Welcome to Kibbe on Liberty. Today we talk with Patrick Byrne

– Welcome to Kibbe on Liberty. Today we talk with Patrick Byrne, the founding CEO of Overstock.com about how it is that block chain is going to save the world. We also talk about the Grateful Dead. Two of my favorite subjects. Check it out. (rock music) – Or I may have had it made up. – Yeah. _ Eventually because I’ve been wearing them and giving them away. – Facebook stalks me and they know I’m a huge Deadhead so they sold me a shirt that says Make America Grateful Again. In fact I’ve worn it on this show. – Have you? I love this. – So you got that hat. – It’s funny going through airports and, of course, there are certain Americans who think this is, there are a certain number of Americans who think that wearing red hats is verboten these days. And you see these looks of anger and then when people are smart enough to look closely most of them light up. – Isn’t it just, totally off track, but this idea that wearing a red hat somehow makes you a bad person. – Oh my gosh, the Left has just gotten crazy with thought control and thinking that they can outlaw, that they can prohibit language. For example, NPC. NPC is the most perfect meme ever. Does it hit the nail on the head what NPC is. And the Left runs around and says, the same folks who’ve gone around throwing accusations of racism around like a frisbee for two years say NPC is dehumanizing it can’t be used. Didn’t Twitter and other people just make it impossible to say? – Yeah, yeah. – I can’t believe this is happening in the United States of America and that more people are not protesting or upset about the corporate distortion of the discourse. Here we go. – This is a drinking show, by the way, for those who wish to imbibe and this is one of my favorite ryes. It’s a little bit different, made by Angel’s Envy, it’s finished in Caribbean rum casks so it’s got sort of a sweeter finish to it. – That’s nice because the thing I’ve always not liked about rye whiskey is that it is a little raw and being finished sounds good. – Cheers. – L’chaim. – Make American grateful again. – Right. This isn’t a secret herb kind of show? Ooh that’s lovely. That’s so nice, that’s exactly, they have fixed the problem with rye. Rye always has a, they have fixed the problem with rye, that’s delicious. Why don’t you give a plug again for this. – Yeah, Angel’s Envy Finished Rye. So if they can fix rye I feel like we can fix the fundamental problems that have plagued the classical liberal project for the last 2,000 years, property and trust. And I want to dig totally into that but why don’t we take a step back and just establish some of your bona fides. You’re the founding CEO of Overstock.com. And so, sort of a pioneer in e-commerce and you were the first big commerce company to adopt bitcoin as a means of payment in 2014. – Actually we were the first small one as well. – The very first. – The largest company taking bitcoin at the end of December 2013 that I could find was a diner in Australia of $800,000 per year. And people were talking about gee, maybe in a few years we’ll get to a 10 million dollar enterprise, then a couple more years to a hundred million and a couple more years to a billion. Well, we stepped forward when the largest company in the world was an $800,000 a year diner and we, at a billion four, started taking bitcoin. And we like to think that we may have saved the revolution five or six or seven years of adoption. – Yeah, and that’s important to where you’re going. I want to get into all of these blockchain innovations that you’re spending a lot of time and money on. But you’re kind of a classical liberal libertarian guy that framework has been with you since you were in graduate school or something like that. – Actually since college. I was sending $10 a year to this organization I’d read about in D.C. called Cato so I’d send ten bucks a year. – So forever. – I like to call myself what Milton did. Milton referred to himself as a small L libertarian, a small R republican. – I’ll buy into that. But were you a Deadhead or a small L libertarian first? – I was a Deadhead first. I was a Deadhead when I was 10. I discovered the Grateful Dead about 1972. It’s almost hard to listen to anything else. – Did you have like an insane collection of shows and stuff like that? – I went to several dozen. I have a brother who went to three or four hundred shows. I wasn’t nuts like that but I went to a couple dozen. – Terry and I did maybe close to a hundred. – Did you really? – It’s something close to that which is funny because I didn’t do it as a kid. I did it after I had a job so that I could afford to do it. So we would take vacations and go see like the Boston shows and they’d play like eight or 10 at a time. – I’ve seen them in Boston, Portland, Maine, Rhode Island. RFK Stadium here a couple times. I was in high school here, Bethesda. – I just watched recently the Grateful Dead documentary, I think it’s on Amazon Prime. – I hear it’s quite good. – Called Long Strange Trip, I’ve watched it several times. There’s all sorts of stuff in there that I didn’t know as someone that was fairly obsessed with the Dead. And one of the things that I didn’t appreciate was Jerry Garcia’s insistence that he was not in charge of anything. He had a very sort of anarchical libertarian attitude about the community that loved him and cherished him and followed him. And they were all wanting him to tell them what to do and he refused to do that and he was quite insistent on it. And I think it was probably one of the reasons why the community and the business model of the Grateful Dead was so robust. It was leaderless, very much in the sense. A model for what I would later sort of apply to some of my Tea Party stuff that I was doing. – Spontaneous order. Well the real thinking, the origin of the Grateful Dead is quite interesting. Do you know the story? – No. – There was this wrestler from up north who just missed the Olympics, the early 60’s Olympics. So he moved down to Stanford and started a degree in creative writing. And he was working in the, he lived on Sandhill Road his name was Ken Kesey and he was living on Sandhill Road and going to Stanford doing a masters in creative writing, working in the mental part of the VA hospital in the Psych Ward. And he started this term paper about life in the Psych Ward. He became swept up in some experiments called MKUltra. MKUltra were the CIA, Army experiments where they fed LSD to people. Give you 10 bucks, sit in a padded room in the mental part of the VA hospital, do LSD, tell us what you see. So this guy started taking part in it. And he had, in one of his dreams, he had this idea of retelling the story that he was trying to tell, the creative writing story, from the