Latest / Great Houses / 20. The Architecture of Trust: Part 3

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20. The Architecture of Trust: Part 3 · Great Houses

• 0:00
  All right.
• 0:00
  Hello everybody, and welcome to episode 20 of the Great Houses Forum.
• 0:04
  We are continuing to talk about the architecture of trust.
• 0:09
  So today we're gonna talk about, uh, some things about supply and demand, and then we're gonna talk about, you know, going long and short on your, uh, on your family and on your community.
• 0:20
  And then we'll talk a little bit about I have, uh, as I'm, as I'm trying to answer the right questions that people are asking and that they care about, I'm, uh, gonna talk about what, what do we need to build?
• 0:30
  What could we build?
• 0:31
  What have other people built in this space?
• 0:33
  So I'm gonna start with a, a phrase that you hear a lot about, and people talk about, you know, the, the velocity of money.
• 0:39
  And there's this idea that there's a benefit to the velocity of money, that money is moving through, and, uh, I have, I have several observations on that, that, and we'll get to most of them today.
• 0:49
  Um, and it's true, right?
• 0:51
  The velocity of money has a benefit, um, but it, it also has an assumption, right?
• 0:57
  And the assumption is basically that you will be playing iterative games with the, the players that the money flows to.
• 1:03
  Okay?
• 1:05
  And, um, another way of framing this is you need to know what the edges of, of the loop are, right?
• 1:10
  And so when I say loop, what do I mean?
• 1:12
  I mean, uh, I mean an economy, it can be understood as a, as a loop of labor, currency, and assets.
• 1:20
  So a currency is something that allows flows of value to be exchanged between labor and assets, and then, you know, more and more abstracted representations of labor and assets, and that's the loop from labor to assets and back again that creates productivity, right?
• 1:34
  And this is, you know, and we, we think about the economy, we think about corporations.
• 1:39
  You know, there are better and worse, there are more and less efficient arrangements of people and property.
• 1:45
  This is what creates economic efficiencies and ultimately high capital societies when you have a bunch of solutions to the question of what is the most efficient way to arrange people and property to solve X problem, right?
• 1:56
  Um, you think about you need, if you, if you're trying to make a widget, you need a bunch of inputs, you need them… You need to have the right machines, you need to have the right skilled labor on hand and available and friendly to you.
• 2:09
  You need to have these relationships.
• 2:10
  Sometimes it's best to have those things inside of one firm.
• 2:13
  Sometimes it's best to outsource them.
• 2:16
  Um, though that, that, that kind of gets into the, the question that we'll be discussing today, 'cause outsourcing is a key question.
• 2:24
  How much do you outsource?
• 2:25
  You know, I, I note that, uh, we, we, we are, we are going to see… One of the most interesting things that's happening right now from an economic perspective is, you know, these giant factories that the hyperscalers are building, uh, and in particular, like the, the big stuff that, that Elon is making for chip, the chip foundry that Elon is, is building, is it represents a significant shift, um, in how we have understood, uh, the…
• 2:50
  Like i- instead of making what most people that are making arguments against outsourcing, they're making governmental arguments.
• 2:55
  They're making security arguments.
• 2:57
  They're making, you know, some kind of like benefit of society.
• 3:00
  What's interesting is that Elon is not really making that argument.
• 3:02
  He is making an economic efficiency argument, um, that actually there's, there…
• 3:07
  He thinks there's a benefit to insourcing and he thinks basically that, uh, most people are, are, are pricing these things incorrectly, which is just fascinating.
• 3:14
  So, uh, so there are broadly three types of, of loops, three types of cycles that, that the money that flows through your life can go through.
• 3:22
  There's the global open loop, right?
• 3:25
  Uh, which is basically the, all of the places where the US dollar is the reserve currency.
• 3:29
  So us, our friends and allies, the euro dollar, and then the petrodollar, right?
• 3:35
  Like all of that- That's the big global loop, and we're kind of at the head of that.
• 3:40
  And then there's a number of other, you know, currencies.
• 3:42
  But, uh, in many ways, and, well, for most purposes, people that are serious, that are doing something important are going to, uh, try to get to dollars to transact.
• 3:52
  And in many cases will need, they will have structural barriers to f- having flows of value move from point A to point B, um, if they cannot transact in dollars, which the US government uses in a variety of ways to kind of extract value from the system as all, uh, as a whole.
• 4:07
  So what this means is that, that you have individual actors, right?
• 4:10
  That, that are transacting in US dollars, um, or in a currency whose reserve currency is the, the, the Federal Reserve.
• 4:17
  And the individual sells to the widest possible market, right?
• 4:20
  You offer your labor, uh, to the widest possible amount of, amount of people in generally within your nation.
• 4:25
  But sometimes, frequently, um, if you can have something that overcomes the cost of, of transit, um, then you'll, you'll move anywhere in the, in the known world, right?
• 4:34
  There's people, there's Americans working in China, there's Americans working in all sorts of places, right?
• 4:38
  Um, and it does create wealth, right?
• 4:40
  This, this type of big thing, this big loop means that GDP goes up.
• 4:44
  Um, but it also tends towards atomization.
• 4:47
  And then, you know, the big, the big thing that, that, that I talk about and a lot of my friends talk about is fertility collapse.
• 4:52
  And I'll note that, you know, we, we refer to this as borrowing from the future, and it's really interesting to think about that, right?
• 4:58
  There's a, there's two, there's two phrases that, that I, I track, you know, these, these, these, uh, truisms.
• 5:03
  You know, the children are the future, and we're borrowing from the future.
• 5:07
  And, uh, you know, I wonder at some point, if you keep borrowing from the future, is there nothing left?
• 5:11
  And when you get there that, you know, stuff just all, all, all the value's been sucked out.
• 5:15
  Anyway, so the other, the other, uh, type of loop is a small closed loop.
• 5:19
  And this, you know, the, the way to understand this is kind of the traditional loop.
• 5:22
  You had strong barriers aside from like some, some caravan traders that could take goods from point A to point B, like on the Silk Road.
• 5:30
  Basically, the bulk of the economy was just kind of what you had within a, a day's walk or a day's ride, or maybe, you know, up to a week, right?
• 5:38
  However long, you know, things could hold without spoiling.
• 5:41
  Um- And so, you know, in a, uh, as, as we have moved, as technology has removed the barriers, um, I think, uh, Dr. Bennett did a, uh, I think a Twitter post or maybe, maybe a Substack article about, uh, you know, there's, there's no longer any, any, uh, economic friction in the system.
• 6:00
  There's only political friction, right?
• 6:02
  And he was talking about immigration and the idea that I think, you know, the, the, the real cost of a ticket to move somebody on a plane from one part, part of the world, you know, to another is like $500.
• 6:13
  Um, and I, I don't think he went into this in, in the tweet or the article.
• 6:15
  I've, I've had other discussions with, with folks on this topic, and we note, you know, the interesting thing about that is $500 to move a body, a human being, right, with all of the, the crazy things that they can do for good or ill, right?
• 6:28
  And any bomb that you can think of, any weapon is gonna be way more expensive than that, at least the way we construct weapons today, right?
• 6:35
  So there's no more friction.
• 6:37
  So what do you do?
• 6:38
  You have two options.
• 6:38
  You can have the small closed loop, which is basically trying to replicate that traditional situation where it was the village, right?
• 6:45
  You had your assets in the village, which was the land and the, the cattle, the herds, right?
• 6:49
  And then you had your labor in the village, and everyone had to work with the assets that they had, and they had to work for the, the labor had to be deployed, you know, i- in the same place that, that they were at 'cause it wasn't efficient to try to move people around, okay?
• 7:03
  And, um, you know, it captures demand, it manages credit, it creates internal scarcity, and keeps value circulating among members, and this can preserve both kinship and capital when it's closed.
• 7:12
  Now, the, the thing that, that, you know, got me started on this, uh, this journey, the, the, the, the Ox article, um, how funerals are keeping Africa poor, something of, something of that nature, is, is he's describing a small open loop.
