Kirk David Phillips (00:01.44)
Okay. My burning crypto question of the day. What gives crypto value? Like how does it even like it to me, it has like, there's, there's no meaning to it at all. There's nothing, nothing physical, et cetera. You're not buying into a company. how is crypto even valuable? Fantastic question, Robin. Welcome to the Kirk and Robin show. Relatable crypto conversations and 21 minute chunks.
So actually what I would say is I would just rephrase that to start with and say, what, does Bitcoin have value? Okay. mean, is crypto, but let's just say Bitcoin because that's where I think people get tangled up. It's actually one of my favorite questions. Maybe my top five favorite questions of all time, as far as far as blocker type questions and where people get stopped. this really amazes me. I mean, these, you know, we're talking about like very intelligent people, very highly educated, very intelligent, very successful people.
Uh, you know, get tangled up on that. It's like, just don't get it. Like, you know, it's like, okay, well my money has value. My green backs by us dollar, my euros. Think about, just think about it from a physical kind of made up anyway. We, we, we just, right. Well, it is made up arbitrary things, right? Yeah. So, you know, let's just think about it from actually having like picture yourself with like physical bills in your pocket. Okay. So whether it's yen or euros,
You know, any, any physical bill, just pick your pick your country, pick your fiat currency like that. Okay. I think about it from that perspective. So yeah. How does that have value? That's, that's the question. That's, that's, that's actually, that's actually, that's, that's funny. You said that because actually that is what that's exactly what fiat is actually Latin, essentially my interpretation of it is because I said so that's what it is because somebody says, that's funny. You said that. So
That's really what it is. It's just like, okay, it's being printed, but see, that's, that's the paradigm. That's the only paradigm anybody's ever known. Yeah. Since they were a kid and they grown up and they've seen their parents and their grandparents and everybody. Gold is physical. Like it's something physical that has. Right. There's a whole narrative around goal. got five to 10,000 years of, civilizations, you know, being enamored by gold.
Kirk David Phillips (02:19.758)
And so that's, that's the only thing anybody's ever known is, is growing up with these, you know, dollar bills. Again, pick your, pick your country, right? Pick your central bank. And that's it. So everybody's just assumed and thinks, oh, that has value. That's the thing. That's the primary thing that has value. And I have to judge everything else, but this thing has, it doesn't require any judgment. I don't need to ask any questions about it. Everything else, however I do. All right. Okay. So, all right. Well, who says it has value then?
Well, it's kind of like, think it's kind of an unspoken thing. It's like collective, say, think so. It's a little bit collective, but it's kind of like, our, our fine central government that has 24 hour printing presses and just prints, you know, nonstop. And anytime you need more money, you just print more money. So do you think that's, know, do you think that's a way to create value where there's no actual controls on just creating? That's basically how we solve problems, by the way, print more money, create more debt.
You know, and this play all kinds of financial games in between countries. So is it OK? Well, how about I don't know if this is a good correlation or not, but like diamonds, like there's a scarce there's a scarcity aspect to it. So is that some of what's at play with crypto? Because you can only mine so much Bitcoin is the scarcity aspect of it. What makes the value increase?
Great question. I love it. I'm so glad that you brought up diamonds. I feel so smart. Yeah. You're really, you're nailing it today. It's awesome. Yeah. I'm so glad you brought up diamonds. I've forgotten about diamonds. Well, my, you can manufacture those. there is synthetic diamonds. However, yes. When you talked about the scarcity of diamonds, but if you want to unpack the scarcity of diamonds, what you wrote scarcity of diamonds points back to one thing and that is clever marketing because diamonds have been historically controlled by
cartel, the De Beers cartel, if the De Beers is the cartel or, you know, one of the players, but nonetheless, there's basically, it's basically a cartel kind of like wheel cartels controlling the price of oil. So the price of diamonds is actually controlled through artificial scarcity and clever marketing. They're not necessarily rare. So we all think a diamond is forever a girl's best friend, all that type of stuff. See? So again, the perceived value has been, you know, from this, the spin doctor, right? So
Kirk David Phillips (04:36.6)
You really think about this is where you really have to take it. totally fell for it. there you go. So you have to go back to really dive into economics here. That's what happened to me. I studied economics and went into business school. I guess it wasn't in high school. I didn't study economics. Definitely in business school. And then further, when I got into crypto, wrote my first book, The Ultimate Bitcoin Business Guy, which is actually behind your head there. The orange book. I've read it. And so that's where I said, you know what? To understand something is to understand its opposite. That's Stephen Covey.
