"It doesn’t get any less scary. All that happens is that you have less life left. It helps if you do your falling early, and it really helps if you do your reaching early."
- Mary H.K. Choi on the importance of not waiting
“When all men think alike, no one thinks very much. It requires wisdom to understand wisdom: the music is nothing if the audience is deaf.”
- Walter Lippman
“Anyone who can make you believe absurdities can make you commit atrocities.”
A. The Medium Is The Message & Manufacturing Consent
When history looks back on 2020 in 10 or 20 years, it will be considered a significant turning point in humanity’s digitization, and perhaps the true beginning of the real digital era. In “the before times” of 2019, Americans were commonly estimated to spend 5-7 hours per day on their electronic devices. In 2020 due to COVID-19, those figures have more than doubled, and online time rose across all demographics and age groups.
A tipping point was reached where most human attention became focused on essentially a single sphere of digital media comprised of three social media platforms (Facebook, Twitter, and Reddit), three TV channels (FOX, CNN, MSNBC), and a handful of streaming sites (Netflix, Hulu, etc.).
The TV channels simply repeat what happened on Twitter that day and deliberately add commentary that drives people to angrily repost the TV content back onto Twitter and Facebook. Politicians and businessman then stoke controversy on Twitter and Facebook and that is in turn played on TV. Similarly, Netflix and the like depend on their content going viral on the other platforms. Each of these platforms depend on users engaging repeatedly and passionately and they are engineered specifically to induce that dynamic.
All of this made me think of two great thinkers: Noam Chomsky and Marshall McLuhan.
McLuhan is best known for his quote:
“The medium is the message.”
His core idea was that the mediums we use shape us more than the messages we share through the medium. Cars change our lives more than any one car. Youtube changes our life more than any one video. Books have changed our lives more than any one book.
The ideas are not as important as the medium through which the ideas are delivered.
How do the mediums you use change how you perceive and see the world?
To quote McLuhan again:
“We become what we behold. We shape our tools, and thereafter our tools shape us.”
This will remind some of you of David Foster Wallace speech: This Is Water.
“There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says ‘Morning, boys. How’s the water?’ And the two young fish swim on for a bit, and then eventually one of them looks over and the other and says, ‘What’s water?’”
Wallace goes on to teach us that sometimes: “the most obvious, most important realities are the ones that are hardest to see.”
A question for you: How have your tools changing your perception of the world?
If you’d like to dive deeper into Marshal McLuhan, this Philosophize This podcast is great.
Noam Chomsky then built on some of McLuhan’s theory to come up with an important concept in media known as Manufacturing Consent.
Some Chomsky quotes:
“The general population doesn't know what's happening, and it doesn't even know that it doesn't know.”
“The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum....”
“That's the whole point of good propaganda. You want to create a slogan that nobody's going to be against, and everybody's going to be for. Nobody knows what it means, because it doesn't mean anything.”
Given the cancel culture across the world and even the narrative around Wall Street Bets and the stock market, I started thinking about Chomsky’s concept of manufacturing consent.
For Chomsky, to “manufacture consent” is to create a system in which citizens become willing and obedient, consenting and unquestioning, obeying certain principles and paradigms, all by way of corporate-sponsored propaganda through mass media and commercialism.
Ben Hunt of Epsilon Theory was recent on the Smarter Markets podcast discussing how social media is being used to engineer the narratives which shape both financial markets and society more broadly.
One of the strategies Chomsky identified was the Mohawk Valley Formula.
The Mohawk Valley Formula is a strategy where you use media to achieve your goals, let me illustrate:
For example: let’s take a look at some popular slogans from US presidential campaigns that the whole family can enjoy! Keep America Great. Now what citizen...voting in a US presidential election...could possibly disagree with that statement? You could disagree with the policy behind that campaign...but that’s not what we’re talking about here. You could disagree that America is great in the first place...but there’s a sense in which you could re-read that to mean that we should KEEP America great and get away from the way things are now. Point is...to disagree with this statement is to be anti-American by default.
