[00:03:09] Preston Pysh: Well, I can tell you as my value investing background, it’s all about mental models.

[00:03:14] Preston Pysh: Charlie Munger really kind of popularized the, the term of, of having these mental models. I know Shane Perish does a lot with it as well. And going through the book, I’ve, I’ve read a lot of books through the years that talk about these mental models, but as I was going through your book, I was like, wow, I am learning a lot that, some that I’ve heard the term but really just didn’t know what it was. And then others that I’ve never even heard of before that have just really kind of helped me conceptualize ideas in the Bitcoin space that I’d never even thought about before. And we’re going to go through some of those today.

[00:03:46] Preston Pysh: But one, one other compliment I got for you on the book. When people are doing a book, sometimes doing graphics can really be a pain in the butt because it takes a lot of effort. It takes a a lot of work to kind of make it accessible and to organize it. It’s just easier to kind of bang out the text.

[00:04:07] Preston Pysh: And this book is amazing in the, in the graphical layout and the pictures that go along with these mental models that you’re describing to make it accessible. Like did you have a background in design or did you just link up with somebody who’s like really good at design work in order to make this so accessible?

[00:04:31] Anil Patel: No. So I have zero training in design.

[00:04:34] Preston Pysh: Wow.

[00:04:34] Anil Patel: My dad was a, a graphic designer, so I kind of grew up around it.

[00:04:39] Preston Pysh: Oh. Oh.

[00:04:40] Anil Patel: But no formal training. Yeah. But I think it kind of came again from that, forcing yourself to condense information into a way where you have to strip away everything that’s unnecessary.

[00:04:54] Anil Patel: So, you know, what I really like to do is I, I would give a lot of presentations in previous careers and I kind of carried that maybe skillset into explaining Bitcoin. And, you know, something that I do a lot is I doodle on post-it notes. So, okay, here, here’s an example. If you’re giving a, a talk or a presentation, and you’re going to use visual aids they have to be very simple.

[00:05:22] Anil Patel: So that an audience can take them in while they’re also listening to what you are saying. The information you’re giving them. So, you know, you really want to be able to communicate whatever you’re trying to show on something about this size. You know, using something like a sharpie from about this far away.

[00:05:36] Anil Patel: So, you know, if, and I like to, you know, let’s just say like a Venn diagram. If you can’t communicate something, As simply as this, yeah. You don’t understand it well enough to be trying to teach someone.

[00:05:51] Preston Pysh: And then you’re just treating it in a layers. You’re just stepping down. So after they understand the, the broader, larger concept, then you’re stepping down into the next layer, layer two of the idea, and you’re making that accessible.

[00:06:02] Preston Pysh: I love it. And boy does it come through in the book for people that are looking for something that talks about a lot of mental models and ideas and paradoxes that lay them out in a, in a accessible kind of way. I, I love this. I will reference this on my shelf. Okay, so let’s go.

[00:06:20] Anil Patel: Thank you.

[00:06:20] Preston Pysh: I, I really will.

[00:06:21] Anil Patel: So I just have to say, I, I really, you know appreciate that coming from you. Yeah. When, when the book actually came out, I was terrified because it came out at the same time as Gladstein’s new book, as Knut’s book. Who else? Someone else had a book coming out and I’m just thinking like, I feel like that indie director that’s trying to have their opening weekend at the same time as like Ridley Scott and Scorsese.

[00:06:53] Anil Patel: So, you know, to hear that from you just means a lot. You know, I have a huge respect for you. I mean it, man.

[00:06:59] Preston Pysh: So here, we’ll go through this. So when we, when, when you’re going through the book and you look back at the experience, and it’s been a little bit of time since you’ve probably finished your, your last sentence in the book what really kind of sticks out in your mind as maybe your favorite or something that while you were going through this self-discovery of, of writing this.

[00:07:25] Preston Pysh: That you’re just like, wow, something like really clicked. Which one of these paradoxes or theories or mental models, if you will, was one that stuck out for you?

[00:07:36] Anil Patel: For me, it’s definitely creative destruction. I don’t even have to think about it. That, to me personally, I think the most people would be the most useful thing to understand, to make sense of the world.

[00:07:49] Anil Patel: I cut my teeth in the music industry back in the early two thousands, 2010s, and I could see things happening all over the place from, you know, we had the rise of MP three s and CD burners, completely changing the economics of the music industry. Now, bands had to tour, you know, tickets were going digital from lining up at your physical box office.

[00:08:15] Anil Patel: StubHub launched. You know, if you wanted to make it as a band, you had to pay attention to social media and YouTube so I could see all these forces around me reshaping this industry that for a very long time had existed in a very similar form. But I didn’t know how to explain what was going on.

[00:08:37] Anil Patel: So understanding creative destruction that, you know, technology. Will continue to evolve. You know, humans are ingenious creatures. We’re going to find better, faster, cheaper, smarter ways of doing things. And that’s going to have real world consequences. So, you know, for me, at that point in my life, I was looking around thinking I don’t understand what’s going on.

[00:09:01] Anil Patel: I have to stop what I’m doing. Ended up going back to school because of it. Just because I felt completely out of my depth by not understanding the, the process of creative destruction.

[00:09:17] Preston Pysh: When you, when we talk about creative destruction with Bitcoin, I, I look at it from a, just a macroeconomics lens and, and you look at the fiat system and you look at how it just props up.

