I was very impressed with Prague last
year and I was very impressed because
there was a lot of thinking going on
about what should we do
what's the point here and how could this
thing go wrong and how could we learn
from the dot-com guys that seem to have
screwed things up but the Internet guys
are those those guys in the financial
crisis how did they screw things up what
can we learn from to grow from and I'm
taking that as the starting point for
this talk to try to suggest something
you might want to think about and look
at anew I'm going to talk about money
debt and smart contracts but the
Internet Archive you think well gosh
what if this Internet Archive it's a
nonprofit in San Francisco we're kind of
Wikipedia SHhhh but a lot smaller and
the idea is to bring universal access to
all knowledge so that's probably you
know if you know of me at all I started
and run this organization and you should
please come and visit us in San
Francisco we have open lunches all sorts
of fun fun things but that's if you
don't know but the Internet Archive you
may know of the wayback machine which
has old web pages and to try to preserve
the memory that has come before on the
internet I may be here because I hang
out with smart guys and sort of internet
pioneer sort in terms of the internet
Hall of Fame and that's probably why I
got and or maybe it's the decentralized
web can we make the the world wide web
work so without having a reliance on any
particular piece of hardware or being up
or down can we make a peer-to-peer
back-end for the web so really help
trying to support the promotion of
locking the web open but I'm expert in
all of those things so I'm going to talk
to you about something I'm not an expert
in and actually I know who I'm talking
to the experts in this but I'm hoping
I'm going to give you a new perspective
in the area of of debt and my story
starts by my having won the internet
lottery
I sold companies I became artificially
wealthy and I was
trying to figure out what the heck is
money and so I started reading books and
my favorite book from that era was
called frozen desire so this guy James
Buck and he goes over the history of
money and he goes and says what what is
money
it's frozen desire and it talks all
about money money money and how it works
and how the how you finance debt wars
and on and on it's very interesting book
what it occurred to me it's like no no
maybe it's not really money that's the
important part
maybe it's dead maybe it's dead and it
turns out that money and debt mostly
create each other and I'm gonna I'm
gonna stay on this for a moment because
I think it's gonna be important in our
crypto world almost always even in the
crypto and the crypto communities they
talk about money and like gold and
things like that where it doesn't go
into there isn't debt but if you take
like currency in the American currency
or any of the world currencies about 5%
is money and the rest is money and debt
create each other the way that you get
more money is you create debt
obligations if you go and say well I'm
against being in debt really what you're
saying is I want somebody else to be in
debt because I have money if I have
money somebody else has debt they create
each other they exist in a one-to-one
relationship almost except for about 5%
that is I find very interesting so
whenever I hear of these bankers or you
know these these economists going on and
on about we want to increase liquidity
out there what they really they want to
increase the money supply just try out a
thought experiment whenever they say
money just insert the word debt and you
will also understand what they're saying
and actually much more precisely when
they say they want to increase the money
supply they want to increase the amount
of debt supply they want to go and
liquidity more money out there they want
more debt so what debt is is and it's
always debt with interest
it's a slope and money goes from debtors
to creditors
it's a slope you can change what the
slope is and you can map and you can
change how much there is and when
they're trying to increase the money
supply they're trying to increase the
amount of debt so that just increases
the amount that's going from debtors to
creditors and then there's interest
rates where you can go and tilt it on
the slide more but it's all going one
way I'm not saying that debt is bad it
just is the debt exists and it has
existed for as long as there has been
writing which I'll get to in a minute so
if you're trying to look for lines of
control and trying to predict how the
future will behold I always try to
figure out what's the root causes out
there I would suggest don't follow the
money as they said in that all the
President's Men a famous movie about the
Watergate investigation follow the debt
follow debt who is obligated to whom
that's going to be the more important
part of how all of this works and this
that I would suggest be the most
indicative of what's going to happen in
in the future at that point a book came
out called debt the first 5,000 years by
David Graeber this is the most important
book I've read in the last 20 years it
blew my mind it basically chopped
pillars out from underneath my whole
belief system this guy basically wrote
it's across the five thousand years
history across the whole world it's a
kind of an amazing book and tried to
detail the history of debt and how did
it work in different cultures and it
works very differently in different
cultures and there's a lot more
possibilities out there a brilliant man
a wonderful read highly highly
recommended but it basically goes on
this structure of sort of how how does
debt evolved and how does obligation let
me define debt precisely debt is
quantified obligation
so there's obligations we all have to
our friends our mothers ah but
quantified obligations is debt and
another characteristic of almost all
debt is it's transferable so it's
transferable actually by the creditor
the creditor can give it to somebody
else so you might be in debt to somebody
and then they suddenly put it to
somebody else and now you're in debt to
somebody else so it really peculiar
device but I highly recommend this book
in terms of how does value exchange move
among people and you guys are all in
