{ "episodeId": "SLP31", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "patri_friedman": { "name": "Patri Friedman", "role": "guest", "tag": "PATRI" } }, "segments": [ { "speaker": "stephan", "time": "00:04", "start": 4.39, "text": "Welcome to the Stephan Livera podcast." }, { "speaker": "stephan", "time": "00:12", "start": 12.18, "text": "Welcome podcast listeners. My guest today is Patri Friedman. Thanks for coming on, Patri." }, { "speaker": "patri_friedman", "time": "00:17", "start": 17.36, "text": "Thanks for having me." }, { "speaker": "stephan", "time": "00:18", "start": 18.32, "text": "Patrick, just from researching about you, you are the MD of Zarko Investment Group, and obviously you're also well known for your involvement with the seasteading movement. Now, you had some interesting discussion on Bitcoin recently, and I thought it'd be great to get you on the show. So the first topic was around Bitcoin maximalism. Now, I know you're not necessarily a maximalist yourself, but maybe you can just outline a little bit of your thoughts on Bitcoin." }, { "speaker": "patri_friedman", "time": "00:46", "start": 45.69, "text": "Yeah, definitely. I think that, so, you know, Bitcoin maximalism is people who kind of believe that Bitcoin is gonna have all of the value and that, all of these other tokens and attempts to form new money are gonna fail. And I somewhat believe that. I think that, one of the problems, one of the many problems I see, in the crypto sector is that everybody's trying to replace Bitcoin rather than to build the next thing, and I don't think it's for good reason. I think that we don't need very many forms of money. We probably need multiple forms of money, for example, privacy coins versus Bitcoin, but we don't need a thousand forms of money. And that the, the types of new crypto technologies that are gonna succeed are gonna be doing other use cases besides money. And I think that CoinDesk money really well. And part of this is, is the question of token price. That is, I think that, I kind of believe in the monetarist model for valuing tokens, MV equals PQ and, and things related to that. And for Bitcoin as store of value, if people are holding their money in something, it has low velocity and it has high token price. And so I think that, you know- I think that Bitcoin could be unseated someday. you know, it has, it does have an incredibly strong community, it has great technology, but someone else might be able to make a better Bitcoin. But what I think is that there will be few forms of, of, few cryptocurrencies that are used as money. Those cryptocurrencies will have a high price because people are holding their assets in them, and all of the other tokens will not be used for money and will have a low price because of, because of the velocity problem." }, { "speaker": "stephan", "time": "02:32", "start": 151.94, "text": "Right, yeah. Yeah, I think obviously that there's a few points where I might slightly disagree, but I think I broadly, you know, we're broadly aligned. Now, one thing with, in terms of tokens is- The question on whether it's a monetary token or whether, you know, people talk about other forms of tokens, like maybe tokens representing, you know, real estate and whatever, and that Kind of discussion is slightly different because in that case, those tokens aren't trying to be money." }, { "speaker": "patri_friedman", "time": "03:00", "start": 179.82, "text": "Absolutely." }, { "speaker": "stephan", "time": "03:01", "start": 180.98, "text": "Yeah." }, { "speaker": "patri_friedman", "time": "03:01", "start": 181.42, "text": "And that's great. It's great when they're not trying to be money. And I think, I think that all the tokens are trying to be money for two big reasons. One is, they're just copying the first thing that worked. They're copying the first use, use case, Bitcoin, instead of making the next use case, which is, you know, a lazy thing to do that doesn't usually work. And the second thing is that the, the, the model Advance is so clear. Okay, we pre-sell this token that we think is gonna be money and have a higher price. It's clear how we're gonna make money, it's clear how the people who buy it are gonna make money. you know, it's just very simple. And again, it's, it's, it's just lazy because if you aren't doing the store of value use case, which almost everybody should not be doing, you need to find some other reason why your token will be valuable or some other way to raise money besides selling a token, and that's harder," }, { "speaker": "stephan", "time": "03:56", "start": 235.61, "text": "right, yeah. They've got to just put in the work. Okay, and I think that is the next angle, the next angle that I wanted to discuss, and this is something you've spoken of, is this Bitcoin agorism or the working the agoric angle. So you commented recently that, you know, cryptocurrency now and the, you know, the general, you know, kind of industry, if you wanna call it that, has interesting parallels with the dot com bubble, where the hype out sprinted the reality, and yet And despite all the frauds and the failures of the internet bubble, the internet really did change everything. So you comment about this idea of markets eating the world, what do you think that looks like?" }, { "speaker": "patri_friedman", "time": "04:36", "start": 275.89, "text": "Yeah, so there's, there's a lot to unpack here. I mean, starting with the, the dot com bubble, you know, I think that there's a lot of really obvious parallels, where people said, \"Wow, this technology is gonna, is gonna change the world,\" they saw its potential, before it was kind of built out and able to do it, and lots of capital poured in, lots of that capital was, was malinvested, you know, there was a bubble, and that bubble popped. But, you know, twenty years later, the internet More than the hypeiest hype in 1998. Like it's, it's, it's everywhere, you know, our, our mobile phones always connected, it's, it's, it's taken over more of the world, and- You know, one aspect of that is Marc Andreessen's famous line, \"Software will eat the world,\" and this idea that software is so general that you can apply it to everything. There's like almost no part of life, you know, I think about like gardening. Okay, gardening is just this random thing that I picked, but I'm sure the software could tell me like which of my plants need more or less water or with sensors analyze the nutrients that they're getting from the soil. And like, is gardening a place that like most needs software? No. Like, can you improve with software? Yeah. And, and so you can improve everything. And so the, the number of businesses that respond and are