Balaji Srinivasan — How to Start a New Country

Tim Ferriss 0:00 [upbeat music] Hello, boys and girls, ladies and germs, this is Tim Ferriss. Welcome to another episode of The Tim Ferriss Show. And my guest today is the one and only Balaji S. Srinivasan. You can find him on Twitter @BalajiS. Balaji is an angel investor and entrepreneur. He has the first and second place records for longest podcast episodes ever on this podcast. [laughs] We will probably keep it to two-and-a-half to three hours, I say with great confidence. Now, formerly the C-

Balaji Srinivasan 0:41 But people listened to them

Tim Ferriss 0:42 [laughs] They do. They do. People listened to them.

Balaji Srinivasan 0:44 They did. Yeah.

Tim Ferriss 0:44 A lot of people. The last two appearances were two of the most popular episodes, certainly in the last year to 18 months. Formerly the CTO of Coinbase [laughs] and general partner at Andreessen Horowitz. He was also the co-founder of Earn.com, acquired by Coinbase, Consyl, acquired by Myriad, Teleport, acquired by Topia, and Coin Center. He was named to the MIT Technology Review's Innovators Under 35, won a Wall Street Journal Innovation Award, and holds a BS, MS, PhD in Electrical Engineering and an MS in Chemical Engineering, all from Stanford University. Balaji also teaches the occasional class at Stanford in his spare time, including an online MOOC in 2013 which reached 250,000-plus students worldwide. His brand-new book is The Network State: How to Start a New Country, and we will certainly wade into those waters and explore all of the related topics in depth.

Tim Ferriss 1:37 But let us begin, if we can, Balaji, with the current state of the crypto market. I know a lot of people would love to hear your thoughts on what you're observing. And just to date this, we are recording July 1, 2022. And then perhaps hearing your thoughts on the Indosphere. But let's begin with those two prompts.

Balaji Srinivasan 1:56 Sure. So I'm not a trader, like a, you know, I'm more of a, much more of a long-term investor/angel/VC. There's actually a, there was a fun tweet today by a guy, Travis_Kling. "I've been doing this for 46 straight months, and I've never seen one like this before." And he's just basically got a list of all the carnage in the markets. And the thing is, that carnage is in the crypto markets, but it's also in the, in the non-crypto markets. And it is, it's a little more pronounced in crypto, but it is definitely like a systemic type of thing. And the way I kind of think about it is there's very few spaces that I get into where I don't have an all-weather thesis that works independent of the price. And so I was in genomics way before, like, people were talking about genomics. I was, you know, doing machine learning way before people were talking about machine learning. You know, like, it's kind of weird to see people talking about stuff that you're doing like 10 or 15 or whatever years ago. Not to say in a thump chest way, but just that you want to try to identify these things that have value independent of that. And the fundamental value of cryptocurrency is can you have a system where the root permissions are independent of the US and Chinese establishments? That is the fundamental question, is one of digital freedom. Because, a- and I can kind of tease that out and, and so on and so forth, but it's fundamentally do you actually have property rights on the internet, digital property rights, or can somebody with a police badge from the US or Chinese establishment, depending on what side of the world you're on, get into all of your stuff, surveil all your stuff, take all of your stuff, freeze and seize all of your stuff, and so on and so forth, right? So that fundamental question of whether digital property rights should exist and whether they will be valuable in the medium to long term is what gives me confidence in the space, not the specific price. So I can talk more, but that's, you know, price is down, price is up, I would only invest in those kinds of things that I believe further that aspect of, like, freedom and, and control.

Tim Ferriss 4:03 Question for you. In our first episode, I think at some point you mentioned for someone who is not going to make a full-time study of things, splitting their allocation to crypto, and this is not investment advice, this is two people talking for informational purposes only. But splitting 50/50 Bitcoin/ETH, does that still hold, or would you, based on what you've seen since and what you are seeing now, maybe any developing thesis, change that?

Balaji Srinivasan 4:35 No, I, I'd say stick with that. I mean, a- again, not investment advice and so on, but basically those ecosystems are just still absolutely massive. If you look at... As I said, you know, y- I, I think I said something like buy it and then hold it for 10 years, and let's see where we are in 10 years. The fundamentals in terms of not, not just number of users, but conversation. I mean, if you could... If Twitter was open source, or rather more specifically if it was open state, that is to say not just the source code was available, but the back end was available, the database was available, okay? Not just through an API, but that you could just hit a key and see every tweet if you wanted to, every public tweet at least. If it was open state, and you could plot the number and the depth of interactions on Bitcoin and Ethereum and all of their offshoots, not just those keywords, but the thousands of keywords and memes and communities and so on that'll be built on these. These are like countries that have built out. And, you know, like, th- those are things that just have mass to them. And you can mark them to market. They've got downs and they've got ups, but they are absolutely massive things with tens of millions of dedicated people around the world, and they've come out of nowhere. So yeah, I don't believe that they're gonna go away. But again, not financial advice, this is just my personal, personal belief. You can get much more sophisticated than that. But, like, the absolute worst thing to do, by the way, and this is maybe obvious, but I'll just say this, is the worst thing to do is buy an asset when it's, when it's in the news and sell it when it's in the news. And what you instead want to kind of do is, like something, it's all inevitable that something will pique your attention, okay? And then what you do is you set a calendar reminder, you know, let's say 30 days, 60 days, 90 days, so that you are almost like retargeting yourself. And then you go and you actually do research on it outside of the scrum, right? Outside of people yelling about it. You intentionally do it async to the market sentiment. There's a famous cartoon. It's a guy and he's like, "This looks like it could be a good buy." And someone overhears and they're like, "Buy? Buy? Buy? Buy! Buy!"

Tim Ferriss 6:40 [laughs]

Balaji Srinivasan 6:40 And then the guy's like, "This stock could really excel." And someone overhear, "Sell? Sell! Sell! Sell!" You know, like this, right?

Tim Ferriss 6:46 [laughs]

Balaji Srinivasan 6:46 And it's this hilarious sort of loop which you don't wanna be the current thing. You don't, you don't wanna be the person who is buying high, selling low. And I think the only way to not do that is set calendar reminders, assess your portfolio, like whether it's a quarterly basis or something like that, and try to make async decisions. Like you almost never want to sell on bad news, buy on good news. That's my macro outside of any given, you know, specific thing.

Tim Ferriss 7:13 Yeah, let me add one thing to that, which is humans in general, and I succumb to this sometimes too, overestimate their predictive abilities. So what is very helpful is set a time, it could be once a year, Jan one, Jan five, doesn't really matter, where you sit down and you identify, say, I'm just picking a timeframe, six months from now, and you grab a bunch of potential asset classes or stocks or indices. So maybe it's Bitcoin, a barrel of oil, S&P 500, and make your predictions. And then set a reminder to look at them three months or six months later when you may, as you are influenced subconsciously by chatter on Twitter, trends in the news, and so on, to think that you know where things are going. Let's see how successful you were over the preceding six months. So that's also a good way to check your cognitive biases.

Balaji Srinivasan 8:17 Can I talk about that for a second, the predictability and vol-

Tim Ferriss 8:19 Yes, you got it.

Balaji Srinivasan 8:20 Okay. So this is something I actually write about in the book, which is we're sort of reentering high volatility times. And the thing about this is most people don't think about it this way, but companies and governments shield people from volatility to an extent that we don't really think about that much, and now that shielding is going away. For example, when you go and buy like a, a laptop from Apple, and they quote you some price, let's say, I don't know what it is, $1,499 or 19... I don't know what the number is, okay? I'm just making that up. When they quote you that price, that includes, that's a price that they are, you know, selling it for. But the price of aluminum is bouncing around, the price of, you know, their rare earth elements on the back end, that's bouncing around. Their cost of goods is, if they weren't, if they were just buying at spot prices, bouncing around every day. And so in theory, their margin could shrink or grow or whatever on, on a given day. Now, what do they do to, to deal with this? They buy in bulk. They have various futures contracts and so on. They buy and sell callers. So they give up some of the upside on that margin to bound their downside. They're getting aluminum for X dollars per kilogram as opposed to greater than X or lower than X. So those companies actually buffer all kinds of crazy variations to give you that clean, dependable 99 or 29 or $1,499, whatever price. Okay? And governments do this as well in lots of other ways. You know, that's why you don't have people walking down the streets with AKs. That's why you, you don't have mobs pillaging and, and so on and so forth, right?

Tim Ferriss 9:58 Wait, wait, wait, hold on. [laughs] Can you tie those two things together? So I followed you on the futures contracts, and maybe, you know, if they're dealing with currency, certainly they would have other protections in place, but how do we go from [laughs] that to preventing people from walking around with AKs?

Balaji Srinivasan 10:12 Sure, sure. So-

Tim Ferriss 10:13 I believe there's a connection. I just would love for you to elaborate.

Balaji Srinivasan 10:16 Absolutely. So it's social and financial volatility.

Tim Ferriss 10:19 Mm-hmm.

Balaji Srinivasan 10:19 And the way to think about it, so let's start with financial because it's more, it's a little more quantitative and people know about it, right? There's this concept called market depth, and if you've ever looked at like Coinbase Pro or any crypto exchange, you see this like V-like thing with the, the buy orders on one side-

Tim Ferriss 10:37 Yes

Balaji Srinivasan 10:37 ... the sell orders on this side. And this is like, uh, you know, how a price is born. Normally, you know, most people in normal life are price takers. You go to the store and you buy orange juice for whatever the price is now, 50 bucks or [laughs] something rid-

Tim Ferriss 10:52 [laughs]

Balaji Srinivasan 10:52 I don't know what it is today, but you know what I'm saying, right?

Tim Ferriss 10:54 Yeah.

Balaji Srinivasan 10:54 Okay. A gallon of o- orange juice is, I don't know, so- some price, okay? And you're a price taker. It's set price, $4.99 or something like that. The thing is, if you start emptying out the shelves, if you buy 100 units of orange juice, and then you go to the next store, it might be $5.50. And then the third store hears you're coming, and they set it to seven bucks, and so on and so forth, right? You start moving the market price. You are now a price setter, in a sense, when you start clearing out units. So you got 100 units at $4.99, and then 200 units at $5.50, and now you can get 300 units at $7.00, and your supply i- increases as the price increases. And then conversely on the other side, right? And so that is actually how a price is born. It's, most people don't usually think about this because you're buying-

Tim Ferriss 11:38 Mm

Balaji Srinivasan 11:38 ... like single individual consumer units. You're not like a, a bulk purchaser. But when you're purchasing in bulk, suddenly people are negotiable. You know, they can, they can make more money on it. They're, they're okay with negotiating. Okay, what's my point? This idea of market depth, just like we see like a price shift back and forth, you know, with sentiment, that's the same concept in financial terms as the Overton window. The Overton window is the set of what things are politically acceptable.

Tim Ferriss 12:05 Mm-hmm.

Balaji Srinivasan 12:05 And sentiment shifts back and forth. There's a thing, here's the current center, and as radicals, you know, push, that thing that was totally unthinkable moves to the center. Or conversely, conservatives push and, and suddenly it, it gets pushed back, right? That's kinda like buy and sell pressure. In fact, you can think of it a lot like that on any given issue. And you have essentially almost, like, votes, right? Like, uh, you, you have, uh, 1,000 votes for this level of the policy, and 5,000 votes for this level of policy, and 10,000 votes for this level of policy, and then, you know, you, you have, you have some on the other side. And when you can shift over those vote banks, you shift that midpoint, which is a policy, just like if you can shift over the order book, you shift over the price, okay?

Tim Ferriss 12:49 Yeah, that's clever.

Balaji Srinivasan 12:50 Right? Okay.

Tim Ferriss 12:50 Mm-hmm.

Balaji Srinivasan 12:51 That is the macro of how I think about, like, prices and policies. You know when people say, "Oh, it's getting political," what they're really talking about is, just like with the price example, most people are price takers, okay? You know, as I said, you, you go and buy the orange juice. Uh, just like most people are law takers, okay? The law, the policy is just applied to you. You know, but if somebody is, like, powerful enough or it's, like, a weird enough situation, that law flexes, okay? Concrete example. Singapore, m- you know, a couple... Uh, I'm taking an example that's, like, out of our time and place, you know, and so on, so people don't get mad. Singapore, like, two and a half decades ago, I think in 1987, there was a, an American citizen, Michael Fay, who was vandalizing things in Singapore, okay?

Tim Ferriss 13:39 I remember this.

Balaji Srinivasan 13:39 And-

Tim Ferriss 13:40 Mm-hmm

Balaji Srinivasan 13:40 ... you remember this, right? And Singapore was going to cane him as per Singapore law. And frankly, had he been a Singaporean or he'd have been anybody other than an American, he would've been a law taker, okay? The law would've just been applied. But all kinds of pressure got applied on this side of the policy market, and Lee Kuan Yew was like, "Okay, we're gonna, like, reduce the number of strokes of the cane." He didn't set it to zero, because that would've been too much of a give. But as a consideration for the... Like, the US government made it, like, a diplomatic situation, and, like, the president got involved, and all this stuff for tiny Singapore. So the pressure for Singapore was significant on the policy side. And so now there was, it was, the law was negotiable, right? That's what it means for something to, quote, "get political," is that you have huge masses of people that assemble and they shift the midpoint of the Overton window. Just like huge masses of people shift the midpoint of a price, right? Now, the thing is, as I mentioned earlier with Twitter, that backend is not open state. So because it's not open state, we cannot see sentiment moving as we can with price, not as easily.

Tim Ferriss 14:56 Not as easily.

Balaji Srinivasan 14:58 Go ahead.

Tim Ferriss 14:58 Yeah. Well, I was just gonna say there, there are other tools that I also... Uh, uh, you probably don't know this, but I p- I pay a good amount of attention to this type of thing on a number of fronts.

Balaji Srinivasan 15:06 Mm.

Tim Ferriss 15:07 So Google Trends. I mean, they're, they're not open state exactly, but you can track certain types of sentiment or interest or fear-

Balaji Srinivasan 15:17 Yes

Tim Ferriss 15:17 ... longitudinally. But continue. I didn't mean to interrupt.

Balaji Srinivasan 15:21 No, no, no, no, you're right. In one sense, we've got far more information than we ever had. In another sense, I know we have 100 or 1,000x left to go. And the reason is that, think about the difference between, uh, and this is a tech analogy, so you might be like, "Well, think about it, huh?" Okay, but, uh, uh, think about the difference between AT&T Unix and Linux, okay?

Tim Ferriss 15:42 [laughs]

Balaji Srinivasan 15:44 So if you're an engineer, you're like, "Yeah, dude, AT&T Unix was, was good, but it wasn't hackable. I couldn't customize it. I couldn't take it apart, look at the engine block. I couldn't make it work on tiny devices and giant servers. I couldn't make it mine," right? And so currently it's good, yes, that we have Google Trends and that we have, you know, the... Like, you can kinda get some sense from the Twitter API and so on. But they're very locked down in a certain way where there's queries you can't easily run. You might have to pay a lot for the API, and so it's over... Versus if that data set was open, we'd have completely different understanding of society and history and politics. It would be at the same level as the unlock going from AT&T Unix to Linux, or the unlock of going from, like, PayPal

Balaji Srinivasan 16:29 to Bitcoin.

Tim Ferriss 16:30 So let me jump in, because the, the next question I wanna ask is what some of the, to you, most foreseeable technological developments are that you, say, almost treat as assumptions in building out your vision for the future over the next X years. And you can choose X. And this might be a place also where we can sneak in, and I'll let you do it. One very primitive way, maybe it's primitive, you tell me, but it's lo-fi way of identifying possible trends through, you pointed out, a stealth topic that showed up in my most popular episodes-

Balaji Srinivasan 17:07 Ah

Tim Ferriss 17:07 ... in the last 12 months.

Balaji Srinivasan 17:08 Yes.

Tim Ferriss 17:09 [laughs] So I'll let you take that wherever you like.

Balaji Srinivasan 17:11 Totally. So what's the stealth topic? So basically, I saw the list of the top 10 Tim Ferriss podcasts, you know, last year, where I was number one and number two, despite how long they were. So hopefully-

Tim Ferriss 17:24 [laughs]

Balaji Srinivasan 17:24 ... you know, the listeners got something out of it. It was an honor just to be nominated.

Tim Ferriss 17:28 I'd like to thank the Academy. [laughs]

Balaji Srinivasan 17:29 Yeah, like to... Very importantly, by the way, to my knowledge, the Tim Ferriss rankings are not juiced or editorialized and so on.

Tim Ferriss 17:37 No.

Balaji Srinivasan 17:37 Did you know that the... You're probably aware of this. Maybe your, your, your listeners aren't. The New York Times bestseller rankings are an editorial product.

Tim Ferriss 17:44 Oh, absolutely. I'm 100% aware of that because I had, just to, just to give an example, one launch week with one of my books which came out through Amazon Publishing, which put me squarely in the crosshairs of almost everyone in the traditional book/publishing world, sold, I wanna say, 120,000 copies through Nielsen BookScan. For that one week, and it was number four on The New York Times bestseller list in my category. And the book that hit number two sold somewhere between 10,000 and f- 12,000 copies, verified through Nielsen BookScan.

Balaji Srinivasan 18:21 Yeah. So do you know about the Exorcist lawsuit?

Tim Ferriss 18:23 [laughs] I don't.

Balaji Srinivasan 18:26 Okay.

Tim Ferriss 18:26 I do not.

Balaji Srinivasan 18:26 So basically, back in the '80s, the, the guy who wrote, you know, the book The Exorcist, which actually got turned into a movie, sued The New York Times because his book hadn't been, a different book, Legion, hadn't been included in the bestseller list. And in their explicit written defense in the courtroom, NYT said the, the bestseller list was actually neither mathematically calculated, nor was it an objective measure of sales, rather it was editorial content, and as such was protected as free speech under the US Constitution, right? So [laughs] it's actually, the most charitable interpretation is like Google's rankings, right? Google's, Google's rankings, you know, what is the number one hit for Sinatra? Okay. Now, what's funny is you'll get a different, you know, if you Google it, you'll probably actually be surprised. For a long time it was the Sinatra web framework, and now it's Frank Sinatra, you know, the Wikipedia article. And the thing is, that's a great example of what should it be? Most people who are looking for Sinatra are probably looking for the web framework. But most people on the planet-

Tim Ferriss 19:30 [laughs] That is the most Balaji statement ever, but continue. [laughs] Do you think that's true?

Balaji Srinivasan 19:35 Oh, yeah, most people who, who are querying Sinatra-

Tim Ferriss 19:37 Ah

Balaji Srinivasan 19:37 ... as opposed to Frank Sinatra.