• 7:25
  So we have local obligations, right?
• 7:28
  We have communities, right?
• 7:29
  And I'm gonna get into the problem with communities where your obligations remain local, but vendors, lenders, status goods, and importantly, monetary authority, who issues your fiat currency and your fiat store of value, uh, those people are all outside of your community, right?
• 7:47
  So how do we close the loop, right?
• 7:49
  Uh, what, what, what defines the loop?
• 7:51
  And, and generally what defines the loop is the ability to issue currency.
• 7:55
  The more demand there is for your currency, the stronger you as the issuing institution are, and the more value there is in being close to you.
• 8:03
  And what do I mean by close?
• 8:04
  I mean close in terms of the Cantillon effect, all right?
• 8:09
  The Cantillon effect refers to the fact that inflation does not occur evenly.
• 8:13
  The closer you are in terms of the, the, the amount of time that has elapsed and, and the number of transactions that, that, um, have taken place, uh, the better off you are, right?
• 8:24
  If there's somebody that's printing money, that's creating new currency, uh, i- if you can be within, you know, I'll, I'll show you a chart in a second.
• 8:31
  Within 100 transactions of those, of those issuers, that's a really good thing.
• 8:37
  It's a very powerful s- kind of structural advantage, okay?
• 8:41
  And, you know, given that fiat currency has been invented, and I, you know, I, as I've observed in the past, um, I classify fiat currency as a weapons technology.
• 8:48
  It will not go away for the same reason that, uh, nuclear power won't go away because these are the, these are the indicia of sovereignty, right?
• 8:57
  Uh, these are the weapons systems by which, uh, modern, modern nations and modern states exert power.
• 9:04
  And to give those things up is, in many ways, to, to give up your ability to, to exert power in the world, right?
• 9:10
  So sovereignty in a fiat world is having the right to issue things that can act as a store of value, um, and freedom, generally speaking, and, and actually I, I would say even I, I'd argue for this in a, in a Christian sense, freedom is having a close and beneficial relationship with the sovereign, right?
• 9:25
  The Christian sovereign, of course, being God, and so you wanna have a close and beneficial relationship with God.
• 9:29
  That's what freedom is.
• 9:30
  Um, and the same is true in, in any fiat economy, right?
• 9:36
  So I have a graph that, uh, that is, that, that was generated for those of you that are, you know, listening to the public podcast, while if you, if you, you know, jump behind the paywall, then you can get, you too can get to see these, these excellent, amazing graphs that I have my AI make for me.
• 9:50
  And the point of the graph is that basically, um- The, the Cantillon effect m-means that, that, uh, the, the additional purchasing power of newly printed money decays over time and, and basically we're, we're assuming a transaction rate, right?
• 10:06
  So for the first 100 transactions or so, um, you get- you, you- b- the, the markets basically haven't had time to react to the presence of the new cash.
• 10:15
  So nobody knows even, even if they know intellectually that more money has been printed, they don't, they haven't priced that in usually.
• 10:22
  It's very difficult for markets to price in, um, in those kind of currency transactions.
• 10:26
  Especially, I mean, w-when I say markets, the, the financial markets might price it in, right?
• 10:31
  The stock market might be able to price it in very quickly, uh, 'cause it's a super liquid market.
• 10:35
  But the asset markets, right, the, um, the, the labor markets, you know, famously will, will lag behind that for, for months, right?
• 10:45
  And, and so you can, you can kinda see that for the first 100 transactions or so, it's a, there's a, there's a lot of, um, purchasing power remaining.
• 10:53
  After 100 transactions, there's still about 70% of the additional purchasing power.
• 10:57
  After 200 transactions, there's about half, and then, you know, it kinda drops off in, in, in a, in a nice, you know, um, I think it's an inverse square curve, basically.
• 11:06
  But it, it drops down to where it's just a negligible a-a-amount, okay?
• 11:10
  Where everyone, where you're not able to spend it for the old value, and it takes about 36 months is what they're, is what they think.
• 11:17
  But the problem is, is, is that if you get new currency, you immediately have to spend it and turn it into, to assets, 'cause if you just get currency and hold it, right, and you've got newly, newly inflated, newly created currency, and you sit there…
• 11:31
  Like, like for instance, one of the key ways that, that, that, that Americans get access to brand-new or nearly new created currencies is, uh, through real estate sales, real estate transactions.
• 11:41
  Most, you know, real estate mortgages, um, if you sell a piece of property and somebody else buys it with a mortgage, you are getting access to fresh, shiny, newly minted cash, right?
• 11:51
  Um, but if you wait and hold onto that cash for too long and don't quickly turn it back into assets, then, uh, then the value of that cash, uh, you know, goes away.
• 12:01
  And I'll, I'll, I'll… For, for, for people that have thought about this is there's some really interesting similarities between this graph and how long you're allowed to hold money before doing a 1031 exchange, which I find fascinating.
• 12:13
  Um- It's almost like we know this at an institutional level.
• 12:18
  Anyway, moving on.
• 12:18
  As a community, you are always exerting pressure on supply and demand.
• 12:22
  And, and, and the way to think of supply and demand is, is to think of the, uh, the, the, the, the balance.
• 12:28
  If you've ever had, you know, the, um, the pipes, the clear pipes, and you put water in the pipes, the water always finds a balance, and supply and demand is like that.
• 12:38
  The, the, the price always reaches a balance of wherever… however you move the different, uh, the, the different places that, that the water can be, can be placed.
• 12:46
  So that's what price discovery is.
• 12:47
  So in order to close the loop, you have to have the ability to affect or influence both supply and demand.
• 12:54
  All right?
• 12:55
  And the problem that we have with this is we tend to have consumer communities, right?
• 13:00
  We tend to think of communities, we think of organized groups that consume or similar groups that consume, which is to say groups that add to demand.
• 13:07
  And worse, they don't even usually, like when you think about, you know, churches and things, they don't even usually come together and, and pool their resources to exert collective buying power.
• 13:16
  They are just all competing for the same goods or services in the market 'cause they're, they're similar.
• 13:22
  This is, um, you know, sort of the, the economic version of René Girard's, you know, uh, the similarity is what breeds conflict concept.
• 13:30
  So what does this do?
• 13:31
  It raises prices, which at least in the short term, tends to hurt the members of the community.
• 13:35
  All right?
• 13:35
  And we have another problem with our consumer communities, is that we're picky.
• 13:40
  Picky, picky, picky.
• 13:41
  Um, so we consume, and we also wanna be picky about what suppliers they use, and this is not true just of, like, consumer boycotts, right?
• 13:49
  You think about people, you know, boycotting Starbucks or whatever.
• 13:51
  But the classic Protestant, "I don't wanna work for any big evil corporation." And, and, and there is a way to do this correctly.
• 13:57
  I'm gonna get to it, right?
• 13:58
  There's, there's not… I, I wanna emphasize there's not no hope, and I'm not, and I'm not saying you should do nothing.
• 14:04
  But what I wanna point out is, is that when you do, like, the consumer boycott or when you say, "Well, I, I only wanna work for people that are, are, that meet certain moral categories," um, you're constraining supply, right?
• 14:18
  And so unless you have a way of constraining demand on the other side, right, then you're gonna, you're gonna have a problem.
• 14:26
  Your prices are gonna go up, okay?
• 14:28
  So on the one hand, the communities increase demand, which raises prices, and on the other hand they suppress supply, which also raises prices.
• 14:34
  And this is poverty, right?
• 14:36
  And i-i-in particular it's poverty because no one that pours money back into their community receives the benefits of the, uh, the increased prices, right?
• 14:45
  Th-this is, this is what I'm calling open loop community.
• 14:47
  So it's the same basic problem that the US has had vis-a-vis the rest of the world with trade balances.
• 14:53
  Uh, with the exception that, that, um, you know, the globalists, you know, to their credit, use the currency quite effectively to kind of extract value.
