Balaji Srinivasan

The Argument For Decentralization | Balaji Srinivasan on The Pomp Podcast

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Key Takeaways

  • The most effective pandemic responses were executed by competent centralized states like Singapore, Taiwan, and South Korea
  • The US is likely to end up with a “Snow Crash” strategy, that is:
    • The state can’t protect people. Corporations develop their own strategies and export it to other communities
  •  “Just as our institutions have become more noticeably unreliable, they have thumped their chests harder to say how they are the truth” – Balaji Srinivasan
    • But they are not always wrong
  • Unless the virus is controlled, “end the lockdown” doesn’t fix things
  • COVID-19 will accelerate the move to mechanized robot and drone wars
  • The ability of a state to stealthily expropriate wealth by printing money comes in direct opposition to Bitcoin
    • “I think BTC ultimately wins”

Intro

  • Balaji Srinivasan (@balajis), is an angel investor and an entrepreneur, He is formerly the CTO of Coinbase and General Partner at Andreessen Horowitz
    • Read the Podcast Notes from his appearance on The Knowledge Project
  • Host – Anthony “Pomp” Pompliano (@APompliano)

How the COVID-19 Situation is Developing

  • There are 3 dimensions for the virus:
    • 1. The virus crisis
    • 2. The financial crash
    • 3. The crisis of our institutions
  • We are seeing the rise of 2 opposing tribes: Anti-virus vs Pro-freedom
  • Each has its own benefits and we need to have a healthy balance
    • For instance, a community of people caring about each other health is good
    • But it can be accompanied with government-mandated lockdowns
  • On the other hand, we will need to decentralize, encrypt, protect privacy, and have a free market
    • Especially when the state implements ridiculous measures to protect health at the expense of wealth
      • E.g. seizing masks and hand sanitizers, imposing price controls, and banning people or companies from trading

Where Do We Go From Here?

  • Countries execute different responses, regardless of political views or ideological backgrounds
    • Balaji sees 3 non-exclusive possible scenarios to how we proceed, explained below
  • Snow Crash: the state can’t protect people. Corporations develop their own strategies and export it to other communities
    • Corporate, individual, and community imposed order control the virus
  • Ready Player One: Government prints a monthly payment for everybody to stay home, the implications:
    • Deflation in things people don’t want anymore (e.g. concerts, events, etc.)
    • Inflation for in demand goods – (e.g. masks, sanitizers, consumer staples, food, etc.)
      • Supply chains can’t cope, resulting in soaring prices and government price controls
    • Printed money will be useful for basic payments (rent, food, internet, etc.)
      • Dark markets with crypto currencies for everything else
    • Internet companies flourish because of low marginal cost to deliver another product
  • Naked Sun: Folks move over to rural areas and have natural social distancing and socialize over the internet

Ranking the Responses

  • The most effective pandemic responses were executed by competent centralized states like Singapore, Taiwan, and South Korea
  • In the absence of a competent state, a decentralized snow crash response comes in a distant second place
    • Balaji thinks the US is likely to end up with a “snow crash” strategy
  • Worse than useless: An incompetent centralized state that gets in the way of an effective response
    • For instance: FDA not approving tests, or a government having “Infinite” lockdown with no plan

On Copying China

  • Contrary to the popular misconception that China is a third world country, it’s actually a sophisticated place
  • The problem arises when copying without admitting or understanding how things work
    • The result is a lumbering state miserably failing at following an agile state
    • For instance, China’s quarantine hospitals had negative pressure rooms, tele-medicine, drone delivery bots, mobile CT scanners, and remote operation capability
    • In short: a technological feat where all the leverage of technology and policy were applied at the same time
  • “There is no way that China in 1968 would have out executed America 1968, but China 2020 has out executed America 2020” – Balaji Srinivasan

Balancing Between Nationalism and Rationalism

  • Rationalism provides growth, nationalism provides tribalism
    • In the absence of growth, people fight over a zero-sum pie, leading to nationalist socialism
  • It’s important to not have excessively nationalistic blinds on
    • We should be understanding why we are behind, and working on getting ahead
    • Lessons can be learned from studying how China and India became rich
  • Excessive rationalism is less pathological but it’s open to hostile takeover – you don’t survive either
  • The world will have green zones and red zones
    • A green zone has the virus under control confirmed by comprehensive testing, with the red zone everywhere else
    • Balaji’s thesis: Green zones will have better wealth and health and less state presence
      • Setting society in a balanced new normal, rather than a crash
    • On the other hand, red zones will have a positive feedback loop of economic and viral destruction. Leading to more unrest (Like Michigan armed protests)

Excessive Nationalism is Evident in Crypto

  • For instance, saying everything is a shitcoin
    • Bitcoiners should know about Z-cash and Zero knowledge privacy
  • That said, excessive nationalism helps fight off price drops

COVID-19 Rendered Militaries Ineffective

  • Moreover, the virus turns soldiers into weapons that infect each other
  • COVID-19 may end the era of human infantry and staffed weapons (ships, tanks, etc.)
    • It will accelerate the move to mechanized robot and drone wars

Questioning the Accuracy of COVID-19 Data

  • Directional accuracy is useful in the absence of exact accuracy
    • Wuhan, Italy, and NYC were particularly high signal events
    • “Just the flu” wouldn’t have brought Wuhan to its knees in 53 days
  • We have good mortality stats, but not good morbidity stats
    • Think diminished lung function or people still convalescent
  • “Just as our institutions have become more noticeably unreliable, they have thumped their chests harder to say how they are the truth” – Balaji Srinivasan
    • But they are not always wrong

Citizens Have Lost Trust in Institutions

  • The best outcome is a democratic country controlling the virus without being a police state
    • “It is possible, but the US hasn’t achieved it”
  • People underestimate what it takes to keep society running
    • For instance, anything involving a large gathering is premised on the utility of public health
    • Unless the virus is controlled, “end the lockdown” doesn’t fix things
  • Many businesses will digitize and become delivery only

The Title Fight of the 2020s: MMT vs BTC

  • Modern Monetary Theory advocates for the state to print money without constraint to pay for anything
    • And if inflation happens, taxes can be raised to pull the money back out of the economy
    • It’s the language of the unlimited government, one that can shut down businesses, enforce lock downs, put price controls, ban flights, print money
  • This is a naïve view – here is why:
    • People will resist higher taxes in a time of inflation, when their consumption is already low
    • The economy is adversarial and people will respond to incentives
      • Possibly, by moving their money into Bitcoin
  • The ability of a state to stealthily expropriate wealth by printing money comes in direct opposition to Bitcoin – Can they coexist?
    • Balaji: “Who is the leader of the free world? I think it’s going to be Bitcoin”
      • “I think BTC ultimately wins”

Additional Notes

  • “The point of the non-aggression principle is not to go around saying FU to everybody, the point is to maintain a civilized society” – Balaji Srinivasan
  • Time flies when you take time off
    • Unless you go after things with same discipline, you can easily lose a week or two
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Notes By Mostafa Khaled

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