point of view of a giant Indian. And that became the book One Flew Over the Cuckoo’s Nest. And he made so much money off of that, it was his first novel, that he bought a farm over the hill in Woodside and it became a commune. And Ken Kesey lived there with lots of other people and they started having this Palo Alto garage band called The Warlocks come. LSD was legal, they were experimenting with, you’d go into a concert, there’d be a bucket of KoolAid at the front laced with LSD. You’d dip your finger in, lick it and then they wanted music that was this very surreal music and this garage band played it for them. After a few months they changed their name from The Warlocks to The Grateful Dead. Jerry, Bob Weir was about a 16 year old kid in Palo Alto. That all grew out of Ken Kesey. And that became the bridge from the beat movement to the hippie movement was Ken Kesey and the Grateful Dead. And that was also the creation of Acid Rock, that’s where the expression comes from because you’re putting your hand in acid and enjoying music that kind of only makes sense to people who are tripping. – Before that Jerry was like a banjo player. And so he was like a beat guy hanging out in that community and it transformed into what became Haight-Ashbury and all that stuff. That’s a cool story, I didn’t know all that. – And Kesey was very much one of us and it shows up in his writing. He wrote two fabulous novels. He wrote One Flew Over the Cuckoo’s Nest which is man against the establishment and the Left loves that story, it’s consistent with their vision. But he wrote this other book called Sometimes a Great Notion which is quite, you ever hear of that? – Yeah, I’ve heard of it, I haven’t read it. – Yeah, professors never teach that one because it’s much more, it’s about man standing up to social pressure, to his neighbors and such and it’s not at all consistent with the Lefty view. And so you see they never in colleges and stuff and every high school kid reads One Flew Over the Cuckoo’s Nest. They never teach this other book, Sometimes a Great Notion. Anyway, Ken Kesey, I would say it sure seems to me from his writings that we would’ve found a fellow traveler in him. – Did you every get to know John Perry Barlow? – I had dinner with him a couple times back 18 years ago when I moved to Salt Lake City. Fabulous guy, inventive guy, I didn’t like what he did after 9/11. I’ll have to say I never had anything to do with him again after that. Do you know what he did after 9/11? – Uh, no. – He staged one of his happenings down at Ground 11 and kind of invited people, I guess he was saying, who knows what he was saying, it was immediately after 9/11. – So you thought it was disrespectful. – It was very disrespectful to the dead of 9/11. And a lot of people, he lost a lot of friends there. A number of people had nothing to do with him after than and I was one of them. – So let’s pivot, I could actually spend two hours talking about the Grateful Dead and I think that would be the best show ever. Us and three other people. I want to talk about the sort of Hayekian classical liberal vision. I saw a talk that you gave about a year ago that went all the way back to the Spanish Scholastics. And I knew about the Spanish Scholastics, Murray Rothbard taught me about them, but I didn’t know the explicit link to the Austrian School of Economics which is, of course, I swim in that. – It’s your mother’s milk. – Yeah, that’s the best there is. And it applies directly to everything we’re seeing happening with technology and blockchain and how order might spontaneously emerge if we can solve the problem of trust. The problem that we have always had has been about trust. Like how do you know that the person that you’re dealing with is going to treat you fairly? Part and parcel of that is how do you know that your property will be protected through that whole transactional process? – Well the liberal tradition, or the classic liberal tradition which I just call liberalism. I’m tired of apologizing. By it’s time we claim our word back. – We’re gonna steal that word back. – Actually I do take to calling myself pro-freedom which ticks off some of my Lefty friends. I always point out to them, look, you call yourself progressive. If you can steal the word progress I get to steal the word freedom. The liberal tradition believes in rule of law. Not ruled by men but rule of law. Well if you have rule of law you’re only gonna be as good as your institutions. Your institutions are what create rule of law. And there’s a long history of failure. And the reason for the failure was given in Federalist No. 10. Am I going to be… – Yeah, yeah, no, no, this is… – Federalist No. 10, Madison in that case was writing. John Jay, Madison, and Hamilton were writing essays to try to convince their American fellow citizens to endorse and approve this new Constitution. And Federalist No. 10 has this very interesting statement where it says, We studied all the previous attempts at democracy, ancient and modern, we looked at what made them fail. We designed this Constitution to make it immune to those forms of failure. Unfortunately there’s one form of failure we didn’t figure out how to fix and it’s the most common, it brings down democracy more than any other and that is what we would call capture or special interest, what they called faction. And they knew they had to fix that problem. The problem of capture. The problem of regulatory capture and deeper capture. That intense, concentrated private interest as a society. Capture these institutions that you and I are all counting on to create fair, neutral rule of law. It gets captured. There’s an intersection between our way of thinking and Marxism. Marxism, of course, that’s how Marx saw the world. – I had one of my progressive friends on the show and we argue and debate about power. He’s more worried about concentrated corporate power and I’m more worried about concentrated government power. But there’s properly understood regulatory capture and how it is that special interests can hijack the process and game the system and rig it against the rest of us should be something that honest people on the Left and the Right and libertarians could actually agree on because you see it play out. You’re a huge critic of Wall Street gaming the system. Sometimes you sound more like Occupy Wall Street than a Republican. – Well I sometimes, I kind of was a one man Occupy Wall Street from ’04 to ’08. – Before it was cool. – Before it was cool and anyone else showed up. So what do you want me to respond to out of all that? – I don’t know, it wasn’t a question, was it? They yell at me because I don’t ask questions but I think. – I like it, I’m happy to sit and drink rye with you. – I’m just curious that we’re at