continuing to be created is just massive as it transforms every area of our life. And I think that there's potential for, for crypto to be similar, but not by having a thousand new money. It's not-- That's why I don't like the term cryptocurrency, because I don't think that these technologies are gonna change our lives because we've got, like, you know- A thousand different tokens. That's like having a thousand different, like, gift cards that only work at one store. what I think is that it's about crypto as in agoraechnology, and this term comes from Mark Miller and Eric Drexler's Agoraechnology, which was written, I believe, in 1988. So this is some real OG stuff that I recommend, listeners read, where they, I think it was the first place that smart contracts, for example, not by that name, but as what were called promises. were referenced, and, you know, I think Eric Drexler's mostly been working on nanotechnology and Mark Miller is, is very humble, and I think that this early work hasn't gotten as much attention as it deserves, but, I mean, this is 1988, and they were writing about, essentially like distributed economic networks for bidding for computational resources and smart contracts and things like that. And the a gourk angle is the idea that That crypto is a set of technologies that makes it easier for us to have markets, makes it easier for us to transact, and it, it's about drawing the line, between past technologies and crypto, you know, not from like Earlier, not from PayPal, for example, and being like, \"Oh yeah, it's about payments, it's about money,\" but drawing a line from Craigslist and eBay and Uber and Airbnb, all of these are, are systems or businesses that take a resource like hotel rooms or taxis That are currently in an opaque, illiquid, informal, disorganized market, and they, you know, in a sense, tokenize it. They bring it into a formal, two-sided network, you know, with rules and reliability, and it turns out that that creates a ton of value. If you take something and make a good market where there wasn't a market before, and so what I see the suite of crypto technologies is doing is helping markets to eat the world, that there are just so many different- places in life where we have disorganized, illiquid economic resources that haven't been standardized and aren't being well matched up between buyers and sellers, and that, like software eating the world, this is something that can be done, you know, a thousand times. Like, you can make a thousand different companies that are finding different, different resources and making them into markets, and that, that this is the direction that I see crypto going, not making a thousand kinds of new money." }, { "speaker": "stephan", "time": "08:53", "start": 532.77, "text": "Yeah, that's an interesting way to put it, and I think one parallel people can draw is, say, when people compared Uber to the taxi market, but that's actually not necessarily the best comparison, because in some cases, it's not that Uber was con- was just straight competing, competing with taxis, but in some cases, Uber expanded the market. More people now took that form of transport as than were in, you know, than taxis serve. So in a similar way, some of these- These other opportunities where, say, people use online, build online services, but using Bitcoin as the money, then there's a way for them to kind of create a new market and so to grow the pie, so to speak." }, { "speaker": "patri_friedman", "time": "09:38", "start": 578.07, "text": "Yeah, absolutely. I mean, you know, when you, when you make it, when you make the friction of transacting lower, you know, by bring people together into a market where you can see offerings from, you know, many different sellers and you don't have to go to a different place for each one, you get lower transaction costs, then, then people transact more, absolutely." }, { "speaker": "stephan", "time": "09:58", "start": 598.14, "text": "Excellent. Okay, and so do you see any potential industries that you think might, this might happen first?" }, { "speaker": "patri_friedman", "time": "10:06", "start": 605.92, "text": "I think, well, I mean, we can see people working on it for like storage space, bandwidth, access to the internet, some of these basic utilities. but I, I would say like the, the, the big one, is real estate. And, and to a lesser degree, you know, securities, all stocks and bonds. And things like that that have these, these formal rules that could be turned into smart contracts and, you know, operate on these old inefficient markets. but I think re-real estate is, you know, it's so big, it's, it's the majority of global wealth, and often, you know, as we know from, for example, Hernando de Soto's work, in a lot of countries Property title is very messy, and poorly stored, and, you know, you gotta go through some, some boxes of, of papers in the back of some, some local office, and I, I don't think that crypto like solves that problem. You still have to figure out who has title to things in order to put it on the blockchain. however, like as we're able to put, real estate Title on the blockchain. I just, I think that, that'll be huge, 'cause I mean, just look at the, you know, first off, it's just the biggest asset class, and if you look at the friction, you know, I mean, for residential here, you know, you're probably talking about three to five percent in transaction fees to, to, to buy or sell a house, and, you know, and maybe less for, for commercial, we're still talking about on the order of, of several percent, and when you're moving around, you know, big" }, { "speaker": "patri_friedman", "time": "11:46", "start": 705.62, "text": "Real estate get rapidly tokenized, and then you're gonna be able to see, you know, real estate investment funds that are like constantly rebalancing their portfolios algorithmically. You're gonna see people slice and dice so that, for example, you know, one party gets the, the stream of rents and somebody else gets the capital gains from appreciation of the property, and then much more exotic things that I can't even think of right now, and probably some of those things will probably be stupid and lead to, lead to some people losing some money, but in general, kind of formalizing This like massive, massive market where most of our wealth is, I think it's gonna be, it's gonna be huge." }, { "speaker": "stephan", "time": "12:23", "start": 742.73, "text": "Yeah, agreed. I think as, as, once we consider the timeline of things, so I think it's more like, once we kinda get the sound money down, then it's kinda, then people will start. Learning to build on top of that, and that's when we can