Today, I am happy to welcome Timer Kuran to the Network CA
podcast and Professor Kuran is author of Private Truths, Public
Lies, and I've cited him many times over the years for people
who want to understand the 2016 election, people who want to
understand distributed consensus, Sudan's consensus to
understand the the fall of the Soviet Union, to been a fan for
a long time. And you know, that's how I came
across Professor Kuran's account.
And then I was tickled to see he followed me on X and I wonder
how you came across my accounts. I don't think I've asked you
this. I came across your account
because people I follow and forwarded your very interesting
tweets and I can't remember exactly what they were, but this
was when I it's must have been around 2017 or 18, as soon after
I joined Twitter and that's how we discovered you.
Excellent. Well, so you know, I, I want you
to give a quick, we can talk about the kinds of things, you
know, topics you're interested in.
I'm always interested in like how people are interested in
each other's intellectual currents because I, I do talk a
lot about tech, but I talk a lot about politics and, you know,
the future and history and, and pieces like that.
So there may be strands that that appeal to you or what have
you. I wanted to go through your work
though, because I think private truths, public lies is something
which has just started to break down in the US, not just started
like last six months or so. We've seen an enormous
preference cascade and maybe you can describe summarize the book
and and talk about what motivated it and and then how
how you apply it in other places.
Certainly. Well, let me start with the
definition of preference falsification.
It's the misrepresentation of 1's wants under perceived social
pressures. It involves of course, self
censorship, hiding one's actual preference from the from the
public. But also, and this is very
important, the second component is extremely important.
It involves pretending to like someone, something that one
actually dislikes. And 11 engages in preference
falsification to avoid social sanctions, to avoid ostracism,
to avoid being called names, to avoid being associated with
disreputable groups, to win favours.
Now there are many negative consequences that preference
falsification has. One of it is one is that it
distorts collective decisions. Let's imagine a department, an
academic department, that is trying to decide whether to
continue using standardized tests in admitting PhD students.
Now thousands of departments across the United States that
faced exactly this question, this issue, because there were
people who argued that standardized tests discriminate
against marginalized communities.
So they brought the matter to a department meetings.
Now imagine a department where the majority, even a very clear
majority, a large majority, believes that there's a great
deal of valuable information and standardized tests.
Even if you don't use standardized tests exclusively,
do you look at other things as well?
There's a great deal of valuable information in them.
But these same people are afraid of being labeled as racist, as
misogynist, sensitive, etcetera. And the people who are pushing
hard for eliminating standardized tests are quite
powerful. They may falsify their they may
falsify their preferences and just to avoid the wrath of the
promoters of eliminating standardized tests.
And as a result, the department might eliminate eliminate
standardized tests, even though a clear majority believes is a
bad decision. Now, preference falsification is
accompanied by what I call knowledge falsification, which
is that you in the process of trying to project to the public
a preference that you don't actually, that you don't
actually have. You conceal what you know, and
you pretend that claims made by others that you believe to be
false are actually true. So in the process you distort
knowledge. If you are pretending that if if
you believe that standardized tests are valuable, but you're
pretending that they're not, you cannot publicly talk about all
the virtues of standardized testing.
You have to say things to be convincing you to the people who
want to eliminate standardized tests or want to want to want to
retain, want to prevent their reinstatement.
You have to pretend that you accept all the arguments made by
the opponents of standardized tests.
So one thing that I remember, you know, from your book that I
thought was interesting was, you know, in my in my head, I was
comparing it to a method actor. Because sometimes these people
who are forced to mouth all of these falsehoods from long
enough time find themselves quasi believing the falsehood or
rationalizing it to themselves. And the external lie sort of
shapes the internal narrative, at least partially.
It does. I mean, there are some people
who actually come to believe their lies preference
falsification in in a wide array of contexts.
It's becoming habitual. It's like the Vaclav Havel thing
about workers of the world. Unite, right?
Yes, and they start they, they, they get used to the notion that
whatever slogans they're supposed to parrot, they they
will just parrot them. They know it's futile to to
question them, to inquire into their veracity, whether they
mean anything. So they simply accept the world
view that is presented to them, and they start start believing
them. That's a very shallow belief,
though. It can be because it doesn't
have much depth, because it doesn't involve actual evidence,
because it doesn't involve a study of the mechanisms that
might be driving certain, certain outcomes.
It's quite, quite shallow. So it's it's actually, it can
be, it can be changed quite rapidly.
But you're absolutely right that that, that some people will come
to believe the slogans that they are they are parroting.
At the same time, there are people that will there are
people in in society. This was certainly the case in
Eastern Europe before the fall of the Berlin Wall.
There were people who did not believe the the lies that they
were being told. They did not believe that
central planning was was provided a better economic
system than a market based economy and but they had to
conceal their knowledge or many of them concealed their their
knowledge. The reasons they believed that
market system would be more efficient and they had to, they
had to in order to advance at at work, in order to be retain
acceptance in their communities, they have to pretend to accept
the party's ideology. So that process distorts public
knowledge, and it affects what affects the ability of others to
see the world correctly. Couple of things on that.
I think a lot of people, not certainly not you, but many
people don't understand just how crazy, crazily taboo capitalism
was in communist countries. Like in Maoist China, you know,
people were executed for, you know, having some grain held
back rather than throwing it all into the common pool.
The Xiao Gang thing, which may be apocryphal about the
villagers who asked do I own the teeth in your head?
And they said, no, the teeth in your head belonged to the
collective. And they signed a contract
amongst themselves and hid it in the roof of the of a Hut.
Because, you know, the the split of property and private property
rights were so taboo that these were capitalist running dogs and
reactionary. So like capitalism was
punishable by death, right? And part of what justified that
is that so much blood had been spilled, you know, against the
evil capitalists. What, you want to let them back
in these selfish, crazy capitalists?
Are you a traitor? So it got mixed up with
nationalism and you had this crazy level of taboo again,
something that we don't think of as being taboo.
