33:12

       Whereas Taleb's on the other side of the fence.

   18. LFLex Fridman33:14

       Right.

   19. RBRobert Breedlove33:15

       And so ... And then after that beef, Taleb came out against Bitcoiners saying, "Oh, Bitcoiners are crazy and wrong."

   20. LFLex Fridman33:21

       Right. I think the great mask debate of 2020 will probably be the thing that ultimately leads to World War III.

   21. RBRobert Breedlove33:28

       (laughs)

   22. LFLex Fridman33:28

       Um, I've been very surprised how tense, how much, like, division-

   23. RBRobert Breedlove33:33

       Yeah.

   24. LFLex Fridman33:33

       ... this one little, arguably silly thing, has led to. I think a lot of people sort of project their, like, it's almost like not wearing a mask is a statement of sovereignty, of freedom-

   25. RBRobert Breedlove33:46

       Yeah.

   26. LFLex Fridman33:46

       ... of like saying, "Fuck you," to the man, the government, the centralized power, or the dishonesty, or the, uh, in the scientific community, all those kinds of things. And then wearing a mask is a sort of kind of signaling of f- of various kind of, uh, socialist ... I don't know. I'm not paying attention to it. I actually tuned out. I was part of a group of scientists that were looking into like do masks work? This very interesting question.

   27. RBRobert Breedlove34:11

       Uh-huh.

   28. LFLex Fridman34:12

       To me, it was an interesting question. I sort of roll in to ask that very interesting question 'cause I think it is an interesting scientific question. But then I quickly realized that just as I was doing this, like, scientific exploration of this very interesting question about virion particles, like what kind of things-

   29. RBRobert Breedlove34:30

       Yeah.

   30. LFLex Fridman34:30

       Like, from a scientific perspective, how do we prevent the spread of a pandemic? Forget COVID, any pandemic.
9. 36:13 – 47:12

   Life is information propogating through flesh

   1. LFLex Fridman36:13

      but back to the fundamental nature of space-time. Let me ask you 'cause we're kind of left at ... I'd like to go back to this idea of, um, that you said that everything we think, say, or do occurs within the bounds of space-time.... uh, so first of all, maybe you can comment on what do you mean in this context about space, time, but also about the nature of, uh, truth. Like, how much of all of this is knowable? How much of this is accessible to us humans?

   2. RBRobert Breedlove36:46

      Mm-hmm.

   3. LFLex Fridman36:46

      How much uncertainty, like we were talking about, is there in the world? Uh, are you, do you fall in a place where we can reason deeply about this world and it's knowable or is it mostly chaos and we're just holding on for dear life?

   4. RBRobert Breedlove37:01

      Yeah, I, I think... I said that all action occurs within the bounds of space time. The other thing, everything we say, do, or make, the other thing is that everything we say, do, or make starts out as an idea. So, there's this concept of universal Darwinism, which basically, um, applies Darwinian principles, but outside of the biological sphere. So, we could say that this kind of gets into Richard Dawkins' memetics, that even ideas are competing, reproducing, recombining, um-

   5. LFLex Fridman37:29

      That idea is so powerful, by the way. I, I don't think it's been understood fully.

   6. RBRobert Breedlove37:33

      Mm-hmm.

   7. LFLex Fridman37:34

      Uh, I think in the digital wa- in the, in the 21st century in the digital world, from my perspective in artificial intelligence, there's yet to be some profound things to be discovered about this whole construct.

   8. RBRobert Breedlove37:46

      Yeah. A- agreed completely. It's been called a- an acid, actually, in that it just, it strips away all of the non-informational components of something, just strips it down to its bare bones. Um, I have a quote in here somewhere about that, but it-

   9. LFLex Fridman38:02

      I'm sorry, which is called an acid? The ideas or the-

   10. RBRobert Breedlove38:04

       Uh, the universal Darwinism.

   11. LFLex Fridman38:05

       Darwinism applied broadly outside of just-

   12. RBRobert Breedlove38:08

       Applied broadly, and, um, I, I would also, I will condition all of this with saying that a lot, most of my thinking is shaped by a book I read recently called The Case Against Reality, um, which introduced me to this concept. But it tied into Darwinism that I've used more broadly in the past, looking at things like money and, and economics. So, the book, The Case Against Reality by Donald Hoffman, um, he has a quote in the book that describes uni- universal Darwinism. He says, quote, "Universal Darwinism can, without risk of refuting itself, address our key question. Does natural selection favor true perceptions? If the answer happens to be no, then it hasn't shot itself in the foot. The uncanny power of universal Darwinism has been likenened by the philosopher Dan Dennett to a universal acid."

   13. LFLex Fridman38:56

       (laughs)

   14. RBRobert Breedlove38:56

       And Dan Dennett says, quote, "There is no denying at this point that Darwin's idea is a universal solvent, capable of cutting right to the heart of everything in sight. The question is, what does it leave behind? I have tried to show that once it passes through everything, we are left with stronger, sounder versions of our most important ideas. Some of the traditional details perish and some of these are losses to be regretted, but good riddance to the rest of them. What remains is more than enough to build on," unquote. So, the way I would in- interpret that is that y- life itself, I've come to view life as information propagating through flesh.

