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Is Bitcoin Just a Flash in the Pan? Peter Thiel Responds

He reveals that PayPal started out as a libertarian project to free money from central control but that proved harder than anticipated

In this fourth and final episode based on his talk at COSM 2019, Peter Thiel — who founded PayPal in part to help break up currency monopolies — offers some thoughts on cryptocurrencies’ future. In the earlier episodes of his discussion at COSM 1919 with philosopher of technology George Gilder, top venture capitalist Peter Thiel offered Three Contrarian Ideas: 1.Big Tech, as it operates today, is communist. 2. Big Tech is also slowing down. And 3. Learning today has almost nothing to do with the so-called educational system.

Now, about the future of cryptos:

This portion begins at 27:21 min. A partial transcript and notes, Show Notes, and Additional Resources follow.

George Gilder: Peter, you started PayPal, in part to overthrow this government monopoly of money. How’s it going? What can we hope for in the future, in the cryptocosm.

Peter Thiel: It’s a little bit harder than I thought in 1999, certainly. One of the books that tremendously influenced me, when I started PayPal, was The Sovereign Individual, written by Rees-Mogg, the father of Jacob Rees-Mogg, the British Brexit parliamentarian. It was about, how we’re going to have cryptocurrencies, and it was going to be a decentralized world, where sovereignty would itself, would get decentralized to the individual level.

I read that book in the summer of ‘98, and it inspired me to start PayPal as this libertarian project that was going to liberate people’s money from the control of the central monetary authorities. There’s a whole set of ideas we had around that. In the context of PayPal, we certainly built a successful business, but that part of the vision turned out to be quite hard to do.

There was certainly forms of electronic money that, in theory, were decentralizing — and in practice enabled more centralization and more control. Especially after 9/11 and the Patriot Act, and all the ways that the regulatory state, was able to more precisely track the flow of electronic money, it may have actually trended quite the other way.

Now, I do think of Bitcoin as the real thing. It’s sort of the centralized currency that we fantasized about at PayPal, but didn’t quite build. I have speculative thoughts on who Satoshi is and the Bitcoin origin story. Without, without stating precisely who I think it is, let me give what I think, is the key origin story for Bitcoin:

Note: “Satoshi” is the name or pseudonym of the mysterious creator of Bitcoin, the best-known cryptocurrency. Many have tried to discover his identity without success: “Google “Satoshi Nakamoto” and the results will lead you straight to image after image of an elderly Asian man. This is Dorian S. Nakamoto, named “Satoshi Nakamoto” at birth. He is almost 70 years old, lives in Los Angeles with his mother, and, as he has reminded people hundreds of times, is not the creator of Bitcoin. ” – Business Insider

Peter Thiel: When I started PayPal, I went to this financial cryptography conference in Anguilla in early 2000. It’s an annual conference and it had this gathering of people who are libertarian, into cryptocurrencies, and probably a decent number of people working at the NSA, spying for the US government, other governments as well.

My theory, is that Satoshi was at that conference or at one like that in early 2000. These ideas were germinated in the late Nineties. One of the manifestations of cryptocurrency at that particular conference was a system called EGLD — anonymous encrypted electronic gold certificates. It was a company, that was based in Southern Florida. They had servers distributed all over the planet, but it was in theory, this gold-based alternative to the dollar.

It was going to be encrypted and safe. And there were all these problems with EGLD. We made it interoperable with PayPal. It turned out that there was a lot of criminal activity. Maybe that’s always part of the territory of these things. We disconnected it but, the people who started it eventually got in a lot of trouble and the whole system was shut down. The company was targeted, they were prosecuted and I don’t think they went to jail, but the whole thing was disbanded.

There was something about the EGLD architecture, that was, in theory, a cryptocurrency and, in theory, fairly decentralized, with their servers in Iceland and Dubai and one or two other places. But in practice, it was still centrally attackable by the larger central government,

I believe that the true Bitcoin origin story was in contrast to EGLD. It’s almost the same name in a way. Change E to Bit, and GLD (for gold) to coin. I think the reason we do not know who Satoshi is, is integral to the history of Bitcoin. If we knew, our too-powerful central government would probably do some very unpleasant things to that person.

George Gilder: Peter, why do you believe that the Communist Party of China could nurture or run giant companies, with tremendous capabilities that actually are competitive with the best companies in the United States? How is it possible, that a communist party can actually be a threat, in this commercial creative domain?

Peter Thiel: Well, I think these companies are a threat, and I think they are very tightly controlled by the Communist Party. So that’s the empirical answer.