this process where Republicans have always said that they’re for limited government and that they’re for free enterprise and Democrats have always said that they’re for the people but the political outcomes seem to entrench power of special interests and that’s James Madison’s worst nightmare. And I feel like if the world ends today we have to say, you know what, the representative of democracy failed because of those concentrated interests. – 20 years ago people thought history has ended because it had become clear that representative democracy was the only thing that worked. So something definitely has gone wrong in the last 20, 30 years with us. – But the counter revolution is something that John Perry Barlow referenced in the 1990’s. That the revolution of the internet and the democratization of knowledge and the ability of people to find stuff out, and this is long before blockchain and bitcoin, and he had sort of this romantic idea. – Information needs to be free or wants to be free. – Yeah, that we all had the right to know. And it wasn’t a positive right, it was the ability to go out and find stuff out. And I feel like the Tea Party and the Ron Paul movement, Bernie Sanders, even Donald Trump are all part of this process of political disintermediation where we don’t neatly fit into one or two boxes that were decided behind closed doors by some shady power. – Right. – But we’re not there yet. If anything it feels like things have gotten worse because of democratization. It feels like everything’s click bait and silos and people sort of angry at each other. But you would argue that blockchain is the solution to all of this. – Blockchain may in fact be a solution to all of this. It may in fact be. – Before we get into that, because you’ve made a major investment in a lot of start up technologies that could be fundamentally transformational but, let’s assume that everybody listening to this has an at best a simple understanding of blockchain and bitcoin. So explain to people what that is and how this technology solves that problem we referenced earlier about questions of property rights and trust. – I will do so. First let me give you the response to your friend who believes that we need strong, muscular government to stand up to muscular corporations. Ask your friend what happens when that strong, muscular government becomes a wholly owned subsidiary of Goldman Sachs? Now you got the worst of both worlds. – And that’s what happens. – Yeah, that’s what happens and that’s what happened. So how will blockchain fix that? Because now we have these institutions, that is strangers wanting to engage in consensual exchange, we can’t trust each other so we just trust the institution. We trust the Land Titling Office, we trust the Mint, we trust the Visa card company, we trust Airbnb, we trust Uber. These are all just institutions that let strangers do something together. Well, those institutions have over time, the middleman who injects that trust, they have a way of extracting more and more over time and becoming predators perhaps. Blockchain lets us re-architect this whole system. All we need is a ledger. And so, imagine there’s a magic ledger like your granddad ran his hardware store out of and it’s magic because first there are copies of it all over the world and when you change it one place it instantly changes it everywhere else. Secondly it’s cryptographically protected so that no one can cheat, no one can put something in secretly, no one can change anything secretly. Well if you had such a system, if you had such a magic ledger, you could recreate all kinds of social processes which currently depend on that third party institution for us to trust. Instead we can have a ledger that becomes the object of our trust and we know that mathematics is keeping it right. So it isn’t something that the bad guys can capture. So if the Achilles heel, as we’ve been discussing, if the Achilles heel of liberalism is our dependence on these institutions and those institutions are capturable by moving things to the blockchain and into these magic ledgers you vastly reduce the scope for the predators to rent-seek on society. – You can fire the middleman. – Yeah, get rid of the middleman. My whole life, that’s my motto. – Get rid of the middleman and all of the unintended consequences. Madison was worried about this. You give government that much power and it’s going to turn into something else, regardless of your best intentions. – Yeah, you know I used to think that there might be exceptions to that. I used to think that, for example, we probably differ a little bit on national security. I’m actually a big national security guy. I think that the world is a very dangerous place and what we have in the United States is very special and I’m very serious about national defense. I have always seen national security as outside and the people involved as outside the general hue and fray of politics. It’s getting harder and harder to believe in that vision of our national security apparatus. I’m really sad about that. – Well the dilemma for, like if you’re a constitutional conservative or a libertarian, the dilemma for us is that we understand government failure and we understand how power corrupts and it happens perhaps especially in these functions that are so vital. So you get a situation where the decisions made by the military actors, the national defense, I call it the military industrial complex but that’s more of a pejorative way of saying it, they’re not necessarily making rational decisions just based on what’s good for national defense. They have all these other incentives that they deal with including regulatory capture with defense contractors and now Silicon Valley. Like there’s a lot of problems there that would be at least limited if there was a party that was willing to say, you know what, we should probably be as stingy with our defense dollars as we are with domestic spending. – First of all, you mentioned the military, I do not believe the military’s the problem in the national defense industry. I think the military, from my interactions with them and I have them from time to time socially and just around D.C. and I’m also on the Council of Foreign Relations, don’t shoot me, but I’m on the Council and I like the Council… – We’ll let you stay. – I’ve had a couple decades of interactions with them. I find them the most sensible people in Washington. And, by the way, it’s nothing like the movies. The military people are the sensible, careful, modest, let’s be careful, let’s make sure we’re not, the people who by instinct follow the Hippocratic Oath that first do no harm. That’s the military. It’s the guys who are not in the military, the various ideologues of a different kind who I think are