• 15:02
  The problem, of course, is that none of that value came back to you, right?
• 15:04
  As, as a listener to this podcast, almost certainly.
• 15:06
  It, it went into a number of, of, uh, much, much narrower buckets, as is, as is often the case.
• 15:12
  So there are two basic solutions.
• 15:14
  Um, um, I said only two.
• 15:17
  I don't know if it's only two.
• 15:18
  Uh, it's probably… It's only t- there's only two that I would not disavow, shall we say, right?
• 15:23
  There are other solutions but, but, uh, but, uh, but we disavow them.
• 15:26
  Uh, and it's issuing your own currency, controlling your own currency, and basically some form of a tariff, right?
• 15:33
  So for instance, let's say you are going to impose an artificial constraint, and we would, I, I… And when I say artificial, I mean any constraint other than price, okay?
• 15:41
  Um, so you have a problem.
• 15:43
  My group cannot afford housing, you know, group X. So you wanna artificially lower the, the price of housing for members of your group, right?
• 15:50
  So you decide to adopt a restriction.
• 15:52
  Property can only be sold, this property can only be sold to members of group X. But the problem is, by restricting demand you have reduced the price, which gives you less dollars available to afford services, right?
• 16:02
  So you, you, because you are selling your assets, the, when the, when the currency flows back over from assets to labor, then you have less, okay?
• 16:12
  Just gives you less dollars available to afford services.
• 16:14
  So the classic solution to this is a labor restriction on the same members of group X. So if you're in… If you're one of the people that can buy the property, then you are also going to agree or have some mechanism by which you're much more likely to work for the, the same people that are selling the assets that, that, that you would be the beneficiary of.
• 16:34
  Right?
• 16:35
  So this both lowers the value of the labor group, of, of group X, and, and in particular it directs the demand.
• 16:40
  It cons- it, it, it focuses the demand, um, towards specific employers.
• 16:46
  Okay?
• 16:47
  Now, why would somebody agree to join group X?
• 16:50
  And, and the answer is some kind of security.
• 16:52
  Some kind of… You're, you're, you're, you're projecting into the future.
• 16:55
  You're, you're in ma- you know, like I, I was criticizing people for.
• 16:58
  You're borrowing from the future.
• 17:00
  So you need a guarantee or, or a, a stronger likelihood of future demand for assets and future demand for labor, and especially a, a future guarantee of quality.
• 17:10
  Right?
• 17:11
  'Cause one of the things we're very worried about, and, and with good reason, is that we'll have, uh, something denominated in a particular name, a s- a good or a service, and then when we come back and we, we, we make assumptions about that, that, that service will continue to be offered at that same quality.
• 17:27
  Um, and I mean I… We've all had this ex- and, and you, you wait for a couple years and they are not in fact offering that good or that service in that same quality.
• 17:35
  And, uh, you know, one of the things that, that I, I experience this frequently in is, is Walmart, in my, my adventures in Walmart.
• 17:42
  And, um, so I'll go to Walmart and I'll see a new thing.
• 17:46
  They've got a new shirt, right?
• 17:47
  A new line, new whatever, right?
• 17:49
  And I buy one to try it out.
• 17:51
  And it's great.
• 17:52
  It's super high quality, right?
• 17:54
  Everything about it is wonderful.
• 17:57
  And so, you know, I, I wait for 6 months or 12 months or 18 months, and I go back and I try to find that same shirt, that same brand, and I find it and it is nowhere near the quality of the first shirt.
• 18:09
  Right?
• 18:09
  This has happened to me many, many times.
• 18:12
  Um, and it's very irritating, right?
• 18:14
  So we want, we want a guarantee of, of, of future quality.
• 18:17
  That's a really big, important thing for, especially for goods.
• 18:20
  Why would somebody agree to restrict their labor?
• 18:22
  And, and when I say restrict their labor, you know, I…
• 18:24
  This is not just, um- like making a promise that I'm never gonna work for… I- I- it's also optimizing myself, right?
• 18:33
  It's, it's saying I'm going to acquire skills that are useful in this domain and not useful in that domain, that are kind of optimized for a particular situation.
• 18:44
  And, and frankly, we see this.
• 18:45
  Frankly, in, in some ways we're already doing this, right?
• 18:49
  I had a very interesting conversation the other day with, with a homeschooler who was kind of coming to the realization that he needed to do more than just homeschool because his children were not going to be capable probably of, of going through the, the, the…
• 19:04
  I mean, there was, there's, there was always, I suppose, an element of humiliation, an element of, of a violation of conscience in the, the path that he had taken to get to his, his station in life.
• 19:14
  But now the new, you know, even, even in under Trump, there are these s- there were s- significant barriers, DEI barriers, woke barriers, and for him to send his kids to put them on that path, he felt like was just a terrible, a terrible thing.
• 19:28
  He didn't wanna do that.
• 19:29
  And so he's realizing, if I homeschool my ch- and, and more to the point, he didn't think they would do it.
• 19:34
  Like, because of how he was raising them, because he was raising them to be high character, high quality, freedom of conscience people, liberty people, right?
• 19:43
  He, he was like, "I, I, I don't think they'll succeed in that."
• 19:47
  Which is a, which is a wonderful problem to have, right?
• 19:49
  This is great.
• 19:50
  Okay?
• 19:52
  But you do have to think about, all right, what, what world am I designing, you know, my children for?
• 19:58
  What am, am I, am I willing to optimi- or maybe not design, but optimize, right?
• 20:03
  What, what world am I giving my children the best tools, the best chance of success in?
• 20:07
  Um, and that's, you know, if, if, if you're, if you're homeschooling your children and you're fairly liberty-minded, you're probably not giving them the basic tools and understandings and, and, and basically trauma necessary to fit in many of our modern institutions.
• 20:22
  So why would someone do this, right?
• 20:24
  And the, and the answer is, like why would…
• 20:25
  what would make it rational to do this?
• 20:27
  And, and what would make it rational is basically that they'll be guaranteed a job, and you, and you see this.
• 20:31
  Um, you know, there's, there's a very interesting article also by David Ock, so I'll, I'll, I'll, I'll get to it.
• 20:36
  Apparently he's, he's fodder for my podcast.
• 20:38
  Um, he talks, he's got a great article on Japanese firms versus, you know, he calls them H firms.
• 20:43
  That's the, that's the… He doesn't call them that.
• 20:44
  That's the, uh, the generally agreed kinda sociological term, and it stands for hierarchical, and it's basically, basically the American firm.
• 20:51
  The Europeans don't actually have H firms, um, in that same way.
• 20:54
  But anyway, um, he talked about the Japanese firm and, and the, these Japanese firms, they focus really hard on high quality, and they, and they hyper-optimize their employees.
• 21:05
  And as a result of that, their employees, it's not that they're legally prohibited from getting a job at another firm, it's that their skills are so dialed in to the specific environment of, of the firm that they tended to be picked up by at, at the beginning, and also takes a really long time to train them, like five, 10 years.
• 21:24
  Um, and it's after school.
• 21:27
  But they're, they're not useful.
• 21:29
  They would have to take a major pay cut and kind of cl- climb back up a very steep hierarchy if they went anywhere else.
• 21:36
  And so the, the, the people that are doing that training, they negotiate very hard for certain, you know, expectations and guarantees.
• 21:44
  It's very, very unusual for a Japanese firm to, to lay people off, right?
• 21:48
  'Cause basically it's no one else will hire them.
• 21:50
  I mean, and, and if somebody else did hire them, it, the, those people would not be nearly as effective or beneficial or as valuable in a different system.
• 21:59
  Sort of like, you know, uh, in, um, one, one of the things you see in like national football, right?
• 22:03
  American football is, uh, the, the different offensive systems, right?
• 22:07
  So you have a quarterback that'll move from one system to another system, and then one of the things that the, the sportscasters will just talk ad nauseam about for the first half of the season that he's in is, "Oh, he's in this new system, and is he, is he adjusting to it well, and is, does he get it?"
