Knut Svanholm, Bitcoin writer joins me on the show to chat about why you are not prepared for hyperbitcoinisation, and various concepts such as adoption, what it might look like, and the infinity meme. Is the infinity meme wrong? I believe it is, but listen in to Knut and I discussing it!
Links:
- Twitter: @knutsvanholm
- Article: You Are Not Prepared – Citadel 21
Sponsors:
- Swan Bitcoin
- Hodl Hodl Lend
- Compass Mining
- Unchained Capital (code LIVERA)
- CypherSafe (code LIVERA)
- CoinKite.com (code LIVERA)
Stephan Livera links:
- Show notes and website
- Follow me on Twitter @stephanlivera
- Subscribe to the podcast
- Patreon @stephanlivera
Podcast Transcript:
Stephan Livera:
Knut, welcome to the show.
Knut Svanholm:
Thank you, Stephan. I’ve been wanting to speak to you for a while.
Stephan Livera:
Yeah. It has been one of those ones I’ve been trying to make it happen for a little while, but just things have coming up and now I’m in Sri Lanka and the time came and I was excited to get to chat with you about Bitcoin and various aspects of it. And of course, we’ll have to get into this infinity over 21 million meme at some point as well, which I’m sure we’ll get to that later. Let’s just start with a little bit about you. I know you’ve been, obviously you’re a writer in the Bitcoin space. You’re a speaker and you’ve also been interested in Austrian economics as well. So why don’t we start there?
Knut Svanholm:
Yeah, we have a lot in common. Like you’re a singer too. I used to be a singer or I am a singer in a way, I guess you don’t stop being a singer and thinking of Sri Lanka. My parents always told me I was conceived there. They went on a honeymoon to Sri Lanka in 1976 and I’m libertarian leaning and argue from first principles and don’t believe that anyone should have a right to more violence than anyone else, just as you. And I’ve been interested in Austrian economics and Bitcoin for quite awhile. So we’re almost the same person.
Stephan Livera:
Did you start with Austrian economics before you got into Bitcoin? Were you like that or were you the other way around?
Knut Svanholm:
I think I was austro-curious maybe before Bitcoin, but before Bitcoin, I didn’t have a coherent picture of what was wrong with the world and why I knew that something was wrong, but I couldn’t really get it through my head. Bitcoin came along and things started to make more sense and started to become a bit more depressing, of course. And then I read the Bitcoin standard almost at the same time as I was writing my book and that got me going quite a bit as well. And when I finally read Human Action, that’s like the nail on the head. That’s like the most life-changing book I’ve ever read, I think, and the best book I ever read. So if you haven’t read the human action by Ludwig von Mises, do so. It only takes about 38 hours.
Stephan Livera:
Yeah. That’s I mean, people throw a lot of shade about these so-called thousand page tomes, but really once you’ve gone through it makes a huge difference. And look for people who maybe they’re not ready to go through the whatever 900 pages or however much it is. If you start with something like Bob Murphy’s book Choice, which is like a modern short form version of that, of course, the best is to go and actually read human action yourself as well. And that’s something I often recommend for people who are, maybe they just need something that can stepping stone into the pathway of a reading about these things, because I think it really is, there are a lot of things that the Austrians got right. And it’s only the Austrians who can explain that coherently.
Knut Svanholm:
Exactly. And I think also anatomy of the state by Rothbard is a short, concise book that helps a lot that can help.
Stephan Livera:
Absolutely. Yeah. Yeah. And so it’s, there’s a range of different, I guess, topics and themes that you can draw from. And so in the Austrian canon, if you will, there’s the books that are more economics based. And so, I mean, Austrian economics is meant to be wert frei, it’s meant to be value free. It’s meant to just be, it’s a statement of economics, but then there is also the more political philosophy elements of it. And that’s the more libertarian aspects of it, where there’s the Austrian economics aspects of it. And sometimes people can mesh them without understanding where they’re different and where they actually mixed together. And so, but I can understand why, because it’s often many of the same people, right? It’s the same people making these different arguments and they tend to hold both views that they are an Austrian in terms of how they view economics, but they are also a libertarian in terms of how they view political philosophy and rights. And the question of, are rights, do they, do we, are we given the right to by the state or do they exist antecedent or do they exist outside of that? Or perhaps it’s a natural rights, natural law approach, or other approaches that libertarians take.
Knut Svanholm:
Yup. I had a conversation with Robert Breedlove about this and he came up with a brilliant sentence. That praxeology is to the subjective what mathematics is to the object. That’s a good way of framing it. I think because praxeology is the great missing school subject, which like arguing from first principles explains why people do stuff at all and why it’s best to let people do stuff nonviolently with each other. That’s the best way of like for human progress in general and for maximizing human wellbeing, if you will.
Stephan Livera:
Right. Yeah. And I can understand where people get confused because you might be thinking like, as an example, it’s possible to be an Austrian economist who is not a libertarian. Right. You might, theoretically again, it’s unlikely, but you might think that this is the most efficient way, but you might not necessarily take the libertarian aspect of it. But yeah. Look in practice to the point, they tend to be the same person. Right.
