Financial Planner Explains Why He Tells Clients to Put 1% in Bitcoin

David Oransky [00:00:00] Part of the reason I think a lot of Americans have trouble understanding Bitcoin is that we have a relatively well-functioning society and monetary system compared to other places in the world. So we don't see the immediate need, but when I saw that in Canada, I was like, oh my goodness, like that could easily happen here, regardless of which society you're on. And then a few months later, not even a few months later, you have, you know, freezing Russia's foreign reserves and it's like,

Vance Crowe [00:00:23] I'm Ashley McFarland, a nonprofit executive living in Duluth, Minnesota. And you are listening to the Vance Grow Podcast. Welcome back to the podcast. I'm glad you're here. Today we have certified financial planner, David Aki from Laminar Wealth on. Now, if you're one of those people that thinks, ah, I don't, not really interested in money or how the Fed works or interest rates, then you may be in for quite a surprise. David has an extraordinary talent for taking really complicated ideas about the economy and making them approachable. David, a few months ago, wrote an a letter to all of his clients saying that he thought that they should convert at least 1% of their portfolio into Bitcoin. This is a strange and wondrous move in a world of very conservative financial planners that stick generally straight down the middle of the road. So I decided to invite David in to have a conversation about how the economy works and really discuss what money is. I hope you enjoy this conversation because it is a wild ride with a man that is very interesting. We're gonna get to that in just a moment. But we've been doing Legacy Interviews here in the studio and one of the questions we often get is, can I do both of my parents together? Well, when we do Legacy Interviews, we offer the opportunity to either sit down with one parent as an individual and do a two hour conversation with them. Or you can have both parents there together sometimes in some relationships. That dynamic of two people talking and communicating and laughing and reacting is exactly the thing that you wanna capture.

Vance Crowe [00:01:59] And other times you recognize, no, I think mom needs her chance to really talk about her childhood and the way she thought parenting went, and then let's bring dad in and let him do one on their own. Either way, it's completely up to you. And if you're interested in having us capture the stories of your parents, go to Legacy Interviews dot com. Alright, without further ado, let's head to the interview with my man, David Aans. David Aki, welcome. Thanks

David Oransky [00:02:25] Podcast. Thanks for having me. It's been a long time coming.

Vance Crowe [00:02:28] Yeah, man. As I look around at the world, I have to ask myself, why in the world are there as many financial planners out there as there are here in the United States?

David Oransky [00:02:37] Yeah, I don't know. I mean there are a lot of financial planners. I have actually no idea if the number has grown significantly recently, but I mean, when I look at my own office building, there's a financial planner that's across the hall and one just moved in yesterday next to me. So I mean they do see, yeah,

Vance Crowe [00:02:52] Yeah, one just moved in down the hall from here.

David Oransky [00:02:54] Yeah, so they're everywhere. I think part of it is, it's one of the, the few professions left where you can still kind of be self-employed. There's not very many of those and this is one that it's still feasible and in many ways in the last decade it's become easier as technology has all gone to the cloud and everything is priced per user rather than a big software license, it's allowed more people to go out on their own. It's also that financial planning is kind of the combination of estate planning and investments and taxes. And so all these professionals that maybe used to have one specific thing they focused on, whether it was taxes or investing or estate planning, are now looking to bridge them all together. And they call that financial planning. And so you see lots of CPAs getting into financial planning, lots of investment advisors that used to only be, you know, stockbrokers trying to do financial planning now. So everyone's calling themselves a financial planner, but there's still a huge range of what that means. Like some people are just kind of still doing their old thing but dabbling a little bit in financial planning. And then some people are truly doing financial planning. And I think that is an area that's growing. There are people now that are just financial planners that don't manage assets, that don't do taxes, that don't do anything else. They're just financial planners. And a lot of that you see catering towards like the millennial crowd and charging like a subscription fee for that. So there's definitely a intent within the profession that we need more financial planners to help people and trying to bring more and more people in that. There's CFP financial planning programs at a lot of colleges now that I think, I'm not sure that existed at all when I went through college.

David Oransky [00:04:26] No,

Vance Crowe [00:04:26] I mean I remember, so I grew up, my dad was a stockbroker and for someone when I was a kid, you know, 30 years ago to have a stockbroker was like a big deal, right? Like that was something like, oh that guy has a stockbroker. Right? Which is where Edward Jones really,

David Oransky [00:04:40] Yeah.

Vance Crowe [00:04:40] Fit in in a weird way. But then like as we go on and now we're adults, now I have people approach me. I cannot even imagine being a 25-year-old going out there and knocking on people's doors and being like, Hey, 45-year-old, I have never accumulated wealth, nor have I been able to grow it or you know, anything. Yeah,

David Oransky [00:05:01] But

Vance Crowe [00:05:01] I think I should do it for you. I think it's a hard profession to break into psychologically just as a salesperson.

David Oransky [00:05:08] Yeah, I can see that. And I get Edward Jones people knocking on my door sometimes and it's always funny, even after I tell them a financial advisor, they continue on with their pitch sometimes. But I mean it's like, you know, a doctor, like you know, there's cancer doctors who've never had cancer and they treat cancer. Like, I don't know that you need to necessarily have gone through the experience yourself to be able to guide others through it. I think there's certain aspects that make you much better if you have, like if you have experience. And so when I started out, I mean I was in my twenties and I tried to make up for what, I didn't have an experience with knowledge. I read everything I possibly could. And yeah, there was things that I missed that on paper looked like they were the right thing to do, but in once you understand, human behavior don't work as well. And so I've learned a lot more, but I'm still don't have nearly the experience that, you know, a baby boomer has

Vance Crowe [00:05:56] Who was the first type of person that that said, yeah man, I'll, I'll hand you some money and hopefully you can make it more money.

David Oransky [00:06:04] Well, after I, so after I left the accounting world and went into, you know, work for a wealth management firm, I was just kind of a behind the scenes junior, you know, financial planner. I was doing a lot of the work, but I wasn't the face in front of the clients. And one of the advisors had a family emergency when a new prospect was coming in and the CEO pulled me in just to basically be a warm seat, you know, be the other face there. And I probably wasn't able to fully stay quiet. And we ended up getting the client and he said, well great, here's your first client. Like, and it started with that. So I mean, initially you borrow a lot of the credibility from the more senior person and eventually people realize, oh, you're the one actually doing everything. And then they start to, you know, trust you more. But I was also, at this point, I was in California, so I was in PA Alto, most of our clients were Silicon Valley, you know, tech people that had made their money, their company gone public, like these people were in their twenties and thirties. And so it wasn't, to them it was like, oh, well I'm really good at what I do and you must be good at what you do. And there was almost a, you know, being young wasn't, wasn't seen as a bad thing. Whereas I think probably many other places in the country it was a, oh, I can't trust you with my money. Like I need someone that's been doing this for decades.

Vance Crowe [00:07:15] Yeah, I think, I mean actually, so full disclosure, you are my financial planner. And the interesting thing was I definitely didn't want an older person because by the time I found you, I already was well acquainted with what was going on in Bitcoin and I thought like, hey, some of the old ways of thinking about things, I really trusted my dad's advice, but he was getting out of the game. So now I had to find somebody. And you are an interesting blend because my wife is like hardcore details, very, very conservative. You know, I'm much more like, hey, let's, let's put it on 32 red because I feel like I have an intuition about this and that. So for her to be able to find a blend, a person that was like able to be on the edge enough to satisfy what I was interested in, but then conservative or detail oriented enough to like make her confident was an interesting blend.

David Oransky [00:08:13] Yeah, I mean I think I was kind of in a position where when I started in the industry, like I was already working with bigger clients right away I didn't, you know, everyone said go out your natural market. It was mostly young people, but I immediately was working with young people that happened to have money. And so I had to develop, you know, I had to be very conscientious. This wasn't, you know, and the people supervising me weren't just gonna let me, you know, run wild and see what happens because these were big clients even though they were young and even though I was young, but it's also just part of my nature. I'm very conscientious. I view, you know, from the beginning, like my view of personal finance and investing because of the clients I was working with was much more not how do we get rich, but how do we stay rich Because most of our clients already had wealth, they had enough money, they could be financially independent. And so I think I am far more conservative financially than, than the average person. I only will take risks that I think, you know, where it's warranted to pay off. I don't view it as gambling. I think, you know, some you can gamble through investing and that is a way that you can make a lot of money doing it the way I invest. It's probably not gonna get you rich, but hopefully it'll, if you're there, it'll keep you there. That's kind of the way you

Vance Crowe [00:09:27] Preserve wealth or compound, compound your earnings at the, at a,

David Oransky [00:09:31] Yeah, I mean there's still trade offs, right? Like, you know, you don't want to put everything in super con, you know, what's, what may be safe for the short term may not be safe for the long term. And so sometimes the best defense is a good offense and there are certain times where you need to take more risk. And you know, I think one of the things that I always think about is it's less important to avoid the bad investments as it is to make sure you own the good ones. You know, the good investments wherever they show up tend to be so good that they more than make up for things that don't go well. And so, you know, when I'm looking, I'm looking at are there certain risks or certain assets that if we don't own that have the potential to, to be a big deal and that if we don't own like could really hurt us. And so I'm okay with knowing that parts of the portfolio aren't gonna do well because I don't know which ones, like if I knew which ones then yeah, sure we wouldn't own them. But you only get that with hindsight. So it's a little bit different of our approach than, than some people. I think I am more conservative. But then there's other things that you would say, well that's not conservative at all. Like why do you have, why do you recommend Bitcoin?

Vance Crowe [00:10:32] Yeah, the, the best example was after several years of us being in working together, I get an email from you one day that that is you telling all of your clients, I, I believe that you should have a certain percentage of your portfolio in Bitcoin. And I don't see any other financial planners doing that.

David Oransky [00:10:52] There's some but not many. And the ones that do typically are much more in the broader crypto sphere. Yeah. But that even that was something that, I mean I first heard of Bitcoin in 2011. Someone that I took economics with sent it to me. And I remember getting the, the email and being like, wow, this is really cool, but like it's never gonna work. And really didn't think much more of it. And every now and then it would pop up. And then in 2017 when Bitcoin kind of left the dark corners of the internet and suddenly everyone was talking about it and I had lots of clients bringing it up and some clients had already had some. And I still at that point, you know, didn't think much of it in part because like, I mean people send me investment ideas constantly all day long and most of them are not worthwhile. And so you develop heuristics and intuition for what's even worth analyzing because you can't analyze everything that comes across your desk. And if you run Bitcoin through your heuristics, for most people it looks like a get rich quick scheme or maybe even an outright scam. And so most people don't even analyze it. And I didn't, I didn't go deep enough and it wasn't until 2019 and there was a, you know, at this point Bitcoin had fallen from 20,000 down to 10 and was bouncing around that range. It had gone down to I think three at one point. And there was a few people that I knew that were completely undeterred and why everyone else said, huh, Bitcoin was dead and dancing on the grave of Bitcoin. There were some people that I thought were very intelligent and agreed in a lot of other areas and was like, what? What do they know that I don't know?

