WBD673 Audio Transcription

No One Understands Bitcoin with Allen Farrington

Release date: Monday 19th June

Note: the following is a transcription of my interview with Allen Farrington. 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.

Allen Farrington is a professional investor and the co-author of Bitcoin Is Venice. In this interview, we discuss the problems with fiat, or as Allen characterizes it “fiat fuckery”. We talk about how money printing leads to inflation and a misallocation of capital, the complexity of the fiat system hiding the resultant theft of capital, the slow demise of pension funds, and the confusion around what growth is and isn’t.

“For literally every other financial asset, there’s always a price people will be willing to sell at, and there’s always an opportunity cost of some other asset that they could have instead…for a decent proportion of the supply of Bitcoin it will never be sold, and that creates a completely new market dynamic.”

— Allen Farrington

Interview Transcription

Peter McCormack: Allen.

Allen Farrington: Pete.

Peter McCormack: How are you? 

Allen Farrington: I'm very well.  How are you?

Peter McCormack: I'm good, man.  This has taken some time. 

Allen Farrington: It has, yeah, and we're doing it in Miami as well, right? 

Peter McCormack: I know! 

Allen Farrington: Not London, not Bedford, not Edinburgh. 

Peter McCormack: Not Manchester. 

Allen Farrington: We've both made the pilgrimage, so we may as well.

Peter McCormack: Yeah, well good to see you, man, a long time coming.  Danny is a particular fan of yours.

Danny Knowles: I genuinely think it's one of the best Bitcoin books I've read, maybe the best. 

Allen Farrington: Have you actually read the whole book?  I'm not joking, I've not read the whole book.

Danny Knowles: So I read the article, I don't know when that was, a couple of years ago, and then I'm probably three-quarters of the way through the book at the moment.  Still working on it.  It's a long book. 

Allen Farrington: Do you want to know something funny, right?  So Sacha is a co-author on the book, for people who don't know.  He's not here this year.  He came here, as in Miami at the conference, he came to the conference last year and we'd had this running joke about how literally neither of us had actually read the book.  And so, he read it in one sitting on the flight to Miami because he was so worried about people asking him about it and being like, "Oh shit, I don't know.  I'm sorry".

Danny Knowles: Presumably you read it in the editing stage though?

Allen Farrington: Well, not really because it's -- I'm obviously being a bit facetious; it's to do with the way that we wrote it.  I have read everything in it; I've never read it cover to cover because I mean even in the final form, it's a series of essays.  They're obviously very related to one another, but we've made some effort to tie them together a bit more, but we deliberately didn't do that too much because some of them are just too different, basically, it would have obviously been forced past a certain point.  So, yeah, so they were all written as essays.  Probably most of them, I forget exactly the number of chapters, but yeah, maybe half the content was written before we even decided to turn it into a book. 

Danny Knowles: It's the only book I've ever read that says, "Don't flick the genitals"! 

Allen Farrington: See, I don't remember when it's -- when does it say that; what are you talking about? 

Danny Knowles: About MMA.

Allen Farrington: Oh right, of course, yeah.

Peter McCormack: So basically, Danny's going to interview you.  I'm going to be the foil in this one.  So hold on, so he read 408 pages, or whatever it was, in an eight8hour flight?

Allen Farrington: I think the actual content of the book is only about 340.  There's a lot of end notes, there's a lot of bibliography and stuff like that.  It's a long flight, I just did it.  It's like nine hours or something, and there's another one if you go to Edinburgh as well.  Plenty of time to read a book.

Peter McCormack: I've not read the book. 

Allen Farrington: So, this interview is going to be great! 

Peter McCormack: Well sometimes I read the books. 

Allen Farrington: Two people who haven't read the book, talking about the book! 

Danny Knowles: Three people who haven't read the book! 

Allen Farrington: Maybe we should interview Danny because he's read it!

Peter McCormack: So, Danny, what's this book about?!  No, but sometimes I like to have the chapter titles because that gives a structure, but I don't want to read the book because I want to be told what's in the book sometimes.  But I have read some of your articles.  I read that other paper you put together, the one where you trashed Ethereum.

Allen Farrington: Yeah, probably Only The Strong Survive.

Peter McCormack: Yes.

Allen Farrington: Yeah, it wasn't really trashing Ethereum, not that I'm a fan of Ethereum, it's trashing DeFi.  I can't even bring myself to say DeFi as if it's like a real thing.

Peter McCormack: And obviously --

Allen Farrington: That was a while ago, yeah. 

Peter McCormack: -- that was a while ago. 

Allen Farrington: That was the basis of the only previous time I've been on What Bitcoin Did.  I don't know if you remember, Danny and I were chatting about that just before we started. 

Peter McCormack: When were you on before? 

Allen Farrington: Good question, yeah. 

Danny Knowles: With Cobie.

Peter McCormack: What?  Oh shit, yeah, of course.  We had four people, didn't we? 

Danny Knowles: Yeah. 

Peter McCormack: Yeah, I remember now.  Only The Strong Survive, you basically immortalised it in a drawing for me once as well. 

Allen Farrington: I don't remember that.  What was the drawing of?

Peter McCormack: So it obviously wasn't, it's about the traditional finance sector.  You know, where you had finance and then you went like this? 

Allen Farrington: Oh, yeah, that's the fiat finance!

Peter McCormack: Yeah. 

Allen Farrington: Yeah, that's one of my better artistic works, yeah, I was very happy with that.

Peter McCormack: But I think that's the DeFi stack as well.

Allen Farrington: Probably.  Yeah, it's similar.  I think the DeFi stack's a lot more obviously stupid though.  No, actually, it isn't.  So, it's coming back to me what the captions on that were, and I'm pretty sure the very first one is like at the top, it's "real productivity" or "actual productivity", something like that.  I'm sure Danny can probably find this quite quickly.

Peter McCormack: "Financial engineering".

Allen Farrington: Yeah, then "financial engineering", then the mess, and then "too much leverage", "print the difference".  So actually, no, it doesn't even make sense for DeFi, because there's no real productivity.  It's like a closed loop.  Print the difference just plugs into financial engineering.

Peter McCormack: We put a new arrow in.

Allen Farrington: Yeah.

Peter McCormack: Put it there.  But Danny talks about you a lot.

Allen Farrington: I'd be worried.

Danny Knowles: In the leadup to this article and this interview! 

Peter McCormack: No, that's not true. 

Danny Knowles: It's because we were trying to get you on the show for about a year. 

Peter McCormack: Danny's got posters of you on his bedroom wall! 

Danny Knowles: Only a few. 

Peter McCormack: Only a few.  He says it's the best book that's ever been written about Bitcoin. 

Allen Farrington: That's very kind. 

Danny Knowles: I think it's amongst them. 

Allen Farrington: I don't think it's even about Bitcoin, but we can get to that if you want. 

Danny Knowles: Well, I kind of went down the rabbit hole of reading -- so, Ben Prentice who works on the show, he's a keen Austrian Economist, got me to read Economics in One Lesson.

Allen Farrington: Yeah, very good.

Danny Knowles: And then, I can't remember the name of the other one.  And then, this was the book I read off the back of those two, and it puts into practice a lot of what they say, but in more Bitcoin terms, I think.

Allen Farrington: Yeah, I think that's fair, yeah.

Peter McCormack: Well, let's dig into your background first, because not everyone will know you.  We know you.

Allen Farrington: What?!

Peter McCormack: Not everyone will know you.  Some will have read some of your work.

Allen Farrington: I don't even have a surname!

Peter McCormack: Give us your background, man.

Allen Farrington: How far back are we talking here?

Peter McCormack: So, how did your mum and dad meet?!  How many times have you been over the border?!

Allen Farrington: Are you serious?!

Peter McCormack: No, what was your educational background; what brought you to here?

Allen Farrington: Well, I studied maths and philosophy at uni.  I didn't really know what I wanted to do after that.  Well no, sorry, I did know that I wanted to do a PhD in maths.  That fell apart for reasons that are probably not all that entertaining for this audience, but in the course of figuring that out, I kind of stumbled into a job in finance.  Really liked that job, did it for a long time, it's still the only adult job I've ever had.  I think it's probably quite instrumental to, it's cringe when I say this, but my Bitcoin journey, right? 

Peter McCormack: My Bitcoin journey! 

Allen Farrington: My Bitcoin journey.  Yeah, for a couple of reasons.  I don't know how much detail you want me to go into about what that company did.  I was an investor, basically, and what we invested in was almost entirely public companies, just means like stocks on the stock market that probably people will have heard of a lot of them.  That was helpful for me in terms of my intellectual development with Bitcoin, because right when I joined, it's not like I didn't email everybody, but it became known quite quickly that I liked Bitcoin.  But just because of what we invested in, we couldn't buy it. 

That was super-helpful, because that actually forced me for a long time to think more seriously about how this would affect businesses, if ever, I mean because this is like 2015, 2016 when I started; it pretty quickly became clear it would eventually start to affect some, if not maybe all, in the very long run.  But that was very, very helpful for me because it's led to, we were chatting right before we came on, that at that firm, we did investment in Blockstream, investment in Lightning Labs, and I think it's just that for me at least, it prompted a lot more rigorous thinking, was a lot more rewarding I guess in terms of the opportunities it gave me in the industry to be frank as well, rather than just back in 2015 saying, "Buy Bitcoin and here's why", and then just forgetting about it for ten years, which is still perfectly valid, I'm sure a lot of people have done that and have done very well out of it.

Peter McCormack: How big is that firm; like, people?

Allen Farrington: People, I think it's about 1,500 people. 

Peter McCormack: Okay. 

Allen Farrington: It's pretty decent, it's very well-known.  I'm not deliberately not saying their name. 

Peter McCormack: You can say their name. 

Allen Farrington: Yeah, okay.  It's called Baillie Gifford, it's based in Edinburgh.

Peter McCormack: Okay, and for them to invest in Bitcoin companies, was this a whole new division?  Were you part of a group that -- did you spearhead the idea that you should consider Bitcoin companies?

Allen Farrington: Yes, I did do that, but it was very well received.  Where I was going -- I got distracted with blockchain and Lightning Labs stuff -- is that the way that they invest, just completely generally, ignore Bitcoin for now; the way that they invest, the philosophy I guess you could say, that they approach financial markets with is very unusual.  And I obviously wouldn't have categorised it this way at the time.  I wouldn't even have known any of this terminology, I guess, but they're basically very opposed to fiat finance, like that little chart that I drew, like everybody there would have got that right away and would probably have approved.  It might be a bit too on the edge. 