• 22:20
  Right?
• 22:20
  And all this stuff.
• 22:21
  Um- And that's, that's even more true in some of these, you know, these corporate contexts.
• 22:27
  Okay?
• 22:27
  Now, so that, that, that's, that's a point we'll, we'll, we'll probably spend an entire at least one episode talking about that here in the future.
• 22:35
  But so it's not just things like homeschoolers are deeply, like, ideological framings.
• 22:40
  You can, you can actually hyper-optimize someone on a particular technology set to the point where it's really, really difficult for them, uh, to find jobs elsewhere, um, and, you know, in, in, in most times and places we don't just tell people to learn to code.
• 22:54
  That's, uh, that's, that doesn't, doesn't really work and it, and it creates a lot of bad will.
• 22:58
  Okay?
• 22:59
  Now, to give, uh, the libertarians their due, um, really a lot of what we are talking about is, is pricing certain long-term behavior, certain bad behaviors, right?
• 23:10
  And so this is, this is one of the, the, the basic issues with corporate limited liability is it, it assumes that the actors won't break the rules and that there will be no, uh, non-obvious long-term consequences for any actions that they take, right?
• 23:25
  Um, and, you know, this is, this is, this is kind of the story of the, the last, you know, probably 200 years is, oh wow, there were externalities right to this thing we did.
• 23:36
  We did something that was growth-minded that seemed like a good idea at the time, um, and now there's a big problem.
• 23:44
  Maybe people are dying or there's, there's massive pollution or, you know, wow, the quality of this thing has dropped, um, and what do we do about that?
• 23:53
  Well, what we do about it is we sue the company.
• 23:56
  Well, the company a- you know, has these, these complex corporate arrangements.
• 23:59
  All the money gets sucked out, you know, certainly every year in, in, in, in many cases each month or each week even.
• 24:05
  Um, and so well what, what, what do we do with that?
• 24:08
  Well, um, we, we regulate.
• 24:12
  We, we, we, we create the EPA, right?
• 24:14
  Now, we didn't, we don't have to do this.
• 24:16
  We don't have to do this.
• 24:17
  We could, and I just always wanna mention this, we could solve this problem just by returning to the old common law general partnership limited liability standard which was, hey, your company was responsible for it and you personally were responsible for it.
• 24:30
  I mean, y- you think of the difference, and I've, I've spoken about this before about the, the, the Westphalian marvel, right?
• 24:35
  Which is that the, this extension and greater and greater extensions of limited liability, um, where you think about i- i- in, in the, in older systems, right?
• 24:46
  Older Christian systems and more Christian systems you were responsible for the, the, the outcome of your actions, and you were responsible for a long time.
• 24:54
  And if people got hurt, then they could come and say, "Hey, we have a problem with how this worked out and, and we demand satisfaction from you." And that was the basis of the old, you know, code duello.
• 25:03
  Like, you're, you're a bad person and you're either gonna make it right and admit that what I said was true or I'm gonna call you a liar and one of us isn't walking away from this.
• 25:11
  Okay?
• 25:13
  And so people, people carried this, this sense of responsibility.
• 25:17
  That wasn't random.
• 25:18
  It wasn't because those people had, like, a different moral character.
• 25:21
  It was incentivized by the structure that they were in, by the legal rules, okay?
• 25:25
  Anyway So we could solve this, right?
• 25:29
  By going back to that, that system where everybody carries their own, their own debts and, and any, any property that you make is forever associated with the things that, that…
• 25:38
  the liabilities that, that may have created it, right?
• 25:41
  And, you know, one of the things that we're, we're dealing with now, again, you know, talking about, thinking about the fact that there's no more economic friction in the system.
• 25:47
  Uh, uh, no more… in many ways, no more technical friction in the system, is you, you, you hire a person, you bring an immigrant to a new country, right?
• 25:56
  And sometimes that works out really well, and sometimes it works out really badly, and in no case is anyone responsible for that, right?
• 26:05
  If you bring, you know, the next billionaire, right?
• 26:09
  Who, who comes in and is a tech endeavor and they… he builds a, a business and he creates enormous amounts of value, great.
• 26:16
  Right?
• 26:16
  But there's no, there's no, there's no value, there's no reward for that.
• 26:21
  And on the other side, if you bring in, uh, somebody that's gonna engage in crime and fraud, and then do chain migration, bring a bunch of other people that are involved in cha- you know, crime and fraud and, and have a lot of kids on the welfare system and do all of that stuff, there's no consequences for that either, right?
• 26:36
  Brought by and large.
• 26:36
  And we have this sense that there shouldn't be consequences, right?
• 26:39
  And, and, and the, the big at… pockets of money, the big multinationals that could potentially, uh, you know, assume legal responsibility for these things, assume financial responsibility for these things, they don't believe they should be held responsible, right?
• 26:52
  And their directors, their key decision-makers say, "Well, if it was a reasonable business decision at the time, I shouldn't be held responsible either." Which means there's no one to take responsibility for this.
• 27:02
  Okay?
• 27:03
  Now, why do we do this, right?
• 27:05
  Why do we have this system?
• 27:06
  Is it, is it just because the people at the top are stupid and/or evil?
• 27:11
  Uh, and the answer is no, right?
• 27:12
  It's, it's… uh, I mean, they… many of them are stupid and evil.
• 27:15
  Um, but, but a lot of this is about optimizing for the speed of growth, right?
• 27:18
  So globalists believe that the path we are on is like running down a hill covered in glass, and you basically have two options.
• 27:25
  You can stop and fall on the glass and get cut up, or you can run faster and accelerate your way out, grow your way out.
• 27:32
  There's a, um, if you want a steel man version of this, that Eric Flint wrote a, a series of books which then kind of grew into this marvelous little alternative, you know, uh, uh, cinematic universe type of a, of a book series.
• 27:44
  Uh, the 1632, 1633, and 1634 alternate history novels do a really good job of kind of presenting this idea and this thought process, um, and, and, and making the good arguments for it, right?
• 27:56
  And, and there are good and reasonable arguments for it because sometimes it works.
• 28:02
  The problem is w- the way we have set up our, our society right now, we need it to work all the time, right?
• 28:10
  And there's a… the, the, the big problem again with growth that I see is, is that it assumes fertility.
• 28:16
  It just assumes- That people are gonna mindlessly have children and that, that, that this, this desire, this drive will just happen without any social, you know, uh, help whatsoever, without any economic incentives, and in fact, with profound and ever-increasing economic disincentives, right?
• 28:36
  And, and what we know is that the conditions of modernity destroy fertility, right?
• 28:40
  And, and, and this, you know, back to the immigration thing, this is why our elites are so intent on importing millions of people because in order for their currency to not crash, they have to have, you know, a certain amount of growth each year, and they expect some of that growth, like maybe a percent or two, uh, to come from, you know, new, new people, new bodies coming in, right?
• 28:58
  Um, and, and again, the other thing is that in, in a healthier cultural template, um, there are times and places where strong cultures with strong churches have been able to assimilate people amazingly quickly, right?
• 29:13
  Um, there, there are, there are, you know, better and different culture, cultural templates for assimilating people, and once upon a time, the West had some really humdinger cultural templates.
• 29:23
  We've destroyed those as well.
• 29:25
  Um- So we, we, we, we have a problem and growth has a problem there, right?
• 29:31
  And, and, and again, I would frame it, I think, you know, when we talk about future bad behavior, uh, I think probably this would be better framed as defection, right?
• 29:39
  And I, I, I talked last week about defection and defection risk.
• 29:43
  Uh, and the point is, you must have something in place to deal with defection and edge cases and all of those things.
• 29:49
  Um, and, and, and kinda while we're on the subject, like an inflexible barrier, thou shalt never sell to members outside of group X is, is… That's not really a very good way of framing this.
• 29:59
  What you actually want is a preference that can be overcome by sufficient money or for, for whom exceptions can be made, right?
