WBD302 Audio Transcription
Why Buy Bitcoin? With Andy Edstrom
Interview date: Wednesday 20th January
Note: the following is a transcription of my interview with Andy Edstrom. 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.
In this interview, I talk to Andy Edstrom, author of Why Buy Bitcoin. We discuss his investment thesis for Bitcoin, why Bitcoin continues to thrive and address the common misconceptions and FUD surrounding it.
“The longer we spend doing this, the more we learn about it, the deeper down the rabbit hole we fall, the more likely, or the clearer it seems that this is a major, major civilisational inflection point.”
— Andy Edstrom
Interview Transcription
Peter McCormack: Andy, I'm getting to talk to you quite regularly now, man; it's pretty cool!
Andy Edstrom: It's great to see you.
Peter McCormack: Good to see you again, man. Listen, look, what a couple of weeks. We had Bitcoin just go fucking wild and then we saw a big dip where most of us are like, "I get this; I'm cool. I can understand this, I've been here before, it's bounced back". But, a lot of my friends who I've been saying since the last bull market, but I've been saying since $5,000, $6,000, all the way up, I've been saying, "Check out Bitcoin", now they're seeing in the news, now they're hearing about people getting rich and they're like, "Shit, am I too late; is it too expensive?" etc, and I think more than ever, I just send them your book, right, Why Buy Bitcoin, they should know why.
Andy Edstrom: Amen, music to my ears. This is the problem with Bitcoin. You and I have been dealing with this for years now. It's the NgU technology creates FOMO, but if you don't have that underlying knowledge of the asset and knowledge of the whole phenomenon, then you're going to have weak hands; you're not going to have strong hands to hodl through those inevitable downturns. And, we just came through one of those, or we're just coming through it as we speak.
Peter McCormack: I'll tell you something funny, right. I phoned my dad up; I phoned him up because the Bitcoin was doing well and I said, "Look, dad", I think I may have said this on another show; I was like, "Dad, do you want some golf clubs?" He said, "What?" I said, "Look, Bitcoin's doing really well, you haven't had any new golf clubs in a while. Let me get you some new golf clubs". He was like, "Oh, no". I was like, "Come on, dad, just do it. Honestly, I promise you, it's fine". And he was like, "Okay".
He goes away and he comes back and he's like, "Look, Pete, it's a lot of money. It's about $3,000" and I was like, "No, it's fine, dad, I love you, man. You've done a lot for me, it's fine. I can get you this; it's not a problem, I'll get you these golf clubs". Anyway, I'm trying to get them ordered, it takes a bit of time, and then the price dumps, right, from $42,000 down to $30,000. My dad phones me up and he's like, "You don't have to get me them anymore, Pete, you don't have to get me them anymore; don't worry about it". I said, "Dad, shut up, man". I was like, "Dad, it was $6,000 last year. Bitcoin does this. At some point this year, it's going to be back over $42,000; it might even do it this month, be back over $50,000".
I've never been so calm about losing so much money in my life.
Andy Edstrom: Amen. Well, you're a good son for offering your dad a new set of clubs, and I'm fortunate that my dad has drunk the Kool-Aid with me, so he's got his own stack.
Peter McCormack: Has he?
Andy Edstrom: Yeah, which is good. But, I have to agree with you. Coming into the weekend, I was wondering, and I usually send a weekly Bitcoin informational/shill email to my friends, family, mailing list; it's not a subscription thing.
Peter McCormack: I get it; is that the one I get?
Andy Edstrom: Oh, yeah, you're on the list. I think I had you on the list.
Peter McCormack: It's a good email, man. I get it; it's a good email.
Andy Edstrom: Yeah, I appreciate that. And at some point, who knows, maybe I'll allow people to subscribe, but right now you can't click on or join. But, I didn't put one out. I started drafting one last weekend and then I stopped. I was thinking about, you know, it's been moving far and fast and I'm not sure I want to just add to the FOMO fire, and I know I'm going to take crap from some people if they pile in in the 40s. So, I didn't hit the send button and right now, I'm feeling glad that I didn't, but yeah, it's bizarre. When it moves that far that fast, there's always the risk of a retracement.
On the other hand, it's really hard to call how far it's going to move before the retracement. I mean, I know several people who are cutting their positions basically at 30 or even in the high 20s, and they missed some of the ups. Especially if you're paying tax; that's a whole other can of worms. This is why we hodl, right? I don't know, I can't call these short-term moves.
Peter McCormack: Yeah. Well listen, look, it's been a strange few weeks to see it ride up and I know what you mean. Even with some of my friends, now would be a time I would struggle. Even back in $10,000, I feel comfortable saying to people, "You should check this out, take a bit of interest", even on the way up to $20,000. I feel nervous now, because wouldn't you hate it if somebody came to you at $42,000 and it dropped down to $30,000 and it stayed there for six months; they might fold. It's a funny thing and I've actually talked about it a bit less now because of that. But at the same time --
Andy Edstrom: So you don't -- yeah, so go ahead.
Peter McCormack: Well, I was going to say, at the same time, my fundamentals are the same. I think, do you know what one of the biggest issues we have with Bitcoin is the unit price, because it's so misleading. It misleads you into thinking something's expensive because it's $40,000. It's not like a car, right; it's $40,000. I think if we went into more regular sats pricing, we migrated to that, if that became the standard, I think it would be a lot easier for people to digest this.
Andy Edstrom: Yeah, I agree completely. The unit price is so tough. And then, jumping all the way to sats, I don't know, I take crap for this; I sort of like bits before we get to sats. It's a pretty far bridge to get all the way to sats, and maybe I'm just not smart enough and can't do the mental maths as quickly as Matt Odell, but I agree with you; for sure, we have a unit problem.
Regarding what you said about telling people to get in versus being a little nervous, I was telling people who were getting interested, of course DCA; always DCA. But, a month or two ago, I was saying, "Look, if you're on zero, you have no position, it's okay to buy a significant piece now and then DCA the rest". But I have to agree with you, now I am more likely to say, "Start with the DCA", rather than the pile in, rather than putting a third in right off the mark, or a half in right off the mark. These are tough calls. It's easier to just DCA and set it and forget it.
Peter McCormack: Yeah. I'll tell you another interesting thing as well. It's like weighing up that idea about what potential gains you can make versus weighing up what potential losses you may have holding sterling. Because, I think what's going to happen is, it feels like over time, those opportunities to get 100X are going to disappear. The 10X itself is going to be quite difficult, right, to actually time that right.
But at the same time, you've got some people who it becomes more of a necessity to end up holding Bitcoin just so they don't lose purchasing power; less so where we are, it's still an issue, but I think in certain countries it's going to become more of an issue. So, I think it's the right time for us to be making the show, Andy; I think it's the right time to be talking about, Why Buy Bitcoin.
Andy Edstrom: Yeah, I couldn’t agree more. It's always the right time. On the one hand, it's always the right time to learn about Bitcoin; on the other hand, you're right that after a pump and after a move, it's good to be reminded of what are the underlying principles, why do we believe in this thing, what are we going to remind ourselves when it's moving down in price rather than up, and why are we here for the long term rather than just here to make a quick trade, make a quick buck.
Peter McCormack: Yeah, although it's good to make a quick buck, but I'm with you, man, I'm with you! All right, dude, let's get straight into it.
Okay, first and foremost, I'm going to kick off with your own question; dude, it's your question, it's your book; Why Buy Bitcoin, like why buy Bitcoin? Do people actually put that to you; do they say to you, "Okay, Andy, why buy Bitcoin?"