Tim Ferriss 19:39 I see.

Balaji Srinivasan 19:39 Right?

Tim Ferriss 19:39 I see what you're saying. Okay. All right, fair enough. [laughs]

Balaji Srinivasan 19:41 'Cause, you know, they, it's like a very proper noun to query, right?

Tim Ferriss 19:43 Yeah.

Balaji Srinivasan 19:44 So they're, like if you could measure it, and Google is the kind of company that when it was good, it was measuring this kind of stuff, their intent, i- basically, you could argue as to what was number one.

Tim Ferriss 19:53 Yeah.

Balaji Srinivasan 19:53 Is it the thing that people want to get? It, it's like searching for apple. Should it be the fruit there, or should it be, you know... Well, actually, if they look for apples, they want the fruit. If they want Apple, then they want the company, right? That kind of thing, right?

Tim Ferriss 20:07 Yeah.

Balaji Srinivasan 20:08 Anyway, but Sinatra's a good example.

Balaji Srinivasan 20:09 Point being that that's something, at least Google people kind of know that the ranking is not objective. When you call it a bestseller list, the impression is that it's a numerically ranked thing, and it's not editorialized, but it is.

Tim Ferriss 20:21 Yeah.

Balaji Srinivasan 20:21 Anyway, point being, coming all the way back up, Tim Ferriss's unjuiced, unedited list was interesting, 'cause I looked at that. That's actually kind of some open source analytics itself. And when I, when I looked at that, I was like, "You know, this is interesting. There is a stealth topic here, which I'm also really interested in, that Tim's listeners are interested in, and I'm not sure it's being named as such, and that is transhumanism." And that's Huberman Lab, that's life extension, that is brain machine interface, and it's limb regeneration. It's all your fitness stuff. It is all the recovery stuff and so on. All of that is sort of a, you know, a whole growing posi- in my view, positive trend. The problem is people have pathologized it. They think transhumanism is like the, I don't know, the Klaus Schwab version from the World Economic Forum, where you all become Misshapen Monsters and you're edited and, you know, you're Quasimodo, you know, or whatever.

Tim Ferriss 21:14 Harvesting adrenochrome from, uh, orphaned children in Romania.

Balaji Srinivasan 21:19 That's right. So, so-

Tim Ferriss 21:19 [laughs] Something like that

Balaji Srinivasan 21:20 ... we need probably a different term for it, and I've got some terms that I've been thinking about. I think, you know, there's, like, often you have the, the positive and the negative version of any term. Like, you can, you know, Russell conjugate it positively and negatively. Like, you know, he was righteously angry, or he was incandescently mad or whatever. You know, you can change the tone of how-

Tim Ferriss 21:45 Yeah, the sweat, transpire, glisten, depending on...

Balaji Srinivasan 21:48 Yeah, exactly. I, you know, I sweat, he perspires, she glows, right?

Tim Ferriss 21:52 Yeah.

Balaji Srinivasan 21:52 So whatever else you might call it, I like to use the term optimalism as opposed to optimism. You are optimizing yourself. You are being positive. There's an objective function. Transhumanism, you, you might say it's just a change. Whether that change is positive or negative is unstated, right? But optimalism is, in a sense, you're improving. You're getting better, right? It is, like, optimal physical fitness. It is optimal health. It is taking care of oneself. It is optimizing finances. It is optimizing everything. Very in tune with, I think, what a lot of, you know, your listeners are, are for, right? So that's, that to me, if you ask about foreseeable futures, transhumanism is an all-weather thing, or let's call it optimalism. People will want to get better, and, uh, I think science is now really starting to catch up there. And this is actually one of the good things about, you know, the state sort of receding and, and coming back and not being able to... Like, the Overton window on this is absolutely moving. People are much more skeptical of the FDA, and that actually has good aspects because it means that more treatments and, and so on can get through.

Balaji Srinivasan 22:55 Um, but all right, so you asked about foreseeable futures. So one of them is optimalism/transhumanism. A second one, which I think is, this is, uh, this will be completely obvious to pretty much everybody who's in, let's say, big tech, but maybe not as obvious to people outside, is, uh, augmented reality glasses. Should I talk about this?

Tim Ferriss 23:14 Yeah, absolutely.

Balaji Srinivasan 23:15 Okay. So in the, like, late '90s and, uh, probably the early 2000s, people talked about the so-called convergence device, and you can go and look at the LexisNexis archives and so on. Bill Gates would talk about the convergence device, and what, what did he mean by that? He thought it was g- be, gonna be like a television which would combine, like, a computer and a phone and all of these other things. Why? It's 'cause, you know, in the, in the '80s and '90s, everybody had a TV, and everybody talked about the TV, and the, the household gathered around it, and they interacted with the remote. So it seemed like a reasonable thing that people who'd been habituated to using a TV could, could do something else, right? And it turned out to actually the convergence device was not the television, it was, it was the phone that acquired all of those characteristics. Uh, but they were correct that there was going to be a convergence device. And there were also people who were interested in, quote, "mobile" prior to the iPhone. Jack Dorsey actually, the reason Twitter, I believe, has 140 characters is it was some, like, SMS payload constraint that, you know, he understood how important mobile was gonna be- Years before the iPhone even came out, right? Most people were not seeing that. Most people even after the iPhone came out, there's this great Quora thread that's a time capsule that's something like, "What's the point of mobile apps?" It was like in 2010 actually, and they're like, "What's the point of mobile apps? Is it just gonna show me coupons as I walk by a store?" Right?

Tim Ferriss 24:38 Yeah. [laughs]

Balaji Srinivasan 24:39 Do you know this thread? Have I talked to you about this?

Tim Ferriss 24:40 I don't.

Balaji Srinivasan 24:41 My friend, Yashan Wang, he actually... I think he replied to this. Let me see if I can find this thread. Yeah, okay. "Without mentioning coupons, why and how is mobile the future? Or will the next revolution really be based around deals and incentives?" Okay. I think it was from 2010 or something like that, right? And the thing is, that post is a great time capsule because from today's standpoint we're like, "What are mobile apps good for? Everything. Everything is good mobile, right?"

Tim Ferriss 25:11 [laughs]

Balaji Srinivasan 25:11 There's Uber, and there's Airbnb, and there's Google Maps, and on, and on, and on. And then when you actually go and think about it, the issue is that because people have been so used to operating a computer in sessile fashion, meaning immobile, they, their imagination wasn't enough. They're like, "Why would I just wanna do that on the go? I d- I don't have a full mouse. I don't have a keyboard. I have to tap on a screen," and so on, and so forth. And Yashan's point was, humans are mobile. And so therefore, even if the interface is smaller, even if your UX is worse, even if it's more constrained and it can't do everything, it has that 1000x value proposition that it's always available to you at all times. And that alone means that every app will become a mobile app. This is totally obvious today. It was probably pretty obvious by 2015. It was absolutely non-consensus by like 2009, 2010 when that thread came out. Uh, except for within the tech people who were investing in mobile. Okay. So what is kind of similar to that? I, I f- and of course not every future comes to bear, and so on, and so forth. But what would I consider something which in like five years or 10 years are gonna be like, "Duh, super obvious. Of course. Huh." You know? And, and now today they think you're a weirdo and that's never gonna happen. Okay. So that's, that's a great... That... You know, when it goes from you're stupid and insane and that'll never happen to obviously that would always be the way it was, I love that because there's, there's a very short gap in the middle of that exponential. You know, other things that were like that were like masks during COVID, or pseudonymity actually in, in the crypto community. Uh, you know. But what is specific one? So AR glasses. So AR glasses, if you combine a few things, okay. So Snapchat Spectacles, which to Spiegel's immense credit, he has persisted with after tons of criticism and, you know, th- like hardware is really hard to iterate on, right? So he has persisted with that. He's made that a big thing. And I give him a lot of credit for that because it's very difficult to do that over multiple generations. It's the kind of thing that your CFO wants to cut. It's the kind of thing that the street doesn't like. It can be low margin, blah, blah, blah. Anyway, Spectacles are out there. I- I'm not sure what, what, how well they're doing, but I, I, they've definitely improved a lot. I like them. I have no Snapchat stock by the way, I'm just saying. Whatever. Thing, it's a good product. So s- Spectacles. Facebook's Oculus Quest. Again, something which Zuck deserves, I think, a huge amount of credit for, putting two billion into that 10 years ago. They're only now really starting to recoup it, 'cause there were several iterations and there was a lot of technology that needed to go into Oculus Quest to get it to where it is now. Oculus Quest. So Spectacles, Oculus Quest. Google Glass Enterprise, which I think is doing like reasonably well. Apple's AR... So a- Google Glass Enterprise basically they're using it for industrial applications. Not walking down the street yet, but for industrial applications like a, like a surgeon or a mechanic or something like that, right?

Tim Ferriss 28:02 Yeah, less likely to get punched in the face when you're using it that way.

Balaji Srinivasan 28:05 Yeah. [laughs] Right. Well, so I'll come to that point. Apple's ARKit, right? So ARKit is like a, you can hold your, uh, phone up and you can see like a glowing orb or something like that on the other side. Or y- you know, for example, you've got a ruler app in the phone, and you can hold it up and it'll just, boom, it'll show you blueprint style what the measurements are of your walls, right? And then, uh, you know, apps like Pokemon Go, right? Which are augmented reality apps. And you put all of that together, and what do you get? You get something which looks and feels just like a normal pair of glasses that you'd get s- from, from LensCrafter or something like that. But you tap it, and you get Terminator vision over the world. And maybe you tap it again, and it darkens and you're in VR. Okay? And it's as lightweight as normal glasses, which we know are a form factor that people do use. Millions of people use them every day. They look like normal glasses, so they don't like stick out to the world at large. But what they do is they now make you hands-free, right? So remember the thing we were saying, why humans are always mobile. Well, why would people want AR glasses? They want the use of their hands, right? They want the use of their hands, and they want to be outside, and they don't want to be stuck inside all the time. And so this will make us truly mobile again, because you won't be... You know, mobile phones will be seen as this intermediate stage where you go and walk around and you're like, you know, like this all the time, right? And I'm not sure if it was Huberman who said this on your podcast or something, but he was like, "You know, the way to wake up, to be alert, is to like look up." Do you know that trick?

Tim Ferriss 29:42 Yeah. I think he did share that on his and my first conversation on the podcast. I believe-

Balaji Srinivasan 29:50 Yeah

Tim Ferriss 29:50 ... that was i- in that episode. Mm-hmm.

Balaji Srinivasan 29:52 It's almost like a, you know, y- you got like this primitive caveman, and he's coming out of the cave, and he's like, "Who will Og smash today?" You know, and looking, looking up like this, you know, and he's like kinda surveying and he's alert or whatever, right? That, maybe that's the adaptation. But the opposite of that is staring down at your phone. And actually Sergey Brin many years ago remarked that it was emasculating to do that, and who knows what the biomechanical feedback loop that's going on is, right? But heads up is heads up.

Tim Ferriss 30:20 How much of the purpose of Alexa as a device in the home do you think is just developing Training data and better tech so that it can be ported over to mobile use in some type of application with, say, AR-enabled glasses.

Balaji Srinivasan 30:38 I mean, it's a really good business in its own right.

Tim Ferriss 30:40 Yeah.

Balaji Srinivasan 30:40 I mean, they've sold tens if not hundreds of millions of those devices. So but yeah, the training data helps, helps a lot. All three companies, you know, Apple, Google, and Amazon have, you know, these smart speaker things, which are... Oh, they're kind of interesting, right? If you snapshot today and then you think back 30 years, the kinds of things that have converged, you know, the, the clock radio has become this. The closest analog to that in the 1980s household for Amazon Alexa thing is that. And the phone obviously has combined lots and lots of different gadgets. And then we're gonna now see, you know, if you look at, like, uh, the Solana cryptophone, when you walked out of your house in the '80s or '90s, you'd have your wallet and your keys, and then maybe your credit card, and then later you have your phone. And it'll literally be a physical wallet and a physical key and a credit card and so on. And eventually, that's all gonna converge into a different kind of thing because it's amazing that your cash and your wallet and your keys to your car and your credit card can all be thought of as a private key on your phone.

Tim Ferriss 31:44 I suspect we're very close to that, right? I mean, you have Tesla-

Balaji Srinivasan 31:46 Very close

Tim Ferriss 31:46 ... which is phone tethered, and then you have, say, Apple Wallet, and then you have, you know, fill in the blank. We're, we're very close to that, I would imagine.

Balaji Srinivasan 31:55 We're close, but it's, it's one of those things. It's sort of like gathering threads. You know, so you have to gather all of the skeins together so that now a Tesla car can be basically opened by your phone, and then you have to sell so many Tesla cars that that's, like, 10% of the market and you've educated the market. And then you do it for, you know, your wallets with your private keys, and then you do it for your passwords and so on. So you're gathering all of these different skeins, and then you, you know, make that tapestry or that coil.

Tim Ferriss 32:24 What is that word that you're using? Skein?

Balaji Srinivasan 32:27 S-K-E-I-N.

Tim Ferriss 32:28 E-I-N. All right. New word.

Balaji Srinivasan 32:31 It's like a length of thread or yarn.

Tim Ferriss 32:33 A length of thread or a yarn, loosely coiled and knotted. Got it.

Balaji Srinivasan 32:37 And maybe I'm mispronouncing it, but I think it's skein.

Tim Ferriss 32:39 Skein. No, you got it. Skein. All right. Yes, you gather the skeins. Sorry

Tim Ferriss 32:44 to interject.

Balaji Srinivasan 32:44 Yes. So you asked for foreseeable future. So first is transhumanism/optimism. And I had this tweet, which is, uh, "Super soldier serum is real." Okay.

Tim Ferriss 32:55 [laughs]

Balaji Srinivasan 32:56 Have you seen this one?

Tim Ferriss 32:57 [laughs] I have not.

Balaji Srinivasan 32:59 Okay, so you'll like this one. All right? Super soldier serum is real, okay? This article is from PLOS. It's, like, 15 years old or whatever.

Tim Ferriss 33:07 Oh, this is, like, myostatin inhibitors or something?

Balaji Srinivasan 33:10 Yeah, exactly. And so on the left-hand side, wild-type mouse. On the right-hand side, myostatin null. And look at the chest on that guy, right? Like, holy moly. So that's why I put, like, the Captain America before and after.

Tim Ferriss 33:22 Yeah, if, if you are able to work with knockout genes and so on, you end up with, uh, animals like Bully Whippets. So people who have seen a Whippet [laughs] will envision this very, very, very thin dog that looks something like a greyhound. But if you look up a Bully Whippet, you will see something very, very different indeed. And there are also cattle breeds that are... have been bred selectively, which is the slow way to do it, for this type of myostatin inhibition. So they end up looking like Arnold Schwarzenegger times 10, basically.

Balaji Srinivasan 34:00 Exactly. That's right. And the thing is that, you know, there's this movie, Limitless, that I really like.

Tim Ferriss 34:05 Mm-hmm.

Balaji Srinivasan 34:06 And the reason I like it is it changes the normal Hollywood formula at the end. See, normally, many Hollywood formula, uh, you know, movies about science fiction stuff nowadays have a sort of Icarus thing to them. He flew. He was too bold, and he flew too close to the sun, and his wings melted, and he came back to the Earth. And so he should not have ever flown in the first place, you know? And, and it's basically like, "You arrogant technologist, you added, but there's always some constraint, and it will be subtracted from you. You'll never learn," or whatever, right? This kind of intrinsic conservatism. And, uh, what's awesome about, uh, it's a 10-year-old movie, so I'm spoiling it for people. But what's awesome about the end of Limitless is that he engineers away that constraint. And because in real life, guess what? All of our planes don't crash either. We managed to outdo Icarus. It wasn't, like, some arrogance of thinking we could fly. We could fly, right? We could figure it out. Yes, there were some cla- crashes. We figured it out. We got it down to a, not just a science, but to an engineering. And so similarly, a lot of people, when you show stuff like this myostatin thing or whatever, they'll be like, "Oh, but it'll give you cancer," or, you know, "Steroids will screw you up, man," or whatever. I'm like, that may be the case if you are not throwing all the science and engineering in the world at it. But, like, okay, so here's a kind of controversial statement. You know Lance Armstrong, the Tour de France winner who cheated and, right?

Tim Ferriss 35:33 Yep.

Balaji Srinivasan 35:34 Okay. Well, here's the thing. I may be getting some of the facts wrong on this, but my understanding is he had serious testicular cancer. His doctors gave him some kind of treatment, and then he did, like, he came back to win multiple Tour de Frances, right? Like, he was outracing other guys, many of whom were also juiced, okay? But the point is, yes, within the game, sure, he broke the rules, should be punished. I don't dispute any of that. From an abstract perspective, I want to know what his chemists were doing because that is some, like, Nobel Prize-worthy stuff. To bring back somebody from testicular cancer to that level of physical fitness is insane, whatever it was that they were doing. Now, is it possible people, again, they'll come up with the Icarus line. What are you talking about? He probably dropped five years off his life. Okay, maybe he did. I actually don't know. But if he did, I think a lot of people might still take that trade-off in the trade-off space to come from testicular cancer to, like, ridiculously ultra-fit and so on, but five years less of, of life. I don't actually think that's a necessary thing. Again, go ahead.

Tim Ferriss 36:39 Let me hop in here, 'cause this is, this is one-

Balaji Srinivasan 36:40 Yeah

Tim Ferriss 36:40 ... domain where I have, I have some familiarity. So for people who want to get an idea of how doping functions at the highest levels, or the higher levels. At the highest levels, you'd need to get, uh, the... Actually, there's a film called Icarus, of all things [laughs] .

Balaji Srinivasan 36:57 Oh, really? I didn't even know that.

Tim Ferriss 36:58 A documentary which goes into the Soviet state's use of doping. And from a-

Balaji Srinivasan 37:05 Ah

Tim Ferriss 37:05 ... biochemical and also even just mechanical logistics perspective, it's staggeringly complex and fascinating, I think. There's a book also, it's quite old, but called Game of Shadows: Barry Bonds, BALCO and the Steroids Scandal That Rocked Professional Sports, which is also a, a, a quite a good read when it comes to assuming you don't want to get into too much of the biochemistry. But let me say just two things. Uh, so one is related to Lance. S- There, arguments have been made that until he lost muscle mass through cancer treatment, um, primarily in his upper body, that he was an excellent cyclist, but not of the caliber that we saw afterwards, and that part of the success, not all of it, but a component to the increased level of success was-

Balaji Srinivasan 37:53 Again, it's a, it's a new version of, like, bulk and cut

Tim Ferriss 37:55 ... it was the recomposition of, of his body and distribution of muscle mass.

