All right. Hey there, this is Prom Constant
and you're listening to Bitcoin for Millennials.
Together with my guests on this podcast, I go on a journey to
discover how our current financial system works, why it's
flawed, and why Bitcoin is the most relevant technology that
you should understand. Episode I'm joined by Des B.
He's an electrical engineer by trade who spends his time
thinking at the intersection of Bitcoin and this extra diesel
energy and energy grids. He's also the Co founder of
Lookingglass Education, one of the best educational hubs for
all things Bitcoin and finance. And he's the co-author of the
book. B is for Bitcoin the essential
guide to all things Bitcoin. Welcome Daz, Awesome to meet
online after we met briefly in in Madeira.
So fun to to talk to you again. Absolute pleasure to be here,
appreciate the the invitation to come and have a chat this
morning. Well, it's your morning.
We just talked about it. It's 55 AM in Australia.
It's 9:00 PM in Europe, but we're making it work.
So I'm. I'm happy you're here.
Yeah, I wanted to start actually.
You're an electrician and later on an electric engineer, right?
By trade. How?
How does a hard working blue collar worker end up studying
and adopting Bitcoin? Like how?
How did that go? That's a great, great question
actually. So in Australia we're pretty
lucky in terms of tradespeople generally earn a pretty good
wage. So that meant eventually after
many years of you, you you kind of as a tradesperson you do an
apprenticeship and you get paid next to nothing And then and
then after you, you become a tradesperson your your wage
starts to increase. So you go from absolute bread
lines into you know a a a humble level of abundance.
So now put me in a position to be able to have some disposable
income and came to a a bit of a fork in the road with my formal
studies and everything around how I was going to direct my
time. And so at that stage of the game
I've done some formal education in electrical engineering and
was then at A at A at a point at a juncture where I was like I I
was, I was putting 20 hours a week into studying electrical
engineering and I had a pathway to keep studying and or make a
choice. I was earning quite a good wage
and I thought, well, I've never, I've always been interested in
investing, but I know absolutely nothing about investing.
So I didn't know what a dividend was, I didn't know what a bond
was. I didn't know what any of these
things were. So I I thought, I will funnel
all of that energy into studying, investing.
And so I very much stumbled across Bitcoin from an investing
lens. After having done over 18 months
worth of study into investing, I read as many books as I could,
watched all the YouTube videos and quickly found out that there
was actually nothing of Fair value to buy.
Everything was was trading at multiples of what would be
deemed fair value by any sort of metric.
And then that was sort of the impetus for me to start looking
under the hood a little bit more and then end up stumbling across
discovering how money worked and and and realizing the the
absolute Ponzi scheme of Fiat currency system that we operate
within. And that was really the the sort
of eye opening moment for me. Yeah, interesting.
When you say fair value, right, like can you share a bit about
that, like how, how do you see that now or how or what did you
run into? Of course.
You know, people talk about fair value.
They talk about intrinsic value, They talk about utility value.
Like how how did you learn about that?
Yeah. So that was very much, you know,
quite often particularly in Australia a lot of people play
the stock market and none of them to my mind and any
conversations for what humble people that I I interact with
from friends, family and work colleagues really know how to
value and equity. They're just rolling the dice.
They're basically saying, you know I bought BHB Billiton
today. Oh, why'd you buy it?
Oh, because it went down 6% from yesterday.
It's going to go back up and that's the sort of whole thesis
around their investing thesis, right.
So the I was lucky in that sense that I'd, I really wanted to
understand what investing was and and went down a value
investing rabbit hole in terms of being able to value a stock.
So what that means is looking under the hood, having a look at
how much debt they've got, what sort of income have they got,
what's their overheads, how much profit are they making And then
doing what they call a discount cash flow analysis and which is
a formula that you can deploy in order to give you a an idea of
what a fair value for that company would be.
And it's very akin to, you know, most people if you said you're
going to go and buy this cafe that's selling coffee on a
day-to-day basis, it's it's intrinsically they know that
they should go and ask that person, well, how many cups of
coffee do you sell? How much, how many staff do you
have, What are your overheads, what's your profit margin?
And you would do that for a cafe.
It stands to reason that you should do it.
For BHP Billiton, it just turns out that the accounting's a lot
harder. So it turns a lot of people off
from that respect. But the metrics are still true.
It's like what's that actual company worth?
What's their assets? What are they, what's their
turnover? What's their profit?
What's how's their capital allocation?
All of these metrics come into play to help you determine
what's a fair price for that for that company.
And then what I sort of discovered through that 2018
into 2019 period was that things were trading for absolutely
astronomical multiples of what would be normally considered
fair value, which means you know a price to earnings ratio is a
nice easy sort of metric that most people can sort of get
their head around. And Warren Buffett's famously
you know, quoted as as sort of looking at fair value of of of a
price to earnings ratio around that 15 multiple 20 if it's a
really good company. And what that essentially means
is, is that is that whatever that number is, so say it's 15,
it essentially means that it's going to take me about 15 years
to get back my original investment based on their
earnings that they make right now.
So it's a good, it's a good metric in in order just to thumb
suck and say, oh OK, it's going to take me about 15 years to get
my money back. And what ended up happening is
in 2018-2019 you get the likes of companies like Tesla for
example, which were trading at 1200 PE 1200 years to get your
money back based on earnings that they'd they'd made in the
past. So and that wasn't a an isolated
example. There was a lot of examples of
that where, you know, I'm looking at the universe of index
for Australia to ASX 200, the 200 stocks within Australia the
top 200. And when I use my discount cash
flow analysis metrics, I had a spreadsheet that brought all the
price data in all this sort of thing.
There's about 3 stocks that were actually deemed fair value and
they were dog shit companies. You wouldn't want to own them.
So but everything else was, you know, absolutely astronomical.
And that's really where I started saying, well, there's
there's two things here. Either I've got something wrong.
So I went back through all the math and made sure that you know
my model was OK and it was or something fundamentally is wrong
with the way that this this works for valuing stocks and and
it turns out that there's nothing wrong with that method
of valuing stocks. It's just that everything else
in this world has attracted a monetary premium because we our
money. Our money no longer works.
Our money no longer functions as money.
And I and I can expand on that that a little bit if you like
when your when your savings account doesn't work like
grandma used to say it worked. You know you could put your
money under the mattress and come back, save your little
pennies off and you come back and and buy something over a
longer period of time. When when we work through this
Fiat monetary system where in in interest rates are below the
rate of inflation, you the longer you hold dollars the less
it buys you over time. So as humans we may not be
intuitively aware of this, it may not be consciously aware of
this, but subconsciously we know that we need to protect
purchasing power over time. So we look towards then other
things and they attract the monetary premium.
So real estate and equities are probably the two best examples
because we as wage earners don't understand finance, we don't.
You know, I'm an electrician, I shouldn't know how to do a
discount cash flow analysis really when it when it boils
down to it, I should just know how to be a Sparky.
But I've had to, in order to be able to get ahead, I've had to
turn my attention towards trying to get ahead and understand and
give myself an edge. And that's why I think real
estate and equities in particular attract this monetary
premium more than anything else. And real estate in particular,
because real estate is easier to understand than equities
arguably, like we all know people, the thesis is you need a
place to live. And I I know I can go and get a
mortgage. I can probably get another
mortgage based on the equity that I have in my existing home
and I can go on and buy an investment property and I can
let someone else pay it off for me.
And and that's really like quite celebrated, particularly in
Australia. Hey there.
Thanks so much for listening to this episode.
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are enjoying this podcast. Thanks again for joining me on
this journey. Now back to the conversation.
I mean I love this angle because I talked to Peter Dunworth who
you might know fellow Aussie. I think it was the 2nd episode
of podcast and you know he's an investment manager or or
financial advisor for high net worth individuals etcetera.
Like he's been doing this for, I don't know 20-30 years something
like that. And we were talking about this
exact thing, right. Like you said like as an
electrician, as an electrician I should not know about this cash
flow. And you also said like to get
ahead but it's not even to get ahead it's to stay level
basically. Right.
Because when you know you and and and we talked about this a
lot already on the podcast, but I still I I, I just love to
illustrate it like this right. Like everyone takes risk with a
job or a venture. You know whether well with an
education even right to become an electrician.
Do I still have a job And all these things like everything is
taking a risk, right. And then you get rewarded in
this money that is deemed trustable by your government,
right. It's backed by your government,
it's not backed by anything. That's the definition of Fiat,
right. And then you come home from
taking risk and you come home to your family who you want to be
with etcetera. But you are forced to take more
risk, IE as you illustrated, you know first spend time to study,
hopefully you study the right thing.
As you also mentioned during studying investing, you didn't
even learn about what money is right that came after that,
right. So, so spending your time on
whatever subject or trade or whatever that is already taking
risk to get to a certain outcome, right.
And Peter told me that he was like, yeah this should be the
biggest illustration because you take risk with this job or
venture, you come home, you take more risk.
But there's people like Peter whose job it is to figure this
out as the the the first thing they do, right.
Not when they come home, but the first thing they do.
And I I, I find that so illuminating, almost right,
that, that so many people are forced to have another job that
they actually don't know they should have.
