WBD311 Audio Transcription

Bitcoin & The Sovereign Company with Christian Keroles & Robert Breedlove

Interview date: Tuesday 16th February

Note: the following is a transcription of my interview with Christian Keroles & Robert Breedlove. 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 Christian Keroles, the Media Editor of Bitcoin Magazine and Robert Breedlove. We discuss the idea of sovereign companies, jurisdictional arbitrage and moving away from a state-controlled world.

“With businesses and the value they create less rooted to the locality of any jurisdiction, it just pushes this free market paradigm on governments, and that’s what we are seeing happen. They are being forced to compete, just like every other enterprise on the planet.”

— Robert Breedlove

Interview Transcription

Peter McCormack: Christian, how are you, man?

Christian Keroles: Doing great, Peter.  Excited to be on What Bitcoin Did and chatting with you.

Peter McCormack: Well, we should be saying this is your first appearance.  It kind of is, but I'll explain to everyone in a minute what's going on here.  It's kind of your first appearance; kind of your second appearance.

Christian Keroles: I'm excited though.

Peter McCormack: Yeah, it's going to be fun.  Breedlove, how are you?

Robert Breedlove: I'm good, glad to be here, guys.

Peter McCormack: Right, so let's set this up.  This is the second recording of this episode.  So, me and Christian recorded a couple of weeks ago this concept, The Sovereign Company, based on an article Christian had been working on; and then since then, we've had the Tesla news, and me and Breedlove in the background have also been working on this Sovereign Individual show idea.

So, I spoke to Christian a couple of days ago.  I said, "Look, let's do this again; we've got new information.  Let's bring Breedlove in and let's make this a monster".  But, it's still kind of your first appearance, Christian, so welcome on.  I've known you since pretty much starting What Bitcoin Did.  You've been around since the start, so it's good to do something with you, finally.

Christian Keroles: Yeah.  It's been an awesome journey.  I remember I contacted you after the Roger Ver show in 2018 and I was like, "Yo, you've got something going on here.  And from there, we started collaborating a little bit with the Let's Talk Bitcoin network; and, it's just been amazing to see you and the show grow.

Peter McCormack: I think that was episode 18, so that was like three years ago; Jesus!  All right, listen.  I'm going to let Breedlove take the floor first, because of the work he's doing, the articles he's been writing, the research he's been doing.  A lot of people will have heard about The Sovereign Individual.  I know, Breedlove, you'll say, "Just fucking buy the book and read it".  You know, I'm about three-quarters of the way through, but we will have people who are going to tune into this show, they've not read the book yet, so let's do the setup.  Explain what The Sovereign Individual is about.

Robert Breedlove: Sure.  So, I think the general setup -- well, there's a lot.  The super high level is that we could say that the shape of society, or the shape of the way we organise ourselves and the socioeconomic systems, tends to reflect the technologies that we use to collaborate with one another. 

So, the high level overarching thesis is that the 20th Century Industrial Age had the large top-down nation state, as we're dealing with large, industrial equipment and industrial effort.  We spent a lot of the 20th century actually mobilising resources from the earth to build buildings, to create capital, make stuff, etc.  And the thesis of the book was that the microprocessor, or digital technology, would subvert and destroy the nation state as an organising model ordinarily. 

The big impetus for that initially, and this is on page 25 of the book; you look at pages 24, 25, it goes super deep on what they call, I believe they call, "anonymous digital cyber cash"; what we would call basically Bitcoin.  They made the point that once people had the option to store capital in a medium that was uninflationary and could not be confiscated, that everyone would figure out the calculus behind this; that it was just better to hold money that doesn't inflate, or can't be confiscated easily, let's say; and that over time, all monetary capital would move into this medium.  And this would essentially, a mere 100%, deprecate the revenue model of the state, because the state only bases its revenue model on taxation and inflation. 

So, this taxation-resistant and inflation-proof money, that they called anonymous digital cyber cash, would be the catalyst for bankrupting the nation state model effectively.  And then it goes deep into other tech, but I think that's the high level setup.

Peter McCormack: And, Christian, the book had a huge influence on you, right; you love this book?

Christian Keroles: Yeah.  So, I currently own nine copies of the book and I always maintain a nice stash for when I meet bitcoiners in person; I make sure that they have a physical copy.  I've also shipped 25 copies to Romania, to Wlad, who I'm sure you guys know each other quite well.  But, he let me know back in the day, when he was working for Bitcoin Magazine, that you can't get it in Eastern Europe easily.  So, I was like, we need to distribute physical copies of this book around the world; that's how fricking important this book is.

So, I've been passing these out like Bibles effectively, and it's just such a prescient book.  It was published in 1997 and just uses first-principles logic, thinking and understanding to predict an unprecedented amount of things that are coming true today.  And I would say it's very, very directionally correct.

Peter McCormack: What was the kicker for you when you were reading it; what was the trigger point for you that, okay, you made the connections, you realised -- because, look, the thing about Bitcoin is we've heard a lot of these predictions, even before everyone was talking about The Sovereign Individual.  But sometimes in your head they're like, "Yeah, but really?  Are we really going to see the fall of the nation state?  Are we really going to see sovereign individuals?"  What was the kicker for you?

Christian Keroles: So, I mean I started reading the book as a bitcoiner.  It was one of those books that the people I respected the most continuously brought up.  But, yeah, I mean I think the fact that in 1997, on page 24 and 25, they go deep on censorship-resistant, inflation-resistant digital cash; that is pretty eye-opening.  But, it has a very nice historical context as well. 

So, some people consider this to be the dryer part of the book, but smack dab in the middle, it really goes through how, throughout history, technology has changed how we organise and it kind of gives a nice framework for understanding how things like gunpowder, things like the printing press; these things have fundamentally changed how we organise.

I think a lot of people think like, "Oh, we all come to a consensus with how we want to organise"; that's not the case.  Technology comes; that changes the logic of violence; that changes the logic of storing your wealth; and, that influences how you live.  So, they then kind of go and look forward into the digital age and they use first-principles thinking to kind of forecast, with the microprocessor, with all of these new innovations, with the world uploading to the web, like we've seen in dramatic fashion in 2021, what does that mean and what is that going to do to how we organise.

Again, if you want to understand what Bitcoin is doing to the world, I think that's again the best book possible to read.

