Misir Mahmudov (Bitcoin writer and working Operations at Adaptive Capital) joins me in this episode to talk:
- How he learned about Bitcoin and Austrian Economics
- Recommendations for listeners who want to learn more
- His thesis on the closure of the gold window and impacts on inequality
- Bitcoin and Morals
- The role of Satoshi
- Kraken: http://www.kraken.com/?utm_source=podcast&utm_medium=stephanlivera
- Unchained Capital: https://www.unchained-capital.com/
SLP79 Misir Mahmudov — Bitcoin, Inequality & Morals
Stephan Livera: Misir, welcome to the show mate. It’s been a pleasure to chat with you here and there and you’re very prolific on Twitter.
Misir Mahmudov: Hey, Stephan, it’s a great honor to be here and I’m a huge fan of your podcast. I think you’re doing a great job and I hope that you continue doing this.
Stephan Livera: Well, thank you. Yeah, look… I think the listeners may not know this, but I just wanna say then thank you very much, you were actually my first Patreon supporter, so thank you very much for being the first.
Misir Mahmudov: No, I think people, if they have the chance and they are a listener, they should definitely consider that, because it’s definitely worth that small amount of money, compared relative to the value that you provide to the space.
Stephan Livera: Oh, thank you very much. Yeah, look… I think you’ve got a really great story as well. You’re quite young and you’ve got this really strong interest and knowledge around Austrian economics and, I think, the listeners would love to hear more about how you came to learn about Bitcoin and Austrian economics. So, tell us a little bit about that story.
Misir Mahmudov: Yeah, absolutely! So, in university I studied financial economics, but, unfortunately, this experience was pretty much devoid of any Austrian theory and I feel like it’s very unfortunate that not only do universities solely teach like Keynesian status quo economics, but also teach it in a way where this approach is not even questioned in any way and concepts, like fractional reserve banking are just taking for granted, as if that’s the only way it can be. So, unless you do your own research and learning outside of class, it’s unlikely that you will come to appreciate Austrian economics today. I think that’s the reality. And unlike a lot of people, frankly, I was not a gold bug. I did appreciate a lot of like libertarian tinkers, but did not really get like a strong hold of sound money back in the day, until diving into the bitcoin rabbit hole… yeah. And with regards to where I’ve learnt Austrian economics, it was it was because of bitcoin. I think, I had being rather eclectic about learning Austrian econ and I feel that it’s very difficult truly grasp the value proposition of bitcoin without ending up identifying with the Austrian school of economics. Because like strictly limited supply of bitcoins, somewhat akin to that of gold is, perhaps, the single most important property… I was thinking that I could just talk about some of the resources, that I’ve used to approach both Bitcoin and Austrian economics. I think those kind of complement each other as you dig deep into the rabbit hole.
Stephan Livera: Excellent, let’s do that!
Misir Mahmudov: So, I think the best way to go about it, is to built up your way to more demanding works. I don’t think it’s the most optimal way to dive into Human Action per se, even though it’s a great book, but if you just give it to a newbie, it’s probably not going to be very effective. I feel like today most engaging motivating way to learn about Austrian economics is through the prism of Bitcoin. And, frankly, I think that Bitcoin is the most promising and effective implementation of this discipline in the modern world. I’m not urging anyone to totally drop gold just yet, huh. But considering the many advantages that bitcoin has over it, I think it’s definitely worth everybody’s time to look into it. So, provided what I just said, I think it’s a good start to read Saifedean’s book The Bitcoin Standard overview of the history, of some of Austrian concepts, like time preference etc. and also give you a pick what bitcoin is all about and maybe also watching some videos of Andreas Antonopoulos, because we have to be honest, in the modern world, people have such a high time preference that they can not be bothered to sit down and read 300 page book, so at least until they realize this is something really huge, which it is, I believe, I mean Bitcoin and Austrian econ… so, I think watching some of his videos would definitely be a good start and then with regards to actual Austrian literature I think pretty good start would be some work by Jörg Guido Hülsmann, who I believe was a guest in your podcast, I really appreciate his work.
Stephan Livera: Yep, episode 51.