Andy Edstrom: Yeah, they do, "Why should I buy it?" absolutely. Why buy Bitcoin? So, as you know, I wrote the book as an investment thesis. I mean, the basic structure of the book is basics on, what is money; then, what is the current financial system and why is it so messed up; and then, what are the basics of Bitcoin and how does it work; and then, what's the upside potential, what's the valuation potential; and then finally, what are the risks? And, there are plenty of risks, right; I've got 40 pages of FUD in this book, okay!
Peter McCormack: I saw it, man, I saw it, dude.
Andy Edstrom: So, yeah, so why buy Bitcoin? I think for most readers of this book, it is the investment thesis. In other words, this book is not for the person who is disenfranchised, it is not the person in Africa or South America who literally cannot move money through the existing system because they don't have a bank account. They know why to buy Bitcoin; they know why to use it, potentially.
This is more about the digital gold, about the hard money asset, about the thing that's likely to protect your overall investment portfolio, or your cash portfolio, frankly, from the ravages potentially of inflation; that's more the focus of the book. But, of course, I talk about the characteristics of money; I talk about how different forms of money score, including Bitcoin, and that is more than just about the scarcity and the inflation-proof aspect, it's much more than that. But, I would have to say, if it was about one thing, it's mostly what I described.
Peter McCormack: Right, okay. Do you tailor that message for whoever you're telling, or is it the same whoever?
Andy Edstrom: That's a good question. I probably cheat a little bit on it. As you know, one of the beauties of Bitcoin is it's so multi-faceted. I mean, there are so many ways you can pitch it. I'm always interested in people's pitches; I'm always interested in how people are attacking it. What's working, basically; what pitch is working for you, Pete; what's resonating with the people you're talking to, or among some particular group or type of person, if you want to go in that direction.
So, of course I tailor it a bit, and when people ask me why did I write the book, I mean, there are a number of people I wrote it for. I wrote it for my clients obviously; I wrote it however for any intelligent reader. I mean, the idea is it's meant to be -- it's not a super low-level book, but on the other hand it's not so difficult that someone's going to pick it up, the average person's going to pick it up, and be totally confused.
I had some feedback. If you have absolutely no concept of finance or money or markets or anything, it may be a little bit of a tougher read, but it is meant to be accessible to the wider world of people. And, in fact, my original draft was quite technical and I hired a very good editor, who was not technical, and I tasked her with, "Look, please Beth --", her name's Beth Rashbaum; she's awesome. She edited one of Stephen Hawking's books, and she edited this book called, The Snowball, which is basically a definitive Buffet biography, Warren Buffet biography.
I asked her specifically, I said, "Beth, make this readable by your average intelligent person, not a crazy bitcoiner, basically; not a super nerd. I want people to be able to read this". So, that was one of the goals and I think, hopefully, we achieved that.
Peter McCormack: All right, well listen, look, we're going to work through some of this, because I need a show to point my friends to. Look, because you said, what are their pitches? Right now, pitching to somebody cold who doesn't have an interest in Bitcoin is still difficult, because you can explain to them inflation; they don't care, they just don't care. You can explain to them it's the best money; they don't care. Whatever it is, they don't care. I've been pitching all year, man, like I said to you.
If there's a little bit of interest, they're like, "Okay, tell me about Bitcoin", the easiest pitch is that, "Well, it's the best form of money that's ever existed. If the investment thesis proves correct, it will deliver exponential returns as it becomes adopted globally". I do really like Vijay Boyapati's explanation, where he says, "It's like gold, it's basically digital gold, but it has this magical property that you can teleport it around the world. It's gold that you can teleport"; I love that. But, the problem with that is a lot of people still don't own gold, they don't understand why they should own gold. It's only people who understand investment portfolios who really consider that.
But anyway, it's a good time; I want to be able to send this show out to people.
Andy Edstrom: Can I just augment one of your thoughts there by the way, about it being gold?
Peter McCormack: Yeah, do that.
Andy Edstrom: Which is, I didn't mention one of the other reasons I wrote this book was to get my cohort, my wealth management colleagues, into this space. Now I say -- I used to say it was to educate them; now we're at the point where I say, it was to shame them into buying Bitcoin. Because, what you said is, most wealth, even in the US, managed wealth let's say is, call it $10 trillion; and most of these portfolios, as you suggested, don't even have gold.
So, gold has been the asset that hasn't performed all that great for about 50 years. I mean, it was really crucial to own in that inflationary period in the 1970s when we left the gold standard, as you know. But, it's been, I don't want to say dead money, but it's just sort of, you know, slowly kept pace with inflation. Maybe it's kept pace with stock prices, excluding dividends, over particular periods of time; it depends on which time period you're measuring.
But, yeah, most wealth managers don't even have their clients in gold yet, which means it's even one bridge farther to get them into the Bitcoin play. Although, as you pointed out, because Bitcoin has several characteristics that far exceed those of gold, ie better gold than gold, so to speak, it is hopefully starting to resonate with some people. And of course, as number goes up, they're starting to pay more attention. Sorry, I interrupted you, but please continue.
Peter McCormack: So now, listen, I've used your book as a structure for this. I've not gone into all the sections, but I think there are some good -- it's a really good structure of a book to take you through your own personal investment thesis. But okay, so, we've started with why people should care about Bitcoin, but I love this title that you have for one of your chapters: "What is so special about Bitcoin?"
Andy Edstrom: Yeah. What is so special about Bitcoin? God, there's so much there. I think one of the ways I approach it, is this truly unique, does this make it special; I don't know, but I apply this framework of what makes good money.
I zoom out and I say, okay, what are the characteristics of money? My view is that most people say there are like five, and I think that's too simplistic. I really wish it were true, but I see there are 14 and they are: good money is identifiable, durable, divisible, dense, transferrable, fungible, private, scarce, short-term stable, long-term stable, required for some important purpose, backed by some powerful entity, censorship resistant, and unseizable. Okay, that's a mouthful; that's 14 things.
Now, no form of money scores well on all those characteristics, so any form of money is pros and cons; it's a mixed bag among all those characteristics. And, I think people can argue that certain are more important than others. Clearly, Bitcoin shines with respect to scarcity, right, durability and divisibility. Obviously, it shines with respect to being censorship resistant and unseizable; that's probably where it's unique.
I mean, you had mentioned the transferability, like Satoshi said, I'm going to butcher the quote, but in one of his early emails it was, "Imagine basically a monetary metal, except it isn't shiny, it's just grey and dull. But, the one thing is you can send it any in the world on a communications channel". That's obviously huge; the transferability there is massive and unique. So I think, as it relates to money, those are the most important characteristics.
If we're talking about how is Bitcoin unique otherwise, how philosophical do we want to get; how cosmic do we want to get? Is it a life form; is it a cybernetic organism; is it feeding itself; do we hold it or does it hold us; is it a meme that infects our minds and causes us to feed the fire? I tried to keep the book more focussed on the, it's better money and if it reaches its potential, then it will be worth a hell of a lot more. I don't get that cosmic in the book. If I had the time, I'd look to write a book which gets much more cosmic, but that's kind of how I think about it and how I wrote about it.
Peter McCormack: It's funny, I wrote down then, when you talked about those properties of money, it's like people don't really think about this though. And then I realised, actually, this is complete bullshit. They do when they need to.
So, perfect example: when I was out in Cambodia last summer with the kids, they're a country which operates with a local currency, and I can't remember the name of the currency now, and the dollar. And there are a couple of really interesting things. They want the dollar, okay; so firstly, they want the dollar.
