WBD114 Audio Transcription 

Giacomo Zucco on Why Brexit Is Good for the UK (and Bitcoin)

Interview date: Friday 7th June 2019

Note: the following is a transcription of my interview with Giacomo Zucco from BHB Network. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

I wanted to understand more about why Brexit could be good for the UK, and after a discussion with Giacomo in Munich, we agreed to record an interview and discuss the topic. We cover why decentralised political power is better for democracy, free markets and both the benefits and pains of Brexit.

Interview Transcription

Peter McCormack: The reason I want to talk to you about Brexit, is a long time ago you spoke to me about it once very shortly or it was a tweet I saw you put out and you were talking about how smaller states are better. It might have even been our first interview.

When Brexit was coming up, I was going to vote for Brexit and then one of my friends said to me, "the great thing about the EU, it's the best peace project in modern time" and I kind of started feeling guilty and then I didn't vote for Brexit. Now Brexit's been such a mess, I'm kind of veering towards wanting Brexit but I don't have a proper articulate argument about it. So I know you do. So a good starting point, what are your general thoughts on the EU? What is good about the EU and what is bad about the EU?

Giacomo Zucco: So first of all there is a lot of unpacking in this correlation sold as causation between European Union and peace. The European Union is basically the merge of two kinds of project. One project was of market unification. So basically, give up artificial and political barriers to market and I think there are very good theoretical reasons to think that these kinds of project can have peace, because it was Frederic Bastiat saying that, "where there are not goods and people crossing borders, then there will be tanks and soldiers crossing borders."

So the destroying or reducing barriers to exchange, to free exchange can help peace. The second part of the European Union project was political centralist centralization. So unification and uniformization of political decisions. So basically centralization of decisions. I think that second part, there is no reason to think it will help a peace. It never did. Historically more centralized society where the control over society is delegated to basically a single point of failure, they seem to to fare better in the short time, because maybe you have less psychological or perceived chaos.

So I give you an example, in all the far west age of cowboys killing each other in the far west, since let's say, the beginning of the frontier until the civil war, there were a lot of people shooting each other, but they were way less gun murders than in the first two weeks of the civil war. So when you have something centralized like an army or you can say the same example about middle age fights and wars in Europe, there was war all the time. There were Vikings pillaging villages.

But then with a few weeks of French revolution terror, you get more deaths and more casualties than in all that. So you have a concentration of risk basically and the European Union is seen as a centralization program, is exactly a concentration of risk thing. You think you have peace unless you will have continental scale war sometimes again.

If you think about that, World War 2, World War 1, they were coming from very, very powerful, bigger nation state capable of total war. It would be impossible to have a World War kind of massacre with the town states, little free states, city states. I mean Hong Kong will never destroy the population of Lichtenstein and if the world was made up of many Lichtensteins and many Hong Kongs, you will have more perceived disorder, but a more stable meta order let's say.

Peter McCormack: Okay. So with the EU itself though, are you a fan of any parts of it?

Giacomo Zucco: Only the Common Market, which is not really a new thing, because if you think about that, Switzerland is part of that, but it's not in the EU. So I would say no, not at all. The European Union as it is, is the bad part of the European integration. I am a fan of European level and world level free markets.

I want to be free to exchange goods and services with people I care about and I trust and that serve me well, independently of them, of their ethnicity or nationality or passport. I don't care about imaginary lines between me and other people. I don't want to trade with the worst Swiss guy, but with the best Russian guy if I can.

Peter McCormack: What about free movement of people?

Giacomo Zucco: That's a little bit more debated and a little bit more divisive, because there is the security concerns about, "what about terrorists!" So even many people were okay in principle with free movement of trades, they are surprisingly and thinking consistently, okay with the restriction of movement of people. I think that the movement of people, is a threat only because it's we see that associated with other very strong political status intervention like welfare per city states.

So in some countries that maybe were organized around a very small, rich population like in northern Europe, then you have a strong incentive for free riders to move from other countries in order to harvest and to benefit from these low hanging fruit on welfare. So you have basically a distortion in which productive people, they can find job everywhere.