the real problem. I don’t care if the next president has shoulder boards and four stars on them compared to any of the political class we have going. – Let’s talk about your vision for the future and how it is that blockchain technology could solve a lot of these problems and truly limit the size and scope of government by getting rid of the middleman. You’ve talked about a tech stack for civilization. – Right. – A blockchain tech stack for the civilization. – You do your homework. – And you have been investing in a number of startup companies that you’re almost sort of reverse engineering Hayek’s understanding of institutions that have spontaneously emerged to solve problems. And because of 2,000 years of experience we know what those institutions are. And now you’ve said, you know what, I’m going to create a blockchain solution that makes those institutions function in a radically efficient way. – Right, yeah, well a lot of the functions of those institutions can now be achieved effortlessly and costlessly through blockchain. And also, most importantly, give us an outcome which we now know is guaranteed by math. We found out 10 years ago, I think, that in the financial crisis people who weren’t living under a rock realized that the oligarchy can buy themselves politicians, they can buy themselves regulators of different kinds, they can buy themselves journalists, they can buy themselves justice in various ways. But even they cannot buy themselves the laws of mathematics. And so by rebuilding these things through cryptographically protected algorithms that execute such rather than on institutions that we all depend on to keep honest. I think it will be a big step forward. There will be a lot less, now who was it, Mark Twain or somebody said trust everyone but cut the cards. This is gonna be a permanent card cut and a whole new way of doing things. – Well let’s talk about some of those institutions. The obvious first one would be money. And everybody knows about bitcoin but you’re critical of bitcoin tourists who don’t fully appreciate the fact that this isn’t really about bitcoin. This isn’t really about like the investment value of bitcoin six months from now. It’s about the independence of the management of the value of money separate from the Federal Reserve. – Exactly, it’s very similar to our instinct as Austrians for gold. Keynes thought that we who believed in gold are fetishistic and he has some Freudian interpretation that it was actually like our shit and we were children and needed to touch it or something, it was really weird. – Well Keynes was kind of a weird dude. – You know what his dying words were though? You’ve got to give him this, what were his dying words? – I don’t know. – I wish I had drunk more champagne. – Words to live by. – Yes, not as good as Oscar Wilde’s though. So, where were we, sorry? – We were talking about money and the Federal Reserve. – The reason that people like us like gold, I believe deep down, like gold as not just personally to have but as a standard, is that gold is something that no government mandarin can sign something and create a new block full of gold where he can with a fiat currency. We like that. – You can’t print gold. Now the disadvantage is, especially in today’s age, we can’t beam gold around the country, actual gold. So what’s beautiful about blockchain based currency is you can have that limited supply, you can have something that cannot be increased through the signature of a government mandarin. No government mandarin can write something and change mathematics. And so since bitcoin is based on mathematics they can’t control or alter the supply. Which means we end up with what we’ve always wanted. A form of communicating to each other, information about value and scarcity, without it going through some medium that government people can dial up and down to distort our signals to each other. – And despite what Keynes argued spending against future generations and monetizing that through the manipulation of money and credit is the most regressive, disruptive, devastating thing to economic progress. And that was sort of the Austrian critique of the business cycle and how it distorted price, relative prices and all that stuff. That should be something that our friends on the Left would appreciate, going back again to capture, like who controls the process by which we decide that we’re gonna put all these toxic assets in at the Federal Reserve. It’s insiders, it sure as heck wasn’t me. – As Matt Taibbi said, the bailout was rich bankers bailing out rich bankers on your credit card. It was a beautiful line, it was true. It’s crazy what we did in ’08. I believe that when a fellow has a cardiac arrest and is on the ground you gotta do something. There was a point in September of 2008 that the financial system had frozen and the government had to step in and guarantee the settlement system otherwise we were in cardiac arrest and everything would’ve collapsed. However, the subsequent, endless gifts and bailouts is gonna saddle us with that forever and I think it was a horrendous mistake and what they should’ve done is rather than ring fence the center of the financial system and say we the federal government are gonna guarantee this and then they let everything else burn away, the small and mid-size people outside that, what they should have done is built a fence and said we’re gonna make sure this burns first and they should’ve supported the regionals. Now the counter argument against that is that society gains an efficiency. By allowing there to be these enormous banks you gain efficiency because you don’t need two executive teams. That all turns out to be total nonsense. I saw Simon Johnson, from formerly of IMF now MIT, he has quoted a study I think it was done by IMF about the expense ratios of banks as they get bigger. And the interesting thing is once they get to be a relatively small size, 50 or 60 billion that’s not a huge bank these days, once they get to that size they gain nothing in efficiency as they get bigger. So the whole justification for the way we went about the 2008 cleanup is I think fallacious. – So what are the cryptocurrency pieces of this tech stack that you’re talking about? – Well crypto, blockchain, fits into all six layers. It fits into identification there’s gonna be a blockchain identification in the world somewhere in the future. The blockchain land governance system, not to replace the Title Office but basically to take out the back end of the Title Office and the paperwork and the opportunities for mischief. We have announced that we are working on for Rwanda. Rwanda has titled up eight million properties within Rwanda. We are building for them a system, an online system, that everyone in Rwanda will be