SLP95 Aleks Svetski – Clashing Visions

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Aleks Svetski (CEO and co-founder Amber) rejoins me in this episode to talk about the clash of visions:

  • Trading or HODLing 
  • Buying with a lump sum or DCA – Dollar Cost Averaging
  • Mindsets around DCA
  • Libra vs USD vs Bitcoin
  • Belief systems

Aleks and Amber links:

Sponsor links:

Stephan Livera links:

Podcast Transcript Sponsored by GiveBitcoin.io:

Stephan Livera: We’re live. Aleks, welcome back to the show.

Aleks Svetski: Hey, man. This time in person.

Stephan Livera: Yeah, exactly.

Aleks Svetski: We’re looking at each other like lovers in the air mate.

Stephan Livera: So we’re here in this hotel in Sydney.

Aleks Svetski: We walked up the stairs, the chicks at the counter are probably like, “Where are these two guys going?” We’re doing a podcast, I swear.

Stephan Livera: I swear we’re not doing what you think. We’re trying to record a bitcoin podcast.

Aleks Svetski: It’s all about bitcoin, I promise, no shitcoin.

Stephan Livera: Yeah, man. So look, I think the topic for today is Clashing Visions. And so there are a lot of different clashing visions obviously. Now, understand obviously most of my audience is more global, they’re not just Australian, but I think for them, it is still relevant, this whole theme around dollar cost averaging. And so within bitcoin, sometimes we see these debates come up. So quick ones could be between dollar cost averaging and trading. And then the other one is dollar cost averaging versus lump sum. So let’s start with trading. So how do you think about the way that you can explain to somebody dollar cost averaging instead of trading?

Aleks Svetski: Well, so I can speak from experience, particularly the trading side of things. So like I have probably been trading for a hell of a lot longer than people in the crypto space, who have become overnight fucking experts in the last two years because they started trading on Cryptopia or something, and they thought they made mad gains. So I was there from 2007. I self-taught myself to trade warrants, options, and CFDs, and derivatives, like always, I had one of the first IG markets accounts in Australia. So like I was in it from then. And I can tell you from experience, unless you devote all your time, energy, patience to it, and you are really methodical, unemotional, you’ve got a system that works and it’s repeatable and you run… it’s a numbers game. It’s a consistency and a numbers game. Unless you’re doing that, you’re not going to succeed at trading.

Aleks Svetski: I’ve tried to dabble multiple times throughout the years, and it’s only when I’ve committed and done nothing else but trade, that I’ve actually had some level of success in it. So for most people, that’s not practical. For most people, they’re sold this ideal, this vision that, “Hey, you can trade in your part-time, and you’d become a fucking millionaire.”

Stephan Livera: In your break at work!

Aleks Svetski: Yeah, exactly. Yeah, and that’s just not how it works. It’s bullshit. Then people run off and start making bots and all this sort of stuff. And you might get some sort of alpha, or you might be able to take some sort of advantage of some arb with a bot for a short period of time. But that stuff gets opt out. And it’s just, I personally think it’s too much the work to value ratio is shit. Like if I look back throughout my entire life, the amount of time I’ve spent trading and what I’m probably up versus what I’m probably down, man, I could have worked at McDonald’s for fucking more money than the time, effort, and stress I’ve spent fucking around trading. Like I’ve had a few big wins, like I was in very early with silver and gold, and me and my brother made a killing out of that.

Aleks Svetski: And then I fucking shorted the market in 2016 when Trump came in thinking that, yeah, this is a fuck up, this is the GFC thing we’ve been waiting for. So it’s like, I just fundamentally don’t think it works. And human beings, we’re wired to want to purchase, buy and get involved when we’re happy, when we’re euphoric, and when are we most happy and euphoric, right at the fucking top. And we are wired to run for the hills and get the fuck out of there and sell shit when we’re most depressed and sad. And when are we doing that? When shit’s dumping. So we inherently do the opposite of what we want to do.

Aleks Svetski: So trading, I just think it’s… actually one more thing, trading in volatile environments where you get wicked out like a motherfucker, particularly with something as volatile and as illiquid as the shit that we’re playing with here with like… I mean, bitcoin is liquid, but it’s not very liquid. And then every the other shitcoin is like the zero liquidity. Like I don’t care if you made 10,000% on some shitcoin, you can’t sell it out at 10,000%. By the time you sell it out, you’ll be back to zero. So I just think all of those things they’re make for a bad recipe for most people. There might be a select few people who should go down the trading path. I just don’t think it’s a smart strategy. And I don’t know if you have seen a new website dcabtc.

Stephan Livera: Yeah, yeah, that’s a great site.

Aleks Svetski: Very brilliant. So we built one for Amber, but this one shits all over us. I’m going to start sending people there because, I mean, it sells our product. If you just shut the fuck up and just bought some, irrespective of the price, irrespective of, “It might come back a few dollars, I’ll buy some more,” get your head out of it. You will do far better, and you can go and add value to the world and society in a way that matters to you instead of trying to be a fucking crypto bro or — .

Stephan Livera: Yeah, yeah, now, here’s the thing. So obviously, I’m agreed with you. But the typical way of thinking, and maybe it’s a masculine thing, it’s an overconfidence. More drivers think they’re a better driver than the average driver. Well, it’s like 80% of drivers think they’re a better driver than the average driver, and that’s obviously that’s not true. Same thing with trading, there’s a lot of people out there who think they’re going to be that top 2% or whatever it is. What do you say to those people?

