May 19, 2020
The Argument For Decentralization | Balaji Srinivasan on The Pomp Podcast
Check out The Pomp Podcast Podcast Page
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
- Check out his website
- 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
- Especially when the state implements ridiculous measures to protect health at the expense of wealth
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”
- Balaji: “Who is the leader of the free world? I think it’s going to be Bitcoin”
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