Knut Svanholm:
It makes me think of a a famous moment in Ludwig von Mises life where he was having a meeting in a fancy hotel with all these other thinkers, like Milton Friedman and Murray Rothbard and everyone. And he caught everyone and called them all you’re all socialists and ran out of the room because he felt that they didn’t really understand him by the way. I was listening to your debate with Peter McCormack about libertarianism and Hey, yeah, I enjoyed it a lot, but I was frustrated by one thing. And that is how when arguing about, and this happens all the time when you argue about a free market versus an interventionist market or like another political system, we often forget that a truly free market has never really existed. That’s the thing.
Knut Svanholm:
People say that wasn’t real communism, but the thing is that wasn’t really capitalism, real capitalism hasn’t been tried yet because before Bitcoin, we have never had a truly sound money and not on a global scale. And that changes the playing field enormously. So it’s like when I argue for libertarian principles. So I always try to push the Bitcoin narrative into the equation, because without that, it can’t really work in reality in my view, because every other currency will always be inflationary because no human can resist the temptation of diluting the money supply.
Stephan Livera:
Right. Yeah. And I’m with you there. I think it’s just, it’s hard for us to make that argument to people because we’re rightly having to point out to them, Hey, let’s go live in this world. That’s never, it’s never happened before. Right. And so,
Knut Svanholm:
No, no, it’s very hard. There’s nothing to compare it to.
Stephan Livera:
And that’s where I think in practice, you end up having to point to real-world examples. And even if they’re imperfect, you can sort of point to that and say, oh, look, see, notice how these aspects of this society that existed before, even if it’s imperfect, that could show an example of why a free market would do something better than say the statist approach. Right. I mean…
Knut Svanholm:
Yeah. It was not meant as a critique of your arguments because I do agree with them. And I do agree that you have to draw examples from real life and like from what actually happened, but what is so hard to explain is that we’re approaching a completely new set of rules and that has never been tried before. And that will truly show people the power of the free market, because I believe Bitcoin will benefit everyone. The more people that go on a Bitcoin standard and like hyperbitcoinize themselves, the better it is for not only the Bitcoin HODLers, but for everyone, because the mechanisms that it allows for, will make production costs and transportation costs drop so rapidly that it benefits absolutely. Everyone, even those that never even heard of Bitcoin.
Stephan Livera:
Yeah. I’m with you there. And I think this is one of those ones where it’s difficult to explain because it’s like we’ve lived all of our lives under a Fiat inflationary world where the costs are rising over time. And so what does it mean to live in a world where we’re living in growth deflation, right. And so someone like Jeff Booth does a good job at helping put that in like a pop economics way for people who maybe if they haven’t gone and read, Mises and Rothbard and Guido Hulsmann, and Phillip Bagus and other people reading the price of tomorrow, it might give them a clue as to what kind of world that might be like. Because even for those of us who are into Austrian economics, it could be hard to visualize really what would that world look like? Because in some ways to think about what would be to have like sustained prices falling is, is quite a weird, and mind-bending bending idea in that way.
Knut Svanholm:
I think it’s impossible for human beings in general. Like people have such a hard time understanding exponentials we’re wired to think in linear terms and like, we’re so used to the fiat system. What that is like we’re used to being robbed every second of every day of something like a small theft of our belongings and our time it’s happening every second of every day to everyone. And like removing that from the equation will like not only relieve people of that particular bad thing that’s happening to them, but also it will like make all this mis-allocations of resources go, go away more rapidly, like, because what interventionists economies ultimately lead to is the misallocation of resources. Resources don’t end up where people actually want them to end up, but they end up where some bureaucrats wanted them and that like hampers the entire machine, because like the free markets — a sound money global free market economy. That’s like the only defense we as humans have against the rise of AI. This is our artificial intelligence, if you want the or like our collective intelligence we can only utilize all of our brain powers — combined power via the free market. That’s the weapon we have against the robots. Does that make sense?
Stephan Livera:
Although, I mean, you could say that the more the free market might bring about a more AI might bring about a lot more use of AI. And I think this is one of those things where even absolutely know that could, that could be about even just setting Bitcoin aside. Right. That could just be an example just there where, and I think this is also another thing where we have to where we are, I’m often careful to explain things because I’m often trying to teach people. Don’t think of it. Like, it’s like some utopian thing it’s better, but it’s not perfect, and yeah. Bad things could still and will still happen under the total free market world right.
Knut Svanholm:
Absolutely. But then again, Good things beyond our imagination could also happen. Like we don’t know how powerful it could be, because we’ve never experienced it before. We’ve seen like similar experiments, like the rise and Hong Kong, for instance, the last 50 years before the police state took it away again. But what happened during those 50 years was like progress that no human could have foreseen and there’s the potential, I try to be an optimist. So I think there are rational arguments for being optimistic, even in in the world we live in because things turn out often turn out better than we believe that they will also, we shouldn’t forget that, especially not in these dark police state times,
Stephan Livera:
That’s right with governments, some governments have literally never been more powerful than they are now, right. In terms of their surveillance capability and their capability to control the way people think in some ways, now they’re able to control a lot of things about how the masses think about things, the messaging they receive. It is very confronting in that way. But of course, I also do believe Bitcoin is going to fix a lot of these things, but it’s about how do we get to that longer term vision, because in that short and medium term, we still have to make it there. And so there’s still going to be all sorts of drama on the way to get there.