[00:09:28] Preston Pysh: The, the zombie is, is really kind of the, the term that everybody uses, the zombie companies, and it doesn’t allow for creative destruction to occur. When you’d look at Bitcoin’s progress after the past 10 years and, and where it potentially goes here in the, in the coming 10 years. How do you see the creative destruction getting better?

[00:09:52] Preston Pysh: Does it take time for Bitcoin to actually do its thing to, to force creative destruction upon the market? What are some of your thoughts on just like what’s happened to date and kind of where we’re going with respect to creative destruction?

[00:10:07] Anil Patel: Yeah, absolutely. Bitcoin kind of provides the solution but.

[00:10:15] Anil Patel: I guess firstly we could look out at the world and survey all these different industries. So I kind of mentioned music industry. You could look at education at the moment, you could look at I mean, software’s impacted so many industries across the board. But one that’s always been maybe immune to that because of the monopoly powers of governments and the central banking cartel.

[00:10:41] Anil Patel: Is their power over the issuance and transmission of value? So Bitcoin has been so successful because it’s. Kind of come from the ground up. It’s a, it’s been a grassroots effort. So it was very difficult to detect in its early days, you know, how much of a serious threat it was. And then it also happens to be decentralized in a way that makes it almost impossible to shut down.

[00:11:11] Anil Patel: So it’s pretty much indestructible, and that’s really the key property you need in something that’s going to challenge a system like that. So, you know, Bitcoin doesn’t need to be the fanciest, shiniest, fastest thing out there. And I think this is something Michael Saylor talks a lot about, is it just needs to be indestructible.

[00:11:30] Anil Patel: So, you know, this is a very unique situation where innovation is usually not welcomed. In terms of, you know, the creation of private forms of money in, in the fiat era. So Bitcoin just does it in a way that cannot be shut down. Yeah. It does it in a way that’s very hard to detect.

[00:11:51] Anil Patel: And it did it in a way, in the early days where it appeared to be a novelty, it was almost treated as a toy. So it had this perfect path to, to get to where it is today, which is, you know, half a trillion dollars, millions of people around the world interact with it on a daily basis. So I’m very optimistic that, that Bitcoin is the thing that forces creative destruction on the central planning of the monetary system.

[00:12:22] Preston Pysh: One of the paradoxes that you bring up in the book that I was not familiar with before reading this was Jevon’s Paradox. Can you describe what this is and then how it applies to Bitcoin?

[00:12:35] Anil Patel: Yes. Firstly everything mentioned in the book, you know, these are not obviously my own original ideas. It comes from reading another book from someone smarter than me and realizing this is very important.

[00:12:47] Anil Patel: And it applies to Bitcoin beautifully. So, Jevon’s Paradox really explains that as we get more efficient at extracting a particular source of energy, you know, let’s just say whether that’s coal or oil or what have you. Or we get more efficient in using it in terms we, we get more out of it and make the most of its energy density.

[00:13:15] Anil Patel: Well, obviously the cost per unit of it, of it is going to go down. And what does that do to demand usually, you know, if oil was $1 a barrel Would we be using more or less energy? Yeah. More. And, you know, velami, so this is, this is kind of the book that really walks through the whole process.

[00:13:37] Anil Patel: For me, this is like the Bitcoin standard of energy is, is energy and civilization. And one key point to take away from the book is that every transition in terms of like the primary energy source that a society uses is driven by. Making the previous source abundant which comes from declining costs in a very rapid fashion usually. So, you know, we would never have progressed to extracting oil. Unless we used massive amounts of coal through steam powered engines that helped extract oil. You know, and that was only possible because the price of coal declined so much because we got so much more efficient at using it.

[00:14:27] Anil Patel: And coal only became possible because we got so good at using wood as an energy source. So every, every major energy transition is powered by making the previous source of energy abundant.

[00:14:41] Preston Pysh: It’s, it’s interesting because you have all these articles that come out of, like the wef and you name it, publication for the past five to 10 years, talking about how Bitcoin’s going to consume all the energy in the world by, in the, and then the, the date they provide is like two years later.

[00:14:57] Preston Pysh: Like we’ve already passed multiple times when they’ve said it’s going to consume all the electricity in, in the world. And not only do they not understand the tech advancements that are happening because of Moore’s law and the, the rigs becoming more efficient, but I really don’t think that they understand this principle that you just mentioned, this Jevon’s paradox moving forward.

[00:15:18] Preston Pysh: And there’s just, there’s so many mental models that are broke in the world. When people are looking at it, looking at Bitcoin superficially, but when you really do the work like you did in in, in going through this book it’s, it’s fascinating to see all these paradox like, like this one that just require people to go a, a level deeper and maybe even two levels deeper to really kind of understand why a lot of these narratives that are just kind of flung around on these you know, click bait type mediums to they’re just shot to to, to pieces. But yeah.

[00:15:57] Anil Patel: And that’s probably a good, actually segue into there’s, there’s, there’s one, one concept in the book that really summarizes just about everything else in it and everything we’re probably going to talk about.

[00:16:07] Anil Patel: In terms of our frustration with those click bait narratives, that, that kind of get put out there. And that’s this idea of the Gell-Mann Amnesia Effect. And it was a, it’s a very obscure term, but it was coined by the author Michael Crichton, if you’re familiar with him. But the, the basic idea is if you read something, a piece of information, usually journalism like you just mentioned, that, that wonderful article that came from the WEF, that Bitcoin would consume all the world’s energy by 2020.