Right. Because if you don't do this,
and you also mentioned this, I think, like people
subconsciously know they have to do something, right?
Like your grandmother had the money under her bed, right?
And then in some way it felt like she could hold on to it and
it was still there after years, right?
That was what savings was. But so.
So people know that a bit, but they don't really know that it's
an actual job like people like Peter have, right?
How how did you approach this? Like, do you also see this like
that right now or like how how how did that go for you?
Was this voluntarily or you were really like, OK, I have to, I
have some excess money. I need to do something.
Yeah, well, I pretty much was on the hamster wheel, living,
living hand to mouth, paycheck to paycheck for the first sort
of two decades of of my existence, right?
And it was only really when I hit about 30 that I started to
critically assess and start to think about these things like
retirement. We were starting a a young
family, you know the job that I was in no longer was serving me.
So I it was kind of the the, the point in my life where I shifted
career. I, I, I I chose to go and get an
apprenticeship, you know. And when I was looking out
towards my future and my retirement age, we've got a
thing in Australia called superannuation.
It's basically like our 401K, our our forced savings
retirement accounts, projecting that out into the future and
realizing I don't think I'm going to have enough to be able
to retire by the time I hit that number with the trajectory as it
was. So it was really this, you know
looking at I think you you hollowed a really good point
Like we as wage earners, we spend time sweat and money, time
sweat and energy and it's really about that energy piece.
Like we we, we expend energy in order to be able to save energy
to to spend later on And when you know the system is, the
total system is working against you, like you know you're doing
your best, you're going to work. Both mum and dad are in the
workforce now full time. You know the kids are not
getting you know looked after in in most scenarios by mum and dad
anymore. It's like they're going to
daycares and spending all their time in school and after school
care and all this sort of thing. And it's really quite an
insidious thing to think about that we're spending all this
time and energy, yet we're not able to deploy that time and
energy later on because we we we can't even save anything.
There's nothing left at the end of each week.
So it was really, that's where I I stopped and I said this, this
path is not sustainable. Living this hand week to week,
hand to hand. What can I do?
What actions can I take in order to be able to make changes in in
in in my life And I was I was grateful to respect that I I was
able to look at that critically and and assess and and realize
that what we were doing in that current state wasn't going to
serve us into the future. And and it was a it was a life
changing realization for me. And I sort of also when I look
back and I reflect on that, it was, it was only obvious to me
because I was living mouth to mouth, hand to mouth like I was
living paycheck to paycheck. Like if you if you're perhaps
even a little bit more advantageous, you might not even
realize it. Like you might not even lift the
lid off and start really tearing under the underlying the the
criticality about understanding the system in which we're trying
to operate in. Right.
So you know it and it's we shouldn't be like This is why,
why I'm so passionate, why we started Looking Glass Education
while we wrote the book. It's because I'm having these
conversations with my peer group, realising that I, you
know, after two years worth of studying into financial markets
and macroeconomics, and realising that nobody knows
this, nobody understands this. And how do I try and distill
down what was then by that point, thousands of hours worth
of research into just really easy to understand language that
people can take away, You know, spend a a couple of hours and
get at least enough curiosity to keep the education journey
going. Because nobody is reaching out
to these people from government, you know, to to let them know
that our system's corrupt, our system's no longer working, no
longer serving you. You need to take some action.
Yeah, I think 2 two things I like the energy analogy is
really good, right? So when you take the risk with
your job or venture, you expend energy or well energy within
certain time, right. And the and the time is finite.
Of course we all, nobody knows how long they have, but we get
rewarded with the technology, right?
The money that we use for which we, you know, we shake hands
for, you know, a certain reward amount of units for the energy
we we expend, right. And so actually the amount of
money you receive is a representation of the energy
that you expended, right? And also if you are, let's say,
a Carpenter, that also involves the energy, you know, the cost
of the wood, for example, that you use, which also cost energy
to create, right. And so the technology is a way
to represent that amount of energy and that is then your
reward, right. But because that technology is
corrupted, I think that's the right word, right.
And it's not necessarily, I think, I don't know, I think I
talked about this with Jeff Booth about the words theft and
corruption. And you know, like for some
people those are like hard words to use, right?
But but I think what you mean by corrupt is that the system we
use is corrupted. It is.
Well this system is actually flawed from from from the, from
the get go basically. But it's been corrupted.
It doesn't work as intended or how it's told to you.
So when you get rewarded in the money that should represent
certain amount of energy, you can keep it for 10 years.
You know the the coins and the bills, but the energy they
represent has become way and way and way less.
And so that's why well, you have that extra day job that you
probably don't realize that that you have right to figure out how
can I at least keep this energy at the same level.
So yeah, I think that I think that's a great illustration.
But like how how do you think our beliefs or well, as you
mentioned like your peer group. I have the same experience only
when I started to figure this out, I also figured out that no
one understands this. Like, no, no one looks at this,
especially not in Western countries.
By the way, I think that's even more prudent, right?
Because the money just works or something in, in some way,
right? So there's no incentive to
study. But how do you think our, like,
flawed understanding of money actually then shapes society?
As you mentioned, like both parents have to work, children
go to a daycare. Parents don't have control over,
for example, what their kids get taught.
People have to take more risk to mitigate the energy loss.
They gamble, do all these stupid things.
Like what? What are your thoughts there?
Yeah. So there's there's a lot of
downstream effects of of of money.
So I I really see money as the communication layer between how
humans communicate value. So when I go and I expend my
energy in my in my way in in my day job and I earn this wage,
that's what I'm relying on it to do, is to store that energy for
me to deploy later on. Because I've I've, I've brought
forward, I've tried to expend energy now in a concentrated 8
hours a day 10 hours a day whatever that time period you
work in order to obtain units that are supposed to maintain
that energy for me to deploy later on.
And when that money and I and I agree with you that that word
corruption can be a triggering word, perhaps it's better to say
like Co opted or you know somewhat obscured.
Flawed exactly. So I I don't mean there's a
nefarious centre of people, you know?
Deliberately trying to destroy the the currency that may very
well be the case but that's not the point I'm I'm trying to
make. But when when we destroy what is
otherwise so Fiat currency takes zero energy to print to to
exactly and we don't even print it anymore like this word
printing. Absolutely.
I think we should find another word for it, because all they
add is digital zeros to their Ledger and so money now is
simply just a. Legendaries, right?
That is. Also, sorry to interrupt, That's
also the I saw someone say or explain.
The word Fiat in Latin is let there be.
So it's let there be money, right?
It appears currently, right? It's not even printed.
There's no ink, There's no paper.
Like all these things. That's a fallacy, right?
It just appears as new numbers, yeah.
And even our modern day translation, many believe Fiat
to just mean by decree. So we we've, we've, yeah,
terminate. This is my.
They say it's there. Exactly, exactly.
So it's even. There's one layer of abstraction
away from energy, right? So we had Fiat currency.
It took some what of some energy to to make the paper, put the
ink on and print it out of the printer.
But even now we've got another layer of abstraction where these
units are just introduced at will.
So and and all we need to think about is that like in a really
simple example if we've got a finite world of finite goods and
services and we introduced extra currency units competing with
those same goods and services, it stands to reason that process
is going to go up. It's it's a bit of a you don't
need to be have a degree in economics to to understand that
prices found between the equilibrium between a supply and
demand of a product or service. So when you introduce extra
units competing with that same amount of goods and services, of
course it's going to result in excess prices and so.
Add something to that, Absolutely.
You know, yeah, goods and services that if you represent
that as the productivity, right. It's everything we do or
everything we create, right? And then again we go back to
that is expending energy or or using energy to for example, we
can say also use stored energy, right, the strength of wood or
surf or sand or make cement or whatever, like, right.
So everything in the productivity is a representation
of energy. But that is a finite thing also,
as you said, right. Because all the people together,
at least the people that can work and add, right, not the
children. That's a finite number of
people, finite number of hours, finite number of energy.
But yeah, if you start valuing that in a currency, right, what
we think is money is a currency that can be created infinitely,
that that's going to create a weird situation, right, Because
the energy used to grow an apple has not changed since, you know,
the appearance of apples. And that is the entire point, I
think, right, that that why is the apple, Why does the apple
cost more units now than 40 years ago?
It's not because the apple cost more energy to make, it's
because the units that you use to price, quote UN quote it in
that became worth less. So you need more of the units to
get the same amount of energy that is captured in the apple.
Oh 100% that's a that's a really good point and and I think like
just to go back to the the earlier example of it distorts,
it completely distorts us as humans and how we navigate
society. Yeah like how we choose to to
expend our energy is now completely distorted because the
fundamental communication layout is, is no longer a yardstick of
which represents fair value. So you know this is where we see
all these downstream effects now throughout and this it it
touches on business, it touches on politics, it touches on the
the family unit, you know Co Co founder of Looking Glass said
Bunny's just got a phenomenal book out.
If your listeners haven't heard of it or read it called the
hidden Cost of Money. And he digs down like he's done
such a great job of digging down into this very conversation
we're having right now in and around what are the downstream
effects of money and what are the downstream effects of our
ability to print money out of thin air and how does it really
change us fundamentally as humans Like how has it impacted
us and how we choose to navigate through society.