Balaji Srinivasan 38:00 Hmm.

Tim Ferriss 38:00 I do think the Lance example is super interesting, and I would, uh, just also pick up on one lost, lost skein. I'll, I'll use skein [laughs] -

Balaji Srinivasan 38:11 Sure [laughs]

Tim Ferriss 38:11 ... from earlier. If people want to see examples of literally they're referred to as double-muscled cattle. So these are mutations, due to mutations in the coding sequence of bovine myostatin. Belgian Blue is the one that you can most easily find, and the s- the photographs of this are, um, quite mind-boggling. Uh [laughs] -

Balaji Srinivasan 38:32 Oh, yeah, Belgian Blue is great, yep. The traps on that thing are just crazy.

Tim Ferriss 38:36 Oh, the everything. It doesn't even look like they should be able to walk. And in some cases, due to selective breeding and other types of interventions, that is the case with chickens now, who are bred for consumption. You know, they can't support their own weight on their legs past whatever it is. I'm making it up. Something like week six. But I don't want to-

Balaji Srinivasan 38:54 Right

Tim Ferriss 38:54 ... take us too far afield. We're gonna come back to The Network State.

Balaji Srinivasan 38:57 Wait, wait. I want, I just talk about this thing you just said, and let's come to The Network State, okay?

Tim Ferriss 39:00 Yeah.

Balaji Srinivasan 39:00 So-

Tim Ferriss 39:00 Yeah

Balaji Srinivasan 39:00 ... one thing that's kind of important about this is, and this will relate to The Network State thing, is um, you know, the title of that book, Game of Shadows, and some of the words, cheat and fraud and, you know, so and so forth. The fundamental issue, and even with the Soviets and so on, right? All of this stuff is being done in the shadows, it's on the border of the system, it's by the bad guys. What it reminds me of is actually in the Soviet Union itself, there were two kinds of groups that talked about capitalism. The, the first were the dissidents, the, the guys who eventually became reformers and so on and so forth. That was a tiny, tiny, tiny minority of people. They were the people who could get outside of their childhood and all the propaganda on how evil those capitalists were. Weren't they imperialists? Weren't they pointing guns at us? Hadn't they killed our brave Soviet soldiers? Hadn't Lenin's revolution, hadn't everybody sacrificed so that you, the worker, could have this bountiful life, and you're so ungrateful and evil? So that, there's that small group of academic types who could get outside their head. But there was a much larger second group of capitalists. You know who those guys were?

Tim Ferriss 40:12 Tell me.

Balaji Srinivasan 40:13 The black marketeers.

Tim Ferriss 40:15 Mm-hmm.

Balaji Srinivasan 40:15 And they lived down to every stereotype of the regime. They would cut you for some vodka. They, they were totally unregulated shadow capitalists.

Tim Ferriss 40:24 So are those guys Team Balaji? I'm just trying to tie this together. [laughs]

Balaji Srinivasan 40:27 No, no, no, no, no. Tying this together. My point is that when our moral premise... W- in the Soviet Union, the moral premise was capitalism is bad, and w- if capitalism's a crime, only criminals will be capitalists, right?

Tim Ferriss 40:42 Yeah.

Balaji Srinivasan 40:42 And it took enormous amount of effort over 70 years to tur- flip that moral premise and be like, "Look, capitalism is at least acceptable, if not good." And then what happens is all of this stuff, you unlock the basic dispassionate gears of civil society. You have accounting and you have supply chains and you have financing. You have all this stuff that we think of as, like, boring corporate stuff, where it comes out of the shadows into... You have courts that deal with edge cases. Because in the abstract, basically once you've denounced capitalism and pushed it into a corner, the Soviets could say, "And what happens if someone cheats you, huh? Well, that's what happens under capitalism." And the answer is, yes, it does. True, that scams or whatever do happen, but we have courts and we have mechanisms. And, you know, in, in the abstract, the whole thing can be denounced as obviously unworkable and so complicated. You have all these edge cases. You have the chancery court which determines in the liquidation who gets, you know, what kind of outcome. You have, you have senior debt. You have all this type of stuff, right? Meaning, y- sorry, I know I'm mixing a few things. Point is, you have, like, Delaware law and corporate law. You have liquidation preferences. You have debt and senior-

Tim Ferriss 41:55 Went from Belgian Blue to Delaware corporate law in [laughs] 27 seconds. I, I like it, the range.

Balaji Srinivasan 42:01 Yeah, yeah.

Tim Ferriss 42:01 [laughs]

Balaji Srinivasan 42:02 Point is basically that there are a lot of details when you actually come and implement capitalism. And from the ap- outside, if you haven't done that, it makes it sound, like, too complicated, a Rube Goldberg machine that'll never work. Why don't we just, you know, seize everything, comrade, and, and redistribute it from the state?

Tim Ferriss 42:16 [laughs]

Balaji Srinivasan 42:17 And the thing that's already there is the thing that's functioning, and the thing that isn't there is the thing that seems can be attacked in 1,000 ways is the system that doesn't exist.

Tim Ferriss 42:24 Totally.

Balaji Srinivasan 42:25 Point is, once that moral premise got flipped, once it was allowed for the bulk of 99% of people to engage in this, yeah, there's a whole machinery that comes in. And so once we can flip that moral premise and we can say, "Look, life extension is good, and more muscle is good, and the whole Icarus narrative is wrong, the Wright brothers are right. Icarus is a myth, Wright, Wright brothers, that's a reality, right? We actually were able to fly. Icarus is just a mythical thing. The reality is a Boeing 747," right? Or, or whatever, Airbus, you know. Name, name some recent flying aviation company that hasn't had some issues, but whatever, right? The overall, you know, planes work. So in the same way, once we flip that moral premise and say, "Optimism good, enhancement good," then we start shifting it out of Game of Shadows and Soviets and, you know, the doping scandals and cheat- all those negative adjectives, and we start going to the positive stuff of, you know, what Huberman is doing and what David Sinclair is doing and so on and so forth. I, the reason I just want to identify this, I actually think that moral language, that moral premise is everything-

Tim Ferriss 43:29 Yep

Balaji Srinivasan 43:29 ... and it's often not articulated.

Tim Ferriss 43:31 No, I, I agree with you. And just like making the market, setting the price depth charts, we, we talked a bit about the Overton window and sort of, uh, shifting that depth chart as a way of becoming political if you're an active player, so to speak. And I think that also applies here. I just want to say a couple of things about the doping and performance enhancement, just, uh, for people who may be interested in going a little bit deeper. Another documentary, and you could learn a lot just by watching. First, I would suggest Bigger, Faster, uh, ex- I always say-

Balaji Srinivasan 44:07 Bigger, Faster, Stronger?

Tim Ferriss 44:08 It's Bigger, Faster, Stronger, but I think for trademark purposes they probably flipped it. Bigger, Stronger, Faster is a documentary that was, that was made in 2008, and it is a fascinating exploration of performance enhancement, and it, it also shows the advantages that richer countries have in performance. And in a sense, doping and competition at the highest levels is very similar to, uh, let's call it tax optimization on the positive side, tax evasion if you want to look at it through that lens. They will look at something like, in this documentary, use of erythropoietin, so EPO used to increase the oxygen carrying capacity of your blood, right? Which is why athletes also will use blood doping. So they might have use of EPO banned by WADA, right? So you cannot do this in the realm of sports. That's against the rules. Then you have blood doping, which at different points and in different capacities has been either allowed or not allowed. It's the same thing, right? If you train at altitude and then you develop blood that has more oxygen carrying capabilities and then you infuse yourself with that, that's kind of quadrant two. Then you have quadrant three, which is like sleeping in an altitude simulation tent. So, and there-

Balaji Srinivasan 45:26 What are the axes? Sorry, I didn't, I missed the axes. What are the, what are the axes?

Tim Ferriss 45:29 Uh, forget about the axes for now. It's just comparing-

Balaji Srinivasan 45:31 Okay

Tim Ferriss 45:31 ... four different options. And then there are a few others. And it's just to point out that the, and again, I don't want to dwell on this too long, but the, the, you can look at four approaches to achieving the same ends with different legal status-

Balaji Srinivasan 45:47 Ah

Tim Ferriss 45:47 ... or different status with respect to the rules, which doesn't automatically mean all of them should be allowed in my opinion. But secondarily, like there are countries that do not have Olympic-sized swimming pools to train in and nonetheless have athletes who are sent to the [laughs] Olympics to compete in swimming, right? [laughs] So I, I do think that there are in some respects incentives that are aligned with athletes to preserve the current state of doping because with more money, with more state support, you can actually game the system more effectively than not necessarily lesser players, but less resourced players. So I, I would just say that I don't think all athletes would want to, uh, agree to, nor teams nor states to say the All Drug Olympics. If people haven't seen the All Drug Olympics skit from Saturday Night Live, they should look it up. It's actually pretty entertaining.

Balaji Srinivasan 46:49 Let me poke on this a little bit because I think-

Tim Ferriss 46:51 Let me add one more thing.

Balaji Srinivasan 46:52 Okay, go.

Tim Ferriss 46:52 And then you can poke on this too.

Balaji Srinivasan 46:53 Please.

Tim Ferriss 46:53 I would also say, definitely I'm not a doctor, I don't play one on the internet, but people should... Muscle mass is good to a point. Preserving muscle mass, avoiding age-related muscle atrophy like sarcopenia, super important, bone density, et cetera. But there are arguments to be made that stepping on the gas with anabolism could be contraindicated for longevity past a certain point. So I would just say there's a, there's a balancing act between sort of autophagy and, and a number of things we know work for longevity as it stands right now, at least in mice and, and possibly in canines. And that balance is something I think people should, should look at.

Balaji Srinivasan 47:42 Hmm.

Tim Ferriss 47:42 There will be a future guest on this podcast, Dr. Matt Kaiberline. That conversation's gonna get into a lot of that. Uh, but please, uh, feel free to push back or, or tease apart.

Balaji Srinivasan 47:52 Just one thing. I actually, I love this. This is great. I'm learning stuff also. But I think the, the framing of it in terms of athletes and the Olympic Games or drug Olympic Games and so on, the thing is, you know, as, as you're aware, in this century or in this sort of phase of humanity, we're moving away from spectator sports and like, I, I don't really care that much about the Olympics or the NFL or something like that, but I do care about physical fitness and running and, you know, lifting and so on and so forth. So fine for somebody who wants to go and do it professionally, but I do care about the average person's health. And for the average person or, you know, any person, that's not a game. The absolute metric is What is their personal muscle mass? What is the... You know, when, when 100 people run around a track, maybe one of them wins, but all of them, the other 99 also get a cardiovascular benefit from that, right? And that's kind of what I'm focused on, is not the zero-sum aspect of who wins this zero-sum competition where it's like this artificial and constrained environment, but rather the non-zero sum of how do we improve people's health across a population generally, even if it is true that these guys who are, like, extreme elite competitors have something to teach us broadly. Like, nothing on the field really matters to anybody outside the field beyond the entertainment unless there's some cool discoveries that come out of there and we're, we're curing testicular cancer or, or we're, we're having treatments for them that make them run around like Lance Armstrong after, after his thing. That's, that's kind of where I'm coming from.

Tim Ferriss 49:28 Yeah, I, I think we're more on the same page than, than you might imagine.

Balaji Srinivasan 49:33 Oh, yeah, yeah.

Tim Ferriss 49:33 The point I'm making is that the dose makes the poison, right? Paracelsus with so many things, and this includes volume of exercise. It includes drug intake. And much like we were talking about technology and looking around corners and seeing what will be obvious or at least widespread, say, five years from now, you can do that with performance enhancement in sports very easily, too. You look at race horses, and then you look at, say, patients with wasting diseases who are using various interventions because it is their, or they view it as their means of last resort. And then you have bodybuilders and then professional athletes, and then you have rich people, right? So if you just kind of track that progression, you can spot a lot of things super early.

Balaji Srinivasan 50:18 That's a great funnel.

Tim Ferriss 50:19 Yeah, you can spot, say, modafinil-

Balaji Srinivasan 50:20 Yes

Tim Ferriss 50:21 ... and Provigil, things like that, 10 years before it's widely, widely known as a possible performance enhancer for cognition, which I would not recommend people do, by the way. It's still pretty poorly understood.

Balaji Srinivasan 50:33 Honestly, just monitoring that funnel and publishing that funnel on a quarterly basis would be one of the most important newsletters.

Tim Ferriss 50:41 Yeah.

Balaji Srinivasan 50:41 That would be an awesome funnel to kind of track.

Tim Ferriss 50:43 I put it into The 4-Hour Body when I wrote it in 2008, 2009. It's still reliable. You can track that stuff.

Balaji Srinivasan 50:50 Hmm.

Tim Ferriss 50:50 It does require some manual labor, just because-

Balaji Srinivasan 50:55 Sure

Tim Ferriss 50:55 ... competitive horse trainers aren't just gonna sit down with you over a cup of tea the first time you meet and tell you all about their doping regimen.

Balaji Srinivasan 51:01 Right. [laughs]

Tim Ferriss 51:02 For a lot of understandable reasons.

Balaji Srinivasan 51:05 I agree with you on, you know, the exact dose of something. More is not always be- I, I agree with all that. The only thing that I'm saying is just, and it seems like a small thing, but it's like, I, I just don't like to even use words like doping, shadows, cheating, et cetera, because that is conceding territory to folks that want to pathologize improvement. And that's the only thing I'm coming at, is that, like, to sort of pull that chip that's, that limiter chip that's in our heads, you know, and, and remove that chip and basically like actually no limits.

Tim Ferriss 51:42 Well, [laughs] so I think, I think it is important to develop an awareness of the words you use because at least if you understand those words, they sort of form the concepts and the boundaries of your thinking.

Balaji Srinivasan 51:54 Yeah.

Tim Ferriss 51:54 At least the boundaries of what you deem acceptable and unacceptable, right? So you should be very aware of the language you use. A- again, I don't want to dwell too long on this. I will just say that if the opposite of pathologizing use of, just to choose one class, like anabolic, androgenic steroids, if the opposite of pathologizing it is, is freedom in the form of anyone taking however much they want whenever they want, I don't think that swing to the opposite end of the pendulum is going to be a net positive for people. So, uh, so the awareness is important, but as is the due diligence, right? Like, I have used a whole slew of these compounds post-surgically to ensure full recovery of my left shoulder, which I had completely reconstructed, and I've talked about this, uh, publicly-

Balaji Srinivasan 52:46 Hmm

Tim Ferriss 52:46 ... because I'm not ashamed of it. I think it was absolutely strategically, medically the right thing to do. I'm not recommending people do that. There are both medical and legal consequences that can follow from all of these things. So speak to your GP, speak to your [laughs] physician, uh, if you want to discuss this kind of thing. But, uh, I, I just want to make it clear that I'm not just an observer in this sphere. Uh, I do think there are times and places where it makes a lot of sense to use these extremely powerful molecules, but they can be misused with long-term consequences.

Balaji Srinivasan 53:26 Totally. So two things there. One is the reason that the Soviet example is actually quite good is they would also kind of jump to, "Oh, so you're for capitalism? Well, then everyone can auction everything at all times, and everything is always, you know, prices and evil hedge funders will take your ho-" Uh, and the thing is that all I'm saying is let's not pathologize this. Let's not put this in a box. Let us actually think... I mean, you don't have to go to the other extreme of roid it up, whatever, whatever, you know, the thing that jumps to people's minds. There's an entire infrastructure, an entire continuum that can be built out when we're not just balled up in the corner of Game of Shadows and cheats and doping and, and, and pathologization. That's all I'm saying.

Tim Ferriss 54:13 It is a great title, though. It is a great title, just the fact that you remembered it and have said it so many times. It's a good title. You gotta be... I mean, I know it's not your style of title. [laughs]

Balaji Srinivasan 54:21 Oh, it's a great title.

Tim Ferriss 54:23 It's like death tax. It sticks. It sticks in your head, right? It's deliberate.

Balaji Srinivasan 54:28 So that's exactly

Balaji Srinivasan 54:29 right. I mean, there's actually this amazing app, you know, that people... It, it came out recently, DALL-E 2, okay?

Tim Ferriss 54:35 Yeah.

Balaji Srinivasan 54:35 And what I love about... Have you ever heard about this? You seen this?

Tim Ferriss 54:37 I have, I have access to DALL-E 2.

Balaji Srinivasan 54:39 You have access to it. Great. Good.

Tim Ferriss 54:40 Yeah.

Balaji Srinivasan 54:40 So and there's also, like, open source, not open source. There's, there's more public versions that people can mess around. So the thing is, that shows the power of words more, to somebody who's of a quantitative bent, more than anything I could say. Because you can write three words into DALL-E 2 and get an image out from it, and it's, uh, it's effectively like an extremely compact programming language. I say, like, Balaji improving musculature. I don't know, something like that. That would be funny.

Tim Ferriss 55:14 Yeah. Yeah.

Balaji Srinivasan 55:14 Whatever.

Tim Ferriss 55:14 Great. Great.

Balaji Srinivasan 55:14 Crazy.

Tim Ferriss 55:14 Yeah.

Balaji Srinivasan 55:15 Point is that if you were to actually write that out in computer code to build some of those images, it would be thousands, tens, hundreds of thousands of lines of code for some of them. But you can literally do it in, like, three words. And, you know, when people say, "Oh, you know, I'm not a, I'm not a number, I'm a name," there's actually a, a wisdom to that because words are like these super high-dimensional vectors. And w- you can combine them to these really complicated manipulations in just a few phrases. And what's kinda interesting is that three different technologies are all converging on the power of really, really short phrases, and those are AI, as we just talked about, you know, where you just give a few words and the computer is able to figure out all of this stuff. Crypto, where you have 12 words or 13 or 14 words, and it's a mnemonic which stores all of your cryptocurrency, right? I mean, literally you could store, like, $100 million in, like, those, those words. You know, you could store all these possessions. And then obviously social media, where a few words can be a hashtag or a phrase that starts an entire movement and that is on every building and everybody quotes and, and so on and so forth. So those three points, by the way, why those three technologies... I know it's almost seems trite to say AI, crypto, and social, but those three technologies are, in a sense, like cognitive or social technologies in a way that rocket ships and internal combustion engines are not because those don't interact with humans. These do. You know, these touch-

Tim Ferriss 56:41 Mm

Balaji Srinivasan 56:41 ... humans in different ways. Anyway, so, so basically I have grown... I used to kind of think that all the word games that they played in academia, in the humanities, weren't that important, and I... It would just bore me as to why they were doing this. And now I realize it's, like, insanely important because a slight tonal shift in a word, that Russell conjugation thing we were talking about, you would get a totally different looking DALL-E 2 image based on the tone.