Aleks Svetski: Well, if you’re going to do it, devote yourself to it. Like, actually, tell me what like… let’s use an example, Michael Jordan, was he the best fucking basketball player in his part-time? Sure. So if you’re going to do that, and you think you’re going to be like the top 2% or the top 1%, go and fucking work on Wall Street, start a fund, like do that full-time. Don’t sit there fucking on YouTube, fucking things and earn your money from that, or run fucking courses. Like as soon as you see someone running courses or doing YouTube, run the opposite fucking direction. They aren’t trading, they’re not making money from that. They’re making money from the courses.

Stephan Livera: They make money selling their courses or paid group right?

Aleks Svetski: Correct, yes. Yeah, paid group. Right, yeah, yeah. My pump and dump group. So, yeah, like I don’t know man.

Stephan Livera: Yeah, yeah, and what about now? So look, here’s the other one, dollar cost averaging versus lump sum. So my quick thoughts on this. So I think from my understanding of most of the personal finance literature and so on, like mathematically, if you have the money up front, lump sum is better. However, here’s the reality. Most people don’t just have a lump sum of money, they have a salary, and they don’t necessarily have a lot of money lying around. And the other component is psychological components. So I think DCA, dollar cost averaging is superior from a psychological point of view. What’s your view there?

Aleks Svetski: 100%. So the lump sum stuff is the question doesn’t become, do you have the money? The question becomes your timing. And there’s this analogy of timing the market versus time in the market, and DCA gives you the latter, the time in the market versus trying to time shit. So what inevitably happens with people who have a lump sum and they wait to invest, they find it expensive at $1,000, and they buy in at $10,000 when it’s cheap, or right now 10 and they’ll be waiting. Like my mom’s one of those examples, drives me nuts and listens to my brother half the time because my brother’s not a bitcoiner, gives me the shits.

Aleks Svetski: I finally convinced her to buy some bitcoin at 8,000 Australian. So there’s just before this run started happening, or just in the early stages of the run, and she bought some. And there’s a fucking rally, it hit $11,000 Australian, and she’s like, “Oh, can we sell it now and then I’ll buy back when it’s cheap.” I’m like, “Maa, just shut up and fucking hold it.” And inevitably, a week of busting my balls, she went and did that. And now, she’s like, “Oh, is it ever going to come back down?” So she’s going to come and buy back when it’s fucking 20 grand, I’ll bet you. So that’s the lump sum mentality, and you end up just burning yourself along the way. Whereas she just continually buys, like it just… I think in the bitcoin space, here we are talking about low time preferences and thinking long-term and that predicates an appreciation of time.

Aleks Svetski: And then we go and spend all our time trying to time the fucking market or trade, instead of appreciating our time enough to just say, “All right, I’m going to allocate consistently without thinking about it.” This is a land grab at the moment. The analogy I was on a podcast earlier today to some like nocoiners and noobs, and the analogy I gave them, I said, “Buying bitcoin today is like being a dude thousands of years ago, swapping rocks for gold to people who have no fucking idea what the gold might’ve been worth. At that point in time, they were like, “Fuck it, I’ll take the rocks, here’s my gold.” And some smart dude is just accumulating, collecting that gold before it’s been priced properly. So that’s the thing you’ve got at the moment.

Aleks Svetski: So, yes, lump sum will work if you want to hold it for the long-term, but most people I think will end up succumbing to their emotions, and most people will end up lump summing on or near a peak, and they’ll end up fucking shitting their pants right down the bottom. And it’s just unfortunate. So if you DCA your whole way through, I just think it’s the absolute best strategy for 99.9% of people.

Stephan Livera: Right, and so I’m, I totally agree, I think really buying just regularly is a great strategy. Now, the other component that’s difficult, so many of my listeners tend to be the more kind of intermediate or advanced level bitcoiners, so they probably don’t have an issue with this. What the deal for them is more, how do they tell their friends, “Hey, here’s how you think about it”? Because most of them, for their friends, they are the bitcoin guy. Their friends or their noob family will come to them being like, “Oh, hey, man, what do I do? Should I buy this bitcoin now?” And they are struggling to teach them, “Hey, don’t just like throw it all in, just like slowly take a position, slowly but surely.” How do you think about communicating that?

Aleks Svetski: Jesus, that’s like asking me how to describe bitcoin in one sentence. Man, ah.

Stephan Livera: I mean the change in mindset. How do you get them to change their mindset from just like it’s a one-shot investment to a regular-

Aleks Svetski: Yeah, yeah, yeah, yeah, to its regular, yeah. I’ve been playing with this recently and I feel like that gold analogy that I just mentioned is like collecting gold before everybody else understands what it’s worth is kind of like been… I’ve been seeing people open their eyes to that suggestion. Another one is I really talk about the fact that, and I use myself as an example, I say, “Look, I refuse to hold my money in something that continually is depreciated and is losing value because it’s being inflated, or because of interest rates, or whatever other exogenous or endogenous circumstances or effects.” So I said, “I’m personally trying to accumulate as much of this asset as I can. Now, I do it regularly, every week.

Aleks Svetski: So I use myself as an example, but I set myself up as an extreme example of someone who’s trying to swap every piece of shitty fiat out that he’s got to bitcoin. And as a result, I’m just gaining territory. So then when I explain that to people, I’m saying, “Look, you might not be as crazy as me, and you might just want to get some exposure. Here’s a way.” So I still haven’t like I don’t know if that answers your question because I still haven’t found like a really clear-

Stephan Livera: There may not be an easy answer.

Aleks Svetski: Yeah, there may not be… exactly.

