Tyler Cowen: belief

Transcript context

…I want it to be true. I think that it is falser than most people who would say that would give credit for. I know many people liked the musical Hamilton. I also liked the musical Hamilton, but the thing about the character, where he feels like he’s running out of time despite that maybe not being rational, is a struggle I’ve often had. I know, rationally speaking, I have at least 20-plus years in my career left, and also know that there is a level of energy and health that I had access to in my 20s that I no longer have access to. And so, I feel some counterfactual regret as to things that I actually spent that energy and health on, which was running the World of Warcraft III guild and being a Japanese salaryman for many years. I do not think that six years of Japanese salaryman optimized for me learning all things. I think I could have extracted most of the signal from that experience in six weeks to six months and then left, but felt myself socially constrained from doing so. I definitely don’t regret moving to Japan because of the other nonprofessional knock-on effects on my life. But the degree to which my career/impact on the world X personal life X family X raising two wonderful children and being married to a wonderful wife — the degree to which that is enhanced by my level of understanding of business Japanese or ability to function in a Japanese office environment, et cetera, et cetera, seems to be rather limited versus my ability to write well in English. I will say one thing about the experience, is that having a lot of free time on your hands in the evenings and no outlet for English was a great push in the right direction of writing more than most people do in their 20s. The compounding effects of writing more are responsible for both a lot of the good stuff that has happened to me and a lot of the good stuff that I’ve been able to accomplish in the world. Crypto questions. Why hasn’t Tether collapsed yet? We’ve run at it many times. Not too long ago, I think the price fell even to $93, which is dangerously low. It bounced back. It seems they could always redeem. What if it isn’t a fraud? I pre-commit that if it is not a fraud, I should have enormous egg on my face. On the other hand, there exists sufficient evidence on the public record in the CFTC case and et cetera that, at times in the past, it has been an out-and-out fraud that had essentially no backing, and that they had done forensic accounting on it. Their examination period was about 18 months and said that it was less than backed in more than 75 days in the examination period. From one sense, I can claim victory. It’s a fraud. I was saying it was a fraud before it was cool. The government now acknowledges that they did funny things at some point in the past. But I think it should also collapse. It is not just a tinkering-around-the-margins fraud. There is a huge amount of actual criminal activity there. One sort of naive answer is, do we expect frauds to collapse quickly? Probably, no. Madoff was active for 17 or 18 years, and the only thing that actually brought his fraud to light — well, various cognoscenti knew about it — the thing that made it undeniable was being unable to meet redemption requests in the wake of the global financial crisis. Madoff, importantly, did not cause the global financial crisis. Of all the crimes in the world, he was innocent of that one. But people said, “Bernie, you have all this money for me. You alone among all the people I invest my money with have avoided this crisis, which is great because now I need money. Can you wire it to me?” He did not have the money to wire, and that’s how his crimes came to light. To a certain extent, it not collapsing is like . . . the thing that we expect to happen everyday until it collapses catastrophically. The thing that we would expect the collapse to happen with — my dominant narrative — is some form of government action against their reserves that were custodied in some financial institution in New York, followed by the public disclosure of that action, which might not be a total freezing, but enough to start the domino, and then a classic run on the bank, and then the pipes get overwhelmed, yada, yada, yada, and price goes down substantially below $93. In a famous interview on Bloomberg, Tether’s character witness — one Sam Bankman-Fried — said that he believes that it is astoundingly unlikely that Tether is worth, in a true sense, $30, but you could quibble as to whether it’s worth 99 cents or a dollar and a penny. I think there is a material chance it is truly worth something like $30, potentially negative after you add government fines and other actions that happen. I continue to expect that to happen.…

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