Misir Mahmudov: Everyone should listen to this one. Ethics of Money Production is very succinct, very to the point and I think it’s accessible to the most readers without any considerable amount of knowledge about economics or anything like that I think it’s a very great book. Also, one book that helped me out a lot is Theory of Money and Credit by Mises is, probably, the other book that I would recommend, not that hard, but a little bit more dense, however, still pretty accessible. mises.org is a website by Mises Institute its a great resource with a huge amount of free books on the topic and I think equivalent in the Bitcoin world would be Satoshi Nakomoto Institute by our friends Pierre Rochard and Bitstein — very valuable recourse, probably, everyone should listen to. I think some people and myself included they really enjoy listening to podcasts or like watching videos and, of course one, of the podcasts that helped me a lot was yours as well as your videos on YouTube, especially, the early ones, they give a very good introduction and maybe intermediate level of understanding of Bitcoin and Austrian econ.
Stephan Livera: Oh, thank you!
Misir Mahmudov: Also another podcast I really like is one by Jeff Deist, who I believe also was a guest on this podcast, and his podcast called a Human Action podcast. Really fun listen. I think that’s a good amount of resources that anyone even mildly interested in Bitcoin and topic should pursue. I think it’s a good way to go about it.
Stephan Livera: I like that, because it’s difficult for somebody to just give them Human Action obviously. We typically don’t recommend that for newbies, typically the newbie books that we would recommend are things like Economics in One Lesson and so on. But for a Bitcoin person, you’re right, I think they need sometimes some videos of motivational, inspirational speakers and that’s why Andreas makes a lot of sense. And what about now on the Bitcoin side, would you say it’s mostly things like the Nakomoto Institute and that was the way you kind of learnt most of that, was it mostly podcasts?
Misir Mahmudov: Yeah, I’m a person, who likes to listen and watch a lot, so I did the whole Andreas’ videos, then all different podcasts: Marty’s podcast Tales from the Crypt is another great listen. But every single one of these podcasts is different. Yours is never more than an hour, but it’s always to the point and if you want information and if you don’t have that much time, but you want to get the most important stuff, that’s very good. If you want more relaxed, more like a different atmosphere, there are the other ones. I think what Pierre and Bitstein are doing is also great, they have been a great ambassadors to Bitcoin. Twitter is definitely another resource, that I think is kind of necessary, if you’re going to be interested in Bitcoin and Austrian econ today, because all of these people are there and they are very much accessible. You can message them and, I bet most of them, most of the times are going to reply, because they are here to spread this message and do the best thing for the world.
Stephan Livera: Excellent! Actually, one other question that came to me now as well is: there are some people within Bitcoin, who don’t consider themselves Austrians, so a quick example might be someone, like Nic Carter. Do you have any thoughts on them, some of these other school of thoughts within Bitcoin?
Misir Mahmudov: Frankly, I haven’t given this topic too much thought, so I don’t know. I feel like its kind of impossible to really appreciate Bitcoin and not ending up at least appreciating Austrian economics, because it is so neglected in the modern world and the fact that it is neglected, perhaps, manifested in the different not so optimal ways that the economy has been playing out in the last 30-40 years. Even if you don’t identified as an Austrian, you should definitely consider reading the major works by the authors of this school.
Stephan Livera: Excellent! So, let’s now talk about some of the work you’ve recently been doing. I know you recently wrote a thesis around gold window closing and the impacts on inequalities. So, tell us a little bit about that.
