Hello and welcome back to the Bitcoin Magazine podcast. I'm your host, Spencer Nichols, and today we are joined by the one and only Tim Draper, Bitcoin investor first and foremost. However, he's also an esteemed venture capitalist with investments in firms like SpaceX, Tesla, Twitch, Skype, BYU, as well as Bitcoin native firms Arc Labs and Open Node. Tim, welcome to the show. How are you doing today?
Terrific. Great. Yeah, we've I think we made 50 Bitcoin investments in different companies, maybe four because we have a Bitcoin FI organization. It's an accelerator for Bitcoin companies. So that's another thing we've been doing around your environment.
Amazing. Yeah, I look forward to getting into that. And I think a place that I think is really pertinent to start with is kind of just talking about the innovation climate in the United States. I know you've spoken towards the idea of decentralizing everything in particular. I know you've written about decentralizing kind of the impetus of science in our society, talking about how centralization can lead to kind of a slowdown in innovation. I think this is top of mind for people right now as we see, you know, these frontier AI labs kind of, you know, what some are calling kind of a regulatory capture type strategy, others are calling a prudent means of slowing down the deployments of AI in society. But I think first and foremost I want to understand how you are digesting everything that's happening right now just in the innovation climate broadly.
Yeah, I think things do innovate faster in a decentralized world. So when a leader decides to be socialist, they control everything and then we all have to sort of walk the walk and talk the talk. But if you have a capitalist society, it's decentralized and innovation can happen from anywhere. And actually, it isn't just relevant for individual leaders of countries. It's also relevant for individual leaders of large companies because in a large company if you have centralized control and centralized decision-making, then you are really only reliant on the creativity of the person at the top, maybe with a few of their advisers, but there might be hundreds of thousands of people with interesting ideas for how to improve the organization and they are muted in a centralized environment. So I recommend that every organization be decentralized. Science in particular has become much more centralized around the biggest grants from government, the Nobel Prize winners, they all seem to know each other. So I actually think that there are some major changes that could happen out there in the world if we decentralize some of the monopolies and all the oligopolies that we have.
And do you find that the current trend of artificial intelligence is becoming a centralizing force or a decentralizing force? Centralizing in that, you know, you have these frontier labs amassing tons of capital, kind of getting their own brain trust together in their, you know, their walled gardens, and then decentralizing in that, you know, we're now democratizing access to research and things like non-coders being able to code, people engaging in data science that couldn't before. You know, what is that overarching trend looking like to you?
It's an interesting question, but I think it's still in decentralized mode because it's so new now. There's a centralization of a lot of the capital that's gone in. The biggest AI companies are grabbing most of the capital, but the innovations are happening throughout. We're seeing entrepreneurs in every single walk of life applying artificial intelligence to their own business and we're doing it ourselves at Draper Associates. So I do think that it's great when there's a new technology because it does tend to challenge those icons that are too centralized. So I would say what AI is doing is challenging the centralization of control of search in one way and it has become decentralized. There are more than one. You know, Google really dominated all of search and maybe Baidu in China, but now there are lots of different choices. You can go to Grok, you can go to Perplexity, you can go to OpenAI, you can go to any number of different AI providers. And as a consumer, you've got a lot of good choices. So I'm actually pretty excited about what AI is going to potentially do. And that's just around search. I also think that it's going to take many of these centralized control industries and challenge them and get them to start thinking in new ways. And so, you know, anything big, big pharma, big banks, big well, big banks have been challenged by Bitcoin. Big accounting, big law, those have all become a little bit more monopoly and oligopoly centralized in their decision-making. And in government too. And now with AI, you can do more things. And so you can, like AI can do a better job of defending you from a lawsuit than any lawyer in the world. It can go out and find so many more things in the history. It can find all the different cases and everything else that you need and it can do a better job. In accounting, same thing. A lot of accounting is now being done by AI and as in a bureaucracy, AI can solve a lot of what a bureaucrat's doing. And it's actually good timing because I know because they put so many regulations down that the bureaucrats are overwhelmed. And this is a big opportunity to decentralize that and open it up. And I also think that just in general we're all better off when we have more choices and AI is allowing us more choices. You know, cryptocurrency allows you a wide variety of choices, whereas we're kind of centralized around the dollar. And it's interesting as long as the government spends too much money, Bitcoin becomes more attractive because the government is, if they spend a lot of money then they either inflate or they raise interest rates. They raise interest rates, you could have a cataclysmic bank failure, series of bank failures, in which case Bitcoin is a great safe harbor. And if you have hyperinflation, then they lose faith in the dollar and then Bitcoin's a better alternative. So I actually think that that's very promising for Bitcoin and for all of us. I think when you have more liquidity in the marketplace because of more confidence and a faster opportunity, faster way of transacting, you benefit bigger. So I think that that is and society becomes wealthy. You know, just the internet created many more contracts and many more deals around the world and it brought about two billion people out of poverty. I think Bitcoin could have the potential to bring the other two billion.
