(A post in the meta-experiment series of the Broken Money book club, part 5)
We've talked before (here, here, here) about one of Lyn's most remarkable claims, about the technological determinism of bitcoin. We've spent less time on the determinism of fiat, but this idea is just as important. Lyn proposes that when advances in telecom made it possible to communicate at the speed of light, that this introduced an irresistable force on the monetary system: you couldn't have sound-money final settlement at the speed of light, so money became principally an expression of credit.
If I were to describe in one paragraph why money has been broken around the world for so long while almost everything else has improved substantially (energy abundance, technology abundance, and so forth), it’s due to this gap between transaction and settlement speeds that the telecommunication era created. (p. 301)
In other words, the determinative force is a kind of impedence mismatch between one important thing (our ability to communicate), and a related thing (settling transactions). For much of human history the distance between those two things was small; suddenly, it was vast, and fiat was born out of that vastness, to great consequence.
The more time that passes, the more I think this is the most profound thought in the book. And it reminds me of another profound thought that I encountered a few years ago:
The divorce between ownership and the real responsibility of management is serious within a country, when, as a result of joint stock enterprise, ownership is broken up among innumerable individuals who buy their interest to-day and sell it tomorrow and lack altogether both knowledge and responsibility towards what they momentarily own. But when the same principle is applied internationally, it is, in times of stress, intolerable--I am irresponsible towards what I own and those who operate what I own are irresponsible towards me. There may be some financial calculation which shows it to be advantageous that my savings should be invested in whatever quarter of the habitable globe shows the greatest marginal efficiency of capital or the highest rate of interest. But experience is accumulating that remoteness between ownership and operation is an evil in the relations among men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.
More succinctly: when new affordances (this time, legal and logistical affordances) allow a person to "own" a piece of a company, but that ownership is abstract, incremental, and operates in a temporally remote fashion over great distances, and you don't have any real experience with the thing you own anymore, or the people involved, or the consequences of that ownership --
in such a circumstance, weird things happen. Empirically, a lot of bad things happen.
So it appears to me now that we can talk in a general way about what comes when you 'split the atom' in this way. If we seperate transaction from settlement, we get X; if we seperate ownership from the visceral results of ownership, we get Y.
As bitcoiners, we're very used to talking about the evils of X. Are they related, somehow, to the evils of Y? Both things resemble a kind of goblin mode artifact, a cousin of high-time preference, throw-away culture.
I'm not sure where to take the idea, but it seems important.
Tom Woods has talked about how one of the major problems fiat created was turning almost everyone into amateur stock traders. On a hard money standard, people can literally just save their money for tomorrow and have confidence its purchasing power will be preserved. Fiat made saving untenable and "saving" became a euphemism for financial speculation.
The logic makes sense, but it would be interesting to know more about this historically, e.g., when money was far sounder, but there were still abundant things to invest in, what did people do? I can imagine there being a serious confound with people getting richer in general, since richer people probably always speculated more. Maybe the difference is that now poorer people also speculate?
Maybe the difference is that now poorer people also speculate?
This is his point.
a serious confound with people getting richer in general, since richer people probably always speculated
Agree. That makes it difficult to evaluate definitively, but people don't save by hiding money in their mattresses anymore. However, it also wasn't that easy to make investments for the average person back then, so maybe they would have done more speculation if it had been as easy as it is today.
"The rich can always afford to speculate" reminds me of this awesome visual essay that argues risk tolerance is the cause of wealth gaps. We discussed it a wee bit here.
Risk neutrality will definitely lead people to greater wealth on average, but it will also lead a larger number of people into ruin, since that's the point of risk aversion. So, we do expect rich people to be more risk neutral, because that's how you get there.
I'm not sure what the evidence looks like wrt wealth influencing a person's risk aversion. In economic models things like risk aversion and time preference are assumed to be immutable in an individual. However, that assumption is known to be sort of dumb and is generally made so that the models are tractable.
There's a bunch of interesting work in being able to manipulate risk tolerance on different timescales; which is an instance of key aspects of a person's life-strategies being "configured" by early exposure to environmental features. A nice account is this book, although there are some controversies.
(In healthcare, the lingo is ACEs -- adverse childhood events. It's foundationally the same evpsych ideas, though the healthcare people are too solipsistic to connect to the larger science, as per usual.)
IIRC the essay splits risk tolerance into relative and absolute risk. It argues that even if someone poor has the same risk tolerance as a rich person relative to their wealth, the poor person's absolute risk is lower than the rich person's. When iterated on in the simulation they provide, the difference in absolute risk tolerance causes a very large wealth gap.
This essay is one of the best things I have seen on SN so far… sharing it with all who will listen.
I think the willingness to take "risks" is the overriding factor, if you consider it risky to borrow heavily when you mimic a leveraged government that can create a borrower's paradise. You didn't need to be a genius to buy inflating assets. Debt is the key. Savers obviously got destroyed for the past 50 years.