Peter McCormack: Actually, my favourite book of the book is kind of the bit you're referring to; the history lesson where it talks about how we went from hunter-gatherers and how much land we needed, and I can't remember what it was; it was something like 25 acres for a group of 50 people, or something, whatever; and then through technology and through innovation, people migrated to building farms; and then in farms, they had to store the crop; and then people tried to steal the crop; and that kind of evolution of humans and how we organise ourselves and use technology.  And it takes us all the way up to the point of where we are today and the nation state and beyond that.

I found it really kind of interesting and I don't know about you, Robert, but I'm guessing the way you see it, there are going to be future text books that look back on this stage of statism as purely just another period?

Robert Breedlove: Yeah, actually this just comes to mind, but Christian, I think I can credit you with me finally reading this book.  It was recommended to me by a lot of people in Bitcoin circles, but I think we had a dinner in LA or something and you were like, "No, you really need to read this book".  I went home and bought it that night and read it.  So, that just came to mind!

Christian Keroles: I remember that dinner; Korean barbecue.

Robert Breedlove: That's right, it was Korean barbecue.  So, thanks for that, because this book has been tremendously influential in my thinking.

But, something else that I've learned recently was actually talking to Saylor, and his overarching thesis on humanity, I guess, is that humans are -- well, I guess you could say this.  The purpose of life is to channel energy across time and space towards the achievement of some end.  That's what really life is; it's harnessing energy and the essentially, trying to proliferate itself across space and time.

What distinguishes humans though, is that we can channel energy more intelligently, or you could say towards higher and more sophisticated ends than any other animal in the world.  We can coordinate our actions to the use of symbols, telling of stories; this is like the classic, I think the phrase Nerval used was, "You can organise 100,000 men under a flag on a battlefield; it's just an idea.  But, for a chimpanzee troop, they can only organise themselves in groups of like 150 strong".  So, it's this ability, if we consider our own efforts a form of energy, right, we can organise human energy at scale in a way that no other species can; and, that's why we dominate the world. 

So, it seems to me like you could even look at the way we organise ourselves; it is a device itself.  So, capitalism or the nation state or socialism; these different forms of statism, they're a tool in and unto themselves.  And, the real purpose of that tool is to organise a peaceful society that can generate wealth through trade; at least ostensibly.  We know with communism, trade sort of collapses, and that's why it actually loses out to a tool like capitalism.

So, I think that this takes us, this Bitcoin breakthrough, takes us to -- it enables a new form of organisation that was never before possible.  We like to say, in the US, that we're free market capitalists, but we know that every nation state in the world is centred on a communist structure actually called "the central bank".  It's the central command and control of money where there is no free market experimentation or iteration allowable.  That's what is handicapping humanity right now, is we have this bureaucratic or communist stranglehold on the free market, in the most important market in the world, which is money, right; it's one side of every transaction.

So in terms of how -- I know it sounds totally crazy today, that the nation state could fall or fragment, but these, as Christian pointed out earlier, it's not about our wishes.  We don't all sit down at a table and decide how we're going to organise ourselves; it's the technological realities that prevail at the time that determine how we organise ourselves.  How easy is it to project power over time; how easy is it to defend from the projection of power; and encryption technology basically changes the game.

But, the mathematical point that I think really drove it home for me, when I read the book, was this savings on inflation and taxation.  So, average US citizen today pays about $10,000 per year in direct taxes; that does not include inflation.  If they were instead able to take that $10,000 per year and put it into a savings account that yielded 10% per year; that, after 40 years which is the average working life, that equals $4.4 million of savings.

With the emergence of something like Bitcoin, the question for the average American paying $10,000 in annual tax per year becomes, would you switch your savings account for $4.4 million in retirement savings?  And, not that people cognitively understand this yet today, but this calculus sort of forces itself on market participants, such that the more governments overreach and try to increase taxes or increase inflation, the more people are pressured into this offshore bank of Bitcoin.

Peter McCormack: So, Christian, while a lot of people have been looking at the idea of the sovereign individual, you went down the rabbit hole of considering the Sovereign Company and the role that plays in this kind of future world.  Give me the background to why you looked at this as a subject?

Christian Keroles: Yeah, so really what I see here is, we now have a new monetary technology.  This monetary technology has fantastic properties that, like Robert indicated, have very real fiscal benefits to using the old technology; and I just saw it as a no-brainer that, yes, companies are already pushing the realm of sovereignty; Google, Apple, the massive network effects tech companies that are operating globally.

These companies, in some cases, are stronger than Western massive nation states; and in every case, they're stronger than every small, tiny, insignificant nation state.  So, what's it going to take for them to take that next step in sovereignty and separate completely from nation states?  I just see that as the path of least resistance for that next step towards breaking down nation state borders.  And it really wasn't an idea that was far outside the book. 

The book talked about this; that the economy is being uploaded to the internet that allows you to do business anywhere; and people are going to start optimising geographically where they're located in order to take advantage of the financial and business operation benefits of being globally dispersed.  And, this idea of geographical arbitrage, or jurisdictional arbitrage; that's what Bitcoin enables.  It enables people, and the internet enables us, as people, to pick and choose where they do business, and have this opportunity to do business in a better jurisdiction; a jurisdiction that is friendlier to Bitcoin and taxation from a legal compliance perspective, but serve the entire world.

So, I just saw that as the lowest hanging fruit really on this next step of this evolution towards a smaller government, sovereign world.  I mean, that was kind of the impetus for writing that.  And, I really look and see the Bitcoin exchange ecosystem as being, especially the offshore exchanges, as being that first beta version of this idea of a sovereign company, a company that is operating in the jurisdiction that suits them best; and, they are globally distributed to make them difficult to take down. 

They have all of their value in Bitcoin, so outside of the financial system, and that makes them very anti-fragile; but yet, they can easily serve the entire globe, including American customers.  Granted, those American customers jump through some hoops.  I mean, just seeing that example, seeing BitMEX's resilience against the US, and then just kind of trying to forecast what that looks like if a bigger, more powerful, more legitimate company starts moving in that direction.

Peter McCormack: I think we should expand into that and talk about the BitMEX thing, what actually happened, because that will give some context to what you've just explained here?