David Oransky [00:12:23] Or who's wrong? Either they're wrong or I'm wrong and I wanna find out more. And so that's when I dug into it. And so I'm probably one of the few people that entered Bitcoin not during an upcycle. And that was probably how I had to do it. 'cause I don't like getting wrapped up in hype and feeling like I'm being pressured to do something. And so in late 2019 it was Bitcoin was boring. And so I had all the time in the world to dig in and, and read about it and expected to learn about it, but still not be convinced or think that, well, even if this could be something it's still not worthwhile to have in the portfolio. You know, it's some venture company venture-backed company type of investment, which I just don't do because most of 'em fail. And instead I came out the other side like, oh my goodness, I totally missed this because it didn't pass my initial screening.

Vance Crowe [00:13:11] The totally missing it. Like that's the, I remember, so the person that exposed me to Bitcoin in a deep way, Rob Long's been guessing the podcast a couple times and I remember me sitting, it was about eight years ago, like right around this time in fall and he sat me down and I was like, all right, give it to me one more time. And when I started to understand like a few key things, 21 million, there'll never be more, yeah. How does this actually go into a wallet? How does this work? This is just the very, very beginning. I describe it as like having a chance to see the edge of the universe, right? Like where you're, you feel this sense of awe. Yeah.

David Oransky [00:13:50] This

Vance Crowe [00:13:50] Sense of like, wait a second, how could this possibly be true? And then have had for the next eight, nine years, whatever it was, this experience of what, having a question about it being like, I don't know, how is that gonna work? And then discovering like how deeply this thing has been thought through,

David Oransky [00:14:09] How deeply it's been thought through in the community that's sprung up around it. It's really a free market of ideas and everyone's constantly testing it and making it better. And yeah, we're continuing to discover new features of Bitcoin that were like, oh my, did somebody truly think all this through and design it? Or is some of this just emerged? I mean before, I mean I used to think Bitcoin was just magic internet money and I still do, but now I don't mean that as an insult. Like I think it really is that magical and it's so elegantly simple when you look at it and it is yet, you know, has the ability I think to eventually grow into kind of the base layer of, of money. And I think that will eventually happen. I just over what timescale,

Vance Crowe [00:14:52] So the, the fact that it's magic internet money. One of the things that's truly beautiful about Bitcoin is they created digital scarcity, right? So normally things on the internet, you can take a photograph and you can, right?

David Oransky [00:15:03] That's the value of digital things is

Vance Crowe [00:15:05] That you

David Oransky [00:15:05] Don't have scarcity anymore. So

Vance Crowe [00:15:06] What is the value of setting Bitcoin at, at an an arbitrary number 21 million? And why is this valuable do you think?

David Oransky [00:15:14] Because money itself is just information like money, like it doesn't matter. We don't, 21 million is somewhat arbitrary. I mean there's, there's reasons that toi chose 21 million. It, it roughly correlates that if it were to grow into, you know, a, the global currency, that you'd have something enough monetary units to somewhat be on par with, you know, say pennies and a dollar or something like that. It also I think has some math where it's easily, you know, divisible by certain things and just works out cleanly. But you could have a different number, like the quantity of money doesn't matter because money is just acting as the medium of figuring out exchange rates between any two goods. So if you didn't have money, you'd have to know the exchange rate between, you know, how many apples does it take to buy a car? How many, you know, fish does it take to buy a bushel of apples? How many hours of labor do I need to exchange to buy a house? And you'd have to know all these things. Money allows you to have just an exchange rate with that base layer of money so that that becomes the information and it allows then society to allocate those resources based on the aggregate of what everyone's viewpoint on that. So like as soon as you start changing the money supply, you're introducing noise to the system like it, that's an un that's unnecessary. So having the ability to print money, you know, to either create money or remove money is, isn't adding anything to that equation of like, how do we price things? Like how do we, how do we determine the exchange rates? It's really a form of manipulation and and misinformation really.

David Oransky [00:16:45] And so it's not surprising them that things get messed up when we manipulate the money. And so the beauty of Bitcoin being truly scarce is that it takes all that out. You know, once you hit 21 million, you, you remove all those other factors. And before Bitcoin, the best thing we had was gold. And the reason gold became money was because it had what we call the highest stock to flow ratio. Meaning there was a lot of gold that had already been produced and yet it was incredibly difficult to produce more of it. So gold, you know, only inflates or dilutes, its suppli at about one point a half percent per year. And that's been relatively consistent throughout much of history. Certain meaning

Vance Crowe [00:17:18] That one point a percent of the entire amount of gold that's out there can get mined every year. Yeah. And if the price goes up, you could go out and mine more, but it's, it's increasingly expensive to bring more gold on.

David Oransky [00:17:29] Yeah. And that's because although we've gotten better and better at extracting gold, we've also taken all the easy gold deposits. So it's like a built in difficulty adjustment into nature. So Bitcoin was really designed to take all the virtues of gold but put it in a digital space. And so, you know, gold was successful because it was scarce. It also does pretty well in the other characteristics of money. Like you want money to be divisible, you want money to be portable, you want money to be fungible, you want money to not degrade over time. And gold did all that really well with maybe the one exception of it wasn't very divisible. 'cause you know, gold is scarce enough on an absolute level that even a very small amount of gold would be equivalent to like a week's worth of labor for for many people. And so that's why over time you had silver spring up next to gold as being the next metal or commodity that existed naturally in the world that didn't dilute very much. And so, but it's the stock to flow ratio on silver, I wanna say is somewhere in the 20 to 25 range, which means it would dilute at about four to 5% a year. So not as good as gold, but still the second best of things that could function as money. And so silver sprung up as the day-to-day transactions and gold was long-term store value. But over time, as you know, global trade became more and more prevalent. Like precious metals could not, you had to transport them, it was very inefficient to move them. It was very risky. You know, there was shipwrecks, there was thievery. And so people started using pieces of paper to have deferred settlement. Like okay the gold can stay in the vault with this trusted banker and we'll just trade this piece of paper. And that's how you know, the system worked for a long time.

David Oransky [00:19:02] And then eventually we removed the gold from the equation and we just traded a piece of paper and that's the system we're on now. And for my entire life we've been on this pure fiat system where there is nothing backing the money other than than credit other than debt. And it seems normal, but the reality is it's an experiment that's only been going on for 50 years. And so people criticize Bitcoin if it's only 14 years old, like no one's ever gonna trust it. We've only been on a pure fiat system for 50 years, that's four times as long. Like for the rest of history going back thousands and thousands of years, we've been on something that had scarcity, we've been on precious metals and anytime any other society used a form of money other than gold and silver, when they interacted with a society that did use gold and silver, gold and silver always one out. And when you say one out, what do you mean? So societies will quickly converge on one form of money. So lots of things were used as money early on. You had, you could have livestock, you could have tools. Seashells. Seashells could be great money in a place that wasn't near this the ocean. But if you live near the ocean and anyone can walk down the beach, pick up seashells, it's not scarce and it's not a very good form of money. And so over time though, like different things are being used as money. And if you're an early you know, person in these early societies, it's to your benefit to try to think ahead of which goods will other people demand in the future. And if you can accurately do that, you have the ability to go collect or create those goods before there's widespread demand and you hugely benefit from that. But then it creates a self-fulfilling prophecy almost. Because if I start collecting what I think will be money in the future, that increases the demand today and the price adjusts, it goes up, which then causes other people to pay attention.

David Oransky [00:20:34] They say, Hmm, lots of people seem to want that good. I think I should hold that as money too. And you quickly get this positive feedback loop where most societies very quickly converged on one form of money. And if two interacted, the harder money almost always went out harder, meaning harder to produce. So high stock to flow ratio or a low kind of inflation rate. And that's where gold kind of became king.

Vance Crowe [00:20:56] It's an interesting thing when you go look at the history of money and you watch how governments are always, you know, they, they're the ones that say, Hey society, this is, now that we have this system going on, we're gonna have this money, this is what's going to be official. So if you go look at gold, right? The Roman Empire is using gold to be able to say, hey, this is the official coin. And people can kind of figure out how much is this coin worth relative to livestock or apples or things like that. But over time, eventually the government's always like, Hey, you know, if we shave this coin down a little bit, we can keep telling them that the money is, the coin is worth this much, but now we can increase our own coinage by 15%.

David Oransky [00:21:39] So it's happened time and time throughout history. So after gold kind of won out as money at that point it was still being, you know, lumps of gold that wasn't in a standardized form. And it was the first coins that we know about came in about 700 BC in Lydia, which is modern day Turkey. And it was the first time that we had

Vance Crowe [00:21:55] True

David Oransky [00:21:55] Coinage and that allowed money to finally be a unit of account. We had a standardized weight and purity and that was a huge boon for trade and it worked out. The problem was you also needed somebody to standardize that, someone to mint the coins so that it was a standard way they were. And you know, who do people trust? Well that's where kings and governments kind of filled that role. They also had the benefit of getting to put their faces on these coins, which, you know, for a king or a rulers, you know, is a nice thing. And so yeah, you can look at the Roman Empire and they had a, I think theirs was a silver coin. The Denari and the global empire was huge. That really was the world's first global monetary standard was this, you know, Roman Denari. And I think at the time that Caesar was emperor, it was like 98% silver. And then by the second century when Marcus Aurelius was emperor, it was down to like 80% or so. And by the third century it was down to like 5% silver because time and time again, yeah, they exactly what you said. They say, Hey, if we shave a little off or if we dilute it, we'll put in some less precious metal in there that allows them to basically extract wealth and effectively print money as we would call it today. And that's good for them. But over time people catch on and then when people no longer trust the money, they, you get civil unrest and you know, stuff falls. So I think governments getting involved with money both led to the rise and fall of, of many, many empires. And what happened after the Roman Empire fell, we entered the dark ages and the thing that finally brought us outta the dark ages was all the city states popping up in modern day Italy. And one of those was Florence, where they created a gold coin called the Foreign.

David Oransky [00:23:30] And keep in mind, these city states weren't like big nation states, these, they are very almost like free anarchist societies in a way that just sprung up around like capitalism and their gold coined, the foreign maintained its weight and purity for over four, four centuries. And not coincidentally that was the Renaissance. So that's when we got all the advancements in mathematics and art and architecture and all these amazing things came outta a period where we had a very, very stable monetary system. I don't think that's coincidental. Yeah,

Vance Crowe [00:23:59] I mean like they talk about the difference between hard money and soft money, right? And if you can count on the fact that the money you're using is going to hold the same amount of value tomorrow or the next day or you know, a few years from now, then you don't have an incentive to spend it as quickly as possible. Right? If you know that your money is gonna be worth 8% or 10% less next year, then you wanna spend that money now. Yeah. And I think the, the thing that that comes out of that, or at least one of the hypothesis is well this explains why you have people that build buildings that are short term now, right? I think it's because they're like, I don't, don't have time. Whereas when you think about the renaissance, they're able to be like, hey, we can invest in the, the, these totally these giant chapels and shit. Well,

David Oransky [00:24:40] And what's so ironic about that is a lot of building design these days is based on, you know, building green buildings. And the thing is, most of the environmental impact of a building is its construction. And so although they may be using more green materials, if that building gets torn down in 30 years and they build a new one, like on the whole, it may have actually been way, way worse the environment versus buildings they would build hundreds of years ago that are still standing because they're beautiful buildings that were built rock solid and sometimes outta rock. And so which one's more environmentally friendly, friendly, I guess it depends over what timescale you're looking at.

