Video - Investing In Education Instead of Speculation

Unlike speculation in crypto-currencies, investing in skills is permanent, transferable across chains, long term and empowering. In this talk Andreas looks at education and training in the bitcoin and blockchain space and how it can enrich your life in a sustainable way.


ANDREAS ANTONOPOULOS: Welcome everyone. This is the same time I’ve been here in the (0:00:04) district and it’s always a pleasure. Toronto and Canada in general is hotspot of activity in this space and walking around this room one thing that really strikes me is how diverse the audience is in every sense of the word. So many people from so many different backgrounds gathered here to talk about this incredible technology and I do want to talk about technology.

When I first got into this space and I started talking about Bitcoin, one of the common misconceptions when I spoke to a room full of people was that they expected some kind of sales pitch. They expected that like selling a timeshare for a holiday resort or a get-rich-quick scheme. I was there to recommend investment in this new (0:00:57) currency in this stock, this Bitcoin thing a get-rich-quick scheme.

Bitcoin isn’t to get-rich-quick scheme but some could argue that it certainly can be a get-poor-quick scheme if you don’t (0:01:13) it quickly. You know (0:01:14) goes how do you make a million dollars in trading Bitcoin? You start with two and then you (0:01:20) and very quickly you’ll lose your share.

How many in this room without looking at their portable devices can tell me what the price of Bitcoin is today?

MAN #1: Sixteen.

ANDREAS ANTONOPOULOS: How many of you know what the price of Ether is today. How about the Dow?

MAN #2: (0:01:42)

ANDREAS ANTONOPOULOS: It’s a big mistake to treat these technologies as stocks yet it’s a common misunderstanding because they look like stocks, right? They (0:01:55) they trade, they have volatility we can look at volume and graphs and things like that but of course, these are not equities (0:02:02) Bitcoin isn’t a company.

Bitcoin is an industry and it’s a currency and it’s a technology platform. And this very strange thing has happened in the space where it has a tradable instrument and we haven’t seen that before. You know, when the internet started you couldn’t buy internet and trade it. Oh look, Yahoo (0:02:25) something I bet my internet stock is going to go up, you couldn’t do that, right? Probably that thing you couldn’t because (0:02:34) had been volatile.

Now, Bitcoin isn’t a stock, it is not an index’s stock for the industry even though it sometimes behaves like that and none of the cryptocurrencies are that. A very fundamental level these are technology platforms but the instrument (0:02:52) behaves a bit like and equity, a bit like a bonds, a bit like an index stock and very much so as a currency but not the traditional type of currency that we know, not currency with a very large economy behind it.

But a currency with a very small, very distributed economy (0:03:13) one that is buffeted by daily events, media announcements, for example the announcement that Bitcoin die again – someone’s writing that article already – and all of these things make the price move a lot.

So, when you get involved in the space a lot of people think okay, maybe I should invest in Bitcoin. Maybe I should invest in Ether. Maybe I should create a portfolio and I spent the last four years dissuading people from that mentality. Do not treat this as an investment. And the primary reason you should not treat this as an investment unless you happened to be an investment professional is that these things are extremely volatile so you have to be very careful. You have to pick your timing right.

Buy low, sell high which is of course the exact opposite of what’s naïve people like me do, right? It’s going up, time to buy. It’s crashing, time to sell. You get the timing wrong you’ll lose a lot of money. What about picking which thing you would invest in? You invest in the Dow? Would you invest in Ether? Should you really be investing in Bitcoin? What about these new things that are popping up every now and then with the initial coin offering, should be investing in those.

So, picking the right time and picking the right location for your investment, the right thing to invest in will determine whether you have success or not. So, I say don’t do that because I have a much better recipe for success and that is to invest in something that does not require timing. To invest in something that does not require choosing, to invest in something that cannot be lost, cannot be seized, cannot be forfeited and that is skills and knowledge. You don’t need timing to invest in learning about this technology. Learn now and that skill will pay possibly for years to come. 

If you learn how to do web development in 1997 you have a 15-year career ahead of you for a highly sought after skill. If you learn how to do iPhone apps in 2003 you had again – sorry, in 2008 you had again a massive career ahead of you for a highly sought after skill. Well, learning in these skills you don’t need to choose. Do I learn about Ethereum, do I learn about Bitcoin, do I learn about the Dow? You can learn about all of these things because these skills are highly transferrable.

The things that you learn about Bitcoin will teach you about Blockchains in general, you will learn about consensus algorithm, you’ll learn cryptography, you’ll learn the basics of economics and game theory, distributed systems, concurrent systems, security all of these skills apply to all of the investments in this space. This is a skill that cannot be taken from you; that you can’t lose in an afternoon because of volatility.