But non-productive people or shitty people, from an economic point of view, is not a personal insult, will tend to move toward big welfare states. Also, the centralized state as a second feature that it tends always to make this the citizen the subject harmless and disarmed, because the state wants to monopolize security, first of all. So you are armless and you are disarmed, you are completely exposed to risk of personal threat and so you start to care about criminals, terrorists because you cannot defend yourself.

But if you think about that, borders at the household level, will be way more effective into managing security, than borders at national levels, because it's impossible to manage security from the internal terrorists, for example, or for people smuggled in or for people there since second generation. So borders are not protecting you from terrorists, the decentralized borders of your household or the Europe gated community world, but the nation state, this courage is always there, they delocalize the centralized security in order to encourage the centralized nationwide security, which usually fails.

Peter McCormack: And what are you feelings, I know it's separate, but what are your feelings on the single currency?

Giacomo Zucco: Well, that's a little bit different. That's like asking me what I will feel about a single language. We're talking English right now, even if my accent is Oxfordian and yours a little bit, I mean not so good as mine, but we are talking English in a way, because we want to converge toward a single standard. We tend to converge across the world to single standards.

Money is one of the standards where convergence is more critical and more important, even more the language, because you need to exchange, you need to optimize the problem of double [Inaudible] across the biggest market as you can. So you want a single unit of account and a single medium of exchange. Also you want to move your wealth intergenerationally, so you need a single store of value. So money tends to be a convergence.

I think that money is one of those cases in which the political intervention, which usually is seen as something which monopolize and usually you see political intervention as trying to aggregate stuff, beating competition and basically crippling competition. In the case of money, for example, I think the reason we have several fiat currencies, is because of state intervention that tries to keep separate the standard preventing people from finding a convergence before fiat money, the civilized world basically had one monetary standard, which was gold.

Before it was also silver, then only the gold, when they switch from physical to [Inaudible 13:46]. So gold was already a single standard. So in the case of EU, it's strange because, when you have centralization, you always have an apparent improvement of local risk and the generation of global risk. What I mean is, Italy for example, the Central Bank of Italy had a terrible monetary policy, which was destroying wealth, all the time inflating the base currency. So it was crazy! 

When Italy enter the monetary union with the European Union with Euro, things went better actually from inflation and the business point of view. So much that the government couldn't go on increasing government spending so much, because they didn't have the money printer anymore. So in a way, these external boundary, improve the condition in Italy locally, but at an expense of creating the incentives to a way... I mean so far, the Central Bank of Europe is kind of conservative about money, it's run by German culture, which is very, very hurt by hyperinflation.

So they know about hyperinflation, they tend to be conservative. But when you reduce the competition, when you rise the cost of moving away from one choice to the other, the cost of opt-out, then the long run effect is more the generation. Let's say that if you, for example, I use as a typical example is Switzerland. In Switzerland, many, many policies and many, many regulations are decided at a town level.

That means that the cost for you to opt out from some regulation, from some standards, some legal jurisdiction configuration, is just to move maybe 200 meters and speak the same language and keep your friends, keep your family close, keep your assets, and you just move your home. While, for example, in big centralized nation states, the only way that you have in order to opt out some regulation is the typical state centers moved to Somalia.

So since I don't like your regulation, I have to give up my family, my friends, my loved ones, my assets, my language, my culture, my skill set, my business network. So that's that's a huge cost to move. So when you have competition, you can vote with your feet. When you don't have competition, you can only think you're voting with your hands on the bell, but actually that doesn't influence anything. So about money, I think that Euro is better than many shitty currencies before Euro so far.

But it's creating the incentive for a super bad continental level hyperinflation eventually and it's already happening. We were hearing some central bankers talking, we hear Mario Draghi says that he will do whatever it takes to save the current financial system, which is dying and there is a mass systemic risk in that concentration.,,,,,

So long run, any kind of monetary unification driven by market forces is great and it is efficient, it is what we want. While the forced, top down imposition of monetary standards is bad. It's the same with languages. It's good that we can speak English together, but it will be very bad for a nation state to impose a language to a native population, eradicating their language in a violent way.

Peter McCormack: It's quite interesting you said, you think we're heading towards hyperinflation potentially in Europe. It feels to me that the levels of debt across the world have been getting out of hand for years, potentially decades, but definitely years. The level of debt in the US is quite scary. Are we essentially across the whole planet kicking the can down the road?

Giacomo Zucco: Yep. We are delaying risk, concentrating and delaying facing reality.