Christian Keroles: Sure.  So, many people who are in the Bitcoin community and have been listening to this show, they're very familiar with BitMEX; and early in 2020, I think it was the CFTC and other American agencies, they arrested Sam Reed, who is a cofounder of BitMEX, based in Boston.  They effectively ordered BitMEX to shut down for violating US laws, and they put out warrants for arrest for all of the cofounders.

So, normally when this happens, business immediately shuts down; funds are frozen; the exchange stops operating; and then, the business has to go into the courtroom and play by the nation state's rules.  That did not happen for BitMEX.  BitMEX is a very unique company in that they are 100% Bitcoin-based, so none of their funds could have been frozen; they never ceased withdrawals of funds; they never ceased operating business; and they actually had the ability to call their shots.

So, they never stopped business, like I said.  They switched out their management team; and no one, outside of Sam, ever was in the custody of the United States.  And now, Sam, while he can't travel, he is effectively free in the US and is again playing on his rules.  He lawyered up, he has his funds; they're defendable, right.

I think this is a great preview on what is going to happen and how resilient these companies are going to become when they adopt Bitcoin.

Peter McCormack: Breedlove.  Just thinking about the idea of a sovereign individual, for a lot of people, it's a transitionary phase where you start to adopt some of the technologies and the tactics to become part self-sovereign.  We know of certain people like, I did an interview with Max Hillebrand; he's essentially a digital nomad.  He's probably a lot more self-sovereign than, say, I am.  I'm tied to the UK, I've got kids here, I've got a house, I've got a mortgage, I've got a registered company.

So, there is this transitional period.  How do you think about the idea that somebody is kind of like a part self-sovereign; and, how do you think about the idea of being completely self-sovereign?

Robert Breedlove: Yeah, I mean it certainly exists on a gradient between being just full-on under the control of the nation state, versus having one foot out into digital space.  The other analogy that the book uses that I really liked, that makes a lot of sense is, they prefer what they call cyberspace, which I've been calling digital space in my writings, I think it's a more apt description; they analogise it to the high seas. 

They say that essentially, because this domain -- maritime law is very different from jurisdictional law.  In the high seas, basically because it's impossible, or very costly, to project dominion into the high seas and maintain monopolistic control there, that no one really does.  The best we can do is to monitor the waters and defend them to protect the terrestrial monopoly that the nation state holds.  But, no one can really hold -- like, we can't say that this is the American Ocean, or anything like that.

So, the high seas have basically become this refuge for anyone that wants to do anything condemned by the nation state; whether that's gambling, or buying things duty-free, or whatever it may be.  So, they analogise digital space to that, saying that it is this cosmically vast domain where you can basically cloak yourself behind encryption; you can detach yourself from your identity in digital space; so, you can achieve these levels of self-sovereignty that are just, before the information age, were not even thinkable; not even remotely possible.

The other advantage of that is you can be, in many ways, non-local.  So, when government tries to crack down on a BitMEX, these guys are just a fluid organisation, right; they're just on servers, they're on Bitcoin; they can really roll that to anywhere in the world, anywhere with an internet connection, and that's exactly what happened. 

I guess the other thing is people tend to think this all sounds rather fanciful or science fiction, but Dan Held dropped this in one of his recent newsletters actually, of old companies becoming rivalrous to the state; establishing so much sovereignty that they were their own sort of little nation state.  When you look at something like the Dutch East India Company, which had 40 warships and 10,000 private soldiers defending this far-flung spice empire; they had these long spice trading networks that they were actively defending like a nation state. 

The British East India Company controlled a large colonial empire; they had 300,000-strong standing army.  This is in the mid-19th century.  And then ultimately, that was then dissolved into the British Empire eventually; so this company sort of emerged back into the state over time.  And then, there was the Hudson's Bay Company, which is the largest landowner in the world and controlled a big territory called Rupert's Land, which at one point was 15% of the land mass of North America. 

So, to Christian's thesis, there's this big incentive really for companies to gain this autonomy as well, this sovereignty, because they're in the crosshairs of nation states, more so than individuals even, because they represent a larger tax base and it's easier for governments to deal, typically with a large organisation, because they're centralised, right.  You can go straight to the management group and historically, you can seize their funds or freeze their funds, or force them into some unfavourable tax agreement.

So, with that pressure from nation states, there's a commensurate incentive for companies to become more and more self-sovereign, so I think to increasingly play this jurisdictional arbitrage game.  And, to do that effectively, you need to adopt Bitcoin.  So, there are pressures even beyond the fiscal and monetary we discussed earlier that actually get into more of the sphere of sovereignty itself.

Peter McCormack: Well, this is why Tesla is such an interesting case study, and also the reason we're re-recording this, because it plays a really important part of the narrative here.  So, Christian, you've talked about regulatory arbitrage, and yourself there, Breedlove.  What happened with Tesla when, during the coronavirus in California when they had the massive restrictions on them, essentially they made the decision to move out to Austin, right?  I'm pretty sure that was a big, influencing factor on certainly Elon moving, anyway.  I'm trying to remember; didn't they move a factory because of that?

Christian Keroles: Yeah, I think they're moving a lot of their operations, including production.

Peter McCormack: Yeah.  So, when you think about it, Elon Musk is one of those people, he doesn't really give a fuck too much about the government and the state; he'll happily challenge them.  I mean, he's got the weight, right; he's got the clout and the ability to do that.  So actually, it kind of feels like it was almost natural for them to become one of the first big companies to adopt Bitcoin the way they've done.

I mean, look, I know Square adopted Bitcoin, but it was $50 million.  We're talking about $1.5 billion here.  So again, Breedlove, how much of this do you think this is Tesla protecting revenues, and how much do you think this is Tesla recognising a transitional stage and actually, requiring themselves to be self-sovereign?

Robert Breedlove: Well again, I'm not sure how much this is -- I mean, I'm sure they have to be thinking about it, right, as governments escalate their unfavourable tax treatment of companies.  This has to be discussed in boardrooms and at the management level.  I don't know if they're discussing self-sovereignty per se at this point, but it sort of only goes that direction.

The big thing with Elon, if I recall correctly, there was a California politician, I don't even remember her name; I don't pay attention to politics much.  But, I think she tweeted at Elon like, "Fuck you", basically.  I mean, what kind of world are we living in?  These are elected officials meant to serve their constituents, of which Elon is one of the largest, probably, contributing constituents to the state in terms of tax revenue.  And, here she is going on a social media platform and just saying, "Fuck you".  It just blows my mind that someone would shoot themselves in the foot like that, but that's kind of the outcome you get, I think, with a really bloated bureaucracy.