able to go to, buy and sell property to each other, arrange inheritance, do all that kind of stuff through this online system that is blockchain guaranteed. And we’re introducing blockchain elsewhere in land governance. – And that’s sort of inspired by Hernando de Soto and the whole idea that you need title to property in order to achieve the real benefits of a market economy. – Well it turns out that that is an idea that the World Bank has been flogging since the 70’s. Hernando came along somewhat later and joined in the World Bank’s program. But it is that idea that once you have land titling all kinds of social progress, all kinds of economic activity begins. I have a deed that I can take to a bank and borrow some money and buy a cart and start a business or something like that. That vision, and one has to give credit to de Soto, he certainly popularized through a couple books this vision that what made capitalism work in the West, and fail everywhere else as he wrote in one of his books, is that we got land governance correct. – But it’s a blockchain solution to the age old problem of enforcing property rights and assigning property rights. – Exactly. – And getting rid of all the corruption. We had Magatte Wade on this show just a bit ago and we were talking about a lot of this stuff and how the challenge in Africa is the lack of the rule of law. And property rights are a fundamental part of that. – The first step. – So you’re talking about something that’s insanely transformational for places like Rwanda. – Right. – That it’s all potential but they don’t have those rights right now. – We’re doing it in Zambia now. We’ve done 50,000 households, I think we’re doing another quarter million. I think this is gonna spread across Africa. I have people contacting me, I won’t tell you the institutions but saying, Patrick when can you get on a plane? I’ve got 54 nations and 1 point billion people in Africa waiting for you to get on a plane and bring this stuff. I keep saying let me finish the product but once I get the products done we’ll go. I’m gonna be going to Bermuda, in fact, I’m thinking that there’s a wonderful premier there named David Burt. Quite ironic, quite ironic that because my brother left America 30 years ago, gave up his citizenship and became a Bermudan. And he was a guy about politically like I am and Bermuda elected a Lefty, a Left party, a people’s party kind of thing and my brother ended up working with them very successfully and it was quite strange. He helped them, he advised them, they made him the Head of the Chair of the Board of Education of Bermuda. Anyway, my brother who’s like an arch libertarian, he’s now passed. He was a wonderful fella, my favorite human being frankly, he died a couple years ago. He had this wonderful relationship with this Lefty government of Bermuda and they did great things. The successor of his partner is a young man named David Burt, Premier Burt, and ironically that he has come to me. So it’s Mark’s little brother, me and his successor. We have formed a partnership and you may see us in Bermuda to the extent they say that they want it. We will use Bermuda as a prototype test bed so to speak. As we are rolling out these products we’re gonna be bringing them into Bermuda. I think a country with 60,000 people in it is probably a better place to test these and get them right rather than take them to a country with a hundred million people. The countries with a hundred million people are calling us and saying when can you get here, when can you get here? But I’m trying to be responsible. – Voting is another piece. Everybody in this town, Left, Right, and center is obsessed about voter fraud and limited access to voting. Whatever it is, nobody really trusts the system that we have and there’s good reason not to when you look at things that happen on a regular basis in terms of not counting ballots or stuffing ballots or hanging chads, all that stuff. – Have you ever run into the NPC’s who, as soon as you bring up voting they say, well what’s the evidence that there’s voter fraud? That the NPC line that they were taught. Well because all attempts to gather the evidence and formulate evidence are rabidly fought against and then they say yeah but where’s the proof that there is some. Let me tell you, anyone who’s worked in politics as you have at the grassroots level, people are nuts if they don’t think that there’s voter fraud. There is so much voter fraud, I believe on both sides, I think whichever party controls the booth. If somebody smudges their finger with ink they can stand there and do somethings with your ballot that make them unreadable and get your ballot rejected. So they think that you’re not in their party. – If you wear a red hat you’re probably suspect. – Or it could be republicans doing it too. Except my red hat, I just want to point out, isn’t a typical red hat. – It’s a totally legit hat. – It’s a legit hat, it’s funny, sometimes I wear one that says Make Bitcoin Great Again. – For those of you listening it says, Make America Grateful Again. – And has a little Grateful Dead smiley. – Yeah, steal your face. – Steal your face. So I think there’s much more voter fraud than people understand is there and there may be voter intimidation. I think that some of the things are ridiculous like we can’t expect people to have a government issued ID is ridiculous. But anyway, that can all be be fixed through blockchain. You’re gonna have an app on your phone that you vote through. And it is blockchain secure, blockchain guaranteed, bio-metrically tied to you so no one can vote your vote. The people who talk about voter suppression, i.e. the Left, but they don’t want to talk about voter fraud seem to forget that there’s really a couple ways I can suppress your vote. One is I keep you away from the voting booth and I do these crazy things that they used to do in the Jim Crow south to keep black people away from the voting booth. They have to recite the Constitution word for word backwards or something. But there’s another way to suppress your vote and that is, let me submit an extra vote and that offsets your vote. If I do that and I get to submit a fake vote I can suppress your vote just by canceling it out. They don’t seem to be very concerned about that kind of voter fraud. Or voter suppression I should say. They don’t care at all about that kind of thing. Every fake vote suppresses somebody’s legitimate vote. So it’s just a different kind of suppression. So I think we ought to have no voter suppression and no voter fraud and we can achieve that through an app on your phone that’s gonna be called Votes that we are backers of that has a blockchain voting app for your phone. West Virginia used it last November for the first federal election