If you are the weirdo and you have found your tribe of weirdos, you have to get used to the idea that you will over time feel like almost all of your principles have been betrayed. For most of human history, to the extent that there was economic growth, it was really too slow for someone to even notice over their lifetime. How do we escape stagnation and accelerate progress? And what if bubbles are good, actually? Just asking questions. I'm Zach Weiss Miller, senior producer, Reason associate editor. Liz Wolf is here.
Liz, they promised us flying cars, all we got was 140 characters. Those were the words of Peter Thiel over a decade ago, lamenting technological stagnation. The character limit has since increased, but his point remains the same: innovation in the software world of bits has accelerated, but progress in the material world of atoms has been stubbornly slow, at least in his telling. Economist Tyler Cowen, who popularized the term 'great stagnation,' argued that we picked all the low-hanging fruit in the early to mid-20th century thanks to cheap cultivation of unused landmass, educating a previously uneducated population, and revolutions in transportation, energy, and synthetic materials that could since be only marginally improved at increasingly greater expense and effort. The result has been stagnant wage growth when accounting for price inflation, and a failure to realize any revolutionary breakthroughs in energy, transportation, or materials science for decades. But today's guest says there's another underlying reason for the stagnation as well: a self-defeating cultural and spiritual malaise and pessimism about the future. It manifests itself in the kinds of dystopian movies and shows that dominate Hollywood, and the falling prevalence of words associated with progress and the future, and a rise of words associated with caution, worry, and risk found in contemporary literature. Byrne Hobart is co-author of Boom, with Tobias Huber—Boom: Bubbles and the End of Stagnation—which offers a surprising way out of this stagnation: embrace the dynamic and chaotic power of bubbles. Investment bubbles, big social bubbles, filter bubbles. Some examples range from the big, ambitious public investments like the Apollo missions and the Manhattan Project to the rise of Bitcoin. Byrne, thank you for coming on the show.
Let me first ask you about that graph I mentioned in the intro, analyzing the language shifts within English, German, and French literature. This is something you reference in your book. What kind of clue does that offer about our cultural moment?
Yeah, so progress does emerge from some kind of intellectual environment, some kind of social environment like that. You either have a lot of cues telling you that things can improve materially, or you have cues telling you that no, this is roughly the way things are. Or you can end up with a view that we had some golden age in the past and we can never recapture it, and the best we can do is slow the rate of decline. And of course, if that's your view, then anything new is probably worse, and so the best you could do is kind of keep things as similar as possible. And yeah, I think also sometimes those trends in word usage—they're partly a leading indicator of what are the attitudes that people will have, they are partly a lagging indicator though of what has their experience been. And you know, there are some domains where there has been just insane progress. Obviously, the software and the hardware it runs on has done incredible things over my lifetime. And then in other areas there are these kind of isolated bursts of progress. So I think more recently things like COVID mRNA vaccines were just an incredible achievement, done very quickly. And then GLP-1 agonists, which are just, again, massive social change, probably quite good. You know, we don't know for sure, but my strong bias is that yeah, they're great and going to have a very positive impact. But then in a lot of other areas, you know, you see things like slowing life expectancy growth. You see things like the physical products that you buy when you're using your marvelous new computer are just pretty similar to what was available before. Sometimes there is a greater variety and it's easier to find them, but we aren't really making that much new stuff. And we haven't really made abundant cheaper energy. We have reduced the energy intensity of a lot of things that we do regularly—so planes are more fuel efficient, cars are far more fuel efficient, etc.—but that's just not nearly as radical a change as going from 'we don't have planes' to 'we can fly,' or going from 'we can travel by horseback or possibly train, but mostly on foot' to 'we can drive pretty much anywhere we want.' So those big transformative changes seem to be happening less and less in the physical world.