this field so recommended so basically I
said all right if that's what's crushing
our people we now had the it was 2008
there's a housing crisis the people at
the Internet Archive were having real
trouble because of rent I've tried to
figure out why was rent so high it turns
out it was debt service on the apartment
buildings if you could make debt-free
apartment buildings you could have rent
that's one third of market-based rent
said great why don't we go and try to
make debt-free housing
happen by going having a structure I
need to be able to create a bank
so I created a bank created a credit
union called the internet credit union
and we ran it for a while and boy that
regulators really really didn't like it
boy it says just go start a bank yeah
there's a they basically didn't want us
around so they crushed us out of
existence and unfortunately Tradehill
which is a Bitcoin company because we
were the only credit union that would go
and deal with them when we went when
they crushed outside of existence they
they went out of existence too so I
learned a lot about how the banking
system work and it is really that bad
right if you think it's bad you're right
in terms of how electronic funds
transfers work ACH transfers its
insecure it's fraud written it's it's a
real problem so we tried to do a bank
when that didn't work we were very early
in Bitcoin at the Internet Archive we
basically paid our employees and Bitcoin
this I think is a picture of the first
Bitcoin ATM it's an open cash box with a
with
with a wallet so you basically can just
go and change your money back and forth
to the Bitcoin um okay a lot of the
Bitcoin people didn't like it because it
trusted people but anyway it worked and
so that was our part of our exploration
with with Bitcoin and then this book
this is where David Graeber got his
ideas on the early part and the era I
think is where the things are gonna get
interesting for you the title of this is
and forgive them their debts it's a line
from The Lord's Prayer and forgive them
their debts and and they will
forgiveness against you and they meant
it literally that basically this is a
history book of what happened during the
Sumerians Babylonians Acadians basically
the Bronze Age Near East how their
financial system worked they were the
first to invent debt with interest with
debt with interest what happens is you
slide things from debtors to creditors
their debtors become everybody on they
lose their farms they become in debt
they leave the land umm they end up with
their wives and children as debt
servants and basically society breaks
down it basically if you allow this to
go too far it breaks down and it breaks
down quickly so what they invented was a
debt forgiveness system every 25 to 50
years they would basically go and
declare debts gone they wiped the slate
clean that's a literal term they were on
slate the Sumerians wiped the slate
clean and you were out of debt it
usually came at the beginning of a
monarch a new monarch would come in and
say you're all out of debt you don't you
owed the government any money you get
your farms back so people could move on
their back onto their farms there are
the children and the wives are all
released from their servitude their debt
servitude and they would do this every
25 to 50 years if they did not do this
then
the society would go exponentially more
and more unequal until people revolted
and they're a civil war every Civil War
for three thousand years was a debt war
according to this scholar interesting
I'd never heard this so um the Hebrews
and developed a system called Jubilee
Jubilee is every fifty years there would
be debt forgiveness and you would go and
let people have their lands back you
would go and take things away from the
oligarchs and give them back to the
peasants
can you imagine that now but if you
don't do this bad things happen so let
me know you say gosh I haven't heard
that before
maybe you have but it was new to me
there were some things that were very
interesting to me in in grinding this
idea home and I'm gonna then come back
around to how it works in etherium the
Liberty Bell was a famous thing in the
Liberty Bell of the United States
founding of the country
it says proclaim Liberty out throughout
the land and the inhabitants thereof the
rest of that line is actually Leviticus
25:10
and it says and it shall be a jubilee on
to you each of you will return to your
family property and your own clan so
what Liberty meant in the early part of
the United States was freedom from debt
was freedom from these obligations that
they were escaping in other lands okay
another one the Rosetta Stone
we know the Rosetta Stone is how we
broke hieroglyphics we understand
hieroglyphics do you know what it said
you know what the proclamation was it
was a government Proclamation okay you
guessed it it was debt forgiveness it's
basically structured debt forgiveness
that was what was worth carving in stone
and distributing it out through the
empire during the Ptolemaic period so we
see it starting to be again and again
Jesus is it in his first sermon in
Nazareth okay this is I'm not a bible
thumper guy here I just a historian but
Jesus in his first sermon coming back to
Nazareth he declared a Jew
year he declared there's this guy who
basically said all you oligarchs have to
give all your money all basically back
to the people you've shafted out of all
of that over the last 50 years and it's
not just me interpreting this it's
actually this is from the Vatican little
footnote this is what it is Jesus said
and that's enough to get you killed
so if you go forward a bit more
to the Spartans the Spartans had real
troubles with with it wealth inequality
and there were two Spartan Kings that
promised reform they were killed or
exiled so they basically said yes we're
going to basically do debt forgiveness
land redistribution that will work if
you don't do this things collapse Sparta
collapsed and the United States is in
this process of kind of basically at war
with itself with massive wealth
inequality yet we have not really
broached the subject of debt forgiveness
so debt with interest the lesson out of
this up is if you do not have a reset
mechanism it leads to societal collapse
and civil war every time it's a way of