Vance Crowe [00:25:15] Yeah. And the, and the incentive then becomes that you can, you can take the time to build a cathedral or a thing that takes you two or three generations in order to get it done. Yeah.

David Oransky [00:25:26] No one does it anymore.

Vance Crowe [00:25:27] No one would do that now. It would be seen as the most foolish thing that you could possibly do. Not to mention one of the biggest reasons you ever see cranes in a city anymore is not because there's capitalistic opportunities, it's 'cause there's tax credits, it's because there's government financing. Somebody else is blowing oxygen onto those buildings.

David Oransky [00:25:44] Yeah. And that's, yeah, I mean that gets back to when you manipulate the money either through the supply or through interest rates. Like, you know, like I said earlier, money is just information. So manipulating the money is creating misinformation and money is the one of the base layers of society. So to me it's no wonder that you have all this misallocation and misinformation throughout society. Like you are messing with one of the base layers of it when you do that.

Vance Crowe [00:26:06] So let's talk about the US system. What is it about the US dollar and the way that it works that most people that you know, they're just spending money, they, they get an, they get a paycheck, they put it in the 401k, what, what do they not most people not know about the way the dollar works?

David Oransky [00:26:23] I mean probably a few things. One is that we often, I think people assume that natural inflation rate is some low level inflation, say zero to 2%. That's kind of the natural equilibrium in reality technology is always deflationary, you know, technology and innovation allows us to create more things with fewer inputs. And that always has been, and we saw this, you know, during the kind of the second industrial revolution back when we had, you know, you know steel, steel companies coming online and the railroad and all that. Like it was a major deflationary environment because technology causes deflation, it makes your money more valuable, your money can buy more if you have a limited supply of money. And so things should be getting cheaper every year as technology. And we see this things in flat screen TVs. I mean, you know, there was a time when flat screen TVs would cost thousands of dollars and you know, they were plasma. If you left them pause for too long, they'd get burned. And now you can go to Costco for a few hundred dollars and buy a flat screen tv. That's way, way better than a thing that cost thousands of dollars years ago. And that's because there the technology has increased so exponentially that it defies all of the increase of the money supply. Like there's deflation, no, even though everything else is inflating, but the reality is deflating everything. So if you were to not create any money in a system, the real estate of the world would be negative inflation deflation. So things would get cheaper on the order of, there's no way to exactly measure this. But estimates I've seen are somewhere around two to 4% would get cheaper every year.

David Oransky [00:27:55] And so instead what you do, so we don't get that, is we print money and I think on average the US has printed about 7% a year. And when I say print, I'm using that. I know they're not literally printing money, but they're expanding the money supply by about 7% a year. So you take like a negative single digit natural deflation, you add 7% money supply inflation, oh, guess what? You get low single digit inflation. That's kind of where we are. And so the issue with that is that rather than the productivity gains from technology being spread broadly throughout society and everyone who holds the dollar benefits by being able to buy more next year, you kind of create the opposite of that system where everything's getting more expensive. And so you encourage people to spend more, which a lot of economists think is good. They want people to go out and spend because that boosts GDP and it makes it look like we're growing. I think it's shortsighted because a lot of what people are buying, they're not putting a lot of thought into they're disposable things. And that if, if people thought their money would become more valuable, they'd be a lot more careful with how they spent their money, they'd save. Like we have kind of a savings crisis and people were trying to figure out how to solve that. You know, one of the basic economics lessons is people respond to incentives and we have incentivized them to spend and consume in the present rather than plan long term for the future. Yeah.

Vance Crowe [00:29:05] And everything around it, right? The Federal Reserve comes out and they don't say, we just moved interest rates. They say we're gonna move interest where we're gonna make money more expensive for you to borrow. So you should go borrow today in order to be able to get people to, you know, get excited, inject more commerce into the system. So what is going on though? Why is it when people talk about inflation or deflation? Anytime I've ever had a podcast guest on probably, I'm probably 10 for 10 on this one. If I say what's wrong with deflation? They're like, oh god no, we don't want deflation. That would be the worst thing ever. Would it be the worst thing ever

David Oransky [00:29:41] In our current system? It'd be very painful. That's because our entire monetary system is based on debt and credit. So literally our money is, is what's backing that is US debt. And so

Vance Crowe [00:29:53] What does that mean? Start from the beginning. Okay, so

David Oransky [00:29:55] Back when the Federal Reserve was created in 1913, the world was on a gold standard, which meant that, you know, basically every currency was tied to gold and you could figure out the exchange rate between, you know, the dollar and the pound based on how much gold backed it. Like you didn't need to figure out all these, you know, supply and demand markets. It was just, well what's the gold price? And so you can think of almost like a, a pyramid of money where at the the top you have your base layer money, which would be gold. That is, you know, what I would truly consider money when I de delineate between money and currency, I think of as money as an asset that is no one else's liability. So if you hold a gold coin, you are not relying on anyone else perform a service to have that be valuable. Conversely, if you own a bond, that's a, that's an asset to you. You've lent money to a government or a co corporation or to somebody. And so that's an asset to you 'cause they owe you that money back,

Vance Crowe [00:30:50] But it's

David Oransky [00:30:50] A liability of them if they don't perform on that. But your assets worthless. And so most money, you know, so if you go back to the gold standard, you know, you had gold in the vaults at the Fed and at banks and you had dollar bills and those, those notes were redeemable for gold. They were an IOU that you can think of like a coat check. You know, you go put your coat in there and anytime you want it back you bring your, your deposit slip and they give it back to you. And that was, you know, the system for a long time. And then, so 1913 we had the Federal Reserve. A few years later we entered World War I, we needed to help finance that war. And very quickly the Fed started buying US treasuries. So, so they started putting us treasuries kinda at that top base layer at which then they could create notes for, you know, our, our dollar bills.

Vance Crowe [00:31:37] What is, what does that mean to buy a US treasury?

David Oransky [00:31:40] So treasuries are, are bonds that the US government sells. So in order for the, the government can raise money in multiple ways. They, one of the ways is through taxation. The other way is through borrowing, issuing US treasuries. You give them money and they give you a bond and then they get to go spend that money.

Vance Crowe [00:31:57] So you give me a hundred dollars today, we'll take that and five years from now we'll give you $110.

David Oransky [00:32:03] Yeah, yeah. They'll pay interest twice a year and then you get your money back at the end of it is is typically how it works. And so that is an asset, but it's also someone else's liability. And so at the time the Fed was created, I think the Fed balance sheet was like 84% gold and it's fractionally reserved, meaning that they don't actually have to have a one for one exchange even then of dollars for gold. But they were supposed, they had that point, 85% was in gold and they had a minimum that they had to maintain of 35%. So in other words, like whatever, however many dollars they have, 35% of that has to be backed by gold. And that was a level that I think nobody really reasonably expected them to get to. They had 84%. So then you get, you know, outta World War I, you get the roaring twenties, lots of easy credit money created eventually led to a lot of misallocation, which is part of what led to the Great Depression and the Fed moves to try to unfreeze the system. And they do that by creating reserves. And reserves are, you can think of as wholesale money. So the Fed has two, two different types of like what I would call layer two money, which are the IOUs on the base layer money, which back then was gold. The reserves are wholesale money that banks hold, they can hold it, they can exchange it with each other, they hold it on the fed's balance sheet and they would move to, you know, reify, the FIS reify the system by creating reserves. The problem is they quickly didn't have enough gold in the vault. They, they could create more reserves but they needed, they couldn't go over 35% and so they needed gold. And so nobody wanted deposit gold into the Fed or any of their banks because at this point people were worried about financial unrest.

David Oransky [00:33:34] And what do people do when they're worried they don't want their money in banks, they wanna hold that first layer of money, the asset that's no one else's liability. And so there was no way people were gonna deposit gold. And so then in 1933 we got executive order 61 0 2 FDR said, everyone has to turn in their gold, you've gotta go give it to the Fed. And so everyone turned in their gold to the Fed and at that point there was a fixed exchange rate of $20 and 67 cents for an ounce of gold. The next year after they'd confiscated all the gold, they devalued the dollars and that was $35 to one ounce of gold. And then the treasury took the gold from the Fed and they took the fed's gold too. And then the next year I think we got the FDIC, which was to prevent those bank runs from happening. And the FDIC is mostly psychological. There is not enough money in the FDIC to actually bail out a systemic bank failure.

Vance Crowe [00:34:23] But let's go back to the gold thing. Like this is one of those like people have trouble wrapping their minds around this, that the US government came to their citizens and said, you are required by law Yeah. To turn over your gold. And by the way, if 20, 30, 40 years later we find out that you still have that gold, you can go to prison for it. Yeah, you can. All of that will be confiscated. And you know, even though they eventually didn't make it illegal to to own or hold gold, it became even

David Oransky [00:34:55] 1974. Yeah,

Vance Crowe [00:34:55] Right. But that's 40 years later. And even after they made it legal, if you had kept your gold, it was still illegal to hold.