[00:16:42] Anil Patel: And that does not happen. You have like this data point now piece of evidence that shows that was incorrect. And you go back and you look at the logic they used to make that assertion. Well, if they’re not kind of thinking from first principles, like put aside the agenda they may have.

[00:17:02] Anil Patel: But if they’re, giving you information that has been, you know, thoroughly researched and is defensible in its logic, then that’s almost a sign you should disregard whatever else they say. Because you won’t be able to verify if it’s accurate or not. Especially in areas where you’re not an expert.

[00:17:19] Anil Patel: You know, so outside of Bitcoin so, you know, in the digital age where you’re trying to curate your own information diet look out for those red flags. Because the tighter and tighter you can get your funnel to a group of people, usually individuals, not, you know, large publishing entities but a group of individuals who are clear thinkers, where that’s proven to you with evidence over time the clearer your thinking will become, the better or easier it is for you to just tune out the noise and focus on what’s actually going on at a fundamental level.

[00:17:58] Preston Pysh: So, so in, that’s in finance. There’s so many people that I follow that are wrong all the time. And, but I think the, to to your point, the, one of the reasons I continue to follow some of them is, is mostly because of their humility to admit like, Hey, I was just dead wrong about this and this is, and then they almost like do a recap on what it is that they missed.

[00:18:23] Preston Pysh: Like that’s a thinker and that’s a person that I’m just not going to write off and say, yeah, I’m not going to listen to anything they say, but, That humility that’s matched with being wrong is the thing that I really think sets a lot of like great thinkers and, and forecasters and people that are coming up with mental models on what they think is going to happen in the world to whe whether you keep falling what they’re saying or not is, is there anything else that you would, that you would say beyond that?

[00:18:53] Preston Pysh: As, as far as just not like writing somebody off, just because they’re wrong ones. How do we guard against that?

[00:19:00] Anil Patel: I’m with you a hundred percent. It’s, you know, everyone’s going to be wrong most of the time. It’s was the rationale behind your decision coming from a place of like critical thinking and sound logic?

[00:19:15] Anil Patel: You know, sometimes you will make the best decision in a situation. The outcome will be unfavorable or negative. Mm-hmm. But given the information you had and the environment you were in, you made the best possible decision. So, yeah, you should be wrong most of the time. But like you said, are you humble enough to, you know, lower your ego and take it as a learning opportunity?

[00:19:39] Preston Pysh: There’s a section in the book dedicated to network effects. Talk to us about this and why this is important.

[00:19:48] Anil Patel: Every new technology that gets adopted at a significant enough scale that it becomes a You know, core piece of how we live our lives gets there by way of network effects. You know, it doesn’t just get introduced or dropped into the world like the Central Bank digital currency.

[00:20:11] Anil Patel: It, it grows with time because it offers something useful to its users, and that usefulness increases exponentially with each marginal additional user. So you could take the example of the telephone, really simple one. You and I have a telephone. Great. We can communicate. We throw an extra person into the mix.

[00:20:37] Anil Patel: Well, now we have three individual lines of communication. Add in one more. Well, it doesn’t just go to four, you know, it goes up to six. And you continue that trend onwards. And it’s the same with bitcoin. In the sense that the benefit to me of using Bitcoin with each additional user, it increases beyond just having one more person in that group.

[00:21:01] Anil Patel: Because now we’ve introduced another human with a unique set of skills, a unique set of values who is going to provide value to that economy in a way that benefits the whole system. So, you know, you kind of see this trend now where People will only sell their goods or services for Bitcoin.

[00:21:24] Anil Patel: And the way you get Bitcoin from someone is you have to create more value or enough value, sorry, that encourages them to part with their Bitcoin. So the way I see it is you have this fiat system on one side and you have this Bitcoin circular economy growing on the other. One is creating an ever-growing pie, and the other one is very much zero sum and full of conflict.

[00:21:55] Anil Patel: So, yeah. I think we’re on a very clear path with Bitcoin in terms of its adoption, mirroring what we’ve seen with the adoption of other major communications technologies.

[00:22:08] Preston Pysh: People that aren’t investors in tech or they’re, they’re more of the, the buffet style. Like really not looking at any of these like emerging technology type companies as, as being investible.

[00:22:24] Preston Pysh: I think this is one of the things that. They often really miss is just the power of, of network effects. I was listening to an interview with Trace Mayer, it’s probably 2015 timeframe, and he published this This article on just network effects. It had been nothing I’d ever thought about before, before seeing this.

[00:22:45] Preston Pysh: And it was, it was very, very influential to me, really wrapping my head around how profound Bitcoin could potentially be. And so he had He had seven network effects back then, and this is just for people just kind of to maybe do some research if they’re interested in network effects more. But the seven that, that, that trace listed back then was one speculation.

[00:23:08] Preston Pysh: He was saying that because of the speculation. It’s going to attract more people into Bitcoin because the price was actually so volatile and, and violent. The next one was merchant adoption, which you talked a little bit about there. Consumer adoption the security features he said would. Would turn into a network effect, which we’re, we’re starting to see that more now.