The theoretical answer is, I don’t think centralized totalitarian communism, is that good at creativity. You did have a good number of theorists and good chess players in the Soviet Union. So there probably are certain forms of creativity you’re able to have even in a Stalinist or Maoist system. But I don’t think the creativity is essential.

The competitive threat from these companies in China is that they are just extremely fast at copying, they’re very fast at copying things that work.

There’s always, in any sort of creative business, there’s a balance between the creative inspiration, what I call the Zero to One, the miraculous beginning, and then, scaling the business and building it. I think in every area of technology and innovation, the United States and the West more generally, are still at the cutting edge. We’re still ahead. We’re the only place in the world, where innovation is really happening. But how much value it is to us, depends on how quickly it gets transferred, and exfiltrated to China.

The West developed the atom bomb in 1945, and that was, again, a form of innovation that was possible in a free society. But, within four years, once you had proven that it could be done, it could be copied, even in the Stalinist Soviet union. Copying is much easier to do than originating, and if you have no IP protection, if we have this massive exfiltration of information and ideas, then the disadvantage is not that great for China. And they can be quite a big threat.

George Gilder: How does your understanding of technology inform you about what the current pulse of personal relationships, and the broader social and societal fabric looks like. Now, and into the future, you can talk forever, Peter. Any room for the human spirit in our futures?

Peter Thiel: Well, one would hope so. I think there are all sorts of unhealthy trends in our society, and things that are very off.

Jordan Peterson

The way I understand the Jordan Peterson phenomenon is not that he’s correct about Jungian psychology, which I think is just ridiculous. Peterson’s been effective because Jungian psychology, is a politically correct way, to talk about the extremely dysfunctional gender relationships in the United States, and the West. I agree with that premise of the question that there are some really big problems. I disagree with the claim, that it’s mainly driven by technology. Maybe there are aspects of tech, of the sort of constant attention distraction, or things like that, that are unhealthy, and that are socially unhealthy.

But there are many things that drive it, and my intuition for what’s gone wrong in a lot of these cultural areas, is just the general sense of cultural malaise, of stagnation, of the future is not getting better. Our society is not progressing when people retreat into playing video games, or living in their parents’ basements, or staying in graduate school.

I think the solution is, maybe you should give them a Jordan Peterson-like psychology lesson. Maybe, you can tell them to turn off their iPhones, or take away their iPhones. But I think the real structural thing is we have to get back to the future. We have to get back to growth in our economy generally. That’s at least, always my bias.

Here’s the live stream:

Here’s are the Three Contrarian Ideas, with transcript and notes:

  1. Peter Thiel: Big Tech, as it operates today, is communist. Visions of the computer age have swung from big centralization in 1969 through big decentralization in 1999. Neither got it quite right, Thiel says. The coming decentralization is the First of three Contrarian Ideas that the famed venture capitalist offers tech philosopher George Gilder.
  2. Peter Thiel says, forget the hype: Big Tech is slowing down. Second Contrarian Idea: We can see the slowdown clearly if we look past the hype. Thiel: A self-driving car is a step up from a car but not as big as a car was from a horse. And Google doesn’t even talk about the self-driving car much now.
  3. Top venture capitalist on tackling the big, corrupt universities. Peter Thiel: Online education is great for learning, but unfortunately, learning has almost nothing to do with the so-called educational system. Thiel’s Third Contrarian Idea: Never bet against the human spirit as a source of new ideas. That includes education reform.

You may also wish to read: Peter Thiel speaking in person at COSM, Seattle, November 10. As a world class venture capitalist, he is known for bluntness about what works and what doesn’t. COSM 2021 focuses on the converging technologies, remaking our world. Thiel asks, is new tech soaring or slumping?


What does super-investor Peter Thiel think you should read?
Some books to consider include history as well as business strategy. The two cannot be separated. A book maven tells us what Thiel has recommended, if you are thinking of starting a business — or thinking about life in general.

Show Notes

  • 00:50 | Introducing Peter Thiel
  • 01:12 | Three Contrarian Ideas
  • 01:50 | The History of the Future
  • 04:53 | The First Contrarian Idea: AI is Communist
  • 06:10 | The Second Contrarian Idea: The Speed of Technology
  • 13:20 | The Third Contrarian Idea: Technology is about People
  • 14:55 | Bet on the Human Spirit
  • 15:22 | The Big Tech Monopoly
  • 19:18 | Improved Education
  • 27:21 | The Monopoly of Money
  • 32:24 | China’s Capabilities
  • 35:15 | Technology and the Human Condition

Additional Resources

  • COSM 2021: November 10-12 in Bellevue, WA 
  • Watch Peter Thiel’s talk on YouTube.

Podcast Transcript Download

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Is Bitcoin Just a Flash in the Pan? Peter Thiel Responds