Knut Svanholm:
It is problematic, isn’t it? And I have to tell you a story about when I flew home from Mexico, I was in Mexico about a month ago at the Bitcoin Standard conference. And when I flew home, like the Southeast Asians were wearing masks on, in airports, like 10 years ago. Right. So they sort of like started the trend and made it like after a while you didn’t notice it anymore, it became a sort of a natural thing. And then overnight the entire world wear masks when they fly. And when I flew back, I saw three Southeast Asian guys in full hazmat suits on the plane
Stephan Livera:
Is that next.
Knut Svanholm:
And they thought like, like, what are you doing guys? Didn’t you learn anything from the mask thing? Are you really going to push things this far? Like, but I don’t know even know if their ethnicity had something to do with it. That’s not the point, but I mean, of course not. Why are you trying to push the narrative even further in that direction. Can’t you see what’s happening here?
Stephan Livera:
Some people are panicked, right? Yeah. They are. People are just that panicked. Yeah. They’re so scared. And that’s the real shame for a lot of that. A lot of this stuff is just, they have been put into such a ridiculous state of hysteria that they will do anything. And so that also is an interesting question, because it’s like, where do we, where do you see that going longer term, or at least in the short to medium term for freedom and liberties in the world today? Now, part of the answer I think, is going overseas, getting to other countries and other jurisdictions and having that competition that hopefully that will enable people who want freedom, Bitcoiners, typically, and others who want that freedom to try to get some of that. But I’m wondering, do you have any thoughts on where that’s going?
Knut Svanholm:
Yeah, I think it might go two different ways because there are different countries have had very different approaches to this Australia and Sweden are two very good examples of that. And I think history will evaluate like the future will evaluate what happened historically. And at some point I believe the mask, all these mask mandates and everything, they might actually go away someday because people are so fed up with it and there are protests everywhere. So there is a lot of pressure on the politicians to stop the madness. Also, we shouldn’t forget that. So it might end naturally I know most Bitcoiners, many Bitcoiners think that we’re heading towards more and more police state things and more and more dystopian. And that might also happen. And if that happens, that will like push things like Bitcoin and alternative ways of life further push those things even faster into the future.
Knut Svanholm:
Like flag theory, for instance more and more people will get a second passport and try to bypass things by doing Bitcoin and by getting on Tor and like using, not using the main social media platforms anymore, but alternative ones and everything. So there’s a perk to things getting darker as well, because it fuels the fire of those of us that want to get out of it. But then again, I think governments can go too far and there’s like a signal from the people there too. So that might be true though, for instance, like the next election in Canada, maybe he gets voted out of office and you get someone that is against all these mandates and all of a sudden Canada is back to sort of normal again, I don’t know who knows. Right? It’s hard to predict the future.
Stephan Livera:
Yeah. I mean, one challenge is that some of these government programs once put in, they don’t get taken away or as the famous Milton Friedman says, nothing is as temporary, as feminine as a temporary government program, or even, war on terror, war on drugs, war on, you name it, how long these things have gone, but that’s one side. And then the other counterbalancing side is the competitive pressure because people will leave if things get really bad.
Knut Svanholm:
And to that point I really like, because Friedman also talks about how institutions once in place fight for their own survival first and foremost those institutions that don’t, they don’t survive very long. It’s an evolutionary process. so bureaucrats tend to find ways of motivating their own existence. And this is a very bad thing of course, but then again, there are some counter examples in history. Like the fall of the Soviet union is one of my favorites. It just dissipated and disappeared basically. East Germany just disappeared. What happened over time with east Germany and west Germany though, is that some of the west Germans heard the stories from east Germany. Oh, like you have to pay for kindergarten here and we never had to pay for kindergarten. You have to pay for healthcare.
Knut Svanholm:
We never had to pay for healthcare. So the west Germans started to vote for socialist policies because they forgot why they shouldn’t in the first place. So in the long run the ironic thing might be that the fall of the Berlin wall makes Germany more and more socialist again. And so there’s a balance there somewhere, I think. And was it Reagan that said that we’re only one generation away from losing our freedoms at all times. And I believe that to be very true that if we want to live in free states or semi free states, at least where you can at least express your opinion, you need to fight for it. Every generation. It’s a good thing to teach your kids.
Stephan Livera:
Yeah. And I think it also does come into the whole conversation around homeschooling, unschooling and things this way of trying to educate the next generation without having so much influence from the statists obviously who want to push things in a certain direction. And then those of us who actually want freedom have to push back the other way and actually do something about it, right?
Knut Svanholm:
Yeah. We should, at least if you don’t homeschool your kids at least tell them what’s wrong with the schooling system. Like at least give them a clue to why they shouldn’t listen to everything the teacher says and why they should question everything because that’s the basis of it. Knowledge comes from first and foremost from curiosity. And if you’re not curious, you don’t get anywhere.