Tim Ferriss 57:10 Sure. That's a good point. Yep.

Balaji Srinivasan 57:11 And

Balaji Srinivasan 57:12 that makes it concrete, right?

Tim Ferriss 57:14 Yeah.

Balaji Srinivasan 57:15 So that's why basically building our own vocabulary and thinking about it consciously from the beginning, sometimes coming up with words. For example, you know this guy Peter Turchin, okay, who I like some of his work. Do you know him?

Tim Ferriss 57:29 I do not.

Balaji Srinivasan 57:29 So he came up with a term which he calls cliodynamics, right? And, like, cliodynamics is, Clio is like the muse of history, and essentially the concept is he named this term. It's like the science of history. It's like a, a quantitative form of history. And so he just took that term Clio and he put it in front, and it has kind of a nice sound to it, and it's kinda cool. And he just made that word, and then he's using that word, and I think it's a great word, right? And what this is similar to, by the way, is if you're an engineer and you're writing code, what you'll find is... And you probably did this actually when you were writing your book. You'll find that you write 100 or 1,000 or 5,000 lines of code, and there's certain concepts, certain nouns and verbs that you keep using. And then you're, you know, at sometime on line 3,700 you're like, "Oh, that noun is actually the core data structure of my entire program, and that verb is the core function of the whole thing." It's a little bit like you're writing a book, and on chapter three you're like, "Wow, that should be, like, the title of the chapter."

Tim Ferriss 58:32 Yeah. Or the book.

Balaji Srinivasan 58:34 Or the book.

Tim Ferriss 58:35 That's how a lot of people work. Or a screenplay, right?

Balaji Srinivasan 58:37 That's right.

Tim Ferriss 58:37 They come up with the title on page 78, where it somehow emerges as a theme with a label.

Balaji Srinivasan 58:43 Yes.

Tim Ferriss 58:44 Mm-hmm. Let's talk about The Network State.

Tim Ferriss 58:48 Let's start with the simple question, which is, what is, what on earth is a network state?

Balaji Srinivasan 58:56 We were just talking about words, and this is, you know, something which is chosen for this purpose to kind of have several different definitions. So I've got a definition of it, and then I've got, like, several different ways of talking about it. So here's a definition, and then it won't seem informative, and then I'll go through it. Or at least it'll seem like a mouthful. So a network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population income and real estate footprint to attain a measure of diplomatic recognition. Okay. Now, you might be like, "Jesus, that's like, that's not a sentence. That's a paragraph." And the thing is that there's l- tons of things which are very simple to describe or interact with, but very complicated to implement. And, you know, for example, Google has this really simple interface of you type something into it. But to implement Google is actually quite difficult. And in particular, if you asked me to define not what a network state is but what a nation state is, people will kinda have a tough time doing that. You know, they might say, "Oh, it's, uh, this kind of like regions on the map or something like that. It's a country," right? But when you, you want to give, like, a precise definition that's not like a circular definition, the, the term nation state, for example, first nation and state means something different. Nation comes from the root word, uh, same root as, like, natality. It's, like, from common birth, you know?

Tim Ferriss 1:00:38 Mm-hmm.

Balaji Srinivasan 1:00:38 And so a nation, that's like a group of people with a common culture, like the Japanese people. And they have a Japanese language and Japanese culture, and they're ethnically Japanese, and so on and so forth. And then the state ... is the system of laws and government that that nation sets up to manage its own affairs, and they're as different as, let's say, labor and management in a factory.

Tim Ferriss 1:01:03 Mm-hmm.

Balaji Srinivasan 1:01:04 Okay? And the same nation could have very different states on top of it. There's some, you know, place like France is aware of this because they have had many different kinds of governments and so on on top. But in our day-to-day language, the nation and the state are conflated. For example, you'll hear, hear the term national security or multinational or national as a synonym for federal, as national meaning, like, the entire... But they're, they're actually conflating things because really a multinational, it's not like it's operating with the Japanese nation and the Catalonian nation and the Kurdish nation and so on. It's multi-jurisdictional. It's operating in this jurisdiction and that jurisdiction and whatnot. It's not like... So, so the word underneath has kind of gotten abused. Similarly, like, national security, it's really, like, state security. It's not really the security of the people. They're sort of abusing a term, right? So there's been this drift and this kind of confusion, and the reason for that is that states want to identify themselves with the nation in the same way that, you know, management wants to identify itself as being the same as labor and to not have a division between the two. Now, sometimes that's good and sometimes that's bad. It's good if management is actually aligned with labor and economically aligned and so on. It's bad if management is disaligned, and in the stereotypical case of, like, the evil CEO exec with the golden parachutes, that's a bad case, right? And so in the same way, when people try to make this extremely tight identification between the state and the nation, it's not actually the case. The, the people can have a totally different government if they so choose. They shrug it off, and that tiny layer of folks that are in the government just d- gets deprecated, and a new government is set up if people pull their pointers away and they set up a new thing. That's what happened, for example, in the former Soviet Union when, when the Soviet governments fell. Okay. So my, my point is that these things that we interact with on a daily basis, we don't usually have to go to first principles and define them from scratch, right? You know, if we just talk about the definition of a nation state, the reason I want to talk about that for a second is it will be more clear why the nation state is a complicated thing and why a network state has a multi-clausal definition because each one of those clauses takes care of a different failure mode.

Tim Ferriss 1:03:28 Mm-hmm.

Balaji Srinivasan 1:03:28 'Cause there's all these different people who've tried to start new countries, and just like a, a venture capitalist deal will have this term and that term, it'll have, it'll have drag along, it'll have liquidation, it'll have pro rata rights and so on. Every single term in this, in this contract anticipates some conflict or failure that had happened in the past, and that's why it's a more complicated contract. And the same with this definition of a network state goes through a ton of different kinds of failures from just putting a flag on an oil platform and trying to call that a country to going and trying to start a war and so on. There's many different ways that people have failed to start new countries, and this definition I think is constructed to route around all of them. Okay?

Tim Ferriss 1:04:17 Mm-hmm.

Balaji Srinivasan 1:04:17 So that's why it's a complicated definition. All right. But first, let me just kind of talk about the definition of a nation state, right? And so first, like, the, the nation itself, we just talked about how that is, you know, this, this body of people that's united by common descent, history, culture, or language, and the state is the government. But even that question of, okay, fine, b- what's, what is a nation, you can actually drill into it, and all of these thinkers, all these famous thinkers, you know, Rousseau and Hegel and Marx and Mill, all these guys that you read about in, in school, you may vaguely remember it, all of them are now actually something that an entrepreneur or someone who's very applied would have to think about. Why is that? Because if in the 2010s we started to ask a question that we had never really asked in the 2000s, and that question was what is a currency? Okay. In the 2020s, we're gonna start asking the question what is a nation? And it, it actually becomes something where y- you know, the thing we took for granted that we thought of as-

Tim Ferriss 1:05:24 Sorry, Balaji. Just, just, just a quick question. Nation or a state?

Balaji Srinivasan 1:05:26 Nation first.

Tim Ferriss 1:05:27 What is a nation? Okay.

Balaji Srinivasan 1:05:29 What is a nation? Because the nation comes before the state. You could have a nation without a state. For example, the Kurds are a group of people that h- have a common ethnicity and culture and so on, but they don't actually have a state. The Catalonians, they're in the territory of the Spanish, where the Spanish state governs, but they're a people without a state. And actually, when you think about this, right, like, the United Nations is actually a misnomer. It's more like the selected nations that happen to have their states.

Tim Ferriss 1:05:59 Hmm.

Balaji Srinivasan 1:06:00 Okay? There was actually a guy, you know, the guy who's currently running Kazakhstan, and he's like, "We can't endorse the principle of self-determination for every nation because we'd go from 192 in the UN to, like, 600 nations." 600, because all of these new states would pop up rather, because there's all of these hundreds of nations around the world that do not have their own state. The thing is, when you start seeing it this way, it's a lens on the map that most people just don't think about. It's a, you're turning a constant into a variable, and that is, when we talked about it earlier about volatility increasing, the biggest way that you can increase volatility is you turn something that you were at total consensus on and 100% of people agreed on into something that only 80 or 70 or 60 or 50% of people agree on. And when you do that, when you take that constant and you turn it into a variable, all kinds of assumptions change. If you're a programmer, for example You know, the difference between operating and assuming that it's just the United States or just in English versus coding your program to work in every country and every language is an enormous change. It can be done, but it's like, it's a significant difference. Concretely, why do I say constants are becoming variables? Well, there are PC examples I can point out, and there's un-PC examples.

Tim Ferriss 1:07:19 Let's do both.

Balaji Srinivasan 1:07:21 All right, let's do both. Okay. Well, constant, two genders. Variable, n genders. Okay?

Tim Ferriss 1:07:27 Yeah.

Balaji Srinivasan 1:07:27 That's a great example of a constant that became a variable, where there was something that was simply an assumption in the 2000s that very much turned into a variable. And literally all kinds of backends and, you know, databases had to get rewritten, turning something that was assumed as a constant into a variable. An- another example is the US dollar. Like, before the, before Bitcoin, no one really thought that that was a variable, and now it is. It's a huge variable. It's something that a significant fraction thinks of every day as something that they can swap in or swap out to at some percentage. And it's no longer, you know, it's no longer the thing that you must reform. It is the thing that you can exit from. And once you kind of start seeing this, that constants are becoming variables, you start seeing it across life. And very roughly speaking, you have the, you know, I'll just use this phrasing, all right? But you have the woke and the tech who are both sort of in different ways disaligned with each other, but also aligned with each other in terms of turning all sociopolitical constants into variables and all economic things into variables. Uh, let me give you the tech side, because it's easier to talk about. For example, is a meeting, is it in person or is it virtual? Now we have to actually choose, right? Oh, uh, are you, when you're reading that book, are you reading that book physically, or are you reading the digital copy? Simply the digital version of everything starts introducing combinatorial complexity, right? Oh, you're talking to somebody. Was it on the phone or is it one of these, like, 10 different apps, right? Are you watching the news? Well, it's no longer CBS, ABC, NBC, but it's like whatever number of different things. Okay? Now, there's a good to that. There's, there's alternatives, there's choice, there's all this type of stuff. Obviously, people have said there's a bad. "Oh my God, you know, our people are living in their own filter bubbles." Really, they're mad that there's more than one filter bubble, but basically this is great decentralization, great fragmentation. So all these constants are becoming variables on the economic side, and tech is pushing that. And then on the political side, woke is pushing that. And lots of things that people just sort of took for granted, for example, you know, the, the police, right? Do you have a society with police? People kind of just thought of that as a constant, and then you have a, a significant double-digit percentage of the population, less today, but that was actually saying, "Defund the police," right? "Abolish the police." And you have an NYT op-ed that says, "Yes, we really mean defund the police." That's a big variable, right? That's a huge, enormous change. That is a, what I call in the book, I call that a moral flipping or moral inversion, where something that was good becomes bad or bad becomes good. And when you have something like that, you start to actually create different nations, because you have the fundamental premises of what i- are good and bad in a population change. And the US is not really a nation state. Arguably, it never was. But it's not really a nation state. At a minimum, it's a binational republic which has the red and blue nations underneath it. And you can see this. There's graphs, like for example, uh, there's a CGR article from 2017 that I link where you can actually see on social media that the red and the blue are literally, like, different clusters. And, and it, it pops out to you. You know? They just literally only link to each other. And one way of looking at this that's really unambiguous is if you look at marriage patterns. People typically will say that they will marry across their race. But you know what? Democrats will only marry Democrats to a higher percentage, and Republicans are tending to only want to marry other Republicans, and that has been growing, right? And the thing is that you iterate that out one generation, and what happens? That becomes ethnicity, right? Ideology becomes biology. If your political party is so important to you that you are not gonna marry outside it, then in like one generation, it becomes at a minimum like Protestant, Catholic, or Sunni, Shiite, or something like that. Hutu, Tutsi, whatever, right? You know, it, it becomes something that's actually tribal as opposed to ideological. The ideology changes the biology. So these are things where they're extremely deep questions where you just didn't even have to think of them as variables because you're born into a world where they've been fixed as constants. Let me pause there and get your thoughts.

Tim Ferriss 1:12:02 Well, I was just gonna ask, how does The Network State solve for this or codify it up front or allow for those types of moral flippings?

Balaji Srinivasan 1:12:12 Great question. So short answer is that it says that the nation is the network that forms online that is defined by the moral premises they share, and you literally have like a survey, okay, which is the good/bad survey. And sometimes explicit is better than implicit. For example, the founder of this community actually has something which is like, "I believe capitalism is good/bad. Law enforcement is good/bad. Entrepreneurship is good/bad. Human improvement is good/bad. You know, two genders are good/bad," and so on and so forth. You have a set of preferences, right? And some of them are gonna be not the extremely hot button issues, but they're gonna be things like carbs, good/bad, and so on and so forth. Okay, and I'll come to that actually. I know it sounds funny, but- One of the things about this is once you define a community on the basis of what they think is good and bad, it's so strong. It's ridiculously strong because they agree on the basic premises. And then they can crowdfund. Th- you don't have politics in the same way because they don't have internal disagreement. They have alignment. They agree on what the good world should be. And then they can crowdfund things, they can appoint leaders. They are essentially organically aligned for a cause.

Balaji Srinivasan 1:13:35 And that filtering of the internet into these network nations is actually the first step. What it's not, and the reason this, the whole, you know, the definition has all these clauses, to give you some examples of failure modes, right? If you go to YouTube and you look at, like, how to start a new country or whatever, you know what all the things start with? Like, they're kind of joke videos, but they're kind of funny. You know what they all start with?

Tim Ferriss 1:13:59 What do they start with?

Balaji Srinivasan 1:14:00 Get some land. And they're like, "But all the land is spoken for," blah, blah, blah, blah, right? So it just immediate- like, the first step they take is the wrong step.

Tim Ferriss 1:14:10 Mm-hmm.

Balaji Srinivasan 1:14:10 Why? Because land is the most contentious, zero-sum, insanely fought over thing. I mean, Russia and Japan are fighting over the Kuriles and, like, there's little islands in, you know, the Mediterranean that the Turkish and Greek states are fighting over. People fight over land so much over the stupid... You know, Canada and Denmark were fighting over this stupid uninhabited piece of land. Do you know what I'm talking about?

Tim Ferriss 1:14:36 [laughs] No, it doesn't surprise me, but [laughs]

Balaji Srinivasan 1:14:39 It was this island.

Tim Ferriss 1:14:40 Humans like to fight.

Balaji Srinivasan 1:14:42 Hans Island, okay? Here's the thing. Why would they fight over something like Hans Island if you go and look at it, okay? It's this uninhabited, frozen island in the middle of nowhere. The non-obvious thing, very non-obvious, I think, is that they can see it on a map, okay? There was a, in the, in the 1800s, there was this fight in the, uh, conflict. And it was called 5440 or Fight. Are you familiar with this?

Tim Ferriss 1:15:05 Say that one more time. Probably not.

Balaji Srinivasan 1:15:09 5440 or Fight.

Tim Ferriss 1:15:10 [laughs] No. I was, I was stuck looking up the Falkland Islands because I was thinking about the Falkland Islands-

Balaji Srinivasan 1:15:15 Yes

Tim Ferriss 1:15:16 ... in this context as well, the Islas Malvinas. But I don't, I don't know 5440 or Fight.

Balaji Srinivasan 1:15:20 Okay, so 5440 or Fight was basically this mid-1800s conflict over the boundary in the Pacific Northwest. And, you know, the, the thing is, is basically like we are gonna get... The Americans wanted the border with, uh, you know, what we would now call Canada to be at 5440, or they would fight a war, right? Now, in actuality, it wasn't, it, I think it turned out to be, like, the 49th parallel rather than 5440. But the thing is, think about that. The latitude and longitude, okay, this, this thing, this map construct that everybody could share became something that lots of eyes were on, and then they were fighting over it, right?

Tim Ferriss 1:16:05 Mm-hmm.

Balaji Srinivasan 1:16:06 Okay. Now, you might say that's, like, the most obvious thing in the world, Balaji. Why, why... Which, of course, they'll fight over a map. They can see a map, et cetera. But let me complicate that picture. First is the map was actually not always visible. In, you know, pre-1492, much of the world was unmapped. The entire, quote, "New World" was not mapped. And maps actually just got better and better, and th- they're, you know, for a long time, there was, like, "There be dragons." You know, there were parts of the world that were unmapped. There was what's called terra incognita, right?

Tim Ferriss 1:16:36 Mm-hmm.

Balaji Srinivasan 1:16:37 And there was this time of mystery. You know, it, it's, it was the frontier, but it was a frontier to the Nth power because you didn't even know the land existed, right? And it kind of seems like we'll never actually have that again until we get to space, but I argue it's actually existing again already in a non-obvious way, and that is on the internet. Point is, when people can see something, they will fight over it. You know, the, the concept of mimesis, right? If they can see it, they'll fight over it. So they can see Hans Island, they fight over it. They see a border, they fight over it. And you can see, for example, the Franco-German border between France and Germany. You know, the border you can't see is the border between Twitter and Facebook. And what do I mean by that? What is the border between Twitter and Facebook? Well, Twitter has, like, 330 million users. Facebook has 3.6 billion. And for each person, you could define the border as for their time spent on... So let's say there's, that's, you know, 3.6 billion Facebook users, 330 million Twitter users. The total is 3.93 billion max. It might be, like, 3.7. There might be an overlap there, okay? For each person, you can define a 0 to 100% in terms of the time that they would spend on either they're 100% Twitter or 100% Facebook, right? The border region would be those people who are 50/50. And that might be a group of 70 million people in the world who spend exactly 50% of their time. And there's people who are farther from the border who are 30/70, and people who are really far from the border near the capital who are 100/0, and vice versa, okay? What I'm describing there is literally something that you could compute. It's not an abstract thing. If you had access to all of Twitter's dataset and all of Facebook's dataset, you could compute this. Here's the thing. Nobody has access to both.

Tim Ferriss 1:18:19 Hmm.

