This is an opinion editorial by Jimmy Song, a Bitcoin developer, educator and entrepreneur and programmer with over 20 years of experience.
Link to audio read of the article here.
I hate politics.
It’s a weird zero-sum status game of perception where the winners get to make the rules. Everything is judged on intentions and nothing on results. It offends me as an engineer because it’s really a way of saying that reality doesn’t matter and that majority opinion can trump facts. It’s a collective delusion about how important our opinions are. When discussing politics everyone is the smug, arrogant, smart aleck teen who thinks he knows everything.
What’s worse is the fakeness of it all and the faux-intellectual arguments that hold sway. What sounds good wins over reality and only the most sociopathic seem to be able to play the game well enough to win. Propaganda trumps reality and that attitude is infiltrating everything like sand after a beach outing.
Still worse is that politics is so much more consequential because of fiat money. Effective politics now has a prize of immense value in the ability to create money out of nothing. This game of posturing, perception and propaganda kills, steals and destroys. Politics is a zombie horde eating away at civilization and multiplying its destruction through creation of even more zombies.
What I hope to show in this article is just how terrible things have gotten and how nearly everything in our current society has turned political.
The Great Financialization
We’ve seen almost everything get financialized. Fiat education, fiat healthcare, fiat real estate, fiat companies, even fiat property are all infected with fiat money. You can tell these things are getting finacialized because there are lots of loans and insurance products around them. Student loans, mortgages, health insurance, corporate bonds, car loans, unemployment insurance and even life insurance are evidence of the financialization or government manipulation of each industry. Almost everything can be leveraged for quick consumption and degenerate gambling. It’s like we’re turning the world into Las Vegas.
Loans and insurance are the gears of the fiat monetary system. Loans create new money and insurance is an outlet for all the leverage from these loans. In various ways, they tax the strong, subsidize the weak, and protect the interests of the people in power. Each financialized industry adds yet more rent-seekers, as more people leverage their way into consumption rather than earning their way. In a financialized world, everyone becomes Wimpy from the Popeye cartoons, the guy that will “gladly pay you Tuesday for a hamburger today.”
Financialization is really the process of fiat money taking over. That is, it’s the subjection of an industry to the control of the government. And the companies go along with it because it’s much easier than actually innovating. Why strive when you don’t have to? Corporate welfare is not that different from normal welfare, just much more expensive. They both remove incentives to be productive or provide value. Every financialized industry slowly debases into DMV-like inefficiency as they grow fat on fiat subsidization.
Financialization has a bigger problem than just the non-productivity of the subsidized entities. The bigger problem is that they become endorsers of the state. Once you take the king’s coin, you become the king’s man.
Messing With The Market
The main effect of financialization is that it props up companies that would otherwise go bankrupt. By loaning companies money or their customers money to buy that industry’s products, the entire industry gets subsidized. These companies become like that guy that always seems to get into trouble and gets bailed out by family. Financialization incentivizes mediocrity.
In other words, merit takes a back seat whenever fiat money gets involved. Instead of market forces creating better goods and services, worse goods and services continue to be pushed onto the market, usually at cheaper prices to compensate for their lack of quality. This is the real reason subsidized industries produce inferior goods. Subsidization leads to debasement of goods and services. If you’re wondering why products and services have gotten much worse during the pandemic, there’s your answer; it’s inflation-subsidized mediocrity.
What takes the front seat instead are political considerations. Right now in the U.S., these considerations include how diverse the executive team is, how environmentally friendly the products are and how much they support the war in Ukraine. These political considerations are called “environmental, social, and corporate governance” (ESG) and they have nothing to do with profit and everything to do with perception and propaganda. The government gets to create its own sock puppets in industry to give themselves more power.
This is nothing new. In other political regimes, industries had to align with war efforts, racial segregation, ethnic cleansing and worse. The more authoritarian a government is, the more aligned you have to be, so Nazis and Communists demanded much more political compliance than, say the 19th century U.S. government. The politicization of industry is an indicator of how authoritarian the government is getting. The past two years have shown this with vaccine mandates, Black Lives Matter support and the Ukraine war support.