Stephan Livera:
Yeah. There’s a lot of things in this whole theme of preparing for a hyperbitcoinized world and trying to either, either to prepare for it or to try and ready yourself so that you’re well-equipped to make it there right. To make it through that short and medium term. And so I think you’ve, you’ve written on this kind of topic as well. I think you’ve written a piece called you are not prepared or you are not ready. Yeah.
Knut Svanholm:
So quite a while back now, but there’s something to that. Yeah.
Stephan Livera:
I guess if you had to summarize that for people who are, maybe they are more of a newcoiner they’re not really as familiar, what’s this idea, why are they not ready?
Knut Svanholm:
Because Bitcoin’s value increases on average by 200% per year. Right now it looks like the curve, the long term curve is sort of leveling off, but that might not be the case. It might be an exponential curve that has the shape of a weird S like this, or like a J shape or whatever, because one, so we don’t know how much Bitcoin’s price will go up over time, but like simple game theory. And the fact that it’s supply is limited, should tell us something about that. The price will go up over time. And as I’ve stated on many other pods, and then in a video and an article is like, I believe network technologies almost always have an S-shaped adoption curve if they’re successful. Right? So there’s like a Heinz ketchup moment where everyone starts to get on board, and then there’s a steep rise and it levels out again when the entire planet is on board, it happened to the TV, the radio, Facebook and Google and so on.
Knut Svanholm:
And I believe that could happen to Bitcoin too, but the price of Bitcoin will follow a very different path because there’s a lot more money and a lot more things in the world than there are people. So, once the entire human race is on board and has some Bitcoin, there’s no reason for them to stop buying Bitcoin and hyperbitcoinization, like the definition of the term is when every other monetary asset has been converted to Bitcoin. So Bitcoin is the only money we have, but it doesn’t stop there either because once we’re fully hyperbitcoinized, we live in a sound money free market global economy without interventionism. It’s a much, much better system for organizing human effort and human action across both time and space. And that in turn will make prices go down even faster than they do now.
Knut Svanholm:
And prices of production and prices of transportation, everything going down at enormous speeds. Which means that the purchasing power of a Bitcoin can only go up faster after that point. And of course, I don’t know if I’m right about this or not, but this ties into the, you are not prepared thing. Is there anyone really prepared for two more zeros at the end of the value of Bitcoin? So like what is that like $5 million per Bitcoin instead of $50,000? Is everyone really prepared for that? Because I mean, you probably 100X’ed, your dollars worth in Bitcoin. I don’t know how many Bitcoin you have. I don’t care. And but I know you’ve been in this space for a long time. So people who’ve been in the space for a long time and who’ve understood that HODLing is the best tactic, because very few people can trade better than 200% per year increase.
Knut Svanholm:
Right. so if you have a compound interest, which makes it probably at least a 100X, your initial position denominated in dollars which means if that happens again, if you put in $1 and you 100x for every dollar you put in like 2014, fast-forward to 2025, every single dollar might be worth a hundred thousand dollars. So the math is pretty simple, and I think no one is really prepared for a hundred X gains in anything. So, and when that happens, the thing people should ask themselves is like, do I really own my Bitcoin? Do I really control my private keys? What third part is, am I trusting, is this really private and all of these things, all of these questions, as you know, the more you learn about it, the more you ask yourself, these questions. And I recently quit my fiat job just because I feel I don’t have enough time for the Bitcoin stuff. I need to do this having a front row seat to the future, and I really need to grab this opportunity while I can. And not only this type of thing, but also learning more about, about how to become more self-sovereign and it’s a journey definitely worth taking, I believe, for everyone sooner or later. Right.
Stephan Livera:
I see. Yeah. So I guess I broadly agree with the idea, right. And I think many people in this space have been talking about this at the earliest I recall was someone like, say James de Angelo I think in around 2013 or 14, he was talking a similar kind of concept of like this S-curve adoption. And what would it look like on the price? And that really, as you zoom out, it just, what looks like a big, big move when as you zoom out, it’s really not that much of a big move. Although I think my estimate of where things are going to go, is it does have to taper off. It has to taper down at some point, I think. Yes, it’s true that if you were to look at the casebitcoin.com and you look at the CAGR stats like right now, the 10 year CAGR stat is something like 144%, something like that.
Stephan Livera:
But I think it will taper down over time. But in terms of longer term, where, what kind of ballpark are we talking? So as as I’m sure, Hal Finney put out that number, and I think that was in like the first week he put out that number of $10 million per coin. And I think something, let’s say ballpark, something in that 10 to $20 million per coin, US, in purchasing power terms, obviously, because by then it will have inflated a lot. I think that is totally reasonable. And yeah.
Knut Svanholm:
Do you think it will have like a 2% deflation from that point on sort of a linear thing?
Stephan Livera:
Yeah. What I would say is once we get to kind of that sort of terminal value, but you know what I’m saying, call it something in that range, it might then settle down into something like 5% per year or something like that. it might kind of, that might be the kind of longer term growth rate.
Knut Svanholm:
But what if I’m right here and it doesn’t settle down, but it speeds up?