Peter McCormack: What is the alternative option?

Giacomo Zucco: Well, if you have a friend who is junkie and he is increasing his doses of heroin all the time and now maybe he stops for a while and he starts to suffer a lot for withdrawal crisis. So what can you do to make him feel better? Well, the obvious answer is to give him a double shot and to help him increasing the shots. But you know that eventually it will just just lead him to a worst crisis in the future. So there is a one answer, which is a delay facing reality now, in order to have a worst crisis later.

So hide the problem under the desk or just facing reality now, which is always suffering basically. So if you have a company and the company has a broken business model. Instead of closing down the company or people in the business model, somebody gives you extra money in order to go on, you are not really solving any problem, you are just creating the conditions for a worse crisis later. So what is the alternative to delaying continuously... So reality is like gravity. When something goes up, eventually it will go down.

So you can try to push and push and push against the laws of reality, probably biology is a better example because it is a bit more unpredictable than gravity. So the junkie man dying of overdose is a better example because it's a biological organism. You don't know when it's going to die and maybe it will feel great after the next shot, but eventually, you don't know when, but you know he's going to die from overdose if he keeps increasing.

So one alternative is suffering and withdrawal. I'm sorry, you have to suffer, you have to liquidate the bad investment of the past, which is not good for everybody. It's certainly not good for your pusher and is not good for you in the short term, but eventually if you liquidate now you have less suffering. If you liquidate the mistakes later, you will have way more suffering. So the alternative is basically liquidation of a bad debt.

There is a good argument that hyperbitcoinisation could bring to hyperinflation of fiat money, but also maybe not, because on one side, hyperbitcoinisation can take the monetary demand out of fiat, but also destroying debt and enforcing the liquidation of debt, could also take a lot of supply out of fiat, because much of the monetary supply of fiat is not central bank money, but it's commercial bank inflated reserve currency.

Peter McCormack: Can countries do this in isolation though, because it feels like almost all countries are competing globally. So for example, say the European Union decided, "okay, we're going to stop taking our shots of heroin. We're going to take the pain." It feels like they would suddenly become less competitive than say China and the US and could fall behind. It's almost like a game of chicken.

Giacomo Zucco: That's very good point. Still staying in our metaphor, our very gloomy metaphor, is it easier to stop using if you are inside the community of junkies or not? Of course not, it's harder. You have a competition of people that in the short term, they feel better than you, because they're doing drugs and only in the long run you have your revenge when they die and you don't! But in this case there is a second problem which is basically democracy.

Democracy is a system that incentivizes short term decision a lot. The time preference of democracy as a system is incredibly high. So a politician running for an office in four years, he will never have incentives to take decision that implies suffering during his office and then eventually people getting better when the next guy will take his place.

So in this sense, this is a very paradoxical and controversial notion, but I think it's technically accurate that some kind of old time monarchies were worst in some kind of situation, but way better, for example, when it comes to time preferences, because if you think you have to leave the kingdom to your son, maybe your power is more arbitrary, but you have a lower time preference because of that.

Peter McCormack: So do you believe that democracy is the will of the people? Or do you think democracy is really the will of a few men and even fewer women's career objectives?

Giacomo Zucco: So there are two answers to this question. First, the actual implementation of democracy as an ideal is impossible. There are several mathematical theories explaining that you cannot really create a fair voting system because... Well game theories are such that eventually, you will end up taking decisions that are not really expression of the majority.

Also there is a practical implementation problem of corruption, the fact that the peers under democratize doesn't scale and so you end up with representative democracy and then with lobbyists and then you end up basically with some kind of oligarchy or illegal cartel. So democracy as purely horizontal ideal doesn't work in practice, it's not implementable. But even if it was, there is the very theoretical problem that Benjamin Franklin was mentioning with the famous sentence, "democracy is two wolves and one sheep, taking a vote about what to have to have for breakfast.

The liberty is one sheep well armed contesting the vote." So the point in many occasions, is that democracy can be the will of the majority, but the will of the majority can be to disrespect the rights of the minority and the most important minority of all, is the individual. If everybody is a white supremacist, but you are black, majority can have it's way, but that's not a good thing because you have your human rights. If the majority of people is... I mean, you can make several examples, and they're not theoretical examples.