ever. And Denver, just a week or two ago, announced that they’re now gonna use it for their next municipal election. I suspect the entrance is gonna come on the back of ADA, Americans with Disabilities Act. Disabled people will start saying you know, I’d like to have that voter app on my phone. And over time I think that’ll be the next breakthrough. That we’ll start having states across the country let their ADA people vote through it. And then it’ll all just break out. And one hopes that within a couple elections, a couple few elections, everyone gets a chance to vote through their app. When that happens there is no voter fraud there is no voter suppression. – So right now Nancy Pelosi is pushing this idea and I think it’s just virtue signaling to her base but she wants 16 year olds to vote. And I don’t know if having 16 year olds voting is a good idea or bad idea but I do know that she probably only wants that because she thinks that would produce more democrat votes in the short run. So that the trade-off for both parties is if you make it easier for people to vote you’ll probably get more voter participation you’ll get more democracy. But, there’ll be fewer dead people voting and there’ll be people voting only once and presumably only people that are qualified to vote get to vote. So it’s kind of a wash and I wonder how the two parties sort of react to the idea of making it easy and honest for everyone to cast a vote. – My impression is the democrats wants it easy and the republicans want it honest. – So we can do both. – Yeah. – And it’s probably a wash in terms of the short-term political consequences. – Political scientists say that the people who don’t vote split about the same proportion as the people who do. So it isn’t like it’s going to radically change the results it’s gonna bring in a bunch of republicans who’ve never voted before or democrats who don’t normally vote. It’s not gonna do that. It is going to be interesting. My guess is that, they say that there’s a one to two percent over vote in America. If you count the number of people who enter a polling booth and it is X, and you look at how many votes that polling station submits, it’s on average 102% of X. And that 2% is a large amount. The game is not played between the goal lines, it’s played between the two 45 yard lines. – At the margin. – And so it’s all elections are over that last 10%. If you can steal 2% of the vote that’s a huge edge. That’ll all come to an end. So it is kind of a question who’s gonna fight blockchain voting the most. – I’ll predict that Nicolás Maduro will fight first. And we think about the voting problems we have in this country but the problem in other countries, particularly in places like Venezuela, where he clearly would not survive a legitimate vote. That’s where you have this sort of transformational institution building kind of dynamic for that I think. – Yeah, that may be. I think it is going to happen, well I think it’s gotta happen in the U.S. first for some reason with voting. Maybe it’s because we’re so identified with democracy, I don’t know. There’s doesn’t seem to be signs to me that it’s gonna pick up anywhere until it picks up here. And it’ll be a few cycles as it keeps picking up and breaking through. But I think it may, one can only speculate, it will eliminate this kind of fraud. It’ll eliminate different things, maybe new kinds of fraud emerge, maybe people come to your home and hold a gun to your head, I don’t know. Different things could happen. Maybe all kinds of people who never voted before start voting but we will end up with voting that more truly reflects the true desires of the people. The true desires of the people cannot… – Yeah, we’ll find out what that is. We don’t necessarily know. So we talked about voting, we’ve talked about money, we’ve talked about property. The big daddy for you is capital markets. And how capital is traded and how those markets clear. Talk about the blockchain solution for that because you think that’s sort of the linchpin of the whole deal. – It is the linchpin, yeah. Capital formation is where human capital and financial capital meet. It’s so important and capital formation currently runs through a system that only evolved in the 1970’s and it’s a crazy system. And it’s because the previous system we had, which was guys running around Wall Street with sacks of stock jobbers running around among brokerages with stock certificates, really seized up by the end of the 1960’s. The volume on an American exchange has quadrupled. The stock jobbers running around with the bags of certificates couldn’t keep up. The industry wanted to go to a direct peer-to-peer settlement system. The government said the technology isn’t ready and they created this other system. It’s very arcane, not going to go into it, but it’s nothing like people think it is. When you and I, if you sell 100 shares of IBM from your Charles Schwab account and I buy 100 shares, you might imagine that there’s one process going on. Some certain process by which the shares are moving. No, no, no, no, no. It’s this crazy process that’s unlike anything you’re imagining. And in that process there’s great opportunity for mischief. And some of what happened in ’08 was a bubbling to the light of that mischief. It’s all in the settlement, it’s not all, a bunch of the mischief is in the settlement system. What this does is it takes away the settlement system. See, if you and I do a trade on the New York Stock Exchange today, it’s three days after our trade that the actual money and stock changes hands. And it does through a completely different system. What blockchain does is let us reunify that settlement and the original trade. And once you unite them a lot of the opportunity for mischief goes away. – So that mischief, there’s a lot of rents in that mischief. What happens to all that extra money that’s sloshing around in the current system? – It gets turned into mansions and Lamborghinis in the Hamptons. In fact there’s a very interesting lawsuit that’s been filed a year, year and a half ago by a bunch of pension funds who have figured out basically that the stuff I was saying in ’05, ’06, ’07 was correct. And they’re filing, I think it’s the first trillion dollar suit that’s been filed against a bunch of these prime brokers who have figured out really a great deal of the revenue of the industry of prime brokerage, which is gold men and people like that, a shocking amount of the revenue actually comes from this settlement stuff and not from Wall Street that you think is paying the rent on Wall Street. So we’ll be going directly after the really the main revenue sources of the biggest Wall Street companies. – How are they going to respond to that? What happens when the empire strikes