But secondly, which is really important, they check the notes. If there is a blemish on the note, they don't want it. If there's a little tear on it, they don't want it, which I found was super interesting because at the time, it didn't really cross my mind. It crossed my mind a little bit because of the whole Bitcoin thing. But right now, when I'm thinking about it, I was thinking, my friends don't think about money. They get it and they spend it; they don't think about all those things you talk about. It's because they don't have to; they really don't have to.
Andy Edstrom: Yeah, let's use that example you just mentioned, and I love that, because I think of two parameters of the 14 characteristics of money with respect to, is this bill, this note basically, in mint condition? One of them I think of as identifiable. Actually, we didn't talk about that a minute ago, but Bitcoin shines through there, right. The identifiability and the resistance to counterfeiting with Bitcoin is clear. If you tried to send me BSV or something and that doesn't conform to the network consensus rules, the transaction isn't going to go through; it's pretty straightforward.
Then the second piece, I think there's durability, because if people in Cambodia are wanting bills or notes in mint condition, that suggests that they're like, "Hey, I don't want a raggedy old note where if I stick it in my pocket or it goes through the laundry, or someone tries to grab it out of my hand and tears it, that it's going to be damaged.
So, yeah, I think that's a good example of those two characteristics coming out. And as you said, people think in terms of the here and now and what's physically there. I want a high quality bill rather than a low quality one, and I think I would map it onto those two characteristics of durability and identifiability.
Peter McCormack: So, it was a real eye-opener for me though, and it was a real eye-opener when I explained it to the children, because they didn't understand that. They've only ever been used to dealing with pounds; that's it. When they go on holiday, they deal with another currency. They couldn't understand we were using American dollars in Cambodia, and I had to explain this to them; but, I've seen that in other places.
Andy Edstrom: Are we spoiled, Peter?
Peter McCormack: I think we are because actually, we moan and bitch and talk about the Bank of England or the Fed and how terrible they are, but compared to the rest of the world, in some ways we're very fortunate. And, I've been fortunate enough to travel a lot and I've seen a lot of really terrible places. Even western places; I know Turkey has a problem; we've talked about Lebanon's had a problem with inflation. I've never been to Africa, but I'm fully aware of the currency problems across the continent.
We are very lucky, yet we are the ones, in some ways, also getting to leap in first into Bitcoin. But, I am aware. There's plenty of adoption of Bitcoin in these markets as well. But, it's trying to get people within western markets where it's hard to explain this. If you're in Argentina, this is easy; if you're in Venezuela, it's relatively easy; and there are many places it's really easy to explain the value proposition of Bitcoin. It is much harder in the UK or the US.
Andy Edstrom: I agree completely, and this is one of the virtues. In a recent episode that we did, I think the quote you highlighted was something like, "This is the first asset in history where average people have had a shot at it before the billionaires and the hedge funds and the corporate investors". And, I'm so lucky to be born and raised in America and had a pretty easy path relative to most of the world. And no doubt, there's a huge segment of the global population that just gets this intuitively.
They get that it will work for them. Yeah, the purchasing power might be somewhat volatile, but if they need it, they use it. So, that's one of the ethical elements that I present to people. You know, the sceptics, they talk about, "This is just one more instrument to make the rich richer; give the billionaires an opportunity to buy some asset that's going to go up another 10X, 100X", and I really don't see it that way.
I see it as a lot of plebs got in, the ones that were paying attention, a lot of people in foreign countries. It's unquantifiable. We'll never know how many people that live on a few dollars a day got a small piece of Bitcoin and it changed their life. I hope that it's a lot and I hope that continues as the thing develops. It may be true that the 1,000X return, at least in a short time period, is behind us, but I still think that, yeah, people all over the world have a shot at making their lives better, if they can learn about this thing and hodl.
Peter McCormack: I'll tell you another way to get people on board is another magical thing with Bitcoin, but it requires giving some away, but I still do that. I mean, I'm sure you do; I mean we all do in some ways, right? If I'm with somebody, I'm like "Download a wallet", and they download a wallet, and I send them $10. And, whilst it might require the six confirmations, the actual transaction usually shows up straightaway.
When that happens and I say to them, "That happened without any intermediary, without anybody in between us, no third party", and they say, "What do you mean?" I say, "Well, with the bank. If I send you £10 with the bank, I go to the bank, they have to authorise it, then it appears in your account maybe a couple of hours later, sometimes instant if they've got the right setup. It's certainly not going to happen if you're going abroad. But, what I just did there was instant and there was no third party. And you could be anywhere in the world and you could be anyone and I could do that", and I think that's some of the magic. That actually is something that really peaks their interest.
Andy Edstrom: Yeah, I totally agree; I agree completely. I've used that trick, I still use it occasionally, and it's also the classic case, the old story about the Allen & Company Conference about the Silicon Valley guys and the legacy finance guys with Wences passing $250,000 worth of Bitcoin around the table wallet to wallet. It makes an impression on your average person on the street and it makes an impression on guys who are already billionaires; it is a magical thing.
Peter McCormack: Well, it's also when you see those things on Twitter, it's like, "$846 million of Bitcoin was transferred for $34"; what?! But, it is magical when you start to use it like that. Okay, cool, so we've covered that bit; we've covered the magic of Bitcoin.
I like this other point in your book, "Why won't it go away?" I mean, this is part of the magic, right? Especially for someone like Peter Schiff, that's an even more important question, "Why won't this thing go away? I said it won't work at $1. It's now $30,000 and it's still here; why won't it go away?"
Andy Edstrom: Yeah. And, there's a quote, which I think is attributed to George Soros, the legendary investor, trader, macro guy. It's basically, "If something goes down by 80% and it doesn't die, then there's probably something there". And, that's been true of investment assets, a stock, a bond, a currency, whatnot. I think it was Dan Tapiero was telling me about this; was quoting that quote. And, it's really true from an investment perspective.
Then, of course, there's the sewer rat analogy from Andreas; that's a classic one, which is this thing, it's like Bane from Batman; it was born in the darkness. It has been just consistently and constantly attacked and every attack seems to make it stronger. And, I think I talk about Bitcoin obituaries in the book, you know, that website; although sadly, there haven't been as many obituaries written about Bitcoin lately. Have you noticed that, Pete; like, 2020, there wasn't that many of them?
Peter McCormack: Well, it's harder to say Bitcoin has died at $30,000. I mean, I get the alerts, the Google alerts, and I did get one in this morning and three in a row, three mainstream articles, "Is Bitcoin, the biggest bubble ever, about to burst? Are investors about to lose money?" Oh, come on, man, are we really doing this again?
Andy Edstrom: Yeah, somebody pointed that out. I was tweeting last weekend and I've just kind of given up on the mainstream media. I mean, I used to complain about it and shame them, and now I just wonder if there's something there that I don't understand; I just wonder if there's some factor. I mean, part of it is the clickbait, right. So, the headline you just cited, "Is it crashing; is it dying?" I guess they just have to do that for the clicks, right. So I say, okay, that's how the business model basically has changed with the internet and aggregator-based search functions, things like that.
So, that is what it is, and it's a shame. And yet, even in the analysis, recent articles I've seen out of the Wall Street Journal and the Economist and the Financial Times, I mean these are otherwise well-respected periodicals in the investment and finance space, and they just keep getting it wrong. Will they ever get it right? I don't know. I think the thing it has most to do with is the volatility, is the price volatility, is the "crashing", like you talked about.
Peter McCormack: Agreed.
Andy Edstrom: And you know, thank God Bitcoin is volatile, because it's the one thing that I think has caused central banks and legacy bankers and the powers that be, the people that actually wield power, to dismiss it and laugh it off and let it grow and get stronger and let people learn about it and let people build actual functions and utility on top of it for years now, and build into the thing that truly is unkillable.