start to see some of this innovation, rather than kind of in the current world where people are just trying to create their own token and basically scam people and, you know, earn what we might call an almost unethical synergistic income. Now, with all the scammers in the space, do you have any thoughts on ways to identify scammers or problems in their pitch or project?" }, { "speaker": "patri_friedman", "time": "12:57", "start": 776.74, "text": "Well, I mean, I was-- rule one is like, no ICOs, and, and that's not quite true. I participated in Tezos because I knew the founders. and I'm sure lots of people made money by buying, getting into ICOs and then selling them quickly. but a, a lot of what I look at is what's the, what's the incentive structure for the founders? And so part of the problem with ICOs is they're often raising, what in venture capital we'd consider to be like multiple rounds. You know, you have a line that's like Series D money for seed stage ideas, so they're raising, you know, multiple rounds of money on a very early stage prototype, and then with little or no vesting or, or lockup, meaning that they can sell, their tokens right away and, you know, turn it into cash and, you know- Peter Thiel has a great line about this in Zero to One about how cash is kind of like the worst form of compensation in startups. It's like the least incentive aligned between the employee or founder or investor and the startup, because you're getting paid no matter how the startup does. and tokens that you can sell right away are kind of like that, not completely, because often the initial token market is pretty thin and the founders are, are only able to sell, so many of their tokens without crashing the price, but in general, I think that, I think that equity is, is a, is a good design and that tokens are, tokens are a cool design for being tokens, but they're a really poor design for investing in a company. and so I make, tend to make equity investments, and of course, you know, hold some Bitcoin and Ethereum and Tezos, So, yeah, not buying tokens, buying equity, and of course, looking at the, you know, for scammers, you know, you just wanna be verifying that, whoever you're giving the money to is gonna have to spend that money on development, that that's monitored, they're not gonna be able to just cash out. And then the question of figuring out, you know, what's a good project is, well, that's much more complicated. That, you know, you have to have an opinion about the whole space and how it's gonna evolve and where, where this" }, { "speaker": "patri_friedman", "time": "15:13", "start": 912.74, "text": "Projects that seem to depend on, like, a future level of blockchain technology that isn't actually built and working yet, and, you know, that's a problem. Like, you, you, you need to be building A company now based on what works now or what will work soon, and not your hope for what this could be in five years." }, { "speaker": "stephan", "time": "15:33", "start": 933.02, "text": "That's a good point around people basically hyping dream, blockchain dreams that don't exist yet, and in some cases, it might be easier to sort of sell that lie because, well, it's not actually a real product, and they can basically- Say it has features that don't exist yet, and that can almost be part of the, you know, the pitch or the, the draw for people. now I think the other thing that's interesting is around making the regulatory rules work with You know, in a Bitcoin world. I'm particularly interested in this concept of jurisdictional competition as countries compete for Bitcoin talent and resources. Do you have any thoughts on whether this process will lead to lower taxes, favorable regulation?" }, { "speaker": "patri_friedman", "time": "16:22", "start": 981.84, "text": "Yeah, I mean, that's a really interesting question. So, like my friend, Vijay Boyapati, for example, Bitcoin maximalist and early Bitcoin holder, he thinks that it will, it will reduce taxes, that basically by moving to sound money outside government control, takes away the government's ability to inflate the money supply, and but I'm, I'm, I'm more skeptical. I think that inflation is something that a lot of us don't like because it's, it's it's inelegant, it's inefficient, and it is, it is theft to us. But I think that, like low steady inflation rates, it's, it's, it's not stealing that much. and that doesn't make it right, but in terms of the, the, how much value is gained by making it go away, I, I don't think it's that great. And I think that, you know, Bitcoin, for example, it's not, it's not like how we used to imagine, e-cash systems. 20 years ago, you know, in the days of Kryptonomicon and the sovereign individual, where it was just gonna be like totally anonymous and like you'd have all these transactions the government can't track, right? Instead, we got Bitcoin, the fully transparent ledger, and, you know, even, even privacy coins right now are like, aren't that private, you know, like Zcash and Monero, like the technology needs to get, not way better, but like a little bit better. We need things like, like the CoinJoin where not every seize the entire transaction set, to have something more like a, a, a private mixer system, so, and I think that once privacy coins are really secure, then governments are gonna like crack down and make it hard to use them. So, I think the governments will always be able to tax like the physical nexus, and they'll just get their taxes that way, but I definitely think that there will be influence, I think that You know, we're already seeing countries get interested in, making more crypto friendly jurisdictions. We're seeing countries try to upgrade their government systems, you know, by putting them on the blockchain. Estonia, for example, is a leader of this, and there's a number of South Pacific island nations that are, that are hiring, crypto consultants and working to, to make their countries, you know, run on, on a bunch of crypto technologies, which is really cool. So I, I definitely think that we're seeing- Jurisdictional competition to adopt these technologies and to host people who are using them. And, you know, I have an article coming out in, in The Spectator, imminently about The intersection between, between crypto and the whole startup countries seasteading movement that I helped start, where I, I think that like governance in crypto evolves much, much faster than on land because, you know, it's just code, the law is code, and because there's not, you know, a bunch of people with guns saying you can't do it, instead you've got this, this world of easy entry, anybody can create a new crypto network, easy