And then another piece of it is in the in like the Soviet Union
especially. And, you know, I'm less familiar
with exactly how to play on in China, but there are only two
kinds of people who are capitalists, which were a, these
sort of intellectuals who could see beyond their own society and
whisper about it in psalms dot literature and so on and so
forth. And then B, the black marketeer
would cut you for a tomato. And who live down to all of the
regime's stereotypes about capitalism, right?
And because they were selfish, they were greedy, they were
fraudulent. They, they were, they just cared
about money. They didn't care about the
people and so, so forth. So it's a little bit like the,
you know, if guns are outlawed, only outlaws have guns kind of
thing, where if truths are outlawed, only outlaws have
truths. And that's a secondary effect of
the, you know, public lies, private truths kind of thing,
right? Because it pushes the truth to
the margins. And the people who voice them
tend to be either intellectual or disreputable.
I'd love to know your thoughts on that.
Yeah, No, no, this is, this is, this is absolutely true, but
also makes it, let's pursue your, your example.
Under central planning, even even the heads of enterprises
that were, that were given quotas to fulfill, quote
production quotas to fulfill their quotas, they had to use
black markets. So they all knew that these
markets work. They all had personal knowledge
that these free markets worked. They pretended the many, many
communist leaders pretended that they were implementing central
planning when they knew very well that the only way to
approximate their their goals involved using.
Shadow prices. Quasi capitalism.
Exactly that shadow process is so and that all this was going
on, but they maintained a facade of commitment to simplifying
students were were taught in in in schools and in universities.
They were they were taught that central planning works and it's
it's so much more ethical. It's so more efficient than than
capitalism, yes. It's similar to in the US system
using your university diploma as a proxy, socially acceptable
proxy for like IQ or SAT scores or something like that, sort of
like a proxy score, like a shadow price, right?
And the because, you know, the College Board and SAT tests are
colleges can administer them, but private employers couldn't
for a long time. But one one thought I have is so
I you know, you know, you're mathematical enough person to
you know, you know the difference between a vector and
a scalar, I assume. OK, so one thought that I've
had, which kind of builds off of your point just now about these
individual administrators. They knew that the system was
broken. One thing I observed, especially
during the Biden administration was, you know, obviously people
were lying about Biden being senile, but they were also
faking employment statistics and they were faking inflation
stats. And they're faking these
different things in ways that they themselves.
Like for example, Larry Summers put out a post said something
like if you included shelter and like the, the rise in cost of
loans and other kinds of things, actual inflation rates like in
double digits or something along those lines, right.
So he was, he was somebody who was expert enough to understand
how this particular agency was faking their particular thing.
And then David Sacks and I looked at some like employment
data and we're like, why is it beating expectations so many
months in a row? This is like kind of weird.
And it keeps getting revised downward afterwards.
And now there's like some revelation that, oh, actually it
was fake after all. And of course.
But so the point is, though, that each of these kind of
administrators was putting a thumb on the scales or faking
things or whatever you want to call it in a way that it would
be hard to figure out how they were doing it unless you had
some domain expertise there. But then they were also seeing
everybody else's fake numbers as if they were real, right?
So you have like 50 piece of fake information out there and
from 49 of them you have no internal information on how it's
being faked. For the 50th one, that
administrator is faking it. So they think maybe the system
is OK and then like it's only their piece, which is a little,
you know, questionable or something like that.
So they can't build an overall system map of how it's broken.
Let me know your thoughts on that.
Actually, there were many people who did sense that the entire
system was increasingly built on lies.
And that is one of the reasons why Trump, who is a very flawed
man in in many respects, received, has received so much
support in several 3 elections in a row, winning, winning two
of them. Because many people outside of
the Washington bubble, outside of the centers of major
influence of major power in the United States, they have sensed
that it's not just one number that is fake, that there are
many, many numbers that are fake.
And they can imagine, they can imagine that if the if the press
is has been systematically hiding the the explanation for
Kovid, if it, if it, if it refused to for a long time allow
genuine debate on on Kovic. It must be happening in in a lot
of other areas, so. I want to I want to show you
something that may get your reaction to this.
So you know, this is a post I wrote.
It's about two years ago, too fake to tell, you know, like too
big to fail, right. So because you know, Sax and I,
you know, Saxon made this off and tweet hard jobs for today.
I don't know where they're finding all these jobs.
All I see are layoffs. And it got four and a half
million views. So clearly like this just struck
a nerve because nobody they wouldn't have gotten so mad if
it didn't hadn't actually been like fake in some way, right?
And so, you know, and, and trust in media as you, you know, as we
were just talking about half of Americans now I believe news
organizations literally mislead them.
But it's one thing to kind of have an overall suspicion and
then it's like another thing to have a specific suspicion.
And one of the things that I was just doing, so I was thinking
about a bunch of issues where it's clear the information was
false. And there's a, there's a whole
spectrum between like, you know, maliciously faked and, you know,
true. And some of them include like
Bernanke talking about the great moderation, how it means to
retain macroeconomic volatility before the finance crisis.
That was just like, you know, incorrect, right?
Because obviously, you know, volatility was coming back with
a vengeance. Cheney saying deficits don't
matter. Bush and Clinton blew up the
mortgage bubble. Bernanke saying we might see a
mild recession. The ratings agency in 2008
called subprime mortgage AAA before the collapse global
economy S&P got retaliated against for down grading things.
So this is a really interesting one where the guys who put out
true information where they're down grading U.S. debt, they got
retaliated against right then Bernanke said QE is a money
printing. Powell saying it was Greenspan
saying the US can never default because it could just print
money erroneous projections of unemployment rates.
So this is like this scrap that I don't remember from almost 10
years ago that showed. By the way, I didn't know that
unemployment rates and growth rates were systematically being
tampered with, but the But that information reminded me of a
thesis that was written under my supervision a number of years
ago by a Chinese student who studied Chinese growth numbers
and official growth numbers that are issued quarterly.
And what she found was a systematic pattern whereby the
numbers were inflated when they were announced and before the
next quarterly announcement. The previous quarters numbers
were systematically reduced. Yeah, exactly.
Making the new number new exaggerated number look even
better. Yeah, exactly so.