Stephan Livera:
Because, I mean, it’s — yeah…
Knut Svanholm:
Where does it end? Because I don’t see an end point. If we have the most effective system ever produced and that’s you say it might fuel the AI revolution in ways we can’t imagine so-so so that you have a deflation rate that increases year by year. So, because I believe very few things in life are linear and stuff that has to do with value and markets and stuff. That’s never linear. Right? And if you have an absolute finite supply of Bitcoins and they are lost every day, some someone is bound to lose. The more users you have, the more people there are that lose their Bitcoin per day. So you’ll have even a shrinking supply a larger user base, a more productive society, the increasing prices all the vectors here points to there not being a point where it levels out and settles on a price
Stephan Livera:
Who knows. I think of it, like, it will reach a point where like, once we’ve hit that saturation right now, a lot of it is being driven just by just the mere fact that we’re so early, right. We are one or two percent globally.
Knut Svanholm:
Yeah, yeah. Now, we have…
Stephan Livera:
And so there’s still a huge, huge, gains to come. And I think that’s pretty uncontroversial amongst Bitcoiners, but I think the point about, would it settle down to a, something like 5% to 10%, and don’t forget that would still be an exponential growth rate, right? Just to, 5 to 10% every year compounded every year. I know, like once you’re talking about global adoption, that would be massive. Because even today countries like developed countries might be doing two or 3%, they consider it a good thing if they can do 3% in fairness, that’s kind of measuring GDP growth, which is not…
Knut Svanholm:
Yeah, GDP is a not a good measured. Yeah.
Stephan Livera:
Tike there are various Austrian critiques of the GDP metrics. So that’s a fair point. I think you and I, probably many listeners would agree with that point. But if it were to say 5% or 10% per year, and we’re getting, like, I think that would still be an incredible growth rate. But I guess it also comes down to that question of which things do you think Bitcoin eat, right. And perhaps this also gets into this whole conversation of infinity divided by 21 million, right.
Knut Svanholm:
Now, we’re getting somewhere Stephan right?
Stephan Livera:
Yeah. Because this is where I think it’s fair to say Bitcoin would eat a lot of the bond market. I think a lot of the debt markets will be gone a lot of the property as in like physical, property market. A lot of that has been blown up by the fiat bubble, so to speak, but I do see definitely a big value and a big role still to be played by equity as a concept in general, there’d still be a lot of companies who, they need to equity as their method of capitalization as their method of funding.
Knut Svanholm:
Explain equity to me. Like I’m five, please.
Stephan Livera:
Okay, so you own a share in a company. Yeah. You own a parcel of a company.
Knut Svanholm:
All right. So you have — the argument against that is that what is the most saleable good in the world? It’s money, right? By definition, money is the most saleable good in the world which should be the thing that people want the most. And that doesn’t, that include the equity as well? I mean, even if you had a company that seemed really, really good at what they do, and had really, really good project progress, wouldn’t you want like a perfect money instead, wouldn’t that be even worth even more to you considering that money would represent not only that company, but every other company in the world and their progress as well. So would the equity market shrink to zero over time in a sound money world.
Stephan Livera:
I didn’t think so, reason being eventually right as part of that tapering off that we’re talking about. So instead of, a hundred percent per year or whatever it is, it’s going to taper it down. And at some point there’ll be companies who outperforme Bitcoin. Right now it’s very hard for a company to outrun Bitcoin over the long run. Very few companies have ever even achieved this incredible feat. So call it ten, fifteen, twenty years from now in that world, it would be quite common. It would be quite commonplace for companies to outrun Bitcoin returns. And what we’re talking about here is like the growth deflationary benefit that you call you get just for simply HODLing. And there’ll be companies who are outperforming that because they, as an example, just to throw random numbers, let’s say the growth deflation number for Bitcoin is 5%, right? Your purchasing power growth is 5% and there might be companies doing 15 or 20% in that world.
Knut Svanholm:
I would even argue that in a hyperbitcoinized world, only companies that outperform Bitcoin would survive because there will be no point to running a company that wouldn’t outperform Bitcoin.
Stephan Livera:
Maybe. But I mean, I could, I could see it, like maybe there are some things that you want to a company structure that maybe somebody doesn’t have enough equity yet. And so that’s where they’re using equity capital to maybe sell a portion or a parcel for the company to be able to run their different endeavors. Right. Because it comes down to why does the firm exist? Why do we have these things? And in some cases, it’s because there’s like, there’s a genuine market need for why these things exist. It’s not that I mean, I see it like, yes, money is the most saleable commodity, but that doesn’t necessarily mean that’s the only thing you want to hold. And I’ll give you another example, even in a world where, that was fixed, people’s demand to hold money can change.
Stephan Livera:
Right? So as an example of that, let’s say there was a big natural disaster. Your desire to hold money in that time period is a lot higher, your demand to hold money versus other things is higher at that time. And so even on that basis, the relative valuation of Bitcoin would change. And so I guess for me, the way when I say, I don’t agree with the infinity over 21 million meme for me, it’s more that I think it’s think of it this way. If you think from an accounting perspective, it is quite feasible that, and I mentioned this in episode 296 with Saifedean as well as just for anyone who hasn’t heard that episode, the point would be, let’s say, just assuming for the [listeners], to make the numbers easy. Let’s say there’s 21 million Bitcoins. I view it like it’s possible for global wealth. And it’s not just possible. It’s very likely that the global net worth would be greater than 21 million. And that’s not a problem per se. It just means that the accounting valuations, if you add up all the property and all the stocks in the world, that it adds up to more than 21 million, right. As an example, it could be 60 million Bitcoins worth of global wealth, but only 21 million Bitcoins and so that’s why I disagree.