And I think one of the most deplorable outcomes of that is,
is this effect on the family unit.
Like, you know, having mum and dad both forced into the
workforce. Like we know, you know, And I'm
not trying to say that having women in the workforce by any
stretch of the imagination is a bad thing.
But what it's it's really done is what I've got a lot of female
friends who would not want nothing more than to stay home
and raise their beautiful little kids, but they're forced into
the workforce because they've got to keep up up to date.
And I think that's the really empowering thing about Bitcoin
in particular is, is you know, you talk to bitcoiners who have
been in the space a little while and and most people really the
purchasing power and the store of value thing is what brings us
in. But it's really the optionality
for you as a human, optionality for you as a family and what
that affords you over time. So you can sit back when you're
you've been able to appreciate your purchasing power, you've
been able to increase your family wealth.
You can step back and critically assess how it is that you expend
your energy in future. Would you rather point it
towards your children? You know And and that might be
mum, it might be dad, like you know.
It doesn't doesn't matter who that is, but at least it gives
you the options to be able to reassess how it is that you're
expending that energy and point that towards it comes back to
Maslow's Hierarchy of needs. Once you've got food, shelter,
you know all of the base layer of your needs, your primal needs
as a human in your survival, you can then start to work towards
this notion of self actualization and you can only
do that through purchasing power.
You can only do that through storing energy and being able to
assess and and and and critically look at how you want
to deploy that energy in the in the future.
And I think that's ultimately for most wage earners, I think
they get that pretty quickly. Once they get that, it's like,
well, hang on, You're telling me if I just save my little ass off
right now, put as much energy as I can in now, bring forward as
much as I can to to try and do the hustle.
And I'm able to store it in something that I come back in
four years time and I can sit back down and go, holy crap,
look what I've been able to achieve.
Yeah, well, this is one of the things I wanted to ask you.
Like what's your favorite mental model for explaining Bitcoin?
But I think this is a great one, right?
Because everyone wants to do this, right?
You don't want to be like, I know women in this example who
work so they can pay for the daycare.
Interesting situation, you know, like, OK, well, you know, the
work is perhaps for yourself. But if you know it's not
something that you absolutely love to do, why are you doing
this right? There's no contribution to
productivity in in in that sense, right?
You know I think like it's a it's a good example because I
know a lot of women as well personally and it and it might
not be paying one for one but it's definitely a large
percentage of the wage. But what they're what like this
whole notion of they're forced into taking swapping their whole
40 hours a week into paying for daycare only to achieve that
extra $100 at the margin and but that $100 is meaningful but it's
so meaningful that they're forced into having to swap that
because they can't afford the sacrifice of that extra 1 or
$200.00 at the end of that pay week.
And it's a it's it's really like most.
And again I just want to highlight the point like if
you're a career oriented woman and and you've gone to uni and
all of this stuff and you and you want to do that that's
that's fine. But most people have been that
option's been taken away from. Them exactly.
Their optionality, optionality is gone, right?
And I think that's also the point where I wanted to go is
like everyone wants to figure out what is it that I want to do
right? What, what am I here to to
contribute, right. Like what is my, what is my
thing. And you know, some people know
that when they're in high school, most people don't, you
know, and that takes that takes some time.
But in order to get there, I think you said it perfectly.
You have to hustle in a sense, so you can.
I always saw money like this, but eventually I like, I always
saw money like this. But it's funny, I only realized
later is I always saw money as buying time, right?
So yeah, you hustle, you have money so you can buy time, so
you can figure out what is the risk I can take into the future,
right? And maybe if I if I'm on this
career path but I want to go do something else, I need time to
study or figure out what that entails or you know what?
What whatever, right? And I think that's what safety
and also talks about about a lot that people discount the future
and they overvalue the present, right.
But the our broken money enforces that even, right?
Like people don't they? They don't, as you mentioned
this, you know, again, the woman in example, but she goes to work
to pay for the daycare. They have $100 extra.
And then what if if you're not happy and you're stuck, like
what? What, what does that do with the
quality of your life? You have the $100, but like are
you, are you happy? You know, but but once you get
on that path, you basically, yeah, kind of block yourself
from, from figuring it out for yourself again, right.
Because then you're in that you're in that loop, as you, I
think, realized for yourself as well, right?
And I think that is the entire point, that that is because how
you're rewarded is something that is not working for you.
It's actually working against you.
Yeah. And I think it's this little
self feedback mechanism. It's a it's a closed loop system
where if you if you've got that $100 spare at the end of the
week, but you know putting it in the bank longer term is not
going to do anything for you. You're more entitled to bring
forth that instant gratification.
So you're gonna go and buy that carton of beer just to get the
buzz on the weekend. So it starts to then feed into
probably less than ideal behaviours.
Then what would serve you better as a human longer term?
Like, you know, alcoholism and drug addictions and, you know,
sitting on your butt watching Netflix, 'cause you're just.
Exhausted term gratification. Whatever short term
gratification you can just to give you a sense of at least
it's worth it 'cause I can now sit down and do this right.
Whereas us you can have any conversation with with any big
corner and we're very much more long term thinking because we've
been able to secure that in in a means that we know when we look
forward there's hope. And that's used that I think
that word hopes overused a lot. Like it's a bit of a cliche, but
it really does give you then hope in the future to know that
that optionality is coming. So you know there's a path out
of this hamster wheel like you've got.
You've got this hope in and around being able to change the
outcomes for you and your family over time.
You've just got to stay the course.
Yeah, I think it yeah, I love this topic, right?
Because I think we don't. We'll talk about Bitcoin, but I
think this is the problem that people need to realize that
they're in, right? And I said it many times on the
podcast. When I was 30 and I had a
mortgage and I worked at a bank, I did not realize what I was in,
right? So everyone has this, right?
Like everyone has this up to, I hope a certain degree.
But most people are are totally unaware of this.
And I think this is the entire point.
The entire point as you just mentioned is the the hope for
the future is can I createspace in you know time to take
ownership for myself instead of having other people that don't
care about me, not in a malicious way, but more in like
they also have their own life. You know, they don't care that
you know your dad's and I'm Brahman, you know, whatever,
they're doing their job. But there's other people that
that influence your life basically.
And once you realize that, then I feel that is kind of like this
matrix point right, red, blue pill kind of thing like OK, so
there's other people that influence my life.
Is it helping me or not And if you realize that it's not then
like you cannot really look back.
Right. And that is the red pill moment.
I think in a sense that that hopefully will give you the
urgency to be like OK I need I need to study this in some way
shape or form right. And yeah, I think if we then get
to Bitcoin, Bitcoin eventually gives you the opportunity to to
to create that space towards the future for yourself because it
actually gives you provable certainty.
It's the ultimate transparent thing, right?
Anyone listening to us should not listen to us.
They should study so they can verify it for themselves, right?
I think that's the entire point. Like, once you take that
ownership and you study, then you realize that you can
actually do it, right? You don't have to give your
responsibility away to other people that don't care about
you. Yeah, and there's this thing in
the Bitcoin space. Odell's famous for coining it.
Be humble Stack Sats, right? But I I think to a degree, one
of the best onboarding mechanisms is is to a degree,
not to be so humble. Like, don't be shy of
celebrating the optionality that's provided for you as a
bitcoiner. So as you move forward and and
you know, don't be shy about the extra optionality that's
afforded you and the and the lifestyle choices that it now
affords you. Because it's a a great
onboarding mechanism. So your friends and family are
going to look at you and go, what's that guy done?
How come he's able to pull his kids out of school and go around
Australia for a year in a caravan?
What is it about him? What has he, what has he done?
I want that for me. Therefore, maybe I'll have a
conversation about how he's able to do that and it's quite
simple. I was able to do that through
Bitcoin, you know, so I I think to a degree, don't don't be so
humble. Don't be afraid to celebrate
publicly with within your closed space, your successes in and
around what this thing's done for you.
Because it's it's it's a life changing mechanism and I think
the more people that do that it, it sort of reinforces this
notion on too late because most people think oh I've missed that
like all the gains are gone but like we're in this precipice of,
you know, institutional adoption coming.
The gains aren't even we haven't even begun to realise the
potential gains that are are possible through the purchasing
appreciation and purchasing power because we've got a finite
source of this. We know that everything else is
forever increasing. So in Bitcoin terms everything
becomes cheaper over time. So there is no right time to
start. The right time to start was 13
years ago. Yeah, you know, the next best is
today. Yeah.
Well, and it is because the money that you are forced to use
will go down over over time, right?
I think that's also pretty verifiable.
I I think it would be nice if we build a bridge between what we
just talked about and then if we go to Bitcoin, right.
So you studied investing. You were like, there's nothing
of Fair value that I can put my money in.
Eventually you found Bitcoin. Like what?
What was your aha moment where you thought, OK, this is
something that I should dive into.
Yeah. So the the real, so I guess the
pathway was from realizing that there was nothing worth a fair
value and then looking at the formulas that I was using to be
able to determine whether something was valued at fair
value or not. And one of the important things,
one of the important variables that goes into that formula is
your discounted cash flow sorry your your your discount rate and
that's normally compared to what they call the risk free rate of
return and that is normally AUS treasury bond for example or a
government bond depending on on wherever you're domiciled.