Path that this was so the grass systematic process, yeah.
So This Is Us had a few jobs, fewer jobs past your initially
reported 2024 admission and now 2025 just a few months ago now
that the new admin is there. And of course the, you know,
other people would say that these guys are, you know, but
the Biden administration claimed to have added 400K jobs from
July through September in order to win re election.
New data suggests none of those jobs ever existed.
The overestimate number of jobs. And so point is that there's
basically a very severe dispute over, of course, Trump in his
own way has a reality TV of many things in particular like, you
know. A lot of the stuff around trade
and tariffs and so on and so forth is, is incorrect.
But anyway, my point, here's my, my thinking on this.
And I'd love your thoughts because this gets, I think, a
deep overlap of, of where we think about things.
So if you go through all these things, all these different
economic stats, that's 20 years of economic fakery.
But it's not all just lies. Some of it is error.
Some of it is very material revision.
Some of it is spin, like quantitative easing isn't
printing debt ceiling doesn't matter, It was tribalism.
Some of it's like pseudoscience. The a mortgage-backed securities
arguably outright flawed, and then transitory inflation in
2021 was all of the above. It was error, it was revision,
it was spin, it was tribalism, it was pseudoscience.
And eventually it was outright fraud because everybody who
bought treasuries in 2021 bought them on the false pretense that
rates were going to be low forever.
And they weren't, They were hiked radically in the next few
months, right? So the, the reason I say this is
when you have the centralized authority that you, you have
some local information and you can compare it to what the
centralized authorities putting out and you can see that based
on your local information, it doesn't match up with what
they're saying, right? You know you're mugged by
reality, but what are you going to believe them or your lying
eyes, right? You've got local sensor data,
right? You can DIF it and you can say
that centralized authority is false.
And I know what is true in this local area, right?
But you it's hard to form a system perspective because can
they actually truly be lying about everything?
Well, are they lying about whether it rained in Panama like
The Weather Channel or something like that?
Can you really go and check that for yourself?
Can they be lying about everything?
Now you need to have some decision rule to figure out what
is true and what is false. And that's really expensive
because it's essentially reinventing the centralized
institution again. And that leads to the, you know,
you know, the concept of Gentleman Amnesia by Michael
Kreiden. No.
OK, so he has this concept which is which you'll like.
He basically says, you know, there's this great physicist
that he, Murray gentleman, famous noble, noble laureate and
basically Michael Kreiden said, if when you go and you read the
paper on any subject, you know, they reverse cause and effect,
they get everything wrong. You know, they're just like,
they just just get it wrong. And because you have local
knowledge and then you flip the page and you read about Japan or
you read about steel and you forget that they just completely
messed up the area that, you know, you read those other
stories and you have amnesia. And, and his friend called it
Gelman amnesia, where any time they wrote a story about
physics, Marty Gelman would find out all the errors and so on
about it. Then he'd flip the page to read
about Japan or Korea as if it was true, right.
And the way I think about this is if you imagine, let's say the
New York Times or legacy media as like or the US government is
like a centralized institution, a hub in the center, right?
Then you're a spoke over here and you, you have, let's say,
local knowledge on, on Duke, on academia, right?
And I might have local knowledge on biotech and somebody else's
local knowledge on Japan or something like that.
But how is the Japanese person supposed to know about what's
happening at Duke better than NYT?
He would just go to NYT to figure out that information
because he couldn't talk to you directly until social media.
And now we can route around, right?
Go ahead. Well, social media then changes
things because you get influencers and you you have
influencers that you trust and you trust them because people
you you you trust are following them are are re retweeting them.
And when you yourself follow them, you find out that
generally what they say turns out to be turns out to be true
or. Or at least at least it comports
with one's worldview even, right?
And then, then the tricky part though is of course, social
media itself is not a panacea because you have, you have lots
of people who are posting fake stuff on social media just for
clout or what have you, right? And so eventually what I came to
the conclusion on is that, you know, the thing about Bitcoin,
the thing about cryptocurrency and one of the reasons, like I
was interested in your work beforehand, but then I matched
it up with my interest in in cryptocurrency is have you heard
that there's a, there's a great book on Bitcoin?
Just the title alone, it's actually pretty good.
It's called the truth Machine. OK.
And and the reason is that. I read it no.
OK, right. So you heard of it.
So The thing is, whether you're Democrat or Republican, Indian
or Pakistani, Chinese, Japanese, you know, British or French,
everybody agrees on who holds what amount of Bitcoin, which is
this incredible thing to have consensus on.
Not a trivial truth, a trillion dollar truth, a $2 trillion
truth, right? People will fight, you know,
over $1,000,000, a billion dollars, a little on trillions
of dollars. And the same algorithms that
allowed us to get consensus because they made it very
expensive, extremely expensive and challenging to fake the
state of the Bitcoin blockchain. The same algorithms can get you
consensus not just over who owns what Bitcoin, but who holds what
amount of stocks, what amount of bonds, what amount of any kind
of property. And that actually then extends
and this is something you may not be aware of.
It extends off chain because have you ever used a smart lock?
You know, smart lock like for a door.
Yes, I have, yeah. Like like a lock that you can
open with your phone, for example, right or anything but a
key card at a hotel, yes. So the the same technology
that's used to secure electronic, you know, like like
digital stuff on chain can be used to digitally unlock and
lock doors, right. So that means that all capital
equipment, all property, every, every door to a room, every door
to a train, a car, a tank, a plane, every everything that
makes a drone fly or a robot animate everything that every
machine in a factory, every camera, all of that can actually
also be gated by cryptography the same crypto as as as
Bitcoin. It doesn't, to be clear, it
doesn't cover the shirt on your back, doesn't cover the food on
your plate. OK, there's still, you know,
personal property that it wouldn't cover.
What that means is we can get to consensus on who owns what piece
of property for all capital equipment and all capital.
And we can actually extend it further because these are like
armored cars for information. So when people are trading on,
for example, temperature data, right, there's oracles that sort
of take the temperature data to the blockchain and then you have
smart contracts on that basis, like you can do insurance
contracts on that basis. So this to me struck me as
something where it has implications for how we like fix
a society that's been affected by public lives for a long time.