Knut Svanholm:
Yeah. I remember that. And I heard that argument and you get into some philosophical arguments here. Like if you have, if you had a society with only one, good, say one property, and it costs the entire, sum of the money supply of that society, what the total sum of that society’s worth the money and the house or just the house?
Stephan Livera:
Well, one is measured by the other, I think, because it kind of breaks down when you have just one good though.
Knut Svanholm:
Yeah. But I’ve heard the argument that it’s actually infinity divided by 42 million because it’s the worth of all the Bitcoin plus the worth of all the things. And I don’t really buy that because the Bitcoins in themselves wouldn’t have value if there was nothing of value to buy for them.
Knut Svanholm:
Right. The thing where the equation is like, it was never meant to be dissected. It was just meant to be a meme because it’s meant to be a reflection of the, that there’s no upper limit to where the price of Bitcoin could go. That’s what it’s supposed to do because mathematically the equation is useless because infinity divided by anything is infinity, right? so it makes absolutely no sense the equation. So it was never intended from my side to be anything else than like a wake-up call for people that look at this thing. It either goes to zero, which is very unlikely or it never stops growing in purchasing power. It never stops going up. It’s very binary. There’s only either it fails or it doesn’t fail, which means that it goes up over time indefinitely.
Knut Svanholm:
So that’s what the equation was supposed to mean. but I do get the critique and that there might be more things of value than there, than there is money in the world. And that ties back for me, it ties back even further to back to Austrian economics and more philosophical things. Like there are things that are more valuable to people than money could ever buy the Mona Lisa doesn’t have a price, but they offered ABBA $1 billion to go on a tour 10 years back. And they said, no, and they’re doing it now instead because they want to, not because they wanted the money because they didn’t feel they needed the money. So of course value is a subjective thing. So regardless of how you try to attach an equation to to value, you can never really measure it. And like not even with Bitcoin, it’s still like the best ruler we have for it, but it’s still incomplete because value is something you create in your head. And you know this, of course, since you’re into Austrian economics. So I think that that’s the whole misinterpretation of the whole thing. I’m trying to put an equation on something that can’t be put an equation on. The purpose of the equation was just to trigger a thought process in people’s heads. And it seems to have succeeded at that.
Stephan Livera:
Okay. Yeah. I think for me, I just see it like maybe, maybe I’m just being silly, but it, just, to me, it sends people down a weird pathway. Now I agree with you. I think in this sense, I agree with you in the sense that a lot of people have not really deeply thought through the idea of growth deflation, right. Of holding money in which it’s, we’re living in a growth deflationary world. Now that is a very astounding concept. And that is a very worthwhile thing to think about, but there’s all these other little things that come to it. and I think I’m just sort of careful that people think go barking up the wrong tree in terms of thinking like, oh, money is a measuring rod. It’s not. Oh, the, all the world’s wealth has to be contained within the amount of money that we have. It doesn’t. So those are just my, I guess my critiques of it. And so just this idea that, like, it just makes sense to me that the world’s productivity growth has to taper. Like it’s not just going to be doing like a hundred percent, but I mean, that part I could be wrong, theoretically.
Knut Svanholm:
I think this part of the rabbit hole is a better discussion for us too, because this might be where we differ, because I’m not entirely sure you might be right. It might taper off it’s likely because nothing has infinite growth, right. And everything. But what if for like the next 10,000 years, it doesn’t taper off, but let’s say you have a 5% deflation the first year, a 6% the year after that a 7% the year after, so that it’s not even just compound interest, but an increase in compound interest at –
Stephan Livera:
Kind of an accelerating rate.
Knut Svanholm:
That’s the scenario that I believe people can’t really get into their heads because it might not be likely, but it’s still possible for that to be like, maybe not for 10,000 years, but for a hundred years, it’s not that hard to think that might last for a hundred years. I mean, we’ve had inflationary currencies for like forever. So, which is like 2000 years in human thinking, which is not forever by the way. Anyway and what that has led me to my latest thoughts on this is that Bitcoin is already the best store of value ever discovered. That’s obvious once you understand it is very quickly becoming the best medium of exchange ever invented via the lightning network, people buying burgers in El Salvador for no fees at all whatsoever, instantly. But the thing I’m very unsure of is the unit of account thing. Because it, if it keeps on being volatile and if it keeps on, like in this J-shaped scenario described previously it wouldn’t really function as a unit of account, not even in a world with like five, as you say, is that tapers off with a 5% per year increase.