And I think one way to turn around that initial question you asked of why things have slowed down is to say, well, maybe that is actually the default. And for most of human history, that was the default. The extent that there was economic growth, it was really too slow for someone to even notice over their lifetime. And if you didn't have a really savvy econometrician a millennium before your time, you would just have no idea that things had gotten marginally better. And you sort of see this acceleration that goes through stages where different various parts of the world—some of this was happening in China and India, some of this was happening in the Netherlands and Northern Italy—we start to have some low-level kind of manufacturing that starts to get more and more productive, there start to be broader trade networks. And then things really kicked into gear with the Industrial Revolution. But when you look at the effects of the Industrial Revolution in terms of just the big macro factors that we can look at, a lot of it was that we found a new place where you could actually make fixed investments. You could take something that worked and scale it a bit, and then the actual increases in efficiency in output per hour were not that great. So a lot of the economic growth from the Industrial Revolution was that there were these profitable investments in railroads, and then a lot of the industries that were serving them, so things like steel and coal, and then a lot of industries that were downstream from them, so things like national brands and just manufacturing broadly. And output per hour was not rising all that fast, it was just there was a category where there was a lot of room for more investments. And in countries that kind of had a social contract or economic arrangements that meant that a lot of the upside from those investments did accrue to shareholders rather than labor, that did also mean there was a lot of capital that could be reinvested.
And so a lot of those networks, you know, they started out fairly small and then expanded. And then you have this period from about the 1930s through the 1970s where there is just a radical increase in output per hour, and pretty much everyone is benefiting. You know, rich people are making more money, regular workers are earning more money, and there's more stuff for them to buy with the money they're making.
You talk a lot in this book—and a pretty substantial part of the thesis is—that people were taking on these massive projects. You talk about the Apollo missions, you talk about the Manhattan Project, you have quite a few examples of basically pre-1970s government-funded ultra-ambitious projects. And now you're making the case that in the last 30 or 40 years growth has majorly stalled. But I think lots of people would look at the gains within maybe not so much the realm of hardware, but certainly the realm of software, and say, what are you talking about, Byrne? For the skeptic, how would you make the case to them?
So software has gotten better, and it feels like a lot of it kind of gets better at the pace at which hardware gets better, such that you have maybe more graphics, more flash, things like that—more flashy stuff on the interface—but the actual core products are not radical improvements. And a lot of the products that we've conceived of, a lot of the interesting, a lot of the popular software products today—the core idea has been around for a very long time, and we've iterated and improved. And the computers have a lot more memory and they have more processing power, which allows them to, you know, sometimes let you run Chrome and Slack and Notion on the same device and not have everything slow to a crawl. And I think that if you looked at just the improvement in Moore's Law and treated that as the rate at which computers improve, then you would also be pretty disappointed at the gap between modern computers and computers of, say, 20 years ago. You'd go, yeah, they can do more things, but have we actually come up with additional useful things for them to do? And I think now there is a really good answer to this, which is that AI is very much a hardware—data and hardware come in, and interesting novel answers to whatever random questions you have or weird works of art that you request, that comes out. So we do see some progress there. But actually, the AI thing—it feels very bubbly, and it has a lot of the traits that we identified in some of these other bubbly events.
Well, so I want to get into that. I mean, a huge part—I think this book could really be boiled down to: financial bubbles are good, actually. And bubbles are sort of wrongly maligned over and over again. Why is it that people malign bubbles? And are you a little bit—I don't know—channeling Schumpeter or somebody here when basically saying like, creative destruction can be really, really painful, but it's necessary pain, it's useful pain?