That will continue to apply at least for a decade, probably more. No matter which direction Bitcoin goes, no matter which direction Ethereum goes or any of the other currencies. So, after all I am here to teach you an investment. I am here to tell you to invest in skills and this, my friends, is get-rich-slow scheme. It takes work and if you work hard in the space you’ll gain a lot.

One thing I have found is that this is the space that moves so fast that learning is a continuous effort. Every single day I learn something new and I’ve at it full-time for more than four years in this space and every day I learned something new. Every day I learned something that redefines my understanding of this technology that makes me think about it in a slightly different way that a thousand new level of insights and depth that I haven’t anticipated.

On the surface it’s a currency, it’s a payment system and if you just see the surface you’re missing everything because underneath there is this enormous rich depth of complexity. If you see my book you will notice on the cover there’s a woodcut of ants, leafcutter ants (0:07:58) this is an animal on the cover of every one of their books but I chose that one very carefully.

Ant colonies are remarkable systems in which the individual is irrelevant, in which this very simplistic organism were just a few tenth of thousands (0:08:16). They can be simulated on a computer quite easily. These individuals follow some very specific, very simple rules triggered by an environment of chemical sense. Within the individual there is no complexity.

But you put a million of them together and what they build is a super organism. This emergent complexity that is the only species on the planet that rivals the social complexity in construction of human society. Leafcutter ants don’t eat leaves they use an enzyme to break them down and brew them in giant breweries. They used the pulp that’s produced to feed aphids that they farm (0:09:05) on cattle. They milked the aphids to get nectar that they feed to their larvae. They are an agricultural society with enormous complexity and none of that exist in the brain of a single ant.

Distributed systems like Bitcoin are systems where tens of thousands of nodes each following a very well-defined simple set of consensus rules come together interacting with a vast complex society of human incentives and actions to produce this enormously complex secured trust platform which exhibits all of these characteristics of real applied game theory on a massive scale never seen before.

The emergence of robust trust backed by thermodynamic guarantees in the case of proof-of-work to create the most secure system we’ve ever built on this planet. We take the concept of proof-of-work that has existed for millennium. Proof-of-work is evident when you look at our societies.

The pyramids of Giza are proof-of-work. What they say is behold a civilization had been marshaled tens of billions of dollars worth of value, hundreds of thousands of slaves over tens of years to produce a monument that cannot be replicated unless you put an equal amount of work. The great Cathedral of Notre-Dame, the great castles of medieval Europe all of these things, the Great Wall of China are proof-of-work artifacts.

They are monuments of civilizations that say here is something that you can only build through the massive expenditure of resource and that stands as evidence of our might. Bitcoin is the first planetary scale monument of proof-of-work and in its footsteps others will follow. It creates this edifice, this monument and it’s a monument of security. It’s a monument to trust on a network scale.

Once you start understanding the complexities of the interaction of game theory (0:11:31) motivation, incentives and markets you’ll realize how deep this system is. We’ve never seen free markets operate in the way they do in things like Bitcoin or other cryptocurrencies. Truly (0:11:46) free markets that provide complete liquidity and flexibility on a global scale have never happened before.

Payment systems that span the globe without borders or intermediaries have never happened before. We are standing on the frontier of history while creating something that will change human society. If you learn the skills that allow you to understand these simple systems that produce this enormous complexity, these skills will serve you well.

Now, you may be thinking but I need to be developer so learn these things and that’s not true. Sure, if you’re a computer scientist this is probably one of the most amazing things that’s happened in computer science since http. If you’re a developer you can learn a lot about this space. If you’re interested in distributed systems this is a revolutionary implementation distributed systems. But what if you’re an accountant, a lawyer, an economist?

When you first look at Bitcoin the initial inclination, the initial feeling is let me take the tradition I have in my profession and see how that will affect Bitcoin. What will be the impact of traditional economics on Bitcoin?

What will be the impact of central banks creating their own currency or banks regulating Bitcoin? What will be the impact of law on Bitcoin? What will be the impact of the accounting rules on Bitcoin? And if that’s what you see you’re missing the much more important bigger picture.

And the bigger picture is that Bitcoin will introduce and see (0:13:38) the disruptive innovation in every single one of these industries. The question is not what will the law do to Bitcoin. What will Bitcoin do to the law? What will Bitcoin do to banking?

What will Blockchain technology do to economics and central banking? What will Ether do to contract? What will these new technologies do in a field that has certain methods, processes and tradition that go back hundreds of years? Because disrupting computer science is yeah, not a big deal. I mean we barely have an intermission, right? This is a space that only has 60 years of history. What happens when you disrupt law that has 4000 years of history? And we are disrupting those spaces.