Yeah. Hearing you say that, what is brought to mind for me is that, you know, I think broadly we're seeing, you know, faster and faster cycles of innovation and also seeing kind of this underlying trend of decentralization. I'm reminded of something that Balaji Srinivasan has said, kind of this thesis of kind of a pendulum swinging towards centralization and decentralization and it does seem as though we could very much be on that pendulum swing towards decentralization. So I want to understand what kind of framework you're working with there as you think about the timing and pace of this transition and the form.
Well, I used to wear this tie to promote Bitcoin so people would recognize that it was an alternative and it was very exciting and we were going to have a decentralized, open, transparent, faster, more liquid currency. But now I'm wearing the tie just to make sure that when we have either hyperinflation or a cataclysmic bank event that at least I've told everybody I possibly could that they should at least have six months worth of Bitcoin in their wallet and they should, and if they're a business they ought to have at least four weeks worth of Bitcoin in their treasury. And if they're a government, they should be buying Bitcoin as a hedge against either if they're relying on the dollar or their own currency, but it's also a great security. It's a great hedge against possible cataclysmic events. You know, when my dad gave me a million dollar bill when I was about 10 years old, million dollars? What can I do with it? He said nothing. And I said what do you mean? He said that's a million Confederate dollars. The Confederates lost the war and everybody wanted Union dollars because the Unions won the war and so there was hyperinflation in the Confederate dollar and that hyperinflation meant that people were trying to unload it too quickly, super quickly. So it eventually had no value when a million dollars worth of Confederate money was even worth a dollar of Union money. I actually think that that's the same thing that could potentially happen with the dollar to Bitcoin if a bank goes out of business or we have hyperinflation. And the only way, I mean, I think okay there's sort of three paths. One is the government stops spending. Odds of that are very low. Number two, the government keeps interest rates low and we have inflation that turns into hyperinflation. That's fairly likely. And then the third is the government increases interest rates to damp down inflation and that creates a whipsaw effect, much of how it happened with Silicon Valley Bank and the banks start going under and then there's a run on the banks and people are looking for some store of value and they go way under.
Where we sit in the current macroeconomic environment. How are you kind of making sense of the headlines around the yield curve against our ballooning debt? You know, we have the oil market putting inflation pressure on things. You know, how are you making sense of the world? And I think the fog of war is, you know, not an easy one to make your way through, but you know, love to hear how you're thinking about that.
You know, I'm a free market open border guy. On the other hand, if you have a government that is restrictive or socialist or too regulatory, you might need sort of a centralized government to free yourself. And I think that's kind of what's happened. You know, I think the world you were talking about the pendulum when the internet popped into the world, the geographic borders became much more open. The borders dissolved. Our businesses thrived. A lot of people came out of poverty. We had a great global economy was working very well. But then fear set in during the pandemic and when you have fear there's contraction and that's when people become nationalistic. So I think we have now put up all sorts of new restricted borders and the wars are happening. When the borders are open, they usually everybody's best interest is not to be open. But when borders are closed, then people are thinking, you know, what are you doing over there? More suspicions. It's a weird pendulum. In some ways, it's becoming more centralized. But the world is a marketplace of governments and the freer the government, the more attractive it is for the people. I think we do have to go through a little bit of a pendulum swing. I would like it to as soon as possible swing back to freedom, open borders, a capitalistic society, free market, free speech, because I think we all really benefit from that. When you don't have those freedoms, there's a contraction in people's thinking. You know, all you have to do is travel to a socialist country and you realize that they are restrictive in what they're allowed to think. And when that's the case, you know, it hurts an economy, but me being in the venture business, it makes me run away because I run to the places where there is more freedom because then if there's more freedom, then they can think more about what could potentially happen in the world. But if they're all socialists, they all have to think the same thing or else the government comes and slaps them down. And so freedom really does decentralize us and makes us more effective. And I actually think there will be a day when, I mean, most of governance doesn't need to be land-based. So one day governance will be just a service and we will pay for it. It'll be very much like inflation and people will provide governance, you know, 11 miles offshore or up in space, something doesn't really have to be tied to a border. And that became pretty clear, you know, as the internet economy was booming. But then some of the politicians were feeling irrelevant and I think they decided that they wanted to get back into control over the people. But the more control they have over people, the less the people can innovate and the slower the economy grows. So, I don't know whether that answers your question at all, but it's kind of a stream of consciousness of what I'm seeing out there right now. Now, longer term, I do believe that we will have competitive governance, which means that governments will have to compete for us and they will be accountable to us around the world. And the most attractive ones will attract the best businesses and the most people and the best brain power and most innovators, the most entrepreneurs, best teachers, all of that will be attracted to the best governments. And the bad governments, the ones who impose restrictions and regulations and taxes on people, people will leave those and they will fall under their own weight.