[00:23:31] Preston Pysh: Developer Mindshare, he’s saying, because you have some of the best developers in the world, it actually creates a further network effect of people building on top of Bitcoin. You’re really seeing that on like layer two and whatnot with lightning. Liquid, other things. Now with the ordinals, you could look at that and say that that’s a another network effect that’s just going to compound on, on Bitcoin.

[00:23:53] Preston Pysh: The financialization piece that we we’re seeing that in derivatives and everything else, and that’s a huge network effect. That’s, that’s really picking up in the last two to three years. And then his, his final network effect was just the adoption of it. Becoming a world reserve currency. And when we look at around the world today with all the, the debate between net consumers and net producers and them not being able to, to really kind of come to an agreement on a settlement layer of using dollars, euros and, and exchanging like raw molecules and materials for, for those things, you can see how that’s now like literally coming to the fold.

[00:24:32] Preston Pysh: And he, he wrote about this, what, seven, eight years ago? Like I’m curious if there’s more, more network effects that he would say now, but you know, he’s, he’s nowhere to be found. But I’m, I’m curious if you have any thoughts or additional points to that Anil?

[00:24:49] Anil Patel: Yeah, well, just the fact that he wrote that in 2015 and there are, you know, other thinkers like, you know, Pierre Rochard or Michael Goldstein who, who are putting out these incredible pieces so long ago with such incredible foresight. That. That what is, what kind of drew me into the space in a very serious manner, was thinking here are these incredibly smart people. I cannot fault their logic. And they’re all heading in one direction, and that is focusing on Bitcoin and it’s monetization path.

[00:25:24] Anil Patel: So yeah, I feel like. We’ve got all these amazing sort of signposts in our past, in, in terms of like the Bitcoin educational content that came out that a, a lot of the work’s been done for us and all those, those, that hard thinking has been done for us. If you’re able to you know, figure out who are the people providing that signal.

[00:25:52] Preston Pysh: Another one that you bring up in the, in the book is this idea of reflexivity. I know George Soros wrote an entire book on this idea. Explain what this is and then explain to people how it applies the Bitcoin in particular.

[00:26:08] Anil Patel: So, the concept of reflexivity drills down to the individual that in a, let’s say a free market, You have a number of thinking participants.

[00:26:21] Anil Patel: They’re going to come in with their own views, experiences perspective capital risk tolerance, and they’re going to be swayed by their own unique set of biases. So that inherently is going to introduce volatility into any market. Now, you couple that with something like Bitcoin that is being monetized from zero and.

[00:26:46] Anil Patel: I think that just kind of compounds even more so. So the idea of understanding reflexivity in the context of Bitcoin is really a way to understand Bitcoin’s highly cyclical nature through these boom and bust cycles that we see, which is, you know, People get very overly optimistic about its future during booms, and that kind of plays into itself creating this positive feedback loop.

[00:27:18] Anil Patel: And we see the same thing on the way down. Now, the important thing to understand is we cannot differentiate between what factors are causing that. You know, is it someone’s views over what’s going to happen or is it the momentum of the market playing back into the individuals in that kind of feedback loop fashion.

[00:27:45] Anil Patel: So yeah, I really just personally use it as a way to make sense of Bitcoin’s volatility in that kind of multi-year cyclical fashion.

[00:27:57] Preston Pysh: I mean, really it just smashes the efficient market hypothesis to like, shreds is really kind of like the idea of reflexivity is just like saying that this is, there’s no way this can be valid for, you know, any quantity of time that you would measure it between, right?

[00:28:13] Anil Patel: Yeah. And the benefit in understanding it is that if you choose to use Bitcoin as your long-term savings vehicle, Is you can tune out that volatility. Because you understand that’s just the natural course that’s going to happen, given the inputs.

[00:28:30] Preston Pysh: Yeah. And, and just to add to that, I would say the, the more that you get derivatives stood up around Bitcoin it only enhances that, that volatility and that that dissidence that you have between Rational acting parties, parties that don’t have enough information that, that are acting and thinking that they’re rational and, and all the mix in between.

[00:28:56] Preston Pysh: Right. Hey, so you talk, you have a great section in here. It’s one of your longer sections that, that you talk about the laws of thermodynamics. You have a outstanding quote from Lynn Alden. She’s, you have her quoted as saying consensus mechanisms that don’t involve work instead involve governance.

[00:29:18] Preston Pysh: Talk to us about the importance of the quote. Talk to us why this section was, was one of your larger sections in the book and why you think it’s important to Bitcoin?

[00:29:27] Anil Patel: Yeah. I mean, Lynn just nails it in that, in that quote, you know that that’ll save you reading several books.

[00:29:34] Preston Pysh: True, true.

[00:29:38] Anil Patel: Yeah. The, the whole point of bitcoin is to remove third parties from exchanges of value and the issuance of money. And you can only do that if there is some kind of work or effort involved in both those things. Either the issuance of currency or the validation of transactions. Now, if you choose not to go down that route, which is, you know, something that’s quite verifiable, you can have.

[00:30:08] Anil Patel: Very transparent rules around it, and everyone’s on the same footing. The other direction is governance. Which is basically the fiat system. And you’re quoting all those responsibilities on the shoulders of a select group of individuals. You can choose whoever you want those individuals to be.

[00:30:30] Anil Patel: You can choose however they decide on particular decisions, but you’ve introduced moral hazard into it. Humans given a long enough timeframe and the ability to influence things at that level of society, you know, like the, the base money of a society you’re just asking for trouble.