exit, you can, you can cash out, Easy to switch between them, and so we're getting all of these governance experiments just happening at, you know, a hundred times the rate that they did on land. i-i-it's amazing, and I think people are gonna get used to that as crypto networks become more and more of our economy, people are gonna get used to these networks having like well-thought-out governance that's way ahead of what we use on land, and especially as people get rich From these crypto networks and get used to seeing them be an improvement in their daily life, they're not gonna take for an answer anymore, oh yeah, this, you know, vote once every four years is the best way to run a government. They're just gonna see that that's not true, and they're gonna insist on their terrestrial government, starting to catch up with their virtual government. So I think that in the, in the medium term, long term, there's gonna be, you know, a really great pressure that will help transform terrestrial governments." }, { "speaker": "stephan", "time": "20:32", "start": 1232.07, "text": "Interesting answer. Okay. Yeah, there's a few points I, I guess we've got to unpack. One of which is just around the inflation aspect. I think, I guess from an Austrian point of view, the inflation argument isn't just the two percent inflation, but rather the malinvestment, which, you know, from the Austrian view, causes that boom and bust cycle. so I suppose in an Austrian view, it's, it actually is pretty bad. but- I agree," }, { "speaker": "patri_friedman", "time": "20:58", "start": 1257.97, "text": "I agree that it, it's not just the theft, but it, it's also- Where the money is injected causing malinvestment. I, I don't agree that that's the entire explanation for the business cycle, but I, I definitely agree that, the government manipulation of, of interest rates and where they insert the money, causes price distortion. I, I totally agree with that." }, { "speaker": "stephan", "time": "21:18", "start": 1277.83, "text": "Yeah, right, right. And then I think the other thing is just around with, you know, online communities, it's I'm sort of, sometimes I sort of struggle to see where, you know, where virtual governance would really play out. I think of it more like people might just, you know, buy things online and use Bitcoin where they aren't able to, you know, spend money some other way. So, you know, historically, you know, being able to donate to WikiLeaks where you couldn't do that before, or being able to buy, you know, let's say Alex Jones has got shut down, so people wanna buy, you know, his products or whatever using Bitcoin. And, I think- I think the other thing with that is around just enabling exchanges between people. So as an example, in the past, people might have had a clum-plumber come over and they might have said, \"Oh, hey, you know, if you, if you pay me in cash, you know, they'd kinda do that deal under the table and they might offer a discount. Maybe in the future People might do things like have a Bitcoin or Lightning, you know, use for that payment, and then say, \"Hey, I'll give you a discount for that.\" Do you see an incentive, or a, a trend that might happen in that case?" }, { "speaker": "patri_friedman", "time": "22:32", "start": 1351.74, "text": "Yeah, I mean, it definitely could happen. I don't see any reason why it would be different from a, from a cash discount. I mean, do keep in mind that, you know, Bitcoin isn't anonymous, and so, you know, the, the cash discount is, is, you know, it's partly to avoid credit card processing fees and all of that, but it's also partly to not pay taxes on the cash, and it's not clear whether, not paying taxes on cryptocurrencies is gonna work or not. But yeah, I definitely think that adoption is, is gonna be, should be driven by use, and that's one of the problems that we have right now, because the technology's early and it's got all of this excitement and all of this investment, is that, you know, the price of, of most tokens is based on speculation and not actual use, and people are just guessing at the use cases, and that's really dangerous because then, you know, you get the, the, the technology and the businesses are, are disconnected from, you know, how- How they'll actually be systems of value generation, and that, you know, having, having tradespeople actually, you know, using this as a form of payment, because it's better. I mean, for example, I, I talked with a, an investor in the Philippines recently who was involved in a company that, offers banking services via ATMs where, they support the traditional banking system and they also support crypto, both, Bitcoin and Ethereum, and they made their own, Their own kind of internal stablecoin representing the national fiat currency so that people could transact in that, in a cryptographically secure way, without having the price fluctuations. And, you know, the, this idea of like, \"Oh, it's services for the unbanked,\" will be one use case. You know, it's easy to say that, but, you know, here's a, a place where people actually did it, where they actually were like, \"Hey, I need to pay you a hundred dollars. I'm gonna do it with this system and give" }, { "speaker": "patri_friedman", "time": "24:32", "start": 1472.06, "text": "And, and, and make your own, account on this crypto network with, or, or turn into money or whatever, I can send it to you through, through my mobile phone. And like, where people are actually using these technologies to transact because it's cheaper, because they were unbanked. And I think it's, it's just really important to, yeah, to get this stuff actually used and to see how it's actually used and not just be guessing." }, { "speaker": "stephan", "time": "24:59", "start": 1498.61, "text": "Yeah, that's, that's, an interesting parallel back to the dot com days where people would, value things on very absurd metrics as opposed to just the kind of cold hard revenue numbers. Okay. So how about institutional reform and building new governance zones? One interesting idea that I've seen you speak about is this concept of law as technology. and this idea with seasteading, that it may start with things like ships for medical tourism and, you know, then pro-pro-progressing to designs based on oil rigs, for example. Do you wanna comment a little bit on where these kinds of ideas are at today?" }, { "speaker": "patri_friedman", "time": "25:37", "start": 1536.71, "text": "Yeah, definitely. and you know, one thing I'll say about the sort of anarcho-capitalism, Component of this law as technology is, i-it's important here that there's sort of two strains of anarcho-capitalism. There's the, the Rothbardian, where