Author: Hector Rosekrans

In case you’re confused why there seems to be an ongoing assault on both science and capitalism, let’s clear things up a bit. At its heart, capitalism is just a special case of scientific inquiry, which is itself a tool for finding truth. These are both types of epistemic tools, the things we use to learn new things about the world.

The core of science is a question – how can we prove what we think is true? You start by assuming you’re wrong (null hypothesis), design a test, and see what happens. Make sure you take good notes.

Capitalism is basically the same thing – what do we think people will want, and how can we prove it? You design and try to market a product. The null hypothesis is important here as well – assume you will lose any money you invest.

The idea isn’t complicated. Get idea, test idea, learn things about the world. Simple and elegant. But the world is a messy place, and you have to be careful. First, make sure you know precisely what you are measuring so you can compare your results with others. Second, tailor the experiment to isolate the one variable you care about while holding everything else constant.

For a business experiment, if I invest X dollars in company Y, how much value will be unlocked as a return on investment?

Similarly in thermodynamics: if I apply X heat to Y chemical, how much energy will be released in the form of rapidly expanding gasses?

In our thermo example you can measure the energy inputs and outputs in joules or BTU, then subtract the ambient heat to arrive at a solution. Easy day.

In capitalism you should be able to measure dollar inputs and outputs, then subtract ambient dollars (inflation) to arrive at a solution. This proves to be substantially harder.

The first problem is the unit of measurement. In science, we use a standard measure of energy, maybe BTUs or joules. One BTU is the amount of energy required to raise a pint of water 1° Fahrenheit, while a joule is the amount of energy required to raise 1 kilogram of water 1° Celsius. Different units are annoying, but easy to overcome. We’re all talking about the same thing.

As long as we have a shared definition of reality, we can do this. The sky is blue means el cielo es azul. 2+2 = 11 in base 3, and 4 in base 10. You’re being a little pedantic if you insist on the former at a dinner party, but you’re not wrong.

A shared definition of reality is critical if we want to compare things across time and space. Unfortunately this isn’t the case when it comes to money. A dollar is whatever the Fed and Treasury say it is. Very postmodern.

A dollar today is a very different thing from a dollar in 1971. We typically think of this difference as inflation, and can do a quick translation using a CPI calculator. But this misses a whole lot of weirdness. The price of some goods have deflated considerably thanks to technology, while the cost of others have far outpaced nominal inflation. God help you if you want to compare value across both time and central banks.

The second problem is ambient energy

In theory, the fiat economy means we could have more or less inflation. Same way you could run your thermo experiment in the desert or in the arctic and need to subtract different levels of ambient energy, for a business experiment you can subtract different levels of inflation to find the real result.

In practice, money printer go brrrrr.

There is a LOT of money printing going on right now, which adds a lot of noise to the data. It gets hard to separate out the signal, the same way it’d be hard to get an accurate reading on our science project if we ran it inside an active volcano.

The real trick is to not try too hard, and instead convince everyone around you that you’re the genius is causing money to explode out of the ground. A lot of people will be incentivized to believe you too. Getting this kind of consensus is certainly a skill and you can do quite well with it, but it’s not one that helps us learn anything new and useful about the world.

To wrap things up, what we want is the truth. One way to find certain kinds of truth is by creating social incentives to experiment with different ideas. Like science, this process is messy and filled with failure, but that’s life.

These kinds of experiments have lifted the world out of abject poverty and created everything we value today. Things have gotten so good in fact that we’ve started taking fundamental underpinnings of the system for granted. There are certainly short term political benefits to playing games with truth and value, but those experiments tend to crash down to earth rather violently. We avoid this by assuming we know very little, and designing experiments to learn just a little more every day.

Incentivizing people to experiment with products to discover truth is capitalism, but this only works when we can effectively measure value across time and space

So how do we fix this? Start using an established benchmark, and move forward.

Living in 2020 means witnessing a revolution in our tools of communication. The last time this kind of shift happened was with the invention of the printing press, where individuals were empowered to freely communicate, share ideas, and organize with each other. The press put the power of the written word, from the Bible to the Federalist Papers, into the hands of ordinary people, and lead to both the Reformation and the American Revolution. The farmers of the Constitution understood this deeply, and enshrined these ideals atop our most important legal framework.

Freedom of the (Printing) Press

As the cornerstone to the Bill of Rights, the First Amendment lays out the core freedoms central to the idea of America. Our rights to speech, assembly, and religion are fundamental to our humanity. Recognizing this is a prerequisite to to sustain a government of the people, by the people, and for the people.

Freedom of the press is critically important as well, and it relies on technology for their realization. Freedom of speech empowers anyone to ask hard questions of their elected officials and powerful institutions, but we need technology to make their answers available to the public. Freedom of the press ensures that information can be published on a blog or in a newspaper, and broadcast over TV, radio, and streaming services.