[00:30:59] Anil Patel: So I kind of see those, you know, two polar opposites really as bitcoin. And everything else, you know, not just the fiat system, but also other I guess digital currencies trying to compete with Bitcoin, but they’re, they’re very separate things. So it’s really going back to proof of work.

[00:31:18] Preston Pysh: I, I even try to like I, I agree with Lynn’s quote all day long.

[00:31:23] Preston Pysh: I thoroughly believe in proof of work, but I also try to like challenge the idea, right? And so one of the better challenges that I’ve heard to, to the idea, which I don’t agree with, but just to kind of throw it out there for the audience to kind of decide for themselves is, so after you get all of the Bitcoin, the 21 million issued, why is proof of work still required after it’s already been issued completely out into the market?

[00:31:50] Preston Pysh: And the, the, to counter that argument, I would personally, and I’m, I’m curious if you would agree with this aniel. Is just think of like all the, all the, the, the 21 million sitting in a vault. There should be some type of work that’s required to protect everything. That’s the, the, the interactions that are happening inside of that vault.

[00:32:12] Preston Pysh: It shouldn’t just be that the people that hold the most coins can just sit there and get fat, dumb, and happy on transaction fees by literally doing nothing. Like it’s not incentivizing. It’s not in incentivizing the recycling of the coins, I guess that, that’s how I would describe the fee structure at that point, when all the, the coins are issued into the market, into the strongest and fittest and most efficient hands.

[00:32:38] Preston Pysh: In a free and open market, whereas by continuing to have proof of work, there you are now incentivizing the miners to find, to go out and literally find the cheapest and most efficient energy on the planet, moving their rigs, moving themselves performing this, this demonstration in the, in this ecosystem that They truly are the, the fittest and that they truly are the most efficient actor to reallocate that capital into the market.

[00:33:13] Preston Pysh: I don’t know how else to kind of like combat that argument that people would say and, and I think that you would probably get. Now e’s eth is not pegged like the, the amount of coins, like we have no idea how many coins are even there or where that’s ever going to end, but I heard people making that argument like, we don’t really need proof of work anymore because most of the coins are already issued.

[00:33:36] Preston Pysh: And that was under proof of work. And that’s why we can now just transition to proof of stake. But I’m curious if, if you agree with it or if you see it different or maybe you have a different way of describing. I don’t know that I did the best job describing my counterpoint to the argument, but-

[00:33:52] Anil Patel: well, let’s imagine that you are trying to move a hundred million dollars.

[00:33:58] Anil Patel: In equivalent Bitcoin units at this point in time. You probably want some level of confidence. Around the finality of that transaction. Are free to choose. You could choose to use the Bitcoin network, you could choose to use X, Y, Z network. So I think the market is deciding is demonstrating which one it values more just by how much value is transacted.

[00:34:25] Preston Pysh: Mm-hmm. Mm-hmm. Yeah, I, I completely agree with you. I know which one, one I would pick, and the fees aren’t going to be that high even for a hundred million movement, right? Like in, in comparison to the, the value that you’re transacting. Right? Okay. Here’s another one that, that I was not well versed on Gall’s Law.

[00:34:48] Preston Pysh: And then I’ll, I’ll read a quote after you’re kind of done describing it for people so that they can kind of understand it.

[00:34:56] Anil Patel: The Gall’s law is the idea of first building a system that is functional. Before you choose to add bells and whistles to it or iterate on it, you want to have a very strong foundation.

[00:35:15] Anil Patel: Especially when we’re talking about monetary systems. And, you know, make no mistake, Bitcoin is money. So imagine you are building a house. How important is the foundation or the stability of that foundation to you? I guess is the question. If it’s not that important to you, by all means, you know, go crazy, be innovative.

[00:35:36] Anil Patel: But what Bitcoin gave us is a very strong verifiably strong foundation that then allows us to innovate on top of it without causing any Permanent damage to that underlying foundation, you could kind of innovate without that risk. Now, if you choose to build a system where the kind of base of it is not yet functional or is still a work in progress, and you’re adding all kinds of things on top of it, I mean, imagine a Tower of Jenga blocks that is only supported by a single block.

[00:36:17] Anil Patel: The more complexity you add into that system before first getting it stable and functional, you’re just adding more risk on top of it. So it really comes down to risk and introducing unknown or unknowable risk into a system by in, by adding complexity on top of it.

[00:36:39] Preston Pysh: I think this one is so important and so lost on so many people that arrive to Bitcoin and or the digital asset space.

[00:36:49] Preston Pysh: They’re, they look at it and they say, they look at the complexity, especially from a software standpoint, and they’re like, well just put it all together. Like, why not? Why does it have to go in these really small modular chunks and that that have to be built upon? And it’s, it’s crazy because when you look at physical reality, You see this everywhere that we build in layers clear down to like building a skyscraper, right?

[00:37:14] Preston Pysh: Like you got the concrete. Well, why, why don’t you use glass? The glass windows, the material of glass windows for the concrete, right? Like we have to build in layers to optimize for the things that, that we desire. And, and for the utility of what we’re trying to do I was in Miami and, and Brandon Quin qui gave me a, a book called Entangled Life and one of the most mind-blowing books I’ve ever come across because it’s talking about like forests.