If it hadn't been as price volatile, they actually would have viewed it as money. So, they still tell us, "It's too volatile. It's not money", and my reaction is, yeah, you're right, don't worry about us over here in the corner, us bitcoiners; it's not money, you've got nothing to fear, nothing to worry about, wink, wink.
Peter McCormack: Do you know what, I think there's a couple of things going on though, Andy. I think firstly, I think there are some journalists that have been covering Bitcoin for a long time, and I'm not going to name names, but initially quite positively; and I've noticed them over time, I can think of two particularly, who've become more and more negative with every cycle, and I can't help but feel like you've been covering this, but you've not bought any; and I think it's hurting you. And I understand that, right; it would suck.
I wish I'd got in in 2011. I wish in 2013 when I discovered it, I'd stuck around. I wish in 2017, I hadn't screwed it up so badly, but the reality is I think some of these people didn't buy and they've watched this thing go from strength to strength and they've missed out. That's got to hurt.
Andy Edstrom: It's got to hurt. And this, I think you were talking about this with Matt Odell, you know, the salty journalists, because I guess for journalistic integrity or journalistic objectivity, they didn't buy it because they were covering it; and, yeah, it's a problem. You have to wonder whether these guys would have been more pro on it if they'd had a little stack, if they'd benefitted from it. I get the journalistic integrity argument, although it certainly hasn't helped cover it fairly.
Peter McCormack: No, I don't get it; I'll tell you why I don't get it. Firstly, from what you just said there; but secondly, if you're a journalist who's covering the economy, are you not allowed to own money, are you not allowed to own shares, stocks? I just don't buy it, I don't buy that one. I don't buy that at all. But, I think there's a second one. I think the ones that have to cover it who, suddenly Bitcoin's in the news again, it's at $40,000, the Economist or whoever has to cover it; you're asking people to cover something…
Look, Andy, we spend all day, every day, thinking about this and looking at this. I mean, I certainly don't know a lot, I don't know anywhere near as much as you; but I think I know enough for me. With my friends, I know enough. But, these people, they've barely looked at it and they come along, they probably Google and they do some research and they see the same stuff again. And probably some of their own bias, they probably covered it in 2017 and thought, "Oh, shit, it's come back and I didn't get any".
I think there's a whole bunch of stuff, but there's very little integrity in the journalism around Bitcoin, and I think that's for a number of reasons. I think it's a lot to do with the skill and the amount of time people spend on it, the experts who are actually working on it, and that saltiness; I think it comes down to that.
Andy Edstrom: Can I just play off that a little?
Peter McCormack: Yeah, go.
Andy Edstrom: I agree with you completely, especially with the specialisation. One of the things worth thinking about in the world today is, the world isn't getting simpler, right; it's getting more complex. So, how can a generalist, how can your average generalist journalist cover multiple topics. I mean, it's mindboggling to me. Bitcoin is my side hustle, right. My full-time job is managing clients' money, but yeah, I spend hours and hours and hours trying to understand this thing. I think it applies to politics too, right? I mean, this is not my original idea, people have been talking about this for a long time.
But it's like, how do you have a legislated body, an elected body, where every single one of them has to cast a vote on all these different issues. And they try to sort of solve it by having this committee structure, like in the US you'll have, whatever, Senate Finance Committee; you'll have the Telecoms Communication Committee; or various committees to specialist a bit. But, it's hard to imagine how, in an increasingly complex world, someone can cover multiple topics intelligently. I really think there's probably more specialisation required. Whether we'll get that, I have no idea.
There are a precious few, as you know, there are a precious few guys who would call themselves journalists, Aaron van Wirdum would be one probably.
Peter McCormack: Yeah. Laura Shin.
Andy Edstrom: Yeah, who specialise, but there aren't that many.
Peter McCormack: Yeah, I think Aaron's the best we've got. I think he's a fantastic journalist. I think there are a few good people. Obviously, I'm not interested in altcoins like Laura is, but I do think Laura's a journalist. I know I'm not a journalist when I follow her work; I know I'm more of an entertainer! But, she's definitely a journalist. I so want to name some names, but I'm not going to name some names, but I just think some people are salty.
All right, man, so look. Bitcoin is money though, but is it not money that people think money is; will it become the money that people think it is?
Andy Edstrom: So, okay, you're alluding first of all to the title, right. So, the title is, Why Buy Bitcoin, and then the subtitle was, Investing Today in the Money of Tomorrow. So, is Bitcoin money? Yes, Bitcoin is money. Is it great money? I think not yet, but I think it has the potential to become great money. And then, there are a couple of ideas wrapped up in this, which I talk about in the book.
So, the first obviously, again not my original idea is, money is an adjective, not a noun. I use the example in the book, Swingers, right. Swingers launched Jon Favreau's career. He's a multi-billion dollar director, directs a bunch of the Marvel movies and stuff, but this was his project and it became kind of a cult classic. And there's that line in the movie where he's trying to screw up the courage to go and talk to this girl and his buddy says, "You're so money and you don't even know it". And, everything is a little bit money.
I use Carl Menger, I think it was Menger, his framework for three basic types of goods in the economy: consumption goods, okay, that's the stuff we use every day; capital goods, those are the things we invest in to make the consumption goods; and then money, or the monetary good. But, those categories are all blurry, so you've got crossover.
So, your house is part consumption good, because you're living there; but, it's part capital good, because you could rent it out to someone else for income, or you could start a business there, case in point. It's a capital good for you for sure. There are always the classic cases of consumption goods becoming money, or used as money; cigarettes in prison, soap, cellphone minutes in Africa, all that stuff.
Then you've got a moneyness component for the capital goods. Apple stock can be used to transfer value; it could be used as money. The example I use in the book is, say you've got a portfolio of investment properties, let's say basically residential buildings, apartment buildings. Well, if you buy all those properties one off, maybe you buy them at a valuation of 15 times cash flow. But, if you take that portfolio, which is illiquid, and you float it on the stock exchange; now, maybe it trades for 20 times cash flow. So, you've got 15 times cash flow of capital good and 5 times cash flow of money. And, what we in finance actually call that moneyness is just liquidy, right; how liquid is the asset.
So, you've got these blurry lines around these basic categorisations, but now we have Bitcoin. And Bitcoin is, to my mind, the first pure money. It's the first form of money that is only good as money, it's only useful as money, and it's not useful as anything else. So, that is a paradigm shift; that is something different. Now, as to the question of, is it money yet, or how good a money is it, that gets back to that framework of, there's 14 characteristics of money; and, maybe the characteristics I value aren't quite the same as you value, or somebody else values.
The censorship resistance, or unseizability, usually doesn't matter, except when it really matters, and whether you've got to cross a border, basically, to get out of a war zone, or some other similar reason. And so, that's where the question of scoring Bitcoin today, how does Bitcoin score today, in the book which is now 15 months old, the way I scored it is Bitcoin is better than gold overall already; it's not as good as the dollar overall today but of course, the trajectory for gold is flat; gold isn't changing.
The trajectory for fiat money is downward as they print more of it, and the trajectory for Bitcoin is upward as not only people learn about it, but as all these layers of utility, these second layers and third layers, the wallets, the exchanges, the lending capabilities, all this stuff as it gets built out, that stuff is clearly on an upward trajectory.
So, Bitcoin is, to me, going to be money and used as money in the future if it reaches its potential, and it looks like it's headed in that direction. And in the meantime, can you use it as money? Yes; today, you can mostly use it as a store of value, you can transact in it if you need to; most people don't because what idiot would sell their Bitcoin for a T-shirt or something else, because it's probably going to go up in value. But eventually, I do think people will transact with it more.