Peter McCormack: Yeah, we've got it here, "Democratic San Diego Assembleywoman, Lorena Gonzalez, issued a strident response to Tesla CEO, Elon Musk's threat to relocate his company's headquarters out of California.  She tweeted 'Fuck Elon Musk'".  And then, I've just seen next to this that, "Last summer, Tesla revealed that its newest automobile factory will be built just east of Austin in Del Valle", I don't know, I can't pronounce that correctly maybe, "and in November, Musk's transit-orientated underground tunnelling project, the Boring Company, announced that it is expanding to Austin".  There you go.

Robert Breedlove: There you go.  And, this is the core theme, is that optionality keeps counterparties honest.  If I'm a bank customer with you and I've got $1 billion in your bank, you're going to be much more likely to deal with me fairly if you know that I have an exit option; if I have either other competitors I can go into or Bitcoin, or anything else.  Sometimes, the power to do a thing, the option to do a thing, is even more effective than actually doing it.  There's a symmetry of relationship, right. 

This is what Bitcoin and the digital age enables; it re-levels the playing field, I guess, between nation state and individual and corporation such that we, companies and individuals, gain this unprecedented level of optionality, which forces the nation state to be more fair in its dealings; and in the long term, part of the thesis of this book, forces governments to compete and earn citizenship, versus just harvesting us, which they do today. 

We just get a tax bill.  It's just, "Here's your rate; here's what you owe us; you have no say-so in this matter whatsoever; we provide whatever services we want and we charge whatever we want and you have to pay it".  That top-down, commanding control, monopolistic control, will not hold in the digital age, where people have this unprecedented level of optionality.

Peter McCormack: You're essentially talking about the idea that Balaji talks about, which is the 10,000 cities thesis.  In some ways, it's a better form of democracy, and I think Rogan was talking about this with Musk this week where they talked about essentially, in some states your vote has zero impact.  It doesn't matter what you do in California; it's going to be a blue state.

But, your foot has a lot more impact.  You can leave; you can move yourself, your company and your tax revenues to another state, and we're seeing that impact now.  We're seeing it with Mayor Francis with what he's doing in Miami; we've seen what's happened in Wyoming.  Andrew Yang's just come out now and said, if he becomes Mayor of New York, he's going to make it a hub for bitcoiners.

It's quite interesting times because in some ways, they're kind of taking themselves on a journey to their own irrelevance?

Christian Keroles: Well, I would argue that it's not their own irrelevance and that this ability, at least in the United States, to kind of have domestic jurisdictional arbitrage, is actually what has made the United States great all along.  So, we discussed this, Peter.  You are in the UK.  It doesn't matter which county you live in, which city you live in; what happens in London is the law and you have no choice.  It doesn't matter how draconian it is.

But in the US, there is this friction in optionality and guess what; things can be horrible here in California, but for the last three weeks, I got haircuts and went out to bars in Utah, because it was available, and I could just drive there easily.  My money still works, everything still works, the identity system still works.  So, jurisdictional arbitrage is the game.

Okay, Bitcoin is just a tool to allow jurisdictional arbitrage for individuals and I would argue that companies have been taking advantage of jurisdictional arbitrage far before individuals have, right.  A Delaware company in the United States, that is jurisdictional arbitrage; Apple holding all of their funds in Ireland in Dublin, that's jurisdictional arbitrage.  And that is only going to increase as people start to adopt Bitcoin, because Bitcoin is that common, globally neutral settlement layer and it allows for the kind of property rights that enable inner, domestic, jurisdictional arbitrage in the US to kind of happen everywhere, and it really flattens the world, as Anthony Scaramucci has said.

Robert Breedlove: We would call this "jurisdictional arbitrage"; it's just market competition.  It's like, "Hey, if I don't like this service you're providing me, I'll go to your competitor", and that's what, to Christian's point, companies have been doing that, playing that game forever.  We have these reverse mergers into Ireland-based shell companies to keep funds offshore so they don't have to repatriate to pay taxes; you're driving to Utah to do things…  This is just the digital age.

I guess the other thing is, with information flowing freely and not -- with businesses and the value they create less routed to the locality of any jurisdiction, it just pushes this free market paradigm on governments, and that's what we're seeing.  They're being forced to compete just like every other enterprise on the planet.

Peter McCormack: The funny thing about Apple and Ireland, what happened there was the EU ordered Apple to pay $13 billion basically in back taxes to the Irish Government, and the Irish Government didn't want it.  They're like, "We don't want this", because if they had to pay those taxes, they were missing out on the beneficial tax arrangement that Ireland was offering it.  Because Ireland was part of the EU, it was seen as anticompetitive; which is why a lot of people actually were in favour of Brexit, because we don't have this opportunity to have this kind of competition.

Christian Keroles: Yeah, I mean you could argue that the EU is the perfect example of going backwards.  Europe actually was more decentralised and it had a lot more of the US effect before the EU; and then since the bureaucracy took over, they've just stifled that competition.

Peter McCormack: Well, we saw what happened recently with the AstraZeneca vaccines, you know.  They were struggling on, I think it was like their second batch of deliveries, and the UK had obviously got their orders in nice and early.  The EU was pissed off about this and they actually wanted to block delivery of orders that had already been made, just because of the slow process.  I think that Brexit, and what's happening with the UK now, has highlighted the problems of that bureaucracy.

But, you make a really good point, Christian.  I'm here in the UK, right.  It doesn't matter where I live in the country, I've got the same shit rules.  The only way I have any jurisdictional arbitrage is to leave the country, which is actually very difficult if you've got children.  If it was regional, say I could move to the next county, you might think about it.  But, to leave the country, it's almost not going to happen.

Christian Keroles: Yeah.  I mean, underrated in the US.  People think that democracy and all this stuff is states' rights.  And that's when I see folks celebrating red states flipping blue or vice versa I'm like, "You don't even get it.  You don't get what makes this country great.  It's that we want to have a massive diversity so that way, consumers and people have the maximum choice".

I don't really align with either party; I'm more or less localised, localised, localised.  So, I love seeing what's happening with the Mayor of Miami and what the aftereffects are up there.  And again, when it comes to who can leave the country easily, let's just zoom out.  We're not only talking about folks in the US; there's a particular feature of the US that makes it hospitable for citizens to kind of have this jurisdictional arbitrage.