I think there's a sense in which Schumpeter has this—you could call him an economic reactionary in that if he's talking about creative destruction, the destruction element is there are old legacy institutions that no longer serve their purpose. And the good thing that financial ups and downs do is sometimes the downs are bad enough that they just kill off the worst-performing institutions, and that's good. So it's this winnowing process where there's kind of like a random set of institutions and some of them are just not good enough, and so we need some volatility to make sure that they are sort of like—you slam on the brakes to see if anyone's wearing a seatbelt, and then you've done something a little bit healthy in prototyping. And it's better than the alternative of never checking and running into more serious problems. So there's a little bit of that. But I would say, like, one way to think about, one way to taxonomize different approaches to bubbles: you can take a sort of strong efficient market hypothesis view of there is no such thing as a bubble, there is just investors' best guess as to what the present value of certain assets is, and that sometimes those guesses are wrong. But when people were buying houses at the peak of the housing bubble, they did assume these houses were good deals. They also assumed that the mortgage-backed securities, the CDOs backed by subprime loans, were also good deals. That when people were investing in Pets.com or DrKoop.com or Space.com or whatever at the peak of the dot-com bubble, they were making their best guess as to what the right investment choice would be. So that is one way to look at it: bubbles don't exist, but uncertainty does exist, and sometimes it looks like a bubble in retrospect.
And then there is probably the default view, which is bubbles do exist and they're bad, and sometimes people stop thinking about fundamentals and start focusing on what is everyone else going to do and what is everyone else going to buy, and will I—'I don't understand why this thing is going up, but I feel like if I don't buy it now then I'll be impoverished because it's clearly going to infinity.' And so a lot of capital gets wasted, and the marginal dollar that goes into a bubbly sector towards the end of the bubble is going into something that is not very much worth doing. And then I think there's a sort of attempt to rehabilitate bubbles, which a book like Technological Revolutions and Financial Capital would articulate, which is that what bubbles do is they pull forward a lot of fixed capital investment and they make it happen maybe sooner than is really ideal, but it does actually have—and we do actually get utility from it. So when there's a railroad bubble, you do actually have railroads, even if you have more than you needed at the time, and if the economy is growing, then those railroads help it grow a little bit faster.
The dot-com bubble is a really good example of this, where it's hard to imagine something like YouTube existing if people hadn't massively overbuilt fiber in the late '90s. And when they overbuilt fiber—since fiber is one of those things where you have a fixed cost and then the marginal cost of delivering one more bit is zero, basically—so if you think that there's pretty much infinite demand for bandwidth, you want to own a lot of fiber, you want to build these fixed assets. And then the downside of that is if there's not infinite demand for bandwidth, if there's demand for whether it's 90% of the capacity you've built or 10%, the price tends to go to roughly zero in either case, because no matter what there's someone else who wants to carry the same traffic and they'd rather have the money from doing that than not, and their cost is low. But all that fiber that was either built and underutilized or was not even in operation at all—organizations like Google did start buying it up in the early 2000s, they got a really good deal, and there was just a lot of cheap bandwidth, which meant that you could have a company like YouTube where it is basically a couple guys who are working in their apartment or have a small office, they don't have the huge amount of infrastructure, they haven't had to do giant deals with big telecom companies in order to get their stuff to customers. The bandwidth was cheap enough that they could build something like that.
And at this point, things have equilibrated a little bit more, so now you do have to think about bandwidth. But one of the reasons for that is that we all got used to the idea that you can at any time watch a streamed video. You stream a video about basically any topic you want, and it's on demand, it's on pretty much any device. So we did manage to kind of spoil ourselves. So that's the quasi-rehabilitation of bubbles: hey, we pull forward this investment, but the investment is still going to be useful eventually, and therefore it's fine. And in our book, what we try to articulate is this idea that it's not just pulling forward the investment—it's not just we would have built the fiber network maybe 10 years later over the next decade and so we would have gotten YouTube a little bit later. No, some of these investments, some of these things would not, could not have possibly come to existence if there weren't a massive bubble. Because what you'll have is this feedback loop where different participants are each acting as if the other participants are pursuing some very ambitious plan and that they're going to invest a lot in their piece of that plan. And if everyone has a fairly similar view of what the end state of the world looks like, they're all kind of aligned about the fact that they should make these investments, and all these investments have complementarities between them such that each one raises the returns of the other ones.