Peter McCormack: So, that crossover, as the dollar goes down and Bitcoin goes up, it's like that. That's essentially your hyperbitcoinisation really. So I mean, I've made enough shows on this. People know the problem with the dollar, why that's, let's say, slowly dying right now. But, what are the things that Bitcoin is missing, to you?
For me, the volatility is a problem for it to be money and the wider acceptance is a problem. I think the latter is a lot easier to solve with technology; most people, you can train to use a wallet. But I think the biggest issue with wider acceptance and it becoming a unit of account is the volatility.
Andy Edstrom: Yeah, I totally agree, I think you're spot on. And the volatility, it's looked lower overall mostly in the last year or so. I mean, we've just had this big downturn which is a reminder that, okay, it's still volatile. When will that reduce? Well, it has reduced over time on average. You look at the yearly standard deviation numbers; that standard deviation of price in fiat, in dollars or sterling, or what have you, and it has been falling over time; that's to be expected.
But, on the other hand, I am not holding my breath for, "Oh, it's going to be less volatile than gold next year", or a few years from now. And when I say volatile, I want to be clear. I'm not just talking about, as denominated in fiat money; I'm talking about in terms of, let's say, purchasing power against either a basket of consumption goods, or against other capital assets.
Peter McCormack: Because the dollar could be crashing whilst Bitcoin is actually quite stable?
Andy Edstrom: Exactly right. I also, by the way, don't expect the dollar to crash the next few years. Some people are talking about, this is it. I can see the dollar going down another 10% versus a basket of, whatever, euros, yen and sterling; that wouldn't surprise me at all. But, I think the dollar's going to be with us for a while yet; not least because those of us who understand Bitcoin, or at least think we do, think that it's going to be worth a lot more and we're just not going to transact with it.
I mean, I'm really happy that people can transact with Bitcoin in parts of the world, or in personal situations where they really need that uncensorability, but the rest of us are just going to hold, we're just going to hodl. I know you've talked about, I think, holding three more halvings for a while.
Peter McCormack: Yeah. So, my view on it is, I'm not going to not spend any, like it's not going to be I can't spend any. I said I was going to do three halvings. I've got no pension, I've got no savings. I was going to do three halvings and my expectation, that's nice retirement.
Now, a couple of caveats: if it hits a certain price, I might take out a small amount and buy a nicer home for me and the kids, because there are some things like, it wouldn't be a case of -- I'd never look at that home as, "Well, if I'd have held for ten years, I'd have had this much money". We would have got the enjoyment of living in that home for ten years, so I'm absolutely fine for that; I always thought I would do that. Then, I might do other things, like little special gifts for family and things.
But, primarily speaking, the majority of my stack, I expect to hold for at least three halvings. I've done one; I will reassess after each one. But, you never know. Look, I've seen people talk about this cycle going up to $50,000 and this cycle going up to $300,000, and then I saw somebody say between $400,000 and up to $1.2 million; it might have been Raoul Pal. So, you make it to the second cycle and it's like, how high can it go? It might have been that gradually, then suddenly; it's happened so quickly that what am I waiting for?
Andy Edstrom: Well, I heard you say that your favourite car was the Lamborghini Countach; I couldn't remember what year?
Peter McCormack: That was as a kid. No, I want my Huracan!
Andy Edstrom: Once we get to Lambo parity, right, so that's $250,000 Bitcoin, that's where we're at Lambo parity, then you can peel one off and buy your favourite car for 1 coin!
Peter McCormack: I am definitely. It's funny; people think it's a vanity thing. I had a Countach Micro Machine as a kid and I was just mesmerised by this. It was a gold one and I was mesmerised by this one. But, it's a bit of a meme and a bit of a joke, but the point being is like, there comes a time where it's like, well you might as well spend some and enjoy some of it.
I've seen people say, "I've sold all my Bitcoin"; I'm like, "What are you doing? Sell 10%". I think if you sold 25% every halving, you would continually grow your wealth. At the same time, you can enjoy some of that money. Some people want to save. I know there are certain things that I'm going to want to enjoy spending it.
You wouldn't want to save it all to 52 and then suddenly I get sick. It's like, why? All those years, we could have had some fun.
Andy Edstrom: Can we talk about the worst thing that can happen as an investor, because I have a page on this in the book? What is the worst thing that can happen as an investor? It's not losing 100% of your investment, right; that's not the worst thing. The worst thing is selling the thing that goes 100X after you sold it. And, I personally have more than one painful experience; I talk about this in the book. The example I use is Netflix, right.
So, I think it was 2012. Netflix was pretty beat down. They had lost their content catalogue. I think the stars' contract had rolled off and they were getting some competition. It was like Comcast was going to launch a streaming service, and maybe AT&T was going to also, and it wasn't looking that great. So, I took a flyer on Netflix, okay.
I bought, I think it was, let me see if I've got this right; 1,000 shares. Okay, the stock was at $50, and I bought 1,000 shares, okay; $50k worth of Netflix. And within, I think it was five months, it traded from $50 to $80, okay. I was like, "Great trade. I'm out; see ya". And today, that stock would be worth between $2 million and $3 million eight years later.
Now, would I have held the whole stack? No. I'm sure I would have peeled some off along the way, but it's one of those painful examples, and it's really relevant to Bitcoin, because Netflix is one of those internet native, network effect-based phenomena, right? We know there are lots of them now. I mean, the same deal with Amazon; same deal with all the internet giants. Everyone underestimates, at least in the past, they've underestimated how big these network effect-based, internet native phenomena can get. Bitcoin is the latest one.
So, I learned the hard way, the painful way, missed out on huge, massive gains for more than one of these situations, Amazon being another example personally, and I'm not going to do it again; I'm not going to miss it. Am I going to peel off small pieces along the way? Yes, probably. Am I going to stay irresponsibly long forever? We'll see. As you say, if you peel off little pieces as you go, but you keep the stack sizeable and you're making multiples of that stack through the halving cycles, that stack's probably going to get bigger.
Selling the thing that has huge potential, that is the most painful, most expensive, worst thing you can do in investing; far worse than losing all your money 100% on some position.
Peter McCormack: I had the exact position in 2017. Before I launched the podcast, back when I was trading shitcoins as well, a couple of things have stood out. Somebody recommended to me -- it's funny, because I was tweeting about it being bullshit today, but somebody recommended to me to buy AOS, and I bought AOS at 50 cents. I bought $25,000 at 50 cents and it went up to 60, and it came back down to 55 and I panic-sold. Then, it went up to $23. But I don't care about the one with the shitcoin.
But, I'll tell you the biggest regret, is the one where I got too greedy and I got into mining. I bought like $0.5 million of mining -- well, it's not $0.5 million of mining equipment; I bought $300,000 of mining equipment and then I had all the costs of running the mining. I basically lost $0.5 million of Bitcoin in mining. That Bitcoin today would be worth $3.5 million, I think, if I'd just held that Bitcoin.
Now, who says I would have held it; who says I would have done something else, but I've learned so much about conserving Bitcoin and the sats you own over time is much more important than the dollar price. The dollar price is interesting, but at the end of each month, I want to own more sats than the last month, that kind of thing; I've really learned those things.
Andy Edstrom: I want to augment this too, because coming from the legacy finance world and thinking about portfolio theory, people say diversify. Well, I kind of don't even want to have that discussion. But, let's say you do believe in diversification, let's say you buy a portfolio of 10 assets or 20 assets, then roll the clock forward 20 years, 30 years; what does it look like? What it looks like is most of those things effectively go to zero, at least as a percentage of the portfolio; but, a few of them will hit really, really big.