   15. LFLex Fridman39:36

       (laughs)

   16. RBRobert Breedlove39:36

       Um, and that we are... I, I guess, um, DNA is a, a quadratic code. I think it's four letters, maybe, versus a binary-

   17. LFLex Fridman39:45

       Mm-hmm.

   18. RBRobert Breedlove39:45

       ... zeros and ones. And we are ideas, we are strategies competing with each other. And nature is that which selects, it's what selects the, the winning ideas, the ones that are most fit, um, to, to environmental conditions, frankly.

   19. LFLex Fridman40:02

       You know, talking about sovereignty and individualism, there, there might need to be some rethinking here about what is actually the basic individual entity that is to be sovereign. Like-

   20. RBRobert Breedlove40:16

       Mm-hmm.

   21. LFLex Fridman40:16

       ... maybe our biological meat vehicles, we're, like, o- way overly attached to them.

   22. RBRobert Breedlove40:23

       (laughs)

   23. LFLex Fridman40:25

       (laughs) Like, may- maybe, uh, especially with genetics and all those kinds of things, or artificial intelligence, or living more and more in virtual worlds, we'll become detached from that kind of idea. So, for example, if I can clone you, you know, make, (laughs) make one million Roberts and, you know, but you'll all have the same idea, what is real, your real value as the... Like, I could just shoot you and there would still be 999 of you, but the idea is the important thing.

   24. RBRobert Breedlove40:54

       Yeah.

   25. LFLex Fridman40:55

       The, the things you believe, so... (laughs)

   26. RBRobert Breedlove40:58

       I would argue that, I don't know, even if you clone someone perfectly, I don't think you can reproduce the individual themselves, because they're, we're all a product of nature and nurture, right? So, my particular concourse of experiences, the path dependence that I represent cannot be replicated, as n- nor can anyone's for that matter.

   27. LFLex Fridman41:17

       Well, that's, that's a hypothesis, so we, we, that-

   28. RBRobert Breedlove41:20

       True.

   29. LFLex Fridman41:20

       That's, of course, a, a, a human meat bag would say. (laughs)

   30. RBRobert Breedlove41:26

       Mm-hmm. Good point. (laughs)
10. 47:12 – 51:25

    Intelligence

    1. LFLex Fridman47:12

       from my perspective, just because just working in AI and looking at the long-term vision-

    2. RBRobert Breedlove47:17

       Mm-hmm.

    3. LFLex Fridman47:17

       ... I, I see us humans and AI systems as, as really the same, and AI systems ultimately as something that supersedes humans.

    4. RBRobert Breedlove47:27

       So what is intelligence?

    5. LFLex Fridman47:33

       So w- in the context of our current discussion, I think, um, intelligence is very closely linked to this notion of ideas.

    6. RBRobert Breedlove47:44

       Mm-hmm.

    7. LFLex Fridman47:45

       And it's the ability to generate ideas, to mold ideas, to, uh, f- compress seeming chaos into some model, into some theory that, uh, efficiently compresses the chaos in, in a way where you can then integrate it with other ideas and they can play and all those kinds of things.

    8. RBRobert Breedlove48:06

       Mm-hmm.

    9. LFLex Fridman48:07

       So in that sense, it's the turning chaos into order, it's the molding of ideas such that our human brains, uh, can work with it. And it, it just, from my perspective, I don't see any reason why that cannot be algorithmatized, converted into compute- computational systems-

    10. RBRobert Breedlove48:25

        I would agree. Um-

    11. LFLex Fridman48:27

        ... which is scary.

    12. RBRobert Breedlove48:29

        Scary or potentially really promising, right? It's kind of the case with all novelty. It's terrifying as much as it is promising.

    13. LFLex Fridman48:37

        Exactly.

    14. RBRobert Breedlove48:37

        That's why you're pursuing it so heavily. But I would maybe take it...... a step further and say that intelligence in maybe its most simplistic form is error correction.

    15. LFLex Fridman48:47

        (laughs)

    16. RBRobert Breedlove48:48

        So, we ... Humans have wants. Again, we're constantly expressing our value through action. There's, there's no other way to express it, by the way. It's whatever you choose to do in any moment, you are expressing the values you hold in your mind and your heart. As we move from A- from less valued A to more valued B, uh, we en- we ... Entropy happens, uncertainty happens, we, we fall off course, and it is intelligence that enables us to render information from that experience and error correct.

    17. LFLex Fridman49:23

        Mm-hmm.

    18. RBRobert Breedlove49:23

        Right? So that we can move, we can move slightly, change, shift our trajectory slightly more towards, uh, B that we're trying to move towards. So, I think that there's something there that I don't know that we can make synthetically, and that when we ... if we, if we, like, if we define intelligence as error correction, so error correction to what? It's error correction towards what we find is valuable.

    19. LFLex Fridman49:50

        Right.

    20. RBRobert Breedlove49:50

        So we're trying to satisfy human wants. Might not just be our own, could be others as well. If I'm an entrepreneur, I'm trying to solve the wants of others, not just myself.