he sort of believed that there, there would, was an obvious correct, axiomatically derivable, system of laws, and that we would have competing courts and enforcement providers, all private who are enforcing that. And to contrast this with my dad's flavor of anarcho-capitalism, where The system is discovering the laws, and where providers are competing, not just on enforcement and, and arbitration, but on actually what set of laws they provide to their, to their customers, and that essentially you're creating this market for a legal package, and that market is, is discovering, new and better laws. And I'm, I'm, you know, not just 'cause he's my dad, but I'm a thousand percent on, on that side, where, you know, if you look at, for example, law and ex- Economics, which analyzes like what laws are the most efficient, and actually has a theoretical model for like what the best laws are. The best laws actually depend on the-- and by best, I mean like Total monetary value for all individuals in the system. that the best laws actually depend on the cost of detecting crimes and enforcing judgments, because the proper, you know, we, we wouldn't wanna spend a million dollars preventing a, a hundred dollar crime. That just is, that's a net loss. you know, and if you think about it from the justice morality perspective, like that hundred dollar crime is wrong. you know, you'll, you won't get it. But if you- But efficient law says, you know, we should pay if, if, if paying will prevent, you know, more crime than the amount that we pay. And so that actually depends on things like, you know, how good our, alarm systems, you know, like The actual cost of detecting crimes and punishing them plays in, and then another area is like we're constantly having new technology that requires new laws, and it's nice to, to be like, \"Oh, we can always reason by analogy from, you know, old concepts of property to new things like intellectual property,\" but, but the truth is that, that new technologies have different aspects, that, that, you know, can't always just be analogized or reasoned from first principles, that we're gonna have to try different laws and see what works. So This is kind of unpacking that law as technology, where I think that laws are, are complex and evolving, and that there's something that is discovered, not, not derived. and yeah, and so new governance zones has been my passion now for almost twenty years, believing that we need startup countries. This kind of comes from, you know- Looking at why do countries not work very well? Why is there no country that I think has a good government? Well, the problem isn't a lack of good ideas for new governments. I mean, look, my dad's got anarcho-capitalism, like this is a really neat idea for a government that could work way better, and lots of other people believe in it too. Okay, well, why don't we have it? Oh, because there's no place that you can go and make a new country. And so I started reading about micronations and about ocean cities, and about se" }, { "speaker": "patri_friedman", "time": "29:06", "start": 1746.31, "text": "It was a startup sector for government, and I started out looking at the ocean because it's kind of the next frontier, and it has some physical characteristics, the fact that you can reshuffle buildings and move, move entire cities, I think would lead to, to more competition, and more efficient law. But it's also just, it's the frontier, it's, it's next, it's what's open. over, over, over time, I'll say that, I've gotten, to think That maybe it's gonna happen on land first, it's obviously just cheaper and easier to build on land, and, you know, initially I thought that, countries wouldn't go for these governance zones, but now, you know, twenty years later, we're seeing a bunch of countries, like Honduras, being interested in it or French Polynesia, which has a non-binding MOU, to, to host a seastead. so I think that it, it, it could, it could happen on land first But that the ocean still has is the best potential for the long term and, and the biggest ones. for, for seasteading, there's basically three, three different designs you can do ships. ships are great from a legal perspective. there's, they actually have kind of a virtual governance system already where you get, you can register your ship with any country, you fly their flag. And you're under their legal system. I wouldn't quite say under their laws, because countries enforce different laws on the ships than on their territory. for example, if you're on a Bahamas-flagged cruise ship, you can have a doctor who's gone to any accredited medical school in the world, whereas if you are a doctor in the Bahamas, and you haven't gone to a Bahamas medical school, you have to go before a board and present all of your, your education, your credentials, and they can decide whether you can work there or not. so that's one thing that's really neat, and it's already got this cool system for franchising sovereignty, which is exactly what we want. But ships have really high operational costs, and, you know, kind of moving around all the time seems in practice to be more of a, a cost than a benefit. and then, then you have designs that are similar to floating houses, and these designs work, any place that you don't have waves. For example, in French Polynesia, we're looking at building inside, inside the reef or inside an atoll, and there you can do, these just kind of float-- simple floating platforms, that are very easy to build on. And then the third type of design is more like an oil rig. This is your, your deep ocean seastead, you know, maybe free floating thing may be anchored to a sea mount, these are very expensive but obviously can handle the biggest waves. and then there's some other options, for example, there's an area, called the Doldrums near the equator where there aren't very many waves, and so you wouldn't need huge pillars. I have an idea for a, a circular breakwater design where you'd get an economy of scale, in building the breakwater and it would create basically an artificial atoll inside, and then you'd be able to do these, easier floats Home like structures." }, { "speaker": "stephan", "time": "32:28", "start": 1947.89, "text": "Okay, fantastic. And then how far is the technology away for some of these examples?" }, { "speaker": "patri_friedman", "time": "32:34", "start": 1953.54, "text": "I would say that, that, It's not so much the technology as the kind of," }, { "speaker": "patri_friedman", "time": "32:42", "start": 1961.58, "text": "well, first off, getting, getting agreements with countries, and then the, like, actually growing these communities that, you know, the