But, on a state level, on a country level, companies, I think, are a lot more in position to take advantage of leaving, relocating and again, now that more and more commerce of the economy is uploading to the internet, the high seas as Robert puts it, it's going to be easier and easier to relocate; and then, if you're holding Bitcoin, to kind of separate your money from the financial system.  Then, all of a sudden, you find yourself in a position where you're shopping around jurisdictions; you have a lot more flexibility with where you go; your money works everywhere; you can accept payments from anyone, anywhere; and, that is going to have a massive effect.

So ultimately, I think, the long-term end result of this is borders changing, but I want to kick it over to Robert.

Robert Breedlove: Yeah, just talking with Christian, the idea of borders that just the strongest military in the room gets to draw these imaginary lines around a group of people and actually, The Sovereign Individual calls this a "tax farm" effectively.  So, the intention, or the purposes of the nation state, is to secure that border such that there is peace within it and that people can trade and create wealth.

So effectively, the border becomes this mechanism for securing private property rights peacefully.  So, not only are we recording ledgers to say who owns what, but we also have these mechanisms of non-violent dispute resolution, like the rule of law.  So if someone infringes on your property rights, you don't have to raise the militia and go conquer them; you can sort of depend on the court system to get retribution instead.

A lot of that purpose and functionality is provided orders of magnitude more cheaply by something like Bitcoin and sovereign more generally.  So, I think it will be really interesting to see.  I guess the one test case we have of this is when US capitalism basically out-competed Soviet communism in the 20th century, and we saw the USSR fall.  It fragmented back into the states it had previously conquered.

So, it will be interesting to see how that plays out, as Bitcoin bankrupts the nation state model; will countries just fragment?  One example would be Texas in the US.  I think in the State Constitution, they have an inbuilt option to become their own sovereign state, so maybe we'll see something like that happen.  But I wonder too, and I think about this a lot, how will property rights be handled post-nation state collapse.  So actually, your property rights in your home or an equities portfolio, or other forms of property, I would suspect that these would become more local.

First of all, I would expect they'd become digitised, because there are a lot of efficiency gains there by just -- there's an oracle problem to be solved, but there are a lot of efficiency gains if you can get a property right into a distributed digital database that's managed by software versus a centralised bureaucratic database. 

But, I would expect too that the enforcement of those property rights will become more localised again.  So, you'll see governments, in the digital age, revert back to its free market origins which were, in the agricultural age actually, when property rights first emerged, when we first started creating savings in the form of grain, livestock, food stuff, shelter; this was the original form of capital, and that's when property rights actually emerged.

When that property emerged, the service provider that protected it, that secured its border from external threat, was government; that's what government came from.  So, I think the digital age sort of reverts the large, centralised nation state model back towards this localised protection service that government began as.

Peter McCormack: There's one slight issue in that, in that a lot of the ideas behind, say, Christian's article with the sovereign company, is that a lot of companies these days are virtual.  Essentially, let's say I run a virtual business.  My staff are globally distributed; I've got people in the US; I've got people in Australia; I pay people digitally; I could pay them in Bitcoin. 

I can't get a bank account at the moment, which is the most mind-blowing thing at the moment.  I can't get a bank account.  I've applied to five banks and been rejected by each one for different reasons, so I'm operating pretty much without a bank account.  But, that doesn't matter; I can do it, right.  I hold the majority of the company's money in Bitcoin.

But, a lot of the companies therefore I deal with are international as well; they're not local.  So, if I was to have some kind of contract dispute with another company, how would you enforce that in the digital world, because we do have the nation state to enforce contracts and to enforce the resolution of contracts?  You do pay potential fines, or whatever scenario.  How do you enforce that in the digital world?

Robert Breedlove: There's a great piece written by ParabolicTrav on Twitter, and he has a partner on that piece whose name I can't recall at the moment.  I highly encourage everyone to go out and read this; it's called Bitcoin Contract Governance, and he describes a model where you can actually use multi-signature schema on top of Bitcoin to provide this form of decentralised contract law enforcement.

It depends on the nature of the contract.  Clearly, the more objective the terms are, the more dry code the relationship, the more easy it is to enforce this way.  But, the truth is, it's not actually the state that's enforcing the contract law; the contract is really enforced between the parties initially, right?  You have the spirit of the agreement, you embody that in terms and then, it's only when there's a dispute that can't be reconciled, either directly or via arbitration, that you then take recourse to the state and file a lawsuit or whatever.

So, it's almost like this contract is governed in the shadow of the state.  In a way it's just saying, "Look, if you don't do this, I'm going to take this option".  Again, like we said earlier, the option to do something is what's important.  I have the option to take this to the courts and sue you if we don't find alternative means of reconciling it.

So, with this Bitcoin contract governance model, which also would be mind-blowing in how disruptive potentially Bitcoin actually is, it could disrupt the centralised jurisdictional court model.  You could have this free market, and I've only read the piece once so I don't know it in detail, but essentially it was a free market of arbitrators.  You could have Party A, Party B to a multisig contract, and then Party C is this arbitrator that you've picked up in the free market.  And then, if there's any dispute, you basically have resource to the arbitrator who will make a decision based on certain criteria and can decide on the release of funds.

So, there is a free market component to this.  I'm not too equipped to speak to it fully intelligently today, but there is an alternative out there and I encourage you guys to read that piece.

Peter McCormack: So, Christian, one of the interesting things with becoming self-sovereign, as an individual it's quite easy.  And if we're honest, we've had a good ten-year run where we can front-run the corporations.  This latest Bitcoin run has really been dominated by the idea of companies putting their treasuries into Bitcoin; Saylor was the starting point really.  But, we've seen Square; we've seen this Tesla move; I'm sure lots of other companies are thinking about it.  But, we've had ten years to front-run them.

I'm also thinking in the idea of a sovereign company, it is actually the small, nimble companies, ones like myself with four or five employees, globally distributed, where the entire business is online; I have the opportunity to front-run the larger companies to become this kind of sovereign company.  Do you recognise that?

Christian Keroles: Yeah, so I think the word "sovereign" is a tricky word, because ultimately to be sovereign, you kind of have to be the top dog, right.  So very, very few organisations are going to actually become sovereign.  But, in the process of becoming censorship-resistant and anti-fragile, there's an opportunity to bloom into what could be a sovereignty. 

