Bitcoin and Lateral Thinking
In Ray Dalio’s Principles for Dealing with the Changing World Order (2021), he explains the ways in which large nations and empires have risen and fallen throughout the ages. By examining nations and empires of the past he is able to analyse various patterns and sequences of events spread out across the last 500 years. For example, when a nation in rising in international prominence it is usually due to enlarged investment in education, which is followed by technological innovations, increased healthcare and quality of life, increased military capacity, a global reserve currency, etc. All great empires throughout history have followed this trajectory in their rise to significance, just as all great empires come to decline over time. The reasons for the eventual decline are manyfold, and include the fact that reserve currencies are often mismanaged, military spending comes to occupy a dramatically higher proportion of spending than education, and the skills and abilities that make societies great are not adequately entrenched through generations; the people who make empires great are not the same people who oversee their declines: debauchery, moral degradation, and an inferior work ethic come to drive the eventual collapse of one empire whilst another comes to fill its place.
He argues that this is the case with the decline of the US at the moment, and the impending rise of China. This makes sense given recent events: the US currently orders of magnitude more on their military than they do on education (and it shows), and the western foray into freedom and democracy was exposed as a complete farce in March 2020 when governments unilaterally embarked on fascistic policies at the expense of logic and rationale. Michael Senger’s book Snake Oil: How Xi Jinping Shut Down the World goes some way to explain the ways in which China’s rising influence isn’t solely confined to being a soft power; China’s interests abroad are not only financial, but they are becoming increasing cultural and militant. Putin’s invasion of Ukraine and the subsequent western hysteria of “oh, we must do anything or he’ll blow us up” (despite Russia having a GDP smaller than Costa Rica) exposed a complete lack of political will, strength, and unity, and only went to solidify the stance of those who’d wish to challenge the prevailing western hegemony. Moreover, it is becoming clearer and clearer that the days of the US dollar acting as the global reserve currency are numbered: Saudi Arabia is already in talks with China regarding pricing oil in yuan, and it appears that the decision to remove Russia from SWIFT has played further into their hands.
Breaking the code of history
In Breaking the Code of History (2010), David Murrin explores a variety of socio-political theories pertaining to the reasons for which empires rise and decline. After spending a couple of years working alongside Melanesian cannibals in his youth, he was inspired to formulate a worldview based on sociological patterns, and used these patterns to accurately predict Brexit (to a high degree of accuracy) and the coronavirus outbreak. These patterns are largely independent on individual actors, and represent a greater analysis of how societies and social groups formulate and evolve as a whole.
His analysis of the rise and fall of nation states differs somewhat from Dalio’s. For example, whilst Dalio sees the Dutch, French, Portuguese and British empires as entirely separate, Murrin argues that historically-speaking this would mean that these empires were extraordinarily short-lived. This is especially true when compared with the Chinese dynasties, whose empire is largely-regarded as one of the longest in the world. However, when one considers the regionalist natures of these “mini empires” (the greatest of which was the British) in the context a larger empire by the Catholic Church, there is nothing unusual about the length of them at all, since they fell under the umbrella empire of Catholicism.
One can certainly make the case that the Catholic Church was dominant for several centuries, and that the gradual decline alongside the commensurate growth of protestantism represents the fall of a much larger empire than those of the aforementioned powers in western Europe; however, it is also true that rising levels of technological innovation make it harder for empires to maintain their control abroad. This can go some way to explain the regional bubbles that we have seen in these past empires, and make it possible to speculate on such bubbles in the future. For example, many sociologist would make the case that the rise of China isn’t the story of the 21st century, and that China simply represent one of the regional forces that is present amidst a larger shift in power dynamics towards the East. China’s growth since the 1970s and 1980s is now accompanied with huge concerns: they are incredibly indebted, have an ageing population, and face growing competition from neighbouring countries such as India (who are on course to exceed China’s population within a few years).
Murrin’s explanation of the difference between linear thinkers and lateral thinkers is perhaps one of the most important and fascinating aspects of his worldview, and the way that it is related to the rise and fall of nations and empires, as well as trying to understand the world in which we live today. Lateral thinkers are those who think outside the box. They tend to be revolutionaries, creatives, entrepreneurs, and challenge the status quo. When an empire is on the rise this will be because the lateral thinkers in a society have accumulated enough power and influence to reshape a society and to challenge the old guard. Their natural proficiency and dextrous nature of agile thinking means that they have the tools to propel a society into a better future. However, the eventual decline of a society occurs when linear thinkers, who are more focused on consistency and maintaining the status quo, come to reach positions of power. The result of this shift is that an empire loses its ability to adapt and compete, since the people who engineered this success are no longer at the helm. As societal systems become more entrenched and linear thinkers become more entrenched at the top of society, this problem is exacerbated and the snowflake of inevitable catastrophe grows into an avalanche as the lateral thinkers who could potentially remedy the situation are simply locked out of society’s leadership positions.
On a less macro scale, one could say the same things for the life cycles of companies (although this is less clear given that the fiat standard appears to have eliminated the concept of creative disruption in favour of zombie corporations, once companies are too big to fail), in that the founders are the lateral thinkers who recognise a way in which society can be improved by offering goods or services. It is my contention that the “woke” culture is a symptom of this societal malaise: rather than innovate and compete in a free market, linear-thinking CEOs focus on virtue signalling and conformity, regardless of the extent to which its obviously bullshit. It is a stunning state of affairs that the last week’s news cycles in the UK have been dominated by debates over what a woman is. Nobody in the Labour Party seems to have a clue and hardly anyone in the Conservative Party seems willing to display the political fortitude of personal strength required to oppose the trans lobby, which in itself is a toothless and non-intimidating minority largely consisting of oddballs obsessed with the rationalisation and glorification of gender dysphoria.