101 right? So let's dive into economics and like let's start from the beginning and like understand this thing So in all street economics you talk about like the mutual commit the mutual coincidence of once Right. I think about this just roll the clock back several centuries. Did you say the mutual coincidence of once correct? Okay mutual coincidence of once. Okay So this is this is this is in the time of barter So think of the roll the clock back hundreds, maybe thousands of years just picture yourself in that time We don't really have you know
Coins really haven't developed yet. Certainly paper bills haven't developed yet. How are two parties going to trade? Whether it's within a culture or a society or between two different, say, you know, whatever it be called at the time, know, clans, empires, whatever it is, how did people trade that way, you know, internally and also externally with other, other empires and stuff like that. How would you trade? Well,
depends what's valuable at the time, because actually salt that once upon a time was actually spices or spices. Exactly. I guess. And so that's some of that stuff at a particular point in time in the history, right. Uh, was considered to be highly valuable. Yes. So why, why salt? Why do you think salt was valuable? I mean, where they didn't have it, where they were from, guess. that's, well, yes. Well, that's always the case. Anytime, anytime somebody wants to have civic. Yes. Cause you don't have it, but
What was salt used for? During a time when it would have ever seemed this highly valuable one of the maybe say a top five valuable type commodity. feeling particularly dumb because I was like, don't know, sprinkle it on your food. Did you have electricity in those times? Well, obviously not. Not like we know it. so if we had a so means although electricity means no refrigerators, right? Oh, how do you present what was salt used for? I didn't know.
Kirk David Phillips (06:58.494)
So it was used for refrigeration. the same way we use it today. Like curing me. Yeah. That's how you dry. You dry out the meat and you take out the moisture and that preserves it. Right. Okay. So there you go. That's, that's why I it was valuable. Clam shells once upon a time were valuable. And so those were used for trade. So then anyway, the mutual coincidence of once would be, what is, what are the chances that I have baskets and you have tomatoes, right?
I have baskets, you have tomatoes, but I want tomatoes and you need baskets. Yes. That at any point in time, we randomly two people that have two things that they also need the other thing that the other person had. That's going to happen. That's going to actually going to be extremely rare. It's going to happen. What less than 1 % of the time. So how do you solve the mutual coincidence of wants is where you have a common medium of exchange, which is where salt and clam shells and other types of things come into play because they were considered valuable, abundant for
you know, and abundant. Well, I guess they could have been scarce, but you know, abundant for the, for the, the party that sources it. And then they're able to sell it to the other party who needs it. Okay. But because it's valuable, everybody says, wow, we can, you know, I have salt. We all need salt because we all need to eat and we all need to preserve the food to eat. Otherwise it would spoil. it becomes a commonality. You see? So you saw that mutual coincidence and then you can just say, all right, well you have tomatoes. have salt. We'll trade that.
And then I go to, I buy the tomatoes, but you don't need the baskets. So I go out to the market and I got my little stand up and I'm selling my baskets. And so I accept salt. I sell my baskets for salt. Right. Then eventually roll the clock forward at morphs. And then we, you know, then we turn into from those, you know, from the commodities, we, you know, go, go into coins, making coins and eventually paper bills. And that becomes a medium of exchange. got it. So that's the common thing to exchange. So anyway,
You're bringing this all back to crypto somehow. Yeah, absolutely. It's actually the evolution. It's actually, got it. It's the evolution of money is really what it is. It's, it's sorry. We even still Bart see the thing about all these things, forms of money. And then you got coins, paper while we're on it, coins, paper bills, credit cards, and now crypto, right on public blockchains is this is the evolution of money. And none of these things have actually become obsolete. I mean, even Roman coins and old
Kirk David Phillips (09:22.338)
coins like that. Now they're not necessarily used in exchange, but they have numismatic value, meaning trader collectors collect them credit cards. That technology is obsolete, but we still use it. As a matter of fact, it's a rail that rides on top of crypto. That's how you get mass adoption is because you just say, okay, cool. Well, there's a lot of projects are creating credit cards. They can spend your crypto because you're using a common thing that all the merchants have. You don't have to get somebody to just eliminate everything and start all over with new stuff.
You continue using what you use. Nothing's even paper bills, coins. mean, what's interesting because nothing has actually become fully, fully obsolete. We still use all these things today. Right. So anyway, again, what has value? And again, this is after studying and studying and studying, writing the book, I just mentioned the first book, talking to people, being in this space and really deep diving into economics about how do things have value? And what it comes back to for me is
one dirt simple thing. Okay. Super super. I'm on the edge of my seat. I thought you maybe you'd nail it. I'd be like, I got it. No, I'm still thinking about salt and, and, and, and tomatoes, but anyway, keep going. before we do the big reveal, why do you think? Cause I think gold is the thing that people are enamored by, right? You know, it's like, it's just like, it has a sheen. doesn't oxidize. It's malleable. It's beautiful.