Majority of people, many times during history, oppressed minority, and that's not really... Some people defend democracy. They try to use this very vapor notion, a very ambiguous notion that democracy is the will of the majority and at the same time, is the total respect of the rights of the minorities, which basically is like saying that is not the will of the majority anymore.

So I think that the ideal is absolute monarchy, but decentralized at the level where my kingdom, is my home and then I can do all the international treaties I want with my neighbor. We can create a network of alliances. I think it was Tolkien, writing to his friend that his ideal, is anarchism or absolute monarchy, which is actually the same thing if you decentralize the kingdom enough.

Peter McCormack: Don't you think we can make democracy better with a Blockchain though?

Giacomo Zucco: Sure!? Everything we're saying is assuming we're not using the Blockchain. If you use the Blockchain, every problem we are discussing goes away immediately!

Peter McCormack: Everything is solved! I did the same thing with Jimmy in Oslo the other day, I'm going to release that tomorrow. Okay. So let's talk about Brexit. One of the interesting things is that the people of the UK voted for Brexit. We've got this very complicated process of trying to divorce ourselves.

Whenever anybody discusses this on Facebook, amongst my group, sometimes I'm the one putting out the questions, just to see what the reactions are, it's overwhelmingly anti-Brexit. People want a second vote, people are against it, but you believe Brexit is good or certainly good for the UK. Why?

Giacomo Zucco: Because of the discussion we had until now, I am strongly convinced that in general, political decentralization is better as incentives in the long run, which means that even if... So let's take a better example because actually UK is a bad example for this, because it's too easy for me, because I think that the policies of European Union as for taxes and and stuff like that are objectively worse in many cases, than the policy of the UK.

But let's assume a case for example like Catalonia. In Catalonia, the political culture there is very wrong, by my perspective. They are mostly socialist, they want to control the economy, they want to ban Uber from the street. So the local politicians in Catalonia wants to increase the level of central planning estate control. But even if the Spanish government was completely classical liberal pro market, it will be better to have a separate Catalonia because of the incentive long run. When you create decentralization, then you create the process of competition and offer incentives that can get things better, based on failures, so people can learn.

So there's more skin in the game. There is a shorter feedback loop. When you are wrong, you suffer the consequences of you being wrong directly and people can opt out of your wrong decision easily. When you centralized, when you are wrong, you can hide the consequences, you can basically export, you can redirect the consequences to somebody else. Think about things like protectionism. "I want to ban every foreign good." If you are Hong Kong, you cannot do that. If you are Lichtenstein, then you cannot do that.

I'm thinking of extremes of course. If you are France, you can do that and if you are Italy, you can try to establish fascism and to ban any kind of foreign good. You cannot do that when you're small. So Catalonia, even socialist, politically stupid Catalonia in the long run will get better, then a very illuminated and rational national Spain. With Brexit, I think that the argument is double. There is the same arguments, so it's better if a UK is not strictly centralized into the policy of the the European Union.

Well, there are some counter examples. For example, some eastern European countries are better as tax level than UK. Ireland is better than UK. But the goal of the European Union is not to make the UK as good as Ireland, it is to make Ireland as bad as Italy. So when politicians talk about harmonization for example, tax harmonization, they don't mean that your taxes will become the ones of Luxembourg.

They mean that they want Luxembourg to stop providing competition to France or Italy or Germany or other statist and fiscally totalitarian countries. So the argument there is that in Brexit, it will be probably better in the short run and in the long run. Maybe not really much in the short run, only because of explicit wheel of retaliation by the European Union politicians. They decided to stop a possible domino effect, so they decided to punish in every possible way, the UK if it leaves the European Union.

Peter McCormack: Because they're scared it will be successful?

Giacomo Zucco: Yep! So just to clarify, I am in favor of UK leaving the European Union and Scotland leaving UK and Edinburgh leaving Scotland and eventually a guy in Edinburgh leaving the town council. So I'm for succession down to the individual level, is the only way you can have real competition in policy making. But if you have Scotland, seceding from UK for a while, UK can say that Scotland will not fare very well.

In the long run, it will be better, but in short run, they will suffer. While for European Union it was not the case because UK as is, was better off immediately after secession. So the problem is that they have to artificially create condition to punish the UK for the Brexit and they are managing to do that in a way.