At their core, the freedom of speech relies on the right to leverage technology to coordinate ideas and actions among individuals at scale. The printing press granted us ability to economically copy and distribute the written word at massive scale. Ideas from the Gutenberg Bible to the Common Sense were widely distributed, and could be interpreted by anyone who could read. The soft technology of the written word was turbocharged by the hard technology of mechanical innovation, and led to the revolutions that lifted the world into modernity.

Digital Speech

With the advent of the internet, we have exponentially improved on the power of the printing press. Overhead costs to reproduce ideas have again fallen to fractions of their previous levels. More importantly, instantaneous world-wide distribution of anything that can expressed on a screen went from impossible at any cost to practically free. For a brief period of time, speech was freed at global scale for anyone with access to the internet.

Unfortunately, freedom of speech that transcends borders has come at a cost. Our traditional methods for filtering quality ideas from gossip have broken down. Worse still, they have been replaced with algorithms trained to optimize for our attention at any cost. Competition for advertising revenue has driven an arms race for our time, leading to sensational headlines, click-bait, and constant ‘nudges’ from our pockets. The reason for this battle is that the world of networks, power accrues to scale, creating winner-take-all markets in information. In the wake of the Web 2.0 wars, we are left with a few large companies in nearly complete control of our tools of communication.

In the process of winning their respective networks, these companies have accrued an incredible set of data about our daily lives, enabling levels of surveillance and potential censorship unimaginable in the wildest dreams of a Stasi or SS officer. Google has recognized this growing responsibility since the early days of 2000 and 2001 when their “Don’t Be Evil” motto was introduced. Their decision to remove this language from their core message is troubling.

Overtime the risk that these tools will threaten liberty compound. Legal pressure from governments, political pressure from the mob, and economic pressure from advertisers and investors could push Facebook, Google, and others to decisions that threaten our freedoms. Today we are protected only by promises. America’s founders deeply feared the monopolist’s power, but they could not have imagined that the biggest threat to freedom would come from companies that can monopolize communications, rather than a government that monopolizes force.

A Revolution in Privacy

The Internet scaled our tools of communication over the past 30 years at an unprecedented clip and has dominated our popular understanding of computers. At the same time, another technology revolution has been quietly playing out in parallel. The development of strong public key cryptography began in secrecy in the 1970s at GHCQ, the NSA’s British cousin, and was made public in 1976.

The importance of cryptography for everyday use is increasingly clear. We can now arm ourselves with tools to protect our ideas and our data at minimal cost, exposing them only to who we chose. In the era of mass communication and mass surveillance, free expression but automated censorship, strong and open cryptography returns power to individuals. We have the ability to restore the freedoms defined in the First Amendment to their full potential, but this time in an even more connected, open, and inclusive world.

The role of Bitcoin

While public key cryptography protects our ideas and information, it doesn’t help with the content filtering problem that led to data monopolists in the first place. Markets and prices are the most effective tools for discovering value and quality, but only when the underlying money using to measure economic reality is stable and predictable.

Bitcoin solved this by creating a kind of money that operates on the same infrastructure and protocols as the internet itself, but cannot be freely printed like dollars or copied like click-bait. While technical limitations of ensuring trust in the system have prevented rapid integration at scale, steady progress is happening every day. Centuries after the invention of the printing press, we have finally found a method to store and exchange value using the same tools we use to store and exchange ideas.

Internet money will enable us to use markets to discover and filter valuable new ideas, without relying on a central authority or algorithm with its own motives. Bitcoin is fully open, ensuring the system that can be trusted by people with radically different ideas and cultures. It has the ability to serve as a common language that facilitates both trade and communication around the world.

Bitcoin offers far more than a break from the legacy financial system. It’s a protocol enabling digitally native value. For America, breaking away from England was just the first step, she had to prove to the world that she could effectively govern herself and honor her professed values. Building trust is a massive challenge that takes time and patience, most people are happy to subject themselves to the convenience of central authorities an go about their lives. But when they work, open ideas offer a blank slate build a better world.

Bitcoin is good. Its ideas are derived from the same ones that underpin classical values of freedom, equality, and personal liberty. In this post I’ll dive into my views on how technology should be though of from an ethical perspective, and why I disagree with the idea that Bitcoin is best used to break the law.

(Spoiler alert – there is a higher law)

The Ethics of Technology

We need to consider what Bitcoin actually achieves from an ethical perspective. Technology can be used for both good and evil, but it often has a bias. Hearing aids are designed to lift up someone with a disability to a higher level of functioning, while nuclear weapons are designed to grant an individual the power to wipe out cities. So the test for the value of a technology is simple – in the hands of a capable sociopath, how will the technology impact the rest of society?