Which is all really abstract, but like the concrete way to think about it is: when AOL is thinking about whether or not to distribute lots and lots of discs and give people lots and lots of free trials of AOL, one of the things they're thinking about is, okay, how many things can people do online? Can people shop? Can they read the news? Can they check sports scores? Can they check stock quotes? And every time someone starts a service that makes those things more feasible, they actually increase the return that AOL gets from getting more people online. And at the same time, every time AOL gets more people online, Amazon is worth more and E-Trade is worth more and Yahoo is worth more. All of these companies are worth more, so everyone is kind of egging each other on, and they end up just resetting the growth of the entire sector to a much faster pace than it would have been. We see this with AI too, where with the hardware—hardware ambitions are a lot higher because the software ambitions have gotten a lot higher, and vice versa.
I mean, a fascinating aspect of your explanation in the book is the role that human psychology plays in this. And you talk about FOMO—fear of missing out—as really the driving force, one of the main driving forces of a bubble, and a very important one. Can you give a qualified defense of FOMO for us?
Yeah, yeah. So suppose it's, I don't know, 1995, and you have been a computer nerd for a very long time, and you've always been interested in this idea that computers can connect to other computers, they could talk to each other, and people can talk to each other through computers. And you've always wondered, does this change games? Does this change dating? Does this change news distribution? Does this change finance? Whatever it is. And then you hear about the Netscape IPO and you see the stock pop, and you have one instinct of saying, well, that was interesting and then someone got there first and this thing is now over—everyone has figured out that networking computers together is a really, really big deal and will make someone a lot of money someday. And the other way to look at it is to say, no, this is getting started, and everyone is going to look at the Netscape IPO and ask, okay, what now makes sense in light of the value of a browser business? And they're not going to cover every single thing perfectly, and especially they're going to have a hard time if they are just new to this—like they are a finance person, the first thing they heard about the internet was when they read the Wall Street Journal and saw news about an IPO on the front page. They are definitionally behind someone who was into this stuff beforehand. So at that point you might start to feel some FOMO. You realize one set of nerds made a ton of money, you're in the set of nerds that hasn't made any money, but you feel like you're about as nerdy as these other people, give or take, so this should be you. And you do feel like you're missing out if you don't start your own internet thing, you might be missing out. And my view is, yeah, that is absolutely—this is the time when those things turn from a concept that people are noodling around with in their head to something you can actually raise money for and turn into a real business, and turn into a profitable business. And you can shape the way these technologies are deployed and where they go, how people use them, how people think about them. So yeah, missing—the thing you should fear the most is missing out.
No, I'm curious though, are there examples where the collateral damage of a bubble outweighs all of the good done?
Yes, yes. In our taxonomy—and this is a rough guide and it is hard to implement in practice—but the way we think about it is that you can break bubbles into two categories. One of which is we're betting on a radically different future. It is nothing like what has come before, and you really can't imagine this future without taking the technology we're building seriously. And that describes dot-coms, that describes, say, electrification of factories, that describes the railroads, describes a lot of—describes cars. The end-order impacts of cars are really crazy because they reshape cities, they reshape shopping, they reshape just how our built environment is shaped and where human beings fit into the entire sphere of things that we have influence on. So pretty crazy, pretty big impact. And then you have another category of bubbles where they're just a little bit more about looking at the past and expecting the future to be pretty similar, but with a more and more narrow confidence interval. And for a lot of these bubbles, they have a lot more of a credit component to them, because you are betting that the future is a continuation of the past, and so you think that future is pretty good.