All this stuff, you just go on their website, the marketing slaps you in the face, but it's like very long-term outlook, both in I would argue in absolute terms, but certainly compared to most of their competitors, a focus on -- they get branded as technology investors, which they don't really like because that's kind of a consequence of the approach, it's not the intention.  The intention is long-termism, high-quality companies, but which are maximally disruptive, I think is maybe the most interesting one, the most kind of intangible and difficult to pin down, where their long-term potential -- so you can probably immediately see where Blockstream and Lightning Labs would ideally fit in this -- their long-term potential comes from doing something, whether it's like a business model or a technology, that is radically new.  And so there's a lot of risk in this. 

They're rightly, I think, categorised as being at kind of the extreme risk, the extremely risky end of the spectrum of what their clients would want to invest in, their clients just being typically massive pension funds actually.

Peter McCormack: But pension funds usually don't want risk, or as a small amount.

Allen Farrington: Well, yeah, they do, exactly.  It would typically be a very small amount of their overall portfolio, it would be by far the riskiest part.  But this whole outlook obviously is very contrary to, you know, I'll just say fiat finance, why not?  Obviously, that's a bit snide, we can go into a bit more detail what I actually mean by that.  It's sort of a Bitcoin Twitter thing to say.  I think it's quite Austrian as well, actually.  I think the really interesting thing is that they certainly don't advertise it as that.  I don't want to say they're not aware of it.  I've had plenty of conversations internally about this and people find the idea really interesting, but it's not directly relevant to what they're doing, so I guess they probably wouldn't think to advertise it that way. 

But it's interesting that it's kind of, in their case, it emerged very much from first principles, which I think is what a lot of people, especially if they haven't had academic training in economics, but who nonetheless quite like the Austrian school, very similar kind of comments that you'll get, and I include myself in that category, very similar kind of comments that you'd get from people like that, that it just appeals from first principles.  So, that was all a very roundabout way saying it, that was all very helpful for me, general intellectual development, just thinking about finance and economics.  But it lent itself very nicely to eventually their being opportunities with Bitcoin companies.

Peter McCormack: Did you have to sell the business case of investing in Bitcoin companies before you selected the companies, or did you just pick one company?

Allen Farrington: No.  So what was really nice about it was that it fit their -- I was just very lucky that it fit their overall philosophy.  I didn't really need to make any particularly Bitcoin-centric case.  I mean, obviously I didn't ignore that that's a component of these businesses.  But again, going back to what I was very loosely describing as the investment philosophy, the case is around extreme disruption, extremely long-term time horizon over which this disruption is likely to play out, and the Bitcoin element is kind of incidental to that.  I mean, it could be any technology.  The vast, vast majority of their investments are obviously with non-Bitcoin, if that's the way you want to split the investable universe. 

So that's maybe one thing to keep in mind as well, that these are very, very small in their overall handful of different portfolios that they manage.  I think the exciting thing though is that obviously if I'm right or even roughly right, if we are roughly right, that'll increase over time for sure. 

Peter McCormack: Well, we're either right collectively or wrong.  And so, if we're right collectively, a number of these companies will be huge, game-changing companies in 5, 10, 20 years. 

Allen Farrington: Yeah. 

Peter McCormack: I think we kind of feel like we all win or lose together.  I don't think there's much of a middle ground.  Obviously, there's an argument that Bitcoin just becomes this asset like gold and you have some companies, but I kind of don't think it's going to work out like that.  I think we either win or we don't.

Allen Farrington: Yeah, I think I agree with that.  I guess on a very long time horizon, that's probably true.  It might not feel like that at various intermediate points though, right?  It's probably never felt like that so far, I mean certainly not to me.  It doesn't feel like we've won yet.

Peter McCormack: I feel like there's a year, year-and-a-half, every four years, we feel like we're winning. 

Allen Farrington: Winning, yeah. 

Peter McCormack: And then there's like this two-and-a-half year period of like, I hope we win.  Maybe we won't.

Allen Farrington: That's when all the good work gets done though, so if you have the right perspective, that's arguably more exciting.

Peter McCormack: Well, it cleans out some of the crap and brings out some new ideas.  But we had a very interesting conversation yesterday with Rational Root, the big carrot.  Do you know him on Twitter? 

Allen Farrington: No. 

Peter McCormack: He's like a Bitcoin analyst, but he's analysed his on-chain data.  Who was I explaining to this earlier? 

Danny Knowles: I can't remember, you were explaining it. 

Peter McCormack: Yeah, he explained the S-curve to me.  So I've seen the S-curve, and I was like, yeah, I know technologies have an S-curve.  And I'll draw it out for you how he explained it to me earlier.  But essentially, the way he explained it to me is that as Bitcoin started to get issued, you started to get this kind of like lockup of illiquid supply, so that's your illiquid supply hodlers.  But you have the total issuance, and up here is your liquid supply.  And so that's been growing like that.  But we hit this kind of inflexion point at the last halving.  So we've got like one, two, so they are the first three halvings, and now what's happening is that it's coming to come back here, but you've got the illiquid supply growing.  So this liquid supply is your S-curve. 

What it made me realise is that, almost thinking back to what you were saying, Only The Strong Survive; this has been really tough, these are tough periods to wait out because during this period, you've got a fluctuation on the price, you don't really know if this is going to work.  It feels almost like some beautiful design by Satoshi, this kind of four-year halving cycle that takes us in through a growth phase and this contraction phase.  But if he's right here, there's going to be so much growth in Bitcoin, there's going to be a lot of capital available to invest in other companies.

Allen Farrington: I can give you an interestingly different interpretation of this, by the way, and see what you make of it.  So, I can link it back to the comments before too, that when I was in that job, obviously there was some consideration given to the price of Bitcoin, especially because it's disproportionately relevant to Bitcoin companies, right?  You can't disentangle the two for probably fairly obvious reasons.  But even outside of that, just intellectual interest, it was essentially my job to figure out what the fair value, let's say, was of other kinds of investments.  So it's worth giving it a shot with Bitcoin as well. 

I basically concluded you just can't and you probably shouldn't either because -- and what I'm about to say, I think, is captured really nicely by that graph -- it is priced in a really bizarre way that I'm not sure has ever previously been the case for any, like literally any asset on financial markets, which is that it's priced at the margin, obviously that's kind of definitionally true, but the people who are buying and selling at the margin are the ones who only kind of get it, right?  The people who really get it never sell. 

So, in order to predict what the price is going to be, you need to at least think, I mean, I don't think this is possible at all, but if you're convinced you can do it, what you have to be convinced of is that you can predict the spread of a meme, essentially, amongst people who kind of believe it, but not fully.  And once I appreciate, I mean, I think that's true, you can disagree, anyone can disagree with that; but once I appreciated that, however many years ago, I was like, "No, you can't do this.  I'm just not going to try any more".  And I think that's what that represents, or it's one way of interpreting that graph.

Peter McCormack: I see it differently.  I see what you have here, the illiquid supply of bitcoiners, and what you have here in the liquid supply and what have been trading are, I don't want to say fiat people because that's derogatory.  I think it's people who are trying to make fiat out of Bitcoin.  And what you've got over time, if you've got less of a supply to be trading in that area, you can still probably make great returns, but what they're doing is you've got this growing supply of bitcoiners who --

Allen Farrington: The thing is that the people at the top become the people at the bottom.

Peter McCormack: I don't think that's necessarily true.

Allen Farrington: Well not all of them, it's not deterministic.  In order for the people at the bottom to grow, I think this is deterministically true that some of the people in the middle have to become them and so if you really want to reverse-engineer, "Well how can you get price out of this?" it's what the people in the middle are thinking at that moment.

Danny Knowles: So, are you saying that my Bitcoin could be worth $1 million because I'm not willing to sell until $1 million?

Allen Farrington: I guess that, yeah.  Well, worth it to you, not worth it in absolute terms.  But yeah, that's related to it.  But I suspect that even with you, that's probably not entirely true.  I think this is the super-interesting thing about Bitcoin, I didn't really explain this before, this is the part that I think is genuinely new; no asset has had this before.  For almost every other, well actually, no, probably for literally every other financial asset, there's always a price people will be willing to sell at.  There's always an opportunity cost of some other asset that they could have instead.  For obviously not the entire supply of Bitcoin, maybe not even a majority of it, but for a decent proportion of the supply of Bitcoin, it will never be sold, and that creates a completely new market dynamic, which I think if you really tease this out properly, you shouldn't try to -- you can try to predict it, maybe on a short-term basis, you can do reasonably well trading in and out of it, but longer and longer term, I would suggest is a bad idea.

Peter McCormack: So, the price is a reflection of how many bitcoiners we've created?

Allen Farrington: I think so, yeah.  I think that's as sensible an interpretation as any.

Peter McCormack: Yeah, because, yeah, okay, that makes sense.  Okay, so then just flipping back, just a short question back to the investment thesis of the firm you work for, the reason they want ultra long term is because a pension fund can be long term and can take those risks?

Allen Farrington: Not really, it's not even really about that.  I mean, when I say most of their clients are pension funds, that's by assets, not by individuals.  They have retail products as well.  The answer is not as interesting as that, I think.  Every pension fund would be in a similar position where they want exposure to basically as many, hopefully uncorrelated returns of different asset classes as possible.  And so it's just very like, I mean, this isn't even a controversial one.  This is nowhere near as controversial as something like Bitcoin; it's just public equities, very high growth probably, very long-term holding period. 

Peter McCormack: And did you come into Bitcoin as an Austrian, or did you discover Austrian through it? 

Allen Farrington: Kind of, yeah.  So, I've told this story a couple of times, it's not really all that interesting, it's almost more it's interesting in terms of not having any elements that are like -- I don't want to say it's interesting because it's uninteresting.  It was just a very slow process for me, there was no like aha moment.  There was no big event that suddenly made me realise the importance of Bitcoin.  But Austrianism was important. 

So, I mentioned before I studied maths and philosophy.  I was a student when I came across it.  Those are obviously both pretty helpful.  Completely coincidentally, was very well-read in Austrian economics, so it appealed from that point of view.  And probably the final component is the only basically real job I'd had.  So I did all kinds of stuff in uni, flipping burgers and stuff like that, but the only real job I'd had was software engineer, so that was also very helpful.  I consider myself incredibly lucky to have been in that position when I did first come across it. 

I always remember this article by Jameson Lopp, which I think we referenced it, and Danny probably knows this better than I do, I think we reference it at the very start of Bitcoin is Venice, I think it's in the introduction.  Oh, what's the title of it?  Nobody Understands Bitcoin (And That's OK). 

Peter McCormack: Oh, yeah. 