back? – Well 12 years ago I took on Wall Street and the SEC came after me with six investigations, one after the other. I’m trying to be friends with the SEC these days. Sometimes they make it easy, sometimes they make it hard. But I became the object of six SEC investigations. Three of them went nowhere, they had to give us letters that say we drop, which they hate doing. And three of them resulted in trivial, and by trivial I mean restatements of the form of 400ths of a percent of revenue or something. They’ve never done anything like this. So 12 years ago it was clear that the prime brokers owned the SEC and when I gave them trouble they picked up the phone on speed dial and the SEC came after me. There were individuals at the SEC, what I’ve never talked about publicly, is there were individuals who I understood to be personally short or have personal positions in our stock and hence have incentives to derail us, making decisions about our fate. However, it’s a different SEC is how I feel most days. It’s actually, no this is the truth, the SEC is so much better than it was a decade ago. I gotta say under George Bush, it was Bush and Chris Cox and I don’t know if he was an ideologue or what but the SEC was terrible. It is, I must begrudgingly, begrudgingly admit, it’s a much better organization than it was a decade ago. Not perfect, but, significantly better and I feel significantly better about our country and the state we’re in because of the SEC today versus 10 years ago. – You said that regulators and FINRA and all of the people that decide whether or not this stuff is okay, they’re generally sympathetic to what you’re trying to do here? – Well they’re not homogenous, but there are regulators, and actually I’m kind of shocked, the SEC they’ve been actually very professional. The people in the regulate and FINRA, I remember meeting with FINRA and you can just kinda see the lights go on around the room. It’s the people who care about enforcing the rules, who truly care, and it’s the people who care about systemic risk. Both of those kind of people really want blockchain cause blockchain takes away a great deal of systemic risk. And blockchain, you’d be shocked, and here I am defending the SEC, you’d be shocked – We’ll have to edit this part out. – At how hard it is for them. If they see an illegal trade in the market occur, you would think that they could just call up an exchange and say who’s behind that trade. Turns out they can’t, they have to do something called blue sheeting. They issue a blue sheet to the exchange, who’s behind that trade, and they try to trace it. But the trades disappear into this mist of netting and pre-netting and slicing and dicing. After ’08 Congress mandated to the SEC you have to develop a consolidated audit trail, CAT. I think they allocated a half a billion dollars for it or something. The last I checked 10 years had gone by and over a billion dollars had been spent and they had gotten nowhere. Nowhere whatsoever. You switch to a blockchain capital market and that consolidated audit trail just falls out for free. We can give the SEC a window into the market at the atomic level of the market and understand every trade. No netting, pre-netting, et cetera. So it really solves the problem at least for the people that want to enforce the rules and there are many at the SEC. That may surprise you now. And it’s great for people who care about systemic risk. – So all of these things in this tech stack are pretty radically transformational and you seem sort of particularly driven to get to the point where this stuff is operational. Was it at all driven by your frustration with politics as normal and seeing that the systems themselves could not be reformed? Like, we’re never gonna end the Fed. We’ve got 22 trillion dollars in debt. The debt for last month, February, was 234 billion dollars. – For one month. – One month. I’m old enough to remember when that was an annual deficit and it was a problem. – Well I’m old enough to remember when we had a balanced budget. Late 60’s and briefly under Clinton. – Yeah, so clearly the systems that Madison was worried about are not functioning. But you’re saying just do an end run around all that. – Right. – Just hack it. – Shoot the thing in the head and start again with an alternative that’s simpler, cleaner, incorruptible, far cheaper. It takes a lot of people who currently have their snout in your pension funds and it ruins their day. – Well, that’s what I’m wondering. I’m wondering about the blow back. – I think it’s immense. What I’m afraid of is that there are, I’m afraid of powerful, concentrated forces who do have friends at the SEC who want to get me shut down. I’ve tried to be a great citizen for the last few years and say nice things about the SEC. You have no idea how much I’ve bent over and tried to help. And I’m disappointed to discover that I do think that there are powerful, concentrated forces who probably have a bigger voice than they should within the SEC and are trying to get the SEC to do things regarding me and my projects and my progress that I wish they didn’t. So there maybe some sort of, I think there’s a Götterdämmerung coming of kind in our society, you know what I mean? The Ragnarök, the great twilight, the battle of the gods at the end of history. I think there’s something like that coming where either we liberate our country or we lose it for good. – So I believe that too which is why I do some of the stuff that I do but I’m an optimist about it. I think there’s something really cool that’s about to happen and it’s probably not through normal political channels. It’s got to be this other thing. It’s got to be people and innovation. One of my friends calls it permissionless innovation. A way that you might just fix things for yourself. In Africa, for instance, could we just go ahead and do it even though we can’t actually fix the political institutions per se? – Well I want to move to Africa. I think that I’m probably going to be getting a house or a compound in Africa. You heard of a fella name Akon? – No. – There’s a fella named Akon who is quite a good guy. Senegalese American, I’ve gotten to know him some, he’s coming out to see me next week. I don’t follow the music scene, I’m stuck at the Grateful Dead, this fellow is evidently the number six global celebrity of music. And he’s a wonderful, smart, decent, very good human being. I like him. We might be doing something. I could move to Africa and spend the next five years just focusing on getting these things installed. I think we can lift billions of people out of poverty in five years if I can get the Feds off my back and get things going. This stuff can all be built and rolled out over five years and change. When I was a grad student