Stephan Livera: Yeah, and part of that is also automating it. Because the other factor for most people, unless they are like extremely disciplined, they’ll let it slip. So how do you think about ways to try to get them doing it regularly?

Aleks Svetski: Two words, download Amber. But seriously, I just think there’s the whole reason I built this thing, man, is to just remove that excuse of “Ah, I’ve got to log on, ah, I’ve got to do this, ah, I’ve got got to do that.” And then when you log on, you’re like looking at the price, you’re like, “Oh, I’ll just set a limit order here, and maybe it’ll just come and fill me.” And then it doesn’t-

Stephan Livera: Continues up.

Aleks Svetski: … continues up, exactly. Then what would you do? You end up chasing, and then you’re like, “Fuck it, I’ll just market order all up here, and then it drops back to where you had your original limit order, and you want to kill yourself. So like I was speaking with Hass, Hass McCook, shout out to Hass. And he was just saying like, “Look, dude,” he goes… because he’s been a bitcoiner for a while, and he said, “I wish I could have just set up something years ago that just 9:00 AM everyday, irrespective of the price, just bought the fucking thing.” Because he goes, “Every time I go into an exchange, I do that. I try and limit order, and try and be smart, and try and apply my human ego to it, which is I’m smarter than the market and no one knows what’s going to happen, and then I just fuck myself over in the process.”

Aleks Svetski: So, yeah, I just think the genesis of products, like what we’re trying to build with Amber, I hope will solve a lot of that conundrum for people who, I mean, in today’s day and age are too lazy to fucking log into an app because we’ve got first of all problems to worry about. So I hope that they can just download it, fucking whack their BSB and account number in it and just direct debit out a fucking amount, certain amount, set a frequency and fuck off.

Stephan Livera: Right, yeah, and that’s perfect, right?

Aleks Svetski: Yeah.

Stephan Livera: Now, here’s the other thing, I think now, think of it this way, so imagine, again, I don’t have a crystal ball, but imagine in a year or two, we hit another crazy FOMO. Dollar cost averaging as a habit may help you then as well, because it might stop you from moving in with your life savings. Do you want to touch on that?

Aleks Svetski: Yep, yep. Well, we saw it with people FOMO’ing in like mortgaging their house at 20,000, right?

Stephan Livera: Yeah, terrible.

Aleks Svetski: Great job, pal. Just if you can hold on for another 10 years, wherever you are, just hold, bro. You’ll be alright just moving to a homeless shelter for the time being, just hold onto that bitcoin.

Stephan Livera: The ultimate low time preference.

Aleks Svetski: Exactly. You’ll be okay one day. But look, it’s exactly what it does, because on the way, what it does is it teaches a really interesting discipline, which is you’re buying more when it’s cheaper, and you’re buying less when it’s expensive. And markets are just merely a representation of what’s cheap and what’s expensive based on the collective understanding of society or the market participants at that point in time. So what we’re seeing with bitcoin is just people… a large majority of people who don’t fucking get it, a few people who do get it, and here we are all trading and agreeing on price or disagreeing on price, or whatever we’re doing along the way.

Aleks Svetski: And those of us who are smarter, let’s not say smarter, who understand it deeper, or who’ve peeled more layers of the onion off, we’re sort of on the side of realizing that this is undervalued. So we’re trying to accumulate, whilst there’s others who completely don’t understand that shit, so they think it’s going to zero, like the Roubini’s of the world. So they keep shorting on BitMEX and losing all their fucking money and good on them. But doing doing the DCA, again, it just removes that emotion and then just replaces it with this sensible buy more when it’s cheap, buy less when it’s expensive, and remove the noise from the market because there’s just so much noise in markets, there’s noise in life, there’s noise in the world, there’s noise on fucking Twitter, Facebook, Instagram, everywhere. There’s too much fucking noise. At least products like Amber will help remove the noise from your financial life. There’s my new slogan.

Stephan Livera: Right, remove the noise.

Aleks Svetski: Remove the noise, yeah.

Stephan Livera: Yeah, that’s great. And so, look, I know you recently slightly pivoted Amber as well, because in the past, and I think the first time I had you on the show, there was a slightly different conception. It was more like a roundup app, it was like Acorns, but for bitcoins, whereas now, it’s more DCA. Do you want to talk to the changes?

Aleks Svetski: Really simple change. We removed the spare change element because spare change is limited by the banking infrastructure. People need to give up their banking credentials to allow a product such as Amber, or Raiz, or Acorns, or any of those to basically look at all your transactions, work out the roundups, and then perform a direct debit. But the direct debit is still can’t be performed till you reach a threshold of $5 anyway. So we sort of like thought, “Fuck the roundups.” Like we’re not debiting to five bucks, so just give people the ability to just debit from five bucks.

Stephan Livera: Just pick how much they wanted.

Aleks Svetski: Exactly. And now, you’ve got more control, you can DCA in, it’s up to you, and we can throw out the whole spare change stuff. We may bring spare change back, but we will bring it back in a different iteration. So like I don’t even know if this is possible yet, but maybe integrating with Apple Pay somehow, so that we don’t have to look at your transaction… we don’t have to look at your statement. We can just take it on a per transaction basis. I don’t know how that will work with the banking infrastructure because it’s all just so shit and fragmented. But we may be able to bring it back in that type of genesis, or we may look at introducing like an Amber card, where you can load it up, and you can use it, and then we can roundup off our own system internally. And that is easy. And that just gives people that gimmicky thing again.