• 30:04
  So who makes those exceptions?
• 30:10
  And this, this is, this is… This gets into how do we build this, right?
• 30:14
  Um, you know, as I said last episode, I wanna emphasize that in all times and all places, uh, these are religious or quasi-religious structures in- include up to and including the Federal Reserve.
• 30:23
  Yes, indeed.
• 30:24
  And so the way you enact, you know, community tariffs, right?
• 30:27
  Was that… That's kinda what we're talking about right now, is how do you, how do you govern things coming in and out of your community?
• 30:33
  How do you have edges?
• 30:34
  How do you have borders?
• 30:35
  Um, is through consecration and deconsecration, right?
• 30:38
  So who are the successful communities in this?
• 30:42
  I mean, it's, uh, the, the usual suspects, um, and there's more than this, but it's the, uh, the Jewish and the Amish, right?
• 30:48
  So the Jewish have their kosher laws, and the Amish have what's, they, they call the Ordnung, right?
• 30:52
  Um, and, and these… The, the important thing that I wanna, wanna just note here at the beginning is these are both mediated by mediators.
• 31:00
  There is a hierarchy here, and you have to trust those people, those mediators, in order to be part of the community.
• 31:07
  Like, that's what it means to be part of the community, is to accept the judgment of these people that are gonna kind of define rules and, and in many cases like set prices, um, and then define exceptions and, and kind of let, let certain people slide on in.
• 31:21
  Yeah?
• 31:22
  So Jewish rabbis and Amish bishops are both performing a very similar economic function, right?
• 31:28
  I'm not, I'm not making a comment on, on their, their, their religious function, which is, is, uh, distinctive, um, in a lot of ways.
• 31:34
  But they both have a similar d- uh, power, set of powers over what is clean or unclean, what is acceptable or unacceptable, what, what gets let into the community.
• 31:45
  And, and, and again, what I wanna say is it's never doesn't get in, right?
• 31:49
  There's always a way.
• 31:51
  There's always a way to bring something into the community.
• 31:53
  It's what does it take, what is the, the amount of effort or the cost that it takes to make something that's unclean into something that's clean, right?
• 32:01
  And, and, and you- we should think of this effectively as a, as an import tax on bringing new things in, right?
• 32:07
  And, and as all import taxes or tariffs do, they make it easier, they're… structurally they make it easier to buy within the community, right?
• 32:15
  Now, they don't make things cheaper, but they make things easier to buy within the community.
• 32:20
  And, and, and this is the point, right?
• 32:23
  The point is you… there, there's a bunch of intangibles that you have not priced in, right?
• 32:30
  There's a bunch of things that you left out of the ex- or that you assumed, right?
• 32:34
  Um, and, and that you had to assume because of the nature of, of life and the nature of reality.
• 32:39
  Um, and so, so you weren't able to sit down and define absolutely everything that you want from this person or from, you know, the, the, the long-term consequences of the decisions, right?
• 32:49
  'Cause you can't imagine all of it.
• 32:50
  You, you basically say, "I just, I want you to sustain the status quo," or, "I want you to, to act virtuously in, in future situations, but I don't know exactly what those situations are," right?
• 32:59
  So how are we triaging?
• 33:01
  How do we deal with the fact that there's a bunch of future uncertain decisions that I'll need people to, to…
• 33:07
  if, if people don't act in accordance with my morality, I'll be unhappy about that, right?
• 33:12
  The answer is you buy within your community, all right?
• 33:15
  Now, um, there are certain other ways that communities, for instance, build their houses in such a way that they embed religious objects into the structure.
• 33:22
  This is, you know, certain Orthodox or Catholic denominations.
• 33:26
  Uh, I mean, some of the Masons, m- all the Masons that I'm aware of do this.
• 33:29
  And so they, they've got these religious objects embedded in their houses, and that means there's a, there's a cost.
• 33:35
  They have a religious duty to remove those objects before they sell the house to an outsider.
• 33:40
  Now, if they wanna, they wanna sell it to within the community, well, I mean, they'll probably still take some of the, the most important, valuable, sentimental items, but it's a lot less expensive than it is to sell the house or sell the asset outside of the community.
• 33:53
  And even after, you know, when you have, like, some of these, these, uh, more intensive shrines, even after the objects are removed, there's still, like, an oddly shaped space in the house, and you can think of this as it's an extra cost on selling 'cause, uh, an outside buyer sees no value in that space.
• 34:07
  So they're, they're not e- they're
• 34:09
  And they might be weirded out by it, right?
• 34:11
  So you're gonna have some kind of a penalty on selling outside of the community, and this is better than a straight restriction on trade.
• 34:18
  You don't, you don't actually want, and no one really does, uh, 'cause it's not, it's not enforced, it's not sensible to enforce, is just say, "Well, you can't have any, there can't be any flow here."
• 34:28
  But you can restrict it, okay?
• 34:29
  You can restrict it.
• 34:30
  You can, you can catch down on the leases, all right?
• 34:34
  Now, when I talk about currency issuances, I, I, I, I don't necessarily mean currency as in the unit of transaction, right?
• 34:43
  You can, um, you need access to the unit of transaction, but, uh, unless you really are wanting to be a government, unless you really are wanting, you know, uh, to have a declaration of independence and be prepared to, to take on all comers, live in the anarchic world, um, you, you probably don't wanna try and compete in terms of what are we transacting in, right?
• 35:03
  Or, or you, you know, you use Bitcoin or use other things.
• 35:06
  But we do mean creating stores of value, okay?
• 35:10
  So in order for your community to survive in a world with any fiat actors, any fiat actors, it must have the power and, and then therefore implicitly the mediators with sufficient intelligence and moral character to issue its own store of value units.
• 35:24
  You have to be able to in a, in a… If, if there's any fiat player in your world that you're having to interact with at all, then you have to be capable of creating your own essentially fiat-based units of value, okay?
• 35:38
  And, and this is because, you know, I w- I wanna ask you a question.
• 35:43
  Are you shorting your community, right?
• 35:45
  Uh, when, when I say shorting your community or your family, hopefully everyone knows what I mean.
• 35:50
  It, it's, it's when you, you increase your ability to survive and thrive when your, if your community breaks, right?
• 35:55
  And if you do that, if you're constantly putting value into your plan B or your options, like, I mean, one of the things about a plan B, I've got a friend that, that does plan Bs for people that are leaving the United States.
• 36:05
  Setting up a plan B makes you significantly more likely to leave your country of origin, right?
• 36:11
  Um, and so if that's a problem for you, then you, you, you, you look at that.
• 36:15
  Okay, well, this, this, this increases my likelihood.
• 36:17
  You know, uh, people talk about having a, having a plan B job, right?
• 36:21
  That if you… There's, there's a shocking number of people that, that while they had a second job, uh, or their first job, and they tried to have the side hustle thing, and they could never quite make their, their actual entrepreneurial ventures go until they just decided, "I'm quitting the old job.
• 36:35
  I'm burning my bridge.
• 36:36
  I'm just gonna focus all in on, on the new thing," and that's when they were successful.
• 36:40
  You, you hear that story, right?
• 36:42
  So when you have a plan B, it's, uh, anytime things get hard, you're just gonna go with the plan B, right?
• 36:47
  It, it, it increases your likelihood of defection.
• 36:50
  And the people that you're planning against, right, you're, you're sort of planning for them to fail, don't like it, and they don't like you, right?
• 36:58
  Now- Uh, most people probably can't explain it in this, this rigorous way that I'm explaining it, right?
• 37:04
  I have that, that, that equation that I talked about last week.
• 37:07
  Your likelihood of defection is equal to one minus your proof of work, divided by your proof of work, plus your bene- the benefits of defection.
• 37:13
  So most people don't think of … And, and again, as I said last week, it's not about that.
• 37:17
  There are better, more wildly more detailed mathematical formula that you can use to more accurately model that.
• 37:23
  But the basic idea of, hey, there is a formula, and it's related to these, these vectors, right?