If you just hold on to them forever, a few stocks or a few assets, maybe one of those will be Bitcoin, will come to dominate your portfolio, even if you just size them in a reasonably few percentage points per position, you know; 20 or 30 positions. That's just the way it goes, because it's those continuous compounders, it's those assets that become much, much bigger, much more valuable, orders of magnitude more valuable, that actually provide most of the investment return for a portfolio of assets.
Now, I'm irresponsibly long Bitcoin, I know you are too; we believe in this thing. We also probably have other sources of income such that if it goes belly up, we're not destitute. But, I believe in this thing so I make a big make, I make a sizeable bet. But, even if you just hold the thing for decades and it realises its potential, that's just what your portfolio's going to look like. It's going to be about a few winners that make it really big, and those things just swamp the rest of what's going on.
Peter McCormack: Has your opinion changed during this Bitcoin journey quite significantly on any issue; and I'm going to tee it up by telling you where it has for me. I always thought the idea of a $1 million Bitcoin, or in excess of $1 million, I always thought it was ludicrous. I was like, "Come on, man, it's never going to happen". That's certainly changed over the last year. I started to understand why that could happen; that's one of the biggest changes.
The other thing that's really changed for me is my conviction around the importance of the Lightning Network. I'd completely written it off. I was like "No one's going to use this; it's got no importance". I now understand why it's important and when it will be important, which isn't today; although saying that, with everything Jack Mallers is doing with Strike, but generally speaking, it's not today. Has anything drastically changed for you?
Andy Edstrom: Yeah, so you mention Lightning and I talk about Lightning in the book and I also highlighted it as having huge potential basically. I have to agree that every day that goes by and Jack with Strike and various other parties who are actually building useful things on top of it, it seems like that's coming to fruition.
I used to be quite sceptical of the moneyness or store of value share that Bitcoin's going to steal from all these other assets. In other words, if there are $300 trillion or $350 trillion of real estate globally, how much of that's going to be taken by Bitcoin, that store of value of those empty apartments in Kensington that nobody lives in; they don't even rent them out. I mean, they just sit there as assets. Yes, you could make an argument that they're also a potential place to live for those very wealthy people who have to flee from somewhere else, but basically they're a store of value.
But, as the world has been so warped with quantitative easing and central bank policy and the money printing, I really can see huge amounts of store of value transferring out of real estate and into Bitcoin. I have a friend, he's not a client but he's a friend, who emailed me and said, "Okay, I'm finally interested in this thing". He's a professional real estate investor and I'm probably going to be talking with him soon, and we're going to talk about this.
I'm going to say, look, real estate has, for decades and decades, well centuries really -- I mean, there was a time when real estate was the scarce asset, right? Back in the Middle Ages, or when people were living on farms, the productive land was the thing to own. I do think that we could move into a world where people say, owning that second house or that third house or that investment property, yeah, if it's cash flowing then that's a real asset; but, as a store of value, it just doesn't appeal as much as Bitcoin, because I can move the Bitcoin; I can take it with me; they can't take it from me as easily, you know, they can't just call the cops or the military and roll over my piece of property and seize it.
So in the book, I think I assigned a few trillion dollars of potential upside value for Bitcoin as taking store of value from real state stocks, etc. I have come to the view that that potential upside is much higher maybe, and that's the $100 trillion case, is that it takes a real big, fat bit out of the store of value attributes of some of those existing investment assets. So, that's one thing that I've changed my mind on.
Peter McCormack: What about the psychological effects of this price continually changing, because as more people adopt Bitcoin, as it takes more market share, like you say, in terms of, say, the real estate market, it just becomes more and more expensive. It's kind of like, "Shit, if I'd have done…" Michael Saylor did it at $11,000; we're now at $30,000. Others are looking going, "I'd love to have done what he did, but it's $34,000; I'm going to get a third less, I'm going to get a third of what he did, not thinking actually they can still 3X theirs, right.
What's the psychological impact of this continually -- because it gets a lot more expensive very quickly?
Andy Edstrom: I'm glad you brought up this point, because it's another thing that's changed in my thinking, which was the four-year halving cycles. I guess smarter people than me had already gained conviction, let's say, around the four-year halving cycle as of a couple of years ago. Don't get me wrong, I had conviction. I was continuing to accumulate dollar cost average Bitcoin since 2017, but I wasn't sort of convinced that this four-year halving cycle with the supply shock, and then the FOMO feeding into the big rise in price, was just going to repeat like clockwork. And now here we are.
It's the third time and I think people just have to start to say, okay, this pattern; we only had two data points before, but the logic is pretty unassailable. I mean, the supply cut is just relatively clear and so you have to say to yourself, okay, well it's playing out again as anticipated, in accordance with this model, and people's acceptance of that, I think that's actually a significant portion of what's bringing the big money in, you know, the institutional money in, like the SkyBridge guys, for example.
I think people have probably realised that it's just likely to keep repeating. And, if I can have some confidence in that, then if I can hold for four to five years, I'm probably going to be fine and I'm probably going to make a multiple, even if there continue to be those upturns and then crashes downwards and then recoveries of bear markets. And so, if you have a five-year time horizon, why wouldn't you take this bet?
Peter McCormack: Well yeah, you see, that's the thing. You have to get your head around this idea that the value of Bitcoin can go up; on a long enough time scale, can always go up, it can keep going up. So, you might feel like you're late; I feel there are some real psychological issues for people. I think those psychological issues for certain people get harder with every cycle.
Like my friends; they will just see it and say, "I can't own a Bitcoin". It's like, "No, you can own Bitcoin. You might not be able to own a whole Bitcoin right now, but you can own Bitcoin and you can appreciate your value". It's probably different for somebody who's put $100 million in for their company, but I think that psychological thing's important. But either way…
So Andy, listen, say they've got this far and they're like, "Okay, I get it, it's magical money, I understand what's the problem with the other money. Where the hell do I start; what's my starting point; what should I do?"
Andy Edstrom: Well, yeah, there are two pieces and I sort of go back and forth on this. I do believe in the, get some skin in the game, like buy something. So, I do work with Swan, as you know; we have a DCA product, so of course I shill them on that. And then, if they're on zero, if they have no allocation, usually I say, "Okay, buy some chunk and then DCA afterward and see how you feel about it". At current prices, as we talked about before, I'm a little reluctant to tell them to buy a decent chunk upfront, but I sort of go back and forth on that.
Then I tell them, "Just keep learning". Oh, the other thing I tell them, by the way is, assume that the moment you buy some, it's going to crash immediately, it's going to go down 30%; just be ready for that. Because, let's be honest, that's what happens with me. I mean, I remember, I think I made a sizeable buy, it was like $11,500. Maybe this was in September, I'm trying to remember. I bought at $11,500, but it immediately went under $10,000. It was down 20% literally an hour later; I was like, "Argh!"
Then likewise, I think I bought $20,000 or I bought $19,500, right, and it had that dip down to $16,500 and it's like, "Argh, every time!", which is why DCA is so appealing. But, yeah, I do prepare people, I try to prepare people mentally and by the way, it's easy to say the words; it's very different to feel the feeling in your gut when you've just bought something and it goes down by 30% immediately. But, I try to prepare people for that.
Then yeah, I tell them to keep learning. Read more books, go listen to podcasts, go listen to Peter.
Peter McCormack: Get down the rabbit hole.
Andy Edstrom: Get down the rabbit hole, suck in this knowledge, because the more you know, the stronger will your hodl grip be, the more you'll be able to suffer those downturns and not get shaken out of position, and that's the main thing, man, not getting shaken out of the position. As old man Partridge talked about in that book, Confessions of a Stock Operator, the worst thing you can do in a bull market is get shaken out of your position.