[00:37:47] Preston Pysh: And it’s talking about how these plants are using the fungi underneath of the soil to use as a communication layer with the other plants and the way that they’re, they’re literally transacting energy, they’re transacting materials with each other, and it’s this whole like complex network. Almost like the trees are the webpages and the fungi underneath, or are the hyperlinks between the trees.

[00:38:13] Preston Pysh: And it’s just, it’s totally blowing my mind. And when I think of this law, this gulls law that you’re talking about, like why didn’t the trees just develop the the, the material that the fungi basically offer the trees to conduct this, this communication exchange and energy exchange between each other?

[00:38:34] Preston Pysh: It’s, it’s because you have to build in layers. Nature’s demonstrated time and time again that we’ve gotta build in layers in order to make sure that, that we don’t breach the security or the integrity of doing too much at one spot. Right. So I love this in, in your book. It was fantastic.

[00:38:54] Anil Patel: Yeah. And Brandon’s really done the work on that, you know?

[00:38:58] Anil Patel: He’s someone who’s taken a passion in his life, compared it to bitcoin. Found out what rules or laws from nature translate. And he’s written some brilliant, brilliant pieces that, that kind of make that link. So I’d encourage anyone to go and check out his work.

[00:39:12] Preston Pysh: Yeah. Brilliant guy. Great guy. So in your book, you have a quote on this one that I’m just going to read for people to, to really kind of give the the reinforcement on what you’re talking about. So Allen Farrington another just brilliant thinker, thinker in the space. He said, cramming all the features of lightning, liquid, discreet log contracts, RGB and so on into the main chain, is just an obvious bad idea. It would introduce unknowable attack vectors and hence holistic fragility to the layer one network.

[00:39:44] Preston Pysh: So, love this. I think this is a really important one, but. We’re leading up to my favorite one that I saw in the book. Here it is, teach us about intransigent minority what it is, why this applies to bitcoin. Truly my favorite model in this book. And I had, I had never read about this before until now, so teach us.

[00:40:12] Anil Patel: Yeah. First of all, this is a a concept popularized by eb. And I know many Bitcoiners don’t always feel that great about acknowledging him, but I think this is an idea we should absolutely preserve and use for our own understanding. And the idea around the intransigent minority is think of Bitcoiners and how willing they would be.

[00:40:42] Anil Patel: Once understanding Bitcoin to accept an alternative unit of account to measure economic value or even denominate their own savings in, at this point you’re just not going to get them to change. They’ve already made the switch, you know, they’ve left that ship permanently. And so now you have a group of Bitcoiners who are unwilling to change their unit of account.

[00:41:10] Anil Patel: And you, that number’s growing over time. You know, we can visibly see that. So what is likely to happen if the friction is low enough for someone outside of that group to offer, say, goods or services? In both denominations, for example, they can still serve their fiat customers, but now they can also serve customers who exclusively operate in the Bitcoin world.

[00:41:40] Anil Patel: And the friction’s low enough, why would they not do that? They now have access to this entire new group of potential customers, trading partners, whatever you want to call them. So over time, that small group of individuals not only grows, but it forces its preference on the rest of the system because there’s just very little risk or cost for others outside of it to cater to that group.

[00:42:06] Anil Patel: And I feel like we’re seeing that. And part of that is because Bitcoin is just a superior unit of account. Especially one thing I try to keep tabs on because it’s really interesting to me is the insurance industry. You know, how many Bitcoiners do you think would want to have a life insurance policy payout denominated in Bitcoin?

[00:42:24] Anil Patel: Now take out the counterparty risk part of it, but just try and think of that, that example. You know, it, it, it benefits both parties. Why would they not do that eventually, if, you know, the regulatory barrier is lower enough to allow that? So I, I feel like we’re going to see this play out in many different industries where people will want to serve Bitcoiners and they’ll be able to do so because the tools to do that are just very easy to implement.

[00:42:56] Preston Pysh: You had a great one sentence line in this section in your book, and I’m just going to read it to folks. You said, when a few individuals shape the preferences of the majority by their unwillingness to submit to the default option, like this describes me, like how I, how I view Bitcoin, how I view it as like people will, you know, they get involved in politics and they’re saying, oh, I’m going to vote this way, or I’m going to vote that way.

[00:43:24] Preston Pysh: And I’m like, I’m voting with my bitcoin. And I refuse to to sell it. And I guess it’s just and I think there’s a lot of other people in Bitcoin that feel the exact same way. Like they, they are going to beat that drum until the rest of the world begins to dance to, to or bend to their, their desires, right? Which is, we are going to use this as our ledger.

[00:43:52] Anil Patel: Yeah. And that’s not us being jerks. It’s, we’ve experimented with something we’ve had, you know, positive outcomes because of it, or impacts in the rest of our life. And, you know, now I want to help others kind of come onto that, that lifeboat. Because I feel or believe that they’ll see similar results in other aspects of their life.

[00:44:14] Preston Pysh: Yeah. I think the reason you see so many people that like once they finally do the hard work and and educate themselves on what it actually is, they’re looking at it as a tool that I know when I buy this and I save in this, that it can’t be debased no matter what. And once you come to that realization and, and truly understand why it can’t be the beast because of the full nodes and all the game theory that’s around it it becomes a really powerful thing of just thinking about all your hard work and everything that you’re doing and just being able to freeze it into these units that, you know, this, some outside entity can’t just make up more of.