Allen Farrington: Really excellent if people haven't read it.  I remember that when telling the story because I'd make sure not to say because of all these influences, "Oh, I got it.  I just immediately appreciated why it was amazing".  That's absolutely not the case, but I think it is important that I didn't dismiss it, because I think almost everybody dismisses it at first, and I did not dismiss it.  I was open to it.  It took a lot longer to get anything like a reasonable understanding of it, but I was very lucky to be in that position.

Peter McCormack: I always find it funny when people in, say, the Twitterverse say, "Oh, you don't understand Bitcoin".  I always find that a really arrogant statement because I think Jameson had it right.  How can you understand it when the things we're talking about today, we weren't talking about two years ago, and two years previous and, yeah, it is like this organic beast that presents new ways of thinking about certain things in the world.  I mean, I think the mining industry now, what's happened over the last four years is a great example of that.  It's completely changing the energy markets.  Some of that's still to be proven, but…  

So how do you come to understand Bitcoin?  Do you just see it as like a stroke of luck, we've got this thing, let's see what it is; or do you have a pretty clear view now for yourself?

Allen Farrington: Well, I think I really take that Jameson article to heart.  I think why that hits home for me is that, I think this is what you're getting at, but cut me off if I'm going off in completely the wrong direction, is that I figure that it's worth focusing, if you're going to be involved full time, which I am now, it's worth not wasting your time attempting to understand every single thing about it and thinking about where you can specifically make a difference, I guess. 

One of the things, I remember we were talking about this a while ago, I was assuming you were going to bring it up at some point, that the framing that I actually quite like for myself is that I don't even really like Bitcoin that much, I just hate fiat.  And so that's kind of the lens that I approach it with.  I think a lot of my Twitter activity's probably better understood in that light too, that I don't actually really say that much about Bitcoin, it's mainly just making fun of fiat economists and fiat happenings.  And so, to maybe a little bit more directly answer the question, in my mind it's the life raft for that horrible mess, first and foremost.

Peter McCormack: When you say that, it makes me think of the Churchill quote like, "Democracy is the world's worst form of government apart from everything else".  It's like, you're not hero-worshipping Bitcoin, it's just the other options are shit!

Allen Farrington: I don't think that's a good quote to compare it to because I think the intended humour there at least is to come back to people who are saying they don't like -- like, I do like Bitcoin.  This is more about my interests and my attention and my expertise, to some extent too, and that feeds into the Jameson article as well.  I don't remotely consider myself an expert in much at all about Bitcoin.  I can't really think of an area of Bitcoin specifically, without reference to broader finance or economics, where I would put myself forward as an expert.  Whereas, making fun of fiat I think I'm pretty good at.

Peter McCormack: So what is this hatred of fiat?

Allen Farrington: That's pretty expansive!

Peter McCormack: We've got time, I've got a whole bottle of wine there.

Allen Farrington: Oh, I don't mind the time, I just mind where you want me to start with this.

Peter McCormack: Well, I think a good point to start would, with something like this, if somebody was listening for the first time and rather than explain to them why Bitcoin is so great, you're trying to help them understand what is the problem with fiat.  Because, up until four, no, six years ago, I didn't even know the word "fiat" existed.  I had pounds and I would buy stuff and I would give them some notes and get some notes and coins back or I'd tap a card and I'd get paid at the end of the month, you know, what would I have left and I'd pay my mortgage.  It was just this system that I'd grown up knowing since I was a kid, since I was first going to take it to the shops. 

Allen Farrington: I think I can even challenge you on that.  You were an adult during the Financial Crisis.

Peter McCormack: Yes, but I think the point you're missing is, there was no world where I thought there was an alternative.

Allen Farrington: Oh, I get that you didn't have a framework to place these concerns.  But you were concerned, that's what I'm getting at.

Peter McCormack: During the Financial Crisis, I was like, "Okay, there's a Financial Crisis, but I went through that.  I didn't lose my job, I didn't lose my house, I was never going to lose my job or house, I worked in a secure -- so what I'm saying is that there was a Financial Crisis, I didn't even spend any time looking at it in detail to think, "Wow, what went wrong here?"  It's just, "Okay, there's a Financial Crisis, I know there's been financial crises before, I know there's periods when my parents struggled", but I never really looked at it and I never knew there was an alternative.  

There is an alternative now and some people are aware there's an alternative and they might be listening for the first time, and I think a lot of people just think the only way is fiat, is pounds, and they get paid at the end of the month and they live on that through the month and maybe they save some or whatever.  But you know when you explain inflation to people, I think they think inflation is just something that happens where things get more expensive, they don't know why it happens. 

So, if you can talk through the fuckery of fiat that you particularly dislike --

Allen Farrington: That's a good title for a book!

Peter McCormack: -- the fuckery of fiat, into a way that you're trying to explain to them, "This is an inherent problem of fiat". 

Allen Farrington: Yeah, okay sure, I mean I can try to come up with ways.  I do want to almost preface this though by saying that I'm wary of even the idea that there is a kind of a silver bullet explanation to this.  There's nothing I'm going to say that's going to make a 30-second soundbite that will convince somebody. 

Peter McCormack: It's a long-form podcast.

Allen Farrington: I think this is actually related, by the way, to why nobody understands Bitcoin, that what Bitcoin fixes, if you like that meme, I very much like that meme, I know some people don't; what Bitcoin fixes is so complicated and widespread and interconnected, it's essentially impossible for a single person to understand.  And arguably all of those, it has the opportunity to do that in the first place because of fiat fuckery.  So, fiat fuckery is likewise impossible to fully understand and is as complicated a topic.  The reason I'm saying all this is that I don't want to disillusion people that there's just a simple, concise, like I said, nice soundbite that will make it all click into place; there isn't.  It's extremely complicated, it will take you a long time to fully -- well, you probably won't ever fully grasp, that was kind of the point I was making a minute ago, to start to grasp, to feel like you're at least on the right track.  I think it's important to kind of get that out of the way.  I can try now though. 

Well, maybe like a starting point is just something that might at least get people's attention.  It's just deeply unfair, it's unjust, it's an extremely complex and convoluted form of theft that relies on its complexity to go largely unnoticed.  I think this is even relevant to why it's hard to understand and why most people haven't even thought about it, that if they do start to think about it, they immediately come up against a wall of nonsense, jargon, and obscurantism, the purpose of which is to stop them thinking about it.  We make this point in the book, and Danny can probably quote it, right?  This is early on, this is in chapter 2, I want to say, early on in chapter 2, where at that point we're just getting into -- Bitcoin's nowhere on the horizon, doesn't get mentioned for a few more chapters, we're talking about fiat fuckery, basically; we don't call it that.  I think the language is pretty polite.

Peter McCormack: You kind of want to rename it now, don't you?

Allen Farrington: I kind of want to write another one!

Peter McCormack: The Fuckery of Fiat!

Allen Farrington: Or maybe the second edition can have an extra chapter.

Peter McCormack: But how much of this is malevolence and how much of it is just the incentives of the system, because if you look at the issues fiat, it is every country.  Every country has the same, at different levels, and to me it seems the degree of fiat fuckery that happens from country to country is largely dictated by either I think how strong institutions are within that country, and how, yeah, largely that.  You tend to find the highest inflation numbers, the biggest thefts say by government tend to be in the more kind of authoritarian or smaller, less-developed countries, where there's a bit more corruption, and places that have a bit more kind of stronger institutions, stronger levels of democracy; the West, it doesn't seem to be as bad right now, that's how I'm going to preface it. 

So a lot of, you know, me and Danny were talking about, was it chapter 2, where it comes down to the fiat fuckery from capitalism, but there's also the government interference; was it chapter 2?

Danny Knowles: I don't think it's chapter 2, but I know the one you mean.

Peter McCormack: Yeah, and I said the area I'm most interested in is the government interference.  But I'm interested in what your views are on, there's clearly people exploit the system and directly steal, but part of it is also I think there's this political cycle which forces governments to do things that fuck with the fiat, but because they're almost required to do it to keep the wheels turning of this broken system. 

Allen Farrington: So I'm not that interested in the more extreme examples, not because they're not important but I think actually they're important in the wider scheme of things, they're extremely important to the people who suffer because of them.  But in the course of the point I'm trying to make, I think they're actually distractions because they allow the perpetrators, if you like, in the less extreme versions to point the finger and say, "Well, at least we're not like that.  A least we don't have hyperinflation, at least we have a democratic mandate", whatever else, which I think is --

Peter McCormack: And I'm with you on that, by the way, because I think if you can point to it in strong democracies with strong institutions, it's more obvious that it can't work anywhere.

Allen Farrington: Yes, well, that's part of it.  I think there's two sides to this.  So, that's probably the end point, if you like, that this really just doesn't work.  It's a completely systemic issue, if you want to think of it that way.  I did want to draw attention, though, to the idea that exactly those kind of hand-waving red herrings, I think, is a perfect example of exactly what I was describing in terms of the jargon and the obscurantism, that if people start to look into this, one of the things they're met with, on the one hand you have all the cargo cult science, which we can maybe get into separately, but you also have more emotive propaganda around, "Oh, the central bank is independent, we don't interfere with it politically here like they do in X other place", that kind of thing.  And, yeah inflation is low, like inflation here is only 2% or 10% or you know don't think too much about how we define inflation and all that kind of thing, like these are yet more obstructions to actually understanding the core issue. 

So yes, obviously places with more openly corrupt governments, more directly stealing, more disastrously hyperinflating, obviously that is worse, I don't mean to diminish that.  But in all seriousness, it doesn't interest me as much. 

Peter McCormack: Well, let's talk about what does interest you then.  I can understand why fiat came to exist; it kind of makes sense.

Allen Farrington: Oh, so can I.

Peter McCormack: It makes sense, yeah, receipts for gold.

Allen Farrington: And I think it's helpful if you're thinking through the process, the historical process, you can infer basically as much malevolence as you want.  I think it's helpful not to.  Because in many ways, I think that's also kind of a red herring.  The system we've ended up with now is not run by people who are intrinsically evil and cackle on their way to work, they're not like Scrooge McDuck.  This is a similar kind of line of thinking that if you focus on that kind of thing, or if you even infer that that kind of thing exists, which I'm not completely convinced it does, you ignore the systemic issues.  So, this question of, "Okay, well how did it come about?" and you mentioning that you can see why it came about, I think it's a lot healthier to discuss that in more, I don't know, what would you even call it, mechanical terms?  Just, sorry, I interrupted you there, but I think that's important clarification to make.