studying economics I remember this development economist. I had a wonderful experience at Stanford. I’m not one of those academic bashers. I had one of the greatest experiences of my life at Stanford in the philosophy department where I got my PhD. But I did all this development economics and there I remember this woman, a professor, talking about how many tens of millions, this was about 1980 something, early 80’s mid 80’s. How many tens of millions of tons of copper it was going to take to wire up India so every home and every hut in every village had a phone. Well, it was like 50 million tons of copper I remember was the calculation. Well then cell phones came along and they just leap frogged that whole step. Same thing’s gonna happen with institutions. For 70 years we’ve been telling the developing world copy our institutions, copy our Wall Street, copy our Citibank, copy our SEC, copy all these institutions. They can actually now, that’s like telling them put in millions of copper wire phones. They can jump, we have a blockchain central bank. Now a purist such as you will say I’m consorting with the devil. Why do a blockchain central, why do any central bank? Let’s get the camel’s nose under the tent. We have a blockchain central bank now. We just announced a deal with Eastern Caribbean Central Bank which we can go in with a laptop, tell the central banker here’s how you now issue currency on the blockchain. Everyone in the country just downloads a free app on their phone and suddenly you have leap frogged, leapt frog I guess, and have the best financial system in the world. A frictionless electronic financial system. We could go to Venezuela and I hope we do when that place collapses. And it’s so sad, so sad. It’s so sad what’s happening in Venezuela it kills me. We could go there and implement this system and in six hours, when their financial system collapses as it will, we can go in with a laptop and this system, everybody download a free app and suddenly they would have the most advanced financial system in the world. And the central banker could control his currency and surveil, we get better economic stats than anything currently going. In addition, imagine you have that world, and then everyone just downloads another free app which is a peer-to-peer lending app. You would now have a situation where poor people could actually save and share money, loan money, borrow money all through apps. With no Citibank, with no institutions that no copying of the American system. It would just be a matter of some free apps they download on the phone and a single laptop sitting in the central bank where when the guy wants to print more money, he’s typing some things in there and it gets spit out on the blockchain. We could save, I mean, I feel like I’m in this rush against time because there are countries which are totally collapsing countries. Those failed states like Venezuela and others around the world where there are muted conversations going between us already about this possibility. We are within a month or two from being able to do what I just said. Go into a Zimbabwe, go into a Syria and say here’s your thing tell everyone in the country to just download this app and suddenly your whole country’s running again. It’s gonna be great. – I’ve probably said this three times, it’s transformational. Final question and then we’ll drink more off camera. – Okay. You don’t have anything to smoke do you Matt? – We’ll see, we’ll see. – What are the rules on that in D.C.? – Oh it’s convoluted, recreational marijuana, you’re allowed to smoke marijuana but you can’t buy it. And we have medical marijuana but can’t sell it. Can’t buy it, you can grow it. – Oh, you can. – And there may be a grow room downstairs from the studio, I’m not sure. – I won’t ask. – Yeah, don’t ask, don’t tell. This is actually related. You may not know this but both of us are cancer survivors. I did not know about that, Mazel Tov. And you first had cancer in your 20’s. I waited until my 30’s, but in my case surviving cancer kind of radicalized me. It told me that I only have so much time on this planet I want to do something. And I look at everything you’re doing today and I’m like, shouldn’t you just be on a beach? You’re a wealthy guy, you could hang out, you could drink the best cocktails, but you’re doing this. – I’m doing this. – What’s going on? – From your lips to God’s ear. To tell you the truth I’m just about at the point where I could do that but, there’s seven and a half billion people on earth, five billion of them do not live in anything like the world that you and I know. No formal rights, no legal rights, no property rights. There are no bank accounts, they’re I don’t want to say primitive because it’s pejorative, but they’re outside the modern world as you and I know it. I think that we can fix that in five years with the capital I have and the technologies I have and with the Feds off my back. For whatever reason I’ve got the fucking Feds here. I don’t know if you’re aware. If you knew how much of my life in the last 20 years was dealing with the fucking Feds and all the trouble I get in for everything I do and everything I say and this and that. If they would get off my back in five years five billion people could have a different life. So anyway that’s what I want to do. See if I sat on a beach now knowing that, I wouldn’t enjoy it. It’s probably my guilty Catholic upbringing but I would probably sit there and say, I just couldn’t enjoy it knowing what I do now. If I give it five years and get all this stuff rolled out and implemented and going, believe me there will be no more sybaritic person in the world. I would be on a beach, I would be enjoying whatever time is left me, I would just enjoy the hell out of myself. But I think I can gut it out for five years. I just need to get these, lovely people though they be, boy this is quite a town. Anyway I just need them out of the way and then I can do that and then I’m gonna sit on a beach and no one will hear from me again. – You know that cocktail’s gonna taste better if you’ve empowered five billion people in the process. – It is and I think I can gut it out. Every day, every night I go to sleep thinking why am I pushing through this bullshit? I’ve got five billion people counting on me to just do it. And after that, believe me, I will be somewhere enjoying myself for the rest of my life. – I will join you for that cocktail. – Welcome. – Cheers, thank you. – Thank you Matt, good to see you. – Thanks for watching Kibbe on Liberty. By now you know this is the most important event of your week, so make sure you subscribe on YouTube. Click the little bell so you get notifications. Kibbe on Liberty, mostly honest conversations with mostly interesting people.