So the the thesis behind that is if I can lend the government
money and we know that they can print it out of thin air, it's
deemed to be the risk free rate because they'll just keep
printing it right. And so that is the comparison
rate by which goes into your formula to then compare
everything else in the world like if I can lend them for
money for free what do I want in return if I'm gonna go out on
the risk curve and and what's that worth to me in terms of you
know a return what do I expect as a return to go out and take
on excess risk. So that's the fundamental thesis
behind how a discount cash flow model works is you're doing a
comparison against this risk free rate of return.
So when I was looking at this and I realized that you know
they're inversely proportional. So the the lower that the
dollar, sorry, the the interest rate goes towards 0.
Everything else trends toward Infinity.
My willingness to buy, you know, they're inversely proportional
stuff. One's going down towards 0, the
others heading towards Infinity. So that was really the the start
of me then trying to understand money.
So how does interest rates work? How do interest rates get
controlled? Why are they near 0 and how do
they, what's the control mechanism by which they they set
those interest rates? Because we know we wait on the
Fed or your central Bank of choice.
Like for us in Australia, it's the Reserve Bank of Australia.
They meet every month and then they dictate what the cash price
is going to be and then that then flows through everything
else within the financial system.
So when you realize and you understand what it takes to
control interest rates, it's basically just through money
printing. And then that was really where I
probably landed on Gold 1st and went, oh, OK, now I'm a gold
bug, this, this sound money thesis scarcity these, you know,
and it was really around trying to understand well if this is
true and we're in, we're trending towards an inflationary
environment where interest rates are below the rate of inflation
and we know that our purchasing power depreciates if we're not
beating inflation. That's the fundamental thesis.
You've got to get above inflation.
Maybe to to to explain because I I love where you're going.
The the interest rates set by the central bank basically
determine how fast or slow, you know what the rate is of the
devaluation of the money. Do I say that correctly?
Well, yeah, How much the money costs basically.
Yes, that's that's the. Yeah, yeah.
What is the cost of capital? So what is the cost to borrow
money and then what's the? Inflation rate of how how fast
it gets evaluated, yeah. Yes, exactly.
And and they control it so that they're trying to control
inflation and that the easiest lever for them to do that is
through interest rates. So if they, yeah, can control
the money flow and the cost of capital, they think they can
contain this beast that's called inflation, so.
Higher rates gives a slower money flow because less people
will be able to afford, slash, borrow right, new money that
then enters the system, yeah, that's more money because more
money, more units entering the system will result in a a lower
valuation of each unit and that is the inflation.
Exactly right. Yes, yes.
And then so when you look at the inflation rate and when you
realize that your interest rate is below the rate of inflation,
we now look at what, what type of assets perform well
throughout history in that type of environment and that's where
you you land on fixed and hard assets, things, things that
can't be printed out of thin air is basically what that means so.
Hard asset is something that's difficult to create.
Correct. Exactly right.
So that's finite things, scarce
things. So to a degree, it's real
estate. And you can argue there's some,
there's some nuance in and around, you know, their ability
to add a floor to a skyscraper, for example.
So you know they can control, you know, society.
When I say they can control, there's no one obviously central
planning that necessarily, but like there's ability for you to
inflate real estate to a degree. But real estate's a really good
thing for most people to understand, like, OK, they can't
necessarily create more land or it's very hard to create more
land. So that's that's usually an easy
thing for people to understand. And that's where you land on
ultimately probably precious metals as well.
They can't be printed out of thin air, things like energy,
they can't be printed out of thin air.
And then that's where I was probably turned towards
understanding the monetary history around gold, the gold
standard and why we left the gold standard and really like
looking at why gold failed. So if gold was this great money,
how come we don't use it anymore?
And it's really around you know and this is where Fiat currency
started to proliferate was around the 70s, like obviously
1971 was the day that we left the gold standard officially.
But it was really around understanding probably what were
the drivers behind that decision.
And I think one of the, the, the large ones is this notion of the
fact that gold's really hard to deal with when you open up like
globalization started. We started looking at global
trade more. So you know, aeroplanes were a
lot more prolific, you know, shipping lanes, all of this
stuff. The world started opening up and
when you are on a gold standard, you've either got have an
inherent amount of trust in a in a centralized system or you've
got to physically move gold to settle trade.
So if you've got two separate countries, you know, say you've
got France and Japan and they're geographically separated, how do
they settle the trade balance when one operates in Euro or
francs back then rather and the other operates in in in yen.
Maybe France doesn't want yen. So you're going to have to
settle on gold now that that gold needs to either be directly
settled. So France has got to ship it,
secure it, send it, protect it the whole way.
And then if you and then, yeah, Japan gets it, like, do I trust
France? No, probably not.
So I'm gonna cast it, I'm gonna probably melt it down, I'm gonna
recast it. And all of that is a super,
super expensive you know exercise and and slow take at
least 6 to 12 months just to do that.
And then global trade probably reverses and then Japan owes the
money to France, so they've got to send it back.
So that's where the centralized bodies ended up really popping
up. And Bank of International
Settlements is a really good example of why people don't
shouldn't trust the centralized A centralized body with with
that task. Because World War 2 is a good
example. So Germany invades
Czechoslovakia and the Bank of International Settlements used
to settle most of the gold trade and Germany invades
Czechoslovakia. Czechoslovakia's got their pile
of gold in the Bank of International Settlements, and
so does so does Germany, and so does all these other countries.
Germany gets in contact with the Bank of International
Settlements and says, hey yo, we've just invaded
Czechoslovakia, that big pile of gold with their name on it,
that's now ours. And the Bank of International
Settlements turns around and says OK, so it's wow, I didn't
know. That yeah, you can.
Read about that in The Terror of Babel, I think is the is the
book that explains that. And that's a book all about the
Bank of International Settlements.
So it's it's just a really good, you know, and obviously there's
probably a lot more that went on the back end of that, but that's
essentially what what ends up happening, right?
And that's why we need a trustless system because nobody
trusts anybody anymore, nor should they, nor should they
have to. So this is so understanding why
gold potentially failed is why we ended up on a on a Fiat
currency because gold couldn't keep up with technology we
needed. You know and as we started to
digitize as well, this further exacerbated this.
And and how we ended up on, on such a system that we're on now
where we've got more dollars in circulation than actual physical
currency notes. Because prior to digitization
and the Internet you needed those physical notes, they
needed to be printed you, you know, you had a degree of
fractional reserve banking. But now that we're just digital,
it's just a 0 on a computer screen, it's a lot more easier
for you to introduce a credit system based on top of that.
So a fractional reserve system in its historical sense used to
say you should have X percentage of dollars backing the credit
that you've got out in the system and will allow you to
inflate this to a certain degree.
But when we've moved towards digitization in the Internet and
Internet banking, that requirement has trended towards
0. So historically that used to be
around 10%. You needed 10% of reserves in in
your Kitty. That's the physical cash in
order to go and lend. Now it's a bit zero depending on
your, but even. Then it was.
Even then it was forced trust, right?
Like that is what people now also say.
So back then it was even forced trust.
After the gold bag money was gone, it was even more forced
trust, right? And I think that is also kind of
what you sometimes hear as arguments for the money.
We have like people who are totally oblivious.
But anyway, right, that they said, yeah, but it's a trust.
No, you are forced to trust it, right?
It's not. You never made a conscious
decision to trust the money that your government says.
You should use that. That's the entire point, right?
That that's why I think this is. And then I I love the first part
that we talked about. This is what people need to wrap
their heads around. Like you are forced to trust
someone who doesn't care about you, right?
Whoever is in the seat in the government or the central bank,
it doesn't really matter. Like if they can do it to
Czechoslovakia, right? They can do it to you, they can
do it to you. Like, that's the point.
Like they gave their responsibility away to a Bank of
international settlements that on paper said we have these
agreements, blah blah, blah. You know all these people that
were in charge, put in their autograph and still you know
their gold got stolen. And I think that is the the
entire concept that people need to wrap their head around.
Like you are unwillingly giving away certain responsibility and
therefore your life is influenced by people that don't
know or care about you. Again, not in a malicious way,
but just they don't know you like this.
Not you're, you're not the individual that you are for
yourself or your family, right? Like I think that is the point
that you need to figure out. And and so you you don't own
what you think you own. You don't own the numbers that
you see in your banking app. Right.
Like your grandmother had real, real, you know, bills probably
under her bed. Right.
Like the numbers you see in your banking app, they aren't even
there. You know and and and and when we
had to create the ink and the pay the ink and the paper, you
know, right. We talked about energy before.
Energy cannot be created. It's it's transformed, right.
And so the energy you expend again, you know, for your job
adventure is in your body, but you are being rewarded with
something that just appeared without expending any energy.
And that is the the dumbest exchange we could all ever take
part of, right? And so I, I, I love that we
could talk about the technical part, but I also love to like
zoom out a bit and make it a bit more conceptually for people to
be like okay, is this the mechanic that, you know, is this
the thing that I'm actually participating in, right?