Balaji Srinivasan 1:18:19 So nobody can compute it. Or you can estimate it, and so on. But unless, you know, like, Twitter and Facebook got acquired, they wouldn't be able to literally find out who was on the border region. They could do sampling and stuff, but s- there's a cloud that has descended, right? These gigantic networks cannot really see their borders that well. They can see themselves, but they can't see what people are doing outside. They have less control, in a sense, right, and less visibility. And so instead, what they'll, they fight over are the visible things like, you know, the use of the network and so on and so forth. But they're gonna fight over border regions less. The only way they can fight over a border region is to make their product so attractive that they can pull people from that border region. Now, by the way, lest it be said that these are, like, trivial things to talk about, Twitter is 330 million people. Facebook is 3.6 billion. Both of those are bigger than France and Germany combined, you know?

Tim Ferriss 1:19:15 Mm-hmm.

Balaji Srinivasan 1:19:16 These are, these are enormous, enormous networks. It's like a huge chunk of humanity. And the fact that we cannot see the border region means that the entire geography of, like, how humans operate is actually changing. You have to kind of remap how you think about geography, 'cause in physical space, for example, two people, you know, they're, they're near each other. There's a physical distance metric and so on. In digital space, it's like a bunch of islands that can snap too. Like, I can be near you as I am right now, and then snap away and be really far, right? And that applies not just for individuals, but for entire continents. So for example, in the physical world, Russia is basically always gonna be adjacent to Japan and Ukraine and Iran and so on. Like Russia the country doesn't move around that much. I mean, its borders can expand and contract. With the Soviet Union it's bigger. When it's, when it's the Russian Federation it's smaller. But it's not like it's suddenly adjacent to Argentina, right? It's not suddenly adjacent to Mexico. It could, you know, like it did, it was involved in the Cuban Missile Crisis at the, at the height of its power, but it, it's not, like, projecting power all over the world. By contrast, somebody like, you know, Vitalik of Ethereum, his network of people, right, or, you know, the, uh, the Solana network, suddenly this network can be adjacent to another network. Solana can start taking users from Ethereum. It's like this huge island of, like, 30 million people just surfaced out of the ocean next to Japan and started-

Tim Ferriss 1:20:45 [laughs]

Balaji Srinivasan 1:20:46 ... like pulling people from it.

Tim Ferriss 1:20:47 Godjira. Yes.

Balaji Srinivasan 1:20:49 Right?

Tim Ferriss 1:20:49 Godzilla. Anyway. [laughs] Continue.

Balaji Srinivasan 1:20:50 Yeah, exactly, right? So it's like Atlantis is real. Digital Atlantis, this huge island. What the heck, right? And, and it can then disappear and vanish, and you can also vanish, you know?

Tim Ferriss 1:21:01 Yeah.

Balaji Srinivasan 1:21:01 Your, your thing can kind of be like, "Hey, you know, we wanna ba- ba- ba- ba, we wanna cut off those network relations and we wanna move our island somewhere else," right? So the thing is that I'm downloading one of about, I don't know how many, 10, 15 different things that turn constants into variables. One of them is the nation, uh, that we, we take for granted, the single group of people, is breaking up into multiple nations that are defined by networks. Another is the currency is breaking up, okay? A third is the geography is changing. A fourth is the moral principles that underpin society are changing. And so when, like, all of those things are in flux, you kind of need something to catch it on the other side because otherwise what people will do is they will sort of try to assert that old thing that just doesn't exist anymore, and that'll be, like, something that does not acknowledge the reality of the situation. It's like opening the, you know, closing the barn door and then expecting to get all the horses back inside when there were forces that were more powerful than that thing that, that spread them all out, that, those entropic forces. You have to kind of go to where those horses are and loop them up and maybe have new ranches or whatever there to, to extend the metaphor.

Tim Ferriss 1:22:18 Okay. So what I'd love to do is, and, and this is just how I like to think about teaching in general, like if you're teaching someone a golf swing, like you show, you show them once, you do it side by side, then you have them take a couple of free swings, and then provide feedback after that.

Balaji Srinivasan 1:22:33 Sure.

Tim Ferriss 1:22:34 What I'd like to do is just paint a picture or get your help to paint a picture of where we might be going, and then we can back into digging into some of the nuts and bolts and concepts of the network state. So I'd like to, to break that into two pieces. So let me, let me just set a framework, if I may. So it could be five years, it could be 10 years, or whatever timeframe, but let's just kind of pick a timeframe. Maybe it's five years, but you can pick. The, the first is just take a few minutes to paint a picture for where you see America in a handful of years, right? Whatever... And again, you can pick the, the distance just so we, so we have an idea. And you have had some predictive accuracy with a number of things over the last handful of podcast conversations. So just to set the stage for, like, okay, if, if your default is kind of do nothing, don't move, this is what you might see coming based on A, B, and C. And then just a few minutes on that, and then after that, painting a picture of if you were taking the pro side of a bet. So let's just say you're talking to some politician and they're like, "Ah, Balaji, you're full of shit," blah, blah, blah. "US is gonna be this, this, and this, and not much is gonna change. And, and I'm gonna bet a million dollars that this network state thing is not gonna be a thing." And you said, "Okay, I'm gonna take a million dollars on the other side of the bet, and here's the picture I'm gonna paint as a possibility." And because when I hear network state, you know, a lot of things come to mind. I'm listening very carefully. I'm thinking on one hand of, like, e-citizenship and Estonia and how that might be tweaked, because most of the people who are getting this e-citizenship have no plans to actually reside in Estonia, right? And then I'm thinking on the other hand of, like, Christiania, uh, this [laughs] basically s- started as a sort of squatters territory within Copenhagen in Denmark, uh, that has its own social structure of sorts, its own economy of sorts, right? I'm th- I'm, I have a lot of these free-floating ideas, but if you could just talk about, like, okay, handful of years out what your vision of the US looks like and what might change. And then if you had to paint a picture of, like, if I had to bet on a nation state coming into existence and getting some traction, this is what I could see happening. And then we can back into the rest of it.

Balaji Srinivasan 1:25:00 So let me start with the first part first. This is just a scenario analysis. I don't wanna say it's a base case. Let's say I think it's probable. I can't say it's 100%, and there's always, there's, there's things that happen that are reactions to trends you predict, but it's hard to predict exactly what that reaction is. But here it goes. I call it American anarchy, Chinese control, the international intermediate, and the recentralized center. Okay? This is my sort of base level worldview for what happens the next five, 10 years. So what is American anarchy? So I actually wrote about this for Barry Weiss's newsletter last year, How We Changed Our Minds in 2021. But the short version is some groups think everything will basically be as it is, the so-called, what Tyler Cowen calls base raiders. They just think everything is gonna be the same. Everybody's kind of agitated or paranoid or whatever, and it's just all gonna be okay. Whatever. And then you've got folks who think that the US is descending into either fascism or communism or something like that, respect- essentially right or left authoritarianism. And they're reacting to that, and they're like, "Oh my God," you know, and you're, you're seeing this every single day on social media. People are pushing back against this. And the thing is that while those two groups all share, you know, th- they've got huge differences, one thing that is true verbally, rhetorically, conceptually, cognitively is even if, you know, there's left and right vectors that point like this, they're both pointing anti-authority. They're pointing against hierarchy. And so the left might say, "We are all equal," and the right might say, "You ain't the boss of me." But both of them point towards this kind of concept of you can't control me, no hierarchy is legitimate, you know, I do not trust authority, and so on and so forth, right? So that's an, that is a subtle vector sum on one axis. Even if the left and right cancel, the anti-authoritarian aspect is summing, right? Does that make sense?

Tim Ferriss 1:26:57 Yeah, it makes sense.

Balaji Srinivasan 1:26:58 If that is the case, then it's the thing that is not conceptualized that we're actually driving towards. The consensus is for anarchy. Because the left and the right can agree that the hierarchy is illegitimate in some way, that the institutions are illegitimate, whether it's institutionally exist or if it is, you know, it's all the deep state. And so both of them are tugging on it in a certain way where there's a vector sum towards taking it apart. And the thing about that is American anarchy is like the ultimate in liberty and equality. Everybody's equal because there's no bosses. Everybody's free because there's no laws or hierarchy. There's an aspect of this that is the ultimate of democracy and the ultimate of capitalism. [laughs] Everybody's doing whatever they want, right? And that strain exists in American culture on kind of both sides. There is a deep liberty, you know, kind of thing. And then you've got folks who will actually say anarchy is good, and they might say it as good as anarcho-communism, or they might call, say, crypto anarchy, where you're, you're imposing, you know, something like Bitcoin on top of it. Basically, it's like, uh, the physical world is very chaotic, but you have a digital world and digital property rights that are there, right? So some kind of structure online. But the issue here is [laughs] we have sort of seen what the transition to anarchy looks like in many countries around the world over the last couple of decades. There's a book by Barbara Walter called How Civil Wars Start, which, you know, there's a lot of things I disagree with her on. But I actually give her credit for essentially pointing out that many American interventions and other interventions overseas, NATO and s- you know, other stuff, over the last few decades, they've been in the intent of spreading democracy, and they've caused anarchy. Like, Mexico is way more chaotic than it was. Ioan Grillo has this book called El Narco, where he talks about how Mexico's democratic transition attended this huge burst in, you know, the narco terrorism and, and violent gangs and so on and so forth. Tunisia, Libya, Egypt. A, a bunch of these countries have essentially... We, we've sort of seen them go from reasonably okay to kind of anarchic. And there's a playbook for how that looks, and that's actually, if you, if you before and aftered, if you just teleported somebody from 2005 or 1995, you know, '97 essentially, to today, I mean, y- there's always some... You can track it back and be like, "Well, Oklahoma City happened in 1995, and there's the Unabomber." There's always something that you can say was a trend line all the way through. But Visual Capitalist, for example, has a graph of riots and shootings and bombings and stuff like that, and it's up and to the right. Yeah, it is, it is something where it's, like, surged in 2020, and it came back down, but it's rising. And it reminds me a lot of crypto, where what happens is it surges, and it crashes, and then people write it off, and they're like, "Oof, it's over. Like, that crypto thing is done." But it's not done. It's coming back. And that surge of anarchy in 2020 that came down, yeah, 2021, 2022 is more peaceful than 2020, but it's way more anarchic than 2017, which is itself more anarchic than 2012, right? So American anarchy is on the rise. And what does that actually look like? There's lots of ways it can play out. I happen to think it's going to be something like maximalists versus wokes in the US, that it's going to be something like a, a broke... I mean, there's lots of different triggers, okay? This is just a sci-fi scenario right now. I'm just spitballing, but-

Tim Ferriss 1:30:33 And by maximalists, you mean, like, BTC maximalists, or what kind of maximalists are we talking about?

Balaji Srinivasan 1:30:38 Yes. Bitcoin maximalists versus wokes, right?

Tim Ferriss 1:30:41 Are there enough Bitcoin maximalists in the US to constitute a critical mass for that?

Balaji Srinivasan 1:30:47 So I think Bitcoin maximalism is the most important ideology in the world that people don't know about.

Tim Ferriss 1:30:54 Mm-hmm.

Balaji Srinivasan 1:30:54 Okay? And why do I say that?

Tim Ferriss 1:30:57 I can hear people clapping through the silence. A lot of people listening are gonna be getting out of their seats for that one, so please continue.

Balaji Srinivasan 1:31:03 [laughs] Well, the thing is that from the outside, people would think I'm a Bitcoin maximalist, okay? But it's a log scale. To a truly devout orthodox Bitcoin maximalist, I'm a status cuck, okay? So [laughs] because I'm fundamentally like a pragmatist, basically, right?

Tim Ferriss 1:31:21 You're a very middle-of-the-road crypto anarchist. [laughs] I'm just kidding.

Balaji Srinivasan 1:31:24 Well, but I'm not a crypto... So that's the thing, is in this book, I'm actually not a crypto anarchist.

Tim Ferriss 1:31:27 I was just playing around. Yeah.

Balaji Srinivasan 1:31:28 No, no, no. It's, uh, it's... What you're saying is actually, it's extremely important because V- the... All right. There's so much I could say. Let me see if I can download it. First is-

Tim Ferriss 1:31:38 [laughs]

Balaji Srinivasan 1:31:40 ... one of the chapters in the book is Centralization, Decentralization, Recentralization.

Tim Ferriss 1:31:46 Mm.

Balaji Srinivasan 1:31:46 And the thing is, when you say recentralization, what happens is both the centralized and decentralized guys look at you like you've got four eyes. The centralized guys say, "Wait a second. We're running America. We're running China. The US establishment exists. CCP exists. Why would you want recentralization? We have an operating centralized system here." Okay? And the decentralized guys would be like, "Why would you want recentralization? We're talking about taking power away from these totally illegitimate establishments with Bitcoin. We're talking about breaking the state and defunding the government and so on. We're giving them defunding the police. We're defunding everything, right? And we're talking about breaking these tyrannies and getting away from the surveillance state. Why would you ever want to rebuild something like that, right?" So the thing is that recentralization has the smallest constituency right now, but I think it's the right constituency, and the reason is, I believe, one of the things I point out in the book is the helical theory of history. So the linear theory of history is we're just progressing. We're just improving. We're getting more equal. We're leveling up. Everything's getting better, and so on and so forth. There's something to be said for this. On some axes, on some measures, humans have been improving. Like our knowledge of math, for example, that is like a roughly cumulative chart. It has drops when you have the Dark Ages and stuff like that. It's not all the way up to the right, but it's like up and to the right. Okay. Then you have the cyclical theory of history, which is... A- and actually one of the things I talk about in the book is there's both a left and a right and a libertarian cycle of history. But the right cycle of history is strong men create good times, good times create weak men, weak men create hard times, hard times create strong men, where it's basically like, you know, this-

Tim Ferriss 1:33:23 This is The Fourth Turning, right?

Balaji Srinivasan 1:33:25 Yeah, yeah. So it's Nietzschean band of Spartans. They go and build a great society, and then these degenerates take it down. And then, you know, we have to, like, from the chaos and ashes, rebuild again and so on, right? What's funny is the left has their own version of this, which is the zealous revolutionaries manage to fight the man and overthrow it, and then a Stalin-like figure comes and compromises the revolution, and the new boss is the same as the old boss. And, and then it comes back to this, right? And then the lib- tech libertarian has a version that's also like this, which is the startup founder goes and rebels against the bureaucracy. They manage to build an operational thing that is actually much more egalitarian, and it's got a flatter hierarchy and takes care of all the bureaucracy, and it's actually more competitive. And then what happens is the bureaucracy encrusts this, and the libertarian founder rebuilds the state, right? And one of the points I make is all three of those cycles are the same cycle because it's not just the right cycle of being, like, strong, and it's not just the left cycle of being zealous, and it's not just the libertarian cycle of having an innovation. You kind of need all of those at the same time to actually go all the way around the cycle to fight that establishment.

Tim Ferriss 1:34:34 So what do you think the US looks like in five years if we could paint a picture?

Balaji Srinivasan 1:34:39 Oh, sure. It's like BLM and Jan 6th all the time.

Tim Ferriss 1:34:48 Hmm.

Balaji Srinivasan 1:34:49 Or let's say much more.

Tim Ferriss 1:34:50 You mean in terms of events or in terms of discussion?

Balaji Srinivasan 1:34:53 In terms of, like, there will be mobs that are gathered online. There will be... It's like stochastic network warfare between two groups. That would be, uh, so is it five years? Might be 10 years. I don't know the exact timeframe. It could happen faster, it could happen slower. But fundamentally, I think the catalyst is if you look at interest rates and you look at the graph. Have you ever look at, look at, like, the long-term graph of interest rates?

Tim Ferriss 1:35:17 Yeah, I have actually, but, uh, we should put it in the show notes for people.

Balaji Srinivasan 1:35:21 We should put it in the show notes. I just want to find this graph. Long-term chart. Okay, so if you go to this graph and you click max.

Tim Ferriss 1:35:29 Mm-hmm. All right. So this is tradingeconomics.com/united-states/interest-rate.

Balaji Srinivasan 1:35:38 Yeah. So United States interest rate, United States Fed funds rate-

Tim Ferriss 1:35:41 Yep

Balaji Srinivasan 1:35:41 ... on tradingeconomics.com, right?

Tim Ferriss 1:35:43 I'm looking at max.

Balaji Srinivasan 1:35:44 Okay. And so what do you see? You essentially see something where over a 40-year timeframe, you have, like, a, a trend which is very much down and to the right.

Tim Ferriss 1:35:55 Mm-hmm.

Balaji Srinivasan 1:35:55 Yeah?

Tim Ferriss 1:35:56 Yep.

Balaji Srinivasan 1:35:57 And what that is, is it's basically something where, one of the things I write about, and, and Dalio's actually also talked about this, there are trends that affect humans that are longer than the cycles that we're intuitively familiar with. For example, you're familiar with the cycle of your breath. That's a few seconds, right? You're familiar with a day. You're familiar with, you know, basically the seasons of a year, and that's actually what most people are familiar with. Beyond that, maybe the election cycle, you know, in four years, or the longest thing somebody might be familiar with, frankly, are venture capital funds or startups, which are like 10-year cycles. That might be the longest thing where you can run an experiment and see a few reps of it in a 5 or 10-year timeframe over your life, right? A venture capitalist might see hundreds or thousands of 5 or 10-year-long experiments that most people don't really, don't really track things over that timeframe. And any normal human cannot really track things over 40 or 50 years. You have to kind of dedicate your life to that, right? So anything that's happening over multiple decades, you really need really good charts and stuff to see what the heck is happening, and this graph is one of the best and most important because it's so unambiguous. And what it shows is essentially that the US economy, we have run out of juice. The Federal Reserve being able to print money and so on, it just keeps going down on this trend, like interest rates. And if you notice, every time they try to jack it up, it has to be pushed back down and kept down for longer and longer and longer, right? If you're seeing that in that graph.

Tim Ferriss 1:37:30 Yep.

Balaji Srinivasan 1:37:30 And now the next time when they're, they're going to be forced probably to ac- Bring interest rates all the way to the floor, maybe before the 2024 election. And I think you will see very serious inflation as a function of that because they'll print money and we'll actually have genuine good shortages because we have all these supply chain things that are hitting. You have China doing its crazy stuff with the, with the ports and the, the, the COVID lockdowns. You have the... Do you know the slow steaming regulations?

Tim Ferriss 1:38:00 I do not know the slow steaming regulations.

Balaji Srinivasan 1:38:02 Basically, like some ESG thing. This is a great example of how, like, moral, you know, the moral flippening. I'm getting this secondhand, so I might have it wrong, but I believe it is reducing the speed of cargo ships to cut down carbon emissions, right?