Misir Mahmudov: Yeah, absolutely! I think one of the only opportunities that I had to learn about austrian econ in college was writing my senior thesis. The topic that I chose was how did Nixon’s cancellation of convertibility of US dollar to gold, affect the wealth inequality in the United States. Just a little intro, like despite the fact that the US economy has seen steady positive real GDP growth over the last 50 years, the wealth inequality has only been rising since the 1970s. As we all know, that is around the same time when Nixon dropped the gold standard. For example, in 1971 the wealth share of the bottom 50% was around 30% and by 2016 it is only 1.2%. In the same time the wealth share of the top 10% grew from 70% to 78%. There is a lot of numbers here, because it wasn’t empirical thesis, but I think it really shows all the things we talked about, all of these theories that we always discuss in actual data and actual real world terms. It’s important to say that closing the gold window had a series of long term implications and domino effect on the function of US economy. The most significant result of the cancellation, was the removal of natural limits on credit expansion. Gold standard, basically, acted, as a limit force on the amount of credit, that was created and resultant increase in the supply of money has enabled various things, such as surge in levels of debt, decrease private saving rates, reinforce the growth of the stock market, which stocks are mostly owned by wealthier part of the population. It also accelerated the purchasing power of the dollar, of course. So, the hypothesis of my thesis posited that the increase in the amount of total market debt, resulting from the cancellation has enabled widening of the wealth inequality in the US. The results were quite staggering, unfortunately I can not share this thesis in public just yet, because of the university policies and what not, but I’m really glad that I have the chance be on this platform to show some of these results. For example, the way I went about this thesis is by analyzing three different wealth groups: the bottom 90%, top 1% and top 0.01%. As we always said 1970s Nixon closed the gold window and what’s interesting is that by the end of 1970s we see that the wealth share of the bottom 90% has started to decrease up until today. The wealth of the top 1% and, more importantly, the wealth of top 0.01%, so like the ultra wealthy, has been increasing at even a higher rate. The R-squared values, if you want quadratic regression for this, are insanely high, they are like 95% or something around like that for the top 0.01%, so these correlations are very strong. The variable that correlated the most with wealth inequality was total credit market debt. Frankly speaking, the relationship for the bottom 90% wasn’t as strong as the other ones, but I think it makes sense, because the ultra rich are usually the ones, who benefiting the most from these policies of credit expansion. Another thing to point out is the fact that, basically, the rise of wealth of the top 10% is to a great extent due to the rise of the wealth of 1% and that is in turn due to the rise in the wealth of 0.01%, so it’s literally the ultra wealthy that are benefiting the most and bringing with them the other top 10, for example there is another great paper by Suezin Zuckman (?) that doves into this and it shows that the rate at which the wealth of the top 0.01% has been increasing since 1980s is much faster, literally the fastest, than any other group that make up the 1%, like the top 1 to 0.05 or 0.1 to… so, basically, you get the idea. Another thing that is also that I took out from working on this research paper was the fact that credit expansion really creates this flow of value into the stock market. Credit expansion is often cited in many different works, as one of the major causes of rising prices in the stock market, as the newly extended credit is often provided to corporations that buy their own stocks and etc. Even in Human Action I think Mises talks about and he is arguing about credit enables reduced market interest rate that increases the profits and the prices of the stock market. Lastly I think that it’s important to say that like Gini coefficient and the stock prices they show very strong positive correlation, which kind of just says that like the more stock prices increase, the more wealth inequality there is, because the bottom 90% they don’t own that many stocks, I believe they own only 7% of the stock market, which is the reality of things, so they have to basically rely on their salaries and they don’t enjoy any of the profits they are made by the rising stock market prices. The final result of my research showed that the wealth share of the top 1 and especially of the top 0.01% had a very strong positive relationship with the total credit market debt, when adjusting for time. That says a lot, because all of this is only possible in the world we are living today, this is not going to be possible in the world, where bitcoin is the money that we all use, so that’s something to think about for sure. And that was a little long, but… yeah.
Stephan Livera: No, it’s fantastic! I think I’m with you there. I think we see definitely do see much more credit expansion and that has driven winners and losers in this overarching kind of game of life, if you will, the people who first have that credit or in the Austrian parlance, those closest to the monetary spigot, receive the new monetary and can benefit from that to the disadvantage of latecomers or people who receive that money later.
Misir Mahmudov: The Cantillon Effect.
Stephan Livera: Yeah, exactly the Cantillon Effect. And it might be just interesting to explore whether there are any potentially benign explanations for this and why they accurate or inaccurate. So, quick example might be… well, the worlds population is expanding, we have better technology, the influence of one major CEO, for example, is rightfully much greater. They can actually influence the production for many many more, you know, big multinationals, they might be commanding even larger workforce, so I guess these of a couple ideas that I’m curious. Do you have any thoughts? Or another example might be demographics, so around sometimes some of these statistics are difficult, because there are other demographics factors changing, for example, the family size, so family size numbers might change. That’s a quick example. Do you have any thoughts on that? On whether there are benign explanations for this?
Misir Mahmudov: well, yeah. Of course we are unable to control for every variable to like prove that there is causation or anything like that. I think that there should be more research done into this, like this is a very very neglected topic. Obviously, before writing the thesis I had to do some research and, to be honest, there aren’t that many papers or works that are written wealth inequality and this relates to the monetary policies that are enacted with our economy today, so I think it really deserves more attention. It’s also fun, if you’re into bitcoin you should definitely start thinking how bitcoin, as a form of sound money, arguably better than the gold standard and what kind of impact it will have on the future economy. And how it will effect the inequality.