David Oransky [00:35:03] Yeah, I don't think they pro, I don't think there was many prosecutions on that, but yeah. But the,

Vance Crowe [00:35:06] There

David Oransky [00:35:06] Was the threat of it

Vance Crowe [00:35:08] And the fact that that happened in the United States is something that most people don't know about our history. It's certainly never taught to me in school at all. But that being a fundamental core part about how the US government, you know, grabbed power and then maintained it. I

David Oransky [00:35:21] Mean it's the only, I mean if a government just simply came out and said, Hey these pieces of paper, you're all gonna use this as money ready go, no one would do it. Like it only worked because people first trusted gold, the dollars were an abstraction of that gold. They were supposed to be an IOUA claim check for that gold. And then, you know, you kinda had the rug pulled out from the gold disappeared. But at that point, what are you gonna do? Like coming out of World War I, the US dollar was the cleanest dirty shirt. Like the, you know, before that the UK had been the global, you know, empire. The pound was the world reserves currency. But the UK coming outta World War I, they needed to devalue their currency to basically pay for the war. So they had to leave the gold standard. And so the US you know, the US emerged as the still the best opportunity 'cause this is all opportunity costs. Like you have to use some form of money. And the gold at this point was all sitting in, you know, government controlled vaults. So citizens couldn't, there wasn't really the opportunity for citizens to revolt and say, no, we're gonna use gold as money anyway. The gold was, most of it was tied up. And so you look at the available options and the dollar was the best. And then coming outta World War ii, it was completely solidified as that, you know, the US emerged as we

Vance Crowe [00:36:29] Really had the only functional

David Oransky [00:36:31] Strong military at that point. And you know, we beca then we had the Bretton Woods agreement where the dollar was tied to gold and everyone else's currency was tied to the dollar. And although US citizens couldn't redeem their dollars for gold, other countries could. And so other countries would use, basically use the dollar for the reserves. But anytime they wanted their gold back, they could exchange at $35 an ounce to get their gold. And so what if, you know, people respond to incentives and so these countries start realizing, hey, this is redeemable for gold, but there's not actually enough, I don't think there's actually enough gold if all of the countries want to redeem their US dollars for gold. So hey, maybe we should redeem ours while we have it. And then you effectively gotta run on the bank from like nation states. And so that was in 1971 when Nixon closed the gold window and said, ah, due to the strength of the US economy, we don't need gold anymore. We're gonna temporarily close the gold window and make it not redeemable for anybody. And then it became permanent three years later when we, I think we officially went off the gold standard and

Vance Crowe [00:37:26] The story, whether it's lore or not, is that like, weren't the French like sending shit

David Oransky [00:37:30] Over? Yeah, I've heard this. I don't, I haven't been able to verify this, but I've seen it in several sources. But yeah, the, because I think the other thing that had happened during World War II is a lot of nations, their own gold stores, they actually sent to the US where they'd be more safe because the US is, we are very lucky geographically were hard to attack. You know, we've got oceans on both sides of esser friendly with our neighbors to the north and the south. And so, you know, whereas Europe has had multiple wars and you know, people, they didn't, their gold wasn't safe there. So a lot of, I think the gold, the, the story I've heard is on up France gold was in the US and they kind of want it back. So they sent over Battleship to pick up their gold and it was why it was in transit that Nixon closed the gold window. So anyway, then, then we had this where the, you know, when we were on Bretton Woods and coming outta World War ii, the US had a huge advantage. We had the global reserve currency, everybody wanted the dollar for their own central bank reserves.

Vance Crowe [00:38:21] And so

David Oransky [00:38:22] It made us, it made the currency of the US really valuable. Like it allowed us to be able to buy things from other countries very cheaply. And so imports were really, really inexpensive for us, but it was hard for us to compete for work. You know, our exports became more expensive because our currency was more valuable. And so that's part of what led to the hollowing out of our manufacturing base was the fact that we had the global reserve currency. So it's both a privilege and a curse. Like having the world's global reserve currency gives you a lot of benefits, but it also has some issues. This is trip's dilemma, if you've ever heard that term, where it's like it's gonna create an issue because it creates create trade imbalances. And in order to help offset that, the US was incentivized to print more money, to issue more debt, to create more money to kind of bring down the value of the dollar to make us a little more competitive, which then exacerbated the situation. 'cause now there's even less gold relative to the number of dollars out there and made other countries wanna come take their gold. And so after we went off the gold standard, the US we, you know, that was the seventies, that's when we had inflation and there was kind of a concern that the dollar may fall. Like who's gonna want the dollar if it's not backed by anything. And so we, that's how we got the petro dollar system as it's often called where Saudi Arabia was the, was the major oil exporter. We were probably their largest customer, but many other people were buying oil too. And we went to Saudi Arabia and said, Hey, you guys need security. We have the best Navy, we'll keep all the straits open, we'll keep everything moving in exchange you price all oil in dollars. Which meant that anyone that needed energy, which is everybody needed dollars to do so.

David Oransky [00:39:53] And so it actually, if anything probably increased the demand for US dollars even than when we were on a gold reserve standard.

Vance Crowe [00:39:59] Because the only way Saudi Arabia is gonna sell you a barrel of oil is,

David Oransky [00:40:02] Is if you have dollars

Vance Crowe [00:40:02] First exchange for dollars. So you

David Oransky [00:40:04] Have to get dollars. And so this has been, I mean it's been really good for us in many ways, but it's also made us a little bit more vulnerable. And the reality is like we can't, we will never pay off the debt if we pay off the debt that creates deflation. This goes back, I think to the original question of how we got here. Like why is, why are economists so worried about deflation? And so when you have a monetary system that's based purely on credit, that means one person's liability is another's asset. And if that, whoever's liability is, if they can't pay, so whether that be a company or whatever, they can't pay, that means someone else's asset gets repriced down, they lose value. And when your money is someone else's liability and that liability can't be paid off, your money becomes worthless. And so if you end up with deflation, you get a deflationary spiral and the whole system basically resets. And that could have been

Vance Crowe [00:40:53] Something

David Oransky [00:40:53] That we could have tolerated early on, but it's the whole forest fire analogy. We, we refuse to put out, we refuse to let the small fires burn. We've always kicked the can down the road to avoid, you know, too big of a crash. Too many companies going bankrupt. And we've created such that now if you were to have that, the fire would be so big it would take likely take the whole system down.

Vance Crowe [00:41:12] And and a good example of that would be 2008. Oh

David Oransky [00:41:14] Yeah. You

Vance Crowe [00:41:15] Know, the banks are too big to fail. The only way we're gonna be able to keep these banks so that they don't fail is to print a bunch of money and hand it out to those banks. Which means you've just created more liabilities or you, how, how does that,

David Oransky [00:41:27] Yeah, I mean, well because it,

Vance Crowe [00:41:29] So

David Oransky [00:41:29] In order to get more dollars, you need more treasuries and treasuries are debt. I'm, yeah, I think there, there's not very many people left that really believe the US is ever gonna pay off the debt. And if you look at the incentives behind it and what that would do, like it, it's just not gonna happen. It'd be so painful that no politician is going to do that. In fact, most voters wouldn't vote for it. It would be way too painful in the short term. And so unfortunately like you can't fix the system from within the system. Like we can't, we can't just stop printing money and allow the system to go into deflation because it would be so painful that everyone would be crying for, you know, to stop it. So instead we will devalue the currency, we'll likely continue to print money. Although right now in 2022 we're kind doing the opposite. We're in a, you know, tightening policy. And I think if you look at the longer arc we're it's, we're gonna be back to printing money at some point, it's really the, that's gonna be the release valve.

Vance Crowe [00:42:21] Yeah, I'd like to actually talk about this. So how would you explain to somebody like it, you kind of feel like you understand what's going on with the Fed when they're like, Hey, we're raising interest rates on borrowing money and this is gonna make it more expensive. So people wanna go out and if you're gonna do a giant building project, you wanna get that money now. But what are, what are the other things that are going on that Yeah,

David Oransky [00:42:42] I don't know that they actually want people to go take out

Vance Crowe [00:42:45] A

David Oransky [00:42:45] Bunch of loans readily. What they're trying to do is, you know, in order to bring inflation down, they need to reduce demand. So there's two ways that they could, you know, inflation is just prices going up. The way we, the way we define inflation these days isn't the money supply that used to be how we would define inflation. Like how, how much is the money supply expanding? That was the inflation rate today. When we say inflation, we mean the consumer price index, the price of goods and it's this basket of goods that, you know, changes a little bit over time. And so in order to reduce the prices going up, they need to either reduce demand or increase supply. Well the supply chains have been kind of all messed up outta COVID. And so instead we're reducing demand and how do you reduce demand? They, they won't directly say this reduce demand by creating unemployment like so that people don't have the money to spend and people will consume less, which reduces demand and allows prices to come down. And so it's, it's kind of one of those things that it, it will be good for, it'll, it may bring inflation down, but it's gonna hurt a lot of people in the process.

Vance Crowe [00:43:46] Your point about the CPI being the way we kind of measure what the money supply is, this is, we could talk about just how ridiculous the basket of goods is. 'cause the way they they do it is they say okay, the consumer price index is, let's imagine everybody has to buy these essential goods and we're gonna put those in a basket and we're gonna keep measuring how much does that basket of goods cost? Although they throw out things like healthcare, housing, you know, like yeah,

David Oransky [00:44:10] Housing, energy housing is probably the biggest.

Vance Crowe [00:44:11] Yeah. And like, so like the, but let's put like that aside for a second. One of the fascinating things you pointed out to me, I I didn't realize was we don't actually know how much money is in circulation, right? Yeah. There's

David Oransky [00:44:24] No yeah,

Vance Crowe [00:44:25] There's no like Excel spreadsheet. Well

David Oransky [00:44:27] I mean there's, there's measurements but yeah, none of them are, are accurate. I mean the usually MM two which includes, you know, all the notes out there includes bank deposits like cash, a lot of cash equivalents. But I mean in, it was in 1982 that the Fed actually stopped trying to manage the money supply and started just focusing on, you know, adjusting interest rates and open market like we don't know. And then on top of that you've got the whole euro dollar system. So, and Euro dollar isn't just in Europe. It basically means anywhere outside the US most international contracts are priced in dollars and that's because the dollar is the world's kind unit of account, the world's reserve currency. And so when you have all these contracts priced in dollars, in order to fulfill that contract, you need dollars. And so that's effectively trading as money. Like there, it creates demand for dollars even though it's not in a dollar system. And so we don't, anytime that you, you know, create a new loan based on dollars that's not tied into the US financial system, you're effectively creating money. But the Fed actually doesn't have much control over that. And so yeah, if you add that into the system, we don't know how much money is out there. And that's what's unique about Bitcoin. You, you anyone can audit and know how much at the base layer, how much money do we have Now I do think that if we end up on a Bitcoin center, there will still be fraction reserve banking. There will still be credit and there'll be a whole layer too of kind of what we have now. The difference is when a company or a nation or whatever can't fulfill their, their liabilities rather than printing more to paper over it, there's gonna have to be a real clearing of the system.

Vance Crowe [00:45:55] Yeah. Let's talk about fractional reserve banking 'cause this is one of those things that like, once you start to look at it, you're like, wait a second. I really didn't understand. I think a, one of the best examples of fractional reserve banking, if you have no knowledge of the system, is to look at it's a wonderful life, right? So the, the story is, you know, George is, you know, about ready to leave town and people come into the bank and they're like, I want my money back, right? Because I'm afraid that it's not gonna be worth anything. Or that bank may go bankrupt. So George stands up and is like, no, no, your money's not here. It's in your house and in that hardware store, because the way the banking system works is people put deposits in, or this is the way people think the banking system works. Yeah, it doesn't actually work this way anymore. But the, the essentially is people think, okay, I've got a hundred people that have come in, they've brought their salary in, they've put a certain amount in the savings account, and they're gonna get a percentage of interest. The bank is going to pay you for those deposits. And in exchange they're gonna take that money and they're going to loan it out to all these other businesses who, those businesses are gonna pay interest on those loans. And then that's how the bank covers the interest that they have to pay to the people. And the bank itself makes money.

