The Exchanges

Q Well, I mean, also our system is a democracy, is it not? Like, so you cannot just do that. Even if the government wanted to weld people into their homes, we have a democratic state here where we have to discuss these things, and there's a legal framework to it, so it's not even possible.

A Yes, but even in the, in the, in the 19 fifties, the 19 forties, 19 thirties, the US was still a democracy, but it basically managed to exert a very strong top-down control on things. even Today, we have something for where for right, like, you know, under FDR, or in the fifties, a very conformist society, which was able to kind of drive things through, even those democracy, it was something where mass media was so centralized, that a relatively few, relatively small group of people could get consensus among themselves. And then what they print in the headlines, I mean, who's going to go and figure out the facts on their own, this gets into the media topic later. So as de facto centralized at the media level, the information production and dissemination level, And then you kind of manufactured consent from there. Today, it's you're combining that democratic aspect, the legal aspect, with a new information dissemination thing, which has destabilized, I think, a lot of things.

AI assessment note: “the US was still a democracy, but it basically managed to exert a very strong top-down control”

Q And you were the CTO for a while of Coinbase, obviously. What was your take on Coinbase's lend product, the SEC coming in and saying, hey, Pump the brakes. We want a bunch of information. And then they've just Brian Armstrong and Coinbase announced that they're not going to do the lend product. What's your take on that?

A So I don't speak for Coinbase anymore. Okay, I'm, you know, in my personal capacity. But I do think that this is sort of the beginning of an era where we're going to be rolling back the alphabet soup that FDR put in place. That is to say, you know, the, the SEC is not set up to go after millions of crypto holders and developers. They're set up to go after a Goldman and a Morgan, you know, just like the FA is not set up to go after millions of drone developers except to go after Boeing and Airbus. And the FDA is not set up to go after millions of biohackers except to go after, you know, Pfizer and Merck. So the entire twin century alphabet soup, that regulatory apparatus is meeting something that it's not really set up for. And, uh, it's going to be, it's the problem is not, the problem is not any one actor like Coinbase or Kraken or what have you. Their problem is that technology has shifted and they've got many more people to deal with. And many of those are individuals who are more risk tolerant than companies. So So I don't think they're going to be able to maintain the status quo of a hundred years ago, the statutes that they're citing. I think that's going to either get knocked down in court or going to be technologically invalidated. There's going to be sanctuary cities and states for crypto, or there's going to be international entities like what El Salvador is doing in …

AI assessment note: “this is sort of the beginning of an era where we're going to be rolling back”

Q and then its sort of descendant of the United States ended up essentially conquering and dominating the modern world. And so, I guess, you know, to bring it back to my question to Balaji, is there a chance that what Xi is doing, returning to socialism, Could this be like the Chinese emperor who banned shipbuilding, or am I reading way too much into the single Wall Street Journal story?

A So my short answer on that is, I think it is, ah, I think the socialist thing is real, but I think it's better to call it nationalist socialism, um, with, with the implications that has. Whereas I think the US is kind of going in the direction of what I've called maybe socialist nationalism. You know, where it's, it's like different emphases in terms of what is prioritized, but you know, and I think in many ways, China is like the new Nazi Germany woke America is like the new Soviet Russia and the decentralized center is going to be the new America. I can elaborate on that, but basically with respect to this, one thing I try to do is I try to triangulate lots of stories. So rather than for example, And nothing wrong with a Wall Street Journal, you know, piece like looking at it. But for every WSJ piece you read, it's useful to get like, you know, what is CGTN or Global Times saying, even if you discount it just to see what they're saying. And then you also triangulate with, let's say the Indian or Russian point of view. And by doing this, you I feel that it's better than just reading 10 American articles. And, you know, especially reading primary sources, like there's this good site called reading the Chinese dream. Which actually translates primary sources, and then you can kind of form your opinions from that versus like, like a quote hot take, right? I'm not saying you are. …

AI assessment note: “I think the socialist thing is real, but I think it's better to call it”

Q this constant kind of evolving cat and mouse game of where does the information lie, who has control over it, and who's influencing people, um, ends up kind of being, I think, the big narrative that we'll kind of realize over the next couple decades. But I don't know, Balaji, if it becomes the endpoint, right? I mean, this is, this feels to me part of a longer form narrative.

A Yeah. So I think like lots of things look cyclic. If you look at them on like this, if you look from the Z axis, it's more like a helix where you do make progress, even if it seems you're going in, in a, in a loop. And so I think, you know, it's centralized, then you decentralize and you re-centralize. It's like the concept of unbundling and bundling. You unbundle the, the CD into individual MP three's, you re-bundle into playlists, right? And so with decentralized media, it's not, Purely every single node on their own, I think it's more like a million hubs and a billion spokes. And Jason, to your point, basically, most of those hubs are not going to allow things that 99.99% of people think are bad, like see Sam, you know, As for the other things like, you know, slander, hack documents you mentioned, the thing is current central arbiters will falsely accuse people of these things or enforce them in political ways. It's the centralization is actually also not a solution. It's being abused as Saks, you know, points out. And in fact, official disinformation early in COVID, which, you know, I had to like basically beat back with a stick. Fortunately, you know, got some of it out in time, but you know, people said the flu is more serious. The travel bans were overreactions that only Wuhan visitors were at risk. That avoiding handshakes is paranoid, that the virus is contained, tests…

AI assessment note: “lots of things look cyclic. If you look at them on like this, if you look from the Z axis, it's more like a helix”

Q Balaji, why do we, why did everybody in the West get this so wrong?