Peter McCormack: I mean, there's a logic to the evolution of money, from why we went from gold to receipts for gold, and those receipts for gold becoming the notes that we use.  And I can even understand why governments decided to bring in central banks.  Governments themselves are a bureaucracy, and bureaucracies by design grow.  They're a beast that continues to grow and it continues to think it has to interfere with all parts of our lives.  And so if you have bank failures, well let's stop bank failures. 

Allen Farrington: Yeah, exactly. 

Peter McCormack: Yeah, so let's have central banks, runs on the banks, okay, so that's why we have a central bank and let's have FDIC programs, let's have whatever the equivalent we have in the UK.  All these things make sense, but it is just this ever-growing beast that's trying to protect us from -- it's almost like, who is it, Dan Tubb who said, "Governments have essentially become insurance providers for --"

Allen Farrington: Oh, I saw that, yeah.  This was just a couple of weeks ago, right? 

Peter McCormack: Well, it's the previous one, I think.

Danny Knowles: Yeah, we recorded two, so that would have been in September time, I think, last year.

Allen Farrington: Oh, okay, I haven't seen that one.  Well, you mentioned it again on the most recent one.

Peter McCormack: Yeah.  He just said, "Look, essentially since World War II, we've become insurance providers and governments are trying to do everything they can to ensure the system and the individuals are protected in every scenario, and trying to make things fairer.  But the way they do things actually, they kind of make things unfair because of the incentives of the system".  But like I say, I can understand every step that's been taken to bring us to where we are, and I think at some point in the future there'll be this history of time, and there'll be the gold era and then the fiat era and then the Bitcoin era, I get all that.  But at the same time, it's good to understand why fiat has failed, what are the, like you said, systemic issues that mean it can't work in a fair way.

Allen Farrington: I can tie this really nicely to the book, but in a probably hilariously cryptic way that you're going to have to unpack!

Peter McCormack: Okay.

Allen Farrington: It forces you to misprice capital.  That is the worst.  There are other issues.  I'd say probably a close second would be, it manipulates people's time preference artificially, and that has other knock-on effects, which we also talk about in the book, just much later on in a slightly different context.  But I think by far the worst issue is that it incentivises, if not causes, mandates, to some extent, that capital is misallocated.

Peter McCormack: That's what Steven Lubka talked to us about, wasn't it? 

Danny Knowles: Yeah.

Allen Farrington: He loves this. 

Peter McCormack: Well, he talked about 0% interest rates in that, it misprices capital.

Allen Farrington: Or, negative interest rates.

Peter McCormack: Yeah, I'm still never going to be able to get my head around that.

Allen Farrington: Well, there's a fairly easy way of explaining why that's stupid, why it's just mind-blowingly stupid.  You're, as a recipient of a negative-interest-rate loan, let's say, or really just any form of financing, you are being paid to destroy value.  You can profit whilst making a loss.  And that's clear.  If you want a kind of more mechanical -- I appreciate that me saying things like, "Oh, misallocate capital", to a lot of people, that would just be jargon, that doesn't mean anything to them.  But that's an example.

Peter McCormack: Well, I think it's a prime example that something's definitely broken!

Allen Farrington: Yeah.

Peter McCormack: Okay, so let's talk about this mispricing of capital.  What are the systemic issues with fiat that causes capital to be mispriced?

Allen Farrington: Essentially that capital itself is scarce, all real goods and time is scarce, and fiat money is not.  And any money, fiat or otherwise, gold, Bitcoin, whatever, is not itself wealth, it's claims on wealth.  And so if you can, as is, not only as happens, but is kind of the point of fiat, create more claims on wealth at no cost whatsoever, then you are going to trick people into thinking there is a lot more wealth than there really is because they only see the claims and they have no way of knowing that they're essentially fraudulent.  And acting essentially foolishly, I guess, you're making -- this is obviously linked to the point about time preference too -- making decisions that do not line up with the state of economic reality, and then the kind of the fancier, more jargony way of framing that is saying misallocating capital.  I could probably dig into that just a little bit more. 

What that really means is making plans around basically businesses, that's kind of an oversimplification, but it's maybe good enough for now; making plans about businesses that assume prices of both the supplies for that business and the product of that business, that even if they're accurate now, they may not be accurate now at all, but even if they are accurate now, they're in no way sustainable.  So, it's encouraging people to put time and effort into enterprises that will not last in the long run.  That's capital misallocation, that's probably a decently concise explanation.

Peter McCormack: And can you give me real-world examples?

Allen Farrington: The exact problem is that you can't know in the moment.  This is why it's kind of a tricky, almost elusive concept, that the problem itself is people acting as if this information they're getting from the market is true, is accurate, and there's not really any way of adjusting for that.  You can't look at prices as they are now and perform a fiat adjustment, I don't know, like, "Well, what would these prices really be if and when we get the banking collapse that's due, and then I'll build that business", that just doesn't make any sense.  It's a really interesting question, but I actually think that precisely why you can't answer it is almost the point of what the problem is here.

Peter McCormack: Well, so as a more direct example of something that I've been kind of intrigued by, as an example, like Twitter was bought by Elon Musk for $44 billion.  It has to pay back interest, I think about $1 billion a year.  I can't exactly remember what their revenue is, but I was thinking it through and I was looking at the share price.  A lot of people have got fabulously wealthy off Twitter, way beyond any amount of actual revenue it's generated. 

Danny Knowles: About $3 billion. 

Peter McCormack: So about $3 billion is revenue; how much profit?  Because that's the money that should be distributed to people.  I mean, revenue can pay wages, but...  But it feels like there's companies in the tech sector that have generated way more money for investors than have ever been generated or may ever be generated. 

Allen Farrington: Okay, sure, that's a good example.  So there's a slight tweak in that answer, which I think makes it a lot easier to address, which is that I got a bit nervous when you said Twitter specifically because I was getting prepared to be like, "I know absolutely nothing about them, and even if I did, who am I to say?" kind of thing.  But there's also a component of that too, right?  That this is the magic of markets in the first place, that you should always be saying, "Who am I to say?" unless you're putting yourself forward as the central planner of the price of capital, which is kind of, that's what a central bank is and that's why we're in this problem in the first place. 

But the tweak that you made there, which I liked and I think opens up a really fruitful avenue for discussion, is just moving away from a single company and looking at, if not an industry, an entire pattern of capital allocation.  You mentioned the tech sector, I'd maybe even go a bit broader than that.  You could stretch that to most US-based venture capital since the Financial Crisis. 

Peter McCormack: Yeah, that's fair. 

Allen Farrington: This actually links interestingly to what you're asking about my previous employer, because there's a few steps involved to get there, but I'll go over them hopefully pretty quickly.  If the pension funds who typically are the end clients of all of this, well, they're members or they're the real beneficiaries, but as an institution, it tends to be pension funds; if the pension funds are increasingly having to think about, for example, inflation, what that means for them is that their liabilities in the future are growing.  Typically there's mechanics of exactly how pension funds work that's not worth getting into, but by and large it means that their liabilities in the future are growing.  It means they have to pay their to-be pensioners more, which makes sense, right?  Things are going to cost more when these people retire.  If they're worried about that, probably two things are going to happen at the same time. 

So, one of them may already be happening, but the one that's already happening is that they're worried about inflation in the first place.  Assume they're right, they're not just paranoid.  They're worried about inflation because of all this money printing.  That's very likely manifesting at least first in financial markets, and then eventually in regular goods, just because of the mechanism of how most "money printing" works or has worked in the past 20 years or so.  So, the regular assets that they would be investing in have basically already taken on a kind of a monetary premium, right, they've become savings, but inflation still exists, it's still expected; I mean, that is inflation, and that is a version of inflation.  And so, in order to meet these increasingly dire liabilities, they need to go further and further out of the risk spectrum.  They need to start investing in things that are very probably more and more, you could just, if you're being super-cynical, you just say "stupid", right, like bad investment ideas.  I guess a fair -- well, there's no doubt about that! 

But this is what's dangerous though, because I think the fairer interpretation would be just that they're riskier, or they're more and more uncertain, right?  They have lower and lower reasonable likelihoods of massively outsized payoffs.  I mean, maybe at a certain point, yeah, you do in fact get to Dogecoin.  I think for retail, it's probably exactly what's happened.  That would have been the last crypto bubble, was exactly this playing out.  But that entire process, first of all it feeds on itself, because when they do that, their only sane reaction to the prices of financial assets being monetised is to further monetise the prices of financial assets so that this problem just keeps causing itself. 

But then also, that's one that I think most people are like reasonably aware of, I mean especially now we've had this for like 15 years now and it's just gotten ludicrous.  And you know, you gave Twitter as an example.  There are far funnier examples of absolutely insane venture investments that hundreds of millions of dollars have been wasted on, billions probably in some cases.

Peter McCormack: $100 million into Worldcoin, I've just seen this week --

Allen Farrington: Yeah, sure, that's a good example.

Peter McCormack: -- which is so obviously going to fail. 

Allen Farrington: Yes, that's an excellent example.  That is pension funds chasing yield.  I mean, it's going to be marketed as innovation and all that shit, but ultimately the cause of that is pension funds chasing yield. 

The more interesting thing though, to me at least, I think the more under the surface, more intangible, more difficult to get your hands on, is what, I don't want to say, should they have invested in, because that again implies that I know, but maybe what would they have invested in?  If capital had been priced properly, what actually productive things would they have done?  And so this is what's an example of capital misallocation.  All of this is an example of capital misallocation, because there's an opportunity cost to this.  You can laugh at $100 million for Worldcoin, but that's $100 million that actual businesses, that could conceivably have done something useful and generated a return, won't get. 

Then, just to bring it completely full circle, the more real, scarce capital that's destroyed in that way, the worse inflation is ultimately going to get, because it will inevitably cost more to make stuff that people actually want because there's fewer resources going towards it.  The resources are all being directed towards complete nonsense.  And that's fiat, it's fiat fuckery! 

Peter McCormack: And so how did we get there; was it inevitable?

Allen Farrington: Yeah, that's a really interesting question.  I think yes, but I'm completely open to other takes on this because I think it's quite a complicated answer.

Peter McCormack: I feel like, I talked about this on the podcast before, my rudimentary understanding of the economy growing up was, I did economics A level and got a C, but there was always surpluses and deficits.  I was fully aware that governments would sometimes run a surplus and sometimes run a deficit and that's just the way it was.  And there were tough times and there were good times.  I feel like we are in an era of post-surplus.  That is gone.

Allen Farrington: Oh, okay, I see what you mean.  Yeah, it probably is.

Peter McCormack: I mean, you might have a trade surplus, but I think we're in a period of permanent government debt.