Right. it's physical. It's tangible. It's physical. It's like, it's rare, especially in the, you know, centuries ago and millennia ago. And you, you didn't have, you know, big heavy equipment where you could go mine this stuff and rip up the earth. know, so was probably extremely rare to accumulate. So why do you think gold has value? Why does gold have a, in your mind, what would you say? Well, again, somebody, well, okay. Scarcity combined with somebody says, well,
Yes. I say, yeah. Okay. Yeah. Somebody's well, somebody says, I'm saying that is more like a coer, it's more from a coercion coerce or coercive type of thing. I say it has value. you have to agree that it has rulers and you know, rulers and Kings and so forth. mean, that's where I think that I say it boils down. Yeah. So what I say it boils down. So what I'm talking about when it was far as like Fiat, because I said so it's kind of like the government, you know, the old
Kirk David Phillips (11:45.678)
It's kind of like the old, you know, like the metaphor where, you know, hold a gun to your head type of things. It has value. Cause you know, cause I say it does, you know, you better do this. Cause I say so it's kind of like, what do you say? It has value for it's one super, super simple thing. The rule applies to everything. You name the thing and you want to know what the thing is. has value, the desk, your phone, anything. It has value because people agree that it has value. That's it. Okay.
Well, that's that's my version. It's that somebody says so I got you. You're not that's distinctly different, though. It's distinctly different. All right. People agree that it does. Got it. OK. It might seem like it's the same, but I how the nuance would be because, know, because with crypto, people agree that it.
does, but not everybody agrees that it does. So you have markets, but I'm getting it. So you have every there's markets. Now some things are the formal markets. So you had, then you have liquid markets like stocks, security, stocks and bonds or security. So you have liquid markets, right? Where you can trade at any given time you want to sell essentially. Although those markets don't operate 24 seven, but crypto does sun sun never sets on crypto. But in trad fi, you know, essentially if you need to sell something, you can liquidate. Now you might liquidate it out of loss.
but at least you can sell it because you need cash and you can, need to liquidate right away. Right. So, but there's all, there's always those markets that exist. So if there's more buyers than sellers, well then there's means there's more demand. The price is going to go up more sellers and buyers and know, prices are going to go down. So it's really, and you know, so that that's what it comes down to is people agreeing. And then, then the more people that you have that agree that it has value, it's like, it goes back to the network effect that we talked about before, you know? And so,
the more people you have joined a network, the more valuable it becomes. The more people that agree on something has value, the more valuable it becomes. It's as simple as that. I don't understand why people get hung up on it. I don't understand this intangible thing, this Bitcoin thing, like why does it have value? But again, that's where it comes back to education. You gotta understand and to understand all of crypto is to understand Bitcoin first, put your stake in the sand. You gotta understand the parameters of Bitcoin. And it is challenging to wrap your head around.
Kirk David Phillips (13:58.478)
Sometimes you got to do it in little chunks, understand a little bit. can't like, like I said, just to try it for me, trying to understand Bitcoin mining, it took me like nine months, right? To understand that sufficiently to where I was satisfied. Right. And then I keep, I still keep learning, but learning doesn't stop. I have a follow up question to something you said, and I think you're going to love it because it'll get your juices flowing as it has to do with crypto being
I remember you wrote about this in your book. was like the first evolution of exchange in like thousands of years or all time or whatever, you know? So maybe say something about that, right? Because that's something that people, either they can feel threatened by it or they can feel like, my God, that is pretty amazing. Like we've never actually had, we haven't had any kind of evolution of exchange.
Oh, I think what you're getting to is having no intermediary is what you mean. Maybe that what you mean? Maybe. But like you said, it's like transforming. I don't know, accounting and finance in a way that hasn't been touched in, you know, thousands of years. So, OK, well, first of all, is that clear on why something else? By the way, I still think people are still going to walk away. It's like, oh, wow, that's too. It's almost like it's too simple.
It's like, don't know. I don't get it. That's too simple for me. Right. I still don't get it. I still can still see people saying I still don't get it. Right. So what was your hang up? Like when you started studying crypto and you be very skeptical person anyway. Right. And and coming at it from a finance professional perspective. What were your what I mean in this in this conversation, where were you skeptical? And because I'm sure people will be able to relate to that. And then there was some aha moment where you're like, OK.