David Oransky [00:47:07] And as long as everyone pays off their debt, the system works and the system grew and it's probably good. The problem is that doesn't always happen. So I mean, the, the way that I think of factories, their bank is kind of think of how it evolved over time. So if you look back to say 15th century England Goldsmiths were like the original banker there. So Goldsmiths were already experts at, you know, storing safely, storing precious metals. And so customers would bring their gold and say, Hey, will you store this for me safely? And he would give them a deposit piece of paper that was again, the coat check example, the IOU ucom exchanges for your coin. And people would pay him to store their coins that he was providing a service and that was full reserve banking. So anytime, if, even if every one of his customers shows up with their deposit on the same day and wants to exchange it for gold, he has all the gold there. So then over time though, those deposit slips begin circulating as cash because people know that the goldsmith is good for him, he has a good reputation. And so it's a lot easier to just not go ever transaction gold. It's much safer to use the piece of paper. And so people start doing that and they become cash. So no one's asking for their deposits back. And then someone comes to the banker, the goal, someone says, Hey, I, you know, I'm a successful entrepreneur, I'd like to expand my business. Can I borrow some of that gold you have in your vault to do that? And he says, eh, I don't really feel good about that. You know, people are paying me to store it. That would be dishonest. And he says, well, I'll tell you what, I'll pay you interest and then you can share that interest with your depositors. And so then, then rather than them paying you, you'll actually pay them and everyone's better off and you know, I'm good for it. Like I'll pay it back. And so, you know, he does that.

David Oransky [00:48:38] And then they, you know, instead of the customer's paying, they, you know, get paid for their deposits, they get interest and everyone's happy. And as long as the entrepreneur pays off his debt, then everyone grew and we got a new business. And so everyone's better off. And that's fractional reserve banking. Because you know that he then lent, let's say he has, the banker has a hundred gold coins

Vance Crowe [00:48:58] And

David Oransky [00:48:59] There's a hundred customers each with one gold coin. Now the entrepreneur comes along and borrows 90 of them. Well, no one's redeeming their gold coins for ca redeeming their cash for gold coins, so that's fine. But if more than 10 people show up and want their gold coins back, we have a problem. It's inherently unstable. And so that's how people think of fractions as their banking. And people have mixed opinions on that. Some people still think it's not right. Some people think this is great, like the economy's expanding, everyone's better off now. We don't have to pay to store gold. Like this is, this is good. It seems like a fair exchange.

Vance Crowe [00:49:30] The the reason people might not like it is because you are creating money, right?

David Oransky [00:49:34] I think the reason people don't like it is a lot of people assume even today that like when they go put money in a bank, that it's being held safely in a vault. They don't realize that it's not actually there. It's being lent out. And so it's more of a people, people's presumptions aren't right about it, but if they think about it, it's like, well, why would someone pay you to hold your, keep your money safe? Like there's a reason they're paying you. And so, but the re way fraction reserve banking works in the modern world, they just kind of flip that on its head. So they say, okay, well if you go to a bank and wanna borrow money, they don't go take that money outta the vault and give it to you. They don't even need to have the money in their possession. They can just create money. So what, you know, they'll add to the asset side of their balance sheet, a, you know, loan receivable from you, and then they'll credit your checking account with the amount of money that you borrowed and they can just create money. Maybe,

Vance Crowe [00:50:24] Let me put that another way. If you go to a bank and you take out a loan for a thousand dollars, you're not gonna go spend that thousand dollars right away. You may take part of that loan and then you're gonna actually, let's just say you take a hundred dollars of that loan just put into your business and now you've got 900 left over, you're gonna put that in your checking account or in your own savings account. So

David Oransky [00:50:44] It offsets. And

Vance Crowe [00:50:45] So then the, the bank's like, Hey look, we just got 900 more dollars back in our system. We can loan that out again.

David Oransky [00:50:51] So think about the example where before, you know, the banker had a hundred gold coins, he has a hundred deposits, everything balances from an accounting perspective. He then lends 90 of those gold coins out to the entrepreneur, adds a note receivable for 90 gold coins. So guess what? He still has a hundred gold coins or claims on gold coins on the asset side. He has a hundred deposits. Everything balances in the modern way. That banker would only need, you know, $10 in, in his vault and you know, 10 depositors and someone comes on and wants to borrow $90, well he doesn't have $90 in the vault. Well that's fine. We'll just create a loan for $90, we'll put the loan on our asset side and then we'll create a checking out for $90. And you get to the exact same spot. You still have a hundred dollars or gold coins, whatever denomination you want to use on the asset side and a hundred on the liability side. Like this is all just accounting tricks. Like, you know, double entry bookkeeping is what allows us to create money, not by mining and minting coins, but just through accounting, accounting journal entries. And so the problem is, it's an inherently unstable system because if someone does default and the bank isn't properly reserved, the bank becomes insolvent. And all those depositors lose their wealth, which is why we have, you know, the FDIC to prevent those bank runs and why, you know, banks are often bailed out. We typically just print more so that people don't actually experience loss, but then that creates moral hazard. And you get banks and companies lending out money that they wouldn't if they didn't think they had the chance of getting bailed out.

Vance Crowe [00:52:17] So somebody could be listening to this and be like, yeah, I mean you guys have all this criticism, but look, it's working. Right? It is totally like cars and the economy

David Oransky [00:52:25] And there ha So in any layered financial system where you have a credit based monetary system, you have to have sufficient trust. And that obviously has been there. Or other words, the, the benefits of being able to transact with paper or the digital representations of paper, far outweighed physical transfer of precious metals that people were willing to take on that risk. If people didn't have sufficient trust, we would still be exchanging gold and silver coins for every transaction, which we haven't done for hundreds of years. And so that trust is there, and I think it's undeniable that without modern banking, without fraction reserve banking, without central banks, we would not have grown into this global society that we have today. Like, so I, I don't want to criticize too much that, that system, because I think it's what got us here. Those were technological innovations at the time because gold and silver moved too slow to keep up with the global commerce. And so the paper was a good way to do that. And initially it was full reserve and then it went to a fractional reserve and then it went to, you know, no reserve. I mean, there's really no money in our financial system anymore. When I, you know, earlier I defined money as being an asset that's no one else's liability. Like there is no money at the base of our system anymore. It's all credit.

Vance Crowe [00:53:33] Yeah. And people don't realize like banks only need deposits in as much as they are regulated by the government to hold a certain amount. But in effect, when they go to loan that money out, they just go down to the Federal Reserve and they say, Hey, we'd like to borrow money at this interest rate because we've got another guy over there that's gonna pay us that interest rate plus something

David Oransky [00:53:54] And this system can work. But, and if that system were really to be allowed to clear in the free market, then what would happen is if a bank, you'd have some banks that are really conservative and would, you know, not make many loans or would only make loans that had a very, very high probability of being paid back. And they probably would be able to only offer a lower interest rate to their depositors. 'cause they're not gonna be able to charge as much interest to the, you know, the secure creditors. And then you'd have some banks that are much more risky and would make loans. And in those cases, if those loans don't get paid off, then the depositors lose money. And so, you know, putting your money in a bank would be much more similar to putting your money in a mutual fund. Like you're trusting the bank managers to make good investments, and if they don't, you're gonna lose your wealth. Instead, we have a system where everybody believes that their money is safe and the FDIC has ensured that to be the case. And so now you've incentivized banks to actually take on more risks because if the bets pay off, they win. And if they don't, well the bank goes insolvent, but the depositors don't get left holding the bag so they don't feel as guilty. Well, and there's

Vance Crowe [00:54:54] Even some nuance there because a bank, when they're regulated, they're regulated often by the state that they're in. And then the federal system that they're in, and the federal, both systems state and federal, when the regulators come in, they say, are you making enough money? Right? Like they actually look at not just are you solvent, they're saying like, Hey, we gave you this charter. Are you, are you being successful with it? Which then forces banks to say, okay, you know, just a few years ago the they, they didn't actually want too many deposits because you, if you have so many deposits now you owe interest, which wasn't very much, but you like now that money is not making money, you

David Oransky [00:55:32] Aren't able to lend that out. Yeah.

Vance Crowe [00:55:33] So, so these bankers are now stuck in this situation where they're not really allowed to go out and make investments into new companies or into, they can only do it if somebody's coming to get a loan. So now they have to look at these like weirdly exotic bonds and they have to like find things that the federal government will allow them to do and put their money in riskier things that have nothing at all to do with the way the bank is working. And if something goes wrong with that bond market, then the deposits they were holding just evaporate,

David Oransky [00:56:04] Right? But the, the depositors will get bailed out this day and age. So that's, that's my issue is that the incentives have been so manipulated that it's no wonder we have the system we do. Like if there's no risk, if there's no, if you don't ever let the system clear out, then you continue to just perpetuate this moral hazard. And to me it's not gonna be sustainable. But, you know, people have been worried about this since the Federal Reserve was created in 1913 since we went off the gold standard in the seventies, and we're decades later. Like, this system can persist for a very long time. So although I tend to believe it's not sustainable, I am an advocate for things like Bitcoin, I don't know when that transition happens. Like it's not really in the US' best interest to move to that other than as a defensive play. Because if you know a, you know, if other countries do it, that could be, you know, bad for the us.

Vance Crowe [00:56:52] So one of the books that made me a little bit more chicken little than I, than I naturally Am was called the Mandibles. Did did you read The Mandibles?

David Oransky [00:57:01] I read it.

Vance Crowe [00:57:02] And like the, it's a, it's a fascinating book. It's like this dystopian future about like what happens if the US loses its reserve currency status. And one of the ways that the author Lionel Shriver suggests this is she says, oh, the, when the us when the Saudi started trading oil in different currencies, right? And like just a few weeks ago you hear Biden, you know, getting in a fight with Saudi Arabia saying, well, we just may not, you know, offer you military support anymore because that's what keeps you strong. And the Saudis were like, well you're not going to threaten us, right? And you start seeing things. Now, I don't know if that's like me being predisposed to like doom porn. Well, or if it's me like saying like, oh, there's something real going on here.

David Oransky [00:57:50] I mean, we do seem to be moving to a more and more multipolar world. I don't know how it plays out. The dollar is still the best fi currency, like by far it's still the cleanest dirty shirt. And you see right now with the US raising interest rates, that's having a wreaking a lot more havoc on other, other nation's currencies than it is our own.

Vance Crowe [00:58:08] Why, why does it do that? I

David Oransky [00:58:09] Mean, there's interest rate, Perry. So if we raise interest rates that would attract capital to the us people would say, why would I, you know, invest my money in Japan where I'm earning, you know, 0.25% on a 10 year bond. Whereas if I invest in the US I can get 4%. And so money flows to the US And so other countries either have to raise interest rates themselves to maintain, to be competitive, or their exchange rate of their currency, the US will change. And most so far have chosen to allow their currency to devalue against the dollar, which allows then you to get back to parity. But yeah, I don't know how it, there are some theories that this may ultimately play into the us So one of the things that happened to America back in 1907, so part of how we got the Federal Reserve was, 'cause the Federal Reserve was actually our third central bank. We had two central banks prior. The charges were never renewed. So Americans, early Americans were very distrusting of central banks. They had seen what happened in, you know, England. They didn't want a central bank to finance the government's debt basically. And so, but then in 1906 we had the San Francisco earthquake, which decimated the city. Most of those buildings were insured by insurers in London. And so enormous amounts of capital we're having to flow from the UK to America, which was bad for the UK economy. And so the UK very, very quickly raised interest rates like I think two and a half percent over a very short period of time, which attracted a lot of that capital back to the UK and outta the US and through the US into a panic, the panic of 1907, which is where most of those pictures of like people lining up outside the banks, that was from nine.