We develop shadow statistics on inflation, on temperature, on
this, on that. We make them tradable one at a
time on chain. We have contracts on the basis
we allow them to be posted synonymously.
There's very script graphic techniques that allow you to do
that. And then we eventually start
getting a picture of what is actually true and false in
society by kind of editing around the edges, right.
And we started with really the monetary system, which should be
the most valuable piece. And then we can extend that to
other kinds of facts. So I know that's maybe a little
technical, but that is how I, I've been thinking about, you
know, you, you pose a problem, which is a recurrence of this
public lies kind of thing that cause the dysfunction, the
centralized organs society. And here's a potential solution,
which is decentralized cryptographic truth.
Let me pause there. Talking about a method for for
extracting information, extracting true information in a
context where people have incentives to lie, to falsify,
right. So I'm I'm not really familiar
with the with the methods that you have suggested, but perhaps
I I can talk about other methods.
Like Bayesian truth ceramic. Similar methods that are used to
predict to measure private opinion in an environment where
private opinion the distribution of private preferences differs
from public opinion, which is the distribution of public
preferences. So talk about that, I'm very
interested. Go ahead.
If there's a lot of preference of of falsification, you know
these two are going to going to differ dramatically.
Now, one way of the that scholars have abused is the
ethnographic studies. Jim Scott, who died recently,
the Yale political scientist he was, he was an expert at this.
He wrote a book called Weapons of the Week, which and and to
collect his data. He just lived among rural Malays
to to develop their trust, to have them reveal their their
secrets. And he discovered that all sorts
of things that they told the state, that they told the tax
collectors and so on were not, were not true.
And so that's that's one way. And that and many of their,
their, the preferences that they projected publicly to and to
authorities, the people outside of their immediate circle were
not were not. So that's one thing you can do
and also conduct surveys that offer anonymity in very
repressive climates. These of course, let me go back
to ethnographic studies, of course, that's it.
It's very expensive to to do. It's very time incentive in time
intensive surveys that offer anonymity in repressive
environments. It's difficult to be convincing.
Yes, so, so so I mean, the thing about it is.
Go ahead. Yeah, repressive regimes know
that there's a great deal of preference falsification and
knowledge falsification because of their repression and they but
they have an interest in knowing where the truth, sentiment,
opposition are, what the what the truth is.
So they all all offer anonymity to censor certain groups to.
So, so basically I don't know this.
So they actually do their own private polling.
Yes they do their their own private polling.
This was this was done in all communist in Eastern Europe.
The Soviets did this in I. Did not do that.
They they did this in. How do they, how do they conduct
that? Was it like how many thought
criminals are there in your district?
Do you estimate, comrade? Do they do it like an
indirectness thing so that the person who said I think there's
lots of saboteurs here could be off the hook or they literally
ask it directly with an anonymous service?
They they did everything. The one I'm quite familiar with
is the anonymous polling they conducted in Leipzig for for
over 40 years now. How they convinced in the 1950s,
how they convinced a group of students, college students at at
Leipzig to believe that the that the check marks they were going
to they they put on pieces of paper that did not include their
their names. How that these would not be used
somehow to to punish them if they were giving the wrong
answers, I don't know. But once the system got got
established and students it at Leipzig learned that there were
no reprisals, they this information became valuable and
the information not that there was no preference falsification
at all in these surveys, but over time changes were were
meaningful. So that's interesting.
So, so, so when the time series approach where they can at least
detect trends up and down, you know, if they weren't sure about
the absolute level. Yes, they, they could, they
could detect these trends and they, they leading up to 1985 to
89, you see a dramatic increase in, in opposition to the
Communist Party in, in the belief that communism was not an
efficient system, that dramatic reforms were needed.
So the, the communist leaders were aware that there was
growing discontent in the, in the population.
So that's one thing you can do. Of course, it's very difficult
to to establish as a system and develop the trust of a a certain
community. Google searches are it can be
revealing. People often will if there's
there might be no public enthusiasm for a particular
candidate. But Google searches can can
reveal that there's actually a lot of enthusiasm, hidden
enthusiasm for for a candidate. There's social circle of
appalling this. This involves asking people not
about their own preferences, but the preferences of people in
their of their the preferences of their acquaintances or in
their in their communities. Yes.
That's so that's, so I'm feeling with Bayesian truth serum, which
is 1 variant on this and this also kind of relevant to
prediction markets. But basically I think this is a
patented technique or something like that.
But there's, there's like maybe some unpatented version of it's
coming on patent. But the idea was very similar to
what you just said, which is you ask people, let's say, for
example, let's say drug use like marijuana or something.
You ask people straight up, do they use marijuana?
And then you also give them an incentive of guessing what
percentage of people actually use marijuana in the population.
And the closer they are, the the more money they get.
And it's like drops off symmetrically or whatever on
either side. So if it's like.
You reward them partly for how well they can predict the actual
distribution. Yes, that's exactly that's
right. So, and under certain
assumptions, of course, your people have to be smart enough
to know that they can go by predicting the distribution.
They're off the hook themselves, right?
Because they're just, you know, trying to predict all those
other people are misbehaving, right?
So this is similar to prediction markets where you are, you know,
trying to estimate whether something is going to happen or
not. And sometimes a prediction
market is really like a verification market where you're
trying to see whether sentiment will, you know, hit a particular
range, you know, and you know, I, I think a lot of your
concepts are good things for people in crypto to think about.
Actually, there's another piece because your other set of books
on Islamic finance, I often think about that with respect to
Bitcoin maximalism. Do you know what Bitcoin
maximalism is? No.
Basically, you know, Islamic finance wants no debt, right?
And you know, actually, you know, Christianity also, no.
Interest based steps. Sorry, sorry, no interest based
debt, Correct. You're right.
I remember precise Christianity also had prohibitions on usury,
on high debt rates. And you know, the the Soviet
Union had prohibitions on a different economic thing, which
is profit and what Bitcoin maximalism is.