Stephan Livera: Yeah, I think a big factor will be the massive reduction in the amount of credits and debt based businesses that we will see. We will see much more equity based businesses, we will see much more people saving up and then doing a business. As opposed to this kind of cheap credit model, that we have seen over the last 30-40 years. I suppose, one challenge that… now again, I agree with you on this, but one challenge we might face, if you talking to somebody who’s say 30-40 years old, there may be a guy who’s been in and around VC investments, software entrepreneurship, in their view the last kind of… whatever 40-50 years since 1971 and the closure of the gold window, that has historically been an aberration, but a person who is today a 30-40-50 years old they might be grown up thinking ‘oh, yeah! That’s normal, that’s how you make money, that’s how entrepreneurs do things’.
Misir Mahmudov: Yeah, absolutely! A lot of people they always talk about, but inflation is necessary, at least like 2-3% of inflation is necessary to probe the demand, to make sure the economy is running, everyone has jobs etc. But a very good argument is that we could easily exist and function well as a society, as an economy in a deflationary environment, because the prices can adjust and yes, it might not be as popular when you don’t get a raise, but in absolute terms, it’s still the same. Nothing really changes. Is only that you can preserve your wealth into the future and you’re not being diluted in all times. And another thing, probably, is the fact that it’s all about time preference. If people are not incentivized to spend their money today, because tomorrow it is worth less, then they are going to be more willing to collect money over time, save up and make more long term investments, because now they simply have more time to think about and make prudent and wise decisions about their finances, about investment and ultimately that is going to have a much better sustainable long term effect on the economy, creating more sustainable jobs, increasing the GDP etc. As opposed to just you going out and buying a junk food and things that you don’t need, just because you know you have to spend it, I’ve got your salary and if you don’t spend it today, in a couple of years it’s not going to be worth as much what so ever.
Stephan Livera: So, in your view then, what’s the perspective on future wealth and income distribution in a bitcoin standard world?
Misir Mahmudov: Yeah, absolutely! It’s interesting to think about equality and inequality, I think that absolute equality and, especially, equality of outcomes is a very populist idea. It’s a very difficult to come to terms with the fact that scarcity is the major driving force in the world. If everyone could have whatever they wanted, whenever they wanted in abundance, then what would be the point of working? Everyone would be demotivated, because everyone has everything. But you kind of have to understand that — scarcity and competition, they are the most natural things. They are there and you just have to live with that. Also the fact that humans always find a way to compete, even if you give everyone the equal amount of recourses, humans are so ingenious that they will always find a way to form hierarchies, compete and assert their dominance and prove themselves, so it comes down to the same thing. So inequality is only natural. The most important take away with regards to how inequality will look like within true free market or the world, where people are using bitcoins, is that they will be able to store the product of their labor into the future, which is, unfortunately, very difficult or outright impossible for some people in the world today. As I said the bottom 90% they own very little share of the total of the stock market, so they simply don’t have access to a relatively better preserving wealth assets, such as real estate or stocks, they just don’t have access to it and even… it’s kind of ridiculous expect them to be able to operate within that environment, because they specialized in one thing, they can be whatever a dentist, a doctor. Why should they go out of their way and dabble in stock market training or in real estate investing, outside of their actual job? That’s not the way it suppose to be. The amount of efficiency, that can be achieved by having every single person specialize in one thing and do that thing best, as oppose to trying do five things at once, just to be able to preserve their wealth into the future is just … the efficiency gains that we can achieve by having sound money, that allows people not to worry and sleep well, I think are very very under appreciated.
Stephan Livera: Precisely. And the big point that has in recent decades come up is this whole concept, people in finance talk about it, is this idea of chase for yield, so they said that ‘if I leave my money in a bank, I will steadily lose 2-3% per year… or more. I need to do something about that’. It’s pushing everyone into the stock market and that, as you mentioned, can also be part of a driver for the massive flows into stock markets.