    21. LFLex Fridman49:57

        Mm-hmm.

    22. RBRobert Breedlove49:57

        And I'm trying to error correct myself towards that goal, um, using intelligence and processing environmental feedback through intelligence to error correct. So, I don't know how, if you eliminate the human ele- element completely, who's doing the wanting, right?

    23. LFLex Fridman50:13

        (laughs)

    24. RBRobert Breedlove50:13

        Where does value come from?

    25. LFLex Fridman50:15

        I know some machine learning people who are listening are saying that's exactly what machine learning is, which is error correction because you have a loss function, objective function that measures how wrong your thing is and you wanna make it less wrong next time.

    26. RBRobert Breedlove50:30

        Mm-hmm.

    27. LFLex Fridman50:30

        That's the whole process of machine learning, but you're saying what humans are able to do is in a world where there's, uh, there's no maybe objective values, absolute values, you're generating that very loss function, that objective function that you're ... That function that measures the error (laughs) -

    28. RBRobert Breedlove50:51

        Mm-hmm.

    29. LFLex Fridman50:51

        ... comes from the, the human mind. Uh, some aliens might disagree with you-

    30. RBRobert Breedlove50:57

        (laughs)
11. 51:25 – 58:07

    Space and time

    1. LFLex Fridman51:25

    2. RBRobert Breedlove51:25

       So to take it one layer deeper on this, and the reason I like this book so much, again The Case Against Reality, so he's making the case that space and time are not fundamental.

    3. LFLex Fridman51:35

       Yes.

    4. RBRobert Breedlove51:35

       Which I f- I started my intellectual explorations in physics actually, astrophysics.

    5. LFLex Fridman51:40

       Mm-hmm.

    6. RBRobert Breedlove51:40

       So for the longest time, even the way I describe money as I talk about space and time, so that, that blew my mind. But this dovetailed nicely with another book called Lila. Um, the, the author is Robert Pirsig. So he wrote Zen and the Art of Motorcycle Maintenance, which is a very popular book. 20 years later he wrote Lila, which no one's heard of, which is crazy. And he basically says he was wrong about his first book.

    7. LFLex Fridman52:03

       (laughs)

    8. RBRobert Breedlove52:04

       And he lays out this entire other, uh, metaphysics of, of quality he calls it. So it's, it's the metaphysics ... I think it's the metaphysics of quality. But his supposition is that it's not physical reality that's fundamental, it's not informational- information that's fundamental, it's value. So he actually ... And it's a beautiful book, I highly recommend it. He essentially is refuting causality itself. We think A causes B, this book makes the case-

    9. LFLex Fridman52:39

       (laughs)

    10. RBRobert Breedlove52:39

        ... that B values precondition A, so that we are actually creating our future through our value systems. And this goes back to, um, something ... I think Solzhenitsyn said this, that the, the line between good and evil runs in the heart of every man.

    11. LFLex Fridman52:55

        (laughs)

    12. RBRobert Breedlove52:56

        So it's as if our moral decisions are actually what's creating the outcomes in reality over time, and then that gets into all the wisdom traditions related to religion where it's always talking about, you know, loving thy neighbor and loving God and all of these other things that are good morally to create the best outcomes.

    13. LFLex Fridman53:15

        So v- values are fundamental.

    14. RBRobert Breedlove53:18

        Value, yes.

    15. LFLex Fridman53:19

        Value-

    16. RBRobert Breedlove53:20

        Yeah.

    17. LFLex Fridman53:20

        ... is fundamental. Oh boy, yeah, that's interesting. (laughs)

    18. RBRobert Breedlove53:24

        (laughs)

    19. LFLex Fridman53:25

        I mean, the ... It does feel like physics is not capturing something.

    20. RBRobert Breedlove53:30

        Mm-hmm.

    21. LFLex Fridman53:31

        You know, there are some people, uh, panpsychists, uh, argue that consciousness might be one of the fundamental properties of nature-

    22. RBRobert Breedlove53:39

        Mm-hmm.

    23. LFLex Fridman53:39

        ... like, the f- from which emerges everything we see. So that could be just other words for this same notion of value and then the l- the basic laws of physics are not capturing that currently.

    24. RBRobert Breedlove53:53

        Yeah.

    25. LFLex Fridman53:54

        So maybe humans ... In order to understand from where humans came from, we have to understand these other properties of nature which are yet to be discovered-

    26. RBRobert Breedlove54:02

        Right.

    27. LFLex Fridman54:02

        ... at the physics level.