far out, farther out in the ocean is just harsh and expensive and needs scale. and, you know, we're not gonna build a floating city until we've built a floating village, and we're not gonna build a startup city-state until we've built a Startup, semi-autonomous village and grown it from there. And so what I'm seeing, you know, now, finally after advocating for this stuff for twenty years, is enough, entrepreneurs who are, who are sold on this idea, and investors who believe in it and countries who are excited about this as a way of, of helping their people, of helping economic development in their country, especially smaller countries. There's something that I call, commoditizing sovereignty that I've been, you know, pushing for twenty years and hoping would be a trend where, if you look, for example, at Tonga selling the dot to domain name or countries selling passports or, or, or special stamps where small countries realize that their sovereignty is itself a valuable resource that they could take advantage of by selling, that we're really seeing that kind of continue and accelerate. And so there is interest, you know, there isn't one of these Yet, but I think that there will be, in the next few years, and that there's really starting to be a, a, a pipeline of these projects that are gonna start. They're gonna start small, they're not gonna have anything like full sovereignty, but they're gonna have significant autonomy to make, to make meaningfully different laws. one organization I'm involved with, I'm on the board of the Startup Societies Foundation, and, you know, we recently got a generous grant to develop a- A dashboard of these projects, both historical and, current, and we're developing a, a handbook, so like how to do a startup society. this is something I've written up about a lot for seasteading, actually, so we published a seasteading book, which is mostly stories about the people, who are in the movement, like me. but what I'd written, was much more of like a how-to guide, and I wrote a seasteading book a long time ago, fifteen years ago, that it, that was- It was also more of a how-to guide, so I'm really excited to, to contribute to this book and, kind of have there be a, a way. I mean, it's not, it's not easy, it's not that anybody's just gonna be able to start a new society, you know? It involves like convincing your government to let you do a, a zone with different laws, which is, which is not easy, and you need to put together a successful real estate development, but I think it's actually starting to be possible to start these, and I think that explosion of zones with different laws that, that I've been hoping for." }, { "speaker": "stephan", "time": "35:41", "start": 2140.96, "text": "Right. And you mentioned around this concept of countries taking advantage of their sovereignty and, you know, making use of that. Now, I guess the question I have is just around, what's the risk then that governments aside, say, \"Okay, guys, you can have this area, but then pull the rug out from under you later.\"" }, { "speaker": "patri_friedman", "time": "36:01", "start": 2161.12, "text": "Yeah, I mean, it's, it's always been the biggest concern of, investors in these projects. I think that, I don't think it's as big a concern because there are ways of enforcing deals on sovereigns. So for example, there's an, an international agreement that most countries have signed where you can enforce arbitration agreements, Again, like a hundred and twenty countries have agreed to enforce arbitration agreements against any country. So if they, if you have a, a, a contract with a country and they break it and you obtain a ruling in your favor in international arbitration, all of that country's assets outside the country ca-can be, in, in any, any of the member countries can be seized to pay that judgment. and, you know, this is because if, if you're an- An oil company or a gas company, you know, you're scared of the same thing. Like we have seen, these resources get nationalized in the past, and so countries have found mechanisms for, You know, for, for protecting themselves for, for big amounts of money. so that's one way, you know, you can get the, the country to post a bond, and You can be popular with, with the people. there's a lot of different, a lot of different ways to, I think, to protect yourself against that kind of thing. I won't say it's no worry at all, like there are various ways that, you know, a country could shift the laws over time or do things that are in their control and not technically violating the, the, the contract because, they don't like you, and that's, that's something to worry about, and it's definitely- Definitely one of the advantages of seasteads over charter cities, you know, even though they're more expensive, your capital's more protected if you can, you know, pull up and move Your buildings to a different jurisdiction, and, and so I do, I do worry somewhat about, you know, big investments in charter cities which are kind of trapped in place, but there's a lot of ways to, to mitigate that." }, { "speaker": "stephan", "time": "38:18", "start": 2297.95, "text": "Yeah, interesting thoughts. Yeah, I like the concept you're mentioning around if, if it's popular with the people of that area, let's say they've, you know, it's an economic zone and there's a whole bunch of new jobs and everyone's becoming a much richer, well then it might be, as long as that can, as long as it works out that way, then it might be much more difficult for that host nation or country to now try and pull the rug and, you know, walk all the changes back." }, { "speaker": "patri_friedman", "time": "38:44", "start": 2323.98, "text": "Absolutely, and it's just, it's good for, for every reason. You know, the greatest challenge of these projects so far has been, you know, people, especially of a leftist persuasion, especially in the first world and not in the, this country, portraying them as, as being somehow neo-colonialistic or exploitative or foreigners taking advantage of these people, you know, when in actuality it's, it's a country saying, \"Hey, please come help us develop our country. Please come help us.