Misir Mahmudov: Yeah, I know. As bitcoin becomes more mature and as infrastructure grows and all that, I think bitcoin will not only start biting into the wealth that is stored in currencies that are worse, that are not sound like bitcoin is. I think it will also take up some of real estate and stock market as well, because a lot of people use these vehicles simply as just wealth preserving assets. A lot of rich people own a lot of apartments just because they know that they will kind of be relatively stable in value throughout time at least… well, I mean, they are assuming that, but they don’t live in them. So, once again it creates a lot of inefficiencies. So, if you give them a form of money, that preserves its wealth and… but a lot of people will be saying ‘but how is it preserves its wealth? It is so volatile? You can’t…,’ but I don’t think that’s the right way to thing about it, of course. Money that is 10 years old, that is sovereign, that is so young and it is open source, it takes time for it to become stable. We have seen that! Over the past 10 years the volatility rates have been steadily decreasing and this is a long term project, this is not an overnight thing. It’s also really important to think about the fact, that the supply, your ratio, if you have 1 bitcoin today, you have 1 out of 21 million and in 10 years time it will still be the same. So, that is a better way to think about it, as opposed to looking at volatility of the short term price.
Stephan Livera: Excellent! I like the points you’re making about how many of today’s wealthy high net worth individuals they will use some of these apartments around the world: Sydney and London, Hong Kong or whatever.
Misir Mahmudov: Vancouver.
Stephan Livera: Yeah, exactly! And now the thing that’s happening and we’ve seeing it a little bit now in Hong Kong is some of the wealthy individuals in Hong Kong have been looking for ways to move some of their wealth out, because of their concerns about China and the extradition laws. So, do you believe that is another driver then, for wealthy individuals to now start considering bitcoin more seriously?
Misir Mahmudov: Yeah, absolutely. It’s not wise to really look and try to assign one event or even one property of bitcoin, as the reason why the price will appreciate or why this will be the reason, because it just so interdisciplinary and it serves so many different things that is even difficult to describe what it really is, and it’s able to help out so many different people in so many different ways that… yeah, but I think that’s definitely a part of the value proposition, the fact it is sovereign, the fact it is resistant to all kinds of attacks and it allows you to be your own boss in terms of who gives you the approval to do whatever with the money that you have, the sole ownership and the right of, you know. Before we move on away too much from a topic of inequality, another interesting thing is how people always talk about the wealth distribution in a world, where we have bitcoins, how will the wealth distribution really manifest itself, because we have people who own a lot of bitcoins, who bought bitcoins early. That’s kind of unwise to say ‘oh, yeah, but these people, these whales bought it in 2013, that’s unfair,’ that is not unfair, because when those people were investing their sums of money into this market, the risks, which existed within bitcoin were much higher, than they are today. So, they were rewarded for taking those risks. Even today I talk to many people and they like ‘oh, no… this is very risky,’ they haven’t done their research, they don’t know anything about it, but back in the day they would just laugh at you. But, yeah, with regards to inequality, I think that there will ultimately be less wealth inequality, especially in the long run with bitcoin, as oppose to the world today. Because even the whales, who owns a lot of bitcoin, will sooner or later have to spend their bitcoins and unlike in today’s world you can’t create more of them. So, you can’t just like arbitrarily redistribute them as you please. In bitcoin I think the wealth is redistributed in the most meritocratic way, whoever works will be paid in bitcoin and that way they can save their money over time and not be diluted, which is unprecedented and I think this is going to have a significant good positive impact on the world.
Stephan Livera: So, look I’m mostly agreed with you and I think one thing that is I’m careful about is just to recognize that there will still be inequality, it’s just that there will be some that is in meritocratic way, as you say, there will be meritocratic inequality.
Misir Mahmudov: Oh, yeah, of course. As I already said, inequality is natural, inequality is necessary for the progress of civilization and humanity, but the way you come to the inequality is the important part. With Bitcoin the way that inequality is achieved is through hard work, is through entrepreneurship, but in the modern world a lot of the times this inequality is achieved is not optimal and is outright not fair.
Stephan Livera: Right, it’s achieved through graft, politics as opposed to through meritocratic behavior or skillful entrepreneurship or skillful investment, that kind of behavior. So, yeah interesting stuff. I think there was another topic, I was interested to discuss with you around bitcoin and morals. What’s your view there on what kind of system is Bitcoin going to push people into, compared to what we have now?