    28. RBRobert Breedlove54:03

        And it's ... We contend with that underlying nature, whatever it is, with the logos, right? So we are, we're looking at uncategorized nature and then we're assigning a word to it. So we're, we're slicing up chaos into little boxes of order and then we're establishing this social consensus as to those labels, which we call words, and we're using that to communicate. And when we communicate, um, we can start to build these other things. This is like, uh, the Yuval Harari Imagined Orders. So we can create these useful fictions, right? Whether it's the nation state or human rights or money, and that allows us to cooperate flexibly in large numbers-... so that we can better contend with reality. We can produce more complicated things. Um, we can c- we can enlarge that bubble of civilization against entropy. And that's what capitalism is all about. It's about further specializing knowledge, further enriching mankind's treasury of knowledge. Um, and doing it... But, but to do that the, the communication media that we're using, the words have to have stable meaning. The w- the money needs to have, um, value that's dependable, right? It needs to be something that's... it's not dictated by any one group. It's reached by consensus of the entire group. That's how, um... So you think, it- it's like optimizing for error correction again, where a free market would be harnessing the intelligence of all market actors, and a central planning or a centrally planned market would be harnessing just the intelligence of a small group of bureaucrats.

    29. LFLex Fridman55:49

        Hmm. And it's not obvious how to achieve this kind of consensus mechanism. I mean, there's obviously so, so we- we'll talk about sort of Bitcoin as an idea. Ultimately, the idea of Bitcoin is connecting it to physics. So like, you can trust that me- physical matter won't change.

    30. RBRobert Breedlove56:07

        Mm-hmm.
12. 58:07 – 1:09:05

    Pragmatic truth

    1. LFLex Fridman58:07

       it's interesting to think about a world where we don't have direct access to reality as Hoffman argues. And maybe, I don't know if you can comment, I don't know if you're familiar with Ayn Rand's work and her philo- philosophy of objectivism.

    2. RBRobert Breedlove58:21

       Hmm.

    3. LFLex Fridman58:22

       Where her whole, her whole contention is that, you know, we do have access. I don't want to misstate it but at least... she would claim that it's not, uh, useful or I think she'll probably say it's not correct to argue that we don't have access to reality. We have the... hence the objectivism. We have direct access to reality. That's the only thing we can reason about, and the only way to live life morally is to reason through everything starting with the axioms of reality which we do have direct access to.

    4. RBRobert Breedlove59:01

       Right.

    5. LFLex Fridman59:02

       Do you have thoughts about, uh, her work or... (laughs)

    6. RBRobert Breedlove59:04

       (laughs) I am slightly ashamed to say I have not read Ayn Rand yet, so she is high on my list and she's been recommended a number of times. Um, but... so I don't know a lot specifically about her philosophy or objectivism but I... to me, it resonates closely with what the American pragmatist commented on truth, and they distinguished what you could say is absolute truth which is at the bottom of reality, whether it's, you know, Mr. Wolfram's mathematical formulas or value, whatever it may be, it's something ineffable, something beyond, uh, the reach of epistemology perhaps even. Um, and maybe that's why religion just sort of points to it, right? It's trying to use... I think Joseph Campbell said something like, "Religion is, um, using stories to point towards the same transcendental mystery we all experience but cannot articulate."

    7. LFLex Fridman1:00:00

       Mm-hmm.

    8. RBRobert Breedlove1:00:01

       So something like, uh, the artist, the artist uses lies to point to the truth, something like that.

    9. LFLex Fridman1:00:08

       (laughs)

    10. RBRobert Breedlove1:00:08

        That kind of thing. Um...

    11. LFLex Fridman1:00:10

        That's really good. Yeah.

    12. RBRobert Breedlove1:00:11

        But the American pragmatist said that... because at the end of the day, this is all about... when we say truth, we need something that is socially, uh, close to social consensus and is not shakeable by political action. So that's what, you know, physics and mathematics are. It's, it's a, an unshakeable, um, point of reference I guess you might say. So the American pragmatist defined truth as the end of inquiry. And in markets, we could say that the, the market itself is a forum that generates truth. We call this pragmatic truth to separate...... pure objective truth that we can't even talk about without polluting it, versus pragmatic truth, which is something that's useful. So the- the- the example here would be, if I give you a map and you're trying to go from your house to the local brisket restaurant, and the map gets you from your house to brisket- brisket restaurant, is that because the map is true or is that because the map is useful? Right? They're very hard to disentangle. We just- when you're just looking at it pragmatically. And in markets, markets I argue generate three forms of pragmatic truth. One is the price. So this is the collective subjective demand and purchasing power of humanity running up against the objective supply of capital and resources in the marketplace.

    13. LFLex Fridman1:01:41

        Mm-hmm.

    14. RBRobert Breedlove1:01:41

        So there's demand overlaid on supply. The result of that is the price. So that is the- the tru- most truthful exchange ratio, which is the closest approximation to the value of any good in the marketplace. So it gives us a data point on which we can operate. It's compressing all known market realities down into a single actionable number. You know based on the price of bread or copper whether you want to buy more of it, you want to abstain from buying it, or maybe you want to try and find substitutes. And it's ... You- you could think of that price signal, it's like an economic nerve signal that's coordinating human action across time. So if we're one socioeconomic superorganism or collective, that- the price signal is the nerve, and that's the first form of- of pragmatic truth that markets generate. The second form would be tools and innovations themselves. So entrepreneurs are experimenting across time. They're trying to satisfy the wants of consumers. Consumers are sovereign in the marketplace. Whatever the consumer wants, the consumer gets, right? I'm trying to satisfy that and I'm trying to do it at a profit. So I'm trying to take viewing the existing price signals of goods in the marketplace, I'm trying to assemble those in a way at a- at a cost lower than the final solution I'm delivering to my customer. I'm selling it at a price higher than the productive factors I combined to create it. And in that pro- that iterative process, we're constantly discovering new and better way- better ways of solving problems or satisfying wants. So we could say to go out and dig a hole, right? Someone wants a hole dug, that a shovel is gonna let you do it much faster per hour than you would with your bare hands. So what is the pragmatic truth of digging holes? It's a shovel, right? It's the be- it's the best way we know how to solve any particular problem based on, uh, the existing treasury of knowledge. So every tool ... E- again, we're back to ideas being fundamental. The shovel itself is just a knowledge structure. We've figured out a way to create this particular implement, and then we've indexed the raw materials-