Let me give you just one example. Well, actually I’ll give you several. Blockchains creates new economic tools that we’ve never seen before. I’ve coined the terms computational microeconomics and computational macroeconomics to describe just two of these new fields. The science of macroeconomics involves today the exposed factor analysis six months after the fact by statistical approximation (0:14:58) activities of an economy, an entire economy.

With Blockchains we can do real-time database macroeconomics and this has never happened before. We have never had the opportunity to look at an economy and study that the (0:15:16) inflation rates in real-time and we could do that with Blockchains. And the study of microeconomics studying the activities of a company or an industry or market, the best we can do again is exposed factor analysis six months after the fact to a statistical approximation but no more with Blockchains.

We can look at the impact of specific markets and companies in real-time. We’re going to have to start thinking about real-time accounting and providing information to consumers of this data who can look at companies and industries in real-time and evaluate their activity. We’re re-inventing the accountability and transparency turning it on its head providing simultaneously very strong privacy to individuals and a very strong impetus towards transparency and accountability for social organizations and governments. The opposite of what we have sometimes today which is how it should be.

If you look all of the things that exist in all of these industries that have hundreds of years of tradition, it’s important to realize that the traditions, the methods, the tools that we use in law and economics even in computer science and accounting, it’s not about the tools and this is the point we often miss.

One of the characteristics of any profession is to establish traditions that propagate the tools and the means and create out the structures of permanence through academia, through professional certification, through regulation and sometimes the more (0:17:21) you are in that profession the easier to forget why – why do we have these processes? Why do we have the tools?

What were the goals? Because we become so attached to the means that we forgot what we’re doing them for. I can’t tell you how many times people tell me that in Blockchains we need an identity as if identity was the goal. Identity is a means to an end. Identity is a means of establishing as a second order effect the reputation. And reputation is a means to establishing as a third order effect the risk of default. You don’t care who someone is, you care whether they will pay you next month. And yet we become so attached to the means we forgot about the goal.

The goal is default risk but we’ve associated that so completely with identity that we can’t even imagine way of protecting against default risk in any other way than full identity with all of the problems that comes with and yet with the multi-sig contract I can protect against default risk with a party that is completely anonymous. I don’t need identity to achieve my goal. In looking at these technologies we have to identify really what are the goals we’re trying to achieve and do these technologies give us a way of achieving those goals with zero side-effects, with greater efficiency and with lower costs and if the answer is yes, feel free to drop the 500-year-old tradition if it doesn’t serve you.

Feel free to sacrifice the sacred cows of accounting, law, justice, law enforcement, economics and computer science if they do not serve you because then we have a new tool, and new set of tools. And if we carefully study these tools we can learn how to apply them in ways that completely change the way we structure society and allow us to more directly achieve the real goals that we have in all of these other fields. It’s very difficult to set outside of tradition and training and professional development and the sense of camaraderie.

And when you do set outside of those things in your profession you will be ridiculed, you will be ostracized, you will be called a fool. Have faith most of the really great people in this world who did great things and changed the world were called fools by all of their peers. Fools like Addison and Ford and Tesla, Marconi, Maxwell, Einstein, none of them were greeted with all the (0:20:38) and accolades by their professional peers. They were ostracized, ridiculed and called fools because their very ideas offended hundred-year-old traditions, sometimes thousand-year-old traditions. Be the fool that’s right.

And the best way to do that is to invest in learning the really, really subtle nuances, the really deep knowledge and insights of this amazing set of technologies that is absolutely going to change our world. Thank you.

So, I think we do have a bit of time for questions if I can get a time check. Okay, we have 10 minutes so we can take a few questions from the audience. Anybody have a question for me? Yes, microphone coming to you, just one second.

WOMAN #1: Right behind you.

ANDREAS ANTONOPOULOS: Microphone’s behind me. Can someone grab?

WOMAN #1: Thank you.

ANDREAS ANTONOPOULOS: Thank you so much. That’s number eight (0:21:55). Thank you. And number seven. There you go. This is our first Q&A session of the day so we’re just going to iron out some wrinkles there. Go ahead, sir.

MAN #1: Okay, great. Thanks to the great talk. I’m just curious (0:22:13) on the Dow (0:22:16)

ANDREAS ANTONOPOULOS: I am shocked and surprised that will be the first question you (0:22:21). I am conflicted on the Dow. I’ve been watching this with great fascination. Mandatory disclosure – I am a Dow token holder. I bought, you know, I’m a (0:22:39) whale is Dow spaces. I am $40.00 worth (0:22:43) so I don’t have because as I invested in a number of different cryptocurrencies because in all of the systems the best way to earn is to do, right?