No stock tipster, in that case, was going to convince Partridge to sell some of his precious stock that he knew was going to go up in the long run, even if he was sure it was going to go down in the short run, because he was going to have to catch both the sell and the rebuy, plus there are obviously the tax effects. And, yeah, I try to tell people, I try to instil in people that idea of, don't get shaken out of position; learn what you have to learn to gain conviction; and continue learning, because there's so much to learn.
Peter McCormack: But, when do we know when this bull market's over, man? You could hit $200,000 and you're like, "Holy shit!" and then it crashes down to $50,000. Or, it could fly up to $400,000. This is like my son; my son's like, "Dad, are you going to sell some?" and I'm like, "Well, maybe" and he's like, "Well, dad, if it hits this price, you could get this" and I'm like, "Yeah, but what if it goes higher?" It's like an internal joke between us now. How do you know, and I don't think you do?
Andy Edstrom: You don't know and I think that comes down to personal circumstances. So, for example, say you're in a position where you have the fiat job, but you've got a stack of Bitcoin and at some price up in the six figures, if you peel off some percentage, then you're set for a while; well, that's a reasonable decision to make, right. It's reasonable to peel some off, set up your financial security at least for some period of time, so you can basically do what you want; so that's one way to look at it.
Another one is regret management. This is a framework I like to apply with clients, right. How would you feel if? How would you feel if you could have peeled a bunch off at $300k and then it falls to $75k? That's hard to imagine if you haven't already been through it. If you have been through it, like you and I have, Peter, then it's not so hard to imagine.
Now, on the one hand, now that we've been through it, it will probably be less painful this cycle; but on the other hand, it still might be somewhat painful. So, yeah, I think it's facts and circumstances; everybody is in a different position and then, yeah, as you suggested, maybe there's something you want to do. You want to buy a better house or, if you've got a big enough stack, you want a second home somewhere; we can get into flag theory, you know, you want to have assets in multiple jurisdictions potentially. I mean, there are all these different variables that I just think are different for each individual.
Peter McCormack: All right, man. Well, listen, let's move on to the risks then. I think at this point, I'm already convinced, but I'm already here, so I'm a bit biased, but I think other people listening might be pretty convinced right now. You've outlined why it's magical, you've outlined the problems with money, you've outlined the investment thesis, you've outlined where people start; what are the risks, because there are risks?
So, this is where you being all in and me being all in, we could look back and go, "We were fucking idiots; we were idiots; what did we do; why did we make such a risk?!"
Andy Edstrom: Yeah, so the book, as I mentioned before, I think, has like 40 pages of risks.
Peter McCormack: Technical, political, economic. You group together sociological and psychological.
Andy Edstrom: Yeah. These categories you mention, technical, political, economic and sociological and psychological, they're sort of arbitrary, those four categories. But, yeah, as you pointed out, the sociological and psychological I kind of lumped together, although you could maybe separate the behaviour of individuals versus the behaviour of groups, and maybe that's a place to start. I mean, the categories I include are naysayers and the media. I think that we can mostly dismiss those.
A year ago, there were really credible people telling you this thing is rat poison and baby brains and garbage. Those people are starting to flip. I mean, some of them are not saying negative things anymore. Others have flipped positive. Yeah, there's some wave there clearly where certain people have flipped and obviously, there are some naysayers we now know and love who may never change their tune.
Peter McCormack: Well, we've got Ray Dalio; he kind of admitted, "I could be wrong here. Teach me about it". Mark Cuban this week started going a bit more pro positive. We're left, I think, at the end, we're left with Peter Schiff, Nouriel Roubini and Frances Coppola. The same three people are going to hate it until their death.
Andy Edstrom: Well, yeah, let's talk about another piece of FUD, or another risk in that category, which is the environmental one. You and I covered this in our recent article on Bitcoin Magazine, Winning Hearts and Minds for Bitcoin. My thinking has actually evolved on this point.
I used to make the argument of, "Well, yeah, some of the energy that's burned is dirty. Whatever, it's coal and natural gas that's fuelling some of the mining capacity, some of the hash rate; but, a lot of it is clean". Now, I've gotten much more aggressive in how I frame it which is, actually it's pretty clear that in a now global market for energy, in a world where electricity doesn't travel more than a few hundred miles, well then much of the renewable energy in the world is stranded assets. It's basically sunny places in the desert, or windy places offshore, that are just too far from a population centre for it to make sense to build energy production capacity, whether it's solar rays or windfarms, or what have you. But, with Bitcoin, you can. All you need is the internet connection.
So, this is going to dramatically increase the unit sales of solar, right; and, every industry on the planet basically goes this way. It is, the new technology's way too expensive, so there's some niche application where it gets a foothold. And then, as demand rises, the units go up, which increases the revenue of the company, which funds the research and development of the technology, which brings the average cost down, which brings in more users; and, you have this virtuous cycle that brings the whole thing down the cost curve.
To me, that logic is unassailable; it happens in every industry. Why wouldn't it happen with, say, solar and Bitcoin? Why wouldn't the fact that you can now build Bitcoin mining farms in the middle of the desert, fund more R&D for the solar companies to bring the average cost of energy down? And so, what we know is there are sticks and carrots, right, with any externality, negative externality; whether it's, my neighbour is making too much noise and it has a negative effect on me; or whether it's, that power plant is spewing too much carbon into the atmosphere. You can either threaten them with a tax or some limitation, or you can incentivise them basically to do better.
Many technologies, they start with some of both. They start with incentives from government in a lot of cases, and that can help get something off the ground. It happened with ARPANET, right, which became the internet; it's happened in a lot of different examples. But, once you get to a certain level, you need the private sector to take over, and that's where we are with Bitcoin.
So, to my mind, five years from now, some governor in some province in India, as an example, is going to make the decision, "Am I going to install a coal plant or a natural gas plant or a solar array?" Well, by that point, when there's a decision to install some piece of equipment that's going to be used for decades, right, and if it's dirty and spewing out carbon, it's going to be spewing out carbon for decades, but if it's clean then it's not, then you'd better already have gotten to the point where the average cost, the fully loaded cost of the clean technology is lower.
Because, unless you're ready to write him a cheque to make up the difference in cost, which in the rich world we just clearly haven't been willing to do, I mean obviously in Europe there's been more of that, but the US hasn't done much of it; unless you're willing to write big, fat cheques, then you'd better hope that that cleaner technology has gotten to the point where on an average basis, it is cheaper than the dirty one. And, I think Bitcoin is going to accelerate that process.
Peter McCormack: Well, man, that's definitely, I guess, a counterattack, right?
Andy Edstrom: Yes.
Peter McCormack: Because sometimes, despite what everyone says, it is kind of hard to justify it. I mean, I can justify it; but if somebody says, "Well, Bitcoin is using the same amount of energy as half of Africa", you're like, "Yeah, well, but gold uses this", etc; it's still a very difficult one. But, if you can actually explain what you said there as a counterattack, it's actually a pro, it's a positive; it pushes down the cost of production.
Andy Edstrom: It is, absolutely.
Peter McCormack: It leads to a cleaner world, so I think it's a solid argument. The funny thing though is I haven't seen so much of the -- I think I've only seen one person really mention the environmental side during this cycle so far; it doesn't seem to be popping up yet. Maybe it will. I think what will happen is, if Bitcoin breaks $100k, some people are going to get really fucking salty, and then they're going to bring out all their big guns, pow pow pow, and take it on, and the environment will be one part of that.