Aleks Svetski: But I just think we transcended the roundup narrative, and we went for the DCA narrative, which was the crux of why we did roundups in the first place. And it’s just made the product so much smoother, like if anyone was listening to us back then and didn’t want to share their bank credentials with the fabric software that we were using and all that sort of stuff, now you don’t need to, BSB account number, Bob’s your uncle.

Stephan Livera: Off you go, nice. So a couple things there then. What about the ability to withdraw the bitcoins out? So where are you guys on that?

Aleks Svetski: It’s available, so people just need to ask for it. And the reason we don’t market it too much now is because we don’t have an automated system, like because we cold store everything. It takes a couple of days to like get the multisig done, yada, yada, yada and send it to them. So we don’t advertise it in the app like BTC Withdrawals go hard because then I’ll end up having too many-

Stephan Livera: You’ll have a lot of transactions pending.

Aleks Svetski: … requests. Yeah, exactly, or too many requests to do it.

Stephan Livera: Requests.

Aleks Svetski: Exactly. And because we do it manually at the moment, is just a pain in the ass. So if people request it done within probably 48 hours, they’ve got their bitcoin and happy days. In the coming weeks, we’re almost there. We’ve made it a lot faster now, like before it was taking three, four days because we had to access the cold storage and all that. Now what we’ve done is we’ve actually just got our own float, so it doesn’t actually touch the customer’s funds. We just have our own float and we pay it out of our own float, so it’s quicker. And we can actually even probably get it done same day now, and then we just balance out the amounts later.

Stephan Livera: Right, yeah, because I think that’s a legitimate concern customers might have obviously. Rule one of bitcoin, not your keys, not your coins. So it might be a good way for them to slowly start accumulating, get a new bin. And then once they’ve accumulated maybe a few hundred bucks, now that’s time where they need to start learning to take possession.

Aleks Svetski: Yeah, so we’re going to introduce like a DCA for withdrawals, which is like, average withdrawals or automated withdrawals, which is when we release withdrawals, we’ll release it with some features that are like hit a certain threshold of bitcoin or dollars. You can set some rules in it, and it’ll automatically send to your whitelisted address. You don’t have to think about it. So again, I want to make this so automated that you’re accumulating and then you’re storing your bitcoin in a way that you’re as safe as possible, and you get out of your own way.

Stephan Livera: Yeah, yeah, because I think we are our own worst enemies in some of this.

Aleks Svetski: We’re, we’re, we’re, yeah.

Stephan Livera: And it’s very easy to start thinking, “Oh, what if I try to sell and buy a bit cheaper and whatever all that,” rather than sort of really zooming out, which is a more appropriate way to think of it.

Aleks Svetski: Absolutely.

Stephan Livera: Yeah, anything else to touch on with Amber?

Aleks Svetski: No, man, look, let’s-

Stephan Livera: Let’s go into, I think you had an article about… it was, again, this theme of clashing visions. You got Libra, this idea of a corporate created shitcoin, and then you got a blockchain technology, which

[crosstalk 00:20:55]

.

Aleks Svetski: Whatever that means.

Stephan Livera: I mean, you and I have both been very vocal about our thoughts on the so-called blockchain technology. And then you’ve got bitcoin, which we both love. So tell us a little bit about how you’re thinking there.

Aleks Svetski: Where do I start? Well, I’m just trying to see, I’m actually going to pull up that article, so I’ve got it in front of me. And then we can hit a couple of those notes. Okay, yeah, so I managed to get it listed on blockchain.news.

Stephan Livera: Oh, right, I don’t even know what that is.

Aleks Svetski: It’s some online publication like they do news and events and everything what’s going on. And then I basically, the is the name of the articles, blockchain, bitcoin, and Libra, what’s bullshit, what’s brilliant, and what’s big brother, basically. And I think one of the key takeaways that I got in there was Jameson Lopp did a really good deep dive on to what is Libra? Is it actually a blockchain, or they’re just using that term like every other fucking large corporate uses the term to sound hip. They’re just using some sort of slightly more advanced database infrastructure if that, or maybe it’s got some redundant fucking servers on it, or it’s got a consortium that’s managing it.

Aleks Svetski: So none of that stuff matters. And what I tried to run through in the article was that one of the things I think that makes bitcoiners angry about the whole blockchain narrative is that there might be some benefit to consortium’s sharing a ledger or sharing some sort of state thing within their consortium. And they might use it to get better checks and balances, and they might create some form of efficiencies, and they’re… I don’t fucking know how their infrastructure currently works, but there may be some commercial internal benefit for them. I think the problem is that they’re taking the bitcoin narrative, which is this narrative about like the fundamental reinvention of money, payments, sovereignty, identity, look at all of these things that bitcoin reinvents, decentralization, etc.

Aleks Svetski: And they’re trying to use the ethos or the… I think you’ve mentioned this word before, it’s kind of like affinity. They’re using the affinity of this invention of bitcoin and applying it to the fucking minute incremental innovation that they might be able to suck out of hashing fucking blocks of data together, or whatever they’re doing on their side of things. And I think what that does is it inherently dilutes the strength or the depth of what bitcoin represents. And on top of that, they go one step further by saying, “Oh, yeah, bitcoin was this thing, but we’ve-

Stephan Livera: “Bitcoin’s old technology”

Aleks Svetski: Yeah, we’ve transcended this-

Stephan Livera: We’ve gone beyond.