Because for me it clicked like that basically.
Yeah. And I think like Lynn Alden
talks about this in a book, Broken Money.
This notion of like money is essentially just a Ledger and
it's just taking different forms.
So we've used various tokens to represent this Ledger.
So this, this checks and balances between that energy
that I expended and and what I'm then owed.
Right, so we can go right back to to to villages like we were
all hunters. I went out and I made the kill.
You know, I brought back the mammoth and we all gorged and
we'd chalk up on the on The Cave like, yeah, Daz was a good lad.
He went and got one kill. Yeah, well, we left.
We left bra meat for for free promos us are killed, right.
And so this is this, this notion around this this credit system
and checks and balances between the debits and the credits,
right, that's it's in it's fundamental form.
That's a really easy way to to sort of understand that concept.
And then as we sort of evolved and we started to progress, it
was then like we we naturally came to barter in like trying to
swap those goods and services. And then we evolved into
representing, having some sort of token representing that
trade. Because I, you know, if I had
chickens and you had eggs or maybe that's a bad example
because potatoes has the eggs as well, right.
Yeah, you got the potatoes. So I come to you with the
chickens and you're like, I don't want chickens this week, I
want beef, right. So, you know, we needed
something that represented that trade that we could then start
that was that was socially. Coincidence of once.
Coincidence of once 100%. So you know, but essentially
that's still like a Ledger. We're still just parking value
in something that everybody recognizes for, for for being
this, this, you know, balance between checks and debits.
And and if we Fast forward for today, the Ledger still exists.
The Ledger is just like your bank has its own Ledger and it's
saying you know Daz has X amount of units.
But we've got to put an inherent amount of trust in that Ledger
to say that that is true. And then that bank has its own
Ledger and then the next bank that it's working with has its
own Ledger. And we're just relying on this
system of trust between these two that the system keeps keeps
going along. So when we look at why like gold
was necessarily a a good form of money, it's because it was
directly tied to energy. We knew it took energy.
It was finite. We couldn't make more of it.
Alchemists have been trying for centuries to create a formula to
create gold out of thin air. They had still haven't found it,
and it takes an inherent amount of energy to dig it out of the
ground, and we know that it's finite.
So this. Is where it's also from the
Earth, right? Absolutely.
Yeah. Yeah.
We can even go back to, you know.
It's actually stored energy, just like oil is Stored energy,
right? Like into oil is. 100% and so
when we look at what made gold good, a good money is because of
that form of scarcity. But then we look at the
digitisation of the world and the need for things to move at
the speed of light. So it was only sort of natural
that we came up with a form of money that mimics all of the
great properties that made gold great, directly tied to energy.
And I guess that's a probably good we could start talking
about that and what that exactly means.
But we also have all of the benefits of what gold made gold
are, good money, as well as all of the benefits that, you know,
digitization and the Internet have provided society.
And we've mashed them together to create what is essentially
the most pristine form of money with all of the features of all
of the great monies in the world, as well as keeping up
with today's technology that that we've ever had.
And essentially all it is, is a Ledger, much like the banking
systems a Ledger. But the difference is it's
immutable. Everybody's got a copy of it.
Everybody can verify the the balances, everybody can check
that there's only X amount in circulation in that they're
distributed amongst all of these addresses.
And if you're lucky enough to have one of those addresses
everybody can check like and that's that's really the the the
mind blowing difference is money has always been a Ledger and and
it's just been over time Co opted and obscured and built a a
large amount of trust and we've just taken that system and we've
just made it better and we've made it completely immutable
verifiable and everybody can participate.
I got an idea to write about. Now it's actually we condensed
all these opaque layers into just one thing that is
ultimately transparent, right? Like like the Internet condensed
all the information in the world into like 1 accessible network
of information. Before we continue, I, I, I, I,
I love this, this angle again I think I think two things right.
When we had gold or bills money how do you say like notes that
represented gold. That was a one-on-one
relationship, right? There was actually a certificate
here in Amsterdam. It was the first actually actual
central bank in the world, right.
People brought their gold, they got, they got tickets,
certificates, that's what they could trade with.
But then eventually if you went back to the central bank you
would actually get the gold right?
It was a one-on-one basically note to to get the real, the
real thing. But because we started obscuring
that or well, making it more abstract, I think it's abstract
because we made it more abstract, more layers, etcetera.
That's when it became obscure. That's also when I love to say
this a lot, but that that's when the corruptibility opportunity
came about, right. Because if you are in, you know,
6 layers above us two, right, You're closer to the creation of
the money and you have the opportunity to make use of that,
whether as a country or big corporation or whatever, you
know, a bank, then yeah, you take advantage of the
opportunity. It's still survival of the of
the fittest, right. Because, yeah, in a sense, we
are all corruptible, right? Everyone would say, well, no, I
wouldn't do that if I was in that position.
But I I think we would all do that to be honest.
But the point is I'll get to Bitcoin.
But the the one other thing you mentioned about trans
transferring the gold, that final settlement part also got
way more opaque and and abstracted, right.
Like it's not that when I went back to the central bank in in
Amsterdam that was not really final settlement but I could get
the thing right. And if I gave you my gold coin
that was final settlement. That was the base layer of of
the representation of value. I gave you the gold coin, I
didn't have it anymore, you had it.
That is what is called final settlement, right?
And if we transact today with credit cards or or bank
transfers or whatever, that's like layer 6 on final
settlement, right? And final settlement is only
once a month between banks and then you have between countries
is once a quarter or whatever like this is all abstracted.
But what Bitcoin brings is not only the ultimate transparency
of the Ledger, as you mentioned, you know, the immutable, you
know, fiscal policy, the the policy monetary policy of the of
the networks or the issuance, the eventual supply and all
these things. But it's also that final
settlement. If I send a Bitcoin to you, you
have it. I don't and you don't have to
believe me that you have it. You can actually verify it,
right? And every 10 minutes, 75,000
notes or whatever the amount is, right?
They will all say this is still true.
And yeah, I think to end this segment, I love to say that the
Federal Reserve in America has never been audited, right.
Not even, let alone every 10 minutes, right.
So we have no clue what happens there, but we are still forced
to trust that money. And you know, Federal Reserve in
America is a good example, but this is the same in any, in any
country, wherever you are, you have a central bank that issues
a currency and you know, check out Google if they have been
audited, right? Yeah, yeah.
Yeah, but yeah, so and and this is also I think why it's hard to
understand Bitcoin. It's a lot together, right.
It's all these dimensions. It's the concepts of of energy
as in you know, individual energy expenditure which is
captured, all these things like what are the most common counter
arguments counter like of our like arguments against Bitcoin
that you face that that like how do you respond to them like what
what's the most common thing you hear?
I I guess like to keep on the same similar theme it's it's
this notion then around well Bitcoin was created at a thin it
like it, it just, you know some guy was coding and then he's
like hey I've created this thing called Bitcoin and next minute
we're meant to believe that this digital representation of of of
this thing is this ultimately scarce asset.
So I think that's really, you know the the the main push back
is this is this notion for people to really understand what
makes Bitcoin different than any other digitisation.
And I think like largely it was by first mover advantage for for
a start. There's a few things that play
into it like network effects and and and all of these types of
things. But ultimately you know it, it
does benefit from this notion of first mover advantage in in
terms of having the most traction, having the most energy
that's thrown. And that's all provable as well
in around how much energy what people are making economic
choices to point energy use and excess energy and wasted energy
towards creating this thing. And we can prove that and it's
really only the the decentralized nature of Bitcoin
by having that first mover advantage like it is the only
provably decentralized monetary good that we have.
You know and and this is where the arguments come in around oh
what about all these other shiny crypto things.
You know that I I keep saying why is it Bitcoin And ultimately
all of those. When you peer under the hood you
will find that they've gone through some form of
centralization, some form of pre mine, some form of centralised
body that's dictating the rules they're doing other things
they're not money and and many people have can speak to this
more eloquently than I can but what what a blockchain is really
good for is money. It's in a very inefficient
database. So it does one thing and it does
one thing well and that's money. Anything else like claiming to
use Bitcoin blockchain for, for these purposes yet to be proven
anything useful, like most of it's a distraction.
So I would say just stay in the database.
Exactly. Yeah, exactly.
So you know and and I think this is where the energy piece for me
like being an electrician and engineer really started to also
cement the that this is the this is the big daddy.
This is where I need to be directing all my time and energy
because that's where economic actors are pointing there
activity towards as well. And and it's really around then
what Bitcoin means for humanity in terms of energy.
Because energy, we know energy is directly correlated to human
flourishing. So your ability as a human to
access energy provides you a better life.
It keeps you, you know, keeps you warm through the winter,
keeps you cool through the summer.
And you can experience a lot more human flourishing if you
can harness and obtain energy. And that's really where looking
at Bitcoin, what we've never been able to directly tie
monetary good to energy before. And I think it's Henry Ford and
Tesla and all these brilliant minds throughout history have
often prophesized the fact that at some point our, our monetary
units in which we communicate value to each other, will be
energy. It'll be and and Bitcoin is the
best representation of that relationship that I've ever
seen. And that's really really a
fascinating thing to to think about and the the, you know
where Bitcoin can can tie into energy grids.
