Bitcoin, The Great Awokening, Wolf Warrior Diplomacy and Much More | Balaji Srinivasan on The Tim Ferriss Show

Tim Ferriss is not associated or affiliated with PodcastNotes in any way. All notes are independently created by PodcastNotes and do not imply any sponsorship or endorsement by, or affiliation with, Mr. Ferriss.

Key Takeaways

  • The US is no longer a hyperpower state that dominates everyone
  • What is rising: Technology, China, and India
    • What is falling: GDP of western countries, US military, and internal cohesion
  • Why did China hinder the bitcoin network?
    • They want root control over everything – “Made in China”
  • China is re-asserting control via right-wing nationalism
    • It is similar to what is happening in the US with “The Great Awokening” – a genuine shift in culture
  • The energy behind the filmmaking in China reveals the aggressive style of diplomacy under Xi Jinping’s administration
    • What happens if the US loses to China in a military conflict?
    • One of the worst scenarios is a reenactment of Executive Order 6102 by Franklin D. Roosevelt 
  • The dominant power centers of the 21st century will revolve around woke capital (NYT), communist capital (CCP), and crypto capital (BTC)
  • Balaji believes that the future business model of governments will be subscription and inflation
  • Once crypto wins over the world it will be “every asset versus every asset”
    • The DeFi matrix is essentially all financial interactions that we think of
  • Centralization vs decentralization (fiat vs. Bitcoin) – the source of future civil conflict
  • Balaji is not a full-fledged Bitcoin maximalist but he believes nothing competes with Bitcoin in the context of economics

Key Books and Articles Mentioned

Intro

  • Balaji Srinivasan (@balajis), is an angel investor, entrepreneur, and the former CTO of Coinbase
    • Check out Balaji’s website
    • Check out these Podcast Notes from Balaji’s last appearance on the Tim Ferriss Podcast
  • This is a chat between Balaji “Have you heard about…” Srinivasan and Tim “No, I have not” Ferriss
    • Balaji likes to talk. A lot. And Tim knows when to listen because Balaji shares a lot of knowledge about the current state of cryptocurrency, US relationship with China, decentralization, and possible sci-fi scenarios for the future.
    • Even though Balaji takes the front seat in this episode, Tim’s great questions and amusing remarks about his own lack of knowledge of the subject make this 4-hour talk effortless and dynamic
  • Host – Tim Ferriss (@tferriss)

The Decline of State Capacity

  • Following the fall of the Soviet Union in 1991, the US was the hyperpower
    • They could win everywhere without fighting, they dominated in every domain
  • Incompetent administration over the last three decades has blown the biggest lead in human history. 
    • Covid 19 was a military defeat for the US 
    • Billions of dollars have been allotted for biodefense in the last two decades
    • The war in Afghanistan did not end on the terms that they wanted
  • “Now rather than winning everywhere without fighting, it fights everywhere without winning.”Balaji Srinivasan

Why Covid-19 is a Permanent Shock

  • Covid-19 brought a change of cultural convention in regards to business
    • Before covid-19, if you were serious about making a deal it had to be in person
  • Today, people can reject in-person conferences, meetings because there is almost always a remote option
    • If there is no remote option, people take different jobs
    • Even post-vaccination, it remains the same
  • “Software is Reorganizing the World” – Balaji’s essay about how software made mass migrations possible

The Forces that Guide Balaji’s Current Worldview

  • “Asia isn’t the future, it’s present.”Balaji Srinivasan
  • What is rising? 
    • Technology: drones, biomedicine, robotics, artificial intelligence, crypto (the new backend of all software), etc.
    • China and India (global trade, number of smartphones, the number of people using cryptocurrency)
  • What is falling?
    • GDP of western countries 
    • US and EU percent of global GDP (It has been dropping for the last 40 years)
    • US military power
    • Internal US cohesion
    • The European percentage of the world (It was much higher in the early 1900s)

China’s Love/Hate Relationship with Cryptocurrency

  • Why did China hinder the bitcoin network?
    • They want root over everything – “Made in China”
    • If it’s not made in China, they look at it with suspicion
    • That is why they were very early on social media bans i.e. The Golden Shield Project (“the great firewall”)
    • Xi Jinping rejected Facebook’s attempt to enter China 
    • They set up similar social networks that China had root access to
  • The doctrine of internet sovereignty
    • The state creates network boundaries and uses law enforcement to exert control
    • They are doing customs for internet “packets”
  • The rationale behind the great firewall:
    • If the nation-state is allowed to interdict and control physical packets that cross their border, why not do the same with the internet?
  • For more information, check out “The Triumph and Terror of Wang Huning”
    • Wang Huning was behind the political ideologies of three Chinese administrations (Jiang, Hu, and Jinping)
    • The article exposes China’s rationale and needs for state control
    • There has been a tension between total state control and capitalism (decentralization of control)
    • They are re-asserting control via right-wing nationalism
  • It is similar to what is happening in the US with “The Great Awokening” – a genuine shift in culture
    • In the past, China did not have the power to disagree on the world stage
    • With Xi Jinping, this is no longer the case

Wolf Warrior 2 Diplomacy

  • What is wolf warrior diplomacy?
    • The term “wolf warrior” references the 2017 Chinese action film called Wolf Warrior 2
    • This Ramboesque action film is basically China in the role of the US, and the US in the role of the USSR
    • It’s what the US had been doing for a long time
  • The energy behind the filmmaking reveals the aggressive style of diplomacy under Xi Jinping’s administration
    • Another film example is The Battle at Lake Changjin, the highest-grossing film of 2021
    • The film portrays the defeat of the US military by the Chinese
  • In China, you get canceled for insufficient nationalism
    • China has changed; it is different than what it was during the internationalist capitalism of the Jiang and Hu era
    • Hide your strength and bide your time was their philosophy

Will the US lose?

