Patrick McKenzie: preference

Transcript context

…Let's talk about some finance. In addition to saving thousands of lives with VaccinateCA, what you've been doing over the last year or two is writing this very excellent finance newsletter called Bits about Money. You explore the plumbing in the financial system. Here’s my first question about this. Crypto at its peak was worth $3 trillion or something like that. From the crypto skeptic perspective that you have, how do we think about this number? What does it represent? Was it just the redistribution of wealth from dupes to savvy people? To the extent that useful applications didn't come out of this $3 trillion, what does it represent? I have two broad perspectives on this. People often treat the market cap of something as implicitly like some sort of cost on society. The true cost of crypto on society has been this. Anytime one engages in attempting to do productive enterprise, some actor in society has said, “okay, I will stake you with some of society's resources. These resources are rivalrous. They cannot be applied to any other things society needs. I do this in the hope that you will produce something that is worthy of being staked with this.” How much have we spent on crypto? Not on trading tokens around, but I mean building infrastructure and spending rivalrous resources that we can't get back. There’s GPUs or ASICs or electricity that could have gone to other things in China, but went into mining. There’s the time of talented and intelligent people that could have been building other software products but were instead building crypto. That number is in the tens of billions or hundreds of billions of dollars. What do we have to show for that tens of billions or hundreds of billions of dollars? I am very crypto skeptical and I could give you an answer to that question. Crypto fans would not like to hear it from me. So I prefer Vitalik Buterin's articulation of this question from 2017. At the time it was $0.5 trillion, a trivial number only $500 billion. He asked, and I'm paraphrasing, "have we truly earned this number? How many of the unbanked have we actually banked? How many distributed applications have a meaningful amount of value doing something which is meaningful?" He has about six other meditations on this. Crypto folks certainly aren't accountable to me. In some manner, you're not even accountable to Vitalik even though he's clearly a leading intellectual in the community. You're accountable to producing positive value in the world. What is the answer to Vitalik in 2024? How many of the unbanked have we truly banked? What is the best use case for crypto right now? Once crypto has a responsive answer that is sized anything like proportionate to the hundreds of billions of dollars resources that we've staked crypto with, then crypto people should feel enormously proud of that accomplishment. In some future where that hypothetically arrives, you have my sword. I will love your initiative. However, for the last many years we have been saying you can still get in early. You can still get in early because the value has not arrived yet. That is my capsule summary on crypto 14 years in. We've staked a group of talented people who are very good at giving a sales pitch, with tens or hundreds of billions of dollars and look at what we have built. This would be a failure in any other tech company, a capital-F failure. Either radically pivot and unfail it or maybe we should stop continuing to stake you with money. Here are two potential responses from the crypto optimistic perspective. I have some people who help me with the podcast who are around the world. I have a clip editor in Argentina. I have a shorts editor in Sri Lanka. I asked them, “how should I pay you?” I haven't prompted them and they say USDC. Maybe it wouldn't be that much harder for them to set up a Wise account, but it's notable that their first answer is a stablecoin.…

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