They are creating a lot of problem that were not there. For example now they're trying to frame Brexit as something against free trade, but actually the request by the Brexit party was mostly to keep the free trade, to keep the unique market and to get away just with the center bureaucratization and center politicization. So get away with a political union and the bureaucratic union and just leave the freedom of exchange with other European countries. If that was the case, the UK was going to be immediately better off and that will be a very bad signal for European bureaucrats.

Peter McCormack: Do you think this could lead to the breakup of the EU?

Giacomo Zucco: So, it depends on how successful the European Union bureaucrats are at making it seem like an apocalypse. Already right now when you post on Facebook and there is a lot of remain sentiment, you have also to consider the so called Shy Tory effect. So for some reason, every policy which is less ideological statist, is less fancy to declare in public. So there is a very strong effort. Also, people are extremely rational when they buy for themselves.

They are kind of rational when they vote and they are completely irrational when they speak. So when you speak, it's really always group thinking, always politically correctness, you want to be part of the prevailing sentiment and statists are very good at managing the narrative about prevailing sentiments. So when you speak especially to pro-government and pro-state media, when you want to feed the narrative, you are always pro the most statist option there. So if the most statist option is remain, you are pro remain.

Then when you vote, you can be a little bit more rational, not much because you are still not directly... So your vote, mathematically speaking doesn't do anything to reality. So voting from individual level is a little bit like going to some kind of religious ritual of the region, which is not true. You light up your candle and you hope, but nothing impacts reality. So if you think about mathematics, your single vote doesn't count.

So the voter doesn't have a strong incentive to be rational because the single action will not change the decision. While when you actually have to... When an entrepreneur want to hire an employee or to choose a provider for some services, it will look for the best and not for the more politically correct.

Peter McCormack: Okay. Going back to the actual process then of negotiating the exit, do you think the UK showed too much of a weak hand to Europe?

Giacomo Zucco: Yes. I'm not so much into internal UK things, but my perception from a safe space in Switzerland was that the Conservative leadership was completely playing into the hands of the European bureaucracy. So I think it was a disaster negotiation so far.

Peter McCormack: So how do you think they should've done things differently? Hard fist? "By we're off, see you later. Come to us if you want to negotiate?"

Giacomo Zucco: I think that at the very beginning, still with the fresh vote, with a strong popular support because even the remainers they were... Now memories fade away and now we want to vote again and maybe it was not correct. Maybe the old people voting for Brexit, now they are dead. So now we have to vote again. So now time has passed, the leadership as has become weaker.

But at the beginning they had a strong hand. So if they wanted to negotiate harder, I think that they wanted... First of all the, they had to, in my opinion, clarify more as a narrative that they were not against the unified market, not against free trade because that was the point. Even if you think about Nigel Farage, it was never campaigning, maybe a little bit against free migration. There was some ambiguity there because maybe some racism, some xenophobia can come into play. But about free trade for example, it was crystal clear.

So if the Brexit leadership, if the UK leadership was about, "we want free trade, we can have it because Switzerland have it and Norway have it, so that's not a EU thing, that's a free thing. We want that. We're not accepting any kind of other imposition." Maybe, but maybe I think it's too easy than it is and of course it's a very big game and of course the European Union has an incentive to make... I mean for the European Union, as you were saying before, if they lose this, they risk a domino effect. If you open up the can of succession, then you don't know how far it can get.

Peter McCormack: What do you think of the second vote? What do you think of the negatives of it actually happening? So if there was a second vote and say the vote was then to remain?

Giacomo Zucco: It's a clown show. It will prove my point that democracy is a farce. But, it also proves the point that the so called democratic activists are hypocrites because they promote an ideology which I don't share. I don't share absolute democracy as I explained, but they pretend to do. So, people voted, so you should follow that, but it will not be the first time, especially at the European level. Do you remember their referendum to approve the European Constitution in Ireland? It was like, "do you want this constitution?" Popular vote no. "Oh, okay. Let's try again. Do you want this constitution?" They went on until they said yes.

So basically you wear them down. So it's a very hypocritical thing. So maybe from a rhetorical point of view, that's a bullet in our gun that these old democracy thing is kind of hypocritical.