[00:44:55] Preston Pysh: And. I, I don’t know, like, it, it just doesn’t seem like there’s anything more important that I could possibly try to educate or work on in my life than making sure that the most amount of people in the world can participate in such a system that they’re not going to be, you know, debase to the tune of trillions of units on a whim.

[00:45:15] Preston Pysh: But yeah, I, I really like absolutely this one. I love this one. This is so important.

[00:45:21] Anil Patel: Thank you. Yeah. And it’s just, look, it’s an opportunity for us. To help protect just the most productive members of society.

[00:45:31] Preston Pysh: Yes, yes. I love that. What’s something that you think the community, the bitcoin community, can do better right now?

[00:45:42] Anil Patel: So, I mean, look, I, I don’t think there is a Bitcoin community. There’s a lot of individuals. With different preferences, beliefs and I think just a lot of the clear, rational thinkers of the world have become bitcoiners over time. If you know, a, a, a lot of my time now, and I think this is true for most other people who have adopted Bitcoin, is spending time educating those they love.

[00:46:09] Anil Patel: Yes. People around them, their family, and how to best go about doing that. And what I think-

[00:46:17] Preston Pysh: Without being annoying, right, is that-

[00:46:22] Anil Patel: What most of us miss is we are trying to bring logic to an emotional discussion. And I would maybe encourage people to try to bring more emotion to that conversation because that’s what enables change. And that will only come if you can pinpoint someone’s source of pain or friction in their life.

[00:46:49] Anil Patel: Yeah. Until you can validate that emotion with them. Not for them, but with them. They’re not going to listen to you about making some fundamental change of how they live their life. Or how they choose to denominate their life’s savings. You know, you have to earn their trust. And one great way to do that is just demonstrate your values.

[00:47:08] Anil Patel: You know, one thing that was obvious to me in the early days is I’m just watching all these Bitcoiners live a lower stress life. They were fitter than me. They were happier than me. They had better relationships, what was going on. You know, I was curious enough, thankfully, to kind of pursue that question.

[00:47:29] Anil Patel: But it was through them demonstrating a life that was, you know, worthy of imitation that I took the leap. You know, they didn’t have to shout down my, you know, throat or throw facts in my face. It was just obvious. So, yeah.

[00:47:46] Preston Pysh: What’s sad is, is the parties that are sometimes using a aggression, and I’m not saying like physical aggression, I’m just saying argumentative, aggression, they come off really strong.

[00:47:58] Preston Pysh: I think most of them are doing it from a, from a place of just deep love for family members or whatever. But they’re, what they don’t realize is it’s, it’s a total turnoff to the person who’s just not mentally there, or they can’t even understand the, the problem that’s being solved. And so then it just turns into conflict and it actually pushes the person away.

[00:48:19] Preston Pysh: Yes. It, it performs the exact opposite of what they’re trying to accomplish. Right. And I don’t know how we can get through to people. Like you’ve, you’ve gotta, it has to be more passive. It has to be more like, let me lead through, through example, as opposed to lead through force or lead, lead through inspiration to the others.

[00:48:40] Preston Pysh: But, but at the same time, how do you extract all the knowledge that’s really kind of required for somebody to get it and to be able to sit through the volatility because they get it. Is just what makes it so difficult and I wish I had a turnkey solution to it, but I don’t, I don’t know that there is.

[00:49:02] Anil Patel: You do. It’s it’s called a podcast, Preston.

[00:49:06] Preston Pysh: Oh. There’s so many people that I would love to just be able to like, you know, give a turnkey here, man. Like, here, just this unlocks like the, the whole breadth of everything that you really need to know and understandable.

[00:49:18] Anil Patel: Yeah. But that’s, that’s part of it too. I, you know, you still do and used to think that way.

[00:49:24] Anil Patel: But then just through redirecting my focus on the people who are already at a point where they’re open-minded enough to listen or to take that leap or eager to learn more. And then I’ve met a whole new group of people that I now love and admire and respect through that. Yeah. So, you know, I just feel that’s the, the, the less just the more frictionless road to take.

[00:49:50] Preston Pysh: Do you have a favorite book or something, or a book that like, has really influenced you and just maybe made you look through the look at the world through maybe a different lens, be beside your own book, which is phenomenal, but thank you. Anything you want to highlight?

[00:50:05] Anil Patel: Yeah, I mean, it, it’s, it’s one that had a pretty profound impact on me and taking down a number of mental blocks that.

[00:50:16] Anil Patel: Were stopping me from maybe fully adopting Bitcoin. When I still had questions around, well, maybe the state would come up with something equally as useful. And that, and that was really understanding the process of innovation. And Matt Ridley wrote this fantastic book called How Innovation Works.

[00:50:36] Anil Patel: You know, I, I really try to reread it as often as possible. And it’s just, it’s a very easy read. It’s just a lot of historical examples of how the process of innovation occurred. And, you know, you, you read the book, you go through all these examples of really groundbreaking discoveries or, you know, innovations that turn into technology we use in our day-to-day lives now, and in very few.

[00:51:08] Anil Patel: Scenarios was the state involved? It usually came from individuals hammering away usually as part of a, a group. They weren’t doing it for the money or the fame. And it was very much, you know, grassroots movements that that eventually took up because they just offered value to society in a way that hadn’t before.

[00:51:35] Anil Patel: So it really just changed my thinking of how the future will be shaped and who is going to lead that.