David Oransky [00:59:40] And the UK did that to us by raising interest rates. And it worked for them, it allowed them to kind of hang onto their power a little bit longer. They ultimately lost it after World War I. And so by us raising interest rates, we're doing the same thing to other countries. We're pulling capital out of those countries when they need it most. And in strengthening the US and I mean, there's some people that believe that that's part of, you know, part of the playbook raising interest rates isn't just to bring down inflation, it's also to increase demand for the dollar by bringing other people in. And potentially as some of those currencies fall, people will dollarize, they'll adopt the dollar as their currency. And so I, I think the dollar likely to be around for a very, very long time and things will likely be denominated in the dollar for a long time. And yet I also believe Bitcoin will continue to gain value. And I think, I think it would be very wise for the US to start accumulating Bitcoin and ultimately backing the dollar by Bitcoin. I don't know that they'll do it, but Right. I, I think we are in a position where we have the most to lose if we don't do that. And we potentially have a huge opportunity to maintain our position in the world if we do adopt Bitcoin, which I think would be best for the world. Like I, as many problems as the US has, like I still think we are the best, we are more likely to fight for civil liberties and freedom around the world. And that not having the US being a major player, if not the major player in the geopolitical sphere would be bad. I don't wanna live under Central bank digital currencies and social credit scores and all this stuff coming outta China. I'd mu, despite all the problems we have here in the us, I'd much rather have this.

David Oransky [01:01:11] So if the US can maintain its position, I think that's a good thing. I don't wanna see the US dollar, you know, go down too far.

Vance Crowe [01:01:18] Yeah, I find that being like something difficult for my own personality, right? Like I'm a, I'm like a, hey, we've got this idea, we know how things work and so I'm on like Bitcoin works, but I don't want to be rooting against the US economy. No, I don't think that like, but I feel

David Oransky [01:01:34] For multiple reasons. One, because it's our home country, but two, I believe that our principles and ideals are still, despite, there's all sorts of examples where we've strayed from these, but I still put more confidence in that than I put in other other systems.

Vance Crowe [01:01:48] What would it look like for a country to back their currency, whether it's the US or somebody else with Bitcoin? What does that mean?

David Oransky [01:01:54] I mean, it could have looked more similar to what we used to have with the gold standard where it's redeemable. I don't know. I mean, this is a big question. I don't really see the US being eager to do so. And I would hope that in that world that there would still be the option for people to self custody where they basically, not only do they have to not do fractional reserve banking, but that they can actually just hold, hold their own keys and they hold that money as though they were holding gold coins. And so to me that's potentially where the world would go if we ended up on a Bitcoin standard, there would still be fraction reserve banking, but you would opt into it. And the difference is if that bank failed because they made bad investments, the depositors would be wiped out or at least bailed in to some degree. And people would have to understand those risks. It would bring along a lot of self-responsibility. And if you don't want that then, then you should put your money at a full reserve bank or self custody.

Vance Crowe [01:02:43] Yeah, the, that, that old line among Bitcoiners, which like, not your keys, not your coin, but that didn't, you know, I, I told that at the beginning. I had so many revelations about Bitcoin as I've gone on and the biggest one, the one that was like the most awe inspiring was when I spun up a node.

David Oransky [01:03:01] Yeah, I've heard you say this.

Vance Crowe [01:03:02] So people have talked about Bitcoin, like they know about miners that somehow, you know, you let these miners go out and they mine and you get Bitcoin for it. We don't need to go into the particulars of it. That's an interesting thing, right? Yeah. That's the security of the system. But when I set up a node and at the time I was on the, on a bank board, it made me realize like, wait a second, one of the reasons that you need a bank or you need multiple banks right now is the ability to move your money from one place to another because somebody has to say, yeah, that, whether it's Visa or it's a bank with a CH or something, they say, if I wanna move money from me to you, I gotta go to somebody that says, yes, Vance has those dollars in his account, now we're gonna move them up to the cloud and now down to David. But once you get a node and that node first, when you plug it in, you now are downloading the entire blockchain. So you are finding out every single transaction that has ever occurred and it goes onto your little SSD card. And now you can get onto the, what I think of really is the information super highway. And now I don't need a third party to be able to say, will you move this money from, from my account over to David's account? I can instead say, Hey, send me your address. And I didn't realize, you know, I had held Bitcoin and things like Coinbase before and I always thought, well, I've got the keys, I can send that money. But in effect, if Coinbase decided like, nah, you still need permission, David's not a good guy, we don't really like him.

Vance Crowe [01:04:33] You can't do that with the node. Once you have a node, nobody can stop you,

David Oransky [01:04:38] Right? And so some people love that and some people that terrifies, like, I tend to be in that camper. I think people should be air to free, but it also means your enemies can use Bitcoin. It also means your enemies don't need permission. And that, that irks a lot of people. And to me it's not that I think that everyone, that there's not evil or bad people in the world, it's just that those are, it gets messy very quickly. You know, when we cheer on, when you know, protestors in other countries protest against stuff and their bank gets frozen and they use Bitcoin and cryptocurrencies to get around it because they're protesting against police violence. We think that's great. They're being being activists. The same thing happens in the western world and we, you know, it's domestic terrorism.

Vance Crowe [01:05:20] Yeah, I mean just look at the difference between January 6th and you know, Antifa or Floyd riots, like most people would say, oh th this one or that one, those are good. I want them to be able to send money, but the other side, I don't want them to be able to do that. Don't. And

David Oransky [01:05:36] You're getting control

Vance Crowe [01:05:37] Over that. Yeah, and

David Oransky [01:05:37] I don't wanna into whether one's, right, but if all you have to do is flip around and say, assume your least favorite political, you know, politician is in power and you want to speak out against what they're doing, well you could very easily find yourself on the other side of that. There's now been press laid and I think the most obvious was earlier this year in Canada, that trucker convoy that they were protesting COVID mandates and they, along with any of their financial supporters, had their bank accounts frozen. And I think that's something that many, many Canadians certainly and many Americans, you know, thought that was justified. Like these people shouldn't be shutting down the capitol over something that, you know. But I think all you have to do is flip that around and yeah, like what if, what if for, you know, any other march that we see as, you know, good for the world and the, you know, there's different politician power and they think you can't, you can't protest, we're gonna freeze your bank accounts. Like you now take away people's economic ability and you do make them more likely to listen to you. You know, it's more authoritarian. So I, I tend to be more, I wanna avoid authoritarian numbers ever it is. And I realize that that will bring more, they'll still be bad actors, but I think again, the good, more than outweighs the bad.

Vance Crowe [01:06:51] That's one of the things about Bitcoin adoption that's been very interesting. So huge amount of our listeners are from Canada and like the people in the trucker convoy, I think there were a lot of people up in Canada that before were like, Hey, we're all trying to get along. You know, Canadians like to get along, they don't really wanna, you know, certainly the audience in Saskatchewan or Alberta, they don't really like the people in the city. There's that tension. But overall they were saying, you know, but things are okay. And then when they watched that they had sent a hundred dollars or a thousand dollars and it was just not just confi not, not just didn't go to where they wanted confiscated and potentially gonna given, be given to somebody else, like all of a sudden this woke people up to like, whoa, whoa, whoa, whoa, whoa, in the past the government never did this to us and so are we ratcheting up? And it, I think it opened up a whole different group of people's eyes to a technological advancement that before would've been like, ah, that's not a,

David Oransky [01:07:44] Was one of the things that made me more bullish on Bitcoin or made me realize that it was even more important than I previously thought. You know, initially that was all theoretical to me. Like I had heard the stories in other countries of bank accounts being frozen and all that stuff. I was like, well, I mean part of the reason I think a lot of Americans have trouble understanding Bitcoin is that we have a relatively well-functioning society and monetary system compared to other places in the world. So we don't see the immediate need. But when I saw that in Canada, I was like, oh my goodness, like that could easily happen here regardless of which side you're on. And then a few months later, not even a few months later, you have, you know, freezing Russia's foreign reserves. And it's like, despite whether you agree with that, like you've now set the precedent that any, any country that's not very, very closely aligned with our agenda needs to be careful about holding their assets in the, you know, US financial system or something tied to that. And so, I mean, some of the best advertisements for Bitcoin have been the governments and central banks that stand the most to lose from it, which is just ironic.

Vance Crowe [01:08:46] So speaking of governments and, and central banks, there's an interesting thing that happens in a government that, like in the United States, people didn't want more taxes, right? So they said, you know, if if a politician stood up and were like, I'm gonna raise taxes by 30% to cover the infrastructure changes we need or to cover these programs, people would be like, no way. Well, the government figured out very quickly, well we can do a tax that most people don't realize, we'll just print money. And we talked about printing money before, but we didn't talk about like what are the mechanics of how a government prints money and what is this concept quantitative easing?

David Oransky [01:09:25] Yeah, I mean, quantitative easing isn't necessarily printing money. There's somewhat of a debate in the economic community about that. But quantitative easing is simply the federal reserve buying bonds typically from banks or other large financial institutions in exchanging for cash that they've just created. And so it like reduces the average maturity on, you know, US obligations, but more than anything it injects liquidity back into the financial system. Now most of that money stays within the financial system doesn't get out to, you know, everyday people spending. And so you don't usually see that hit price inflation. So in that regard, people say it's not really printing money because when you print money, it goes straight to the people and increases demand for goods temporarily until we get a new price where everything clears. But I think what you have happening is it ends up bidding up other scarce resources. So you see things like stocks, like real estate,

Vance Crowe [01:10:17] People

David Oransky [01:10:18] Wanna hold that rather than dollars because those are more scarce and they hold value. So you've seen, you've seen those things go up way more than the CPI. So although the basket of goods we may buy, you know, as consumers when we go to the grocery store and shopping has only gone up on average a few percent a year until this year, you know, real estate's gone up way higher than that. And effectively what we've done is we've forced the monetary, some of the monetary premium to leave the dollar and flow into these other assets. And which means that the people getting left behind are the people that didn't already own those assets and they're getting ever and ever further outta reach. You know, houses today are way, way more expensive than they were before and a lot of that ties much more closely to the printing of money, the expanding of the money supply than it does CPI increases because remember I said all technology is deflationary, like things, most things should be getting cheaper over time. The reason they don't is because we print money to offset that while certain things, technology doesn't create more of, it doesn't create more land. Like yes, you can create taller buildings, but that also is a lot more expensive to create that building. And so these things that are more scarce. So you've got real estate, you've got healthcare that requires a lot of human inputs, education, like those things haven't gone down. Those things have gone way up in price and a lot of those aren't captured in the CPI. So housing used to be like asset values of housing used to be in the CPI and they changed the definition, I think it was back in the eighties to owner's equivalent rent. So they said, what would it cost to rent your own home? And so that's one of the reasons we haven't seen the inflation show up there is the, although property values have gone way up, rentals haven't gone up as much.