Knut Svanholm:
It would be very difficult to use sats as a unit of account because price we have to remember that stable prices is the fantasy. That’s the artificial thing. That’s what Fiat currencies do. They artificially increase, the prices of everything. So it looks that the prices of stable when they’re really not because all the production costs have gone down and all the transportation costs have gone down and you can’t really see how fooled you’ve been because paying for paying for anything, everything gets cheaper over time. Right. So if you have Satoshis as the unit of account, how do you live in a world where every day, which is like the inverse of a hyper inflating world, it’s a hyperbitcoinised world where we’re prices like drop faster and faster every day. So it’s impossible to plan ahead for the future because hyperinflation…
Stephan Livera:
Deflation. Yeah.
Stephan Livera:
Right? Yeah. So I guess what you’d be saying is, it would be growing so quickly that it would just be like, it would be hard to find your feet almost because things would get so cheap so quickly. You wouldn’t even know how quickly you could buy things, you know.
Knut Svanholm:
What I’m saying is that it might be easier to use a more stable, if you will, unit of account like kilowatt hours or liters of milk or whatever, something, something other than sats, because sats will, will not be stable. They can’t be — by design.
Stephan Livera:
I just see it like, it’s going to be unstable, but people are just going to use sats anyway. they’re just going to be getting very rich very quickly and their purchasing power is going to be shooting up. And here’s the other thing, there’s all these other factors that we could layer on one example, demographics. Right. I could say to you, okay. I’m Knut. So I’m in my thirties now let’s say 40 years from now, or 50 years from now, I’m towards the end of my life. Let’s say I’m in my eighties. Let’s say my average expected life expectancy, whatever, 80 something. Right. I’m not going to live forever. I might at some point want to spend more. And so even that would change the way things are, because let’s say all those years, I think, okay, look, I’m not going to live forever. I’m going to stop spending. And whether that it could be on some big grand projects to leave so that people remember my name or whatever it is. And I start spending some of my stash down, that’s an example where a lot of new coins would come into the economy and there’ll be other, old HODLers who are spending some coins or whatever
Knut Svanholm:
That’s happening right now. Like the number of wallet users with one Bitcoin or less is going up, the number of users with a hundred thousand Bitcoin or more is, is decreasing. So it is redistributing wealth, which I find very fascinating.
Stephan Livera:
Yeah. But I guess the point is the point is that could also impact the quote unquote growth deflation aspects of it. Because every time some person with a lot of coins is spending a lot of those coins and putting them back out into the economy…
Knut Svanholm:
Yeah, they’d get some liquidity, yeah.
Stephan Livera:
And it would then that could counteract against this idea of massive, massive growth, every, because they’re spending some down right.
Knut Svanholm:
In a way, well, not over time since the supply is absolutely limited.
Stephan Livera:
Right. It matters how many more people are trying to accumulate versus how many people are trying to spend at that given point in time, if lots of people are trying to spend and not as many people are trying to accumulate well, then that does depress the purchasing power.
Knut Svanholm:
Of course that’s how markets work. Right. So but I was thinking about another point. Yeah. The point of like, if you look even in El Salvador at this point in time people are not using sats as the unit of account. They’re using dollars. Everything is priced in dollars still. And because it’s easier, it’s a better unit of account at this point in time. And I think something like the dollar that like, remember that the gold standard, the only reason that gold was a good form of money was that it had an inflation rate that was reflecting the deflation rates of everything else. Right. So or like how how many more goods and services were in the — it reflected the expanding economy, the gold expanded at almost the same rate.
Knut Svanholm:
So prices denominated in gold could stay the same over long periods of time, but that’s not what Bitcoin does. Bitcoin is not gold. It’s something completely different. It’s absolutely finite, absolutely scarce. We have never encountered that before. So I think we should be humble when making predictions I should be humble making my J shaped prediction, of course, because it’s outlandish. But even like people who think it will taper off should also be humble because we don’t know if it will taper off ever. we can’t really predict that because never seen a commodity like this before. And that’s sort of ties into what I’m trying to do with everything divided by 21 million equation, like fuck with people’s brain, if you will.
Stephan Livera:
So most people are not ready. What are some of the mistakes that you see people making? And how should, how should people be thinking about it if they don’t want to make a mistake on the path to hyperbitcoinization?
Knut Svanholm:
The first thing is get off zero and that’s the most important lesson for most people, like get off zero. You shouldn’t own zero Bitcoin. You should own some Bitcoin. And then just wait. And at some point in time, those Bitcoins will be the lion’s share of your net worth, regardless of how rich you are at this point. At some point in time, those Bitcoins will be worth more than you are, or than your total net worth at this moment. And at that point, it will be much less profitable to use violence against you to get your money. It will be much more profitable to provide you with something of value to get some set Satoshis in return. And this is the beauty, the most beautiful aspect of Bitcoin. It makes violence a lot less effective on every level of society. I mean, you can threaten me and threaten my family and take all my Bitcoin and good for you. You did. But that, wasn’t all my Bitcoin, that was like a thousandth of, you can’t know how many Bitcoins I have. No one can know how many Bitcoins another person has. so it makes violence lot less effective because yeah, I don’t need to go into that any further, for sure. I think I’ve lost the question there. Was there a question there?
Stephan Livera:
What are some of the common, I guess, mistakes that you could see people making along the way, because they are not ready. And so I think in most cases it would be people, as you mentioned, firstly, not owning any Bitcoin or not HODLing any. And then the other one, obviously it will be people who are perhaps spending too quickly or spending too before they’ve let Bitcoin grow to the level that we all believe it will.