Energy production generation is really going to be a game
changer for the globe especially like and you can argue whether
you agree with this notion behind going 100% renewable.
Right before we I get the argument I get the that this
idea around us having final resources probably the most
important thing to realize about bitcoins energy use and it does
use a lot of energy. Nobody's arguing that it does
not. That's what is probably the most
important thing to realize is that at its at its fundamental
level I, you know in Australia, here we've got quite high energy
prices. I can't plug a Bitcoin miner
into my wall socket at home. It's deemed it's not an
economically viable decision for me, cost me more in the energy
use then I would be mining the Bitcoin.
So really why that's important to understand is that by its
nature Bitcoin is incentivized to seek out the cheapest cost of
energy. Now if there's that those
cheapest cost of energy always end up being wasted, otherwise
unused excess capacity or renewables, those those four
things generally make up the energy mix that that Bitcoin is
using. So where that's really important
for you as an energy user and as an as an energy consumer is it
can help capitalize and monetize energy grids so that your bills
are cheaper. And this is where I think the
education really, really needs to come to the fore in terms of
why. Does it get cheaper?
Sorry to interrupt, but it gets cheaper because it will make
sure that all the energy that is created within the power grids
will also actually be used and not wasted, right?
And therefore the power company earns more money, right?
So they don't have to charge you for the electricity that you as
an individual use for your home, right?
Because basically you're paying double or triple, you know,
whatever the real cost of the energy is because they're also
wasting a lot of errors. Yeah, that's, that's 100%.
And I can explain why that is a little bit and I think there's
probably a thing I'd like to clarify in there.
Just to make it clear, in case anybody's like you can never use
100% of your grid, because that's absolutely true.
But what we can use is introduce Bitcoin into the profitable
region between. There's always going to be a
profitable region of operability above your maximum demand.
So I can talk about all of that. So maximum demand is basically
the the maximum demand on the grid that everybody wants to
consume power and we experience that typically you get a peek
through the day period, but you'll also have seasonal peaks
as well depending on where you are.
So I can imagine in the Netherlands it gets quite cold,
your maximum demands probably going to be around winter.
For us in Australia, it's typically summer because we get,
you know, really, really hot summers, so everybody's air
conditioning loads. So a lot of power usage is
either direct most of the time directed towards heating or
cooling. They're really where your your
peaks are. And what's important to
understand about an energy grid is to make sure that you've got
the energy available. We have to be generating energy
in real time. There has to be capacity.
There has to be spinning motors. Yeah, solar capacity, wind
capacity available to be tapped into at the moment that we need
it. So what we do is we do
forecasting on historical data in and around how much energy
did we use last year, what are the trends in industry like.
We've got EVs coming on, we've got air conditioners going on.
We expect that this energy use is going to continue to
increase. So what we have to do as a grid
is we have to have enough energy to cater for the worst of days
that has to be available. Otherwise we have reliability
issues, we've got rolling blackouts, we've got load
shedding schemes that we, you know, you only have to look at
countries like South Africa who you know you can't rely on
energy power 24/7 there, you just simply can't because they
don't have enough generation capacity.
So the developed world very much manages that a lot better than
say the developing world in that in that regard.
But what's important to note is that if we are going to build
out a grid that's going to cater for this worst of case scenario,
the worst case, you know, it might only be one day in the
whole year that we've got to cater for with this maximum
demand. If your maximum demand's here
like at a peak and then your normal demand is down here, what
demand represents is your maximum billable amount that you
can charge people, right. It's your maximum revenue that
you're going to ever going to be able to obtain from your
consumers to pay for keeping the lights on to keep the all of
this capacity going. So what Bitcoin mining
represents is a fully controllable and flexible load
that we can introduce to introduce another revenue
customer into that grid. So that when we are not at peak
demand, but we're at like a normal demand level, what we can
do is introduce a new revenue model, a new consumer to be able
to help monetize the excess capital costs that we had to put
in to build that grid out to cater for the worst of days if
we don't have. That's the most important point
by the way. I think because you make an
investment for the energy sources that you use to create
the electricity, right? So you know what, whatever you
do, hydro, sun, wind, whatever, right?
And just from a business standpoint, you want the highest
ROI from your investment. How do you get the highest ROI?
Is that you have these sources running whenever they can run
basically, right? Not not only to be prepared for
the highest loads or how did you set it, like the maximum day,
yeah, but also just to get the highest return out of your
investment and. They will.
Probably run right? Still run, but they just waste
the energy and then they just charge the the the users of the
energy that is actually used, just double or triple.
That's how to get to. Return.
Exactly. And and the more that we
investigate renewables the the the harder that is to balance
because a lot of you know and that's slowly getting fixed with
technology. We don't necessarily have to dig
down into into what that means, but solar's a really good
example of us losing a bit of the ability to control the
generation. And So what we have in Australia
is what we call a duck curve effect on the energy grid.
So through the day, what we're starting to notice is we're not
at home using all our power through the day.
We're at commercial, you know, buildings, we're in the
workplace. So our maximum demand, our load
profile is actually quite low in Australia through the day.
But what's starting to happen is that we've got too much.
We've gone very aggressive on rooftop solar here.
So just about every person in Australia's got solar on their
roof to help offset their own energy costs.
Well that was the idea right is to is to spend a bit of money
put some solar on there and help offset your costs.
But what that's resulted in is downstream making your the
energy that you do pay for even more expensive.
But that's another rabbit hole for another day probably.
But the really the the dangerous precedent that we've set now
with this idea is that we can't control this solar in in its
current form. So we've got too much generation
happening through the day that we don't have enough load to
soak up. And what that does is it puts
pressure on what we, what we refer to as the heartbeat of our
network. So these rotating machines is
what sets the heartbeat of the of of of our network.
So in Australia, in the in the EU it's around 50 Hertz, in the
US it's 60 Hertz. That's the representation. 5050
times the cycle and 50 Hertz is the heartbeat of your energy
grid when you've got uncontrollable load.
I'm sorry, uncontrollable generation.
That actually puts stress on your rotating machines.
Your rotating machines actually need this.
They need load. They need a certain amount of
load to be able to maintain that heartbeat.
When you've got too much generation.
Putting pressure on that, it actually speeds your heart rate
up. And just like you, it's not good
if your heartbeat goes too high or too low.
That is critical for an energy grid and we've only got a very
finite band in order to be able to maintain a nice healthy
balance. So if it's 50 Hertz, we've got
about 52 to 48 Hertz is the band that we can operate in safely
before equipment starts blowing up.
And we we experience some really quite negative effects on the
grid. So when we've got uncontrollable
solar that's actually making that heartbeat speed up and
that's a really, really dangerous precedent to set and a
really dangerous well, we can, we can look forward into these
policies around increasing renewables and we can start to
understand the constraints that we're going to have, the more
that we explore that. And here's another example why
Bitcoin mining is the perfect solution.
Because what ends up happening on your energy grid is that
we've spent all this money building up this hydro facility
here and this wind facility here and all these things.
I mean, they're economic actors, like they want to be generating
24 hours a day, seven days a week to pay for the excess, the
the cost that they expended to build this thing.
Yeah, Yeah. And when we've got too much of
one thing, that balance gets thrown out.
So what you end up with is wasted, trapped energy like
hydro scheme, for example, when that sun is shining and we're up
in Cairns here in far North Queensland, we've got a lot of
water. So through, you know, through,
through winter, we've got these weirs that are used for these
hydro facilities. They're full of water, they're
ready to go. All they've got to do is release
the water through the hydro generator.
But if there's not enough demand on the network, those hydro
generators have no, no ability to generate.
So the bid actually goes, goes negative and they will actually
get charged to generate. As crazy as a notion that that
sounds, if they choose to start up their generator, they will be
charged for generating instead of, you know, getting paid to
generate. So that's where Bitcoin mining
as an economic actor to be introduced into all of these
things really starts to make sense That if I've got a really
large load that I can introduce to the grid to introduce a new
revenue model, then all of a sudden I can start tapping into
those otherwise wasted energy sources.
I can start soaking up some of that excess generation capacity
like solar. And I can start to turn that
into revenue so that all those downstream costs and effects
don't end up going on the consumer.
Because if we don't do that, consumers end up paying either
one of two ways. They pay directly through their
consumer bill, through their energy bill to pay for all this
stuff, or they pay it indirectly through government taxation
because governments are then like want to incentivize that,
that building out of that capacity.
So they're going to introduce government subsidies, which are
funded by taxes. Great.
Last points. Yeah, I I think it's it's maybe
good to add why then Bitcoin miners, right they are computers
why wouldn't we use computers that do AI right or we know
whatever the other ideas are. But I think the the point with
Bitcoin is that if you have a Bitcoin mining facility and you
can turn off computers at will, they are not servers, right.
They are computers that have one task basically.
That is why I think bit you know, but please add like that's
the biggest argument for Bitcoin mining is that let's say you
have, I don't know, 10,000 miners and you need to turn off
5000 or 8000 or 7000 or 6000, that doesn't really matter.