Allen Farrington: Just to be clear though, because you've mentioned this a few times now and I don't disagree that that's -- this is more what Dan was talking about, right, this is like they have to insure absolutely everything.  I don't see this as being so much a political issue, I think the political issue is just layered on top of an even worse problem.  I think it's an economic issue or a finance issue, if you like.  This is a problem with how money works at the level of banks, in my mind, and that's actually key to my answer to, "Was this inevitable?"

Peter McCormack: But governments position themselves as the regulator of the banks and they allow, disallow certain things.  So I don't know, maybe it's both.

Allen Farrington: Oh no, that is also relevant, definitely. 

Peter McCormack: Yeah, there's an issue with both. 

Allen Farrington: But I think it only makes it worse, it can't make it better, it can at best do nothing.

Peter McCormack: I believe there's a ruleset that can be created for a government to operate within a budget. 

Allen Farrington: Oh yeah, definitely. 

Peter McCormack: But they're never going to do it because the political cycle is out of kilter with the economic cycle. 

Allen Farrington: Yes, yeah, I agree with all that.  But I think what I'm getting at is that I see that as being, I guess, a related issue, but essentially a distinct issue to how fiat money actually works.  And I think even this is potentially something that you could easily get distracted by and think, "Maybe we can fix this politically".  My whole point is you can't, you absolutely cannot.  This is completely systemic to how money works, how fiat money works.  Politics can only make it worse, it can at best have no effect, it cannot make it better.

Peter McCormack: Okay, why?

Allen Farrington: Do you want me to go back to, "Was it inevitable?" because I think the answer would be easier?

Peter McCormack: Yes. 

Allen Farrington: Okay, so the reason I think it was inevitable was -- I'm alright I guess.

Peter McCormack: You're doing most of the talking.

Allen Farrington: The reason I think it was inevitable is a little complex, I think it's a little historically involved, and it's essentially that gold, and to a very small extent silver as well, but you can probably just focus on gold, gold is very good money in some ways and very bad money in other ways.  I think the simplest version of this, I'll give you a really brief version and then we can go into a lot more detail if you want to, but the simplest version is that gold is very bad for increasingly complicated commerce.  And I think commerce basically got so complicated that gold no longer suited it well before the kind of periods bitcoiners usually talk about and are usually angry about.  But I think that's because there was a lag while the form the money took remained reasonably effective for a while until basically people caught up with the shenanigans that they could get away with. 

Peter McCormack: Just to interject, one thing I don't know about the time when people used gold for commerce, did they have like a bag of nuggets of different sizes and they would say, "I want to sell you this horse, I want those three nuggets there"; like, I don't know how it was done without coins?

Allen Farrington: Why does it matter how it's done without coins?  I only had coins in mind, to be honest.

Peter McCormack: I'm just intrigued by it because -- no, go on anyway, forget that. 

Allen Farrington: Maybe we can go back to that.  So, the very short version, in my mind, of why we ended up here is that there was insufficient foresight as to how bad it would be to move away from gold in pursuit of commercial utility.  And by the time anybody did actually realise it was too late -- because there was also political capture.  But I think my sort of mildly -- I don't want to pat myself on the back too much, but I just genuinely think I have a slightly different view on this, at least from Bitcoin Twitter.

Peter McCormack: I think better!

Allen Farrington: I mean, it might be wrong, so who knows! 

Peter McCormack: More intelligent.

Allen Farrington: I think you can trace the problem back earlier.  I basically don't think gold is all it's cracked up to be.  If anything, you could actually see this as being even more bullish on Bitcoin, that in my view, gold was always doomed to fail because it was always going to be, first of all, moved away from actual specie to fiduciary media.  And basically, once you've done that with gold, the game's kind of over, even if it takes literally hundreds of years to then get to where we are now, because of the ways in which it is worse as money.  That part of it bitcoiners completely understand, because then you're into on the one hand, central banks emerging in the first place in order to be effective clearing houses of this because it's very expensive to move.  Once you have, not even central banks, but few enough commercial banks performing this service, they get 6102d and then all the gold goes away and then you just yank the reserve entirely and now we have fiat which means nothing.  I sped that up a little bit.

Danny Knowles: So, it's because gold moves very well through time but not through space basically?

Allen Farrington: Yes, yeah.  It was moved away from in the first place because it could not move fast enough to keep up with commerce.  I can tease this out a little bit more to make the bullishness on Bitcoin even more apparent and more kind of obvious, that whatever the money is, it's essentially information.  I don't mean this to be too kind of like mystical or metaphorical or anything. 

Peter McCormack: No, no, that makes sense.

Allen Farrington: The way it functions is essentially as information.  And, if people are able to trade in ways that rely on moving information faster than the actual physical manifestation of that information, then you get a tension.  And that tension, I think, is why we moved away from actually using gold.  If you believe it, it's perfectly reasonable to disagree with any of that, but if you believe it, that should make you far, far more excited about Bitcoin, because it has all of these properties of gold that make it good as money, that is extremely scarce basically, that's by far the most important one, extremely scarce, very easy to verify.  But because it's also completely digital, it entirely lacks this problem of being difficult to move and being difficult to keep up with commerce.  If anything, it's far easier to move than almost anything people actually ever trade.  And so it's maybe a bit early to say this too definitively, but it has the potential to be far more robustly decentralised.  None of that's contrary, like every bitcoiner understands that.  I think my interesting take is going further, basically being even more bearish on gold than most bitcoiners are.  So I think that's how we got here. 

To get back to your question, gold is not very good as money either for even mildly sophisticated commerce or, and usually just both, the potential for political attacks.  Very easy to politically attack gold, and it's very easy for people to not even mind that so much because it's not serving their needs as money in the first place, because their commerce is a lot more sophisticated than it can serve.  But none of this applies to Bitcoin.

Peter McCormack: And do you think fiat has mainly been exposed due to, (1) central banks, and (2) we live in an age of being able to -- I can buy something from somebody in Nairobi and I can pay them and I can get that shipped to me.  We're living this, rather than me going to the guy next door and buying this horse from me, we've had this more complex commerce environment that requires this; do you think that is the reason that fiat failed?  If we hadn't have had technology, information superhighways, it would have --

Allen Farrington: I don't think so at all.  I actually think I quite strongly disagree with that.  I'll tell you why I think we have failed in a minute.

Peter McCormack: Well, I think back to your point, I think technology has allowed this, it's the creation of these products. 

Allen Farrington: Oh, I see what you mean.  Okay, yeah. 

Peter McCormack: Yeah, in that the ability to just move any amount of money through centralised databases like that, you can create these exotic products and this re-financialisation of everything and derivatives of everything has just made these multiple claims on thin air.

Allen Farrington: Okay, yeah, that's very interesting.  That's not at all what I thought you were getting at. 

Peter McCormack: Yeah, whereas you wouldn't have had that so much in an era of no information technology.  But also, information technology, conversely, has then made Bitcoin work.

Allen Farrington: I think I still disagree.  I think it's necessary, make sure I get this the right way around; I think it's necessary but woefully insufficient.  I think the only reason that anybody engages with that kind of financialised nonsense, even if it's enabled by a smartphone, is that they're chasing yield basically.  It's basically the same problem that the pension fund has when they invest in Worldcoin.  It's that they are aware of the reality of inflation and they need to invest in more and more ridiculous things with smaller and smaller chances of massive payoffs.  I think that's basically the same reason that somebody would do it, whatever, some weird derivative they don't understand because they can do it on Robinhood, or something like that.  These kinds of financial instruments have existed for a very, very long time.  I get your point that it's --

Peter McCormack: Compounds it then.

Allen Farrington: Yeah, they're far more accessible now obviously than they've ever been before, but that doesn't mean people should have any reason to use them.

Peter McCormack: Okay.

Allen Farrington: They use them because of fiat.

Peter McCormack: Okay, let me put it a different way.  If we were to flip it and look at why this doesn't happen with Bitcoin or why Bitcoin limits this, Parker Lewis, you know Parker, one of my favourite people in Bitcoin, he's said to me multiple times, "The most important thing about Bitcoin is the 21 million, and not the number, it could be any number, but everything about Bitcoin comes from the fact that there is a fixed limit".  There are 21 million, and every benefit of Bitcoin is derived from that.  If you didn't have that, then you don't have Bitcoin. 

So, I try and think of all the things we've discussed here that are broken and think one of the most important characteristics of Bitcoin that stop that is the 21 million, the self-custody and that you can move it anywhere to anyone at the speed of either a ten-minute block or the speed of a Lightning transaction, without anyone being able to stop it happening.  Is it those three; are they the three pillars?

Allen Farrington: No, I think I agree with Parker, I just leave it at one, I wouldn't even add the other three. 

Peter McCormack: Oh, you'd leave it at one? 

Allen Farrington: Yeah, because the other two don't matter if it's not signed.  I mean, every shitcoin has the other two, who cares?

Peter McCormack: But you still have to have these other two, and they are still kind of unique.  Can you be sovereign with dollars?  Well you can keep them under your couch, but you can't send them at the speed of light. 

Allen Farrington: Can you be sovereign with dollars?  I mean, I don't think so.

Peter McCormack: Well, I can keep my dollars under my -- people in Argentina are sovereign with dollars because they keep them under their mattress.

Allen Farrington: They're more sovereign, but I mean this might be a tangent you don't quite want to go into right now, but I mean I dispute that they even really own anything.  They own a bank liability.

Peter McCormack: Yeah, okay.

Allen Farrington: They can still get rugged.

Peter McCormack: Of course.  Yeah, prices of Bitcoin can still collapse.  Things can happen.

Allen Farrington: Actually, sorry, maybe that is a worthwhile distinction though, right, because I'm not sure exactly what a good example to tease this out, I mean other than Bitcoin itself, a good example to tease this out would be, but you could in theory have something that is perfectly sound as a monetary candidate but which, for whatever weird, technical reason, you can't actually own yourself.  So maybe, yeah.  Safe custody, yeah. 

Peter McCormack: What are the components that make this work; what are the must-haves?  The ability to move anywhere in the world, censorship resistant, at the speed of light or ten-minute block, great; I can do trade with anyone in the world; I am self-sovereign, so I don't rely on a bank, which I have my risk; and there's 21 million.  Are they the fundamental pillars of the money we need right now that fix every problem that we have with fiat?

Allen Farrington: Everything! 

Peter McCormack: Everything!  Or is it not; is it less? 

Allen Farrington: I think it probably is.  I hesitate to give too definitive an answer on this.  This is basically, how do you fix the world; are these three things enough?  I mean, the combination of them, which we know we have with Bitcoin, is clearly better than fiat or gold, which are the only other options, really.