Peter McCormack: Do you even think that it should have come to a referendum, this is the kind of thing the people should be voting? Or do you think it's something that the people we vote in should be making decisions on?

Giacomo Zucco: Oh, neither. If I think in abstract terms, I think that any single individual, should decide if he wants to join this or that political jurisdiction. Of course I know that this is a very long shot and know this sounds unrealistic? So I mean, if you want me to give the ideal response, is neither. You should vote only on your property and you should eventually act with force, only on people violating your property. Except for that, no vote is useful or productive.

Then if you want introduce some realities and constraints, then I can become progressively reasonable. But it really depends on the constraint. Sometimes democracy is better than not. Sometimes it's not. The European Union is not really even a dictatorship, it's pure bureaucracy. So I think that's kind of the worst of the two worlds.

Peter McCormack: So you actually believe in a society and a structure whereby everybody is completely individual, completely sovereign for every decision of themselves relating to the property?

Giacomo Zucco: As a matter or rights, yes. Then you can delegate exceptions because you can. You can join alliances, you can join contracts. Basically think about the nation states today. Today you have a nation state, so you have basically an international law. International law says that, "any nation state can do whatever the fuck they want, unless they are aggress the borders, the physical border of the nation state" and there is a reason for every other state to get him back in his place with force.

Or if it violates international treaties, so basically property and contracts. There is not a world police, I mean there is the USA, but there's not legally a world police that can decide everything on from a judicial point of view. Factually speaking, there is a strong guy in the room, who can have a strong influence over others. But for rights, every state has its right. So one of the things is relationable to what I believe, but I think it's just a consequence of logic.

Is that if you substitute national borders to private property and the international treaties to interpersonal contracts, you basically have what our grand grandparents will basically call "natural rights", which are like the logical rights. Basically it's, don't steal other people's stuff, don't damage other people's stuff, including their body and if you make a promise, you should respect it. Otherwise people will have a right for compensation, proportional compensation. I don't think that's even cultural. That's actually the only logical way to resolve conflicts.

Peter McCormack: But do you still have countries and governments in those scenarios?

Giacomo Zucco: You could have something that, for example, Murray Rothbard was calling "Nations By Consent." You can have for example, as he was saying, "I'm not against the state. The state is great, it's the best achievement for society. The other thing that the state should respect is the right of secession, even at the individual level." So one of the typical red herrings and the straw man arguments by status, is to conflate coercive centralized nation states with any kind of political organization. If you are an individual kingdom, you can create any sort of alliance or treaties as long as you can also take it back, when you want to take it back.

So you can enter alliances and you can exit alliances. Unfortunately in the last two centuries, we have seen some alliances forming and when the people wanted to secede from these alliance, they started to use aggression in order to keep them in, like American Civil War, which was not... I mean this is very controversial and I don't want to go there, but I don't think it was mostly about slavery, which is a terrible original sin of the US freedom concept, but there were statists slave-ist states in the union and they were slave-less states in the confederacy.

Peter McCormack: Okay. I can't see how we get to such a scenario as that?

Giacomo Zucco: It's one of the things about the natural rights philosophy and what people can call "libertarian philosophy" is that when it's correctly intended, it's not the final state philosophy. It's not a utopia. It's not, "I have a system. It's perfect." Let's try the system and if we get there, it's perfect. It's a process. The process is basically we should have zero people hurting other people or taking other people's stuff or violating contracts.

That's impossible. But I can tell you that the less we have of that, the better we are off in the long run. The typical example is medicine. So you meet the medical doctor, how realistic is a world without diseases? That's scientifically unrealistic. So is this medical doctor crackpot? No. He's really trying to fight any disease, he knows it is impossible. He tries to minimize some suffering and unhygienic habits and stuff like that.

So he will try to improve and he knows that the direction is disease bad, health good. So freedom good, criminal aggression bad. I don't tell you that it's possible to get to a zero criminal aggression state, but I think we are in a culture that legitimizes systematic aggression to a world scale. We can get better than that.

Peter McCormack: Okay, so back to Brexit and thinking about my friends, their concerns and some of the things that come up. So we covered peace, you said that's a false narrative?

Giacomo Zucco: It may be correlated with open markets, not with centralization.

Peter McCormack: We're going to be queuing at the borders every time we want to go on holiday now.