    15. LFLex Fridman1:03:47

        Yeah.

    16. RBRobert Breedlove1:03:47

        ... we found in nature to this knowledge structure to create a shovel, which allows us to better satisfy human wants, um, you know, faster, cheaper, better, effectively.

    17. LFLex Fridman1:03:57

        I'm trying to generalize. (laughs) you're blowing my mind a little bit here.

    18. RBRobert Breedlove1:04:01

        (laughs)

    19. LFLex Fridman1:04:01

        I'm trying to generalize the idea of tool to how to think about it, 'cause I keep- I keep just ... When you say tool, I keep imagining different to- like, specific instantiations of a tool. I'm trying to see ... So the price is a pragmatic truth that's, um, communicating value in the ne- in this network.

    20. RBRobert Breedlove1:04:21

        Subjective demands against objective supply.

    21. LFLex Fridman1:04:26

        Subjective supply.

    22. RBRobert Breedlove1:04:27

        So it's- it's an economic democracy.

    23. LFLex Fridman1:04:29

        Objective supply. Got it. So that's the demand supply, and then the tools are the ways of extracting, uh, or solving problems is the more general kinda-

    24. RBRobert Breedlove1:04:39

        Mm-hmm. Or satisfying wants.

    25. LFLex Fridman1:04:41

        Satisfying wants.

    26. RBRobert Breedlove1:04:42

        Yep.

    27. LFLex Fridman1:04:42

        So wants are somehow ... That's the s- that's part of the supply and the demand. Okay.

    28. RBRobert Breedlove1:04:48

        And want- wants are back to value, right? Because everything someone wants-

    29. LFLex Fridman1:04:51

        Back to value.

    30. RBRobert Breedlove1:04:51

        ... they're expressing their value.
13. 1:09:05 – 1:12:54

    Creative destruction

    1. RBRobert Breedlove1:09:05

    2. LFLex Fridman1:09:05

       Can you, um, play my therapist for a second and, and if we talk about creative destruction, I think Buko- not Bukowski, um... Hunter S. Thompson has a quote, something like, "For all instances of beauty, many souls must be trampled." (laughs)

    3. RBRobert Breedlove1:09:24

       Wow. (laughs)

    4. LFLex Fridman1:09:27

       But it, i- th- there does seem to be an aspect of competition that destroys. You were talking about entrepreneurs sort of on the outside of the circle of order, tr- striving to make sense, to compress, uh, volatility or the chaos of the wa- o- of the universe. Is there some way to protect a little bit against the pain of that destruction, of that creative destruction?

    5. RBRobert Breedlove1:09:57

       (laughs)

    6. LFLex Fridman1:09:57

       That, uh, entrepreneur screaming, on fire as he enlightens the rest of us.

    7. RBRobert Breedlove1:10:03

       (laughs)

    8. LFLex Fridman1:10:03

       Is there some role for us humans together in the togetherness of it? Uh, also government, but any kind of collectives in helping that entrepreneur who's on fire to maybe, after a few minutes, to, to, uh, spray him with some water and, uh, put him out of his misery?

    9. RBRobert Breedlove1:10:26

       I would say that, you know, pain is the inarguable basis of being, right? Pain is, no matter how you try to (laughs) explain it away or, or describe it or, um... It's not something you can rationalize away, right? It's no one, I think, ever... Like, someone may want to cut themselves to have an endorphin high, but no one wants to suffer, we'd say, right? So pain, in that sense, it is what we're constantly trying to deal with and to move away from or create buffers between us and, and potential pain or potential un- you know, uncertainty, and that pain is information.

    10. LFLex Fridman1:11:11

        Yeah.

    11. RBRobert Breedlove1:11:11

        When we experience something that is misfit to the outcome we desired, that pain is what puts us... It, it, it encourages us to change our trajectory, to get back on course towards our, our valued aim. So as far as, you know, you need... Entrepreneurs that are exploring and if you're trying to do something new, if you're a pioneer of any kind, you are courageously facing pain. You're willfully confronting it. So I don't think it's avoidable in that sense. It's not like we can have pain-free economic growth like what the central bank would maybe, uh, have us learn to believe, that we can just run these experiments, and when they fail, we'll just paper over all the losses and continue-

    12. LFLex Fridman1:11:53

        Mm-hmm.