[00:51:43] Preston Pysh: Yeah. That was called How Innovation Works. Is that right?

[00:51:47] Anil Patel: How Innovation works by Matt Ridley.

[00:51:49] Preston Pysh: Okay. And then you held up another one on the energy front.

[00:51:52] Preston Pysh: What was the name of that one?

[00:51:53] Anil Patel: Yeah, that’s called Energy and Civilization History by Vaclav Smil.

[00:51:59] Preston Pysh: Yeah, that looks really good as well. Sorry, I’m, I’m literally writing these down because I got a long drive on my hands over the the weekend here. So I’m going to be listening to these.

[00:52:09] Preston Pysh: Why is it so hard to be a Bitcoiner? Is it hard to be a Bitcoiner?

[00:52:14] Anil Patel: It’s not. When you were able to have conversations like this with other Bitcoiners and kind of flesh out your thinking to you know, maybe. Confirm that you’re not completely crazy, but being a Bitcoin, especially if you came to Bitcoin as you know, independent of your circle of friends, your family is just lonely.

[00:52:42] Anil Patel: Because it forces you to completely rethink how you live your life how the world works. You’re probably reading completely different books to, to norm’s. So it’s just lonely because it’s a very different path. You know, in the future I believe this will be the norm. You know, kids will be learning about Bitcoin or, or sound money and Bitcoin just happens to be the soundest money.

[00:53:11] Anil Patel: But it’s hard being a Bitcoin because it’s a lonely journey if you’re doing it in isolation. Yeah, so go out and find, you know, your, your other Bitcoin is, you know, go to a meetup, go to a conference, you know.

[00:53:21] Preston Pysh: I think that’s why Bitcoin, Twitter is so people are so active is because of what you’re describing, which is a little bit of loneliness.

[00:53:33] Preston Pysh: You, you kind of feel like you’re like this. Strange person that, that nobody can understand you, right? And it’s a little bit of a, a place to seek salvation online because you can actually interact with people that, that understand why you’re so excited and hopeful for the future and where this is all going, but.

[00:53:55] Preston Pysh: Yeah, it’s a great point. I never really thought about it being lonely, but I think you’re right. I think it, if, if I didn’t have my like online community and Twitter and people that I could talk to, it would be extremely lonely, I think.

[00:54:09] Anil Patel: Yeah. And think about how much of your life is influenced by the values that Bitcoin gives you.

[00:54:15] Anil Patel: And then how much of that do you have to hide in public? Just because it’s going to lead to a lot of maybe unnecessary conversations or further alienation. So uncomfortable.

[00:54:25] Preston Pysh: Very uncomfortable conversations. Yes, yes.

[00:54:28] Anil Patel: Yes, yes. Yeah. Yeah. And having to, having to hide such a, a core part of yourself is difficult. You know, you can’t then be authentic or vulnerable with the people that you usually are.

[00:54:39] Preston Pysh: Yeah. I find myself using the phrase, if you say so a lot with you know, close family, friends, whatever, right?

[00:54:52] Anil Patel: Yeah, and that’s why like if you don’t attack that challenge using the B word, but some other like fundamental concept that helps them see flaws in the current system, perhaps then they might be willing to search or the solution to that.

[00:55:15] Preston Pysh: So for folks that are watching this on YouTube, here’s the book right here, The Bitcoin Handbook. I have it tabbed, highlighted like I said at the start of the show, this will sit over on my shelf and I know I’m going to be walking over there from time to time and pulling it off and looking up some of these mental models because, you know, some of these, some of these ideas, you, you think about them, you kind of are aware that that’s.

[00:55:39] Preston Pysh: A framework, right? But I, for some of them, I just didn’t even know that there was like a name to it. And I want to be able to capture it so that I can hand off to some, oh, well this is the mental model or the idea that that this is based upon. And then there’s like, you could read an entire book on some of these mental models that go into excruciating detail on them.

[00:55:56] Preston Pysh: But you do such a great job outlining them and just the organization. The graphical design work is phenomenal. Hats off to your dad. It was in your DNA man. But thank you so much for coming on. And Anil, is there any other thing that you want to highlight? Just tell people where they can find the book and yeah, give a handoff.

[00:56:19] Anil Patel: Yeah, you can find me on Twitter in the bio of my Twitter handle. It’s @anilsaidso. Here’s a link to another page where you can download pretty much all my educational resources for free. They’re designed to be very visual, very introductory, normy friendly. Send them to loved ones. It’s all free.

[00:56:46] Anil Patel: Spread them around, steal them. And Preston, I just gotta say man, like. I’m such a huge fan of yours, like what you’ve done for not just everyone, but for me personally. You know, the amount of value you put out into the world without asking for anything in return, I’m just really grateful that we have you.

[00:57:10] Preston Pysh: Thank you, sir.

[00:57:10] Anil Patel: So thank you.

[00:57:11] Preston Pysh: Thank you. I’m, I’m thankful we have you as well, putting out amazing material like this. So this was a real pleasure. I look forward to staying in contact and hopefully I meet you at a conference or some meetup someday in the future here. And Anil, that was, that was really fun.

[00:57:26] Anil Patel: Thanks Preston. Look after yourself.

[00:57:28] Preston Pysh: You as well, sir.

[00:57:30] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener if you enjoyed the show or you learned something new or you found it valuable.

[00:57:50] Preston Pysh: If you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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