Giacomo Zucco: In my opinion, borders is a statist imposition. I know why many partially libertarian people are still defending borders because they think that... We discussed that right. There is a perception that the borders provides security and even people who are market oriented, so they don't mind the goods and services crossing borders, they are scared about people crossing borders. That's a problem when you have to visit another country.

But the theory about secession is not to give away your right to cross the border without being bothered. I'm completely okay if the European states create a bilateral agreements with UK, in order to let me pass in and out without any kind of control. Actually, the European Union didn't really provide anything different from that. When I go to UK, I still have to show my passport to some random bureaucracy that does not know me and don't have any right on my personal movement liberty.

Peter McCormack: Because we might have to revert to World Trade Organization rules, which is a 20% levy, that this is going to be devastating for the UK economy and it's going to drive us into recession.

Giacomo Zucco: I think that's not the point that we can dismiss. You can make some rhetorical argument like, "no, it's going to be good because you can probably fight exaggerations in apocalyptic scenarios", but they have a point. If the European Union is going to punish UK, in order to set a precedent for other countries, then the UK economy will be worst off. 

Maybe you a recession is a strong word. If the next political leadership is a smart enough to implement a huge liberalization of the economy, maybe they can over compensate the damage. But it will be naive to say Brexit will not... We're back to the same point of before. I'm sorry, but you're a junkie. You can suffer now or you can suffer more later and eventually die.

Peter McCormack: And you think that the suffering is worth it?

Giacomo Zucco: Yeah. When you're liquidating mistakes of your past, suffering is the only thing that works.

Peter McCormack: So how do you think this is going to play out? Because for me, I've got this real fear that we're going to have a second vote and it will be a remain vote and then it's all going to be kind of brushed under the carpet and forgotten about. I think that's the worst scenario as well.

Giacomo Zucco: But it's also very realistic. I'm kind of cynical about anything political right now. I was a political activist back in 2010.

Peter McCormack: Yeah you were a member of a party before? You told me about it before, a group?

Giacomo Zucco: I was never in a party, I created, well a tea party organization, it was not a political party, it was a grass root movement, basically emulating the Ron Paul Tea Party campaign, then the name Tea Party was taken over by Republicans. But originally it was a libertarian thing and I created the same anti-tax movement in Italy and was debating the prime minister on television live.

So I had my moments of fun, but then I realized that... I mean I'm skeptical about modern democracy in nation states, is a game created to come to this kind of concentration of power into the hands of the state. So you cannot play their game and win. You can have a delusion of winning some battles, "oh, we have a Ronald Reagan and we can lower taxes".

But that's just a freak show that just is entertainment. The big dynamics of the state, is the state in increasing its power. I am more optimistic in general because of non typically political means like Bitcoin. We are back where we usually start! Bitcoin is a way to start a political and fight a political revolution without shooting any bullet and without casting any vote.

Peter McCormack: Okay. So if somebody is listening to this and they are worried about Brexit, they think we should be part of the EU. How do you convince them that Brexit is a good idea and what are the benefits?

Giacomo Zucco: I really don't want to... I could try to be rhetorically effective, but I think that it will be just a short term rhetorical detour. The point is, this is going to suck. But if you really try to follow the logic and you don't follow emotions and you don't follow easy political narratives, but if you tried to follow logic, you will see that the alternative is to have a system which can suck orders of money to the worst. 

It's literally centralization of continental wide nation blocks. It's something that can create the equivalent of world wars, but worse. It's Orwellian. Locally, this is bad, globally you are better off. That said, I know that I will probably not convince them and I think that Brexit will be severally reducing this power at least for some years.

Peter McCormack: So vote Brexit and buy Bitcoin?

Giacomo Zucco: Buy Bitcoin! So this is the thing, mathematically speaking, your vote doesn't impact reality. So don't put Brexit, but if you can make 10,000 people voting Brexit, then you should. But you're single vote, if you do the math... So my vote, for example, I do vote for town council because my vote can actually impact reality.

But when I started to learn probability in high school, I calculate the probability of vote of voting affecting the reality. I understood it was a religious ritual, more so than anything and so I decided this threshold, if the probability to affect the reality with my vote, is higher than the probability to get struck by an asteroid, while I walk to the polling station, then I will go, because asteroids are dangerous and I want to be sure!