    13. RBRobert Breedlove1:11:53

        ... or you're just delaying and exacerbating the inevitable volatility back to reality. Um, but what I would say is that capitalism, because we're building... We're increasing the capital stock of the world, which, again, capital is the mitigation of risk, so we're reducing the overall risk of existence by accumulating more capital in the world. And that's what protects that entrepreneur that's deciding, "Hey, I saved up a million bucks. I'm gonna go try this business idea. I'm gonna put all my, my money on the line." And if he goes up in flames, then he, his cost of living, when he comes back to reality and he's starting over from zero, his cost of living is substantially lower starting over from zero than he would be out in the wilderness on his own.

    14. LFLex Fridman1:12:36

        Mm-hmm.

    15. RBRobert Breedlove1:12:36

        Right? So it's the, the accumulation of capital stock is the buffer against uncertainty for everyone, um, and it gives you actually more potential to go out and experiment, to go out and confront, uh, the chaos of nature because you are, are better healed, effectively.

14. 1:12:54 – 1:25:38

    Capitalism vs Communism

    1. LFLex Fridman1:12:55

       So I think we're speaking, (laughs) uh, in sort of, uh, idealistic terms about the power of capitalism when it works well. Is there any aspects that you think that don't work well?... and a free market, and all the basic pragmatic truths that we were talking about, is there, is there ways it can go wrong?

    2. RBRobert Breedlove1:13:17

       So, I would first argue that we have never seen an actual purely free market. Um, closest example would be, you know, kind of geopolitically, we have a free market in that governments are not necessarily governed, um...

    3. LFLex Fridman1:13:41

       Hmm.

    4. RBRobert Breedlove1:13:41

       But they are premised on governing large groups of individuals. So, that's not, doesn't exactly-

    5. LFLex Fridman1:13:50

       You mean between governments?

    6. RBRobert Breedlove1:13:52

       Yes.

    7. LFLex Fridman1:13:53

       See, but isn't there still... So, a free market, maybe you can correct me, a fr- is the free market still grounded in the ideas of, you know, property rights and all those kinds of things, right?

    8. RBRobert Breedlove1:14:04

       Yes.

    9. LFLex Fridman1:14:04

       So, governments tend to also sometimes be violent towards each other.

    10. RBRobert Breedlove1:14:07

        That's right.

    11. LFLex Fridman1:14:08

        So, they don't respect the f- uh, all the basic aspects of capitalism.

    12. RBRobert Breedlove1:14:11

        That's right. So, maybe another way to look at this is that gold is the original governor of government, actually.

    13. LFLex Fridman1:14:20

        Hmm.

    14. RBRobert Breedlove1:14:20

        And this is the reason governments have abused and gone off of the gold standard. So, historically, if you are a bank or a nation-state, and you produce more currency than your gold reserves can justify, then people, then gold will flow out of your bank or out of your country. So, there's this natural check, um, via the money that be- via capitalistic money, which is gold, right? Gold was selected by the free market. It's not decreed by a government. It, it provided this natural check on government action. So, my, I guess to get back to the original question is, we've never seen a pure free market because money has always been monopolized, um, and, and coerced, frankly. So, to try and answer what goes wrong with a free market is really difficult because we've never actually seen it. And I would define free market is one in which government only protects life, liberty, and property, and so it has very minimal role in society. Um, again, just as network security for, for the economic trade network, and anything that... Any government function that goes beyond those three core functions, which by the way, are pretty much the core tenets of morality as well. So, governments just really intended to preserve, uh, you know, natural law, if you will. Anything that goes beyond that is, moves us closer to an unfree market. So, every regulation, every act of coercion, um, is actually a, a gradation closer to a purely unfree market, which would be a monopoly. So, in terms of what, I guess, theoretically, we could say goes wrong in the free market is that it's volatile. It's, it's trading off, it's accepting short-term, short-term volatility, uh, in exchange for less long-run volatility.

    15. LFLex Fridman1:16:29

        Yeah.

    16. RBRobert Breedlove1:16:30

        And this tends to be the way of nature, by the way. So, if we, we could look at something like, there's an, uh, a region in North America called Baja California and it ex- it runs into the United States and it runs down into Mexico as well. So, the same topology but two different jurisdictions. In the US, uh, we very heavily manage forest fires. We're trying to manage nature effectively. Whereas in Mexico, it's much more unregulated. It just, th- they, when wildfires spring up, they let them burn off. North America, when wild- wildfires spring up, we're actually extinguishing them. So, we're constantly trying to dampen the short-run volatility of these small brush fires. Whereas in Mexico, we just let them burn. We let nature do its thing.

    17. LFLex Fridman1:17:14

        Yeah.

    18. RBRobert Breedlove1:17:15

        The consequence of this is that the wildfires still occur eventually, but they're much larger and much more devastating in North America where human intervention has occurred because it is, um, it's dampening nature's natural corrective mechanism of clearing this underbrush with these sm- um, more frequent and smaller fires at the cost of much larger fires. So, again, we're delaying short-term volatility and exacerbating long-run volatility. And it, and in Mexico, it's the opposite, right? Just these wildfires burn much smaller and more continuously over time. The further effect of that in North America is that the fires can get so big and so hot that it burns away the topsoil, so it actually destroys the fertility of the soil itself. So, the point of this is that human intervention, right, even... The intention behind, uh, North American authorities managing that forest fire is to create less destruction. That is the intention. But the intention is divergent from the outcome. So, uh, in Talebian-speak, he would say that human intervention moves us from Mediocristan into Extremistan.