The main tool at play is money. Financialization guarantees alignment with the people in power. Entire industries get bought and enslaved by the money printer. Needless to say, this isn’t good for the people and they carry the heavy burden of supporting all this with the debasement of their savings.
The People In Power
The incentives of the people in power are horribly misaligned with what’s actually good for the people. Because elected officials are typically not around very long, they tend to have a very short-term focus. That is, they’re generally high time-preference and politics reflects that. Every elected official is like the many millions today living paycheck-to-paycheck, covering today’s bills only, with no regard for planning for tomorrow
I first started paying attention to U.S. presidential politics in 1988. Every single presidential election I’ve observed has been called “the most important election of our lifetime.” And it’s not just one side, it’s both sides and they encourage this sort of thinking. The people that win in politics have a higher time preference than the people who win the lottery.
How many political scandals last more than a week these days? What seems so important this week is forgotten three weeks later by almost everyone. The people in power have the attention span of squirrels. What matters to people in politics is now and there’s little concern for what will happen to civilization tomorrow.
Deference To Power
Yet despite this obvious lack of prudence or wisdom on the part of our leaders, there is a significant deference to their opinions. Unsurprisingly, this means most people become likewise very high time preference, or impulsive and imprudent. You wouldn’t normally trust an impulsive person to be the designated driver, for example, yet people defer to government leaders because of the significant power they hold. To disobey would mean getting canceled. Financialization has hit everyone and noncompliance means economic death.
In that sense, every CEO of a large company is really a political officer. They have the power to dispense favors because they have the newly printed money at their disposal through loans. It’s no wonder these positions have gotten so political. Currying favor with the money printers through marketing is much more important for a CEO now than actually making good products.
Instead of deferring to the market, companies defer to power. It’s no wonder so many industries have seen little-to-no innovation for decades. Noncompliance means economic death and subsidization means stagnation. Not a great environment to thrive as a business.
And guess who gets screwed? Instead of customers, the community or society at large being the beneficiaries of the company’s goods, we get the people in power getting all the benefits. CEOs, politicians and investment bankers get to advance their agenda at our cost.
Whatever Is Convenient For The Powerful
The powerful get what they want at the expense of everyone else. In a badly aligned system like politics, this typically means destruction of value. Rent-seekers will spend other people’s money for their own benefit without providing value to anyone. This often includes creating more rent-seeking positions! The zombie horde grows.
Instead of new innovations, regulations keep out any competition for current incumbents. Nuclear power hasn’t progressed since the 70s, and neither have airlines. Gee, I wonder what happened in 1971?
This is unfortunately the normal course of business as financialization has essentially put the power of money printing into the hands of the politically connected. Becoming friends with the politically connected pays better than creating a useful good or service. It’d be like selecting a quarterback based on who’s good friends with the team owner. It’s not going to lead to much progress or prosperity.
Bitcoin And Politics
If this whole thing so far sounds depressing, that’s because it is. There’s no question that the financialization has gotten worse, the subsidization more abundant, and politics more ubiquitous. Yet there’s one thing that we’ve seen going against the tide of all this destruction of value: Bitcoin.
We saw that Bitcoin was different five years ago during the Blocksize Wars. One side was a powerful group of well-connected CEOs who made a consensus among themselves about what Bitcoin should be. They wanted to define and control Bitcoin through changes in its protocol.
On the other side were the users. They are what would be considered irrelevant in politics. In the normal course of politics, these were at best people that could easily be manipulated by propaganda and at worst, people that could be canceled.
At this point, any outside observer would have predicted that the powerful companies would win. They were the better political players and knew how to take power in any governance structure. This was a professional football team going against the JV team of a local high school. One side seemed poised to easily get what they want and use politics to get it. Whether through regulation, subsidization or cancellation, the CEOs had tools to get what they want.
But something strange happened; the JV team started to win. And the reason was because there’s no central authority in Bitcoin. There wasn’t a group to bribe. There wasn’t any governance board to appeal to. They had to deal with the market, the people, the users. They couldn’t bypass them with some authority that could change the rules for them. We found out that they weren’t a professional football team as much as they had the refs in their pocket. Bitcoin created a fair match.
And the users, the people, or the market responded. They said no. And won.