Peter McCormack: Okay! So obviously it's a Bitcoin show. If any of my friends listen to this, they're going to be going, "why are you doing this?" What is the connection here with Bitcoin? What is the bigger picture?

Giacomo Zucco: So I think that the same reasoning we are discussing about political centralization is actually very, very straight forward to apply to Bitcoin itself. The point of decentralization in Bitcoin is always a trade off between convenience, efficiency and long-term security. When you decide, for example, to not store your keys, but to just put your Bitcoins in some kind of third party custodian, then you are better off, not just as as conveniency, we usually say that user experience and security are a trade off, but locally speaking, most of the time, your security... I mean we tell people "be your own bank, not your keys, not your coins", but we have to be honest.

If you are your own bank, your risk of losing your keys, sometimes it's higher and not lower of your risk of getting your keys robbed, than if you were just using a custodian solution. So a custodian solution, not just easier, they're also some times safer because there is a division of labor and there is economies of scale. The same goes for node running. If you don't run your node, you don't verify your payments.

So you can trust the Mycelium or Ledger or whatever, or worst of all miners with SPV, to validate the transaction for you. But if you do that, maybe you are better off than running your node, because you will mess up with your node. But globally speaking, you know that if everybody does like that, then we would create incentives to get worse and worse and worse.

So it's the same trade off. So usually you want to delegate because that's easier and sometimes even safer. But when you delegate, you create the systemic risk long term. This the same for firearms. Is it more effective for you to defend yourself with a gun from a criminal or for a trained policemen? Of course it's more effective for the trained policeman assuming he can arrive in time.

But the problem is that if everybody thinks like that, then you have an easy takeover by a totalitarian government because nobody can resist them. You think about the children in school. So we were discussing home schooling for example, and somebody was pointing out that when you do homeschooling with 20 families together and you hire some professional teacher for some topic, then you create a school again.

So centralization is always easy. But the point is that when something is very critical, safety critical, then you should give up some efficiency, in order to maintain a long-term incentive structure which is better. So it's the same. A succession in which you use a seed from Coinbase and use a seed from SPV hash power and you are your own key storage and your own validation node.

It's hard. It sucks. You can also get it wrong. Maybe you will be worse off in the beginning but in the long run you are creating better incentives for long-term global security. It's a trade off between local personal situation and global systemic situation basically. Also the second connection with Bitcoin is that of course we are discussing Brexit in the UK, but you should know that there are two UKs and people are wondering why there are two UKs!

Peter McCormack: So there's UK and there is Great Britain.

Giacomo Zucco: Yeah, so UK politics is way more... There was a video about two guys in a bathroom and they were discussing like a soccer teams with the Olympic teams with political structure and the UK is a mess. You have England, Great Britain, the Empire, the Commonwealth, you have everything.

Peter McCormack: So we play football as nation states, so we play football as England, Ireland, Scotland and Wales.

Giacomo Zucco: So the smart move by Peter is to blame is shitcoining onto UK politics! There are more Bitcoins because I'm from UK and I'm confused about all these names.

Peter McCormack: And then with the Olympics, we compete as Great Britain. So I think we had a team for the London 2012. We found a way of coming together and getting the team together, but we don't do it ever!

Giacomo Zucco: So Ireland. Ireland together with Ulster in one...

Peter McCormack: So Northern Ireland is part of, see this is where I might even come across as dumb. I think it's part of the United Kingdom.

Giacomo Zucco: Yeah, correct.

Peter McCormack: But the Republic of Ireland isn't part of either.

Giacomo Zucco: Exactly, but they play together in some kind of international sport.

Peter McCormack: I think Ireland play together on rugby. They don't have a separate Northern Ireland rugby, but they have a separate Northern Ireland football. I know it's madness! Basically it's like all the results of colonialism.

Giacomo Zucco: If you don't want your Bitcoin live to become as messy as the Great Britain, UK life, you should know there's just one Bitcoin and stop wondering!

Peter McCormack: Yeah stop wondering. Don't listen to any of the bullshit that Peter McCormack says!

Giacomo Zucco: Or Pedro!

Peter McCormack: Yeah Pedro the fucking degenerate. All right, brilliant, thanks Giacomo, that was great. Really useful. Thank you for coming on again.

Giacomo Zucco: Pleasure!