    19. LFLex Fridman1:18:23

        Mm-hmm.

    20. RBRobert Breedlove1:18:24

        So, Mediocristan would be something much more like nature where, for instance, you can't double your body weight in a day, probably can't even do it in a year, right? But in Extremistan, which is something much more information-based, you can double or, or send your net worth to zero in a single trade, in a single moment, right? So, when we, we try and intervene with natural biological systems that have, um, these feedback loops, we actually start to push the system more to behave more like an Extremistan system, um, that has, you know, less short-run volatility but, but lo- um, more extreme long-run volatility.

    21. LFLex Fridman1:19:03

        So, the... But the question is, w- where you look at, uh, capitalism or communism, for example, uh-

    22. RBRobert Breedlove1:19:09

        And by the way, yes, I will talk to somebody who is a Marxist or a communist. Like Richard Wolff is a pretty eloquent defender of these ideas because it's, it's always good to really understand ideas- Mm-hmm. ... as opposed to just reject them o- offhand. Uh, when you look at the system of capitalism or the system of communism, there's ideals, and a lot of people argue in this perfect form- Mm-hmm. ... would actually be good for the world. The question is, how resilient are they to the corruption- Mm-hmm. ... uh, of human nature? And I mean, y- you're saying that there's not a f- there's never been a free market, it's, it's a, it's a very true statement. The question is, how resilient is capitalism or whatever implementations of capitalism we've had up to this point to human nature where one person will become successful at, f- through legitimate means then starts to try to manipulate the system that takes it away from a free market or takes it away from- Mm-hmm. ... uh, the, the things that, uh, give him the riches in the first place, and then, uh, try to, through corruption, get more, get, that's the thing you said, uh, the lazy human ways. Mm-hmm. Now try to figure out how to get something for nothing. That's right. So how resilient do you think is capitalism to that? Well, the best implementation we've had of it really has been the United States, I think, up until this point. But it's still, the cent- central banking itself, this was in the 1848 manifesto of the Communist Party, measure number five reads, "An exclusive state monopoly and centralized control over cash and credit." So the central bank is a Marxist or communist institution. It is antithetical to the free market principles on which the United States was founded. And indeed, the United States resisted the implementation of a central bank. Um, I think it was Andrew Jackson. I know there was the First National Bank and the Second National Bank were both disbanded, and then, uh, Andrew Jackson, who was my favorite Tennessean, he's, he has some famous quotes about routing out the bankers like a den of vipers. Uh, I think he punched one of the central bankers in the face, uh- Okay. ... back when our leaders were, were a bit, a bit more badass, I guess you might say. (laughs) And, um, you know, finally in 1913, the, the Federal Reserve was, was implemented, and, um, it's been kind of all downhill from there. W- so what is, uh, can you... Oh, okay. Um, oh, I was just gonna say that, that communism and capitalism is also a matter of scale. You know, the idea behind communism is, uh, from each according to their ability, to each according to their need. Sounds beautiful, right? Sounds like a great, peaceful, harmonious way to organize ourselves. The problem is... And, and by the way, I am a communist in my family, in my home, right? At that very smallest of scales. Yes, in your very small circles of trust, you're much more likely to behave selflessly towards one another. By the way, I look forward to the Bitcoin community clipping out that part. (laughs) Saying that Robert Breedlove is a communist and that i- ideals of communism are beautiful. Yeah, context matters, people. (laughs) Sorry, go ahead. (laughs) Um, but to your point, it does not scale, right? As, as we move into this larger system of socioeconomic cooperation, which is necessary to deepen the division of labor, to generate more wealth, right? We need to interact with one another on much larger scales than this communistic utopian ideal, we get into the realm of capitalism, where we need really sound rules, hard rules, consensus, verifiability, um, and frankly, prices. 'Cause the other thing in com- in, um, Soviet Russia is they tried to replace the profit motive, or the price signal, with this devotion to, this nationalistic faith and devotion, where it's like you don't need self-interest anymore, you don't need prices or profits, you can just protect Mother Russia, right? And serve Mother Russia, and that would create wealth. And what happened, right? They destroyed price signals. There were shortages, there were famines, there's, um, all levels of corruption. Because- Mm-hmm. ... you know, to your point, it's once you... People have to run the system, no matter what. So when you're, when people are always pursuing something for nothing, and you put someone in a seat of much closer to absolute power where they're making all the pricing decisions, they own all of the productive factors in the economy, they're not beholden to any market force, there's no market, uh, check on their action, that that institution tends to become more corrupt. And further, it's, it's an inferior resource strategy. Um, I alluded to this earlier, where the other way to think about free market versus central planning is it's decentralized or distributed computing versus centralized computing. So each one of us, I think the, the number is 120 bits per second of active awareness, and so we can take in... Clearly, we process a lot more than that, but our active awareness, I think, is 120 bits per second. Um, in a centralized planning body, like in Soviet Russia we had, they had the pricing czar, maybe they had 10, 20,000 people deciding the prices for the entire country, you're only getting that much data throughput, right? 20,000 people times 120 bits per second. Whereas in a free market, if everyone is free to interact with deep capital markets based on an accurate price, you're getting the data throughput of 120 bits per second times the entire economy, right? So you're getting... It's a more efficient means for disseminating knowledge, effectively. Mm-hmm. And then, again, knowledge is just, the more knowledge, uh, a socioeconomic structure can contain, the more wealthy it is.... right? Prices, tools, all these things are just knowledge. So, in that respect, that's why something like capitalism, even in its marginalized form, state capitalism, out-competes communism. It's a, it's distributed computing versus centralized computing.