David Oransky [01:11:55] In other words, the the rate of return you would expect on real estate now has gone down as the prices have gone up. And so because the rent level has relatively the same, it doesn't show up in CPI, but if you hold the asset, wow, it's gone up significantly. And so yeah, people often when we talk about taxes are worried about, you know, is the tax progressive enough? Like it should be taxed, you know, those who have more should be taxed at a higher rate. Well, when we print money in through inflation, it's an invisible tax essentially, but it's a lot more arbitrary. You know, it's not targeting specific income levels or anything, it's whoever holds the dollars. Well, as a percentage of your wealth, who holds more cash. It's not wealthy people. Wealthy people have, although they hold a lot of cash on an absolute level, they have most of their assets in stocks and real estate and other things. Those things all benefit when the money supply increases. Those who hold most of their savings in cash, maybe they only have a bank account, they see the value of the purchasing power of their dollars go down and down and down. It makes it harder and harder for them to get ahead.

Vance Crowe [01:12:53] When people, we started this conversation, we were early talking about deflation, right? And they talk about just the, the crisis that that can occur. And they always point to Japan and they say, look at how terrible it's gone for Japan. They've lost a generation, they're way behind. What, what's going on there? What is that all about?

David Oransky [01:13:14] I mean, Japan's more indebted than any other country. They have a, they're a little bit different of our circumstance. A lot of their debt is owned within the country, whereas a lot of us debt is owned by foreign countries.

Vance Crowe [01:13:26] Meaning that their own citizens have been like, Hey, I wanna buy Japanese bonds.

David Oransky [01:13:29] Yeah, I don't know that they're still eager to buy 'em because the Japan has pegged their 10 year rate at 0.25%. And so that's why you see the yen as the currency valuation has gone, has gone way down relative to the US dollar, the US dollar is way more value than the yen. So the Japan, through us raising interest rates, has had to basically buy, they have a, they will, they promise to buy any bonds that they need to in order to keep the interest rate at 0.25% on the 10 year bond. So they've effectively bought bonds and exchanged yen. So they're adding more yen to the system and taking bonds offline, which is expanding their money supply. So it's devaluing their currency. So that's how they're dealing with it and we'll see how it plays out. I mean these are kind of experiments that we don't know. Like this is the first time in history we've been on a pure fiat system with nothing backing it for this much time. You know, every other time that you've tried to take the precious metals away, the system kind of falls apart. So we'll see, like I don't know how it's gonna end. And a lot of people do look ahead to Japan to see, well what can the US do? You know, it's an experiment. I think that's the thing that people realize. People assume that this is the way it's supposed to work, this is the way it's always worked. We've only lived in this regime for 50 years.

Vance Crowe [01:14:40] That's mind boggling, right? Like that's one of those things I, I have a regular conversation with people I'm close with about Bitcoin and their big thing as well. It's really only been around what, like 15 years at this point, right?

David Oransky [01:14:50] I think turned, well the white paper was 14 years ago, two days ago. Yeah.

Vance Crowe [01:14:54] So, so like it's only been around and you know, how can we trust it? And I think they're completely right about, like, we really don't know how the government will regulated. It's entirely possible that we'll get four or five years down the line and the government will say, turn over your Bitcoin or it's illegal or, or you're just not allowed to

David Oransky [01:15:11] To

Vance Crowe [01:15:11] Denominate.

David Oransky [01:15:11] It's, there's a lot to be excited about Bitcoin, but yeah, there's still risk to it.

Vance Crowe [01:15:15] But like I think when I look around at the world and I start saying like, what, you know, what, what's gonna happen? How I start asking myself, well am I reading good enough news? Am I absorbing information from places that will give me a robust view to be able to see as far to the horizon as I can? What about you? Where do you get your information from?

David Oransky [01:15:41] Random places. I mean I over time have, you know, I try to pay attention, keep my ears open to people that are saying things that seem to make sense and what models they're using to, you know, come to those predictions. And then how accurate do those predictions turn out, you know, models make predictions and then from there you can evaluate and you know, did they get lucky? Did they actually have some insight? And you start to try to update your own mental models to be more informative. But there's, I don't think there is one good source. I mean increasingly like the general news seems to, that's not being where the ideas are coming from. And that's where I think, you know, Twitter is, is amazing. Some of the best thought leaders are on there. There's also a ton of noise. But over time you can find the people that seem to be good at finding the signal and use that somewhat as filters to determine what gets to you. But I think you do need to be very careful not ending up in echo chamber. You know, not only aligning yourself with one group, not only aligning, you know, not ever breaking outside of your own followers to see like what other people are saying. So I try to stay very open-minded, but there's not one source that I see as gospel and oh, if this person said it or this organization, like that's gotta be it.

Vance Crowe [01:16:51] You came back to Twitter after a five year hiatus.

David Oransky [01:16:54] Yeah, well I mean I, posting on Twitter, I've still, you've been a lu for the last five

Vance Crowe [01:16:59] Years. What brought you back? Why'd you decide to,

David Oransky [01:17:02] Well, I mean, I guess what made me leave was I just felt like I didn't have much to add to the conversation. It was also during that time period I had three kids and was busy with other stuff. And then what brought me back was more, I've started speaking and sharing views more publicly on things like Bitcoin and people are gonna go there to look for it. And so I, I've started dabbling with it a little bit 'cause that's where people, that's where the conversations are happening, you know, that's where all the thinkers are. And so that's where I was anyway. And as people started wanting to communicate with me, I felt like I needed to get back on Twitter. So yeah.

Vance Crowe [01:17:36] Yeah, it's been a rather seismic shift from, since I've known you. Like you've always been very willing to share what you think and both sides of the coin, but you are not a public, a public face. And just recently you've started, well, at least that I knew of.

David Oransky [01:17:50] Yeah, no, I tend to prefer to be more under the radar in part because I like to explore ideas and as soon as you go out publicly with them, now you've got people attacking you and it makes it harder to change your position. I don't ever want to feel like I have to defend a position when the information is changed. I don't wanna have to always be consistent with what I thought prior. And so there's always the risk to that when you put that out publicly. Like you've gotta then explain any shift you made and you know, it can be tiring sometimes. You know, I, I've much more interested in just learning and continuing to that and you know, it came out in conversations like this. I got asked to be on some panel about cryptocurrencies early this year and I initially turned it down. I was like, I don't wanna be, I don't really wanna be a public figure in the crypto space at all. Like, although I, you know, into Bitcoin, like it's not really an area that I wanted, didn't think I wanted to be known for. But they came back to me and said, no, we really want you. And you know, on that panel I kind of laid out why I thought most of crypto people should be very skeptical of. But I thought that there may actually be some signal there with Bitcoin. And then lots of other people wanted to talk to me about that in here. So I kind of, I kind of stumbled upon it and yeah, now I'm out publicly that I support Bitcoin and think it's a good thing and it's now

Vance Crowe [01:19:03] How does it feel to be in that public position? I mean, it's not brand new so you're not like early adopter territory.

David Oransky [01:19:08] I didn't think I was early until, you know, I looked around for other financial advisors that were Bitcoin only and I found like half a dozen of them. Like there's not many. So no, I think we're actually extremely early. Despite me thinking I was really late to the game, it took me three tries to understand it. You know, I saw some analysis by somebody saying, you know, what is real Bitcoin adoption? Well first how do you define adoption? You know, a lot of those studies show anyone that's ever basically touched Bitcoin, they've opened an account on Coinbase, they've bought, you know, $10 worth and some, you know, if you instead you define as someone that owns, say 0.1 Bitcoin, so about 2000 US dollars worth of Bitcoin, how many addresses have at least that using that as a proxy for adoption? And this probably overstates it 'cause many people have multiple addresses. It's less than 1% of the population has adopted Bitcoin. Like we are still extremely early. Which is why when you look out and see the world, like, I'm not saying Bitcoin is a foregone conclusion, although I do have a lot of conviction in it, I I wouldn't put my entire wealth in Bitcoin despite believing in it that it's so asymmetrical the opportunities here that if, if Bitcoin really grows into any of these things that we think it could be, it'll be way more valuable than it is today. So there's another Bitcoin or who's a ex bond trader, Greg Foss, who thinks his price target is like $2 million and he's very, very confident that it'll get there. What

Vance Crowe [01:20:28] Does that mean a price target?

David Oransky [01:20:30] He thinks that Bitcoin will eventually be worth $2 million per Bitcoin. And he gets there I think by saying, you know, once institutions understand Bitcoin, their life would allocate 5% of their portfolio to it. It's a similar allocation to how some institutions allocate to things like gold or other natural resources. And doing that would would increase Bitcoin's price, he thinks to about $2 million. And he says, yeah, I'm not a hundred percent sure, but I do have a lot of conviction in it. But if you look at what the market's pricey on, whether they think it's right, well Bitcoin's trading at $20,000. So that's, you know, a difference of a hundred x. Like that means Bitcoin says, or the market says there's a 1% chance that he's right that bitcoin's gonna be worth $2 million today. I don't know what the chances are, but I think it's higher than 1%. And so the asymmetry and the opportunity here is significant, but I think people still need to be very careful that the timescale on which it happens is very unknown. And he'll say it himself like, I don't know the time, like could be five years, it could be 50 years. And so I, you know, I do one, none of this should be taken as investment advice. Do your own research if it's not obvious, but I think you we're still early enough that you need to be careful. You shouldn't put more money than you can afford to wait for a very long time and and be okay with the possibility that it goes to zero. I think that's very unlikely. But I think you need to be okay with that possibility. And you know, for my clients, we're in a position where they can be successful, whether the current system continues on as is without any major paradigm shift or if we move to a more Bitcoin centric world.

David Oransky [01:22:00] And so I'm hoping that they will be, I'm, my job is to make sure they're gonna be successful no matter what happens. The future is uncertain.