Societies want lateral leadership because they want their leaders to be adaptable and they want their leaders to be strong. The worst trait that a leader can have is to be a conformist, but if coronavirus has shown us anything it is that this is the prevalent trait amongst western leaders at the moment. Particularly in Canada, Australia, Peru, Italy, Germany and New Zealand (there are many others that appear to have lost the plot but the list is too long), where the leaders have decided to conform with their Chinese overlords so much that democracy has become a shambolic façade masking a divisive and kleptocratic plutocracy. In the US, Biden’s extraordinarily linear way of thinking (on the rare occasions when he is awake and knows where his) has meant that he is extremely predictable: one didn’t have to be an expert to know that his warning to Russia that the US would evaluate an appropriate response depending on the “scale of the incursion” was a green light for Putin to invade — a far outcry from when Trump told Putin that if he laid a finger on Ukraine he’d bomb Moscow. The nature of Murrin’s thesis on 500 year cycles means that decline is an inevitability.
That is, unless something drastically changes.
Bitcoin: the last cycle?
This might seem like a dire state of the world and current affairs, and one could rationally conclude that living through the dying days of the western empire is a disastrous time to be alive.
However, it is my contention that both Dalio and Murrin are incorrect about what follows the fall of the US empire. Whilst I do think that there will be a shift of power from the West to the East, the notion that China will utterly dominate every aspect of the world for the next century strikes me as unlikely. There are many reasons for this, the most important of which is Bitcoin. In every other cycle throughout history a leading power has eventually risen to a stage in which they are able to establish a world reserve currency status, and are thus afforded all the benefits that come with it (most notably, entrenching their position). China has already spent decades embarking on ideological wars against Western values, and has tried to shield itself from Western influence via its infamous firewall. Some would argue that this has been advantageous to the Chinese national unity and the solidity of the regime has meant that the government is able to plan for the longer term. Youtube, Facebook, and Google are all banned in China in favour of their own censored and state-sponsored versions, resulting in an inevitable filtration of outside information that has left the population woefully underexposed to the nuance of international relations, differing ideologies, and international history. This desire for the state to control her citizens has become so profound that even when Chinese students study at universities abroad (in the UK this applies particularly to UCL and LSE) they are often incentivised to report on one another, or have Chinese professors working at the university who will report on them, for speaking out against the politics of the country whilst they are away from home — if they drift too far from the mark, they are often no longer allowed to leave the country.
It is my contention that the yuan will not be the next reserve currency, or at the very least if it is, it won’t hold onto that status for very long. Bitcoin’s features as the hardest money ever means that it will inevitably play a significant role as people flee fiat and become evermore concerned with the growing risk of a Thucydides trap. Bitcoin does not even have to become the de facto currency that people use in day-to-day transactions for this to happen; if Bitcoin becomes a global reserve asset then this will be almost as meaningful as if it were to become the global reserve currency.
In such a context, China’s myopic decision to ban Bitcoin miners from the country will be judged harshly by history. 600 years ago the Chinese thought they were the most civilised country in the world and there was therefore no need for further exploration, and they thus burned their ships - banning Bitcoin and excluding the nation from the chance to lower their time horizons from a financial sense, and to surrender the might of a nation of sovereign individuals in favour of a dictatorial regime doesn’t appear to be a sustainable policy.
A Bitcoin revolution is a peaceful one in which it is conceivable that a Thucydides trap may be avoided. The ideological nature of the CCP disregards the collective wisdom and profound nature of collaboration that distributed systems can afford to a population. It may not be that the US is dominant in the future in Bitcoin terms, but China definitely won’t be, and this will be their blunder. The decision to ban Bitcoin miners was one of desperation and outright stupidity on their behalf, and belied a total lack of understanding of the importance of distributed innovation rather than solely state-sponsored surveillance equipment.
A Bitcoin revolution is decentralised: there may be many countries and many regions that win; a revolution in which anyone on the planet can participate (many Chinese will still be able to participate since code is law, although they will be incentivised to leave the country with their wealth) doesn’t necessarily represent a shift of power from one part of the world to another. The most significant change that is ushered in is the shift of power from large governments to individuals, and the inevitable shrinking of the state in favour of empowered individuals.
Bitcoiners are the lateral thinkers that are ushering in the next revolution, but I am certain that the technological differences encapsulated in this one mean that it shan’t be akin to any of the preceding cycles. How close are we? Historically a revolution only needs 5% of a population to recognise a change that is needed and to put it into effect, and the rest of the people will follow suit. These people invariably comprise a majority of lateral thinkers (30% of society as a whole is lateral and 70% linear). Currently, Bitcoin’s penetration rate is 2-3% of the global population, and assuming that the current network effects of Metcalfe’s Law don’t break down, it will rise well above 10% within a few years.
From that point forth, my prediction is that society will have entered a completely new area in which the linear thinkers will be punished for their lack of foresight and lateral thinkers will be rewarded disproportionately. The EU clusterfuck will suffer for their odious regulations and there will probably be more dystopian pushback as we enter the final years of The Fourth Turning, but the future is bright for those who think outside the box and challenge the existing status quo with conviction.
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