The Secret to Understanding Bitcoin & Cryptocurrencies in Under 10 Minutes



everybody and rocky here and today's video is I hope the first in a series I'm referring to as economics in these videos I hope to merge my understanding of economics and technology to come up with original insights that add value to your life as well as mine my goal this video is to give you an understanding of money that is not just deeper than your current understanding in under 10 minutes but give you a deeper and more sophisticated understanding than many economists have what I find so fascinating about money is that it's something we all use and we all want more of but we never really think about it it just works and because it just works people can get away with applying lazy thinking to it see what I'm talking about just ask someone what makes the usdollar valuable first of all you'll be shocked at how many people think that it's backed by gold when it's not that ended in 1971 the best answers you're likely to get are still just conclusory statements that have been memorized like its stores value or it serves as a medium of exchange what usually hampers people's understanding of money is the unconscious assumption that it is created consciously for a purpose as opposed to something that emerges anywhere there are humans money is something we create because it's useful and the very fact that we can all use it on a daily basis without even thinking about it means that there must be something intuitively simple about it otherwise it wouldn't work in other words the very fact that so many people have such different definitions of money and beliefs about how and why it works is proof that all of them must be missing something fundamental but before we can get to that I need to establish to first principles now if you're not aware of first principles logic or what I call the Elon Musk method the idea is to approach a concept by first looking at what are effectively truisms statements we can all accept as true though I would argue that you don't necessarily have to agree with someone's first principles in order to gain value from the exercise the point is to say assuming these statements are true what conclusions did they lead to and are they valuable if the conclusions are powerful if they provide you with utility that might confirm the veracity of the first principles being used and if not maybe you should try to explore other first principles these are exercises not religious proclamations with that being said here are the first principles of money that I find to be the most powerful number one productive people create valuable things to value is subjective that's it hopefully these claims are it controversial all I'm saying is that if you produce something value valuable you are by definition a productive person if you don't produce anything valuable you are by definition not productive but the truth is that all of us are productive to some degree just some of us are more productive than others none of what I'm saying should be seen as a value judgment it's just what I'm making the words mean now who decides what's valuable well everyone it's subjective if someone finds a Gucci bag valuable it's valuable to them even if it's not to me if I want to pay to watch Conor McGregor fight his performance is valuable to me even if it isn't to you value is clearly subjective and if that all seems fairly obvious to you you should know that it directly contradicts some of the fundamental assumptions of Orthodox economics but what does all of this have to do with money well because we have big brains no matter where or when we exist we understand that if we want to increase the number of valuable things we have access to we need to develop systems for keeping track of and rewarding our most productive people that's why we always create money to reward people for their productivity in other words money is always always a Productivity point system good forms of money hold their value and can serve as mediums of exchange but in order for them to be good in the first place they must be well designed productivity point systems now you might be saying no it's not plenty of unproductive people are rich and tons of productive people have been shot that's great because now what we're talking about are the flaws in the various monetary systems that exist in the real world human beings as a collective invariably think about that invariably create different types of money which they then use to trade goods and services that they find valuable goods and services created by productive people the systems themselves due to the flawed natures of the people who create them are also invariably flawed again invariably but to explore this argument a bit further let's imagine a fictional system that on the whole gives points to the most productive members of a society based on how much valuable stuff they create the more valuable stuff you create the more points you get which you can use to buy other valuable things wanna buy corn make great shoes want to take a trip to Iceland be a great graphic designer at least that's how it works in the fictional society to which I am referring I'm sure people want to start asking questions like yes but is this a fair Society or is this an ideal Society well maybe no and no but the question I'd ask you and I won't tell you what the right answer is is is this a stable and sustainable society now imagine another fictional community they design a system that gives out points to the least productive members of a society in this community the best way to get lots of points let's call them rubles is to create absolutely nothing if for example you're a good farmer you till your land and produce a copious harvest those in charge will assume that you acquired this harvest by oppressing other people because you have stuff that they don't and so not only are you not entitled to money you're not entitled to your harvest that belongs to the people who produce nothing because they didn't oppress anyone they get money they get your harvest and you go to a fictional land called Siberia now one is welcome to argue that this is a fair and/or ideal society but again my question would be is this a stable and sustainable society as I said in my original economics 101 video my goal is not to tell you what anything is all words are made up and all definitions imperfect there's no such thing as money there are pieces of paper coins strings of code that we refer to as money because doing so is a useful fiction for us in the moment economies collapse and currencies hyperinflation the money that people are using ceases to become a useful fiction and money ceases to become a useful fiction when it can no longer be used to acquire things you find valuable things which were created by productive people none of what I've said should be interpreted as meaning that unproductive people or more accurately less productive people are evil or deserve to live in poverty that's not what I believe and it's not the point of this video I would like to address these concerns in another video however doing so requires first that we understand the function that money serves and the difference between good and bad money well-designed monetary systems