Saifedean Ammous

Time Preference: The most Important Economics Lesson | Saifedean Ammous on OnceBITten

Check out The Once BITten Podcast Episode Page & Show Notes

Key Takeaways

  • “If Bitcoin succeeds, it will be like the sewage system or electricity: it’s one of the best things of our civilization but nobody will talk about it.” – Saifedean Ammous
  • Every moment of your life you make decisions that make your life better or worse. Being conscious of this helps you make better decisions
  • Understanding you are your own worst enemy and best ally is liberating – Why?
    • “Because then you can just get to work on yourself, and yourself is one thing you CAN change”
    • Ask yourself, are you delaying your long-term goals because you are busy with daily activities, rather than investing in things that matter to you in the long run?
  • Lowering one’s time preference means thinking longer term (Valuing the future over the present)
  • What’s the  lowest time preference act you can do? Become a parent (Suddenly you care about the future, even beyond your own lifespan)
  • In raising children, Saifedean emphasizes tying rewards to actions – “We can’t do what we want to do until we do what we have to do first”
  • The Internet allows you to learn things directly from anywhere
    • Saifedean utilizes this by teaching economics courses outside of mainstream academia

Intro

Why Saifedean wrote The Bitcoin Standard

  • “Bitcoin is a complicated animal, you could argue no one understands it completely” – Saifedean Ammous
    • The book puts together all his ideas and views on Bitcoin. It explains why it’s interesting and why it matters
  • The book is dedicated to his daughter, to immortalize his thoughts in writing for her, to have forever
  • Looking to the future, “If Bitcoin succeeds, it will be like the sewage system or electricity: it’s one of the best things of our civilization but nobody will talk about it.” – Saifedean Ammous
    • It will be like the plumbing system, vital but unseen. Books will be written about the world before the invention of “financial plumbing”

Everything You Do is a Trade with Your Future-Self

  • Fact: Every moment of your life you are making decisions that will make your life better or worse. You are making trade-offs with your future self
    • Be conscious of this, it helps you make better decisions, you start considering the consequences in the short-run and the long-run
  • There is liberation in understanding that you are your own worst enemy and your own worst ally – How so?
    • “Because then you can just get to work on yourself, and yourself is one thing you CAN change, you can control at least”
    • Saifedean adds: “It’s much better than demanding things from others or placing blame on others”
  • Ask yourself, are you delaying your long-term goals because you are busy with day to day activities rather than investing in things that matter to you in the long run?

The Significance of Time Preference in Austrian Economics

  • People always have a positive time preference (aka: Value the present over the future) – The question is by how much?
    • We have a time preference because we are mortal, lowering one’s time preference means thinking longer term (Valuing the future over the present)
  • Saifedean covers time preference in every economics course he teaches – For a simple reason:
    • Learning about your own internal economy (i.e. trade-offs with your future self) precedes learning about money or capital or how economy works
  • Austrian Economics perspective: Time preference determines how much people will be consuming vs saving, it sets the interest rates
    • The fact that humans choose to consume at all shows they aren’t indifferent between consumption today and tomorrow
  • Many factors shape a person’s success, but in the long run time preference plays a big role 
    • This is evident  in success stories of people working their way up against all odds and terrible circumstances

Time Preference is a Central Idea in The Bitcoin Standard

  • Sound money holds its value and lowers the time preference of society – This has significant implications:
    • People are encouraged to save and defer consumption. As a result, they develop the mind-set of spending on useful things
    • Economical and personal decision making shifts towards building for the future and people cooperating with one another
  • Bitcoin lowers peoples’ time preference as they start to appreciate the opportunity cost of giving away something that is scarce, even if it is volatile
    • People share stories of quitting addictive behaviors like smoking or drinking and putting the money into Bitcoin instead – Saifedean recalls his favorite tweet:
      • “A hangover is Satoshi’s way of reminding you that you could’ve been buying Bitcoin instead with the money that you spent on alcohol.”
  • On the other hand, fiat (government) money ruins the concept of opportunity cost – Here is why:
    • Money is cheap, interest rates are low, it’s easy to borrow
    • In addition: holding on to money means it loses value

The Lowest Time Preference Act: Parenthood

  • Suddenly you care about the future, even beyond your own lifespan
  • Children are only concerned with the present moment, growing older involves becoming aware of the future and understanding actions have consequences (In essence lowering of time preference)
  • Parenting challenge: Left to their own devices, kids will eat Twinkies and watch TV all day. But this doesn’t make for ideal development – How to get them to do other things?
    • Saifedean emphasizes tying rewards to actions –  Life isn’t just all of the wonderful treats coming to you at the press of a button
    • He constantly vocalizes the idea of “We can’t do what we want to do until we do what we have to do first”
    • Be careful to not express parent love by satisfying all of their needs because someday they will have to provide for themselves
    • Saifedean and Daniel are open for parenting tips on twitter

The Current Academic System is Flawed

  • A big issue is academia has become isolated from real life – How did we get here?
    • Success isn’t judged in a free market of ideas where everyone puts their work out in the open where people put it to use
    • Instead: rewards are assigned centrally by an institution, by the academics, who read each other’s work and decide on promotions and research grants.
  • Saifedean blames this on government financing ruining incentives
    • Instead of a meritocracy, “you have to play by the rules to be “let in” and be given the funding”
    • Result: academia has optimized away from usefulness and towards playing the game
  • Saifedean teaches outside of mainstream academia – Here is why:
    • It’s demoralizing to realize you could have spent your time producing stuff that people value and pay for
    • Being out in the market, getting feedback from consumers, is at the heart of entrepreneurship – Academia deprives you of that
  • The Internet allows you to learn things directly from anywhere, people will find ways to explore these efficiencies
    • “Ultimately, education is not about grades or certificates, education is about learning things that are useful” – Saifedean Ammous

Saifedean’s Upcoming Book

  • Saifedean is working on a new Austrian Economics textbook: Principles of Economics
  • The book is being peer reviewed while in writing – here is how:
    • The draft is posted online while its progressing, people can see it and provide feedback as it goes along
    • The benefit is changes and modifying structure don’t require much editing compared to if it was done after completing the draft
  • The Internet obsoletes the traditional writing process of writing then sending drafts and getting feedback

Additional Notes

  • If Saifedean was to pick one person to spread the message of bitcoin to their audience, it would be Lionel Messi (because of his popularity)
    • But he encourages fans of Ronaldo and Messi to send them copies of his book
    • Daniel jokes: Maybe they will shill something of more worth than hair gel

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Notes By Mostafa Khaled

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