But if you have a server park that is machine learning, I
don't know, AI, something, you know, powering something like
that, then it's going to be really hard to identify, OK,
which which servers are actually being used right now, right?
Like, am I not cutting someone off from the surface that I
provide? Right.
So there aren't really any other computing power or or like
companies or constructions that use computing power in just that
singular way like Bitcoin mining does.
Do I say that correctly? Yeah, it comes it comes down to
the disruption like disruptibility.
So if we turn off a Bitcoin mining facility, largely it
doesn't affect the network as a whole because it's going to be a
small portion of of the whole and then we just keep Tik
toking. And if it was a longer term
thing, you know the Bitcoin difficulty adjustment, you know,
which we don't need to get into right now, but that just adjusts
So the long term, it's only ever a short term effect anyway, but
the long term effect will will adjust as well.
If that were the case and you and you contrast that to like
you say with if it was a a data server, an AI server, whatever
else server, Amazon Web Services, there's real life
utility relying on that, on that function.
So you know, you can imagine if it was a Netflix server and it
went out, people will be up in arms with Netflix because hey,
my stream just got interrupted. I was halfway watching the
Matrix, right. And and I can no longer watch
it. So it's not as easy to use those
other types of of data centres in order to be able to switch
off on on a whim and and the response rate is really what
makes Bitcoin mining unique. So we this idea around and they
call it ancillary services like using load.
So we've got, we've got supply side demand, supply side
controls and we've got demand side controls.
So demand is about controlling load, can we control and we've
used really large like Iceland's a great example, they've got a
lot of aluminium export because they've had a lot of excess
energy. So aluminium smelting, aluminium
production is, is really energy intensive.
So that's where they've had all of these aluminium smelters pop
up in Iceland because they have excess energy and they've used
that as the ability to help introduce load to to to that
grid, to operate the same thing. But the really critical part is
you can't turn off an aluminium smelter or a steel mill on a
whim. They've got molten steel that's
going to harden in their, you know, in their, in their
production facility. So it's not good.
It can't react on a dime. Bitcoin mining, it can be shut
down within a number of seconds. We can go from really high, high
load. And this is the, the really key
thing is like even a a web server and they're going to have
a finite amount of power that you're going to ever draw.
Whereas Bitcoin mining, we can actually introduce more and more
as long as the the connection capacities there.
We can have gigawatts worth of Bitcoin load sitting there at a
geographical location that's suitable to the grid in
containers. And then if you need that
switched off in a hurry, you can switch it off in a hurry.
And if longer term it's no longer needed, we pick up those
containers and we relocate them to the next energy centre that's
required. And it's really a mind blowing
concept that is not fully understood by grid operators.
And I think the reason why, like even in Australia, 'cause I do
this, that's my Fiat job. I I can, you know, I I, I work
on this stuff from day-to-day and I've tried to enter into
some conversations with the regulators.
But you know the the, the problem with most developed
countries is the fact that because the energy transmission
grids, generation of facilities took so much money to to to
build out, it ended up being done by government because no
one wanted to touch it, because of this respect that you can't
make money from it. Like ultimately they're very,
very expensive in a traditional sense to build out these grids.
I've got a good example. So in Queensland state of
Queensland in the northeast of Australia, we've got 64,000
kilometres worth of what we call swirl network, which is poles
and wires. So it's single wire, earth
return, single wires you on poles, going out to cattle
stations, Comm sites, all of this returning through the mass
of the earth is the return conductor.
It's a pretty mind blowing concept if you're not familiar
with it. However, we've got 64,000
kilometres of this stuff that we've got to go out and service
from day-to-day. That services 4% of our customer
base, only 4% of our customers. So we it's not profitable you
can't do that in a profitable sense and that's why governments
have ended up owning a lot of the grid infrastructure over the
years in most developed countries because it's taken a
government to go and expend all of that to make sure that these
people out in the Bush have got power.
So you know and that's that's a legacy thing that we've that
we're going to carry forward. So, but where where the point
I'm trying to make is that the conversation when you've got a
government utility owning your infrastructure profits not
always the main driver whereas if you're a a private entity
profit's always the main driver, it's the it's the economic
driver that make that forms most decisions is around profit.
So that's I think where we see Texas ERCOT is most of those
generators and most of those facilities are private entities.
So it's been an easy conversation for them because
they're driven by profit. So it's a bit of a no brainer
when you say we can, we can continue on with the, the
building out of all of this, all of this stuff and we can
introduce this new economic actor, this new revenue source
to make all of that make sense. So it's a bit of a no brainer
for a private entity to go. I think so too.
You're telling me I can have access?
Very simple. Yeah.
Where you you have that conversation with a government
employee and they go, well we've got all these other drivers the
environment and social and you know all these other drivers
profits neither here nor there really.
So it's it's a harder conversation to have and you
couple that then with and This is why I'm a pretty you know
dogmatic maxi with Bitcoin and and I and I do vocally talk out
against all of this other grift like NFTS and you know all all
these crypto scams. It's because I'm.
I'm passionate about the conversation about what Bitcoin
enables humanity and energy's one piece.
You know, we've spoken about the money all of these things.
All of this other stuff is a distraction.
And I've had these conversations with these government officials
and they see Bitcoin in the same light as all these other scams.
And it's not it. It it is really an uplift, an
upgrade for humanity and all of this other stuff is a
distraction. And and in one respect, I'm
grateful from the fact that this ETF, these ETFs have been
approved in the United States. Because if anything, I think it
puts a bit of legitimacy in Bitcoin as being an asset that's
worthy of a seat at the table for the discussion.
Because now it's starting to be, you know, if Blackrock's
investing in this and encouraging investment in this,
maybe it's not embroiled in all of this other crypto and all of
these other schemes. So I think that conversation
like as a government entity they can't be seen to be coupling
with a scheme, right. And that's where Bitcoin's been
framed in the same light as in all of these other scams.
And we haven't had a a really good robust conversation because
straight away they can't see past the scam.
So I think that's really where the opportunity lies
particularly over this next cycle is legitimacy and it in in
in IT as an asset and then also the legitimacy as it being a a
very viable future load to help monetize energy grids and help
build out the energy grids of the future.
Yeah. Well, you said extra
profitability for commercial companies, right.
But I I would say that's a secondary effect.
The first effect is just 100% ROI just on your basis
investment of just the. Correct.
The, the how to say the equipment basically to for you
know for these sources so and and well fascinating that a
government employee or government how do you say
company, energy company then says to you, well we're not
thinking about that but yes not profitability but you could say
well if you are 100% efficient you know how does that sound you
know but but then I think we come back to what are the
incentives of a government and the broken money and all these
things like that even that is in most big organizations not even
top of mind right because they they are not focused on money in
that sense and there is always money.
As a company agency. Right, so there is always money,
so you don't have that incentive to think about.
Am I actually using the money in the most optimal way possible?
So even when you come with a solution, they are not even
aware of the problem right to what you bring this solution to
SO. And I think that's.
Really hard. The education opportunity exists
for to reach out to consumers, right is like your energy bills.
Everyone's energy bills are increasing and they're going at
an exponential rate. So if you understand Bitcoin,
also understand energy, and then start having those conversations
with your members of Parliament. To say, I demand this like this
is, you know, if it's a government infrastructure, it's
really belongs to the people. Therefore, I demand that you at
least investigate this, this notion of being able to
introduce a new revenue source that's gonna obviously secure
the network do all these excess extra things, extra benefits,
excuse me a second, start a phone call coming through all of
these extra benefits. And I as a constituent of your,
of your government demand that you at least look into this
because it's gonna mean I'm, I'm gonna have cheaper or more more
approachable energy bills into the future.
And I guess like in particular if if where this is really
important is if renewables actually resonates with, you
understand like this is a millennials podcast.
So I think millennials in general are a bit more accepting
of of this idea around achieving 100% renewables, right.
It's, it's critical. You cannot have an energy grid
as safe, reliable energy grid based on renewables if you don't
have Bitcoin mining at least playing a part in that energy
mix and and I can explain why that is a little bit around
again, it ties back into this notion around maximum demand,
right. But if we look at maximum demand
from a renewables perspective, wind energy, we talk about this
thing in in the energy space called capacity factor.
So that is what is your installed capacity and how much
of that are we likely to be able to tap into on average you know
reliably into the future. So wind energies have around 30%
efficient at best. OK, so that means if your
maximum demands here, you need at least three times the size of
your maximum demand in installed capacity in order to be able to
maintain a safe, reliable grid. Now that's a, that's a, it's a
it's there's a lot more nuance in that, right.
And I'm not saying that even the notion of Bitcoin being the
panacea to soak up all that extra 2/3, but it's going to be
if. We talk about fair value for the
energy that already 3X is the price, the fair value of the
correct energy in a sense, right?
If you do nothing exactly. So I mean and and this is where
the framing sometimes I think we get it wrong in in the Bitcoin
space about it being the panacea to fix everything.
It it won't be the panacea, it won't soak up all excess 2/3 and
that's not what we're suggesting.