I get it. This is really awesome. Right. Well, first of all, I don't, that's a great question. First of all, I don't know any Bitcoin or the wasn't skeptical. You should be skeptical. You should be skeptical. You should actually doubt everything. Trust no one. Be skeptical of everything all the time until you get sufficiently, you know, satisfied with your inquiry. That's how it should go. You shouldn't just automatically assume. And, know, because you hear something sweet, sweet. got instant buy-in right away. I won't ask a single question. You you be skeptical. Every big, the question is how long were they skeptical? Was it a day, a week, a month?
Kirk David Phillips (16:14.83)
And it, you, whenever you hear somebody, you know, like I'm talking about OG Bitcoiners and you know, OG crypto people and you hear their origin story and you'll always hear that they were skeptical at some point I dove in, I studied it around the clock for 30 days and then I was all in. I mean, that's what happened to me. I don't know that I was ever so much, I guess I had some degree of skepticism, but it was like, I need to, I need to dive in. I got to like research and understand it. So I mean, I always, you know, I'm always doing that first with anything, you know, digest it. So I think it was more to me and more of a
digesting period. It wasn't like hyper skepticism. Although the first time I heard about it, which you know how I got into Bitcoin. Yes, I did. So yes, I was highly skeptical upon first. Yeah. You know, especially since first inquiry. Think of it first. Well, yeah. So what so what what kinds of things did you encounter where you were just kind of like kind of like, you know, I know there was a moment for you where you were like it was an epiphanous moment, probably of some sort where you're just like, this is amazing.
as a way of exchange, right? That's right. Yeah, it actually didn't take me long. I'd say somewhere in the first two weeks to 30 days in the digestion period. But, you know, and I was like, wow, this is freaking amazing. I'm all in. I mean, I am long. And again, that's what we talked about before it comes down to conviction. The deeper you understand something, the more conviction you have, the better to have investing outcome that you will have in the longterm. Okay. Okay. The deeper they understand the deeper the conviction. Yeah.
better the result will be. That's like your number one thing. And that's all founded on education. It's founded on education and understanding it. So basically it was like, this is freaking amazing. That's why every day I think about it new. see Bitcoin in a new way every single day. It's more beautiful than the day before that's been going on for like 11 years now. So basically one of the big things is, so let's go back to the clamshells and the baskets and tomatoes and the salt.
Right. So in those days that was a peer to peer transaction. Think about the marketplace or you you're strolling along. There's the market and we saw marketplaces today like that. Flea markets and actual markets like that. Right. Right. Farmers markets. That's peer to peer types. That's peer to peer stuff. So we trade the, we trade the goods and we trade the whatever the thing you traded for, you know, the salt or whatever. Now it's, now it's money, but still it's peer to peer like cash is peer to peer. Right. Essentially. But
Kirk David Phillips (18:29.432)
to exchange electronically in a more like sophisticated way, we needed trusted so-called trusted intermediaries that actually you can't trust. So that's the problem. That's the problem with intermediaries 2008. remember 2008. You cannot trust the traditional finance. Why? Because if something can be usurped, if there's no controls, human nature will override the controls. That's how it works. That's how it works. So basically,
trusted eating trusted intermediaries fails from the beginning. It has an inherent flaw. Why? Because you have humans evolve, forget about the technology and all that stuff that doesn't work. So you have to have a trusted. That's the thing that could not be solved for, for centuries. like centuries since we had, let's call it, we had this type of money and electronic money, you know, however long that is, I don't know what it is. Say it's a hundred years or whatever. But the point is we couldn't figure out how do you eliminate the intermediary still have a resilient system.
where we exchange electronically. That's what Satoshi's brilliance is to figure out how to take essentially off the shelf components, put it all together in this resilience. So it's such a beautiful, beautiful thing. I knew it. get your Jesus going. I know he's moved to tears. am. so you got to go read the white paper. So anyway, so that's what Satoshi figured out how to remove the intermediary and you're able to
actually the thing is talk about untrusted. can actually have untrusted party. You don't even have to know who the other party is and have a system and a network that's so resilient that it's, you know, proven it's, it's proven. So, you know, for the past 16 years now, so when our last Satoshi minute where we got to wind it up, so that's it. That's really what that was the big break. Of course we could dive into other great, wonderful juicy things about it, but that's
what it is removing the inner trusted intermediary or the intermediary the untrusted the intermediary that you can't trust now we can operate on peer-to-peer this is it's so brilliant and again that's why I'm on everybody agrees that it has value and that's why we've gone to in just 16 years we've gone to no value to you know 10,000 Bitcoin pizza to $300 to $95,000 today thank you Satoshi I love you Satoshi thank you
Kirk David Phillips (20:50.646)
And thank you. This was really enlightening. All right then. Well, until next time, Robin. Thank you. See ya.