collateral to lend against, so the housing bubble would be an economical example of that. The housing bubble did not start because someone built a really really good robot that could build houses really fast, and it didn't start because we had some marvelous new technology that made houses way better to live in. It was really that we had better pipelines for getting money into housing investments, and then that created this feedback loop where housing prices were supported by the availability of credit to buy new houses. And so people were refinancing rather than defaulting on loans, and they were also generating a fair amount of economic activity—like mortgage withdrawals turned into consumption, they were like a low single-digit percentage of consumer spending at the peak of the bubble. So you had economic growth that looked a little bit better than it actually was, predicated on this credit growth. And the credit growth was predicated on the fact that the collateral behind it also looked like it was performing better than it really was. And as soon as there were any jitters anywhere in that system, it started unwinding pretty fast. And it turned out that there were also a lot of those really really hyper-efficient financial pipelines for moving capital around were also really really good at being completely shut off. And so that's like the subprime thing—it was in the news, people were worried about subprime in early 2007, that's when some of the early bankruptcies started. Housing prices peaked in 2006. The financial crisis was really when financial institutions realized they don't know who they can lend to, who will actually pay them back. And like if you have these really highly rated structured products that are backed by subprime loans and you realize that the default rates are higher but also the correlation of default rates within one of these products is higher than you thought, you don't know if something that's AAA rated is actually going to pay off 100 cents on the dollar or 95 cents on the dollar. And if the standard is that someone can lever themselves up 30 to 1 buying these things, well you don't want to be the person who lets someone lever up 30 to 1 and it turns out they lose 5% and their collateral was 3%. So you stop lending and suddenly the whole system seizes up.
Yeah, I mean you trace a lot of the bad risk taking or the creation of bad bubbles back to Bretton Woods, or the collapse of Bretton Woods when we abandoned the gold standard—or abandoned the ability to trade dollars in for... we had abandoned the gold standard long before that. But I mean what's your argument there is that we pushed normal people to invest more of their savings in the stock market, right, because that was the only way to keep up with inflation. Here's a little chart that kind of helps show what happened here. The red arrow I have pointing there to the closing of the gold window and then you see a big run-up in inflation that was then only pushed down in the '80s. So people were looking for places to protect themselves against that. On its face that sort of system would seem to be good for bubbles because you're encouraging money to go into the stock market and inflate all sorts of things. But how did that actually encourage the bad kind of bubbles?
Yeah, so I have incredibly mixed feelings about this pre-Bretton Woods and post-Bretton Woods world. Because on the one hand, modern finance is pretty incredible and lots of fun, and gives a lot of smart people some really interesting things to do with their day, and definitely does tend to transfer money to a lot of those people, which is awesome. So I think it has some pro-social aspects. But one of the problems is that it does encourage a lot of people to spend a lot of time thinking about kind of the mechanics of money and how money moves around rather than thinking about the underlying real-world economics behind what they're doing. So in this Bretton Woods period, you basically suppressed a lot of volatility in the banking system, and the world seems to tolerate just a finite amount of volatility that you can shift around but not ever destroy. And when you shift that volatility around, real-world volatility—real-world economic volatility—does sometimes take the form of depressions and booms and the cycle between the two, but it also takes the form of changes within industries and deployments of new technologies and things like that. So I think part of the view was just what the Bretton Woods system did was tell a lot of smart people that finance has been partly solved and you should just not spend that much time on it. Like it's not going to be all that interesting, and a lot of the cool things you can think of doing, we will just make rules against them. Because anytime you have this sort of rigid rules-based system, when people find interesting edge cases and start exploiting them, that weakens the system. And there was a lot of that especially towards the tail end of the Bretton Woods stuff, where you did have a lot of people who were figuring out different ways to speculate on gold, or they were figuring out that there were US dollars that were outside of the US financial system and so you could use them as a means to speculate on things like interest rates. And the system was fraying for a long time before it actually collapsed. And it did—once that system collapses, once currencies can fluctuate and once money can move more freely, it does mean that there's just a lot more stuff that you can do that does entirely involve moving these abstractions around and not doing anything especially concrete. I don't know how much that directly fed into the software boom, but certainly it's hard to imagine modern finance without Excel, it's hard to imagine some forms of modern finance without FPGAs and people rewriting all the standard libraries of C++ to make them slightly faster and more efficient, and really cheap data storage, and lots of techniques for churning through that data and finding these tiny tiny aberrations that you can exploit, etc. So there is a little bit of a feedback loop there, and you can view these as all kind of part of this same phenomenon—shift of attention away from the tangible and real and towards interacting with these abstractions.