Misir Mahmudov: The way I like to think about and the way I even decided to approach this topic is because… I think the beautiful thing about Bitcoin is that once again how multifaceted it is, it lends itself to a great number of analogies, metaphors juxtapositions, that help people see the benefits of the system. We always speak about bitcoin is all of these different things: stored energy, stored time, unconfiscatable asset, borderless money, all of these different things. And it is true, it is all of these different things. Another cool thing the way different people describe bitcoin, for example, Brandon Quittem calls it the Mycelium and I don’t think this is a coincidence, that you’re able to see bitcoin through all of these different lenses. We always talk about consensus… about how we come to a schelling point, where we are happy with what bitcoin is and the way it works, but it’s kind of difficult to understand what this consensus means. A way to look at this is by considering bitcoin, as a manifestation of human values, basically seeing it as a system of universal morals so to speak. Even, if you look at it through vices and sins, you’ll get gluttony, for example, it makes you think of low time preference, you want to save your bitcoin, because it will appreciate in price over time and you should, basically, sit on it instead wasting it on junk food and overeating. Or like sloth, you can’t be lazy in Bitcoin, you have to take responsibility, you have to own your private keys, it sounds like an additional world, where you can just lose your credit card and go to a bank and the costs of doing that is very expensive. Greed is probably my most favorite one. Because greed is known to corrupt people very often, it’s very strong force and greed is the reason people steal, lie and do other reprehenible things. But Bitcoin has such a strong appeal, because it usable to align with the fundamental human values and with regard to greed, how does it make sense? Deep down everyone knows stealing, hurting and doing all these things is bad, but it’s just such a tempting force, because people always want more power, better their lives, that they fall prey, they fall victim to greed and they act upon that. But the most beautiful thing, that bitcoin is able to paradoxically and so ingenuously use human greed as a way to protect against greed itself, and protect the social consensus of human values. Bitcoin encodes all these universal values that people from different cultures have agreed upon from time immemorial and poses it into algorithms that are not prone to as much human component and human factor that is so vulnerable, so often fails in spite of the best intentions. As long humans are greedy and kind of distrustful of each other, in other words as far as humans are humans, Bitcoin should thrive. This is more on the philosophical, psychological side of things, but this is something to think about. Bitcoin aligns with what people around the world most of the time think what is right and what is wrong… Bitcoin makes stealing very difficult, Bitcoin makes lying very difficult, because everything is verified, Bitcoin minimizes trust, so it uses these human components that are kind of almost innate to us and programs them into the system, that everything functions without having to be vulnerable to these human factor once again.
Stephan Livera: Yeah, look I can think of a couple of practical examples of what you’re saying as well, so a few obvious ones. Any current holders of bitcoin would be very very highly incentivized to not go for any changes to Bitcoin’s 21 million supply cap. So that’s the obvious one, right? The most obvious one. There are the other ones as well, right? Anyone, who is the holder of bitcoin, now has some incentive to care about protocol changes. They’re gonna care about changes that may impact on the ability of their node to verify the full supply of bitcoin, any changes that may come, that might make it easy for other people and ruin the system. I also liked this concept of Mexican standoff, I’ve seen Bitstein tweeted this as well, he was saying Bitcoin is like this Mexican standoff, because everyone is watching each other, because they don’t necessarily trust each other.
Misir Mahmudov: Oh, yeah absolutely! Once you to start learning about Bitcoin and, especially, once you start owning some bitcoin, that literally reforms you, as a human being in terms of your incentives and in terms of your behavior, is that you become like a PR agent, but not in the bad sense of this word, but in the most positive sense of this word, that you’re trying to spread this message and you’re not just trying to sell something to a somebody, if they spend enough, they will understand, that you are not trying to sell them something random, but you’re actually trying to better their life outcomes and, hopefully, potentially make a world a much fairer place. Once, you own some, you’re incentivized to spread the message and educate people, which is quite a beautiful.
Stephan Livera: Fantastic. I know you’re also interested to discuss about some of these ideas around Satoshi, as the potential single point of failure. So, tell us a little of your thoughts on that.