• 37:29
  But people have an intuitive sense that handing resources to the system and thereby starving the family, friends, and community of those resources is increasing your likelihood of defection.
• 37:37
  They feel like you are shorting them, right?
• 37:40
  So everyone remembers the, the Gates-Musk feud, the big Gates short of Tesla.
• 37:44
  Uh, Musk was very angry that Gates was shorting him.
• 37:47
  Now, the funny thing about this is Gates kept losing, and he kept having to inject liquidity into the system in a way that benefited, you know, uh, Tesla.
• 37:57
  But Musk was very angry that Gates was shorting him.
• 38:00
  And so what I'm gonna say to you is, if you short your community, they will not trust you.
• 38:04
  And if you short your kids, they will leave, right?
• 38:07
  And we, you know, we, we talk about long-term care policies.
• 38:10
  If you put your trust … And I'm not saying don't have long-term care policies.
• 38:14
  But if you put your trust in a long-term care policy a- and, and you're, you're betting that your children can't or won't provide for you, especially when there's some sense that you're doing this instead of making that liquidity available to them, uh, then, then, then that's gonna cause your family some, some trouble, right?
• 38:31
  And, and hopefully at this point I've, I've established that, that, that is not just your kids being irrational and emotional.
• 38:37
  They are sensing, even if they can't explain it, even if they can't ex- uh, you know, predict exactly what it does, they are sensing that your likelihood of defecting from their success is increased, right?
• 38:48
  Um, and, and there are a million ways.
• 38:50
  There are a million ways to, to short your kids.
• 38:52
  So why do we do this?
• 38:53
  We love our children.
• 38:54
  Why do we do this?
• 38:55
  Um, and then, um- You know, I, I say, "Well, it's the only bet we have," right?
• 39:03
  Well, what's, what's the other side of a short market?
• 39:05
  Well, the other side of a short market is a long market.
• 39:07
  And what are, what are, what is the fundamental condition?
• 39:10
  What do you need for a long market?
• 39:11
  And, and you, you… The big one is you, you gotta have a potential upside.
• 39:15
  So there's, there's several, uh, rights that you have to have for, for a long.
• 39:18
  So the AI, I went through and asked the AI, "What, what are the bundle of rights that you need, um, for…
• 39:24
  to have a, to have an effective ability to, to go along on something?" You need an exposure right.
• 39:29
  So you need some claim that increases in value when the thing that you're long on rises.
• 39:34
  So stock, equity options, royalties, revenue share, carried interest, ownership of scarce inventory or a valuable skill tied to that market.
• 39:41
  Uh, you must have a participation right.
• 39:43
  You must share in the actual gains, not merely help create them.
• 39:46
  An employee who builds AI tools for a company may be working on AI, but he is not meaningfully long AI unless he owns equity, earns bonuses, controls a business line, owns intellectual property, et cetera.
• 39:57
  So you need a control or use right.
• 39:59
  You need enough authority to act on the thesis.
• 40:01
  If you are long farmland, you need, you, you have to have some level of contractual rights to farm, lease, improve, borrow against or sell.
• 40:09
  Um, if you are long AI, you need the rights to use the tools, to build the workflows, to own the outputs, to serve the clients or deploy the capability inside a business, and you need an exclusion or protection right.
• 40:18
  You need some way to keep others from taking the upside that you created.
• 40:22
  Uh, that could be legal title, it could be IP ownership, it can be, uh, trade secrets or contracts, brand and customer relations.
• 40:28
  It could be a whole bunch of different things.
• 40:31
  Uh, two more rights.
• 40:32
  You need a duration right.
• 40:33
  You need to be able to hold the position long enough for the thesis to mature.
• 40:36
  You need a downside capacity, which means you need the ability to survive being early or being wrong.
• 40:41
  Um, so going long is not just believing something will rise, it's being able to, you know, kinda stay in there.
• 40:46
  And then finally, and most importantly, you need the monetization right.
• 40:49
  You need a way to turn the rise into gain.
• 40:52
  You need to be able to sell, to license, to borrow against, to collect income, raise prices, get promoted, receive distributions, or compound the asset.
• 40:59
  This is the most important right.
• 41:00
  You have to have a way of capturing the upside.
• 41:05
  So when you think about, uh, capturing the upside, how would you capture the upside of, of your kids being successful?
• 41:14
  Is it, I mean, is there anything that immediately jumps in, in, into mind, right?
• 41:19
  Probably not, and that's because there's a, there's a, a feminist.
• 41:22
  I do love quoting the feminists from time to time.
• 41:24
  They're, uh, they're, they're right about surprising things.
• 41:26
  Their, their solutions are all hellish, um, as I'll get into.
• 41:29
  But, but they're, but they're right, frequently right about the problem.
• 41:31
  So there's a, a feminist author named Nancy Folbre, um, who wrote a, a article called Who Cares?
• 41:37
  A Feminist Critique of the Care Economy, and then she also wrote a book called Who Pays for the Kids?
• 41:41
  Gender and the Structure of Constraints.
• 41:42
  And there's this great quote from the paper, "Public policies have been used to socialize the benefits of children more successfully than the costs, redistributing resources from parents to non-parents and from mothers, who devote the most time and money to the next generation, to everyone else." And so her, her basic…
• 41:58
  the basic idea here is that the modern welfare state systems, pensions, social security, public infrastructure, future GDP, and tax revenue, and the way that those are s- extracted from labor effectively socialize the long-term societal benefits generated by children's future adult labor and contributions.
• 42:14
  But the upfront financial time and opportunity cost of raising them remain largely privatized, and those are borne disproportionately by parents.
• 42:21
  And this is very different from past systems.
• 42:24
  In most past systems, if you had living parents, you effectively didn't pay taxes, right?
• 42:29
  Most taxes were on property or even poll taxes were assessed at the household level.
• 42:34
  And so- I mean, people might have paid some sales taxes and things of that, of that nature.
• 42:39
  But if, if you were a, a, a child, whether in a, a noble household or a peasant household throughout the medieval period, you, you basically would… You might con- you would, you'd contribute, your labor would benefit your family, or if you were apprenticed to, you know, a, a, a, a craftsman to…
• 42:55
  you would c- it would benefit the guild, um, or your particular master's household within the guild.
• 43:00
  And then it was at the, the household level that taxes would come down.
• 43:04
  And so that, that, that structure was, was, was very different.
• 43:07
  So we did away with the first half.
• 43:09
  Now, uh, Fulbright's solution is to finish the transit- uh, transition to a fully socialized economy, right?
• 43:15
  So we've done half of the transition, the half that hurts parents, and she wants to just go whole hog and do the rest of it.
• 43:20
  Um, my solution, of course, would be to stop socializing the benefits.
• 43:25
  Um, and, and, and of course, when we say socializing, what do we mean?
• 43:27
  We mean that the state takes the benefits and redistributes it to, to those who, that, that it likes.
• 43:32
  So there's no, i-i-in that world, it's, it's very difficult, okay?
• 43:37
  As an unmediated, as a, as a person without, without some community that's doing something unique and different, if you're just interacting with the legal system as it sort of appears to you, as it lays itself out for you as an individual, there's no immediately obvious way for you to go along on your children's future and actually benefit, right?
• 43:55
  Um, maybe you could start a company and invest in your kid's company, but that's, you know, it's very, very… These are edge cases.
• 44:03
  It's very unusual, okay?
• 44:05
  Very, very few people become entrepreneurs.
• 44:06
  Very, very few people are successful as entrepreneurs.
• 44:09
  So what do you do when there is only one bet?
• 44:13
  Well, you take it.
• 44:14
  If there's no way to recoup the upside from going along on your family or your community, then the only thing you can do when planning for the future is bet on the system, which in the current climate, as I said, feels more and more like shorting your children.
• 44:25
  So what is the alternative?
• 44:29
  And the alternative is a Torah scroll, right?