Knut Svanholm:
That’s sort of part of the learning process, right? Dabbling with shitcoinery and losing seeing, seeing five years later, how much that lunch you paid for in Bitcoin is actually worth today is a very, very good lesson. Yeah, so that comes naturally. So, but the first thing is get off zero. The second thing is don’t spend them. The third thing would be, or maybe the second thing, are they actually yours? Do you hold your own private keys? Because it’s a very important thing. And this has been a mantra among Bitcoin for forever, not your keys, not your Bitcoin. And that is still true. And then of course you get into all the other steps, like should you store them in some other ways, should you do multisig? Should you — are you technically competent enough to do this or that, should you like should you run your own full node?
Knut Svanholm:
Should you do this and that, should you coinjoin? Are you actually in the driver’s seat of this thing or not? There are so many layers to that and so much to learn. So I think no one, I mean, it’s not trustless — you have to trust a lot fewer third parties, but there’s always some trust involved. Like you have to trust hardware manufacturers, you have to trust. There’s always some trust involved and depending on where you are and on your Bitcoin HODLings, you should like adapt to that. And like, okay, I have this many Bitcoins they’re worth this and this much now. Now, I need to go to the next step. Now I need to learn how to do this and how to do that. So I hope that answers the question.
Stephan Livera:
Yeah. I think these are just lessons and things that people have to think about. And of course, I think the one tip that people could take on as well is just to feel that urgency of stacking, because when you are first new everyone, basically all of us regret, not stacking harder when we could have in the earlier, whenever your earlier days of Bitcoin, where for you or for whoever that’s a common thing. So it, again, that’s related to that idea of everyone buys Bitcoin at the price they deserve. Well, everyone gets that sense of urgency to stack sats at the front side is a as well, but that’s also probably an important lesson for people out there. If you’re a relatively new Bitcoiner, or you’re new to this, then just keep in mind that you want to have your automated stacking plan and you want to be stack stack stacking and regularly accumulating because you’ll, you’ll regret it in a year or two you’ll look back and think, oh wow. I missed out on so many sats.
Knut Svanholm:
Yeah, yeah, yeah. But I have very few regrets regarding my Bitcoin journey. Really. I lost the staggering amount of $10 on trading shitcoins, $1 in each of 10 different shitcoins. And I saw quite quickly that two of them were going up in relation to Bitcoin. The other eight were going down and I thought I can never figure out which one is going up and which one is going down. I don’t have the time or the patience or the luck necessary to do this. And like the diversifying the basket is just, it’s going to be a net loss. So that lesson was easy and it didn’t cost me that much. And I’ve been a maximalist ever since, of course, but so I have very few regrets even though I’ve given away Bitcoin, and like, I should have stacked more at some point, everyone has those thoughts, but if you’re truly grasped this thing, you, also that it’s never too late and it’s never too late to start stacking. It’s never too late to like, do something with it. And a good resource to start with would be your course on saylor.org. Right. That’s Bitcoin for beginners, yeah. 10 hours.
Stephan Livera:
Bitcoin for everybody, yeah.
Knut Svanholm:
That’s like Morpheus training Neo type course, you know.
Stephan Livera:
There’s only so much you can do.
Knut Svanholm:
By the way. There’s no way that we won’t be disappointed by the next matrix movie. Right.
Stephan Livera:
Yeah. It looks pretty bad to be honest. Hey, we’ll see. We’ll see.
Knut Svanholm:
Unless Gigi had something to do with a script, I’m sure I will at this point.
Stephan Livera:
Yeah. Yeah. Gigi is great. if Gigi was involved I’m sure it would be a fantastic movie, but unfortunately I don’t think they got Gigi involved. No, don’t worry. We’ll have to, there’ll be like Bitcoiner remakes, right. They’ll go back and take these terrible movies and remake them in good ways. So…
Knut Svanholm:
The memes will be fantastic.
Stephan Livera:
That’s right. So yeah. Look, I think that’s probably a good spot to finish up there, Knut. Let’s finish up and give the listeners if you’ve got any closing thoughts for them. And of course, where can they find you online?
Knut Svanholm:
Most of my bitcoin stuff is still on Twitter. I’m @knutsvanholm on Twitter. I also have an author page on Amazon, amazon.com/author/knutsvanholm. I have a Patreon as well. if anyone is interested in that, now that I’m trying to support myself only doing this Bitcoin philosophy stuff and well, that’s about it. Well yeah, I’ve made a bunch of videos with Yoni Appleberg and Guy Swann, and you can find them on YouTube, just just search for candidates on them. And I’ll bet you find them there or search for everything divided by 21 million. I share the playlist quite often on Twitter as well. Shilling them. And I’m very proud of them those videos.
Stephan Livera:
Well yeah, look, we can take our disagreements about the infinity meme and put them to the side but thanks very much for joining me today, Knut.
Knut Svanholm:
Yeah. I don’t think we disagree that much. I know I am looking forward to continue this discussion in real life someday, Stephan.
Stephan Livera:
Of course. Thank you!
Knut Svanholm:
Thank you!