Misir Mahmudov: As time goes on, we really are able to better appreciate everything, that Satoshi has done and, especially, the fact he disappeared, perhaps, that was one of the most important things that he did, because of that basically enabled him to… not only physical point of failure, but also not be an ideological, a directional single point of failure. Some people try to argue, that ‘Satoshi wanted it this way!’ Or ‘this is his vision, this is how it suppose to be.’ But that’s a prime example of an appeal to authority and even, if we for a second entertain the idea, that something is what Satoshi really wanted, I think it is quite obtuse and, perhaps, dogmatic or at least naive to believe whatever Satoshi said more than a decade ago, was the most optimal implementation of Bitcoin. Similarly, it is also kind of narrow minded to think that through out all this time Satoshi himself, herself or themselves hasn’t changed his mind. It is true, that without Satoshi we all wouldn’t be here, we wouldn’t be having conversation today, however in the end of the day it doesn’t really matter what Satoshi believed at that point, because so many different things have changed, so much time has passed. The optimal way to go about things always changes and we need to be able to adapt, and clinging onto what’s Satoshi said in ten year old forum post is… people shouldn’t put so much emphasis on that, because, especially, a lot of people are going to try to use that to their advantage. And once again, Satoshi is not an all-knowing, omniscient being, they are also a human being, they are not a God and it is therefore unwise to blindly follow whatever was said back then. They’re, basically, not infallible like some people say they are… the real Bitcoin is whatever social consensus is, not what Satoshi said it was or whatever you think Satoshi meant it was. The schelling point is that at this point in time, it is constantly evolving and becoming more and more anti fragile. Satoshi could not have possiblly predicted every single development around Bitcoin, that has and will change or threaten it during its lifetime, so once again, you just need to think through this before you ascribe so much value to these little things. We should also consider, that Satoshi disappeared for more reasons, than just to avoid being this physical point of failure… they say he did that in order to avoid faith of bit gold, Digi Cash, that, basically, had to close down, because their creators were not pseudonymous/anonymous. I think, that he also left to avoid being a single point of failure in the sense of the direction that Bitcoin takes. That was very much purposefully done… had not Satoshi disappeared, his opinion intentionally or unintentionally could have such a large influence, that it could be counterproductive to Bitcoin. I don’t wanna pick on any projects or people, but thankfully Satoshi spared us of having Vitalik, who’s decision making or his mood, or whatever this extrinsic factor, that can have such a big pull on the actual project. Bitcoin is so much more than just one person. Having a single person leading a project, even, if nominally, makes a project a lot more vulnerable. The average people they love to follow somebody and they like to believe in that one person, make a called out of that person, rather than the project itself and no matter how smart that person might be or how great they are, they are still fallible. And the most importantly, the human is fallible and human’s nature is corruptible, not because of person is good or bad, but only because of they are human and they often are exposed to these different things. Those are the kind of thoughts I had about the topic.
Stephan Livera: It’s investing idea around the cult of personality. Even, if somebody was incredibly intelligent, some super genius person and they were very high upstanding moral person, if the government knows who they are, they can chose to come after them or take their family, or do something and then at that point you’ve got somebody, who is now owned, right? A government or a business could influence protocol decisions around Bitcoin, and that could’ve led to all sorts of negative pathways, and many of these negative pathways in some of the shitcoins they just may never actually happen, because here it’s that whole problem of the Warren Buffet saying ‘you’re only realize who’s swimming naked, when the tide goes out,’ right? So, many of these shitcoins will never get to the point, where a government needs to go and kind of coopts the leader of it, but it’s kind of prudent in that Bitcoin doesn’t have that person.
Misir Mahmudov: Absolutely. I feel like these people, who use Satoshi’s name or they’ve tried to ascribe so much value to it… they are often just so dishonest, but yet effective with some people in order to defend your righteousness and it enables one to easily dodge difficult questions by simply replying ‘Satoshi said so! Are you questioning Satoshi? You think you are smarter than Satoshi?’ No, I’m not, but I just don’t want to fall prey to, once again, this appeal to one person. Important takeaway: do not make idols, provided enough time you will be disappointed in them and, once again, not because they are necessarily bad or good, but because everything constantly changes and I think the quote, that goes “you either die a hero or you live long enough to see yourself become the villain” is especially relevant. Satoshi is probably must have been aware of this one.
Stephan Livera: Well, I think that was in the Dark Knight from I think from around 2007 or 2008, so it was around that time.
Both are laughing
Misir Mahmudov: That’s a good one. It’s just fascinating, we are so lucky to be here at this time, in this place, so early! Once again, a lot of people say that ‘oh… yeah, I’ve missed the train, I’ve missed the boat and it is too far gone now, there is no point… the price is too high,’ unfortunately, they are incapable of even daring to imagine how big this can be and the fact that total addressable market is so big. I think we are very early. It worth everybody’s time to learn about it and at least do their own research.
Stephan Livera: Yeah, that’s a definitely a big point as well. Many people, when there are new to Bitcoin, they think ‘oh, I am late’ and then even, you listen to stories of people, who have been around and they got in like 2012 or 2013 and they feel like they themselves were late.