interpreting the Maoist revolution the
Bolshevik Revolution you know take away
any of the ideological terms just think
of it as just how do you go and equalize
after you've ended up with massively
unequal wealth inequality so what why am
I talking about this here
well crypto you guys are designing a new
system it's a beautiful system it's
based on math it's not based on
regulation it's got all sorts of
interesting properties I love it been
involved in it terrific
well crypto be different well whenever I
read this wonderful book digital cache
by Finn Bolton
that's wonderful book about the history
and the dreams of crypto currencies and
it never talks about debt in fact I've
talked to several people here and they
say well it can't happen with Bitcoin
and it can't happen with the earth
theorem I suggest it can and it will
because if it evolves into this such
that 95% of the money out there in the
world is matched with
five percent is sort of the Bitcoin
equivalent so I think they're at least a
major possibility that there's going to
be lending and there's there's going to
be derivatives and the like that are
going to hang on to this and one of the
things that reason why we're going to
get that is because of smart contracts
smart contracts allow you to quantify
and enforce certain obligations so
actually I would suggest the etherium
community you guys we guys are building
the actual mechanisms that we're going
to be able to do this type of thing but
the weird thing about it is there's
almost no reset button right we think of
regulation is bad right government is
you know they screw things up well they
have been a bit of a reset button boy
have they screwed things up and often
they're working for the wrong people for
all the wrong reasons
you know there's issues there but if we
make a system that is debt with interest
that has no reset then at least
historically we can run into some severe
severe problems so that's the basic
point of this of this talk is to say
that the evolution of money began debt
money and debt beget each other that
debt with interest goes exponential if
there's no reset mechanism then there's
societal collapse and civil war
basically you have very few winners and
lots and lots and lots of losers and
that's not a very stable environment I
wonder and I just posed to you that as
we're designing a next generation
Internet money how money and value is
exchanged with smart contracts that the
debt system is something we can't just
go and say oh well we'll just won't do
it because it will probably be built in
some way how do we go and build our
systems that will serve a large number
of people over time I look at the
microfinance system where it was like
ain't it great let's go and put a lot of
poor people in debt
so they did and they that's gone really
wrong in a lot of circumstances and
there's in cases of India going and
giving peasants the right to not pay
back their debts in microfinance because
they were committing suicide its to
higher rate so even these systems that
seem great at the time they're awesome
they have some downsides to them right I
speak to you as an Internet pioneer it
didn't all turn out quite the way we
thought it would and so let's go and see
if we can learn from those things but
also what are the precursors to the
systems that you're you're building what
should this mean for aetherium I don't
know the answer to that really I don't
um what I wanted to do this and I really
appreciate your your time is for you to
think it through a little bit spend a
shower on it spend a commute right I've
just sort of okay what does this mean in
terms of debt and how can it go out of
control how is the system that I'm doing
kind of walking in a set of losers that
maybe exponentially increasing when I
hear somebody really enthusiastically
saying I'm going to go and make better
for billions of people just go and look
at it again and go and say well is that
true how did it play out before when
certain other people have said the same
things it's not to say we shouldn't do
it
it's just our tyent chance now it's
early enough people like you guys that
are building these systems we can do
something about it
let's not come to regret what we're
building now thank you very much
I have 26 seconds for a question yes
pardon
what's the precursor for debt
forgiveness now desperation usually it
only comes about when people are really
desperate we had a chance in the United
States when the debt the housing debt
happened and we could have gone and
forgiven the housing debt and kept
people in their homes we didn't we
bailed out the banks we didn't bail out
the home owned owners and now a lot of
those homes are now owned by Berkshire
Hathaway and they're rented back to
those people so it's a level of
desperation it's going on right now a
student debt in the United States yes so
I I will read the books but I was
wondering if you could give us a little
summary though of from the perspective
of the people that are holding all of
the debt and it's getting forgiven this
is a terrible thing and you were saying
well Spartan Kings two of them were
killed and so forth yes so what sort of
how does a society get to a point where
it does this non civil war peaceful
forgiveness of debt what are the
conditions that make that happen in the
United States in the early 20th century
well in this 20th century we had the
Bolshevik Revolution the hour of
revolution in the United States we had
the New Deal the New Deal the oligarchs
hated the New Deal the New Deal of FDR
there was a 95% incremental tax rate my
grandfather complained that if he made
another dollar 95 cents if it went to
the government he hated it he did just
fine don't cry for my grandfather and so
this is what the United States did is
they basically taxed their way into
restoring a middle class we had a Gilded
Age and we crushed it the United States
I grew up with sorry had a middle class
the United States I live in now it's
disappearing it is
horrible and it in erodes so if you can
do it without a civil war you can just
do it by having somebody powerful enough
that one is wants to preserve society
and keep people from all moving away
from their lands which is sort of what's
going on now in the isolation thank you
you