Peter McCormack: It's the 21 million that fixes the systemic issue of inflation, real inflation, which is the real cancer of all of this.

Allen Farrington: Yeah, just to be completely clear on that though, if what you mean by 21 million, I know the number itself doesn't really matter, but just in terms of what it actually gives you, it's the inability to print it, that's what matters. 

Peter McCormack: And the print has all the second-, third-, fourth-, fifth-order effects throughout the economy, which leads to theft.

Allen Farrington: Yeah, that's helpful actually to put a lot of this in more context, because one thing that I think can put people off from this discussion quite a bit is thinking that bitcoiners are saying and only saying that fiat is terrible as money, which I think it is important to roll back on a little bit.  There are many ways in which fiat works really well.  It's excellent for payments, for most payments.  It gets tricky if you're going across different currencies and different jurisdictions and so on.  But we've got to a point now, I mean especially basically with integration with the internet, and also smartphones too, most payments are very slick.  Even if it's not consumer stuff, like business-to-business payments between banks are very cheap, they work really, really well. 

So it's not saying that absolutely everything is bad about it, but it is saying that the lack of soundness and the ability for some people to make it costlessly has all the second-, third-, fourth-, etc, order effects, and they are what has fucked everything.  One of them is capital misallocation, for example; one of them is screwing with people's time preference.  Basically, everything we've talked about up until now are those second- and third-order effects, even though the first-order effects of, "Can you buy stuff?" are like, yeah, okay that works pretty well. 

Peter McCormack: Yeah and that goes back to your original point of fairness.

Allen Farrington: Yeah.

Peter McCormack: Because if there was no other form of money apart from Bitcoin, we wouldn't be worrying about some of those issues with Bitcoin, like the price fluctuates, because there's only one form of money, so it's not going to die, so there's less risk.  And we wouldn't have inflation, so everybody would be playing by the same rule set as such.  Actually, this is really making me think of that American HODL conversation. 

Danny Knowles: He talked a lot about this. 

Peter McCormack: Yeah, he talked about money is really a proxy for time.

Allen Farrington: Yeah, we say that in the book.  Danny can tell you where.

Peter McCormack: Maybe he stole it from you.

Danny Knowles: I actually can't tell you where!

Allen Farrington: I want to say chapter four, I think that sounds right.

Peter McCormack: But it is that money is a proxy for time, and when you steal money, you're stealing time.  And when he first said that to me, I was like, "Huh, I understand that", because I've always said there's only two scarce assets that matter in the world: one is Bitcoin, one is time, and I'm 44.  I'm at that age now where you're starting to think about time in kind of profound ways.  You can start to think about, well, I was reading the paper the other day, a guy had a heart attack at 48.  I mean that's four years, that's not long.  You start to think about time a lot and you think about it a lot more the older you get because you've got a decreasing amount of time but you don't know what the end number is.

Danny Knowles: Your liquid time's drying up!

Peter McCormack: Yeah, your liquid time's drying up, but you don't know if it's a year or ten years.  And so, I think to Steve Jobs.  He was like the richest guy in the world or top three at the time.  He had cancer, no amount of money could buy him any more time.  There's a saying, it stuck with me so hard.  Somebody said to me once, or I've read it once, that said, "An inch of time is worth an inch of gold, but you cannot buy an inch of time with an inch of gold". 

Allen Farrington: Oh, that's good. 

Peter McCormack: Isn't it?  And it made me think, time is really valuable but it doesn't matter how rich you are, you can't buy any more.  And I think there's a crossover.  The younger you are you think of money, and the older you are you think of time, and there's this crossover.  So, when American HODL said to me, "Money is a proxy for time and when people are stealing your money they're stealing your time", you're right.  I met a Venezuelan in Colombia when I went to make a film in Venezuela.  I went to Colombia, I met this guy, he was a teacher and he left Venezuela.  He said, "Almost overnight, my entire net wealth went to zero".  And they stole all the time that he'd worked to create that wealth, and they stole the time from the future that he had chosen to spend on what he wanted, but he couldn't do it because that money was gone.  It really sticks with me.

Allen Farrington: You remember before, I was saying that you have these examples that are a lot more vivid, where the governments are a lot more obviously corrupt and the inflation is a lot more striking, and so on and so forth.  This is a great practical example of this.  So again, obviously not to diminish that situation, but the exact same thing is happening here, just in much slower motion.  So, everything you just described, right, imagine somebody in that -- well, like you, imagine it's you -- well no, it can't be you because you have Bitcoin.  Imagine it's someone who is your demographic, let's say, other than holding Bitcoin.

Peter McCormack: No.  I can give you a me example.

Allen Farrington: Was it like you five years ago or something?

Peter McCormack: No, I can give you a me example right now, a great me example right now.  We had a good year last year.  We worked really hard, we did well, we made a profit, took a dividend.  The dividend went into the bank, I have no need to spend that dividend now.  And yes, I own Bitcoin, but I don't want to put every penny I have into Bitcoin.  So I have pounds in my bank account right now.  That is, like Saylor says, kind of a melting ice cube.  And so, the work I've put in the previous years to get us to the point to have that dividend is now being stolen from me.  And so, that is stealing either time from me or time from Connor here or time from Scarlett in the future, because that's money that could go to them for them to do things.  So it affects me. 

Allen Farrington: It does.  Where I was going though, again, I'm not meaning to diminish that situation either, but I was heading to a specific point because I wanted to link it with something I said before, which is imagine you don't have Bitcoin.  Imagine that your perception of the value of your future time is your pension fund, and they turn around to you one day and they're like, "Yeah, we actually don't have anything because we put it all into Worldcoin".  It's a bit extreme, it's not going to happen exactly that way.

Peter McCormack: This happened to my father.

Allen Farrington: Well, okay, there you go.  Something similar enough to it will, like literally will happen to everybody, I'm not meaning to be too alarmist, but some version of this is going to happen to everybody.

Peter McCormack: My father worked for Monarch Airlines for nearly 40 years and saved into a pension, and prior to him retiring, I won't have the dates, but let's say the decade before he retired and the decade after he retired, that pension had three haircuts.  So, before he retired, he knew the amount he would get was going to be less than he'd planned for; when he retired, it was less; and since then, there was another haircut.  So, everything he worked for for 40 years, he was told, "You work hard, you put money into this, and this is the life you can have afterwards", took three haircuts.  They didn't take haircuts because he did something wrong, it took haircuts because other people did things wrong. 

Allen Farrington: Can you go into more detail on that?  Who did what wrong? 

Peter McCormack: So, the haircuts are either, and I can't tell you, either the misallocation of that fund by the pension fund, or poor management of that company so they had to dig in to the pension fund; I don't know if they did.  Or, the pension fund wasn't able to perform because of government policy, which meant they were chasing an ever higher number.  You know why. 

Allen Farrington: Well, no, I don't know, but I think this is another really interesting example of something that's come up a few times now where, I won't speak to that specific situation because I don't want it to seem like I know, but in situations like that, I still think the way you're framing it now is letting what I deem to be the real cause kind of off the hook.  I mean, you can come back to this, right, I'm not going to put words in your mouth.

Peter McCormack: No, what's the real then? 

Allen Farrington: So, I don't think -- it may be the case that they were literally just raiding the pension fund, but I think it's unlikely that there was actual fraud or actual malevolence involved and maybe some incompetence --

Peter McCormack: I don't think there was.

Allen Farrington: -- but even that, I'm not sure.  I think the real cause is, once again, how fiat works.  I don't think they likely had much of a choice about this.  Again, in the far more hypothetical example, the people who are putting $100 million into Worldcoin, they don't think that's a good idea, they just have no choice.  That, I think, is worth being angrier about than looking for fraud or looking for corruption.  If it's there, obviously, you should be angry about that, too.  But this is why I'm saying that this is going to happen to everybody.  It's not just going to happen to the people who happen to, by some horrible coincidence, you know, their pension fund managers are corrupt.  It's going to happen to everybody.  Sorry, Danny. 

Danny Knowles: What do you mean, they don't think it's a good idea?

Allen Farrington: They're doing it because they're chasing yield. 

Danny Knowles: But they must analyse the risk and think --

Allen Farrington: They think it's the least bad idea.  Okay, I can flesh it out a little bit more.  I see what you're getting at.

Peter McCormack: Is this the guy at the casino who's had a bad night and he goes all in, black or red, fuck it; he knows it's a bad idea? 

Allen Farrington: It's a little different than that.  It's more like, say he, come up with something reasonably realistic, he needs money for surgery, I guess.  I don't know, that's the first thing that came to mind, why you need loads and loads of money right away.  He needs money for surgery and the only way -- he can't earn that, it's just not possible, he doesn't have enough time to earn it.  The only way he can possibly get that money is putting it all on, you know, red 32.  Even red isn't enough, like it needs to be red 32 specifically.  That's pretty close to what I'm talking about; that they have such extreme liabilities caused by inflation that there is no other asset they can invest in that can possibly get them a good enough return. 

So it's not like they're saying, "Equities are shit, bonds are shit, everything's shit, Worldcoin is where it's at"; they're saying, "It's completely implausible that putting this in the S&P 500…" or whatever.

Danny Knowles: I see.  It's that bonds aren't going to cut it, the S&P is not going to cut it.

Allen Farrington: Nothing's going to cut it given how dire their financial situation is.  They have to put it in Worldcoin.

Peter McCormack: So, obviously the entire pension market's fucked.

Allen Farrington: Yes.

Peter McCormack: Is it to the point where it's going to collapse?  Or is it, everyone is just going to get a worse and worse deal?

Allen Farrington: I mean, yeah, basically everyone's going to progressively get a worse and worse deal.  I think it depends how much money is literally printed to keep it afloat.  I think probably what happens is more like not all, but most of the financial assets that the pension plans hold, will continue to be monetised to avoid a political disaster.  That also depends where in the world you're actually talking about and what the political process is.  The nominal value of those assets will go up to meet the liabilities, but the process of ensuring that will cause even more inflation that the recipients, the ultimate beneficiaries, the pensioners, will then have to deal with once the pension fund itself is out the picture.  That's probably what's going to happen.  I don't think it's really possible for pension funds to collapse, they don't really have that mechanic.

Peter McCormack: No, just those who rely on those pensions -- 

Allen Farrington: Just get a worse and worse deal, yeah. 

Peter McCormack: Yeah, worse and worse deal.  And that worse and worse deal is propped up by intervention, which has diminishing impact.