Again, that's kind of a big reason why I focus in on companies with this article, because I just recognise that multinational global corporations are the closest things to taking their sovereignty back completely.  So, when I think of your business, I think you can use Bitcoin and jurisdictional arbitrage to become extremely anti-fragile, and start flirting with sovereignty; but, it's going to take a little bit more scale for you to become a sovereign.  You'd probably have to partner with a sovereign to help you in your path of becoming anti-fragile and, you know, you're turning into a cockroach.

Right now, if you are just domiciled in one country and using fiat, you have no sovereignty; so, you're just trying to claw some of that back.  And again, we're already seeing big, multinational, network effect tech companies pushing the boundaries on sovereignty.  And that's again why I think that that's going to be where it first instrumentalises itself.

But, individuals like you and I, small businesses, holding their funds in Bitcoin, starting to domicile in different nation states, diversify which jurisdictions they're exposed to; on a grand scheme, that also is going to be huge in kind of forcing the hand of different nation states to start becoming more competitive and to start trying to do what they can to compete, rather than resting on their laurels.  So, it's very exciting.

Peter McCormack: Can we work through that idea that you talk about I'm not big enough to be self-sovereign if really, it's those who have to dominate their markets?  But, the idea of The Sovereign Individual is that you can be self-sovereign as an individual; so why, as a company, is that different?

Christian Keroles: Well, I mean it's like the long game, sure; individuals will become self-sovereign, and I think there are already self-sovereign individuals.  Like, I think this is probably someone who's typically frowned upon, but I would consider Vladimir Putin to be one of the only sovereign individuals today; maybe the Head of North Korea.  I mean, you could point to several "dictators"; they are sovereign, right?

But, using these techniques to become more anti-fragile, more censorship-resistant as a company, as individuals, those same techniques can be used by bigger entities and they themselves can start -- I consider the bar is, you need to be able to start competing with a nation state directly.  That is sovereignty.  And, nation states are going to shrink because of this technology, but we're going to see alternative organisations grow.

Ultimately, there can be individuals that achieve sovereign individual status; they'll probably be leading these companies.

Peter McCormack: But, is what you're saying that as long as you're ruled by some form of nation state under some form of government rules, you can't essentially be sovereign?

Christian Keroles: Yeah.  I mean, you're just shopping around and that's going to help you become more sovereign, claim sovereignty; but, to be a full sovereign individual, full sovereignty, you need an enormous amount of power; a nation state level power.

Robert Breedlove: I think it exists on a gradient, right guys, like we talked earlier; sovereign, not sovereign.  First of all, there are different domains in life where you may have more or less sovereignty.  And, the definition, by the way, I think is important here.  I forget the name of the guy who said the quote, but he said, "The sovereign is he who decides the exception"; so when you get to decide there's a general rule or guideline that we're using and operate, whoever gets to decide the exception to that rule effectively has sovereignty. 

So in these certain areas, with Bitcoin specifically, if you're in a fiat regime and the taxman says, "Your funds are frozen and you need to go to court now to try to fight and get them back", you cannot claim any exception; you have no levers to pull to protect yourself.  But, if you're in Bitcoin and that happens, there's not really anything they can do.  You actually have full control over those funds; you maintain the exception.  So, they try to enforce a rule over you, but you have the exception to go anywhere else in the world.  That gives you sovereignty over your monetary wealth or energy.

So I think, again, the theme here is the less attached you are to a locality, because if you're rooted in a locality and you need, whatever it is; you need to send your kids to that school, or you need to source your tin from that mine, you have to be physically present in this place to run your life or run your business; that is what subjects you to the dominion of the monopoly on violence that's locally predominant.  But the more, say, informational I guess your business or your life, the more sovereign you can be in the digital age.

Like you, Peter, who's running a podcast; you could really do it anywhere in the world; your team's already distributed; your capital's already in Bitcoin.  You're pretty much all the way there.  You would just kind of have to leave the UK and go negotiate maybe another, better tax treaty somewhere.  But the last piece is what I think Christian's getting to.  We need a little bit more size or weight to be able to go, today at least, and actually go and negotiate a more favourable tax treaty with a different jurisdiction.  You're not really going to get that treatment as a smaller individual or small business.  But over time, as states are shrinking and individuals are growing in power, this negotiating leverage becomes a little bit more equalised between state and individual.

Peter McCormack: Yeah, it's a couple of interesting points there.  I've moved the company money predominantly into Bitcoin; I hold six weeks' fiat cash flow; I've moved personal money -- well, I'm essentially over 100% now, because I'm leveraged.  So, I have sovereignty over my money.  And I've also, with my team, I've now said, "You can be paid any amount in Bitcoin", and I've had responses from 5% to 20% of their income coming in Bitcoin, because they've still got to pay fiat bills.

My weaknesses now, my real weaknesses, are any form of, I don't know, government pressure onto the platforms which host my content, because that would be -- you know, if Apple and Spotify were forced to remove my content; yes, I could find somewhere on the dark web to host it and make it available, but I'm going to suddenly, you know, where say I'm doing 750,000 downloads this month, next month I might do 100,000.  So, it really kills that part of the business.  That's my current weakness.

Are there other technologies therefore that are going to become important alongside Bitcoin for this?

Christian Keroles: So, let me jump in here.  I think that's a great example, and we're in this state of transition, right.  Personally, when I see Bitcoin, I see Bitcoin as the impetus for the personal server revolution and right now, we are very, very much dependent on centralised cloud providers that are not sovereign, that are all kind of trapped by the nation state.  So, kind of seeing how more and more of our society starts to kind of own their own hardware and starts to run their own stuff, again, we're in the process of shrinking the power of the nation state and growing the power of the individual.

It's a process, absolutely, and yes, you as an information business very well could be completely smothered, even though you still have access to your funds and your freedom.  It's a very easy way for you to kind of be smothered on the internet, but that is changing.  We've seen Donald Trump get de-platformed and guess what; he's on gab.com, he's on other places; and, those places don't have nearly as much pull as Twitter, but their importance and their relevance is increasing as well.

So, as we keep seeing more and more people get marginalised because of the growth of the state, we're also seeing the incentive to self-host, to go to alternatives; and, those alternatives are going to become more significant.  So, I just think it's part of a process and really, Bitcoin is the key that is unlocking, incentivising and enabling all of this and that's why, if you're talking about all of this kind of stuff, you have to talk about Bitcoin.  Bitcoin is fundamental and necessary.