It basically says Bitcoin is the only coin, there should be no
other coins. It essentially has a prohibition
on, let's call it equity issuance, right?
The any, any, any new coin which is created is sort of taboo in
the same way that interest was under Christianity or Islam and
profit was under communism and issuance of new assets is under
Bitcoin maximalism. And there's a similar sense in
which it has a somewhat distorting effect on the
economy, which is to say that Bitcoin maximalism is so anti
finance that it's very hard to do decentralized finance on the
Bitcoin blockchain. So it's moved to other chains
like Ethereum and Solana. Now one of the pros of this is
that they basically think everything outside of Bitcoin is
a scam. And so they're OK with
everything that is not Bitcoin being pushed off of the Bitcoin
chain. They want a very simple economy.
They want gold and only that. They don't want to need tricks.
They want it to be simple. And this is actually, I would
argue in part also related to our previous point, which is
it's a reaction against, let's say, an administration with all
the lies of the Soviet Union or made the Biden administration or
all the past kind of things. There's a tribal reaction to
that, which is just mass distrust in the centralized
power and just wants total simplicity, total verifiability,
what I can touch and feel with my hands.
But that also means less civilizational complexity, maybe
a dark ages or less economic scale because there's no trust
anymore. Everybody goes back to what they
can touch and feel with their hands, sort of a tribal kind of
order, right? So there.
So almost like phase one is publicized private truths and
Phase 2 is this extremely simple financial system like Bitcoin
maximalism or post Soviet economics, where there's such
low trust that scale is inhibited.
Let me know your thoughts. Scale is is inhibited and the
going back to the this Islamic case, the reason the Middle East
fell behind economically is that it could not scale up.
It had economic institutions that were quite well suited to
the Middle Ages when the scale of production, the scale of
commerce was was quite small. Huge problem was when the West
developed the institutions for mass production and mass
communications, mass transportation, etcetera, and it
developed the technologies that would make mass production and
so on and so on profitable. The Middle East found itself at
that point, and the Middle East wasn't the only region in the
world. There were other other places
that as well that had been more advanced economically than than
Europe that found themselves unable to compete through small
scale operations, small scale enterprises with the huge
enterprises backed by a huge amount of capital.
That the that the Europeans were presenting.
So, you know, The thing is, you know, you know more of this
history, you know more of this issue than I do.
But the Abbasids and the Omians did manage fairly large scale,
right? The state, the state did right?
And certainly the modern. You didn't have private
enterprises, large private enterprises.
I see. That's interesting.
So the, that, so, you know, it's, it's some of the
comparative stuff, you know, I've, I've been, I need to learn
more about, you know, the basically Middle Eastern
economics and so on and so forth.
Have you, have you seen, have you read Fukuyama's Origins of
Political Order? Yes, I know.
I know. Several of Fukuyama's books,
yeah. OK, so there's one thing in that
that stuck with me and I'm going to just paraphrase and, you
know, like like summarize a very big and complicated thing.
And something that stuck to me was kind of the concept of, and
maybe we can relate this to the Europe and Middle Eastern thing.
In China, you have the state above the law.
And in India, for many, you know, many centuries, you had
the law above the state. And what that meant was in
China, they took the pragmatic attitude that was kind of
actually in a sense pragmatic or, or unlimited a government,
whatever you want to call it that like your chair could just
turn into a CCP agent or an agent of the emperor if if the
state so desired. Because what could really hold
back the state law is just a piece of paper, but the state
has, you know, the guns, it has the troops, it has the people.
And so really it just has root access to everything.
And so state above law is a strong state, weak law.
In India, it was the opposite where the kings were actually
relatively weak because Dharma, they believed in Dharma and
karma. And so somebody could quote the
Vedas or the scriptures against them and they would be like, OK,
I don't want to, you know, not be reincarnated.
I'm going to step lightly. And Dharmic law, you know, was,
was actually pretty strong, right?
But the state was relatively weak.
And I think about that also in the modern context in some ways
in terms of China versus crypto, where the modern China is strong
state weak law, where XI can just order lockdowns or seize
funds, take Jack Moss companies and so on so forth.
But the Internet is sort of law above state.
We have Bitcoin, you have cryptocurrency and that can
constrain states. And if they want to seize your
funds, they can't, right? You now move from people's
belief in reincarnation, which is a human belief, something
that's harder than that, which is like their inability to, you
know, solve certain kinds of math problems to take the money
on chain. And and then the kind of
European and Middle Eastern world are yet different kinds of
structures, right? Where Europe you can argue the
law equal the state for a long time, you know, rather than the
state above law or law equal state that you know that they
were arguably they were considered connected and in the
Middle East. Maybe you can give some remarks
on that. I think like my very rough
impression is see, there's been various stages absent that you
may have. It's also before the modern era,
you didn't have as much fundamentalist Islam and that
like the whole say Kitab Wahhabi as thing is actually a late 20th
century phenomenon because Mubarak and others right were
very secular and they laughed at the idea that everybody was
going to be veiled that they laughed at the idea of the tar
hub is going to be a big thing. But then yet again, you have now
today Riyadh and, and the UAE are actually very modern,
despite having people in traditional dress and so on.
So I don't pretend to fully understand the full Middle East.
I'm actually pretty bullish on it in recent years because
there's been a lot of pro tech pro, you know, pro capitalist
sentiment there. There's Kareem and other kinds
of things. Maybe you can help give me a
lens because, you know, I spend more time there.
I spend more time in Dubai and I'm, you know, I'm, I'm bullish
on the region, but I, but I, I don't know everything about it.
So, you know, maybe you've got some thoughts.
So I happen to be also optimistic with regard to the
long run. The last book I wrote on the on
the subjects called Freedoms Delayed, not Freedoms Denied.
I believe that the the institutions necessary for the
Middle East to achieve the right balance between the power of the
state and power of our society, that that potential is is there.
I don't think there's any quick fix.
I don't think that in in a region where you don't have a
single democracy at the moment for where religious freedoms are
quite, quite weak, I don't think that we're going to see a
Jeffersonian democracy anytime soon.