Another example: Hope and Change. What human being can possibly disagree with the idea of hope being a good thing? The statement is shallow BY DESIGN to get people to think the question of this election is as deep as a kiddy pool...when in reality its more like the depth of the ocean.
The point Chomsky was making is that this is one propaganda tactic that uses the media to drastically limit the parameters of a discussion, which in turn effectively, manufactures the consent of the herd...hence the title manufacturing consent.
For those that want to dive deeper, check out:
This is how Chomsky believed consent was manufactured, and his Five Filters of the Mass Media Machine framework:
Ownership: Mass media firms are big corporations. Often, they are part of even bigger conglomerates. Their end game? Profit. And so it’s in their interests to push for whatever guarantees that profit. Naturally, critical journalism must take second place to the needs and interests of the corporation.
Advertising: Media costs a lot more than consumers will ever pay. So who fills the gap? Advertisers. And what are the advertisers paying for? Audiences. And so it isn’t so much that the media are selling you a product — their output. They are also selling advertisers a product — YOU.”
The Media Elite: The establishment manages the media through the third filter. Journalism cannot be a check on power because the very system encourages complicity. Governments, corporations, big institutions know how to play the media game. They know how to influence the news narrative. They feed media scoops, official accounts, interviews with the ‘experts’. They make themselves crucial to the process of journalism. So, those in power and those who report on them are in bed with each other.
Flak: If you want to challenge power, you’ll be pushed to the margins. When the media – journalists, whistleblowers, sources – stray away from the consensus, they get ‘flak’. This is the fourth filter. When the story is inconvenient for the powers that be, you’ll see the flak machine in action discrediting sources, trashing stories and diverting the conversation.
The Common Enemy: To manufacture consent, you need an enemy — a target. That common enemy is the fifth filter. Communism. Terrorists. Immigrants. A common enemy, a bogeyman to fear, helps corral public opinion.
Which takes us to the Robinhood / Reddit / Gamestop debate.
It is portrayed in the media as Redditors (the 99%) vs Hedge Funds (the 1%).
Is this the right debate?
Is there another explanation, to quote Ben Hunt on the Smarter Markets podcast:
Who else benefited and who might have, let's call it an incentive, to create a story that, Oh, let's go get GameStop. Let's go trade on this. Let's go trade on that. It's market-makers like Citadel or this one market maker in particular. Who else has got an incentive? It's the other hedge funds who say, huh, there's a hedge fund here....and I know the guy who is the head of Melvin Capital, his name's Gabe Plotkin and he was at a hedge fund called SAC Capital back in the day before he spun out from Stevie Cohen, that's the guy who owned SAC Capital, now owns the Nets, so he's been in the news around this as well. Gabe Plotkin and Melvin Capital who famously have this, or had this enormous short bet on GameStop that wasn't that there was private information. Everyone knew on Wall Street that they had this big position and whenever you see somebody with a big position, everyone else on Wall Street is starting to think to themselves...hmm. How can I play the game to stick it to them and make a lot of money for myself?
So you take those two groups together, the hedge funds, the investment groups who saw this big position that Plotkin and Melvin capital and some others had short this crappy little stock, which GameStop is. It said, all right, how can we play this? And you put it together with the big market makers who are saying, bring it on guys, because the more we can get this kind of retail trading action here, the more billions of dollars we can make. Those are my opinion. I'll call it the puppet masters, let's call it. Who are through 1,001 different ways trying to tell you, Hey, it's just you little guys, this is your opportunity to go beat up on a big guy. When it's just other big guys who are making the real money here. That's what I think happened.
Where do you think consent is being manufactured?
Where are the parameters of the conversation being limited?
B. What Is Money?
Seriously, what is the point of money and why do we use it? How would you explain money to a ten year old.