But so, that's not really a risk then. Let's talk about the actual risks. I mean, look, technical risk, I put it down to one big, catastrophic bug. That, to me, that's the only real technical risk worth talking about, and I don't worry too much about that right now. I think if it is, it's recoverable, with consequences; a rollback and consequences. I mean, are there other ones; am I being naïve here, Andy?
Andy Edstrom: Well, you know, because you mentioned Vijay earlier and I feel like in your recent conversation, you maybe mentioned like a major hack or theft. If Coinbase gets compromised and a big stack is stolen, that shouldn't be terminal for it, but it could set us back for some period of time. But again, you're right, there's a big different between what will actually kill it versus what will set it back in time.
I have actually come to your conclusion which is, unless it stops cranking out blocks on the regular, right, unless it stops clearing significant amounts of value every ten minutes roughly, then it's hard for me to see what's going to kill it. We could talk about the government attack or the government FUD, and this --
Peter McCormack: Well, do you know what, let me throw one in here. I think the one Saifedean talks about; the best government attack on Bitcoin is good policy.
Andy Edstrom: Yes! I agree, I think that's right.
Peter McCormack: It destroys the use case.
Andy Edstrom: He's spot on. Yes, government rectitude. That is a clear and present threat to Bitcoin; yeah, exactly. Just like we're dead if our solar system collides with another star; let me do the probability calculation on that; let me get my calculator out!
Peter McCormack: A fucking fat zero.
Andy Edstrom: Yeah. The other thing too, I mean that gets into the ethics of it too, right? I mean personally, there's nothing I'd rather be working on than Bitcoin, honestly, for ethical reasons as well as Number Go Up reasons. But, even if it fails ultimately, or even if it doesn't reach its potential, if it brings government to heel a little bit and prevents the serious crack-up boom, what the Austrians call the crack-up boom, that's coming; or, even if it brings it forward and makes it less severe.
I mean, I talk to family members about this. We talk about The Fourth Turning. I think you had Brandon Quittem on, maybe, to talk about that. And, you know, every 80 years or so, we get one of these crack-ups. Usually it's a major war. Last time, it was World War II. The time before that, it was the Civil War. The time before that, it was the Revolutionary War, and people die.
So, to me, it's how many people are going to die in this next hard period, which I actually think will happen in the 2020s; this is my expectation. Sorry to get dark on you here. But, if Bitcoin can help with that, can mitigate it, can cause the ultimate crack-up to be less painful, that alone is worth working on.
Peter McCormack: Yeah, it's funny you should say that. I really can't think of something else I'd rather be working on right now. I mean, I'd like to make films, but when I made films, I wanted to make a Bitcoin film. It's just so fascinating to be at the forefront of something, and it really clicked for me again recently. I've been working my way through The Sovereign Individual, because I'm doing a show about it with Breedlove soon.
Andy Edstrom: Perfect.
Peter McCormack: I'm like, I've got to be super prepared for this; he blows my mind when I talk to him. So I'm like, I've got to be super prepared. So, I'm going through it, and actually the idea that we're going through a revolution, that this is a period in time whereby, you know, we look back at the history books and we talk about the Agricultural Revolution or the Industrial Revolution or the Digital Revolution. This is something that might be looked back in the history books in a couple of hundred years. This is when money changed. This is how money used to be, and then money became this and then suddenly everything kind of got better. I'm not going to say it's a panacea for fixing everything, but it's really interesting to say, "Shit, we're living at the forefront of this"?
Andy Edstrom: It's huge. This is what happens. I mean, you mention Breedlove who did a special with Saylor, and you did, I think, two episodes with Saylor. I love Saylor's quote where he says, "I'm giving you fire and you want to trade it"! Like, I'm giving you this civilizational-changing technology and yeah, you want to dick around and trade it up and down.
Yeah, it's entirely possible the longer we spend doing this, the more we learn about it, the deeper down the rabbit hole we fall, the more likely or the clearer it seems that this is a major, major civilizational inflection point. By the way, I want to talk a little bit about policy around that too. So, I have a friend who works in cybersecurity and I put a question to him publicly on Twitter the other day. He didn't respond; at least, I don't think he did. And, the question I put to him was, "Will cybersecurity be able to move forward without Bitcoin?" and here's why.
So, you probably know about this recent hack, the SolarWinds hack. Basically, all this personal information, we think, got seized, compromised by the Russians. We don't really know who took it, but it's just the latest in a long trail, I talk about this in the book, of hacks and personal identity stolen and personal information taken. And, there's never any penalty. Equifax was the classic case. Remember the Equifax hack a few years ago? 143 million identities stolen and a year after it, the stock was higher. There basically was no downside, there was no penalty.
For the first time, first of all with ransomware, where Bitcoin is demanded as payment; for the first time, there's an actual financial penalty for not having your cybersecurity house in order. This is huge. This means that actually, there's something to be lost by the company that's basically behaving badly or negligently. The second thing I would say is, as the world transitions to more and more interconnectedness, we're spending more of our time on the internet basically in cyberspace, we have to get security right, we have to get cybersecurity right. It is critical to the functioning of the system and therefore, the whole species.
So, Bitcoin is the first time that there's an actual bounty on securing private keys. It's most evident with the exchanges. If they screw up, they lose huge amounts of money. And because there is that bounty, it raises the game for the world overall on figuring out newer and better ways of managing private information. And this is, I really think, crucial to the advancement and survival of all humanity.
Peter McCormack: Dude, that's a great way to end it. Bitcoin is about the survival of all humanity! All right, look; firstly, brilliant as ever. If you're listening to this and you haven't bought Andy's book, go and buy Andy's book. It's called, Why Buy Bitcoin. I'm going to put links in the show notes but, Andy, listen, if people want to find out more, where should they go, what else should they do?
Andy Edstrom: Yeah, absolutely. Thanks, Peter. Follow me on Twitter. The handle is @edstromandrew; that's last name first name. As you said, the book is, Why Buy Bitcoin. It's on Amazon, it's on Apple. Of course, I work with Swan Bitcoin; swanbitcoin.com/andy; you can get a little free Bitcoin, you can do your dollar cost averaging. Then, if you want to see or hear other interviews or podcast appearances I've done, it's personal website andyedstrom.com.
Peter McCormack: All right, well I'll put links to all of that in the show notes, probably not for Swan because, you know, I've got sponsors, but whatever, man!
Andy Edstrom: Sorry.
Peter McCormack: But listen, appreciate you coming, it's all good. Look, it's great to get to know you, man, recently. Hopefully we'll do some other stuff together. I appreciate you, I appreciate everything you're doing. Good luck with it all and, yeah, go and check out Andy's book; it's fucking brilliant!
Andy Edstrom: Yeah thanks, Peter, and actually, let me add in one more shill which is the article you and I co-authored on Bitcoin Magazine; it's called --
Peter McCormack: This is bullshit by the way! This was Andy's work that I helped a little bit and I reviewed. I think I can take credit for inspiring it and reviewing and adding some comments, but it was your work, bro.
Andy Edstrom: Well look, it was a better product for your involvement, not least because it started the gun on getting it out. As people may have heard the story, you did that episode with Matt Odell. I was already working on the article and you basically ideated the same concept on your episode and I was like, "Wow, I've got to get this done, got to get it out", so anyway.
Peter McCormack: Everyone needs to read Jonathan Haidt's Righteous Mind. It's a real game-changing book. It should make you a little bit more tolerant to other ideas; maybe it won't. It did for me. Well listen, anyway, I'm going to stick it all in the show notes. Andy, love you, man. Stay in touch. Anything you need, you can always reach out to me and I bet we'll be making another show in another few months anyway.
Andy Edstrom: Thanks so much, Peter, I look forward. It's been a great time.
Peter McCormack: All right, bro.