But it definitely will play a part in that energy mix to be
able to make that sustainable. So the types of things to make
100% renewable grid that that they're looking at, you know, in
Australia, nuclear's not really considered nuclear is in my mind
a good option to making sure that you've got rotating
machines. It's got a lot of benefits for
the stability of a grid. But if we ignore nuclear for a
second, what they're looking at in that energy mix is solar,
wind, battery storage, hydro, pumped hydro.
And then we're also looking at different things like hydrogen
production. That's another good way.
But hydrogen production is also very inefficient.
That's only about 30%. You'll expend three times as
much energy as you will be able to store with current
technology. It doesn't mean that that won't
improve over time, but this is the the type of energy mix that
we need to start considering in and around introducing extra
revenue into that grid to be able to monetise and get your
ROI on those capital projects to make everything else viable.
So you can invest in battery storage, so you can invest in
high. Exactly.
And pumped hydro and all of those sort of things over time
and and build out a reliable grid because nobody wants
rolling blackouts like that's that's not where we want to go.
That's a failure. Yeah.
Yeah, yeah. And I think like it's it's a,
it's a tragedy that some like and and particularly those in
the younger generation are actually saying I'm OK with it,
I'm OK with rolling black, Yes, 'cause I've got to do my bit.
You know it's this it's this real socialist type of mentality
towards towards the future which it's I mean that might be that
might be admirable in in some circles but it's not needed like
that. That's the if if we if we don't
have to have rolling blackouts you don't have to make the
sacrifice and we can have all of the benefits of a nice reliable
safe grid while also making sure that it's it's profitable for
the companies to run and your energy costs are as small as
they can be. It's a bit of a no brainer in my
mind. I think it's because in some way
the line of communication has been energy usage is bad.
But as I think as we talked about before the the entire
world, world revolves around energy, right.
I I mean like if you look around, if I see you here, a
plant, a book, a candle glass in my in my window, everything
costs energy to create or maintain, right.
So the the, the fact that we now think, oh, energy usage is bad,
now energy, we need more use of energy.
That's how we propel our civilization forward.
Right. But the fact that people really
think this, right, I think it goes back a bit to the mental
model that we talked about before.
When when, you know, there's people who really think this,
oh, yeah, I'm OK with rolling blackouts.
Then again, you're deferring your own responsibility to
someone else who is not able to figure it out, right.
They're not able to figure out how to make, you know, these
renewable sources economically viable to actually use and give
us more energy so we can actually go go forward, right.
So you're again letting yourself be defeated by the, I don't want
to say incompetence, right, but by the actions of other people.
But it's also because we just don't know, right.
It's only by studying and and yeah, it's just studying.
It's just spending time and most people don't have the time to
study money. That's what we talked about,
right. But this is a whole nother
subject basically. And I think that is also the
problem in a sense that it's so easy to just basically lay down
and, you know, follow what other people are saying, right?
It's just it's hard to think for yourself.
If you cannot even get to the level of knowledge or
understanding to think for yourself to create your own
opinion or view on something, then of course you follow other
people. And and it's really like it's a
bit freedom of choice as well. And I think it's, it's setting a
really bad precedent because, I mean, you might agree with that.
You might say I'm OK with rolling blackouts, but you're
then forcing your decision on everybody else because you can't
just. Back in time yourself if yes
also. But we're also going back in
time. Yeah, in a sense, right.
We're going back to the 1900s or 1800s or whatever.
And I I talked about this in in previous episodes.
It's it's also downstream from the money as you mentioned
before, right? Like I like to say, like
currently this is part of my pitch, right?
But why is it funny that the bread was $0.20 fifty years ago
and now it's four or $5 or EUR whatever your currency is,
right? Like that is going back in time.
Things should become cheaper. Energy is abundant.
Right. And if you're going to be OK
with rolling blackouts then welcome to the 1800s.
Right. It's it's so illogical.
Yeah, I this is something I really want to fight personally,
right? Because it's just, yeah, you're
convinced of something that is not real and very, Yeah, it's
nonsensical. It doesn't make sense.
It just doesn't make sense to agree to that just because,
yeah, other people are incompetent or the money is
corrupted, basically, right. Couldn't agree more.
Yeah. Interesting.
I love how our conversation went.
Two really different directions. But yeah, that's what I love
about Bitcoin. That's what I love about talking
to other Bitcoiners. These are I think two of the big
dimensions of Bitcoin for people to again I think study and
eventually like try to under understand.
I think one also doesn't exist without the other, vice versa,
right? Like you, you have to understand
these things. So, and there's a whole.
Host of downstream effects like like you say, it all just comes
back to to money ultimately and all of the downstream effects of
money. And if we fix money and we can
fix energy and we can fix real estate and we can fix all of
these things, 'cause everything is is correlated.
Everything's you know, connected.
So you know it and that's why I'm here, man.
That's why, you know, that's why I love, I love Bitcoin from that
respect that it it it ultimately, if you you can
still, you can peel back all of these layers and you can find
really sound arguments to like it's again, it's a cliche and
it's overused. Bitcoin fixes this, but it
really, really does. It's it's incredible.
Yeah, I think, you know, fix the money, fix the world.
Sounds very grandiose, right? But I think for people,
especially also millennials, right, People who are concerned
about the future, people who have young families, right?
Like, I'm the same, right? But the I think I tweeted this
yesterday, but think about everything you would want to fix
in the world, whatever it is, it is in that state.
Because the money is broken. Every, every bad thing in the
world is downstream from the money.
The money broken money, you know, creates prefers,
incentives and people will abuse that, right.
And that's why we have to fix the money.
Money, that is, that that we cannot tamper with, right?
And I mentioned the corruptibility of of the humans
before, but I think This is Money that fixes our own
corruptibility because we cannot fuck with it.
And that is the entire point. We need money that we cannot
corrupt or any other person can corrupt, and that's the
trustlessness, right? So if we have that technology to
exchange value between each other that is incorruptible,
then we we can try to be corrupt as humans.
We can try to scam or abuse, you know, whatever the Bitcoin money
system is that we use. But you won't get really far.
And the same goes for governments, right?
I think what you said like if you eventually start demanding
and you can do that as citizens, I think you can demand your
things because you can demand what will be good for you
because the government is also just other people, right.
And they have the same issues with you know, their personal
internal challenges, whatever their family at all all these
things. Like I think it's Steve Jobs
says like everything you see has built was was made-up by people
not not smarter than you, right. I think that's that's really
true. So if we have an incorruptible
way of exchanging value, then everyone needs to basically get
in line including the government, right.
And then if they want to ask you for money to subsidize their bad
investments in renewable energy sources and we have Bitcoin, we
can say, you know, well, convince me, pitch me, you know,
like just not take it from me and not and and then use it in
in the, you know, an ineffective way.
So yeah, I mean, I love this conversation.
I think this is really what it's about, so I want to thank you
already so much. But I do have a last question
that I want to ask, and I ask everyone the same same question.
And the question is what is a core belief you will never let
go? My core belief I'll never let go
is I think this notion behind you know, and this isn't
necessarily Bitcoin related but this this notion of you're
you're in charge of your own destiny.
So thank please don't sit on the sidelines thinking that you
don't have optionality and you don't you can't do anything in
in your present circumstance. Bitcoiners, I think get Bitcoin
really quick, 'cause we've most of us are self motivated people.
We read, we take the the opportunity to improve
ourselves, to to learn to to never stop learning.
And I think that's a core belief of mine that will never stop
changing is like, you know, I I talk about this optionality of
Bitcoin and around it, giving me optionality and that may mean
that I might be able to leave my Fiat job one day and pursue the
things that I'm passionate about.
It doesn't mean I'm going to stop.
I'll never retire. I will never stop.
I'm one of those, you know, motivatedly minded people to
keep the hustle going. But it'll just mean that I can
choose where I direct that time. And I think if if there's a core
belief that that I, I, I hold really true, that I can never
see changing, is that people need to upgrade themselves.
They need to never stop learning.
They need to always be looking inwards.
Reflection. How can I be better?
How can I keep learning? And what can I do in order to
change what's in my sphere of influence?
If I don't like my world, take action.
If I don't like my situation, my job, my you know, the way that
you know you're interacting with family and friends.
Own it, Own it. Look in, look inward and see
what can I do to affect change. Because it's in with your within
your power, within your ability to learn about what you need to
do to make the change. Amazing ending.
Love death. Thank you.
Thank you for your time. From I absolutely loved it, man.
Appreciate your time. Me too, man.
Well, I hope to see you again in real life.
I don't know when or where, but let's let's see.
I'll link to your X account. Looking glass.
The book, so people can follow you and check out your stuff.
And yeah, thanks again, man. And I.
Appreciate it. Thanks.
Cheers. I hope you enjoyed this episode.
If you did, it would be amazing if you could rate, review, and
subscribe on the podcast platform of your choice.
It will help us educate more millennials on the importance of
Bitcoin. You can follow and connect with
me on Twitter. I'm Bram K That's at BR AM K and
if you are or know someone who has an interesting perspective
on Bitcoin that's worth sharing, hit me up.
I read and reply to every single message.
I appreciate your support and hope you'll be here for the next
episode. Thanks for listening.
Bye.