To quote Saifedean Ammous from the Bitcoin Standard.
“Being a medium of exchange is the quintessential function that defines money –in other words, it is a good purchased not to be consumed (a consumption good), nor to be employed in the production of other goods (a capital good), but primarily for the sake of being exchanged for other goods.”
According to economist Carl Menger, a key property of sound money is in its salability, defined as the ease with which a good can be sold on the market with the least loss in value.
Then the next question is can money be Digitial?
Money is, and has always been, technology.
Specifically, money is technology for making our wealth today available for consumption tomorrow.
Money is unique among all the goods we seek because we value money not for its own sake, but rather solely for its prospective exchange utility. That’s a fancy way of saying we hope it keeps its value long enough to enable us to trade it in the future for stuff we actually want. The question of which money humans will choose, therefore, boils down to which good, or goods, any individual believes will best store the sum total of their lifetime of daily labor (i.e., their life force).
Taking the Menger criteria above:
Time: Bitcoin is the first store of value in history for which its supply is entirely unaffected by increased demand.
Space: Bitcoin moves much faster across space than fiat.
Divisible: Bitcoin is even more divisible than fiat.
But what is Bitcoin?
Bitcoin is the first, secure and largest digital asset in the world by market cap ($650bn). Bitcoin’s blockchain is protected by Bitcoin Miners.
Bitcoin is the first asset in human history which exhibits “absolute scarcity”, or zero terminal inflation. This makes Bitcoin a unique store of value or “digital gold”.
To put some numbers in perspective:
- Bitcoin Market Cap: $650bn
- M1 USD Money Supply: $7 trillion
- Gold: $12 trillion
- M2 Money Supply (which the FED just increased by 25%!): $19 trillion
- US Govt Debt: $28 trillion
- Global Stock Markets: $100 trillion
One of the craziest things about Bitcoin is that unlike every other asset whose supply increases with its price. In its case, the supply is fixed, so any increase in demand simply leads to a rising price.
But what is Bitcoin really backed by? After all the USD is backed by US taxes and the US Department of Defence.
A common misconception about bitcoin is that it is backed by “nothing” and that there is not any tangible value. In reality, bitcoin is protected by the largest pooled network of computing power in the world. Software code alone does not dictate that the network is secure. Bitcoin miners, bitcoin nodes and bitcoin users who control the economic value, all constantly enforce the network’s consensus rules. No one trusts anyone, everyone constantly verifies everything, which acts as a system of checks and balances to ensure that the network rules are constantly enforced.
I think rather than digital gold, the proper way to think about bitcoin is as a new form of money but it is difficult to conceptualise whether a digital asset can be money.
Keep in mind that the dollars in your bank account are all digital as well.
The major difference between those digital dollars and bitcoin is that bitcoin is scarce and impossible to forge.
Now, I know three types of people when it comes to bitcoin:
The believers: They have owned it for a while and have +10-20% of their net-worth in it.
The dabblers: They got involved in the last year and might have 1-5% of their net-worth in it.
The dis-believers: They think it’s a bubble, a waste of time, and it will end badly.
95% of the people I speak to are in Category 3.
What about you?
I highlighted this last week and will highlight again. The discussion between Mike Saylor and Ross Stevens at the Bitcoin MicroStrategy conference is a must watch.
Those that want to go deeper, should listen to: Bitcoin’s Common Misconceptions with Robert Breedlove and Preston Pysh.
Thank you to Harris Kupperman and Yaser Anwar for their ideas, thoughts and views.
C. A Few Things Worth Checking Out
1. Was our solar system visited by extraterrestrials in 2017?
Prof. Avi Loeb at Harvard has a great and detailed book on it. Thank you Kartik for flagging. This Scientific American article does a great job discussing his work.
2. David Brooks of the New York Times on The Coming Technology Boom.
3. HBR IdeaCast: Bill Gates on How Business Leaders Can Fight Climate Change.