Peter McCormack: But, even with Parler and gab.com, they could still face the same pressures; they could still censor Donald Trump if they want.  I think what I'm getting at is, is there a need for other decentralised technologies, obviously that don't need tokens and bullshit like that, but that enable people to host their business, host content, outside of this control?

Christian Keroles: I call it self-hosting, yeah, just running your own hardware.  That makes you censorship-resistant and anti-fragile.  But, it's just the impetus for it and the network effects around that are still growing.

Robert Breedlove: I think there are a lot of interesting projects to this end, but you're absolutely right; if we're going to have a society that is premised on free speech, which is basically what Western civilisation is, that the ideas of anyone should be free to rectify and in the way we organise ourselves, then we need, in the same way we have immutable money now with Bitcoin that we can express and receive value without any interference, we need that for information as well.

It's kind of interesting that we sort of got it with the internet in the beginning, that we had these -- and we do have it still.  We have these immutable protocols more or less, like different layers of the internet stack, like TCP/IP or HTTP; but, at the application layer, we don't have it, right, the application layer permission.  And, that's where you see these games being played, where whatever, the President of the US is getting censored off of Twitter and other social media platforms.

I think what we need is, as Christian called it, self-sovereign compute or self-hosting, and there are a few projects that are interesting into that end; the Yourbit project, very ambitious, but would allow people to basically take total sovereignty over their own digital existence.  I think that we might actually see a lot of this be re-architected on top of Bitcoin.  Maybe we'll see something like a Lightning protocol-based messaging service.  I know, Peter, you've done a podcast that was really interesting with a guy talking about the impact of the Lightning Network on podcasting.

We've also seen social media platforms develop there to where it becomes a true free speech digital platform.  No one again, if we're back to, "The sovereign is he who can make the exception", just like with Bitcoin, no one can make an exception to the database with a core rules set.  Therefore, all users are basically maximally sovereign.  We need that; we need those platforms to really get this digital age going towards its, I guess, libertarian promise.

Peter McCormack: It's a fascinating transition phase.  I don't know about you, Christian, but you're kind of watching these things play out step by step, things that people have predicted, things I've read about.  A lot of stuff I read about the Nakamoto Institute when I first got into Bitcoin, I was like, "Yeah, whatever.  There's this digital money, I get it, but come on".  We're actually seeing all the pieces of this kind of start to play out now.

Christian Keroles: Yeah and honestly, that's why I really recommend reading the book; because, once you read The Sovereign Individual, I mean there are a lot of other great resources out there of people thinking in first principles, like Pierre and Michael Bitstein with the Nakamoto Institute; but, once you see it from the perspective of, this is what moving onto the digital high seas is going to do to the world, and then we are actually living in that transition…

Marty Bent called 2020 the Year of Clarity at the beginning of 2020, and I fully believe it was the year of clarity.  It showed us how free we are; it showed us the nature of our government; it showed us so many things.  And, having the purview of being a bitcoiner, have read several books that have thought through this transition to moving into the digital high seas, and then actually watching it, it's an amazing show and a lot of popcorn for sure!

Peter McCormack: Are we not, as a group of bitcoiners, this little weird part of the internet and our ideas are actually a little bit radical and the rest of the world are looking at us going, "What the fuck are these people on about?"  Or, do you think right now, this stuff is actually something that is a radical idea that is becoming mainstream?

Robert Breedlove: Well, the market is, in practice, truth and Bitcoin is the fastest growing asset in human history.  I'd say there's some grain of truth in what we're talking about.  And you're right, we are in this radical niche side of the internet talking about these crazy, colossal ideas, like the downfall of the nation state; but, that's exactly what digital technology is.  It enables us to transmute our imagination into reality more quickly than ever.

Get into deep Austrian first principles; it's all about the free flow of information and goods.  That is the ideal market space and the less inhibited it is by any interference, specifically government interference, the better it is for everyone, the more wealth it creates for everyone.  And, I'm literally re-reading Human Action right now, and some of the things I read by Mises from 1949 I'm like, he just described the sovereign individual thesis; he just described the digital age; he just described Bitcoin.

So, it's as of all of these things, they've been in the collective human imagination or psyche for some time, but they're just now able to be expressed with digital technology.  And, I think we're living through an actual, I don't know the actual word for it, but a renaissance of some sorts.  We're at a, what the book would call, a "mega-political transition" where we're going from an industrial age into a digital age, and it's maybe hard to comprehend the profundity of that up close. 

But, it could be so extreme to look back on this in a couple of hundred years and thing we actually lived through it; we're actually blazing the trail here that we didn't even understand at the time.  So, it's kind of like, as we push out onto these digital high seas, we had the ruthless capitalists or whatever they say that dominated the 20th century; maybe we've become the sovereignists that dominate the 21st century.

Peter McCormack: But, it's a lot easier to be rational with retrospect.  I mean, this is no different from the early stages of the agricultural revolution, the early stages of the industrial revolution and I'm sure there were some people who spotted what was happening, and the others who just went along for the ride, or didn't accept it.  I know the book talks about the "digital revolution" which is this. 

I keep thinking that perhaps you're right; perhaps we are living in that moment and in 100 years, 200 years, they'll be teaching this, well, not in the government school books, because there'll be no government, but do you know what I mean?  This will be a part of history where we transitioned away from the nation state and it was like, "Look at that weird time where we had these armies and nations that ruled over people", and Bitcoin was the thing that enabled it.

So, Christian, before we close out, I still think there are going to be some people listening to this and going -- look, I get it, I get emails all the time from people, all different subjects, where I talk about my business and putting money in Bitcoin.  I'll get 10, 20 emails saying, "How do you do that; I want to do that for my company?" 

There are going to be people, certainly I think it's going to appeal to people with small businesses, distributed businesses, online businesses, who are thinking, "I need my business to become more self-sovereign", and I would say there are two reasons for doing it; not just defence against the state, but actually I think it gives you a competitive business advantage.  Certainly making my business primarily Bitcoin-based has given me, just in terms of capital alone, has given me a lot of advantage.  I can launch new extensions on my business a lot easier these days.