  • The US lost against Covid-19 and in Afghanistan, will they lose against China?
  • War with China Over Taiwan
    • From Taiwan’s view, it’s debatable as to whether the US would fight
    • Wars happen when things are questionable and when there is a miscalculation
    • Two possible outcomes according to Balaji are: referendum or military war
  • The US likely loses if it gets involved in military war
    • Read Killchain by Christian Brose for additional information on this subject
    • Brose says: “Over the past decade in US war games against China, the US has a nearly perfect record. We have lost almost every single time.”
    • This is known in the department of defense, but not so for the US public and congress
  • China will use asymmetric strategy: usage of aerial denial weapons forces US navy to be offshore with no ability to call for reinforcements
  • What has happened recently in India with regards to crypto and where is it going?
    • Indian crypto exploded over the last 6 months
    • Now that China is out of crypto, it left the door open for others
    • In the future, India can be like an intermediator between American anarchy and Chinese control

Who Will Control the Dominant Power Centers of the 21st Century?

  • It will revolve around woke capital (NYT), communist capital (CCP), and crypto capital (BTC)
    • Communist Capital (CCP): you must submit
    • Woke Capital (NYT): you must sympathize
    • Crypto Capital (BTC): you must be sovereign
  • Communist Capital is obvious
    • Bow your head
    • Submit to the Party
  • Woke Capital is less obvious
    • Apologize because you are powerful
    • Because you are white/male/cisgender
  • Crypto Capital is holding your head up high
  • Balaji calls for a fourth intermediate – the decentralized center
    • The decentralized center is what works for everyone
    • Netherlands, Singapore, and Dubai are good examples of functional societies that have different trade-offs of NYT, CCP, and BTC

Future predictions for China and America

  • Where is the US progressing for the next three to five decades?
    • One possible scenario: Chinese control and American anarchy
    • Chinese victory (referendum or military victory) over Taiwan 
  • What happens if the US loses to China in a military conflict?
    • “Fiat money is backed by men with guns.”Joe Weisenthal
    • It would prove that the US no longer dominates all other states
    • There would be no way to downplay the loss like in the case of Covid-19 or Afghanistan
  • Potential economic markdown
    • One of the worst scenarios is a reenactment of Executive Order 6102 by Franklin D. Roosevelt 
    • FDR confiscated all the gold in the US and made it be exchanged at a certain price
    • There is a lot of money printing happening right now and Executive Order 6102 and Bitcoin seizure is a possible future outcome
  • “If inflation is rampant, and they try to seize the BTC that I think could be the match for the next kind of wave of conflict.”Balaji Srinivasan

Subscription and Inflation: the New Business Models of Governments

  • Balaji believes that the future business model of governments will be subscription and inflation
  • How does the subscription model work?
    • Subscription will be based on a SaaS type service
    • People pay for a subscription and gain access to an identity; passport, driver’s license, etc.
    • Examples are Singpass in Singapore, X-Road in Estonia
    • It’s not just a revenue model, it’s also a crime and punishment model
    • The subscription model provides huge control to the root operator of the state
    • It is important to have the right to exit, to preserve Bitcoin and crypto
  • The rationale behind the inflation model:
    • Prices come from the interaction of supply and demand
    • Supply and demand are now tangible
    • Bitcoin is short-term volatile but shows long-term relatively stable
    • It is the opposite of the US dollar
    • This is where inflation comes from (the smart version of fiat)
    • Fiat is flat today, but decreasing in the long-term

How Does the DeFi Matrix Relate to Inflation and Subscription?

  • What is the DeFi Matrix?
    • Once crypto wins over the world it will be “every asset versus every asset”
    • The DeFi matrix is essentially all financial interactions that we think of
  • Digital wallets can ultimately hold anything (fiat, Ethereum, NFTs, etc.) not just Bitcoin
    • Things that never had a price (an hour of your time, JPG, byte on your Hard disk) now become priceable
    • “You have this gigantic table and every existing exchange today, a crypto exchange, a stock exchange, a foreign exchange, foreign currency exchange, all of them can be considered sub-matrices of these like a crypto exchange is fiat currencies, cryptocurrencies versus each other.”Balaji Srinivasan
  • Everything is a sub-matrice of the DeFi matrix, and it’s getting re-priced all the time

Centralisation VS Decentralisation

  • Deplatforming, unbanking, canceling, etc. become means of digital warfare
    • There is no physicality, only words, and economics. And if there is physicality, it’s secondary
    • But this is not the coming conflict according to Balaji, it’s centralization vs decentralization – fiat vs. Bitcoin
    • This is the new iteration of the Democrat vs Republican
  • People will switch sides; patriot Republicans will support the government
    • Many of the tech CEO’s will side with decentralization
    • “I think Bitcoin itself will be the main flash in the conflict, and crypto is sort of — Bitcoin is different from crypto because maximalists want it to be different.” Balaji Srinivasan
  • There will be a significant civil conflict, but the decentralized side will prevail according to Balaji

Balaji’s Cryptocurrency Assessment (This is not investment advice!)

  • But what would Balaji do if he had no crypto and could only place one bet?
    • Balaji would choose BTC because everything else is a technology company
    • Bitcoin became an element on its own, something like gold
    • It has no leader (the founder disappeared) thus there is no feeling of submitting to anyone
  • Most bills have famous people, historic figures on them, “… and you can separate out the economic, the ideological, and the technological”Balaji Srinivasan
    • Balaji is not a full-fledged Bitcoin maximalist but he believes nothing competes with Bitcoin in the context of economics
    • Regardless of the superiority of Bitcoin, there is no 100% chance of success
    • There are possible security issues but the risk factor is relatively low

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