Aleks Svetski: Exactly. When in reality they’ve like taken a fucking breadcrumb and that they may have created some sort of efficiency within their own infrastructure. And that’s fine, but that is not going to impact society. It’s not going to change anyone’s fucking life. It might add some dollars to their bottom line, or more realistically, it might add some extra dollars to IBM and the big four who are selling fucking [crosstalk 00:24:10] blockchain solutions, exactly, for 10X because they slapped the word DLT or blockchain on it. Like that’s the real benefit there. And one of the things I noted in there was Libra didn’t give a fuck about blockchain. What Libra is, is an attempt to build or to create a non-sovereign money. That’s the fucking battleground, not blockchain. No one with a brain gives a fuck about blockchain. What people care about or what the real fight is about, is about a money, literally a new form of money. And that’s why governments and all these sorts of shit are up in arms about Libra because now like… I actually think that Libra is probably red pilled more people into bitcoin than most things-

Stephan Livera: They may well.

Aleks Svetski: … because you’re seriously, because people now have the conception that maybe a non-sovereign, non-state issued currency could be a real thing. And, oh, but that bitcoin thing isn’t that similar. Oh, wait a minute, but bitcoin is like the antithesis, like it’s the money owned by the people that’s non-sovereign, that is an inflatable blah, blah, blah, blah, blah. Whereas this thing is, it’s non-sovereign, but it feels a bit in fucking 1984 to me. So it’s like, initially, I was really confused about… I wasn’t sure if it was a payment mechanism, or if it was a new money, or what the fuck it was.

Aleks Svetski: But now, like the more I’ve sort of got my head around it, I’m like, “This is big.” It’s very big for bitcoin because it inherently validates bitcoin, and it also validates bitcoin’s decision, or the broad consensus to keep bitcoin this, it’s optimized most for sovereignty, for censorship resistance for unemployability, fund compromisability, whilst all the other shitcoins optimized for smart contracts, for speed and for all the shit that Libra could do with a fucking snap of a finger, literally made everything else obsolete and validated bitcoin, and has put in the minds of people the very seed that a non-state issued currency is possible. So I think it’d be really fucking interesting long-term.

Stephan Livera: Yeah, yeah, for sure. Let’s simplify it a little bit. So one way to think of it might be pipelines, and then the oil that flows through that pipeline. So with bitcoin, obviously this can get confusing because in the old days we had this convention of capital B bitcoin and small B bitcoin. And one referred to the payment network as it were, or maybe if you want to not get too triggered, it’s like, think of it like a settlement network, and bitcoin, the monetary token. But then Libra, it has its own kind of equivalence because it’s got obviously its own kind of like a basket currency, which will be comprised of many other monies, and its own little highly centralized, highly controllable censored pipeline-

Aleks Svetski: Payments system.

Stephan Livera: … through which the Libra oil can flow through. So how do you think about the way you compare those in terms of like the bitcoin oil versus the Libra oil?

Aleks Svetski: Yeah, really good analogy, man. I actually hadn’t heard of that before today. What to comment?

Stephan Livera: To me, it really, the way I think about it it’s like it shows that even bitcoin’s payment network is superior from that kind of noncensorable way, because obviously, the questions all the US government people were asking were like, “Hey, can Milo Yiannopoulos use Libra coin?” And David Marcus didn’t have a good answer because they nailed him on this.

Aleks Svetski: Yeah, yeah, yeah, yeah, well, I guess it’s just, I think this meme sums it up is Facebook launches Libra, US governments sends cease and desist to Zuckerberg. Sitoshi launches Bitcoin, US government sends cease and desist to dot, dot, dot.

Stephan Livera: Exactly.

Aleks Svetski: It’s like that piece right there sums it up because the Facebook and the consortium and the whole Libra thing, they’re not fucking stupid. They didn’t go out to create an enterprise blockchain. They went out to literally do what bitcoin was doing, but within their infrastructure, so within their pipes and with their own oil. And that’s the paradigm shift of our generation. The paradigm shift of the prior generation was the internet coming up. The paradigm of shift of this generation is the creation of a new money.

Aleks Svetski: And they’re going for the fucking big ticket, which is, as you’ve described it, the creation of a new oil that is the thing that society functions off, and then the infrastructure and the pipeline is going to be built off that. So I guess the question is going to then just come to people is which oil do you want to use? Do you want to use the one that can very easily go down the path of becoming China’s social credit score system.

Stephan Livera: Right, and it can get blocked very easily.

Aleks Svetski: Correct.

Stephan Livera: It’s not very liquid, right?

Aleks Svetski: Exactly, yeah, yeah, yeah.

Stephan Livera: Viscous or whatever.

Aleks Svetski: Yeah, yeah, yeah, yeah, and then it’s got trapped doors and shit everywhere, you know what I mean? So like versus the one, like I actually, I got asked by Brady from Citizen Bitcoin, like ages ago to sort of say, what do I think the next 50 years looks like? I actually now think the next 50 years looks like a world where you’ve got liberty, freedom, and economic rights, and the ability to have property rights, privacy, and all that sort of stuff on this bitcoin economic network versus a world that’s increasingly feeling like an Orwellian 1984/Chinese credit score system/stuff box.

Stephan Livera: Right, got to ask for permission,

Aleks Svetski: You got to ask… fucking you got to like you can’t say shit, you liked the wrong thing on fucking Facebook and all of a sudden you can’t buy groceries, and you fucking go hungry for three days, and they teach you a lesson, and you never say that shit again.

Stephan Livera: Get sent to reeducation camp.

Aleks Svetski: Yeah. Dude, so, I mean, people really need to think about how important the bitcoin innovation really is because without that, we’re all fucked.