\" provide jobs for our people, which, you know, ought to be exactly what, what left wing people want, but, you know, somehow their brains are broken on this topic. and so, you know, I think part of the, part of the solution is just You know, making that bond with the local community as strong as possible, working with them from the very beginning, listening to their needs and hearing what they want for the project, you know, making sure naturally these projects are gonna have some, expatriates coming and living there, helping provide the capital and the experience, but they also need to have a, a lot of locals and be, be providing jobs for the locals and just, you know, building that, that, that strong relationship, that, that partnership. you know, that can withstand, you know, this, these, these attacks and smears from people who, who don't even live there and don't have the problem of like, you know, needing a factory job and having that be a huge improvement in their life and don't understand that for most of the world it is a huge improvement in their life." }, { "speaker": "stephan", "time": "40:19", "start": 2419.45, "text": "Okay, and I thought, we would just sort of, start to wind up and talk about some of your, your thoughts on, you know, back to Bitcoin. have you got an- Any discussion or do you know what the thoughts of your father David are on Bitcoin?" }, { "speaker": "patri_friedman", "time": "40:36", "start": 2436.12, "text": "Yeah, I mean, he, he hasn't gotten into the, the technical details like I have or the differences between the different tokens. he has some, some-- He's been paid Ethereum for some of his talks, and he's certainly, he's certainly interested in them. And, you know, I mean, he actually- You know, so he was into these digital cash projects before I was, you know, he was loosely involved with like the Cypherpunks back in the nineties. His anarcho-capitalist work was cited by, Tim May, who wrote the Cypherpunk Manifesto as an influence, and, you know, Tim May said, said that, You know, to some degree, anarcho-capitalism was an influence on the, the design of, of early systems and influenced Bitcoin's design because online kind of is an anarchic system where you need to have self-enforcing agreements, you know, and that's what the whole Bitcoin design is, a distributed self-enforcing agreement with no central authority that, you know, obviously has, has deep, deep connections to, Anarchist theory. and so I think my dad is excited about it, he's, he's interested in it, but he just, just hasn't gotten deep in the details. You know, his focus these days is studying, legal systems that are very different from ours. He's got a, a new book they can read online for free that he's working on about that, which I think is, is really interesting from a, from an Agarist perspective that, you know, our, our Our ideas about what kinds of laws you can have is limited by like what we see around us and what we can imagine, and actually, you know, we have thousands of years where people have tried a bunch of, really different laws, and that we should be drawing from those for ideas for our new legal systems." }, { "speaker": "stephan", "time": "42:29", "start": 2549.42, "text": "Yeah, fantastic. I mean, I, you know, when I was much younger, I read, The Machinery of Freedom, and I thought that was a fantastic book on, you know, anarcho-capitalism, and I think, you know, still to this day is a great example of, introduction to some of these ideas. Okay, and how about your grandfather, Milton? What would he have thought about Bitcoin, and would he see it as a reliable e-cash as he predicted? I think it was around" }, { "speaker": "patri_friedman", "time": "42:56", "start": 2575.96, "text": "1999. I don't think, well, I You know, obviously, you know, he, he was a, a monetarist economist. In fact, you know, MV equals PQ was his license plate for, for a long time. He, the, the government only offered a dash, and so he would have like a little piece of electric tape to turn the dash into an equals on his license plate, which, you know, is totally illegal, but nobody cares about. and so I think he would have been really interested in, in the, the monetary dynamics of it, I think he probably would have said that it's not eCash for two reasons. One is the transparency. You know, a, a key quality of cash is that it's not traceable. That's one of the things that makes, you know, it's an anonymous bearer instrument. And so I think he would have said that Bitcoin isn't eCash because it's traceable. And then the other thing is, is, just the, is the high transaction costs. Again, you know, handing somebody cash is, is extremely low transaction costs and You know, Bitcoin is, is proving to be more of a sound money and sound money that, that can be used as the settlement layer, you know, for larger transactions, but it's just, you know, it's, it's not, it's not really The technology doesn't seem to be well suited right now for being a payment system, although obviously things like, like Lightning, built on top of it, and there are lots of other ways to do payment systems with Bitcoin as the ultimate sound money settlement layer, so I absolutely think that it's coming, but I think he wouldn't see it as eCash for that reason, you know, but not 'cause he's skeptical of, of the, of the technology or the possibility, just 'cause it, it, it doesn't yet have those cash-like qualities, but, you know, a a, a privacy coin with low transaction costs, and, and really good privacy, which I think we'll have, you know, in the next, couple of years, I think he would see as a reliable e-cash." }, { "speaker": "stephan", "time": "44:59", "start": 2698.54, "text": "Yeah, fantastic. Okay. And then how about on, in terms of your own thoughts, from a, you know, as you mentioned, privacy technology. I'm not sure how closely you follow some of the Bitcoin development, but there has been some work on things like, you know, coin joins, and other ways of, you know, breaking the heuristics that, chain analysis companies will use to try to make it traceable. And obviously, as you mentioned, Lightning Network. Do you have any thoughts around, you know, the privacy and the Lightning Network? development in Bitcoin?" }, { "speaker": "patri_friedman", "time": "45:30", "start": 2729.94, "text": "Yeah, a little bit. I mean, honestly, you know, I'm not able to follow all the aspects of, of blockchain technology, but both, plasma channels and like coin mixing are things that I happen to be interested in, and have read up about. So, you know, I think Lightning Network, which is a form of, of plasma channel, it just absolutely makes sense, right? If you've got your, you know, cryptography lets you prove that a series of transactions happened, doesn't have to happen on chain, You know, you can batch them up and that's just, you know, obviously a, a good thing. and then CoinJoin, I think, I think that, you know, having, having there be a transaction with multiple inputs and multiple outputs, is like obviously a great way to obscure, you know, especially if you add something like ChiaMian mixing in, where, you know, I create my transaction and it, it involves