Tim Ferriss 1:38:19 Okay, let me just define two things real quickly. So you mentioned Dalio, just for people who don't know. Ray Dalio, former, let's just call him head principal at Bridgewater Associates, at least at the time that I interviewed him. Largest hedge fund in the world, about $175 billion or something like that. ESG, environmental, social, and governance factors. So just that bleeds into the, what you were just discussing. So please continue.

Balaji Srinivasan 1:38:45 That's right. So just to summarize it, basically, we have more money. They're eventually gonna need to print again. We have literally fewer goods, where China's cutting off supply. There's sanctions. There's wars like Ukraine. There are COVID lockdowns. There's stuff like slow steaming, which is this huge self-inflicted wound by the ESG thing, where every single container ship in the world has to slow down now, right? So you have a lot of things that can sum up into something where it gets nonlinear fast. And if that happens, and you do have not just the inflation we have now, but genuine serious inflation or even hyperinflation, that is when society comes apart in the US because, I mean, people have been so freaking angry at each other during the 2010s in a relatively booming market, right? Like in the 2010s, up until 2019, things were, like, dec- decent economically, but man, were people mad at each other. And when there's, like, actual genuine scarcity, if that does happen, if physical goods are hard to come by, and your infla- you know, inflation's destroyed your currency and so on, and you have a country where people are heavily armed, and they're yelling at each other on social media, and you've got 50 governors res- like, you've got a very potent cocktail for bad things. And we've sort of seen this in lots of other countries that, frankly, America was involved in, in, you know, partially destabilizing. Like look at Libya or something like that, or Mexico or what have you. But that people just really do believe on some level, quote, "It can't happen here." But I think American anarchy, unfortunately, is, is sort of where we're heading.

Tim Ferriss 1:40:25 Hmm.

Balaji Srinivasan 1:40:25 What exactly does that mean? You know, I'll try and paint a picture. So first of all, in 1861, if you go and look at the map in 1861, you have the Union, and you have the Confederates, and it's the ideological and the geographical coincide, right? You have the North, and you have the South. And we take for granted that the victory condition was for the North to just invade the South. And because by invading their capital and burning and so on, they didn't just destroy their supply chain, they also killed their morale. And eventually, they got the entire South to concede, and they could flip them ideologically. And, you know, Emancipation Proclamation and Reconstruction, they uninstalled the software in their heads and installed software with new moral premises. Same in World War II. Invade Nazi Germany, denazify them, capture the capital. The ideological and geographical coincide, and that's how we think of wars as working. Now, today, though, if you go and look at a map of the US and you look at Republican, Democrat, it's not like in clean states. It's very fractal. It's at the individual county level. You've got a little red here, a little, you know, blue here, purple here. It's extremely grouped together. It's fractal. And so what that means is that in physical space, these two nations are cheek by jowl. But in digital space, as a, as that graph I showed you showed, those two social networks are just clustered apart in digital space, right?

Tim Ferriss 1:41:52 Mm-hmm.

Balaji Srinivasan 1:41:52 They are, they are separated in digital space. Did I show you that graphic? Did you see it?

Tim Ferriss 1:41:55 Yeah, I got it.

Balaji Srinivasan 1:41:55 It's this one. Hold on.

Tim Ferriss 1:41:56 We'll put this in the show notes for everybody.

Balaji Srinivasan 1:41:58 So when you see that graph, you're like, "Oh, okay. So in physical space, people are cheek by jowl, but in digital space, they're far apart." And that's where the battlefront is, right? And you can reconceptualize the last several years as a social war, okay? Because if in a physical war, the goal is to invade territory, in a social war, the goal is to invade minds. And now, when we think about cancellation, deplatforming, hashtags, et cetera, et cetera, the point is that what you're trying to do is get a node on their side to flip from blue to red or red to blue. And how do you do that? Because they're now uttering your hashtag slogan, right? BLM or MAGA or something like that. They're ut- uttering that slogan. That node is flipped. It's like capture the flag. You're seeing from their utterance that they are saying the thing that indicates they're now on your team, right? They're raising a flag over their company, et cetera. And you are able to cancel and silence those people who are saying things that are contrary to your view, and so on and so forth. It is essentially something where because you are constrained from using physical violence, since what are you gonna do? Invade a cornfield? Invade a city? That doesn't actually work. You're winning digitally. It's digital warfare, right? Now, when I say constrained from using physical violence, as we've seen, that's actually less of... You know, we're, we're starting to see stochastic digital violence. The Proud Boys and Antifa and so on punching it out in the street, that's actually an extremely unusual thing in the '90s and 2000s America. You just never saw, like, left and right-wing militias punching it out in the streets. But you see that now. That's actually something which is de rigueur. I don't know. We're on the 100th or 300th. We're... It's like, it's like an event. You wouldn't be, like, sh- totally shocked that that's happening, that political violence is happening in America, but it is, and it's on a ramp. And so you put all that together, and basically what I see is serious inflation, Bitcoin mooning, and then the US government trying to freeze or seize the Bitcoin with something that's similar to Executive Order 6102.

Tim Ferriss 1:43:59 My question for you just quickly on Bitcoin mooning. So we have not yet seen, I don't think, in the charts Bitcoin act as an inflation hedge-

Balaji Srinivasan 1:44:12 Right

Tim Ferriss 1:44:12 ... in the same way that, say, gold perhaps has. Why would that be different this time around?

Balaji Srinivasan 1:44:18 So this is not 100%. It's possible that I'm wrong about this. But Bitcoin's-

Tim Ferriss 1:44:22 And I say this as someone who owns quite a bit of Bitcoin. [laughs]

Balaji Srinivasan 1:44:25 Totally. Totally.

Tim Ferriss 1:44:26 So.

Balaji Srinivasan 1:44:26 So here's the fundamentals argument for that, right? Uh, you know, as sometimes there's certain things where the correlations only are visible over the very long run, you know, like the interest rate graph we were just talking about.

Tim Ferriss 1:44:36 Yep.

Balaji Srinivasan 1:44:36 In this case, you know, we haven't seen a long run with Bitcoin, but what we have seen a long run with is gold. And the fundamental thing is Bitcoin's core value proposition is seizure resistance. That is to say, all stocks can be seized by hitting a button, as was done with the truckers, the Canadian truckers, or as was done with the Russian sanctions on 145 million people. Billions, billions, you know, hundreds of billions of dollars, I think, was just frozen because those assets existed on servers that the US establishment had root control over. When I say the US establishment, that's not exactly the US government. There's the government, but there's also the network of people who are loyal to the US establishment. Those are, like, certain tech CEOs, certain newspaper publishers, and so on. It, it's basically the extended... It's all the folks who are basically supporting the current order. If those folks can hit a key and freeze your assets, you don't really own your assets. In a wartime scenario, as what happened with Russia just now, the assets aren't theirs. Now, outside the US, this means, this has meant that a lot of countries are reexamining whether they want to have so much exposure to things that the US government has, has root access to. Powell actually had a speech on the dollar's role and competition just a few weeks ago where he mentioned stablecoins. You can probably find a better version of this, but it's basically, "Rapid changes are taking place in the global monetary system that may affect the international role of the dollar. A central bank digital currency is being examined to help the dollar's international standing." So that is not some random person. That's the chair of the Federal Reserve mentioning, A, that the dollar's international standing is being called into question, and B, that cryptocurrencies and stablecoins are related to the preservation of that standing. Okay?

Tim Ferriss 1:46:32 Mm-hmm.

Balaji Srinivasan 1:46:33 So when you zoom out signal and noise, that's remarkable. Relative to where Bitcoin [laughs] was in 2010, 10 years later, the Federal Reserve chair saying the dollar's role in international finance is being reexamined, and cryptocurrencies are part of the mix of policy responses.

Tim Ferriss 1:46:50 Yeah.

Balaji Srinivasan 1:46:51 That actually shows we are, whether you want to call it winning, certainly affecting and changing things, right? So the thing is, only those assets that can't be frozen or seized are your assets, and Bitcoin has a root system that extends way outside the United States to hundreds of millions of people around the world that value it, and that is not the case for your frozen assets on a stock exchange, for your valueless dollars, your chair that you can't move across borders, and so on and so forth. There's a shelling point that has been built up, which is probably gonna be Bitcoin. Now, why is it not gold? Well, the thing is, there's either physical gold or you have, you know, some certificate which has counterparty risk, right? So if it's a certificate, you're back to square one where it can be seized. And, and even with physical gold, Executive Order 6102 showed that a sufficiently motivated central government can defeat gold. We have not yet seen that Bitcoin can be so defeated. It is in question. Executive Order 6102, for those who don't know, is FDR's gold seizure.

Tim Ferriss 1:47:58 Oh.

Balaji Srinivasan 1:47:58 So the very organized US government at that time was able to seize the gold and then resell it on international markets at a markup. It was just this giant tax on all Americans, right? And something like that, I think, is quite likely to happen because it just takes all the rhetoric on abolish billionaires, tax these rich guys, blah, blah, blah, all that type of stuff, which is people won't care that someone took on risk to, to invest in Bitcoin or hold Bitcoin during the drawdown. They won't care about any of that. They will care if Bitcoin is a million dollars and the dollar is inflated and it's 2027 or 2028, and you need this to fund the US government. I know that sounds crazy, but think about it like this. In 2010, there were people who had seen the Arab Spring, and they had seen how important social media was abroad. If nevertheless having seen that, you projected that by 2020 or 2021, the most important political issue in the world would be whether the president could tweet-

Tim Ferriss 1:48:58 [laughs]

Balaji Srinivasan 1:48:59 ... for a time period, right? That literally one bit flip on a server in Virginia, that... You remember the thing we were talking about with mimesis and what people fight about?

Tim Ferriss 1:49:08 Mm-hmm.

Balaji Srinivasan 1:49:08 5440 or fight, right? This account, like the bytes on this server in Virginia, okay, when I say Virginia, it's probably Amazon's servers there that Twitter is hosted on. The bytes on that server, those little bytes that record what somebody was saying, that's where the fight is. Whether this person can or cannot tweet is literally a matter... Like billions of people around the world wanted to know whether that bit would flip this way or that way. Okay?

Tim Ferriss 1:49:38 Mm-hmm.

Balaji Srinivasan 1:49:38 That's insane from the perspective of 2010, even knowing that Twitter and Facebook had done the Arab Spring, that they had caused social revolutions abroad, that they had connected hundreds of millions of people. I- if you had written that the entire politics of the world would depend on whether the United States president could tweet, it would be an extrapolation. But that's what I'm trying to tell you, is I do think that if in the 2010s social media became what all politics is about, by the end of the 2020s, cryptocurrency becomes what all politics is about. You will not be able to fund your government without

Balaji Srinivasan 1:50:12 it.

Tim Ferriss 1:50:12 All right. Let me, let me hop in here. So there are three things that I'd, I'd really love t- to cover, and, uh, we'll, we'll see if [laughs] we can do it.

Balaji Srinivasan 1:50:20 Please.

Tim Ferriss 1:50:21 Uh, so the, the, the first, just because I don't want to let this go too quickly because I know it's a question that is on a lot of people's minds. So you're painting a picture for Bitcoin appreciating in value based on the difficulty in seizing Bitcoin by a central actor like a government. Now, many people, right, not, not your keys, not your crypto, will have their crypto in, uh, trusted third parties [laughs]

Balaji Srinivasan 1:50:52 Mm-hmm

Tim Ferriss 1:50:52 ... and will not have cold storage and be going through all the Jason Bourne steps necessary to sort of implement all of that well, right? Or they'll do it in a, a B-minus fashion, and it'll all be trackable anyways.

Balaji Srinivasan 1:51:05 Yes.

Tim Ferriss 1:51:05 So if they throw you in a jail cell, you're going to give up your keys probably. But my questions are, so I want to... I, I do want to make sure we hone in on, like, all right, if you had to bet on what the first-

Balaji Srinivasan 1:51:16 Extremely important question

Tim Ferriss 1:51:17 Yeah. So-

Balaji Srinivasan 1:51:17 Yeah

Tim Ferriss 1:51:17 ... let me just lay out my kind of menu, my wish list here, and we c- we might tackle it in reverse order. But the first successful network state, what does it look like, right? Well, that, that I would love to, to hear your answer to. Then you have Bitcoin maximalism is the most important ideology no one has heard of. I want to double-click on that and understand why that's the case. And then coming back to the most recent conversation we've been having, what would need to change for Bitcoin to actually behave from a pricing perspective as an inflation hedge? Because it has seemed to be up to this point, a risk-on asset with instant liquidity in a market that never closes, and when shit goes sideways or people get afraid, there's a sell-off. So it doesn't seem to mirror the behavior of, say, gold in the perhaps traditional way that some investors view it as an inflation hedge or hedge of other types. And so, uh, so I'm just wondering, if, if a lot of people who participate in crypto are not going to have cold wallets, and therefore not a critical mass, perhaps enough of a critical mass to move the market... And again, there's a, there are a lot of assumptions baked into this question, but what would need to change for Bitcoin to suddenly behave in the way that you are describing? Is it the international devaluing, and I, when I say devalue, I mean more perceptually, of non-US governments and central banks and so on with respect to the US dollar? But even if that happens, I kind of fail to see how that h- makes the hop. So could you just paint a picture of what needs to happen for, for Bitcoin to behave in the way that Bitcoin holders would like it to behave?

Balaji Srinivasan 1:53:04 Well, see, here's the thing, is the reason I'm not a maximalist is I... Many reasons, but one of them is I don't think everything can be reduced to money. I actually think maximalists often, in some ways, sort of how wokes are like the opposite of Nazis. You know, they, they're both racially obsessed, but they... Like, white people are the best or white people are the worst, but you get a lot of the same things like separate graduations and all this stuff. Maximalists are like the opposite of communists in the sense that they're both economically obsessed, and the communist thinks everything is, you know, should be within the state, and it's the fault of business, and the maximalist is actually often the opposite. And the issue is, why am I not a maximalist? Well, for example, there's many things you can't just buy. Like, if you're in Syria and you have 100 BTC, what do you actually want to buy? You want to buy peace, right?

Tim Ferriss 1:53:53 Yeah.

Balaji Srinivasan 1:53:53 You want to buy a walk down the street in a high-trust neighborhood where there aren't bombs flying around.

Tim Ferriss 1:53:59 Balaji, just for people who don't have the definition, could you define what a, what is a Bitcoin maximalist? What is that ideology or that belief system?

Balaji Srinivasan 1:54:07 There's different definitions, but I would define it as somebody who thinks that any digital asset other than Bitcoin is a sin.

Tim Ferriss 1:54:15 Got it.

Balaji Srinivasan 1:54:16 Okay? And it is... You know, people have made the comparison of, like, wokeness to a religion. In my book, I actually talk about it as a doctrine, which is related to religion, but not exactly the same. More than a technicality, the wokes, they actually don't worship God. They worship the state and/or the network. That is to say, they're not about thoughts and prayers. They're about pass a law. And they're not all employed by the state. They're outside of it, and they act through it on a network, right? Maximalists are similar in that they've got the zeal of a monotheist or of a monostatist, like a communist, but they're a mononomist for a coin, you know? So, and, and, and one of the things that's interesting is, you know, like a communist would be pathologizing profit, and a Christian fundamentalist or religious fundamentalist would pathologize interest, and a maximalist pathologizes digital issuance. So just to kind of click on that, right, like a communist, they think of all profit as exploitative. That boss is obviously screwing somebody because, you know, he did a markup, didn't he? Why couldn't he give it away for free to the community? He's stealing some for himself. Like, there's f- 50 arguments you can make against this, but the problem is that it's intuitively appealing to people that profit is sort of getting one over on somebody, right? It feels like a scam, right? And communists were able to get hundreds of millions of people to buy into this notion, and it was, it was something where rather than say, "Look, there's good profit and bad profit, and manage this," they just pathologize the whole thing. Interest is similar. You know, Christian fundamentalists, other religious fundamentalists, there's things about usurious interest rates. Are you familiar with this concept, like usury?

Tim Ferriss 1:55:54 Yeah, usury. Yep. I am.

Balaji Srinivasan 1:55:56 So what is the concept? It's basically like They take the good and true thing that debt is bad, and I would actually also agree that most Americans are in way more debt than they're supposed to be or should be, and it's like a power tool. Th- they take the valid concept that interest can be abused, is being abused, has been abused, and they turn it into something which says, "Interest cannot happen." Okay? But if interest cannot happen, and interest is banned, and because all interest is usury, you break the economy.

Tim Ferriss 1:56:25 Yeah. And let me just hop in for a second. So usury, I'm just gonna give a definition here. The illegal action or practice of lending money at unreasonably high rates of interest.

Balaji Srinivasan 1:56:35 Yeah, and everything is in unreasonably.

Tim Ferriss 1:56:37 Yeah, everything is unreasonably, right. So if [laughs] anyway, we get, get into what that means. But yes, yeah, exactly.

Balaji Srinivasan 1:56:43 Yes. So because any rate of interest is unreasonable in, in some, under some religions. Like, you know, Islamic finance, for example, or, like, very religious Christian, you know, groups were against interest of any kind at all, right? Then what, what happens is every single financial model breaks. You cannot figure out, okay, should I allocate money into this building project or this tech... Like, basically the power user tool goes, goes away. You might say, and I might agree with you, that the average Joe should not be buying all the stuff on credit and debt, and they're getting screwed by it, and I might agree with you on that. But I don't think you can take away the power tool, because it just breaks the economy. And then we go to issuance, right? If the communist pathologize profit, and the fundamentalist pathologizes interest, the maximalist pathologizes digital issuance. They're okay with the issuance of equity, paper equity. That is to say, you know, you can go and incorporate a company and pre-mine the shares of the company for the founders. That's, like, an accepted thing to do. Every single company is like that. You know, you're pre-mining the shares. Oh, my God. And the thing is that you get people to buy into it or not, um, and it's your own efforts. Why do you issue that new currency? Why do you have that stock? Why doesn't everybody just get paid dollars in your company? Why is it not all dollars? Why, why equity? Equity is a scam, right? Like, that's what, you know, lots of folks on Hacker News will say. They'll say, "All startup equity market is zero. It doesn't, it's not worth anything." Well, the reason is that if, again, going back to first principles, the value of an equity, uh, or stock is the net present value of, you know, the future dividends that would go to that share. And so, you know, basically you buy a stock, and then you assume that in 10 years or 15 years, Facebook goes public, and it pays out dividends, and you pay $10 now, and you get, you know, $50, uh, in dividends in, in 15 years, and that's actually, that's a win, right? Now, of course, in practice, for tax reasons, other reasons, companies will do buybacks, and there's lots of ways where that Econ 101 or Microecon 101 concept of the dividend has been abused, granting all that. But fundamentally, there is an income stream there, and the reason that you don't just have somebody just give dollars to everybody at a company is that through their efforts, they can go and close sales. They can close deals. You can go and close the sale for $10 million. That brings in revenue into the company. In theory, that could be dividended out, uh, to the shareholders, and therefore, your individual efforts can boost the value of that equity in a way that you cannot really boost the value of the dollar, right?