Ha -- brilliant example of evergreen stuff on SN. Thanks for the link.
I'm curious how you indexed this in your mind. Like, what was the process by which the current discussion reminded you of the older SN one? It seems like a rich interlinkage.
Forced to guess, I'd say I found it via some kind of composite index where the column order is (player names, game shape). Whatever index I have where game shape is first indexed is probably more sparse than I'd like.

On the topic of brain indices ... The other day when I was trying to recall Drew Barrymore's name, I first audibly called her Hallie Barry then Happy Gilmore before arriving at Drew Barrymore. Brains must have some kind of soundex system.
Similar systems were used (and perhaps still are, though the field's momentum is elsewhere) to map out the brain's semantic structures back in the day. It works both semantically and phonologically, and presumably via other associational mechanisms as well.
I'd never heard of soundex, I'm totally stealing that.
Money being technologically determined is the standout idea for me too (perhaps only because you shared the insight anomaly). I also tend to find setups, how a money is freely chosen in this case, much more fascinating than consequences.
if we seperate ownership from the visceral results of ownership, we get Y. Are they related, somehow, to the evils of Y?
This is such a good question.
Self-custody is non-trivial. "Low" and persistent inflation, when argued from a human action perspective, intends to nudge people to spend more. Perhaps if we have to store our own money, the cost of storage will likewise nudge us to spend more.
There are probably other consequences of visceral ownership. @benwehrman observes here that it creates a polarity in bitcoiners where they become hyper-local or hyper-nonlocal. I can reason to each mode starting with visceral ownership, but it has a kind of quantum nature that's hard to unify.
A related idea that your link made me think of. (I don't think I've talked about it here, but I may have, bc I'm obsessed about it.)
Littering drives me out of my fucking mind. I have a pretty expansive morality in general, and try to be empathic (see my bio), but I think if there were no consequences to killing people, I would fucking murder people who litter. Like, on occasion someone will be driving through my neighborhood, roll down their window, and just toss garbage into the street. I would seriously pump that driver full of buckshot if I were 100% sure of not getting caught. The "fuck you" that such a person is saying to all of creation is something that drives me out of my mind.
In recent times, I had the thought: how would you behave if you felt absolutely no ownership of the world? That you didn't have a stake in reality or anything that unfolded there, including the needs of your fellow beings?
You might behave like that littering asshole. And what might lead a person to feel such a nihilistic lack of ownership in reality? Do I have the seeds of that in me? Ah, that was quite the look inward.
Point is: some of this same vibe is caught up in this question. If you have a visceral feeling that you're part of something, you behave in one way. If you have no such feeling -- or you feel only a hazy echo -- other things ensue, some of them pretty heinous, worse than littering (gasp).
Is there something to be done with that insight? Is this a truly giant thing that bitcoin could meaningfully help with? If so, man, that would mean something. What about Keynes's quote, though?
There is something here. Ownership is a major input to behavior. In the context of SN, I tend to frame it as private property (ownership) vs a commons. Part of SN's mission (I think) is to inject more ownership into the digital commons. Private property just scales better.
I loathe litterers too. I loathe all chronic externalizers though. I find it disgusting. We used to live next to a party AirBnB and I would spend at least an hour of each day plotting revenge.
The owner of the airbnb had ownership, but her ownership had boundaries and she would knowingly "litter" outside of the boundaries. If her property were instead a commons and she were merely a member, all things being equal she would probably litter more.
It seems ownership makes people behave better but only to the extent that they internalize the costs of their ownership. Does bitcoin make people internalize its costs? Not all of them, but it does couple ownership with its benefits so bitcoiners are at least internalizing some costs of ownership. We might also argue owning an appreciating asset invests us in the future such that bitcoiners are more averse than average to future costs.
It's interesting to imagine increasing internalized costs further. Perhaps if bitcoin could only be acquired by personally mining it we'd have more end-to-end ownership. The tradeoffs of that are unclear though.
We used to live next to a party AirBnB and I would spend at least an hour of each day plotting revenge.
God I wish I did not understand so totally what you mean. I used to live downstairs from a similar thing and the amount of murder fantasizing would have me institutionalized if anyone could read minds.
Does bitcoin make people internalize its costs? Not all of them, but it does couple ownership with its benefits so bitcoiners are at least internalizing some costs of ownership.
I like this idea, and I like trying to think about ways that btc adoption could be incremental on some of these weirdly philosophical points. It makes me weirdly optimistic, that there are these forces that are subtle, but at the scale of billions of people over decades, incredibly consequential. Just a modest internalization of costs could result in something dramatic.
It's comforting sometimes to know others share our experiences.
I just realized I answered what happens when we don't separate ownership. I'll have to come back and answer the actual question.
Haha. I appreciated the inverse answer, too :)