Vance Crowe [01:22:06] How did it go when, when you write this letter to your, you know, people that have acquired wealth, they have their ideas about how money is gone. Like,

David Oransky [01:22:14] You know,

Vance Crowe [01:22:15] I was giggling with, with

David Oransky [01:22:17] You, I said, you've been waiting a long time for that, that email a lot of interest. I mean, so shortly this, I mean, you know, Bitcoin a year ago was what, trading at like $67,000 or something like that and now it's trading at about 20,000. And so a lot of people, I mean I've had numerous people say, well I wanna wait till it's going back up, let me know when it's just gonna go up. And then I want like, I dunno. So I mean at this point I'm trying to get clients to have like 1% and that's not much, but it's a, it's a small enough amount that I think they could, they could easily absorb that if it went to zero, you know, they're, you know, market the way markets have been moving lately. I mean, portfolio values change more than 1% in a given day and that the price is low enough right now that if you were to allocate to 1% and just let that grow, not rebalance, that that very well may be enough to provide kind of that insurance against what if we, what if we do, what if the dollar and all these other assets get demonetized over time and Bitcoin kind of steals that monetary premium. Like I view it much more as a hedge now

Vance Crowe [01:23:21] I

David Oransky [01:23:21] Think a lot of my clients still don't really understand Bitcoin. Like I've tried to explain it, but it's hard to explain Bitcoin. I mean, I've given presentations on Bitcoin and the shortest I've been able to get that presentation down to is an hour and a half. And that's just to provide like a foundational level of you need to have the context to understand these concepts before we dive into it as an investment strategy as anything else. And that's really hard, you know, most people don't wanna sit through an hour and a half presentation of something that they're not already interested in. And so I've kind of said, you know, I'm okay with clients borrowing my conviction enthusiasm up to about 1%. And that's, that's kind of what I'm recommending for most of them. It depends a little bit, and I'm okay if they go higher than that, but they need to kind of do their own research and have their own conviction, make sure they really understand it. 'cause it is, it is very different than any other financial asset. Anything else that, you know, normally would be in the portfolio. And we don't even directly manage it. I mean, I am a big believer in the ethos of Bitcoin of being not your keys, not your coins. And so I'm also trying to educate my clients on how to eventually take self custody or collaborative custody of it or, or some of these things.

Vance Crowe [01:24:22] I agree with that a hundred percent. Like I, so I enjoy the act of engaging with people on Bitcoin in particular, if they have actual criticisms of it. If it's people that are just like, oh, well that might not work, right? But like that's more interesting. And I think I can explain Bitcoin in about 40 minutes, but I have to be able to draw, I have to be able to like sit in front of them and draw it out. But one of the things that's happened multiple times is people are like, all right, well will you help me buy some Bitcoin? And I'm like, no, because the act of setting up a node, opening an account, you know, doing these various things are the critical steps that you need to move from being like, I don't know, this is kind of a wacky, neat idea to being like actually valuable to you because otherwise if somebody else does it for you,

David Oransky [01:25:09] Yeah,

Vance Crowe [01:25:10] It really isn't different than getting a bond. Well

David Oransky [01:25:12] And you're going full self custody, which is the ideal way to do it. But I think the reality is most people aren't gonna do that. I think, I think the next, the next round of of adopters is gonna be people that are gonna want more support. There's a reason they haven't jumped at, I mean, I talk to a lot of people that say, oh well once there's an ETFI mean I talked to a lot of advisors that are curious that say, ah, I'm not dealing with all that mess. You're doing it sounds like a headache of trying to teach people how to do this. Like I'm gonna wait until there's an ETF and then I'll buy it in their, you know, in their, in their brokerage account. I think a lot of people want easy, and I think there's products coming for that, but there's trade offs. I mean that's a basically, you know, like principle, like there's trade-offs to everything. Yeah.

Vance Crowe [01:25:49] And that's, it's, if it's more convenient, it is less safe, right? And if it's more safe, it's gonna be less convenient and,

David Oransky [01:25:55] And people don't understand, I mean people don't understand the current financial system and they trust that. So there's a certain also like, like I said, by some measures, less than 1% of the population has adopted Bitcoin. And so it's no wonder that people don't feel comfortable with it if they don't really understand on a deep level. But as adoption increases, people will borrow other people's comfort with it, you know, and there's more institutions and so, you know, some bitcoiners worry about recreating the existing financial system just on Bitcoin. And I think to some degree that's gonna happen. But I don't know that that's bad. Some people, that's what they want. Not everybody wants to understand cryptography and hold their own keys. And

Vance Crowe [01:26:31] I think my model comes from, I lived in Kenya when they had just adopted this thing called the M PACE system, which was essentially using cell phones, which people started to get a lot of, and being able to take what was the, remember when you used to get those little credit cards and you'd dial in a number and you'd be able to get new minutes on your cell phone? Yeah,

David Oransky [01:26:52] Yeah, yeah.

Vance Crowe [01:26:52] Right. So they actually turned that into a financial system that allowed people to do banking and the M paces system. So both the sell system and the banks work together. And what I realized was at first, when you get to this new country, you're like totally overwhelmed. And then you're trying to use this banking system and at first you're like, I can't do this. But then you have something you need to do and once you need to do it, I need to send money from me to them, or I need to get something. Now all of a sudden your ability to learn goes way up because you've got focus on that. Yeah. And I think that's what the, the, I think that people are discounting the adoption curve and the learning curve when it comes down to I need to do something. And I think the Canadian trucker example would be the perfect one. Like the people that I know that adopted, you know, Bitcoin are in Lloydminster, Saskatchewan, you know, they're in deep Alberta and all of a sudden they're figuring this out. And it is not anywhere near as hard as people are, are believe that it is once you have a motivated reason to learn it.

David Oransky [01:27:59] But I think most of the people that have adopted Bitcoin at this stage tend to be intelligent people who tend to be distrusting of the system. Like they're, they're naturally skeptical people and so they alre they were earlier to identify the potential need for it. I, when I think of many of my friends, they're highly intelligent, but they are extremely still trusting the system and the system's working very well for them. They have, they haven't had a need for it and in terms of adopting it, they'd have to adjust in many ways that they think about the world and maybe even many ways they think about economics. I mean there, when I was going through it, there was all sorts of things from economics that I was like, this never fully made sense to me despite studying economics in college. Like it just didn't feel like really this is how it works. Yeah,

Vance Crowe [01:28:45] You're talking about the, the current system we're ins, hey, we

David Oransky [01:28:48] Quantit economics and how like, and, and that like, wow, what a simpler system, you know, more the Austrian school and like, you know, that's, you know, heterodox in, in, in most econ circles. But to me, me it's common sense and it's just taking microeconomics and expanding it broader. But yeah,

Vance Crowe [01:29:06] I mean that's follows me exactly right. Like I am definitely distrustful. Like I find

David Oransky [01:29:10] A lot Yeah, I'm too, I'm far more paranoid than most of my clients.

Vance Crowe [01:29:13] So, and the challenge is like, how do you use that distrust to motivate you to do things that are difficult and without becoming a crazy person, right, without becoming a person that believes like at every corner, you know, I better be stocking up on iodine tablets.

David Oransky [01:29:28] Well, and so part of it, I mean like with the clients like you, you stop short of helping them. Like I'm in a position where I feel like that's partially my job. Like I have to be trying to, they're hiring me to look further on the horizon than they can see. And so I have more of an obligation, not even, I don't think a legal obligation at this point. I mean if you look at, you know, if anything like the regulatory environment won't be kind to, to Bitcoin, I view it much more as a moral obligation. If this is something that I believe is a real risk, it's my duty to, you know, try to help my clients get there. It's a little bit harder 'cause I can't do it for them. Like I can't buy Bitcoin directly in their brokerage account. I would have to use some roundabout derivative do so, which is antithetical to my belief in how Bitcoin should work. And so I have to, there's more friction to get them there and that's harder and that friction is an impediment to a lot of people. But I do think in the years that come, there'll be far brighter solutions. I mean, I know, I mean part of why Jack Dorsey left Twitter to focus full time on block wasn't for, you know, to grow their credit card business. It was to focus on Bitcoin. You know, after he spent time traveling around Africa, he was like, this is what the world needs. This will make the world a better place. And he's very focused on creating solutions that make it much more frictionless for anyone to use and maybe even not have to not have to spin up their own node and all that stuff. I don't think most people want their own node.

Vance Crowe [01:30:45] Well, we're gonna see about that. Yeah.

David Oransky [01:30:47] I mean I guess supposedly when it's on, when it's on your iPhone and it doesn't, you don't have to think about it then maybe people will.

Vance Crowe [01:30:53] Yeah, I mean I, I think that it, we're not gonna see broad adoption if it's at the level of no,

David Oransky [01:30:58] Not everyone's gonna buy the components crater raspberry pie. That's not gonna happen.

Vance Crowe [01:31:02] That's fair. I think though, that, I guess my bigger point is that people are far more competent at being able to do these things than when they're

David Oransky [01:31:11] Motivated. When

Vance Crowe [01:31:11] They're motivated.

David Oransky [01:31:12] Yeah. And

Vance Crowe [01:31:12] That motivat and I think

David Oransky [01:31:13] A of people are motivated Yeah.

Vance Crowe [01:31:14] Can come very quickly and, and inflation

David Oransky [01:31:17] May be one of those s if inflation sticks around and people see, I think that could be one of the catalysts that gets people to wake up and say, Hmm, maybe I do need to explore other options. And

Vance Crowe [01:31:25] I guess my point about bringing M Pesa is it's not necessarily because the negative thing happened, right? M Pesa allowed them to do things they had not done before and all of a sudden they were like, I can figure out how to use this cell phone to send money. And so I guess the reason I keep bringing that up is because for me, I need a scenario in which Bitcoin succeeds. That doesn't require the doomsday. I

David Oransky [01:31:48] Hope it's not the doomsday I, I mean I think that's a possibility, but I hope that's not the one we go through. I hope it's a much slower, gradual transition and that we're able to onboard people more slowly. So that's less painful. I mean, ultimately some of that debt may have to get cleared out and become worthless, but I think if we can do it a slower transition, it'll be less painful for more people. Like I don't really want to go into complete chaos anarchy off

Vance Crowe [01:32:09] That. Even if I were to win, it would still be so painful. No, I

David Oransky [01:32:11] Dont wanna live through that world. Yeah.

Vance Crowe [01:32:12] So, David Aki, I had so much more. I wanted to talk with you about Waldorf School. Yeah. And ways to think about spending time with friends. But we are run out of time. If people wanted to learn more about your firm or to invite you to come speak, where would they go?

David Oransky [01:32:29] Our website is laminar wealth.com. There's a contact form on there. That's probably the easiest way to, to get in touch with me. You can find me on Twitter too. I'm more active right now than I have been, but,

Vance Crowe [01:32:38] Oh, it's great. I love it. I hope you keep tweeting a bunch.

David Oransky [01:32:42] You can. You can find me there too. Send me a DM that should be open now

Vance Crowe [01:32:44] And we should make one shout out that you, in your office, your wife is also a CFA and she is extraordinary and I, I adore her advice and the way she thinks about things. So

David Oransky [01:32:57] Yeah, she,

Vance Crowe [01:32:58] This being a full endorsement that I think Laminar Wealth is, is a place

David Oransky [01:33:02] To, she's the one that makes everything happen. I'm kind of the crazy professor. She's the one that makes it all work.

Vance Crowe [01:33:09] Well, I hope people reach out to you, laminar wealth.com. I'll throw it in the show notes. Thank you so much for coming on, man.

David Oransky [01:33:14] Sounds good. Thank you, Vance. Appreciate it.