Misir Mahmudov: Really, everything is relative. There will be people, who will be coming later and they will be saying the same things. There will be people… I think… who will be buying at 50k and they are right now think it’s too expensive, but the FOMO will pour in… that’s just how humans work… although, everyone claims they buy low and sell high, but it always the other way around. It’s all cyclical, so we just have the cycles and we just need to embrace it.
Stephan Livera: Misir, tell us a little bit about what you’re working on at the moment, or what you’re thinking about, if you got any ideas for articles coming up or research?
Misir Mahmudov: Yeah, absolutely! It’s always in the back of my mind. There is no day, that I spend not thinking of Bitcoin or not listening to podcasts, such as your own, which, once again, I think is a great resource that everyone should take advantage of, if they are not doing so already. I’m always on the lookout for new ideas, always brainstorming… there is one thing I’m always passionate about is trying to optimize the way to onboard people into the space and find the most effective, the most succinct way to communicate the value proposition of Bitcoin to them, without them losing the interest within the first five minutes, because it’s such a dense, yet such a fascinating space. We always need to be thinking of finding those the most optimal and most accessible ways of bringing in more people and not necessary alienating them, although some people deserve to be alienated, they are scammers or what not. A lot of people are willing to listen it’s just that you have to find the right approach, and not be too demanding in the begging. That’s what always on my mind.
Stephan Livera: Yeah, it’s interesting, because many of the early people were cypherpunks and the next wave were libertarian people, so obviously people like me and you come from more libertarian Austrian angle, so it’s quite easy for us to see the value. A good example is someone like Alex Gladstein, who himself is not a libertarian, he is more progressive. He is able to sell it to other progressives, because he can speak to them in a way, that is a little bit more, it resonates with them. Do you have any thought on that?
Misir Mahmudov: And that’s the most beautiful thing about Bitcoin. I always keep saying that Bitcoin is so interdisciplinary, that you can talk about it in a plethora of ways to all kinds of people and there will always be something about Bitcoin, that will appeal to them exactly that kind of person. It doesn’t matter what their political status, it doesn’t what their religion is, what their color is, all those things don’t matter. There are things about Bitcoin, that can literally better their lives in various ways, that they want to hear about, that they are willing to listen to you talk about and it’s just about finding that right approach. I feel like, when you’re about to tell a story of Bitcoin to a person, you should consider their background, what they like, what they don’t like, what they do in life, what their interests are… this is not about being facetious or trying to sell something, it’s about considering how Bitcoin can help them, because I am almost sure, that there is a way Bitcoin can help all different kinds of people. So, that’s very important, I believe. Before you try to shout at them and tell, ‘You have to read Human Action. You didn’t read a thousand pages. Don’t talk to me yet.’ I mean I love the book and I really identify with the Austrian school, but we are taking this thing mainstream and we can’t expect all these people to do all these things, that we have done and we see value in. We just need to optimize for these people to get on the same boat as us and really see the main stuff, because we are living in such a world, where the attention spans are so small, people are always interested in different things, but we need to get them onboard. If we are going to take this mainstream, we shouldn’t be too harsh on them, we should sometimes give them a break, we should optimize for them not being too alienated. I know it’s very important for us to keep to our standards and certain important things that can never change, for example 21 million, like these things. Yes, of course, I understand, that the real bitcoiners will always fight against all scammers, that try to sell them their shitcoin or try to change some parameter of Bitcoin, which is not going to fly. But some people, who are willing to listen, if we are taking it mainstream we should consider what they care about, who they are and then kind of accommodate them in that sense.
Stephan Livera: I think it’s a part of you have just to meet them, you have to meet people where they’re at. That’s, probably, the way I would summarize it. So look, Misir, that’s pretty much it in terms of topics we have for discussion. Just for the listeners tell them where they can find you and where they can keep up with what you’re doing?
Misir Mahmudov: The best place, where they can find me and contact me is on Twitter @misir_mahmudov and my DMs are open, and I’m gladly reading and replying on them, so you can always ask me stuff. Once again thanks you so much for inviting me, this was so much fun and a great honor to be in the same list with the people, who are doing God’s work and I’m a huge fan of your podcast.
Stephan Livera: Awesome! Thanks again for coming on the show and I’ll speak to you soon.
Misir Mahmudov: Thank you, Stephan. See you.