breaking my payment up into- To many different pieces that then travel through many different intermediary accounts before reaching their final destination. I think there is like a, a basic problem with the early coinjoin stuff I've seen where, like, okay, the, the network or the, the, the, the recorded blockchain doesn't know, how to map the inputs to the outputs, but if you imagine like, how does that transaction get formed? It gets formed by people saying, \"I wanna pay this much from this account,\" so this account and sending it in, and then some nodes combining all of that into transaction, but you're still revealing to, to the validators what the individual transactions are, and they could be recording that someplace other than the blockchain. So I know that there's some proposed systems where essentially, you know, imagine like a, a, a tree graph where, as, you know, a set of people, like as two, set of people come into a transaction, they, they send it to a node, the node like combines that into a combined transac- Transaction before sending it to another node. And so, at the end, when you've created this large join transaction, it's not that every node knows what all the possible inputs and outputs were, but, you know, only the node that I sent mine to knows, like me and three other people, what the specifics are, but, you know, assuming that they don't pass that information on, nobody else knows. And so we're limiting, who has that information about the inputs and outputs. So I think something like, like that, maybe with, with like onion Routing, mixing systems, if you like really need privacy, I think that is a great way to, to, to create these, these privacy coins. Like I think that it's not, I worry about like scaling, and like I follow, like Vitalik's Ethereum work on scaling and sharding chains, like that seems-- there seems to be a lot more theoretical difficulty there. I feel like anonymizing, like we have some pretty good ideas of what, about what to do, and- You know, I, I'm a big fan of Zcash, for example. I think they're, they're doing great at like steadily increasing their, their anonymity. So I think that it's very solvable and will be solved in the next few years." }, { "speaker": "stephan", "time": "48:40", "start": 2920.09, "text": "Okay, excellent. Alright, so, listeners, if you want to find Patri, you can find him online. His website is patri friedman dot com and his Twitter account is pat, is at patricimo. have you got any final or closing thoughts that you'd like the listeners to, you know, to know or anywhere else that you'd like them to find you?" }, { "speaker": "patri_friedman", "time": "49:02", "start": 2941.74, "text": "I'd say that, that Twitter is the best place right now, and I think that I think this is a really exciting time to, to be an agorist or to be, a believer in, in sound money or to be interested in better ways of transacting. you know, we have to be careful not to let our excitement get ahead of us in terms of how we spend our time and money on projects that aren't, that aren't ready yet. But, you know, like what an exciting time to live, like where the world is being-- It's, it's kind of like, kind of like, like being a geek in the '90s, But they weren't, they weren't cool yet. They weren't making people billions of dollars and changing the world. And I watched, you know, over the course of the nineties and two thousands, suddenly this, this set of skills that had made you like unpopular as a kid is like transforming the world and is like, is, is, is the power, that gets you, gets you money and gets you to run businesses. And, you know, it seems like we could be having something similar happen now for people who understand monetary economics and Decentralized, trustless systems, which is, you know, which is us, which is anarcho-capitalists and agorists, if, you know, if crypto networks, if markets eat the world, then that means that the world's economic systems are gonna be reshaped, into a form that's much more like the stuff we study, that's more like what we like and what we're into, and that's, you know, gonna-- it's already has made, a number of, Sound Money believers, really, really rich, and if it continues to grow, it's gonna, it's gonna keep doing that. And, you know, man, that's, that's exciting, right? When I was a kid, I wouldn't have dreamed of a world where, like, when I'm fifty years old, it's like the computer nerds and the Austrians who are rich and powerful because of how the world went. Like, I would never have dreamed of that, but like, it's happening. Like, the first part's already happened, the second part's starting to happen." }, { "speaker": "stephan", "time": "51:08", "start": 3067.67, "text": "Yeah, it is a fascinating time to be alive. Alright, well, thank you very much. It's been a very fascinating conversation, Patri. Thanks for coming on." }, { "speaker": "patri_friedman", "time": "51:14", "start": 3074.41, "text": "Yeah, thanks for having me." }, { "speaker": "stephan", "time": "51:16", "start": 3075.73, "text": "So that was my conversation with Patri Friedman. Obviously, there are some areas where, if you're a regular listener of mine, you'll know I disagreed on certain points. Obviously, I'm not as into Ethereum. I take a more sound money centric view. Patri and I might disagree on things like the application of the velocity of money theory. But this comes to differences in our economic- view from a Misesian and Rothbardian influenced view versus the Friedmanite monetarist view. But my intention with this interview was not to have a debate on economics, but rather to focus on points where Patri and I agree. So despite our differences, I found Patri offers a very intelligent point of view on various things such as Bitcoin and crypto eating the world as agoric technology, this concept of law as technology and competitive law. It was interesting as well how he discussed the Friedman Night, conception of anarcho capitalism where the system is deciding on the laws. It was also a really interesting discussion on jurisdictional competition and the ability to enforce agreements against sovereigns or to influence their behavior in the direction of liberty, which I think is a novel insight. It was also really cool to get some insider perspective on what his father, David Friedman, thinks on Bitcoin and crypto, and also his late grandfather, Milton Friedman, and what Milton might have thought on Bitcoin. Anyway. Let me know your thoughts. Subscribe to the podcast by searching \"Stephan Livera Podcast\". Find my website, stephanlivera dot com, and find me on Twitter at stephanlivera. That's it from me, and speak to you next time." } ] }