ensure that productive people are motivated to keep being productive so that they create lots and lots of valuable things the more valuable things we create collectively the more wealth we generate and the more able we are to provide for ourselves our loved ones and our most vulnerable members who can also be a much-needed source of demand for those valuable things on the other hand the fewer valuable things we create and the less wealth we generate the less able we'll be to provide for ourselves our loved ones and our most vulnerable members whether you consider yourself a socialist or a capitalist or anything in between is I believe totally irrelevant to the issue at hand regardless of what you believe if you don't understand that we develop money in order to reward people for producing lots of valuable things or wealth you will never be able to create a stable and sustainable society or even community what's so exciting to me and people like me about the burgeoning field of cryptocurrencies is that they present a new way for creating monetary systems and distributing money and they are monetary systems systems that efficiently manufacture and distribute productivity points so that we as a group can generate more wealth for the very purpose of providing for our most vulnerable members that's why dan Larimer creator of the cryptocurrency steam as well as people like former greek Finance Minister Yanis varoufakis have outlined designs for a universal basic income that are in line with this understanding of money and not in opposition to it but I would argue that Larimer has already made tremendous progress on this front with steam which crowdsources the determination of value instead of relying on flawed and corrupt individuals in large banking institutions in wall street to distribute the productivity points we refer to as US dollars this is demonstrated on the social networks teaming where people are rewarded money based on the up votes of other users in other words points are distributed directly to content creators based on how valuable other people mainly their customers find their content to be check it out for yourself by following the link in the description it just works they give out thousands of dollars every day by creating productivity points called steam out of thin air and allowing steam it users to determine who gets them it's totally free but steam has real value all right well as far as I'm concerned you now understand money better than the majority of academic economists and to test that out let's explore more sophisticated subjects like how do you get a raise well your salary has paid you in the form of money productivity points if you want more money you have to create more value for the enterprise or prove that the value you create is not sufficiently appreciated that doesn't necessarily mean working more hours or working harder it could mean working smarter meditating more or learning how to spend more of your time in a state of flow where studies show that people are as much as five times more productive as long as you produce more value you should be compensated with more productivity points now what if you work at a place that doesn't reward people with money in proportion to the amount of value they create maybe your co-worker creates half the value you do and gets paid the same amount do you think that will be a stable and sustainable enterprise maybe you should think about working someplace else if you really are producing that much value it would be just bad business not to hire you in other words if your work won't pay you what you truly deserve it could be a blessing in disguise if it motivates you to leave a sinking ship before it even hits the iceberg on the other hand if you work for a company that is great at distributing the right amount of productivity points to the right people not only do you know that all you have to do to make as much money as you want is create sufficient value for the enterprise but you can rest easy knowing that the enterprise is likely stable and sustainable because it's properly incentivizing the creation of value of valuable products some companies even distribute their own private form of money called shares shares also serve as productivity points and therefore can also be thought of as a form of money companies give this money to their employees in addition to their salaries as an abstract representation of ownership in the enterprise they enable the company to reward their productive employees not just with currency which is money they can use to buy things like food shelter and entertainment but with a piece of the very enterprise they helped build thereby encouraging them to add even more value to the company because they will be able to recapture that value at a later date when they sell those shares of course as with any monetary system it could be flawed and points could be given to employees who are not productive again your new understanding of money can be used to assess that this is not a stable and sustainable enterprise obviously the most productive employees will leave the company as they continue to see they're less productive peers get unjustly enriched eventually the company will be made up primarily of unproductive people meaning it won't be able to produce much of value and it it'll go bankrupt on the other hand a company that has a good system for rewarding their employees is not just a good place to work but could be a good investment opportunity for example several years ago I exchanged money I had earned four shares in a company called Tesla Motors because I believed they would produce more value with it than I would and that additional value would eventually be reflected in the share price it wasn't because of one car that they made it was because I was convinced that they could attract and retain the most productive people in the world as you can see once you start thinking about money as productivity points it can give you insights into many aspects of your life maybe even things you felt were previously out of reach none of this is to say that this is the only way to think about money in fact I would love to hear how you think about money in the comments and how that adds value to your life at the end of the day my goal is to figure out what works not what's right there is no right answer for all I know it might be better to think of money as a kind of communications protocol that links us all together in a complex interconnected web of information it certainly does help us transmit massive amounts of information incredibly efficiently but that would be the subject for another video all right well my goal with this video was to help you achieve a sophisticated understanding of an important aspect of our lives in a relatively short amount of time if you feel I did that please subscribe and follow the link below to check out the companion article on steam it and to view bonus content give me an upvote it's totally free and it's how I make money you can also follow me on Twitter and Instagram also at and rocky and please let me know if there's anything related to economics or technology that you would like to hear me discuss thanks for watching

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