The key distinction is relative power. We know that in fact, all men are not created equal. But certain technologies help level the playing field, while others grant power disproportionately. Give Hitler control of a one-to-many medium like radio where he can propagandize directly without competition, and you get Kristallnacht. Give him a Twitter account and he’s just another troll, whose horrible ideas will get ratio’d to hell as soon as they’re exposed to the light of day.

As a many-to-many platform, Twitter gives a voice to the voiceless who may otherwise be censored by centralized technology. That includes women abused by powerful men, minorities harassed by law enforcement, and middle class Americans disgusted by the excess of the elite.

Like Twitter, Bitcoin is designed for freedom. The trade-offs that limit transaction throughput are made to ensure it remains a tool available to empower individuals, no matter their circumstance. Anyone in the world with an internet connection and a Raspberry Pi can hold Bitcoin, run a node, and verify their transactions.

The end result is monetary security – protection against direct theft, as well as protection against debasement risk that plagues centrally controlled currencies. In this way, Bitcoin is an extension of our natural, unalienable rights, and a powerful force for good in the world.

Natural Law vs the Laws of Men

Bitcoin’s design makes it clear – this stuff is made to function in a hostile environment, and enable “breaking laws and social constructs”. It’s useful however to ask specifically what kinds of laws Bitcoin can break. At the core, Bitcoin supports two natural rights – the right to save for the future, and the right to transact freely. Centralizing technology has restricted these rights in practice, and even made possible laws that codify those restrictions.

Those laws are fundamentally in opposition to natural rights. They are man made, and out of harmony with moral law. Bitcoin is a weapon, built to fix this.

The Bill of Rights was designed to enshrine natural law into the DNA of an embryonic nation. While the rest of the Constitution laid out the government’s legal powers, the first ten amendments aggressively curtailed their scope in relation to the people.

America’s founding documents were far from perfect. They failed miserably in granting those natural rights to every human within the 13 colonies, and by definition they can only apply to Americans. The beauty of Bitcoin is that through the internet and open source code, today anyone can claim those rights, anywhere in the world. Unjust legal authorities can still prosecute or persecute Bitcoiners, but for the first time in decades if not centuries, they are fighting a losing battle.

Bitcoin is a tool that strengthens moral and civic principles rooted deep in western civilization. To the extent that Bitcoin violates an ordinance, we examine the underlying issue with strict scrutiny and a healthy dose of skepticism.

In Part Two I will discuss Bitcoin and to crime, and explore its relationship with law enforcement and international relations.

Dear Congressman,

I am a veteran, a patriot, and a Bitcoiner. Yesterday, you called for legislation to ban cryptocurrencies in the United States. This would not only be a strategic disaster for our foreign and economic policy, but more importantly, it would cut directly against the laws and values that have propelled our great nation to its unique position in the first place.

The Bitcoin Network, like the U.S. federal government, is a system of checks and balances. It relies on freedom of choice, individual incentives, and transparency to achieve this new form of value. In the same way that our Constitution allowed the people to break free from the centralized control of monarchy, Bitcoin leverages modern communications and cryptography to grant people the power to choose their own forms of value.

The goal of Bitcoin is to build a new form of money, one that can be protected from unwarranted surveillance and seizure by any entity. This is deeply American idea, enshrined in our 4th Amendment protections under the bill of rights. Bitcoin does not disrupt the rule of law, it only helps ensure that law enforcement living up to its obligations of due process before depriving anyone of their rights. We are blessed with a legal system that is far more just than in many other parts of the world, but we can always do better. I agree that Bitcoin represents a major problem for governments that are more concerned with controlling their citizens than protecting their rights, but that is not the America that I know.

The founders said “Life, Liberty, and the Pursuit of Happiness” was the goal of the American project. With life and liberty secured, Americans are free to ask “Why Not?”, and our history is filled with innovators who thrive on a culture that encourages pushing the envelope.

Chuck Yaegar strapped himself to a rocket, lit the fuse over the Mojave desert, and broke the sound barrier, setting the stage for America’s leadership in aviation and space exploration for decades to come.

In 1958, Chuck Berry picked up his Gibson guitar and brought an entirely new energy to American music. Johnny B. Goode brought Rock and Roll to the masses, and has shaped nearly a century of pop culture around the world. 

This spirit of innovation is uniquely American. It why our institutions from Hollywood to Wall Street dominate their competitors overseas. It is even deeply rooted in our military, where a German WWII commander in lamented that Americans were so hard to fight because we routinely ignore our own doctrine.

Bitcoin is a global project, but its values are the same ones that built this country. If we ban it, we will be sending a signal to our adversaries that we fear its power, while at the same time ceding our technical leadership to the totalitarians. More importantly though, we will stifle the creative spirit of innovation that has gotten us where we are today. In America, we don’t believe that anything should be decided by government fiat alone. Why should money be any different?

Very Respectfully,

Hector S. Rosekrans