Allen Farrington: Yeah, and also everybody else gets a worse deal too, because what this process is supposed to do is, well, I mean ideally they would just have sound money and they wouldn't need to do any of this, right, they could actually save with money.  But even if you give it the benefit of the doubt, it's supposed to allocate capital well.  And so, everyone suffers in the end, because the ultimate, again we don't need to go through this in too much detail, we've talked about it already, the consequence is that Worldcoin gets funded and real businesses don't.  So no one does well out of this.  Well, the only people who do well are, this is something we whine about quite extensively early on in the book, are cantillionaires, basically, the people who are closest to the money spigot, to be a bit kind of rhetorical about it.

Danny Knowles: So, in the book you say, "It's not who's close to money".  Don't you call the financial markets the money spigot, rather than say they're close to it? 

Allen Farrington: Yeah, we probably say something like that.  I see what you're getting at. 

Danny Knowles: You need to read your own book!

Allen Farrington: Yeah, I told you guys, I admitted right at the start I've not read it!

Peter McCormack: It's a good book, Danny was saying!  So really, finance is simple, or it should be, you take capital from savers, you pass it onto investment projects, you try not to lose it, you try to give back more.  You don't get paid a lot for this because it's not that hard, the end.  So that was the interview.  We should have just said that, we could have gone down the pub! 

Allen Farrington: Yeah, that's a whole other slightly edgy thesis I have about all of this, that on a Bitcoin standard, the asset management industry will be, I mean I just make the number up obviously, but 10% of its size, maybe much smaller than that.  Most of it exists to solve the problem of inflation, but in attempting to solve it, it makes it worse.

Peter McCormack: Can I throw my curveball question at you, or something I wrestle with? 

Allen Farrington: Can I say no?

Peter McCormack: I guess.  We'll kick you the fuck back!  So, one thing I've tried to wrestle with, with this, is say, okay, I agree with everything you said, you're completely and utterly right about this being theft on the individuals and it's a cancerous system that can't work.  But has there been benefits to this in that, has the money printer led to more money to be available for investment and therefore has that accelerated? 

Allen Farrington: That's a good question, yeah. 

Peter McCormack: Has this accelerated innovation?  Look, there's going to be some people who think big pharma is bad, I get it, the majority of big pharma is bad.  But do we have more MRI machines available in hospitals that are able to scan and look for cancers --

Allen Farrington: Yeah, I see what you're getting at.

Peter McCormack: -- do we have innovation in terms of immunotherapy that wouldn't have happened without this; have we had all this innovation off the back of it that has lifted us up?  Because the other side is that we do have less people in poverty now than a certain period.  Do we know for certain that without this system, it might have been fairer, but the growth might have been slower, and generally we might have lifted people out of poverty slower; do we know the net impact?  And look, it's not that I'm a fan of it and supporting it, I'm just more intrigued to know. 

Allen Farrington: It's worth steelmanning it, yeah.

Peter McCormack: Yeah, is it?

Allen Farrington: I should come back to telling you off for using growth, the word" growth", you misused it. 

Peter McCormack: Okay, I apologise.  But you understand this?

Allen Farrington: You haven't read chapter 3. 

Peter McCormack: I haven't read chapters 1 to the lot.  Do you know, I'm trying to think of the last time I actually read a book.  I've listened. 

Allen Farrington: Should I answer while you're thinking about it? 

Peter McCormack: I listen to books. 

Danny Knowles: If you don't have an audio book, that's what you need. 

Allen Farrington: Yeah, we do soon.

Danny Knowles: Okay. 

Allen Farrington: I don't know when, I don't want to throw Guy to under the bus, but it's coming. 

Peter McCormack: Hurry up, Guy.  Guy Swann, we love you.  I don't read books any more, I don't have the time to read books, because I can listen to a book while doing shit.  I can listen to a book in a day.  I can probably listen to yours in a day and I'll find jobs to do while I'm listening to it.  I don't have the time to sit down and read, I don't have the time to sit and do fuck all.  I don't have the time to not do stuff, so audiobook would be very welcome.  But do you understand the sentiment of the question?

Allen Farrington: Yeah, of course.  And it's a good question.  This is an entirely worthwhile steelman, I think.  I think the answer is --

Peter McCormack: We can't prove it?

Allen Farrington: -- we can't know, but almost certainly not. 

Peter McCormack: Not? 

Allen Farrington: Yeah, as in almost certainly things are not better because of this.  We haven't made good investment decisions because of this.  And the reason --

Peter McCormack: Is it the Concorde analogy?

Allen Farrington: What's the Concorde analogy; I don't know that?

Peter McCormack: That we had massive innovation in air travel all the way up to about Concorde, and then the innovation in air travel slowed down.  And why did that happen?  Well, you can look at us coming off gold standard and the way capital was allocated changed a lot around at that period in time.

Allen Farrington: I don't really know anything about Concorde, unfortunately.

Peter McCormack: Well, that was the last greatest innovation.

Allen Farrington: I don't know what it is.

Peter McCormack: In air travel, we went supersonic in, was it the 1970s, Concorde?

Danny Knowles: I think 1970s, yeah.

Peter McCormack: Yeah, and then since then, we don't have Concorde any more, we don't have supersonic.  Is it supersonic?  Yeah.

Danny Knowles: Yeah, supersonic.  But wasn't that down to like fuel prices, and all sorts of stuff like that? 

Peter McCormack: We haven't had that innovation. 

Allen Farrington: Didn't one crash as well in Paris? 

Peter McCormack: One crashed in Paris, and the interesting thing about that, Virgin tried to buy all the remaining planes and they wouldn't sell them.  But what I'm saying is, the innovation we've had since then has been different.

Allen Farrington: I mean, that may fit, I just don't want to pretend to know much about aviation; that may fit my answer.  The reason it's almost certainly not the case is that, it could be -- there's maybe two sides to this.  So, one is that it could be the case entirely by accident, like there could be a fluke that has sort of made it through.  But even to explain that, I don't think it's intellectually coherent to be arguing for this on any grounds other than that you, or at least somebody, it doesn't need to be you specifically, but somebody is smarter than everyone else combined.  Because that's the product of, I mentioned this before, I forget in what context, but that's the product of a genuinely free market, is it's kind of democratic in some way.  It aggregates everybody's revealed preferences, not just what they say they want, but what they actually want as determined by their actions. 

So, for you to suggest, for anybody, I don't mean you, but for anybody to suggest that the product of interfering with, in this particular case we're talking, I mean this is true in any market, but we're talking about capital markets, right, interfering with capital markets because you want to create better outcomes basically, is the gist of the question, that could only happen if whoever is doing the interfering literally knows more than everybody else combined.  And so that's why I think it's extremely unlikely.  In fact, it's so overwhelmingly unlikely that I would say it's basically impossible, except by fluke.

Danny Knowles: So is it kind of the broken window fallacy?

Allen Farrington: I don't think so, but go on.

Danny Knowles: Well, the idea of that obviously is that if someone breaks a window, does it boost the economy because you then have to hire a glacier to fix the window, but you don't know where the capital would have gone otherwise?

Allen Farrington: Oh yeah, I mean it's obviously related in that sense, yeah, that I think it's very likely implicit in asking that question.  I mean you were kind of doing it as a devil's advocate I suppose, but if you were putting it forward seriously, I think it would have to be implicit that you're not fully on top of the idea of there being an opportunity cost to that capital, which is where a lot of this comes from, just lack of awareness of opportunity cost thinking like, "Oh, I want to fix this problem and in doing so there will be no bad consequences whatsoever.  We'll just fix it and then that'll be the end of that".

Peter McCormack: So, you're saying there is an efficient market hypothesis? 

Allen Farrington: Very good!  No.

Peter McCormack: No!  And I know you don't stand for -- but you kind of are.

Allen Farrington: Do you want me to go back to growth by the way?

Peter McCormack: Yes.  Why is that a swear word?

Allen Farrington: Yeah, exactly.  Well, no, it's not.  If you use it properly, it's great.  But you can tie in the broken window fallacy, which is what reminded me that I'd said that a few minutes ago.  So this is like one of my almost favourite pet peeves of fiat-ism. 

Peter McCormack: Fiat-ism! 

Allen Farrington: Yeah, or fiat fuckery. 

Peter McCormack: Are we going to be calling this show, Fiat Fuckery?!

Danny Knowles: I think we are, yes.

Peter McCormack: We are going to call it that!

Allen Farrington: I definitely get a kind of a perverse kick out of pointing this out, like it shouldn't make me happy because it's not a sort of sad topic, but I just nerd out on it a bit.  The way the word growth is used, including the way you used it, which is why I got pissy, in almost every discussion of economics or macroeconomics or finance is subtly wrong, in a way that on the face of it maybe doesn't matter that much, it's kind of just semantics, but it's worth exploring because the misunderstanding itself reveals, sheds a light, on fiat fuckery, on the other deeper misunderstandings that you have to have to take fiat seriously. 

So, when most people say growth, what they really mean is, a better word would just be increase.  What they're talking about, they'll usually say like GDP growth.  I think that's what you meant before when you said it.

Peter McCormack: I didn't think it through, but I know GDP growth is kind of like gaslighting because it's not fucking real.

Allen Farrington: Oh, exactly, this is where I'm going.  It's just more specific about why it's not real.

Peter McCormack: It makes me think of Einstein and relativity.

Allen Farrington: How?

Peter McCormack: Well, because you can have GDP growth, but you have to consider inflation in that.

Allen Farrington: Oh, sure.  I mean, you just have real GDP growth, though, that's easy to strip out, that's not that. 

Peter McCormack: But they never give us real GDP growth, because that means they have to --

Allen Farrington: But I mean, if you know the two numbers, it's not hard. 

Peter McCormack: All right, go on.

Allen Farrington: People who say this should say increase, because what they are talking about is the ratio of almost always one flow to another.  I'll explain what I mean by that.  So, GDP is a flow in the sense that it is an amount of, I'll just say dollars as the unit, but fiat, whatever, money; it's an amount of money over a period of time.  That should be fairly easy to appreciate.  And that's more like a macroeconomics example.  You want to talk about finance instead, so would revenue be.  So, people talk about revenue growth, they're making the same mistake.  Profit growth is at least a bit more helpful, you'll see why in a minute, but even that's wrong.  In all of these cases, if you're just comparing GDP from year one to year zero, or revenue or profit or whatever, that is a ratio of one flow to another.  It would be better described as an increase. 

What growth actually is, is the ratio of a flow to the stock that generated it.  So, this idea of the concept of stocks and flow is extremely important. 

Peter McCormack: Yeah, I'm with you.