I think that the the region is is quite troubled at the moment.
But I do agree with you that that the region is not
completely a basket case. It's not hopeless.
It's not condemned for forever to very repressive, very
repressive regimes and it will not it would not remain forever
economically underdeveloped. Let me point out it just taking
off from some of the points you made the during the Umayyad and
Abbasid times, roughly the 8th century to the 13th century, the
Middle East had strong states in the sense that that salt they
had strong say states in a, in a, in a, in this, in this sense
that they could deny property rights.
OK, they could, if the Sultan, if the Sultan wants to
expropriate something, was powerful enough to to do that.
They were able to. Their ability to tax was far
greater than than the taxation capacity of European countries.
In that sense they were, they were strong.
They were shallow states in the sense that they did not provide
many social services. Social services were were
provided by through private non government organizations that we
can get get into that if you if you want.
What is the the big problem in in the Middle East in in with
regard to modernization was apart from the fact that it
couldn't scale up in commerce and production is that it's
civil society didn't develop you didn't get a value didn't get
pressures from below that that constrained the state.
This is what Europe? No Magna Carta esque
development. No Magna Carta esque
developments over a long period. And it wasn't just the, the
Magna Carta, it was overtime you had merchants got organized,
gills got organized, various religions got, got organized.
And they started putting pressure on the, the state.
They, they, they obtained seats at, at society's bargaining
table. And that's the rise of the rise
of parliaments and the, and the, the seats given to to merchants
and so on. That is, that is a process that
takes 1000 years. And we don't see a counterpart
of that in in the Middle East until the the 19th century.
Yeah. So it's interesting because
basically the, you know, you're of Turkish descent, right?
And so like that, you know, that whole area, that's where the
Byzantine concept of Byzantine politics and so on comes from,
right? But that always struck me as
something where you did have lots of groups maneuvering
against each other, but you would not call that civil
society. You would consider that
something different. Or am I, you know?
Mistaken you had you had conflicts among elites.
But as distinct from civil society.
Distinct from civil society, there there was constant angling
among the elites, people in the sultan's circle for for better
position people, you know, there was a lot of backstabbing going
on. There was, there was constant
renegotiation among among elites, but you didn't have you
didn't have groups from below gain again a place at the
bargaining table. They were never part of the
negotiations. I see.
That's interesting. Even the reforms of that started
in Egypt and Turkey in the in the 19th century that came from
above. It's, it's interesting because
I, I have to, I have to kind of sit and think about that for a
bit because, you know, there's like 1 school of thought that
says, you know, change comes from the masses, another school
of thought that says it's actually always just elite
versus counter elite. There's a third school of
thought that says if you become a leader of the masses, then you
are almost by definition a counter elite.
And you know, so on and so forth.
Right. And so I'm not disagreeing with
you. I'm just, I'm just, you know, I
have to, I have to think about that for a little bit.
The I think the other thing is in your definition of civil
society there that there's sort of a positive reason for, let's
say, merchants to group together that didn't necessarily have a
necessarily political reason like farmers or what have you.
They could, they could be building together, you know,
they could be trading together and so and so forth, and they'd
get to know each other socially. Building their capital and
labor. Yeah, exactly.
So, so, so they had, they had some organic reason to be
together that wasn't just fighting the government or
whatever, right. And so because of that, there
was like, you know, they, they actually, we're not simply
always part of the power struggle there.
They were also part of, they were like a organic structure
that emerged just by its own. Maybe that's maybe that's a
useful distinction. You know, one thing actually,
maybe you can say something. I know there's a digression as
well. But modern Turkey, I don't fully
understand it because on the one hand, it has these crazy rates
of inflation in their hand. Like, you know, whenever I fly
through Ankara or something like that seems pretty nice.
And you know, like when I'm going around Turkey, it's like,
at least the Istanbul area seems pretty nice and they've got the
bear actor drones and so on and so forth.
And so I can't really, I'm just rationally ignorant about Turkey
because I don't understand it. But maybe you have some thoughts
on it? This this connects with a point
I made earlier that there is is a huge potential in the Middle
East. Turkey is right now, Turkey
right now has an authoritarian system, but as a very dynamic
economy and it has large groups of people who are quite
alienated from the system. And when I say the system, it's
not just the political system and the the party in power,
Adwan's party, but also the the dominant religion, which is
Islam. Islam has not had a liberal
schism. All of the schisms that have
taken place in in Islam over the past 200 years have been have
been radical schisms. Groups.
ISIS's is an example of Qaeda is another example.
The Muslim Brotherhood is another example.
They are groups that that oppose the oppose the mainstream
variant of Islam in a particular geographic area for being too
relaxed and they they want to they they promote a more
puritanical, stricter form of Islam, of course.
Can I argue, can I argue with you a little bit without,
without risk, Yes. So there, you know, you can, one
thought is that the, there's, there's Sunni Islam, Shiite
Islam, and then socialist Islam, right?
In the sense of wokeness. The woke version of Islam is in
a sense of liberalizing. You could in some sense
radicalize, in some sense liberalizing.
But it's to the left on some dimensions of Sunni Islam #1
arguably it's with them on other kinds of things.
So it's almost like a third school, right?
That hasn't been kind of thought of.
Except that it's not organized. You don't have.
You don't. Have Protestantism.
But Protestantism has, you know, is organized.
There are hundreds of Protestant churches.
They all have, have their, they all own, they all own property,
they have legal standing and so on.
You don't have a recognized liberal Islam or OK when I'll
say woke Islam, Yes. Yeah, so, so let me give a
fourth. So let's say Sunni Islam, Shiite
Islam, socialist Islam, or woke Islam.
And then the 4th, which is secular Islam, which I know
sounds oxymoronic, but I, when I'm in the Middle East, I see a
lot of people there, especially in Dubai and, and increasingly
Riyadh, who are, maybe they're in, you know, traditional
attire, but they're very sophisticated tech, finance
capitalist people, men and women.
And they have great conferences And they are like, I don't get
any sense of like they're, they're exactly like the, you
know, Arab and Muslim people that I've worked with in tech
outside the Middle East, right. And so like, that's, that's very
different than I think Saudi was pre MBS.