Stephan Livera: Oh, I’m totally with you. Right, and I think the other thing to layer on is Patrick McHenry, Patrick McHenry rather. He said there’s no capacity to kill bitcoin. Yes, very important because he was a ranking member on that financial committee. And if he is saying, “Look, America is a country of innovation. We don’t want to unduly or even try to shut this down because first of all, we know we couldn’t, even if we tried, and we would just push all the innovation elsewhere.”

Aleks Svetski: Yeah, exactly. Well, I mean, America needs more of him honestly. And it’ll start sounding like what fucking America was a hundred years ago, not the cluster fuck that it’s become, but that’s my comment there.

Stephan Livera: And so look, now here’s the other thing, let’s layer on another idea. So those people who are already libertarians, they’ll be down with this straight away. But let’s remember the percentage of libertarians probably in Australia. If I had to guess, it would be like 1% or 2% if you’re lucky. So how do you appeal to those other people? One thing I’m thinking is Orange Coin Number Go Up. It’s literally, they come for the gains. What do you think?

Aleks Svetski: Seriously, again, I’m just going to tie it back to Amber, not in a selfish answer, but like as a… when people ask me, they’re like, “Oh, how are you going to get people to buy bitcoin?” And so we’ve optimized it as an investment app. That’s sort of how we positioned it, it’s the micro investment app. Like we originally had the… a lot of the wording was about savings and micro saving and we wanted to treat bitcoin as a savings tool. But what we found was that people were like not interested in saving, like if they wanted to use a savings tool, they were just going to use their bank account. And trying to like, so we’re like, “Okay, the best way to red-pill these people is to give them the promise, or at least the indication that there’s a better future ahead. And by subscribing to the idea of Orange Coin Go Up, they will have the opportunity for a better future.

Aleks Svetski: So fundamentally, I mean, greed is the human emotion, that’s the driver that is behind all of our innovation, all of our striving to do more, etc. Gordon Gekko was right, greed is fucking good. Without that inherent emotion inside us, we wouldn’t get off our fucking asses, you know what I mean? So if we can appeal to that initially, and then somehow it’s the bitcoin name, I came for the fucking gains, and I stayed for the community, or I stayed for the drugs. I stayed for-

Stephan Livera: Because of sound money.

Aleks Svetski: Because of sound money or whatever other reason it is. So I think that’s the best way to red-pill people is to say that, “Hey, 10 bucks worth of bitcoin five years ago is now worth 30 grand. Here’s 10 bucks, get involved, get started.” And when people start like, man, my girlfriend’s parents like convinced them to buy some bitcoin too, and now the dad, he’s on the fucking app every day looking at the price and sending me price reports. He’s like, “Bitcoins at $15,000 now. Should I buy more, should I buy less? It’s amazing what it does to people. So it’s fascinating, man. So I think Orange Coin go up is the initial piece that we need to get, it’s the initial crack and crevice. Now, as things progress geopolitically and macroeconomically and all that sort of stuff, the narratives of store of value and self-sovereignty start to really pick up, we’ll find people from other walks of life that are interested. We’ll get the doomsday preppers, we’ll get the fucking-

Stephan Livera: I think we’ve already got the preppers.

Aleks Svetski: I think we’ve got a lot of preppers, but I still feel like a lot of the preppers are going more like, “When the bombs drop, you’re not going to have your bitcoin. I’ll bet I’ll have my gold, and my lead, and my guns. So I think they’ll become increasingly interested in bitcoin. And so all of that sort of stuff will happen.

Stephan Livera: Yeah, like maybe those guys will be part of the impetus for things like ham radio, or Lot49 mesh networking, these kinds of ideas as well. So that’s another kind of thing. So I think that’s another thing as well. It’s kind of like Bitcoin is this pac-man, and it’s going around the world, just eating up different people, and then it’s taking on a new whole market.

Aleks Svetski: I fucking love that analogy. I’m literally writing an article called Bitcoin is the pac-man.

Stephan Livera: Oh, there you go.

Aleks Svetski: I swear to God. It is that though, it is like literally eating up not only all the other fucking shit coins, but eating up all the other fucking money, all the other narratives, all this other, infrastructure, payment industry. It’s eating everything up.

Stephan Livera: Like I’ll tell you what? Another thing that’s really interesting as well is that despite the millions of dollars of marketing budget that the shitcoins have and the blockchain technology people have had, they still were not able to beat the power of the ideas of bitcoin. The ideas of bitcoin were stronger than all of that.

Aleks Svetski: Well, money talks, man. That’s the thing. So like that is testament at least to the fact that we still have at least the remnant of a society that is still partly capitalists, and that people’s self-interest is still what’s more important. And collectively, we will move towards what we are… we’ll move towards what is of interest to ourselves first and foremost. And bitcoin represents the first time we’ve been able to create a system where whilst working in our own self interests, we are working for the interest of the collective. And it’s just so fucking powerful that that was able to be created and whilst everything else is like this working in a blockchain self-interest doesn’t create anything, and it’s like just noise for somebody else. Like it’s just, I feel sorry for everyone on that side of the field.

Stephan Livera: The poor XRP Army.

Aleks Svetski: Oh, dude. For all of them, for the Social Justice Warriors in Ethereum, for the deranged lunatics in the XRP Army, for the fucking shitcoin bag holders who are sinking like, man, it’s… and then for the nocoiners who are too fucking arrogant or too ignorant to even want to listen to it. Like I got knocked back by Kochie the other day because we were doing some PR stuff for Amber. And literally, here’s the feedback that I’m getting from the media companies at the moment is we don’t want to cover bitcoin because we don’t think it’s a good thing to cover as an investment product. But we’d be interested to hear about the underlying technology if you’d like to comment on that.