Allen Farrington: So in this case, well actually in all of the three examples I gave, the stock would be measured in dollars.  So with the economy, it's actually a little bit complicated because -- I'll go in the other order actually, sorry.  So with profit and revenue, the stock is the capital employed by the company.  And this is where you get various financial metrics that people are comfortable with, like return on equity, things like that.  With the economy, it's a bit trickier because you can appreciate in principle what it ought to be, which is the aggregation of all the capital employed, but we immediately run into problems because there's no way of measuring that.  We don't need to worry about why that's the case, it's just interesting to appreciate. 

Now, what this -- the metric you want, by the way, with a company would be profit over capital employed.  You can tweak that in various ways, like return on equity is actually slightly more specific, not that important to this discussion, but the way you interpret it is really important because that tells you, should tell you most of the time, something like how sustainably can this grow, as opposed to revenue going up from one year to the next, which tells you nothing whatsoever about sustainability.  And so, back to what you were mentioning before about all this tech bubble nonsense that all the investment has gone to, a very easy way to verify that that capital was all misallocated is that it has never generated any, maybe not never, but mostly has not generated any returns on capital.  Their revenue has gone up and up and up, and hence they're very exciting and growing and whatever else, but they're just fundamentally poor investments, for the most part.  And in macroeconomics, it's the same thing.

Peter McCormack: Is that only truly known as a net across the economy?  Because you could have individual examples where there is a high return --

Allen Farrington: Oh, of course, yeah.

Peter McCormack: -- but the only way you really know is net across the economy, capital investors versus return.

Allen Farrington: Yes, yeah, exactly.  So, I think this is what you were getting at anyway, that if you only care about GDP going up, which is the aggregate equivalent of just the company's revenue going up, that could be a good thing, but there's no guarantee whatsoever that that actually reflects anything good having happened to cause it, and that's where the broken window fallacy comes in.  In the broken window fallacy, your stock is clearly going down because you have one less window now.  But your revenue, your flow is going up because you have to spend time fixing it.

Danny Knowles: Because you employed a glazier.

Allen Farrington: Yeah, and so in that case, clearly your return would be negative because you've just wasted time.

Danny Knowles: But it could be perceived as growth.

Allen Farrington: But if you only care, as the point of the fallacy, right, if you only care about the activity, then you see it as a good thing.  And this actually ties back to loads of things we've talked about already.  That is capital misallocation, right?  Aggregating this to an economy as a whole is, sorry, I'll take a sip.

Danny Knowles: But just while you're having a drink, going back to that fallacy though, it's very easy to see why people perceive that as growth and a good thing, because the other thing's invisible.

Allen Farrington: Yes, exactly.  So, this is why a moment ago when I said, if you aggregate this to the entire economy, it's very tricky because the capital employed part, you can't really measure properly.  You can appreciate what it should be, but there's no way of really knowing what it is, which is why you have to be rigorous and disciplined when you're thinking about it, because basically where this falls out is just intellectual laziness.  It's like, "I can't measure that, oh, but I can measure that, so I'll just measure that". 

Peter McCormack: So we have to be a little bit more sophisticated and honest in how we measure things. 

Allen Farrington: Yeah, and almost all, not just capital misallocation but I mean like zero or negative interest rates is just capital consumption, falls into this trap.  If you're consuming capital, that's growth.  I mean, that's like revenue, GDP are essentially measures of consumption, right, not value added, , not how much value did you create, just how much value did you move around, right?  If you consume capital, you've got growth, but you almost by definition have negative returns.  You're destroying real wealth, but you're making yourself feel good because you're doing something at least. 

Peter McCormack: So how does Bitcoin fix all of this?  I always feel like this is where we would want to end it and go, "We need a part two", do you know what I mean?  Because I'm thinking we've got nine minutes, we have to be somewhere in a bit. 

Danny Knowles: There's one question I really want you to ask first though. 

Peter McCormack: You want to ask, you ask it.

Danny Knowles: So in the book, or actually I think it's in the article originally.

Peter McCormack: Is it the genitals thing again?!

Danny Knowles: The what thing?

Peter McCormack: The genitals.

Allen Farrington: The flicking the genitals. 

Danny Knowles: No!  So you say, "Bitcoin is not a sword for Theseus to fight the Minotaur, but a thread to follow to exit the labyrinth", basically saying like opposition of Bitcoin are going to start saying that it's a hostile thing.  We interviewed Jason Lowery two days ago, who obviously is a proponent of Bitcoin or supposedly, and he's saying that it's a violent thing and I'm very curious in your take of it.

Allen Farrington: So, I'm hesitant to address this because I don't want to misrepresent his view and I honestly don't know exactly what it is.  I've kind of steered clear of, I don't say steer clear of him, but it's a very Bitcoin Twitter thing.  It kind of goes back to what I was saying before, honestly, that like I don't consider myself to really have that much expertise about Bitcoin specifically.  So, I don't really comment on most of that kind of thing on Twitter, I just comment on fiat fuckery.

Peter McCormack: My view on Jason Lowery following the interview is, we all have a way of explaining Bitcoin to our cohorts and he's found a way of explaining Bitcoin to his cohorts.  But if you hold him at face value and you believe and trust him, he wants the same as what we do, and he's seen the influence he can have is within the USG, and then therefore he's trying to explain Bitcoin in exactly the same way as I am, but through the lens of the military-industrial complex.  That's my view. 

Danny Knowles: I guess kind of like what we were talking about before the interview, you were saying you're writing these papers for very traditional finance people to understand, and I guess he's doing the same thing but for the military to understand perhaps.

Peter McCormack: Yeah.

Allen Farrington: Sure.  I haven't read it though, so I this is what I'm saying, I don't want to --

Peter McCormack: Fair enough.

Allen Farrington: Maybe you can just ask me a question just in your words and I'll do my best to respond to that and not act like I'm responding to him. 

Peter McCormack: Well, go back to the point that Danny said, that what's the specific part of the quote where they will try and frame it?

Danny Knowles: Well, in the book you say you think opponents of Bitcoin will try and smear it as like a hostile thing.  And the point I was trying to make is that we now have proponents doing the exact same thing. 

Peter McCormack: Yeah, so he's positioned himself as a proponent.  I don't think he's positioning it as hostile itself, I think he's positioning it that the race for Bitcoin between nation states will naturally become hostile because they're hostile to each other.  Does that make sense?

Allen Farrington: Yeah, that seems reasonable.  It's kind of bland. 

Peter McCormack: Economic warfare exists already, the dollar hegemony versus --

Allen Farrington: Yeah, I don't see what this has to do with Bitcoin though.

Peter McCormack: Well, what he's saying, he's saying Bitcoin, I don't say the word violence, but he --

Danny Knowles: He said the word, he said Bitcoin's violence.

Peter McCormack: Yeah, but I think he's walked that back a little bit, hasn't he?

Danny Knowles: I mean, maybe if you're not very familiar with it, maybe we'll just cut this section and leave it out.

Peter McCormack: No, that's fine, just put the motherfucker on the spot!  He's Scottish, he's used to violence from us!

Allen Farrington: I mean, I can address that anyway, that's a good example, right.  No, Bitcoin is absolutely not violence.  I can't think of any sane interpretation -- I mean, that's even coming from a point where the section you're quoting from, or the chapter rather, almost everything in there is deliberately rhetorical.  Bitcoin is not literally -- which one is that?  Ariadne, clearly, it's not literally gravity.  But these are, I think, helpful or at least amusing avenues to interrogating its properties. 

So, if you say Bitcoin is literally violence, I think that's just blatantly nonsense.  I'm also very sceptical that you could possibly use it in the way I say Bitcoin is gravity, for example, and still arrive at anything useful.  In particular, because one of the things I say is titled "Bitcoin is Logos", just because I'm being pretentious, but it means "Bitcoin is speech", and speech is not violence, speech is definitively not violence.  And so it would seem to be contradicted by something I've already said without really needing to add that much more.

Peter McCormack: Yeah.  This has been fucking brilliant, by the way.

Allen Farrington: I've had a great time. 

Peter McCormack: I'm going to wax lyrical afterwards.  I wanted to get into the Bitcoin solution, I feel that it might be another two hours.  I think I'm going to call this one because we spent two hours on this brilliantly, but we're going to very quickly ask, when can we do this again? 

Allen Farrington: I don't know, we've been trying to do this for a year! 

Peter McCormack: Well, we're going to want to do part two and part two will be, "Okay, why is bitcoin the solution, and what does it solve and what does it change?" but I just think we won't do it justice if we try and fit it in now, and so I think this is a worthy ending to a brilliant, brilliant fucking conversation and we will bring it back.  Allen is there anywhere you want to send people?

Allen Farrington: No, not really.  Twitter is fine, I hang out there.

Peter McCormack: We will link to all the articles in the book and the show notes.

Allen Farrington: Oh, I should talk about the book.  I mean, we've obviously been referring to the book quite a lot, so I should maybe conclude with some details on that.  So, you can get it on Amazon.  If you want to pay in Bitcoin, you can get it from Bitcoin Magazine.  If you want it just for free, you can get a PDF from my website, which is -- you can probably put this in the show notes as well, I guess it's not that great to --

Peter McCormack: Fuck the free one, let people pay!

Allen Farrington: -- read out a URL, but it's pretty simple.  It's uncerto.com.

Peter McCormack: Fucking pay, fucking pay!

Allen Farrington: No, so this is important, actually.  You pay if you want.  Obviously, if you want a physical copy, you have to pay.  It was really important to me and to Sacha and to Alex Gladstein, who wrote the foreword, that there is an option for it to be free as well.

Peter McCormack: Yeah, just make them work to find it, for fuck's sake!

Allen Farrington: OK, yeah, fine.  I won't tell you exactly how to get it.

Peter McCormack: It's out there for free if you want it. 

Allen Farrington: You can get a free version if you want to look for it.  But if you do buy it via any of those avenues, Bitcoin Magazine have been excellent on this, or I mean they were a year ago when they set this up, after they've made their money back in the production costs, all of the profits are going to the Human Rights Foundation.  So, that's a reason to buy it. 

Peter McCormack: So, definitely pay for it.

Allen Farrington: As well as, you know, having a physical one is good.  But yeah, it's good.  I like that approach, right?  There are ways to get it for free, but you have to earn them.

Danny Knowles: So you don't make a penny on the book? 

Allen Farrington: No.

Danny Knowles: Very cool.

Peter McCormack: Allen, honestly, brilliant, loved this.  Cannot wait to do this again in seven years or whenever we can tie you down!  No, thank you, thank you so much.

Allen Farrington: No, thank you.