A Well, so a few things. One is, um, political differences aren't public in China, but they are real. So it's, it's all the backroom stuff. Uh, and there was a real leadership shift from Deng and Jiang and Hu to, to Xi. Uh, you know, the Mao era was revolutionary communist. The Deng, Jiang, Hu era was internationalist capitalist. I think that was real. And the Xi era is nationalist socialist. And it's just different. Like who did not fully control the military the way that Xi does? Um, there's this ad you guys should watch the Chinese military ad. It's called like, we will all be here or something like that. And the thing about it, it's not just that it's like extremely well coordinated military parade and set to be intimidating and so on. It's that the whole thing clearly just falls up to one guy, Xi. It's not him riding in a car with the rest of the communist party Flanking him as an oligarchy. It's just like one guy, this two million person army folds up to him. That is a true consolidation and roll up of power that he's able to accomplish among other things with tigers and flies going and throwing Bojili in prison, go, you know, having generals, you know, thrown in prison for whether they were actually corrupt or whether they simply, you know, dissented or were. Yeah. Yeah. It's, it's hard. It's hard to know from the outside, you know, in one sense, Because so many folks in t…

AI assessment note: “political differences aren't public in China, but they are real.”

Q Because, by the way, the early peer-to-peer versions failed, right? Because, ah, Juiced, I mean, you know, the alternative didn't really work out.

A Right. The hub and spoke. Yeah, yeah, exactly. Right. So, I mean, BitTorrent did exist during this time. It's not like it was zero, but generally speaking, this was the era of hub and spoke MVC dominance. And now we're into a third architecture, which I call CBC, client, blockchain, client. And so desktop clients have a blockchain that they communicate with. For example, I have a wallet, you have a wallet on your client, and then the Bitcoin blockchain intermediates us. I debit and credit you. Okay. That's a different architecture than both MVC and CBC and actually combines the positive qualities of both. It's decentralized and open source and programmable like peer to peer, but it also has global state and it's highly monetizable like MVC. So combines the best of both worlds. And it has some, something that's very new, which is not open source where it's open source code. It's open state where it's open state database. Like open state means the backend is open also. So all the applications that get built out, essentially our clients that same back in that same Bitcoin or Ethereum or what have you back end. And then you kind of exchange between them and the true scarcity now comes not from locking in your users, but from holding a currency, it kind of gets reduced the IP gets reduced to its minimal viable thing, which is holding that cryptocurrency and what you can do with that…

AI assessment note: “Right. The hub and spoke. Yeah, yeah, exactly. Right.”

Q you become such a polymath? Was this just one of these things where you've always been curious about everything? Like, just tell us about, I'm curious about like how you grew up, first of all, and then second, how do you spend a normal day? I just want to know those, and then, then we can just jump in. I'm just curious, because I do extremely well-read and extremely knowledgeable.

A Well, thank you. I appreciate that. Um, you know, I try to learn from, from everybody. What do I do? Uh, I think normal people Go to the club or they, they go out and have fun. And I, I read math books and history books and science books and stuff like that. That's how I have fun. I find that more interesting. Um, nothing wrong with, with going out. People do that. I go for walks and stuff. I work out. Um, but, so I, I do a lot of that. Um, and, uh, I have, I, I mean, other than that, I just, I just read a lot, and I, and I, I think I remember a moderate amount, and so I cite that.

AI assessment note: “I read math books and history books and science books and stuff like that.”

Q Clearly, Sachs is letting his kids use whatever they want. I mean, we definitely need to have some of those over here. Balaji, what do you think is going to happen? Worst case, best case for China in the next Two decades.

A Well, so one thought I wanted to give is basically that in some ways this is inevitable because China and India are 35% of the world. Asia was the center of the world. And one way of thinking about it is that America and the West executed extremely well over the last couple of centuries, and Asia didn't with socialism and communism. And now that they've actually got a better OS, it's not like the US really could restrain them, you know. Um, so in that sense, that's also part of their internal narrative in a, in a way. I mean, of course, Mao killed millions of people there. They screwed up their own stuff, but their narrative is they were colonized by the West and the Opium Wars or patronizes copycats emasculated on film for decades. They're like heads down and sweatshops. They built plastic stuff. They took orders from all these overseas guys and, and now it's their time to stand up and take back their rightful position in the world. And that's like, that's their narrative. And so it's, it's important to not, not agree with it, but at least understand where it's coming from because they want it more, I think. Um, and so I, I disagree, Jason, with your, with your view that they're going to have a revolution. I think that's like, that's the kind of, that's a Western mindset where, you know, Australia, for example, is having these COVID protests. In China, the harder the crackdown…

AI assessment note: “one thought I wanted to give is basically that in some ways this is inevitable”

Q You just said that the blockchain couldn't be changed and that all the facts were permanent. So why does it depend now?

A Well, for something like child porn, for example, it's actually being used for that. You're not going to find lots of people who are running those nodes. It is, it's something where edge cases are always used to attack something. There's a famous cartoon which says, how do you want this wrapped? And it's called control of the internet. And it's either protect children or stop terrorists, right? And so when we talk about an edge case like that, I mean, the CSAM stuff, child porn, you know, that was, that's used by Apple to justify intrusive devices that are scanning everybody's stuff. The, I think the answer to a lot of those things is If, if you're doing something that's bad, there's usually ways of going after it that don't involve this gigantic surveillance state that was after all only built in the last 10 or 20 years. There's normal police work that you can do. Um, if they're actually like, you know, a bad guy, there's other forms of police work. You can get search warrants. You don't have this completely lawless thing where you just, you know, some guy in San Francisco hits a button and you're digitally executed. And so, so, you know, it's not that there isn't any possibility for rule of law. It's just that it has to actually be exercised in this.

AI assessment note: “edge cases are always used to attack something”