• 44:33
  So Torah scrolls are hand-copied, very expensive, ritually prepared tools, and highly expensive, ritually prepared, you know, people, right?
• 44:39
  The, the, the, the s- the scribes that, that copy these, they, they study for years, and they go through intensive training within their community.
• 44:45
  And as a result of that, you know, Torah scrolls can reach just kind of for the basic labor of, of a, of a hand-drawn Torah scroll can reach into tens of thousands of dollars.
• 44:54
  And im-importantly, if blessed and approved by the right rabbis, they can reach valuations in the six figures or higher.
• 45:00
  Now- You know, when I say valuations, the, the, the, the, the Jewish community hates actually selling these.
• 45:07
  I, I, I believe it does happen.
• 45:09
  They really dislike it, actually selling these.
• 45:11
  Um, but, but they get valuations.
• 45:14
  They understand, hey, these are incredibly valuable things, right?
• 45:18
  So the value-- this, this is a way of betting long on, on that community, right?
• 45:22
  So the value you have tied up in the scroll, that store of value, is essentially betting that your community will survive.
• 45:28
  The fact that it has no value outside of your community means that you are decreasing your likelihood of defection.
• 45:34
  Because any choice that you-- If you make a choice that detracts from the community's survival, that makes it less likely that you will be able to access that value in the future, right?
• 45:45
  And it, it's also important to note that, that, those valuations, those, those highest valuation numbers are only within the original community.
• 45:53
  So let's say you, you, you, you, you leave the original community or you move away, right?
• 45:57
  Or the original community goes away.
• 45:58
  You find a new-- these-- A Jewish person finds a new and different Jewish congregation, a different synagogue, right?
• 46:03
  They defect not all the way, but into another community.
• 46:06
  The value of that scroll there is lower, right?
• 46:09
  And you, you will probably face some practical challenges in getting it out of the hands of, of the original rabbis into the hands of the second group of rabbis, right?
• 46:16
  Because it's that-- Normally, it's the, it's the rabbis that are the custodians of those things.
• 46:20
  Um And then the second point is that there is actually an upside, right?
• 46:25
  These scrolls can go up in value if the community grows in numbers and in average wealth, 'cause there's more people that want those scrolls, want access to those scrolls.
• 46:34
  They're, they're, they're… They grow with age and kind of with the, with the status of the community that they represent.
• 46:39
  Um, and, and, and the Catholics do, like so the, the, the Jewish community, because of their ability, like they make these things, right?
• 46:46
  It's pure fiat, right?
• 46:47
  Their, their scribes are capable of creating.
• 46:50
  They get paper and ink and a special person, and they're able to make something from, you know, from those relatively inexpensive ingredients, right?
• 46:59
  The Catholics don't, so they could make… I mean, they could make an infinite number of them.
• 47:03
  They don't though, because it's about preserving the value.
• 47:07
  It's about having these stores of value.
• 47:08
  So they deliberately constrain the number of these things that are created to kind of prevent inflation, right?
• 47:15
  Uh, and the Catholics have a similar feature in terms of their relics.
• 47:17
  Uh, so the Catholics don't have an infinite number of relics obviously, but they, they have a very large number of relics in, in various vaults, and they don't release them all at the same time.
• 47:26
  The other thing is that in the Catholic context, you generally can't own a relic.
• 47:29
  You can sort of donate to the, the, the care of it or, or provide funds for it to be transported and displayed from place to place, but you can't own it in the same way that, that you can, you can own a Torah scroll.
• 47:40
  'Cause individual Jews and Jewish families can in fact own Torah scrolls is my understanding.
• 47:44
  So another way to think about this is, you know, as, as mentioned in the Q&A last week, uh, uh, Catholic credit unions meant that mediators of that community who tr- the, the bankers who traditionally worked very closely with the priests were incentivized to get people jobs, right?
• 48:00
  So these are kind of the examples that, uh, that, that I, I wanna put in front of you, right?
• 48:06
  So now obviously, um, in, in America, America's a, a Protestant majority nation by, by a long bit.
• 48:12
  Um, and so Protestants don't do this terribly well.
• 48:16
  Um, many of them aren't, aren't sure it should be done at all and, and, and they, they struggle with, okay, what, what would this, what would this look like for Protestants?
• 48:23
  So here's, here's what it might look like.
• 48:25
  I spent some time thinking about this.
• 48:27
  What, what, what could this look like?
• 48:28
  Um- It, I, imagine a world in which we had a health insurance company.
• 48:34
  All right?
• 48:34
  So we got our health insurance company, and the health insurance company is, is, is, it's our guys, it's our people.
• 48:39
  They, they, they're running the, the health insurance company.
• 48:41
  And they say, "Okay, we want to give a discount to m- people that are living in mold-resistant housing." Right?
• 48:49
  "We don't wanna pay for your health insurance if you got mold in your house.
• 48:51
  That's bad, right?
• 48:53
  Um, and so we're gonna have some group of people that are gonna go to your house and investigate it and give you a certification if you're mold-free or not.
• 49:00
  But the best way is for you to have timber-framed housing." Um, there's, there's … I, I hang out with the Homestead Heritage people from time to time, and one of the things that I've picked up over the years is there are apparently just a bunch of benefits, uh, for keeping out mold and not having mold, like, propagate through your house, um, by having timber framing.
• 49:16
  Like, one of the classic places that mold kind of sets in, in, uh, in traditional, uh, American housing is when you, when you put y- a lot of, a lot of, uh, kind of corners of these houses are two or three, uh, uh, two-by-fours kind of pressed together.
• 49:30
  And frequently, if there's basically any moisture between those boards when they're put together, then mold will grow there and kinda get in there and just be a constant source of, of, you know, mold exposure in the house, right?
• 49:43
  So we have our, we have our financial element, the health insurance.
• 49:47
  We have our physical a- asset, and then we've got the mediators, the maha priesthood, right, for the win.
• 49:52
  Another thing that this could look like would be, uh, based AI tutors, right?
• 49:56
  This is my, this is my other view, idea that I wanna put in front of you.
• 49:59
  So you, y- the idea would be view- we've developed an AI tutorial model.
• 50:04
  We, we've got some AI tutor that's, that's, that's aligned with our community.
• 50:08
  It's valuable within the community from a maintenance and status perspective, but it's, it's, you know, as we have different groups, it's less val- the less aligned it is, the less valuable that model is, right?
• 50:18
  So an LDS model is more valuable to the LDS, a Catholic to the Catholic, and you know, the Baptists and, and, and, and others will multiply as, as often as they have, uh, theological disagreements, which if, if you're familiar with any Baptists, is quite frequently indeed.
• 50:33
  Um, and then, you know, the, the next logical step that, that I would think is, you know, you've got somebody that's been trained, that's been vetted.
• 50:39
  The AI system can, can be … serve as the basis for some kind of employment certification, right?
• 50:46
  Um, that would be a similar element, something that I think Protestants could see the value in, contribute to, you know, own, and then you're … if you, if you own the model, you're responsible for kind of improvements and tweaks in the future, and you're probably charging some kind of licensing fees to all of the families that are using that model or using the software.
• 51:06
  Um, so you're … That would be a similar thing to the, to the way that the Torah scrolls function economically, uh, at least as close as I could come up with.
• 51:13
  So- But kind of at a, at a, at a broader level, there, there, there's a bunch of different ways that you could think of, people have thought of to, to, to solve these problems.
• 51:23
  The core is you have to have underlying obligations that, that hold people together.
• 51:28
  And the basic obligation that holds most of these community together is the children, right?
• 51:32
  You are responsible for your children, and if you fail, the guy above you has to pay for the education of your children in the faith or in the community, right?
• 51:43
  Um, and, and this is important because i- if you are playing fair, if you do not have massive governmental subsidies, right, it's cheaper and way less hassle for the guy that's above you in the, in the chain of guaranteeship to make sure that you are successful than it is for him to take your children and just pay for their education, right?