If somebody's thinking about this, where would you direct them in terms of things to think about, what they should be reading?  Obviously, you're going to tell them to read the book, but what else should they be thinking about?

Christian Keroles: I would say that just owning Bitcoin is not enough, and just owning exposure to Bitcoin is not enough.  Really, what I outline in the article is three steps to self-sovereignty.  Number one is, you need to hold your wealth in Bitcoin, a censorship-resistant, inflation-resistant store of value money. 

The next step is you actually have to hold and validate your own Bitcoin, right?  So, when you hold your Bitcoin in a custodian, yes you don't have to deal with some of the personal responsibility required to safely custody keys; but, you also forgo many of Bitcoin's censorship-resistant features that enable you to become more anti-fragile.

Then lastly, and I think most importantly, is this jurisdictional arbitrage facet.  Ultimately, holding your own keys and holding your value in Bitcoin enables you to better take advantage of jurisdictional arbitrage which is, in my opinion, the key of this whole revolution.  And, the main thesis of The Sovereign Individual is jurisdictional competition; it's no longer being trapped in the jurisdiction that you're born in, and having the ability to vote with your feet.

So, you need all three components.  You need to hold your value in Bitcoin, censorship-resistant, anti-fragile money; you need to validate and hold those keys yourself, so that way you actually have the value, you're not trusting anyone; and then, you need to set your business up in a way that you take advantage of multiple jurisdictions, or a jurisdiction that is going to give you guarantees.  But, that jurisdictional arbitrage aspect is super important.

The beautiful about uploading the economy in 2020 to the digital high seas, and I'm going to start using that, Robert, because I just think it's a really apt analogy; but, once you've uploaded to the digital high seas, guess what; you can find your post and you can broadcast everywhere; you can serve the entire world and it really does not matter where you are jurisdictionally.  You don't have to be in this kind of metropolitan hub anymore, because the internet is the metropolitan hub.

You can't be a sovereign company without those second two factors of holding your keys and jurisdictional arbitrage; but again, I just think that all of them logically make sense.  And ultimately, Bitcoin enables that jurisdictional arbitrage, which is so extremely exciting.

Peter McCormack: Nice.  Breedlove, have you got any final comments, anything you want to add to that?

Robert Breedlove: Yeah, I agree with all those points.  You can't hold paper Bitcoin and think that you're self-sovereign, because you're just assuming counterparty risk again.  Your counterparty gets to decide the exception.  If they disappear with your Bitcoin, or they get hacked, or they go bankrupt, you're dead in the water.  You've got to hold your own Bitcoin; you've got to run your own node.

I would add to that too that, to play this game of jurisdictional arbitrage, you really need citizenship optionality.  A lot of people call this "multi-flag theory".  This is sort of a new space I'm exploring myself, but just figuring out if things go south in your home, right, if the UK for you, Peter, just gets super draconian overnight, or they enforce some law that is just not acceptable, what do you do; what's your plan B; where do you go next?

It's a lot easier if you have prepared for that, if you already have an alternative passport or visa, whatever, to another country versus trying to scramble in the moment that everyone's rushing for the exits, right.  This is, everyone's rushing to exit the theatre, and the door's just kind of one size, you know; you end up bidding a lot more to get out.  So, it's better to do it in advance than do it in the moment.

If you want to go either further up on that self-sovereignty spectrum, I think the 3D printing of everything is interesting, but specifically firearms.  The fact that we can now print firearms to protect ourselves from predation is really interesting.  I think that will be increasingly relevant to the symmetry of violence going forward.  And then, I think taking these general survivalist courses. 

I'm not trying to sound tinfoil hat doom and gloom here, but it doesn't hurt to be prepared for all possible outcomes; because I think the big thing here with the sovereign individual thesis is that the ultimate outcome is actually quite a beautiful world.  We're a lot more free, we have a lot more wealth, we have a lot more control over our own lives; but, the transition is highly uncertain.  We don't really know what that looks like going from centralised model to the decentralised model.

So, in that transition, you really just need to be prepared for all eventualities.

Peter McCormack: Yeah, I don't disagree.  I think that's the bit that I think about a lot, is the transition itself is likely bloody; the transition away from the state.  The state not accepting things is likely bloody, it's likely a revolution; and then, the early stages of organising yourself with a smaller, or if no state, itself will likely be bloody; that it will likely be a scenario where there's a lot of figuring out how this actually works.  So, very interesting.

Well listen, look, appreciate you both coming on.  Breedlove, we're going to follow this up.  We're going to do The Sovereign Individual itself.  Like I say, I'm three-quarters of the way through it.  It's taken a long time, because I'm going through slowly.  I'm keeping a lot of notes and I'm repeating a lot of sections, but I'm looking forward to covering that.

Christian, it's been great to finally get you on the show.  I'm going to share the article you wrote out on the show notes; everyone should check it out.  Christian, if people want to follow you, where can they do that?

Christian Keroles: Yeah, so I'm very active on Twitter @ck_SNARKs.  I'm starting to play around with Clubhouse as well; same handle @ck_SNARKs.  And, I'm leading things up over at Bitcoin Magazine, so of course for everything Bitcoin related and a lot of the best articles and thought leadership.  Both of these guys have contributed too.  Go check out bitcoinmagazine.com and I've got to plug the conference, Bitcoin 2021; b.tc/conference.  That's where you can get your tickets to the Bitcoin Conference in Miami this 4 and 5 June; super excited for that.  Bitcoin 2019 was an absolutely fantastic event.  Companies that are making a huge impact in this space were formed there, and we're hoping to repeat and do it bigger and better in Miami this year.

Peter McCormack: Nice one.  Well, I'm hoping I can get over; I'm hoping planes will be flying at that point.  Breedlove, how do people follow you?

Robert Breedlove: You'll find me on Twitter as well, @Breedlove22.  And then, I've just launched the What Is Money show, so it's kind of a podcast and YouTube channel.  You can find that at whatismoneypodcast.com or just search it on YouTube.

Peter McCormack: Brilliant.  Look, love you both, appreciate having you both on.  Hopefully, we'll meet up in person soon, because it's been far too long.  Christian, I used to get to see you every couple of months, but now it's been over a year, so hopefully soon enough, guys.  Take care, appreciate you coming on.

Christian Keroles: Cheers, Peter.  Thank you.

Robert Breedlove: Thanks, Peter. Thanks, Christian.