Aleks Svetski: And I lost my shit. Like the shit that we got back from Kochie it was like, “Yeah, sorry, we will never support scams or Ponzi schemes on our network.” I was like, “Are you that intellectually ignorant or lazy to not want to look into it?” And what I told a couple of them, I was like, “All right.” I said, “I’ll be available when bitcoins back at 1000 grand, and you’ll be scrambling to find someone to talk about it. So it’s just, I don’t know man.

Stephan Livera: Yeah, they’re stuck in a blockchain land. And here’s another funny one. So obviously, you and I are in this world. But people are looking at it from the outside. They think, “Oh, you bitcoin people, you’re being tribal. Why are you so tribalistic? Why don’t you just be open and accept all the crypto together and it should be friendly to everyone. And it’s like-

Aleks Svetski: Kumbaya.

Stephan Livera: … hold on, I don’t think you understand what’s going on here.” What do you think about that?

Aleks Svetski: Oh, dude, well, tell me where you’re going with the tribalism piece just so I can —

Stephan Livera: Yeah, I mean, so, for example, like they will think of it like, “Oh, you guys are paying out all the other cryptocurrencies.” Like from our point of view we’re like, “Well, hold on, those cryptocurrencies are not as liquid, they’re not as secure, they don’t have the same real backing or decentralization of bitcoin.” So from their point of view, from the outsider point of view, they think, “Oh, you guys are just being tribal,” whereas from our point of view, it’s more like, “No, we actually think there are better characteristics about bitcoin.”

Aleks Svetski: Yeah, absolutely. Yeah, okay, cool. So what you’re saying there is people perceive our arguments as tribal, whereas we understand our arguments as logical, right?

Stephan Livera: Yeah.

Aleks Svetski: Yeah, yeah, correct. 100%, man. I mean, it’s just the people who say that they say that because they’ve taken an anecdote somewhere or they’ve heard something that sounds nice. Look, I’ll give you an idea, an example, equality as a concept sounds nice. Everyone’s like, “Oh, yeah, we should all be equal.” But when you start to understand it practically, you start to realize that the only way to create equality is through violence. So then you’ve got ask the person, well, do you believe in violence? “No, no, no, no, I think we should have no violence.” And then when you start to even question that, it’s like how do you enforce no violence through violence? Like there’s no other way.

Aleks Svetski: So a lot of these outsiders or shitcoiners and all of that, they bind to these veneer ideologies where they hear things that sound theoretically nice but in practice don’t fucking function. Because in the real world, everything comes with a trade-off. There is no such thing as being on the complete one side of a fucking spectrum. Everything has a trade-off. And I love Nic Carter’s article that he wrote about, like bitcoin chose consciously the trade-offs that it wanted to make along the way.

Stephan Livera: Bitcoin is biting the bullet.

Aleks Svetski: Correct, it was biting the bullet. Exactly, that article’s fucking brilliant because it chose those trade offs along the way. Consciously not the deranged fantasies of the shitcoiners who went out and built their own things, who were like, “Oh, I’m here to fix bitcoin. Oh, it looks like I can’t fix bitcoin. So I’m going to go spin off my own shitcoin, and I’m going to fucking be the savior of the world.” And they think they’ve made no trade offs. But, I mean, let’s bring it back to Libra. Libra is an example of them becoming now fucking irrelevant because nobody’s going to use their shitcoin with fast payments when you’ve got 2 billion people on Libra, and they’ve got six people still trading their coin on fucking Binance.

Aleks Svetski: It’s like, it just shows that the real world, the world of practicality, the world of logic comes with the ability to be… comes with the requirement to understand things deeply, and in understanding things deeply, comes with the realization that there are trade-offs in the real world that you must make. And in the process of making those, you need to optimize for what? For the outcome that you want to achieve. And that’s what the people outside of Bitcoin don’t realize. They think like, “Oh, you’re just deflationists, or you’re just the fucking bigot, or you’re toxic, or you’re a tribalist.” They haven’t taken a moment to understand the depth of thinking that we’ve gone through over the years of being involved in this.

Stephan Livera: Yeah, right, exactly. And I think one point you’re making there is kind of like Libra it’s killing the shitcoins, or every other shitcoin. It still is itself a shitcoin, but it’s basically killed all the other shitcoins. And then so it’s kind of like becoming this almost like a three-way race, then if you will, like the kind of Libra, USD, or bitcoin. It’s kind of like getting to the final boss. I guess closing thoughts and how do you think it plays out? How does Bitcoin, if it does, does it win against those?

Aleks Svetski: I’m going to answer it in funny way. So because I believe money is fundamentally a belief system.

Stephan Livera: All right, so Neil Woodfine is on your case right now, watch out.

Aleks Svetski: Look, I believe fundamentally what we do as human beings is in order for us to cooperate in a society and to build a society, we need to function off these shared beliefs or these shared fictions, whatever the fuck we’re going to frame them as. And what we do though is the shared fictions or the shared beliefs that are the most important, we try and find things that can embody, or objects, or items, or units that can embody the elements that allow that shared fiction to be as robust as possible. So the reason to this date that fiat is still around or that we can sit here and I can give you a 20 bucks cash and you’ll accept it from me.

Stephan Livera: Nope, I won’t.

Aleks Svetski: Fuck you.

Stephan Livera: Nah, go on, go on.