But what about—you talked in there a little bit about low time preference and people thinking along longer and longer time horizons. And you seem to be making the case that there's a relationship there between not having a really reliable savings tool in the US dollar—you can just predict that's going to lose its value by the time you retire or whatever—and the willingness to kind of withhold until you see the right thing. I mean, how does that sort of allocation of money play into your theory of making productive bubbles and not just Beanie Baby bubbles or whatever?
I think it's just when you have more ways for money to move around, it can chase these more speculative and kind of more referential things. And if you do constrain that, then really the only way to get some kind of wild speculation that just causes a torrent of capital to pour into a single industry is for that industry to, in some sense, deliver the goods. So you know, a lot of capital moved into the US residential real estate business, again not because of any kind of fundamental underlying economic change, but because it was just really easy for capital to move. And we had this weird imbalanced system where we replaced a system where gold is in theory the store of value and the global reserve currency but really everyone interacts with the dollar, with a system where the dollar itself is that reserve. And that does force other countries to accumulate dollars. There was this set of exporters who in the late '90s and especially in the early 2000s just ran massive trade surpluses with respect to the US, which is partly a function of—they were selling either oil in the case of oil exporters or manufactured goods in the case of China—but also the system really only balances out if everyone is using dollars all the time. And if say Saudi Arabia and China use dollars in bilateral trade with non-US countries, because everyone can agree on what the dollar is worth and everyone can move a dollar around and people can't necessarily come to the same kind of agreement on other currencies—if you have a setup like that, countries need to accumulate dollars as they grow. They need to accumulate dollar-denominated assets because they will need to make good on the money that they owe in dollars, and they need different economic actors within their country to be able to source dollars. They just don't want to have a shortage of hard currency. And to do that, to make that equilibrium, you do need the US to run a pretty substantial trade deficit. So it just set up a really really weird system where you have things like really high savings rates in poorer countries and really low savings rates in the richest country, and it's supposed to go the other way around. It's supposed to be that countries get rich and they run out of local investment opportunities, but the world is poorer, and so the things that exist in the US, you can kind of copy them and scale them up somewhere else. But you tend to see basically the opposite of that.
Yeah, and I mean the counter-reaction to that has been Bitcoin. I mean Bitcoin has been the attempt to recreate sound money in a way, or recreate money that doesn't lose its value over time—that's the selling proposition of it anyway. And you have an entire chapter devoted to Bitcoin because Bitcoin has gone through several what you might call manias. We can look here at the price history of Bitcoin and see the huge run-up and then giant fall and then a big run-up again, a slightly smaller fall. Like, could we just look at this for a second as a case study in your theory of bubbles? How did each of these bubbles within Bitcoin make it a more substantial and lasting product, to the point that today it's hitting new all-time highs—it went over 100,000 for the first time a week or so ago?
Yeah, so one of the reasons that we had a chapter on Bitcoin is that it is much more of a pure bubble phenomenon. There's just a lot more ways to get carried away, and it's much much harder to put a value on Bitcoin other than that someone else is going to value it at some higher number in the future. And so that's really what you're betting on. And that is just generally true of currencies. You can think of a currency as a sort of controlled continuous bubble where you do have an irrational buyer—they're willing to overpay for something that is otherwise just a worthless blend of stuff with some fancy drawings on it. And that buyer is the IRS, and their deal is like every year they will buy a bunch of US dollars from you in exchange for not putting you in jail. And that's a really good deal—like you should definitely take that deal every time they offer it to you.
Great deal at twice the price in my opinion, since I'm not really a fan of like prison food, unfortunately.