• 52:02
  This, you know, and, uh, the other way of saying that is it, that's why it requires massive government subsidies with the explicit goal of controlling future political outcomes to fund most education, right?
• 52:13
  Uh, you basically have, you know, homeschool education, that makes sense from an economic perspective, and then you have big government education, and everything in between is just constantly on the brink of, of, of economic collapse, right?
• 52:28
  So when I say, you know, the, the guy above you, I wa- I want you to imagine that we have, we have taken your, your, your obligation to, to pay for your children's education.
• 52:39
  We, we know what that cost is, right?
• 52:41
  And we, we say the, the fundamental basis of, of, of alignment in our community is different people going to each other and saying, "Hey, if you fail, I'm gonna take responsibility for educating your children.
• 52:53
  And if I fail, this other guy is gonna take responsibility for educating the children." And then so on, and so on, and so on, all the way up to the top, right?
• 53:01
  And I, I, I have an image on the, the, uh, the presentation that I'm showing of, I call it, they call it the braided chain, where you have different groups, different nodes, and they have a variety of links that, that ultimately kind of come up to, to one central guarantor.
• 53:13
  Um, but- You know, y- you've gotta have this, this core thing of, of, of, of you're accepting responsibility for this.
• 53:23
  You are saying, "Hey, our bond is not just I agree with you. Our bond is I'm committed to making sure that you're successful." And, and, and what I'll note is that it, in traditional communities and, and even today in, like, fiduciary contexts, uh, people that give advice have skin in the game, right?
• 53:45
  And you know, this is one of the, the great problems that I observed about, uh, like the, the fathering movement or, or the, the c- the quiver full movement I think is it was called, um, where you had these people that would, that would assert enormous authority in people's lives, right?
• 54:00
  Uh, and they would not accept any responsibility if those decisions went bad.
• 54:04
  There was no economic skin in the game, right?
• 54:07
  And the problem is when you have no economic skin in the game, you make bad decisions.
• 54:10
  You don't evaluate the markets correctly.
• 54:11
  You don't interpret information accurately, right?
• 54:14
  Um, y- y- we should want authority and responsibility to be paired.
• 54:20
  I think that's, that's the biblical norm.
• 54:22
  That's the biblical idea is that authority and responsibility are paired, okay?
• 54:25
  And so, um, that would be, that would be kind of the, the, the framework and the argument.
• 54:30
  If we wanted to do this as, as groups, as men, as a community, it probably starts by getting together and saying, "Hey, we're not just an undifferentiated mass all appealing to the same big government, you know, supply.
• 54:42
  We, we are going to form these little chains.
• 54:45
  Some of us are gonna be successful.
• 54:46
  Some of us are being, gonna be incredibly successful," right?
• 54:50
  Other people are gonna be unsuccessful, and when you're unsuccessful, you, you, you can basically trade independence.
• 54:56
  You have pre-negotiated a trade of, of independence in exchange for support, okay?
• 55:01
  And now you've done that, you gotta do that voluntarily, right?
• 55:04
  Um, but if you can do that, if you can have that understanding of, "Hey, we're, we're, we're accepting responsibility for these different things and, and we're, we're pre-negotiating how are we gonna handle it if one of us fails," right, then, then you can do a lot, right?
• 55:19
  Then you can, then you can generally be independent.
• 55:21
  This is the, these braided chains, these are the closest … Th- this is what it looks like to be genuinely independent, uh, in, in my view So, you know, how do you build a great house?
• 55:32
  You know, which is kind of the question that, that I'm, I'm, I'm working with and returning to.
• 55:36
  The answer is, if you can solve the problem of people being unable to bet on their children and their community and their tribe, they will want you to serve as their mediator, as their guarantor.
• 55:45
  And someone will have to.
• 55:46
  Someone is going to have the position.
• 55:48
  Someone is going to solve these pro- I mean, a- assuming that, you know, we don't just have a, a major collapse and, you know, 90% of the population starves, which I, I don't believe will happen.
• 55:57
  Someone will solve this problem, and whoever does will have the ability to, to, to ask for and get a certain amount of political concessions, you know, local power or, or national power or global power, right?
• 56:10
  Someone will have to solve this problem, and accepting that hierarchy is a core part of this and who- and that whoever solves this problem will be ef- effectively the guarantor of the community, and his house will be a great house.
• 56:22
  If you wanna build a great house, figure out how to create circumstances where someone can bet on their family, right?
• 56:28
  Someone can bet on… I'm looking at you, you crypto guys, right?
• 56:31
  With all of, all of the cool things that you know how to do.
• 56:33
  Uh, you know, there's, there's this interesting platform somebody was showing me the other day, Hyperliquid.
• 56:37
  Um, you know, there, there are, there are smart contracts.
• 56:40
  There's all sorts of things that, that you, you could potentially work into this structure.
• 56:45
  Even, even things that are great injustices, right?
• 56:48
  Even things like, like student loans, right?
• 56:50
  Um, you shouldn't… I, I, I, I don't know that it's, it's wise to pay off somebody's student loans in one, one fell swoop.
• 56:57
  Uh, that's, that's probably, probably a, a, a, not an advisable thing to do most of the time.
• 57:02
  But you can step in and say, "Hey, if you're joining my community, if you're, if you're, if you're coming up under me, I can assume the, the responsibility of helping you pay this off," right?
• 57:12
  On a, on a monthly basis.
• 57:13
  I can undertake the obligation, right?
• 57:16
  Um, in excha- now that'll be taxable to them is and all that stuff, right?
• 57:19
  You're not trying, you're not trying to, you're not trying to avoid anything on that front.
• 57:22
  But you are saying, "Hey, this is, this is part of our relationship." And the fact that they have this, this obligation, even an, an unjust, undischargeable obligation like student loans, that actually can serve as the basis for a community like this.
• 57:37
  As, as does any of the, the core obligations, your duty to your wife, your duty to your children, your duty, you know, your duty to the US government to pay it back for all, all, all that it invested in you.
• 57:47
  Um, those things and trading the, the, the, the liabilities, the future liabilities in a, in a, a covenantal distributed network like this, that can be the basis of a great house.
• 58:00
  Um- And in some sense, I suppose it, it, it, it needs to be.
• 58:03
  That, that I think is, is the challenge in front of us.
• 58:06
  Like, find technical ways to solve that, right?
• 58:10
  Find ways of, of bring people together and say, "Hey, I'm going to create the preconditions that will allow you to bet on your children's success, and then, and then be your guarantor so that you can get some benefit out of that."
• 58:21
  'Cause that's a very difficult problem for a, a man with a wife and children to solve.
• 58:26
  It, it's, it's still a pretty difficult problem for, you know, a small business with 10 families.
• 58:30
  But for, you know, a church of 500 or 5,000, very solvable.
• 58:35
  Very solvable.
• 58:36
  Um, you know, if you, if you have… I was talking to a guy the other day that, you know, he's, he's basically built a referral network at scale.
• 58:43
  Um, and that, that gives him access to a whole bunch of companies.
• 58:45
  He was a very successful entrepreneur, and so then he was able to say, "Okay, you know, I'm, I'm, I'm gonna train some kids, and then I'm gonna refer them." And, and he's able to recoup value 'cause he's doing it at scale.
• 58:55
  So if you can figure out a way to do that for families, allow them to bet on their children's future and benefit from it, right?
• 59:02
  I mean, that could be as simple as, "Hey, we have a, you know, almost an MLM-style referral network, and we allow ch- parents to re- to, to refer their children," right?
• 59:11
  And then, and then we use those si- types of structures, um, to, to, to reward people on the long term for how good the performance of their, of their kids and grandkids and the rest of their lineage, right?
• 59:23
  All of those tools that create, you know, these, these, these vertical structures in, in business, in, in referral systems, in business networking, they could all be used within the family.
• 59:34
  It's just that no one does that.
• 59:35
  So all right.
• 59:37
  That concludes my prepared remarks, and, uh, and that's the end of the, uh, the public version of this.