Tim Ferriss 1:59:23 Yeah.

Balaji Srinivasan 1:59:23 Like, your, your elasticity, right? You're not... You know, the, the dollar economy is so massive that your individual efforts will be a drop in the bucket relative to a million other people who are doing things, right? So your effort results in results, right? Effort and results, that's capitalism. That's the thing that Deng Xiaoping's key insight, the reason that China boomed, is he allowed the farmers to keep some of their grain, that their effort led to results, right? So effort leads to results. That's what equity is. It gives you a shot. I know I'm explaining, like, super basic things, but honestly, this community has gotten its head into this sort of religious fundamentalist mode.

Tim Ferriss 1:59:58 This community meaning BTC maximalism.

Balaji Srinivasan 2:00:01 Maximalists, yeah, because they've gotten their head into a religious fundamentalist mode where... And, and by the way, some of the fault here lies with the SEC as well. Fundamentally, we have not been able to make the analogy between digital equity and paper equity. Why? Because the SEC has tried to say, "Oh, they're all unregistered securities, and so we're gonna throw everybody in jail," and so on and so forth. So what does that mean? That means that... Look, do I think that a digital asset is the same as an equity? No. I think it's like a horseless carriage versus a, a horse-drawn carriage. At first, you make the analogy, but it's also got fundamental differences. You know, with a digital asset, you can, you can issue it to all of your users. They can use it in programs. It's on chain. It does all... It slices, it dices, it does tons of things that paper equity does not, right? But it is similar in one sense, which is that a paper equity is something that incentivizes people to build out a company, and a digital asset incentivizes people to build out a network, right?

Tim Ferriss 2:01:06 Mm-hmm.

Balaji Srinivasan 2:01:06 Now, the problem is that the SEC, you, you've got a pincer attack of the journalists and the maximalists basically, okay? The bureaucrats and the maximalists. Because on the one side, you have these guys who are stuck in the past with orange groves and how we... They're, they're the SEC guys who are trying to pathologize the issuance of digital assets and saying, "Ah, we're gonna go after that. That's, like, unregulated, you know, issuance of, of assets." And the crucial thing, by the way, is they're not, like, going after the bad actors in the space. They're going after... For example, they went after Kik, you know, which is a, like, a fairly reputable company. They just randomly targeted them for enforcement. They're just going after not the bad actors, the actors they can get the maximum headlines on. What that does is it forces Web3 people to not make the analogy to equity. When they can't make the analogy to equity, and they have to, like, shy away from it with all kinds of stupid word games and so on and so forth, people do get the sense, oh, there's something up here. Hmm, they're not being totally straightforward with me. And then that pushes it. It's like this trampolining. And then the maximalists attack it as, "Ha ha, it's actually equity in disguise, like an illegal crowdfunding or whatever." And the thing is, that same maximalist is typically anti-Fed. Yet pro SEC, right? They're like the most selective crypto anarchist ever, where-

Tim Ferriss 2:02:23 [laughs]

Balaji Srinivasan 2:02:23 ... you know, you're, you're against the Federal Reserve. You know what I'm saying?

Tim Ferriss 2:02:27 For the discerning crypto anarchist.

Balaji Srinivasan 2:02:29 Yeah, yeah, yeah. And, and-

Tim Ferriss 2:02:30 [laughs] I don't often engage in crypto anarchy, but when I do... Yeah. [laughs]

Balaji Srinivasan 2:02:34 Yes. And the thing is, it is fundamentally, in a sense, unprincipled, right? It is basically something where it's like there is a rationale for it, which is number go up technology. Like, anything that seems to make the price of Bitcoin goes up is good. And if that means banning every other coin so the only coin people can buy is Bitcoin, well, that's good. Again, though, this is like the communist zero-sum mentality, because if the Web3 crypto economy didn't exist, I don't believe that Bitcoin would be where it is.

Tim Ferriss 2:02:59 Yeah.

Balaji Srinivasan 2:02:59 You need all of this infrastructure around it to, to build the thing up. I think that's super obvious.

Tim Ferriss 2:03:04 Yeah. You need more cultural awareness. You need the zeitgeists to shift. Like, all these, all of these things, or a lot of them, contribute to the rise of Bitcoin also indirectly.

Balaji Srinivasan 2:03:13 Yeah, yeah. I mean, it's like, it's like to me, that's insanely obvious. But the thing is that the 21 million, again, there's an aspect of it that's zero-sum, like the communists, which is one person's gain is another person's loss. If you're getting Bitcoin, I must be losing Bitcoin. One of the ways you see this is in the Bitcoin community, you don't see that many crowdfunders. You see actually fairly large crowdfunders in Ethereum and so on, right? Now, what does the maximalist community have? You know, like, I've, I've criticized it, but let me actually say certain things that... I mean, it's very complicated because maximalism has... Sorry, we're putting this. Many of the things that they say are things where I agree with some or all of it. But it reminds me of, it's like somebody who's a progressive, and they would agree with many statements about how you need to have equity and, you know, not discriminate against people and so on, but then they see people saying those things going and burning down Black businesses. A- and that's, like, completely the opposite of what you actually seem to want ideologically, right? This is harming these people that you're claiming to help, right? So the words don't match the actions necessarily.

Tim Ferriss 2:04:32 Mm.

Balaji Srinivasan 2:04:32 You know? If the words are, in this case, for greater freedom and so on, why are you arguing for, like, governments to crack down? Why are you arguing for willing buyer, willing seller to stop? Why are you trying to pathologize capitalism? That doesn't seem to make any sense, right? And that's because I think it's gotten, sort of maximalism gotten twisted in this ideological knot, which unfortunately is gonna be very helpful. [laughs] And that's, now that's the paradox. You're like, "What? Why? That's an unusual..." Here's the thing. I know I'm digressing, but let me... I'll bring it, I'll bring it home. I'll bring it home, okay?

Tim Ferriss 2:05:05 Yep. And then I also want to hear what Bitcoin would need to do or what would need to happen or what will happen to make Bitcoin behave in the way that so many holders such as myself would like it to behave-

Balaji Srinivasan 2:05:16 Totally

Tim Ferriss 2:05:16 ... in terms. [laughs]

Balaji Srinivasan 2:05:18 So the answer is, one of the things I've learned over the last 10 years, 15 years, is the value of irrationality. All the other people in Web3 basically are in, are in it for technology or finance or something like that, right? Maximalists are in it for fundamentally political/moral/social/ethical kind of things. Do I... I think there's a continuum where, as I said, some of the words I agree with, but a lot of the actions and behavior I don't. Still, I recognize the zeal, and zeal really, really, really matters. Zeal matters because zeal is the difference between selling when it's low, and zeal is the difference between selling never. Zeal is the difference between talking to everybody about it all the time and making it your life, and just having it be one component of a otherwise healthy life. Zeal means putting it at the top of your identity stack, putting it in your profile, having it be part of your existence. Like, you know, the top of your identity stack, that's really precious space. You know, what you identify yourself as, you know, you might live in Missouri, but you're not, might not identify yourself as a Missourian. You might identify yourself as, as a Bitcoiner or as a Christian or as a Republican or something. That top identity thing is really important, and that's something that maximalists have. And so what I think is actually gonna happen is the political spectrum will rotate. I think, imagine adding yellow, a splash of yellow, so that red-blue becomes orange versus green, okay?

Tim Ferriss 2:06:44 Okay.

Balaji Srinivasan 2:06:44 And orange versus green rotates it, and so it's Bitcoin orange versus dollar green. And on the dollar green side are actually quite a few Republicans, a lot of the, you know, security state people, military people, neocons, folks who basically side with, at the end of the day, they will choose the American flag, and they'll choose the, the US government and so on. And on the other side is Bitcoin orange, and here, actually, lots of Democrats will actually choose this side. And for example, like Jack Dorsey, like Glenn Greenwald, like a lot of the Substackers, like a lot of the tech founders, uh, these are folks who would never, you know, fold into Trump. But they also are just fundamentally anti-establishment. They have that rebel DNA, that fundamental rebel DNA. Just like a lot of those Republicans who will side with dollar green don't really like the current US government, but fundamentally, it's my country, right or wrong, okay? So it's a rotation of the spectrum. You know, if the normal political spectrum is left versus right, this is like top versus bottom. It's like the authoritarian is dollar green, and the libertarian is Bitcoin orange, okay?

Tim Ferriss 2:07:58 Mm-hmm.

Balaji Srinivasan 2:07:58 And that rotation is a pretty big shift. Uh, you know, I'm not sure what percentage of both parties shift. It might be that orange is, like, 60% Republican and 40% Democrat or something. But one of the most underappreciated aspects is many, many non-white people will shift to Bitcoin orange, and the reason is, is that inflation hits Like African Americans, Latinos, Asians, and whites all at the same, you know? And if you look, the more equities and other assets you hold, in some ways you're kind of more buffered from this. At least you can have some ups as well as some downs. But inflation is absolutely crushing people of color, and that is something I think... You know, for example, Jack Dorsey, who has Square Cash, that's actually very popular among the African American community, among other communities, and it has a different user base than your typical, like, tech app. And in fact, he, he's gone and, and talked about that, given talks about that and, and tweets about that, and so he's probably seeing this in the numbers, that inflation is hitting this group harder. So because of that, the moral legitimacy of the establishment is called into question because they define themselves, if you read again, like, something like Barbara Walters' book or something, she imagines that this future civil war or conflict will be between a tolerant, diverse establishment and some, like, 4chan Nazis, right? But that's a wash. That's a, that's an easy win. That's a 90/10 win, right? That's 95, 99/1 or whatever, right? When you rotate it and instead it is basically all pro-freedom people who are Bitcoin orange and against inflation, and probably maybe more people of color than not than on the other side, and then you have, "Well, it's still our flag, it's still our country, it's still our state," that's now set up for something that's much closer to a 50/50, right? That's actually something where a lot of people would be torn between those two groups, you know? And when it's 50/50, unfortunately that's when conflict is maximum. So that, unfortunately, is how I anticipate things to go.

Tim Ferriss 2:10:15 When do you think digital gold will behave like gold, if ever?

Balaji Srinivasan 2:10:19 Great question. All right, so now let's talk about that, so the practicalities. These practicalities really matter. Why do they matter? Well, the question of whether Twitter could censor somebody's account and so on was an abstraction, 'cause people just assumed that, you know, they wouldn't hit it. You should assume every single thing gets weaponized in crazy ways. We have not yet had total cyber war. We're gonna see some crazy things, uh, as a function of that, and that's gonna push people to truly not your keys, not your coins type stuff. Problem is, right now, yes, a lot of coins are o- on exchanges. What I think we're gonna see is every possible edge case and failure mode will happen, but maximalism is not simply a technological thing. Really, it's mostly a political thing now, okay? So first, what are all the things that will happen, okay? I think you will see freeze and seizure orders given to centralized exchanges. They may have, however, the moral support from their community to not comply. They may be located in red states where the governor says, "This is a sanctuary state for crypto." Because if you think about the concept of sanctuary state for immigration or for abortion or for gun laws, right, all of that groundwork has already been laid, right? One of the things I predict in the book, I talk about is I think that maximalists will introduce a constitutional amendment for no seizures of Bitcoin, just like free speech or, you know, right to bear arms, can't seize Bitcoin. Fundamental right. And I actually think you'll probably be able to get that through in a fair number of US states. Maybe not the full constitutional amendment ratification process, like you may not get, like, the quorum that's necessary, but I think you'll get that ratified in some states. And then those states that have ratified it can point to that and say, "We've ratified it, therefore it's a law of our state, therefore we're not seizing the Bitcoin," and companies could put their servers there. Okay? I mean, this is the level that I think things are gonna get to. They're gonna get really intense. Or, or they keep them in El Salvador, right? Or they keep them somewhere else. And then the question is, you know, like the Andrew Jackson thing, the court has made its judgment, let them enforce it, okay? So just like as I said, like, you know, in 2010, would it have seemed insane to say that the billions of people would care about the position of some bytes on a server in Virginia where Trump has access to tweet or not? You know, like, that would be insa... I'm telling you, [laughs] people are going to really care where that money is in 5 or 10 years. They're really gonna care, you know, if they can freeze it or not.

Tim Ferriss 2:12:57 Yeah.

Balaji Srinivasan 2:12:57 Now, few other things that can hit. Quantum computing could hit, okay? It is possible that the Chinese, who are working heavily on... Th- this, this is the thing about the book. I talk about there's so many different billiard balls in this theater. It's like a world war in the sense of there's all these different theaters happening, and you could just be absorbed with the American theater, but there's, like, the Asian theater and there's the this theater and there's that theater, you know? So the Chinese are working very aggressively on quantum, and there's a scenario... I'm not an expert in, in, in quantum computing. I know enough to be dangerous. But there's a scenario where quantum decryption advances fast enough and quantum encryption isn't there or it's expensive, and you can do decryption with these, you know, high qubit systems that are in one location, but encryption you can't do outside or so- something like that. Quantum safe algorithms just don't get distributed in time. I, I've seen people argue about this. I'm, I'm not saying I'm strongly on one side or the other, but that's like a wild card that could come through that breaks some of the assumptions on the cryptography. There's other th- attacks that could happen, firewall attacks, where you try to block the packets that are going through, and then the people pipe them over Starlink, or they try to do, you know, port randomization, or they try to encrypt the traffic so it looks like in... so you're sending an email when you're sending a Bitcoin transaction. People could try... Oh my... There's so many things that people try. One of the issues is the Bitcoin network itself is not extremely high capacity for on-chain transactions- So it's hard for everybody to use it on chain all the time, but people can go and hold large amounts of money with one transaction. I am seeing stats which show coins coming off exchanges since, I think, early 2020 or thereabouts. I am seeing those numbers. I think Glassnode has some of those numbers. So you can see, I think, a decline in this. Why? Because actually, you know one of the funnier things that's hilarious that's actually pulling money off of exchanges? You know what it is?

Tim Ferriss 2:14:48 I do not.

Balaji Srinivasan 2:14:49 DeFi.

Tim Ferriss 2:14:50 DeFi.

Balaji Srinivasan 2:14:50 DeFi, because you can only engage with it through, like, a decentralized wallet for the most part, I mean, there are centralized exchanges that let you do it, but regulations make it hard. Because of that, people have moved funds, more and more funds locally.

Tim Ferriss 2:15:05 Oh.

Balaji Srinivasan 2:15:05 There's been a financial incentive to pull funds locally, and that, I mean, incentives ultimately are, are work, so it's a funny thing where DeFi may actually [laughs] ... the thing that lots of maximalists hate may actually have pulled more funds locally. That's a hypothesis, but I think it's-

Tim Ferriss 2:15:18 It'll be the unknowing avenging angel [laughs] for the entire sector is this demonized, decentralized DeFi.

Balaji Srinivasan 2:15:26 Yeah, yeah, yeah, exactly, and sometimes things are like that, you know? So I, I, I can't prove it, but, uh, it- my, my strong hunch is people will bring the BTC locally. They will transform it into something like WBTC or RenBTC or something like that in a DeFi thing and then do something with it, right? That's, th- there's several different operations that are, that are like that. I don't have... Probably somebody like Dune or Nansen or something could support my hypothesis, shoot me down or, or confirm it. Anyway, coming back up. So the thing is, the Bitcoin seizure resistance point, there's many holes in the story in the sense that there's many things that people can and will press on from central exchange seizures to lower capacity on the chain and whatnot. But the pushback to that, and this is the im- kind of an important and subtle thing. I'll try to articulate it. When you have the state coming after you, you can double down on the network, okay, meaning internet-type technologies, but also peer-to-peer network of people and so on, and you can do things like Zcash, which encrypts all transactions. You can do digital nomadism. You can move overseas. You can do all, you can do all these run and escape and exit things, and those can be good, but it's a tactic, and ultimately you can't just only exit. Sometimes what you're doing is you're exiting with a tactical retreat, and you then get to higher ground. You get to a more secure position, then you can push forward, right? Like, you know, the Puritans made it all the way to the US and escaped persecution, and then 170 years later, the US, the power they had built up, they were able to invade Europe. Or Google, they escaped to this corner, which is Search, and they built up their resources there, and then they had billions of dollars. They could invade Microsoft's territory with Google Docs, right? So sometimes you retreat to a corner. You fight hard enough so that you're not being invaded yourself. You build up power there, and then you can come back, right? That's kind of what the maximalists have done, though it's not super conscious necessarily. Maybe some of them are conscious. Fundamentally, their innovation, lots of everybody else is thinking zero knowledge and all this stuff, you know, and I think that's good. That's the network innovation. The maximalists are actually taking some of the state's playbook and using it. So the El Salvador thing, various Bitcoin bills, their innovation is actually on the political level, not technological. They're basically like a "political party," but really a political network, okay? In this sense, they're like the wokes. The wokes exist really as a network thing. They exist in academia and so on. They're like a ghost that can animate a Democrat sometimes and make them do something.

Tim Ferriss 2:18:01 [laughs] Sorry. It's good, yeah. I like the image.

Balaji Srinivasan 2:18:05 You like the image, right? And here's, here's why I say that. Like, if you look at Hillary Clinton or Joe Biden, and you look at what they were saying in the '90s or '70s or something, like, they're saying completely different things, right? The, these are, in a sense, a politician is, like, inhabited by a ghost that speaks through them.

Tim Ferriss 2:18:22 Mm-hmm.

Balaji Srinivasan 2:18:23 In fact, a lot of things, this is actually a very powerful model for thinking about a lot of things. Ideologies are like ghosts that occupy a huge number of hosts, and then they, like, animate them, and their eyes glow a certain color to fight each other. And often, you know, for example, like Russia versus Germany in the 1940s, we think of that as, you know, communism versus Nazism. But now it's, like, flipped, and the Germans are liberals, and the Russians are nationalists. But they're still fighting. So the ideology's flipped, but the tribes are, like, still fighting, and sometimes, you know, one tribe picks left tactics. The other tribe picks right tactics. And then, you know, it flips, and one tribe's pick- picking right tactics. The other tribe's picking left tactics. Point is, th- this concept of, like, a ghost that's, like, inhabiting a politician is also happening with maximalism. For example, the, the guy who was running against JD Vance in Ohio, Josh Mandel, right? Did you see his, like, tweets on Bitcoin?