15. 1:25:38 – 1:29:54

    Jordan Peterson on religion

    1. RBRobert Breedlove1:25:38

    2. LFLex Fridman1:25:38

       You know, we kinda brought up religion and Joseph Campbell and myth and the, the propagation of ideas. And I kinda, uh, before I forget, I wanted to ask your thoughts about this. You know, Jordan Peterson, I haven't really understood exactly, like be able to pin him down exactly what he sees as the role of religion in human society. But it, uh, feels like he's describing it as having, uh, value for us. This, the ideas of myth are valuable. They're of valuable mechanisms for, I think you mentioned kind of directing us in this world as a human society.

    3. RBRobert Breedlove1:26:23

       Mm-hmm.

    4. LFLex Fridman1:26:24

       Um, do you think about myth? Do you think about religion? What's the use of it in the, in this construct of, uh, markets and this, uh, and this framework of, um, where ideas are ultimately, uh, the, the fundamental thing that makes societies work?

    5. RBRobert Breedlove1:26:44

       Yeah. I think Jordan Peterson, who I'm a huge fan of, he's been very influential on my thinking, um, and influential on my own religious views as well. Um, I think his position would be, and he said this before, that he acts as if God exists.

    6. LFLex Fridman1:27:06

       Mm-hmm.

    7. RBRobert Breedlove1:27:07

       And I've had some, some arguments about this before, but w- to me, that points towards the preeminence of action and how important action is versus your, your cognitive beliefs necessarily. Um, and I think there is a lot of utility in that, that if you follow the moral code of something like the Bible, um, you do reap benefits from that, society reaps benefits from that. Um, and this is not... and sometimes I, I bring up this point and people will be like, "Oh my God. Are you kidding me? Have you read the Old Testament? They're clobbering people with rocks when they do the wrong thing." It, the Bible doesn't claim to be this like do everything that was done in the Bible. It's more like charting this moral progression where we came from this very barbaric society into something more like the New Testament where we're honoring, you know, individual sovereignty, uh, above the state and things like that. So, I think that mythology itself is another form of data compression. If you look at these stories, um, you know, Cain and Abel is a good example where Peterson makes the point that it's a tiny story. It's, you know, a paragraph-ish long, but it contains so many layers of meaning, um, in regards to violence, to evil, betrayal, work, um, the divergence between intention and result, you know? 'Cause, uh, I think Cain is actually making... uh, he's making the effort to sacrifice for God, but the sacrifices he's making are not, God doesn't find them useful, right? And so he, he sort of rejects, rejects them. For a, again, if we're, we're, we're organized by these useful fictions, right? These, these, uh, Hararian imagined orders, I think mythology's kind of the original version of that where we were learning to organize ourselves, uh, around stories to best coordinate our action across space and time. And so I think it's very foundational. Um, and ba- back to what we were saying in the beginning that if value truly is fundamental, I think it's interesting that all these stories point towards often common moral values. They're not perfectly aligned, um, but it does speak to just the, the evolutionary importance of morality and the subjectivity of morality where morality sort of evolves over time based on, you know, frankly, the capital stock we've accumulated. The more capital stock we've accumulated, the easier life is, the less barbaric we have to be. Whereas if we're living in conditions of true scarcity, um, then we tend to be a bit more barbaric towards one another.

16. 1:29:54 – 1:33:45

    Inflation

    1. RBRobert Breedlove1:29:55

       And that too, the, to dovetail this into something largely unrelated, but I think is really important is inflation. Inflation, by artificially increasing the prices of goods and services in the world, right? We're, we're injecting more dollars, chasing the same level of goods and services. We are artificially increasing scarcity, perceived scarcity, right? And when you increase perceived scarcity, you are amplifying divisiveness. This natural, the natural state of man is when everything is scarce and you really have to fight hard just to eat or drink water that day. So it's, it's de-civilizing in a way by artificially amplifying the perceived scarcity in the world.

    2. LFLex Fridman1:30:44

       Can, can you elaborate? How does inflation increase the perceived scarcity in the world?

    3. RBRobert Breedlove1:30:49

       So we could think of the price itself is an indication, it's a data packet, if you will.

    4. LFLex Fridman1:30:54

       Mm-hmm.

Episode duration: 4:03:48