And you know, I don't know, I don't have enough track record
or net record. I, I don't have enough game film
on what Dubai was like 20 years ago.
But it basically feels like like San Francisco, honestly, in
terms of or like what San Francisco used to be in terms of
being plural and pro tech. And you know, they still have
the cult of prayer and so on and so forth.
And they still have traditional dress.
Go ahead. Yeah, yeah, yeah.
No. One of the things that has
happened in the Middle East, and this is happening below the
radar screen of of most people, is that religiosity is declining
dramatically. That's exactly what I'm saying.
So I'm. Not would you?
Yes. Reforms didn't occur out of the
blue. They're not happening just
because, you know, he's trying to push society.
He sees the trends. He sees that youth are less
religious. He sees that people are fed up
with with the Wahhabis they are wealthy enough to have access to
in information coming from outside of Saudi Arabia.
They're all out on social media and so on.
He is extremely clever. He's trying to get ahead, get
ahead of the the curve and be the the leader of the
modernizers in. Turkey religiosity is that is
that was that a backlash to ISIS and the craziness or is it like.
Backlash to Wahhabism and it's and it's a consequence of higher
education which has happened in Saudi Arabia the literacy rate a
century ago was less than 1% and now there's universal literacy
women go to a school in fact more women I I believe this is
true for Saudi Arabia as well are in are in college than than
men and they are this is making and making a difference and you
have you have a growing number of atheists and deists in places
like Saudi Arabia. The numbers are huge in in
Turkey we're talking about 20 thirty 40% who are nominally
Muslims still but they don't actually consider themselves
Muslims. They don't believe in organized
Islam. Iran is another case in point.
Religiosity is is falling dramatically.
And this is I, I think the this is what creates a huge potential
for change, including change in interpreting the religion.
Now, this is not to say that. Yeah, please.
Yeah, there's going to see. Well, the reason I ask is
there's a there's an interesting quote from a a senior person in
Dubai, right on. Like let me see if I can play it
for you. Yeah.
So this Sheikh Abdullah bin Sayed right?
Done this quote from like a few years ago.
There's so many quotes, you'll have to show it to me, yeah.
Yeah, it's, it's a very good quote where he basically said
that Europe is going to produce way more fundamentalist than the
Middle East because they they get it right like that, say the
Middle East actually understands it and so and so forth, right.
You you mean that you mean Muslim fundamentalists in
Europe? Is that what he's?
Yes, that's. What?
That's what he was saying. So here, let me let me show you
this. Let me paste this on.
Let me see if I can. I'm not sure if this will if you
just play that video. And and let me say this in
English so you can understand what I'm saying.
I have translation. No, I know you have translation,
but I just want to make sure you get it right.
There will come a day that we will see far more radical
extremists and terrorists coming out of Europe because of the
lack of decision making, trying to be politically correct or
assuming that they know the Middle East and they know Islam
and they know the others far better than we do.
And I'm I'm sorry, but that's pure ignorance.
So can you hear me? Yes, Did you see that?
Yes, yes, no, I I did, I did see it.
I, I, it won't surprise me if a lot of fundamentalists emerge in
Europe at the same time, there are a lot of Muslims in in
Europe who are quite tolerant, who are, who are not Islamists.
You just don't hear about. So of course, of course, if you
look at the United Kingdom or or the Netherlands or or France,
the ones you hear about are the are the violent ones, are the
ones no. No, I'm totally with you on
that. Cathedral so there there is So
one possible one possibility is for liberal Islam to emerge in
Western Europe or in in North America and then spread to the
Middle East. So that's a part, that's a part
where at least what I'm observing is that you have more
like, for lack of term, tech libertarian, secular, you know,
people in Dubai and Riyadh and, and that seems to, that's like
hugely on the upswing. Anyway.
I, I, I, I throw that out there because I feel that that's
something which is not part of the public perception about the
Middle East that they're doing startups and they're doing tech
and it's not, it's not all war. And and somehow actually maybe
you have a thought on this actually, what was your do do
you think Turkey, as you know, is it doing poorly economically?
Is it doing well? It's very hard for me to say.
By the way, it wasn't on a car that I stopped through.
I think it was Istanbul. Yeah, it makes more sense.
Sorry, I got that wrong. Do you have?
Do you have a view on whether? Istanbul is a big global hub, so
yeah, yeah. Yeah, that's right.
So that's that's. So the Turkey is ahead of the
curve. Expect to many, many Arab
countries because it started reforming its institutions
earlier. It it start started started the
process in the early even early auditor came several generations
after the process started. The process involved involved
abandoning Islamic institutions, which were the basis of the
economy and replacing that and and borrowing European
institutions. This started in the in the 19th
century of Turkey. In Saudi Arabia.
It's the process started in the 1930s.
So you have and and secularism. Saudi Arabia has not had a
period of official secularism was the Middle East was
secularizing in the in the late Ottoman Empire and then it had a
period of assertive and very aggressive and to an extent
repressive secularism in the between 1923 and 1950.
So there is there a lot of there's a lot of experience with
secularism there and secularism has secularism is is second.
The secular period is remembered for for many achievements which
which helps Now the the reason I'm bullish on the economies of
the region is that they have all complete.
They've all moved away from Islamic institutions and adopted
all of the institutions that enable capital accumulation on
large scale, forming of large profit making companies, the
formation of large NGOs that have flexibility.
And if the region starts liberalizing in one area, the
starting point might be religion, it might be
intellectual life, it it might be it might be politics.
Liberalism will will will spread.
And all of the institutions necessary for a liberal order
have already been already been adopted and religious opposition
to them is minimal if not a non existent.
You can. Under classical Islamic law, you
could not establish a corporation.
There's no such thing as a fictitious individual that would
be recognized in in courts. Islamic law.
Classical Islamic law is extremely individualistic.
Only natural individuals are recognized.
That's no longer the case everywhere.