Tim Ferriss 2:19:19 I assure you I have not.

Balaji Srinivasan 2:19:22 Okay. See, the thing is, this is the kind of stuff I track, and the reason I track it is 'cause, like-

Tim Ferriss 2:19:26 That's why we're friends. [laughs]

Balaji Srinivasan 2:19:27 Well, sure. [laughs]

Tim Ferriss 2:19:28 I'm just kidding. That's why I can have you on the podcast, so then I can ask you. [laughs]

Balaji Srinivasan 2:19:32 Yeah, so he, like, sort of casually tweeted something which was like, gosh, uh, Mandel was like, "Ohio must be pro-God, pro-family, and pro-Bitcoin," right? And the thing is that, look, as I said, I think Bitcoin will draw significant support from the working-class Democrats to an ex- because of the inflation thing. I mean, the fundamental thing about that is it doesn't matter what the establishment says, how good their propaganda is, when you're seeing your money crumble underneath, right? In fact, the-

Tim Ferriss 2:20:06 Yeah

Balaji Srinivasan 2:20:06 ... more they say it's transitory, the more they say things like... You know, one of the things that's gonna be a big message, unfortunately, censorship is gonna increase dramatically if inflation happens. Do you know why?

Tim Ferriss 2:20:15 Tell me.

Balaji Srinivasan 2:20:16 Because in Argentina, in other countries where inflation has happened, the government argues that talking about inflation causes it- Because you're causing people's price expectations to rise, therefore you're disloyal-

Tim Ferriss 2:20:32 Hmm

Balaji Srinivasan 2:20:32 ... if you talk about inflation, and you're undercutting the stability of our society. And so therefore, they publish public inflation stats that are fake, and then you have to actually have stats outside of Argentina that are real. And so now we are faced with the issue of, you know, like that's, that's something which, you know, in the 2000s or whatever you could tut-tut at Argentina, Banana Republic, blah, blah, blah, you know. Once you need shadow stats that can have to sit outside, not Argentina, but outside America, right? Shadow stats on inflation that are powerful enough to resist attempted censorship by the US government. I actually wrote this post last year with the spec on this at 1729.com/inflation that actually goes through the whole problem, which actually quite a non-trivial problem, because you need censorship resistant hosting, you need to scrape lots of prices, you need to, um, have maybe some instrument that is like an actual, not a stable coin, but a flat coin. That is, you're, you're tracking oranges, you're tracking bread, you're tracking milk, and you've got a coin that remains flat against those things. That's what actually people care about, maintaining their purchasing power, not so much, you know, whether it's flat versus a dollar that's inflating away, right? And that post actually, it integrates, it takes everything that we've been doing in crypto and puts it into one thing. It's the, it's the price signals, like all the price feeds. It is the decentralized hosting because states will try to take it down. It is obviously Bitcoin, but it's also Ethereum with the DApps, blah, blah, blah. It's all, it's, it's crypto oracles. It's everything into one app, which is the inflation app, that I think becomes like the new coin market cap. It's like the thing people refresh every single day that mainstreams kind of Web3 and BTC, right? And I know that sounds like, [laughs] "Oh my God, that's terrible," right? And there are bad aspects to it, s- no, no- no question about it. One of the things that I'm talking about with this book is anticipating that level of instability. What do we build on the other side? Okay.

Tim Ferriss 2:22:29 Okay. Can we actually pause for one second?

Balaji Srinivasan 2:22:31 Yes.

Tim Ferriss 2:22:32 Just I'm gonna share-

Balaji Srinivasan 2:22:32 Of course

Tim Ferriss 2:22:32 ... you've been sharing, while we're talking, we've been sharing things in the chat.

Balaji Srinivasan 2:22:36 Yes.

Tim Ferriss 2:22:36 I'll share one that you might enjoy. Uh, and we, we don't need to spend a lot of time on this, but you'll, you'll probably enjoy it. So this is a post I put up in, uh, January 2021, and it's a picture of the Reserve Bank of Zimbabwe with a $100 trillion note. And in the description, I just say, "Had it framed years ago to remind me of how quickly, quote-unquote, money can change in value."

Balaji Srinivasan 2:22:59 Mm-hmm.

Tim Ferriss 2:22:59 And then went into a discussion of ultra-inflation and the belief that some people have of that can't happen to a reserve currency, and on and on and on. So I'll, I'll include that in the show notes.

Tim Ferriss 2:23:10 What do you think one of the first successful attempts at a network state will look like? And related to that, because you mentioned the carbs good, carbs bad as, as, as one possible decision to be made that is woven into the fabric of a network state, just as an example.

Balaji Srinivasan 2:23:27 Yes.

Tim Ferriss 2:23:27 And I'm wondering how you, how you preserve, if this is important, sort of rational adaptability in the face of new evidence, right? Because evidence could come out, uh, turns out carbs are good, right? Or whatever it might be.

Balaji Srinivasan 2:23:41 Insanely important.

Tim Ferriss 2:23:42 And so how do you prevent, you know, wild, wild country and some sort of disintegration into... Or not disintegration, but, uh, the formation of a calcified religious state when setting the parameters for a network state. So what does a first, what might a successful network state look like? What do you, what would you wager? And how do you prevent the calcification that I mentioned? But you were gonna say something else with respect to the Zimbabwean $100 trillion note.

Balaji Srinivasan 2:24:12 Yeah. So when there's people who say, "Oh, the reserve currency can't fail," and so on and so forth, they're actually like the inverse of the maximalists. They... You're not having a rational argument with them. You're having an argument about faith, and the reason is, one of the chapters or subsections in the book is, I call it God, State, Network. Okay? And the question is, what is the most powerful force in the world? Is it an almighty God? Is it the US military? Is it the government? Or is it encryption? And, you know, in the past you might have said capitalism, peer-to-peer networks, and so on. Okay? God, State, Network, the thing is, it's a generalization of religion. Religions worship a god, okay? But a doctrine, if you look at that in the dictionary, it could be a political or religious or other movement. A doctrine, you, you know, you have as your Leviathan. It could be a god, it could be the state, or it could be a, a network, right? So communism is not a religion, but it's a doctrine because they worship a state, right? Maximalism is not a religion, but it's a doctrine because they worship a network. Wokeness is sort of like partially state, partially network, where they live on the network, but they animate the state. Okay? Communism is actually also partially state, partially network, because they had this international network of communists, but they were primarily state. The mid-century US, for example, was like half God, half state, because it was like, "For God and country, we'll fight the godless communists," right? But it was like mostly state, but with a God, you know, dosing. So you can make hybrids, not just pure forms. But God, State, Network is actually a really useful lens to start looking at movements. Because the reason that guy is saying to you that the reserve currency can never go away is he worships the US government, in a sense. Even if he doesn't understand it, he really thinks it can never go away. Right? You know, there's this series of books, or a series of essays when communism didn't work out, and it was called The God That Failed. People put religious level faith into that, right? You know, people... You probably heard the term America's civic religion.

Tim Ferriss 2:26:17 Yeah.

Balaji Srinivasan 2:26:18 The Constitution as similar to the Bible, right? And so one of the issues is that those people who are really asserting that the reserve currency won't fail- Are often the ones who kind of suspect on some level that maybe it could, and they, you know, they, they just can't imagine a world without that, and they don't want you to undermine their god, right? And you're kind of a traitor or you're, like, unpatriotic and so on and so forth. And, uh, you know, y- sometimes you talk to somebody who's very religious, they'll say, "Well, if you didn't believe in God, people would just commit all kinds of crimes and so on," right? There's actually, by the way, there's, there's more argument for that than you might think because if you actually believe in hellfire, then it's like decentralized law enforcement. You know, the law might only catch you with some probability, but if you actually believe in hell, then doing this little crime, even if the law doesn't see you, well, you're going to hell and that's more of a penalty than the l- it's like scalable law enforcement if you can get people to really believe in it, right? There's actually, like, a meta logic to it. But okay, people who don't believe in, in God, what do they believe in? They believe in the boys in blue. They believe in the state. Okay, what if you don't believe in either? You're not just an atheist, but you're an astatist. Then you believe in the network. Then you end up in something like maximalism or, or crypto-tribalism. Okay. So the thing is that that dispute, I mean, there, you know, Carl Schmitt wrote this book called Political Theology, right? And he's like all these religions, I mean, he himself was, like, a, a Nazi jurist or whatever, right? So, but basically Nazism, communism, et cetera, these are all, you know, many people have observed these are all effectively like religions. They're either religions themselves or they're God replacements, and they animate huge numbers of people to fight as if a, a religious kind of thing. So therefore, we're not just having, like, a, a scientific discussion, right? It's, like, a fundamentally religious discussion. So just something that one should think about when you're ha- when you're talking about this kind of thing. There's some folks who look at it dispassionately, and why would you be able to look at it dispassionately? It's because, you may not realize this, you have some island of stability on your own. You're either, you had this great phrase before, you're like a tech-enabled Jason Bourne. And actually, I thought about it after and I'm like, that's much more you than me. I'm not gonna be doing all the stunts in the movies in the same way that Tim Ferriss is, right? But the thing is, if you have very high sense of agency, if you're, like, a CEO or you're a founder or you're a president or you're, like, very driven and so on, then you can kind of find your footing on something. You ki- you know, you're not a joiner of a movement. But if you need to have, if you don't feel like that, and most people don't for lots of good reason, you need to have a movement that kind of supports you in some way where, you know, you can't just create one from scratch, and that's actually one of the things I want to help build. So that brings me to your next question. Basically, if it's not these ideologies of conflict, right? Because in an era where everything is, is cracking, people, like, these ideologies, these ghosts are set up to recruit. They're set up to pull you in and you're like, you know, for example, if you were, if you were unfortunate enough to be in Eastern Europe [scoffs] between 1939 to 1945, right? Like, all these guys had to choose between the Nazis and the communists. That is an absolutely hor- horrible ch- [laughs] you know, the answer is neither. Like, the answer is GTFO, right? Good- both those are dead ideologies, you know, on the ash heap. Go ahead. What were you gonna say?

Tim Ferriss 2:29:37 No, [laughs] just for people, get the fuck out is what that stands for. Yeah.

Balaji Srinivasan 2:29:41 Exactly, right? And it's true. Like, those people who were caught in between that vice, nobody ended up well off, right? And, and so there's this false, it's like the Iran-Iraq War. Like, who wants to be in the middle of that? That's like Shiite versus Sunni. My answer is neither. I do not want to be involved in this, this false dichotomy, this giant conflict. David Heinz had a, had a good thread which I quote on this, which is like, you know, what political violence is actually like. Basically, the, I'm just gonna quote this at length. It's from, like, seven years ago. No, sorry, five years ago. He was like, "People have a fantasy of how political violence works. You smite your enemies in a grand and glorious cleansing because of course you're better. But grand and glorious smiting isn't actually how violence works. I'm not sure how to really describe it so people get it, but this is a stupid comparison. But here, imagine that one day Godzilla walks through your town. The next day he does it again, and he keeps doing it. Some days he steps on more people than others. That's it. That's all he does, trudging through your town back and forth. Your town's not your town now, it's a Godzilla trudging zone." That's kind of what it's like, right? And that is, I mean, if you think about BLM or, you know, like a, a giant riot, it's not like some surgical, you know, kind of thing. It's just, like, burning things down, blowing things up. It's in the name of some higher cause. That's why people do it, but it's extremely non-targeted. It is simply n- you know, that's why friendly fire happens worse. Like, people get blown up, people get blown to smithereens. Immense damage and destruction on both sides. War really, really sucks. And I know that's super obvious to say, but all the wars that, you know, with the exception of the military class that's actually gone overseas and fought, the US, like, hasn't actually had experience with that in living memory. You know? It's, it's got all these violent video games. You know, I, I like some of these games and so on, but it's all fantasy type stuff, and, uh, it's, it's not, like, a reality. And once you actually live through that in World War II or the Korean War or something, you don't want any more of it, and you go back to, like, kind of a peace mode. You understand, you understand how things can spiral in a bad way, right?

Tim Ferriss 2:31:57 Mm-hmm.

Balaji Srinivasan 2:31:57 But having had that go for 70 years, people are now being drawn to these ideologies of conflict, and what is the alternative, right? So the thing is, and this is, I think, one of the more important concepts in the book, th- these abstractions I pulled out. One of the concepts I have there is the one commandment. Okay? So I mentioned God, state, and network and how you can make hybrids of them, right? So the network state actually requires a one commandment. So you actually have something that's like it's not just, uh, technology and politics, but something that's similar to faith. Okay? And so what do I mean by a one commandment? I mean you take society at large- And you have one focused moral innovation relative to society at large, and then you have an opt-in startup society. It could, you know, it could literally be you buy some land in, in rural Pennsylvania or Minnesota. It could start as a digital community that crowdfunds land around the world. Okay, so it could start digitally, it could start physically. I recommend starting digitally for a variety of reasons. But you have this community where you have a moral premise, okay? Let's say s- I give several examples, but there's different tiers of how aggressive that moral premise can be. It could be something like cancellation is bad, okay? Cancel culture is bad. So that's something that you could do purely online. How do you do it purely online? You form a guild where people are there, and they're helping each other out in, in just some general work matters. But if one of them is canceled at one point, which is a rare event, that group all defends them as one, okay? So that's something where there's a moral innovation relative to society at large, where y- society at large is sort of neutral to negative on cancellation, but isn't actually able to stop it. This group actually says, "That is a danger to our life. It's a big enough deal that I'm going to join a society that's like an anti-cancellation society. I'm gonna pay some percentage of my income effectively in cancellation insurance by being part of this society. And I have 1,000 people, and I will work with them on just normal fun stuff. 99% of the time, we'll just share each other's content, launch each other's products, advise each other. 1% of the time, we'll have to defend each other online," and it's like a guild, okay? So that moral innovation, crucially, that group is not saying change the traffic laws. They're not saying change everything else. They're just innovating on one focused dimension. It's very similar to a startup, right? A startup is all about focus. One thing you're changing, right? Um, let me give a second example of the one commandment. Carbs bad, okay? So this is something if the first you, you would need what I call a network union, like a digital only thing. Carbs bad, you'd need actually some physical component. You need what I call a network archipelago. So you've got like a physical network of spaces. It could be like small cul-de-sacs or gyms, things that your community has crowdfunded around the world. And what do you do with the moral premise carbs bad, that moral innovation? Well, you basically implement like keto kosher at the border. You have ... You interdict it. You take it seriously, okay? And if you really seriously take sugar and carbs bad, and you take that to the nth power, okay, and you have a small town, okay, that really thinks sugar is bad, what happens? Well, first of all, it changes everything on the store shelves, okay? Like every, every single grocery store, there's no cookies. There's no, you know, candies. There's also no high fructose corn syrup stuff, a lot of the prepared stuff. A lot of that stuff goes away. It changes every restaurant. They can no longer add syrups and things to their food to make it tastier. It changes every meal. So first of all, you basic- That alone is a lot, right? Changing every single meal in e- every single grocery store and every restaurant within these borders is a pretty big deal. As I said, keto kosher, there's a precedent for it, which is kosher, like a, a changing food, but that's pretty big. You go further. Once you've got this done, probably people lose like 30 pounds coming to the community. So you have photos that show before and after, that your moral innovation led to a technological innovation, okay? Progress used to be thought of as moral and technological progress together. For example, the public health innovators in the early 1900s, public sanitation, like sewers, okay? That was both, you know, cleanliness is next to godliness, and it was a, obviously a technological innovation for all the pipes and stuff, right? But the will came first, and then the way. You know, those things were actually like highly related. Then what happened is those split over the course of the 20th century, and so now you have the tech innovators over here who do startups and stuff. Then you have the moral innovators who are political activists, social entrepreneurs, and so on and so forth. And we, we don't necessarily think of those as the same kind of thing, but actually there's a market for revolutionaries. So on, on the tech side, it's obvious you have venture capitalists and you have founders. Do you know what it looks like on the political side?

Tim Ferriss 2:36:50 Tell me.

Balaji Srinivasan 2:36:51 It looks like activists and philanthropists.

Tim Ferriss 2:36:54 Hmm.

Balaji Srinivasan 2:36:55 Okay? So you have activists on right and left, and you have philanthropists on right and left who are backing these activists, and those activists can be activist activists. They could be aspiring young politicians. They could be NGOs. They could be like, you know, various kinds of things, folks who want to foment social change of some kind, right? Like a technological innovator who sees a problem in the market and wants to build a change here, these people see a problem in the law or in society, and they, they wanna take something that was a one and turn it to a zero, something that was bad and turn it good or vice versa. And they get funding from a philanthropist, or they do it themselves, you know, it's like bootstrapping, and they try to drive change in society, okay? And i- when you start thinking of them as like a moral innovator, just like a tech innovator, so what is the ultimate win of a moral innovator? It's like Obama's a community organizer, and then he becomes president. That's like a guy starting a, you know, company in their dorm room and becoming Zuckerberg, right? And when you see this, you're like, "Okay." There's actually a term that we use both in the corporate world and in the political world. Do you know what that term is? It's president.

Tim Ferriss 2:38:02 Hmm.

Balaji Srinivasan 2:38:02 Okay? You know, like the president and CEO of a company and the president of a society, right?

Tim Ferriss 2:38:07 Yep.

Balaji Srinivasan 2:38:07 So the president of a startup society has aspects that are similar to the technological innovator, but they also have aspects that are similar to the moral innovator. And they start with that moral innovation. So I've mentioned two so far, like the cancellation proof culture, right? Or the carb-free zone. Now, but you take the carb-free zone, you start iterating it, okay? So first is everybody's dropped 30 pounds. There's no sugar. You're, you're buying more and more territory. People are like, "Whoa, this is amazing." And crucially, you have border control, right? You have an immigration and application process. People sometimes get mad about this, and I'm like, "Look If Harvard can do it, if The New York Times can do it, if they can filter aggressively everybody who steps into Harvard Yard or into The New York Times company Slack, then you have license to do it. You have complete moral license to be as ruthlessly selective as they are, right? On the institutions they care about, they're highly, highly, highly, highly selective, right? So you have moral license to do that, okay? So you have moral license to be selective. Now, by the way, being selective on entrance is different than not letting people exit. It's like y- you don't let everybody into your house, but if they wanna leave your house, of course you let them leave, right? So, you know, th- th- they are different, entrance and exit. So you have selective migration in, and you're looking for people who have-

Tim Ferriss 2:39:21 And you mean physical migration, or is this digital presence?

Balaji Srinivasan 2:39:23 Yeah, digital and physical. Basically, you don't... They don't