Aleks Svetski: But the reason we can still do that is because there is still a shared belief that that is… what we see with hyperinflation is just the collapse of that shared belief or the collapse of that shared fiction. So what I think we’ve got moving forward is we’ve got the broad-based belief that’s been built up over generations for the US dollar. Then the emergence of these new things, like the two new horses, which is bitcoin and Libra, and who can gain market share based on initial belief. And a lot of people think Libra is going to win that race out, but what they’re missing is the fact that Bitcoin has objective qualities of its nature that will help reinforce a much stronger, more ingrained belief because… let’s use the sum, let’s use an analogy of we could build a chair out of wood, or a chair out of a fucking paper. We can both objectively believe that it’s a chair, but one… sorry, we can both subjectively believe that it’s a chair, but one objectively has different-

Stephan Livera: Attributes, oh, yeah.

Aleks Svetski: Attributes, exactly. And that is where so then more people are going to want that chair. So over time, more people are going to want the thing with objectively better characteristics. That doesn’t mean that money is not a belief system. It still is a belief system, but we choose to believe, or in our own self interest, we will converge to the belief system that, oh, sorry, we’ll converge to the unit that best supports that belief system.

Stephan Livera: Right, so I think the way [crosstalk 00:44:23].

Aleks Svetski: I think it’s a more nuanced arguments.

Stephan Livera: Yeah, I think the way some of the bitcoiners have spoken about this is like instead of shared belief, it’s more like shared recognition. It’s more like this kind of idea that if you’re going to use a certain money, you should be using a money, in your own perception. You should be thinking, “Well, hang on, all these other people are already using that money. I might use that too.” And so I think this tension then between like is it a money or is it not, I think what it’s saying is what caused those other people to use that money. And part of that was certain characteristics as have been discussed earlier on the podcast like stock to flow, Saifedean as well, discussing around ideas of saleableness. So I think that is kind of what that argument, in my view, that’s what that’s getting at.

Aleks Svetski: Well, let me layer it with one more nuance is the closer you get to the core of it, the more it becomes objective. The further out you get, the more it becomes a subjective belief because the people, 20, 30 years from now who are using bitcoin and not even touching the core protocol, maybe using layer two, layer three lightning or whatever, they’re going to be using it because the next guy’s fucking using it, not because they understand the core.

Stephan Livera: Oh, of course, of course.

Aleks Svetski: So then, so what happens is as money progresses, it must be a belief system that more and more people buy into and believe, not necessarily because they understand the core elements of it, but because the consensus of the ecosystem or the society within which they’re in operates off that belief system. And the thing is when you remove the core attributes, like what we did with fear, then the thing can crumble in on itself. And that’s how you get this crazy fucking hyperinflation or this crazy collapse of an economic system, or a belief system of some sort. You could not get a collapse of something if it wasn’t a belief system in the first place, or if there’s not a belief system in there. So money, fundamentally, is a belief system, but the core and it’s what’s in the center actually fucking matters if we want it to subsist.

Stephan Livera: Right, so I guess putting on my Neil Woodfine cap, I would say maybe we’re just talking in different senses of what is a belief system. So I think the point that say Neil Woodfine, or even I have made the similar kind of argument as well, is that what drove that center part, that was what really what made the money. The other staff just flowed as a result of it anyway. So like, yes, yes, it’s true, there’s other people who believe in it and so on. But I think it was all because which one was the best money? And then the belief systems were downstream of the objective characteristics. That’s probably one way to think of it.

Aleks Svetski: Yes, so broadly speaking, correct. So that’s that… yes, so I agree with you there. There’s probably another argument, but we won’t go through this here. Maybe we’ll link to my article about Homo sapiens and evolution and how money came to be as a concept, but I think there’s an argument for the idea that money, even as a concept, yes, we might choose the best objective representation of money to be the best money. So I agree with that. But just the very creation of money as a concept, the reason as it exists is because we choose to play a game for the purpose of building society. So as a result, we need some sort of fabric or some sort of glue within society, which is this ability to do work, perform value add, do something in society and have a measure of that, that we can then use in order to interact with other human beings. Yeah, it goes a little bit deeper, but it’s probably not… it moves into philosophy. And it starts to get-

Stephan Livera: More on political philosophy and like kind of how do societies organize themselves and stuff like that.

Aleks Svetski: Correct, and all that sort of stuff. Exactly, exactly. So it basically states the very essence of requiring money is that we as a society need to function. So we choose to create this thing called money in order to cooperate, the same way as if we’ve created things called religion, or states, or laws, or governments, etc. Yeah.

Stephan Livera: Right, yeah, yeah. Look, we should probably wrap it up before we get kicked out of this room, and we have to promise them we would just record a bitcoin podcast, I swear. Anyway, before we let you go, tell my listeners, those of them who haven’t heard you before, where can they follow you, and where can they find Amber?

Aleks Svetski: Sweet. So Twitter, Aleks Svetski, it’s spelled a bit funny is A-L-E-K-S S-V-E-T-S-K-I. So I’m on Twitter. I’m always ranting about some stupid shit on there. I mean, I’m on LinkedIn and stuff like that, but that stuff is like become cancer. [crosstalk 00:49:16]. Yeah, exactly. It’s become absolute cancer. And with Amber, if you’re in Australia, we can definitely service you, amber.app, that’s it. We’re not available overseas yet, but hopefully we’ll be in UK and Europe before the end of this year. Yeah, so fingers crossed. And other than that, yeah, thank you again for having me on, bro. Really enjoyed this, and looking forward to doing a round three, maybe 2020.

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