Commerce is conducted under rules that allow enterprises,
large corporations, large corporations, every place you
find stock markets where shares are shared, trade and
everything. These are things that were in
that are incompatible with classical Islamic law.
Well, you know, it's interesting because one, one thing that I
can't shake is the feeling that maybe is different 2530 years
ago, but I have a feeling that the West has become in some ways
more fundamentalist than at least the parts of the Middle
East that I see. And here's why I say that.
I think, for example, what is the modern thing on corporate
law, right? It would be AI agents and AI
personhood and so on and so forth, right?
That would be like the modern updating just like there was
that sort of, you know, kind of use your imagination fiction of
a corporate person. It's less fictional.
An AI that can trade on your behalf, maybe have even have
some liability. It has a crypto wallet, so it
has some bank account. It can be fined even you know
what have you. I have a feeling that there's
going to be strong forces that resist AI personhood in the
West. I can I can feel a developing
anti tech backlash that'll probably happen next year's, but
I I I think there'll be less of that overseas, maybe not
specifically in the Middle East, but it somehow I think it maybe
it's the West is unfortunately declining with the rise of the
Internet, but the the Asia and the east is rising with the
Internet. And so because of that, the West
will correlate the phone and AI and all this kind of stuff to
their decline and the east will not they will correlate it have
the opposite conclusion. I'll be more friendly to these
new constructs. Did did the did the ban on
corporate personnel, was that related to like the ban on
iconography or basically the iconoclasm?
No, this was the concept of a corporation was developed by in
the Roman Empire in the in in what is now was Istanbul
Justinian's codes of the 6th century.
It contained the concept of the corporation.
The West borrowed that concept at a time when states were in
Europe were quite weak in the aftermath of the fall of the
West Roman Empire. Islam arose about a century
later and developed very strong states.
The states state did not want competition from corporations.
What were the communities likely to benefit from the corporation
and gain strength for by incorporating?
They were the old tribes. Islam's Islam is not just the
religion, but it was also a political project.
It tried to replace universal Muslim Brotherhood with
tribalism. And so even though many concepts
were borrowed from Roman law and from Persian law, the concept of
a corporation was deliberately ruled out through by making
Islamic law extremely individualistic.
That was the reason why there's no concept of corporation.
And so the the and and the reason why the concept of the
corporation was not, even though it was always known why it was
not brought into Islamic law. In later centuries after
Europeans started using the corporation for various reasons,
not just to add to organize universities and to make guilds
more efficient, but also to to make commerce more efficient and
finance more into banks were established as corporations.
Starting in the 16th, 17th century, trading companies
started getting organised as corporations.
Why didn't the why didn't Islamic law Islamic law seeing
the advantages of the corporation in the West, why
didn't it undergo reforms at that point?
Well, one of the reasons was that there wasn't much pressure
from below for establishing corporations.
Commerce was what was in the hands of optimistic enterprises
and small enterprises don't see not only small but but short
lived enterprises. They don't see a reason to to
incorporate. There wasn't a constituency that
that demanded the corporation. The corporate corporate laws in
the Middle Middle East arose in the OR or were put in place at
the beginning of the 20th century.
Again, from above by people who understood that unless you gave
society the tools to establish corporations, the Middle East
would would continue to be colonized and it would be ruled
by Europeans. Because our cooperation tools,
that's really interesting they're.
They're tools of cooperation on a large scale.
Yes, that's right. You can't if, if with a small
partnership of 2-3 individuals, you can have the individuals,
you can have all the individuals come to court.
You can't do that with a large scale organization.
You can't have every shareholder holder of Microsoft say if
there's a court case involving Microsoft, you can't have all of
them come to come to court, right?
Right. Right.
Yeah, I understand being able to act on someone else's behalf.
And actually, you know, a meta Organism like a company and, you
know, every single person who was part of Coca-Cola in 1950 is
basically being swapped out and replaced with, in a sense
they're like an immortal person because every cell can be
swapped out. The CEO can be swapped out, but
so can every person. And in theory, you could have a
corporation where every single person swapped out and then they
were swapped back in. If that's ever happened, maybe
you know, so like, I don't know, like a change of control or
something. But the OK in itself lives on.
And I find very interesting this this notion that you could add
that AI can have legal personality.
Legal. Legal.
So, yeah, so this is something that I think a lot about because
you know, somebody like I've talked about this, others, some
people have treated this, but the next step after corporate
personhood and double entry accounting is AI agency and
triple entry accounting, which is what the blockchain is.
Because it's not just the debit and the credit, there's also
universal Ledger that accounts for it.
And AI and and crypto go together because like crypto and
the blockchain, that's the kind of money that's kind of property
that AIS can natively interact with.
Now how you you want to have what they do be bounded, but
could an AI be a corporate secretary?
It probably could. Could it do your books for you?
Probably could Anything that's relatively routine and
straightforward and not exceptionally time or rule
varying. It can't do markets, it can't do
politics yet because there's a very time varying demands, but
the relatively routine kinds of things, it could do that so.
What kind of liability will it have?
I'm sure this is the the. The limit, the liability will be
limited by how much crypto is on it's person on it's AI person,
which is funny. So OK, I want to, I want to just
quickly wrap up. This is actually pretty, pretty
awesome. I think we connected your, your
books to actually cutting edge technology.
We're public lives, prior truths and in terms of preference
falsification and in relating that to not just contemporary
events but also decentralized cryptographic truth and then the
concept of personhood and corporate personhood and how
those held back in some ways kind of leads to yeah plus
crypto and then also other aspects of determining whether
or not people are telling the truth related to prediction
markets. So I recommend your work for
people who are interested in how older social system systems
function and dysfunction and how if you're interested in the
sidle implications of new technologies that there's a lot
to to learn and digest from your work.
And so I've been a big fan for a long time.
So thank you very much, Timur, for coming on the pot.
Well, well, thank you very much for the opportunity and I
greatly enjoyed the the conversation and learned a lot
in in the process. And you mentioned the number of
concepts that I was unfamiliar with and I will go and try to
educate myself about them. Great.
Awesome. Looking forward to it.
And let's talk more. OK, bye.
Bye, take care.