Bitcoin Is Anti-Political
There were a lot of people that were betting on the side of the corporations and the powerful. These were seasoned pros when it came to propaganda and politics and surely, they would figure out a way to defeat some plebs on Twitter? Yet they couldn’t. The corporations couldn’t change Bitcoin because Bitcoin was different. The users got to decide what was and wasn’t Bitcoin. The playing field was frustratingly fair and level, much to the detriment of the people specializing in influencing the refs.
Bitcoiners not only resisted the protocol changes, but any attempts to represent them by proxy. Erik Voorhees famously claimed that they represented them because these users were these companies’ customers. The market spoke clearly and loudly in the futures markets that this was not the case. Despite all the money and resources clearly being on one side of the debate, the plebs won. The users had a voice, not through some intermediary or trusted third party, but directly, through the market. And they spoke. It turns out that we were the professional football team all along and they were the JV team that specialized in bribing refs. The plebs won and it wasn’t particularly close.
Bitcoin is anti-political. It resists political processes because changes require consensus. Even a small minority can resist changes to the rules. There’s no bribing the ref or the rules committee. Bitcoin took politics out of the equation.
Altcoins Are Political
Contrast this to altcoins and the difference couldn’t be more stark. Altcoins operate completely at a political level, controlling the perception of the public through massive propaganda campaigns. They are in the habit of subsidizing anything and everything that makes their coin look good while spreading FUD about anything that makes their coin look bad.
They defer completely to the people in power, like the creator or foundation. They bribe influencers and give them rent-seeking positions. They rob people blind while telling them it’s good for them.
If you doubt me, think through this thought experiment. Would an altcoin have been able to resist the SegWit2x agreement from five years ago? The answer is no. The people in charge of the altcoin would have decided and that would have been it. Indeed, SegWit2x-like agreements are happening all the time in Altcoinland. They are called hard forks and show how centralized and political these coins are.
Bitcoin Is Living The U.S. Constitution’s Ideal
Interestingly, consensus-driven decision making was the original design of the U.S. Constitution. It was supposed to be very difficult for any law to get passed and for a while, even one senator could derail it. That meant every change and every law had to take into consideration everyone that it would affect. If it didn’t satisfy all those people, then it wouldn’t get passed. Unfortunately, this changed as the checks and balances kept getting debased. Changes to the rules came easier and easier even as the economy stagnated.
Unlike the U.S. government, Bitcoin fulfills this idea that every person has a say. You can’t just take stuff away from someone without their consent. Cynically, you can say that politics is the agreement by the majority to take stuff from the minority. That’s simply not possible with Bitcoin. It’s for that reason that Bitcoin is anti-political.
If you hate politics, you’ll love Bitcoin. Happy Bitcoin Independence Day.
Twelve New Altcoins Coming Soon:
- WomanCoin – Coins for women only, with the board of governors that decide what a woman is, not you because you’re not a biologist.
- Diffirand – Founded by an academic that got tired of scamming a few undergrads and decided to scam the entire public instead.
- BitcoinNakamoto – A fork of Bitcoin for those that believe a16z should own Satoshi’s coins.
- BytePecunia – Privacy-focused coin that guarantees nothing, like say, supply, future governance or even privacy.
- Methamphetamine – A coin that keeps promising to change everything based on the fanciful ideas of its teenage founder, but fails to deliver because said teenage founder can’t code nor has any interest in doing so because of the premine.
- Trinium – Founded by some Asian guy to market to a billion Asians, but nobody in the West cares because it’s only Asians that are getting hurt.
- Catastrophe – Get 18% yield until the price doesn’t go up anymore at which point it’s a -100% yield, unless you’re one of the people at the top in which case you get a 20,000% yield.
- Cripple – A coin with a blockchain/database run on a piece of paper with pencil, to be better for the environment.
- Daschund – It’s got a cute logo and does nothing, but the hope is that a billionaire will someday jerk around the public with it.
- Salami – A token in a SQL database run by ex-Wall Street investment bankers to screw over the public even more.
- Sucker – Recruit 10 people to get rewarded with staking coins which can be redeemed in three years when the founder will be in prison!
- SeedOilSwap – A governance token for a platform that allows exchange of synthetic asset swaps that are enforced algorithmically through the drool coming out of your ape NFT.
This is a guest post by Jimmy Song. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.