Yeah, so what they're doing there is kind of engineering this bubble where you can say, you know, I look at these green pieces of paper and they're just not that aesthetically appealing. Like I don't want to stack up just an arbitrarily large number of them for any reason other than I know I can just offload these on some dumb buyer in the future, and that buyer's the IRS. But then I also know what if I sell these to someone else, perhaps in exchange for goods and services, they will value it for the same reason—that they can offload it on the IRS. So you have someone who's basically constantly pumping that market in a way that maintains its value. And Bitcoin ended up achieving a weird quasi-equilibrium where you don't actually need a buyer of first resort who is always going to have a bid under the asset and is always going to keep the price elevated. You just have a group of people who agreed with their money that yes, this is actually worth something. And yeah, Bitcoin bubbles have this interesting speculative feedback loop where when they start moving up, you do start to see people trying to build real-world applications on Bitcoin or on other cryptocurrencies, and you see people trying to actually use them for real-world transactions. And then as things keep going, you actually switch to a more purely financial bubble where the really exciting financial products being built with crypto are products that allow you to either borrow against your crypto in order to buy more crypto, or that automatically provide liquidity for crypto trading. Which is actually an interesting dynamic that has shown up in emerging markets that have strict currency controls or have some level of financial regulation. What tends to happen sometimes—and this was a big feature of the Southeast Asia economic bubble and then crisis of the late '90s—was at first there was genuine economic growth. So these countries were manufacturing exporters, they were exporting more every year, their labor costs were very very competitive with say Japan and Korea, and so you could bet that they were growing. And so outside money started flowing in, and as that money flowed in, it meant that more economic growth was either in the financial system or was things like building new airports, building new hotels, building fancy restaurants, all so that the Western bankers and hedge fund managers who were in town to visit their investments could have a really good time. And after a while, a lot of the manufacturers started getting priced out of the labor market—they just couldn't compete with construction and with service jobs in the capital city. And so you have this economy where it's growing and it's getting capital inflows, and that growth is entirely—it's more than 100% due to the capital inflows. So the capital inflows are just predicated on the capital inflows continuing. They didn't continue forever, and there were just a bunch of economic disasters in that part of the world, kind of one domino after another. So crypto, I think, goes through those same kinds of cycles, and that's just something that crypto people have to kind of get used to. But what they should remind themselves of is that if they were in crypto because it was the fastest way to 10x their money, they either got that or they learned their lesson. But if they're in it because they like the idea of this permissionless system for exchanging value with arbitrary third parties, whether they be human or machine, and being able to have this global infrastructure for determining shared truths that basically nobody can alter or tamper with—if they view that as a genuine public good and as a really cool concept and something they want to work on and contribute to, a lot of the people they don't like in crypto will just not be hanging around after the next downturn. But if you do find that the marginal buyer of crypto—like when you go to a crypto conference, if you find that people are wearing nicer suits and they're driving fancier cars and they're talking about price action and not about use cases—you know, you could take a little money off the table and get your coins back later when all of those people are back to investing in cannabis or GPT wrappers or whatever they find next.
I am curious though—I mean some of the promises of Bitcoin so far haven't been borne out. I'm thinking about the degree to which you sort of need to build things on top, like via Lightning Network, in order to actually make it so that transactions can process even semi-quickly in order to be legitimately useful. Or I'm even thinking about how quite a few years ago the promise was that Bitcoin would be extremely useful for remittances in third world countries, and we've seen a little bit of that to be clear, but we haven't seen I think nearly the amount of that that people really anticipated. Does this lend credence to the idea that it's bubbly and hyped, or does this just lend credence to the idea that these things take a long time to build and there are lots of people building in parallel, and the fact that there's so much investment in this just means that will happen more quickly than if it weren't as hyped?
Yeah, so I guess like 10 years ago I would have said yeah, just give it time. We gave it time and yeah, it doesn't look like Bitcoin itself is the right thing for consumer-facing applications. But it's also true that there is room for a store of value whose goal is not to be consumer-facing at all, and where it's actually kind of a weird edge case or weird bug if consumers are using this directly as a transactional medium.