And in order to do you have to hold a token. If you want to write an Ethereum contract you have to have Ether. If you want to use Dash or Monero or Bitcoin or Storjcoin or whatever you have to own a token so I did buy Dow tokens. I also warned people on social media that this is the first one, it’s completely untested and it will probably be extremely risky. I didn’t expect it to blow up within just four weeks of launch that was quite fast. But, you know, one of the things I said is that the most interesting lessons come not from success but from failure.

If you think that this is a particle physics experiment the really interesting science happens when you analyze the degree of fire (0:23:55) and explosion, right? In space two particles together create a very big bang and then you look at what come shooting out of that collision. Well, we’re going to be studying the debris of the fire (0:24:09) collapse of the Dow for years and it’s going to teach us a lot about governance.

I think it’s important to realize that if you look at this from a perspective of capitalism unique destruction in order to learn and one of the things that is unique about all of the systems is we’re not talking about them, we’re not theoretically analyzing them we’re doing them and that’s the only way to learn and sometimes that means spectacular problems like this. And I think that’s okay as long as you go into it knowing the risks and really people should not understand the risks before they get involved. Now, how is this going to be resolved? There are no good options at this point.

There’s a lot of people who suggest that perhaps it should be allowed to fail, that it’s a great security bounty for the person who discover the flaws and that the investors caveat emptor knew what they were getting into. Others say that they should (0:25:13) a softfork followed by hardfork and other interventions in the Ethereum chain. The idea is appealing, it sets up a terrible precedent that may cause more problems than it solves.

And I’m not going to take here a position because I have the luxury of not being either a miner or one of the Ethereum core developers who has to make this very difficult decision. I am going to watch with interest that there are no good options. In the end though I don’t think these changes, the fundamental nature of these things smart contracts are fascinating they will have an enormous impact on (0:25:59) on internet of things on many other technology fields. The implementation distributed on autonomous organizations either as investment vehicles or as new forms of social organization for entrepreneurs, for cooperatives, for any form of governance space social entity.

All of these things are amazing and they will happen again and again and again and more of them will blow up spectacularly and we will learn. You know, even Enron taught us something if not at least to improve our accounting standards and practices, right? And, you know, we have four of the great accounting and management consulting firms here today 10 years ago there were five. Oops. So, you know sometimes that the surprise you pay for innovation. All right, let’s do one more question in the back there.

MAN #2: So, I’m speaking from one of the accounting and consulting firms (0:27:05) so there’s sort of hype now about a year ago, clients (0:27:07) do not know about Blockchain and now again we’re meeting and everybody is like this is it I’ve read so much about it but then I’m wondering is this the hype that’s kind of brilliant (0:27:23) and I see proof-of-concepts being done but if they are – they are pretty scared that it’s five year away, that’s what I can (0:27:27) that would Blockchain survive that long and what would it be fundamentally one or two examples or events that will actually make it mainstream and people will start talking real things rather than this (0:27:43)

ANDREAS ANTONOPOULOS: I think you’re absolutely right. The hype around Blockchain is entirely out of sync with the actual implementations with one exception and that exception is the Bitcoin Blockchain. You can also say perhaps with two exceptions because Ethereum is also now has become a large scale viable production system with still some growing pains but definitely something to watch carefully.

So, there are a couple of really important Blockchains in the world today and other than that we’re seeing an enormous amount of hype. I think part of that represents just kind of the general economic conditions. If you have a lot of money and in many corporations today a lot of money is the situation because of free money and stimulus and low interest rates that we’ve been in now for six or seven years, what you’re going to invest in? Equities, that’s a bubble. Real estate, that’s a bubble.

Student loans, that’s a bubble. Auto loans, that’s a bubble. Bonds, that’s a bubble. Corporate bonds, that’s a bubble and so what are the problems we have in all of the Western (0:29:01) developed economies is that we have a lot of money chasing very little yields and that tends to create these exuberances and so people are looking at Blockchain and say “Okay, maybe fintech is the place where we might get some yields” and I think the investment has far outpaced the reality on the ground which will eventually correct.

But if you look at the broader space you have to realize there are some real Blockchains changing things in a very real way and those Blockchains are the open, transnational, borderless, open access, open innovation, permissionless Blockchains such as Bitcoin and Ethereum and others that are setting the stage for real change with real applications today. A lot of hype but also a seven-year experiment that refuses to die; continues to deliver more and more innovation every year and will continue to surprise people.

Five minutes, let’s take one more question and then we’ll wrap it up. Maybe two questions if we a quick one.

MAN #3: Hey Andreas, thanks for the talk. Do you mind commenting quickly on alternative consensus mechanisms that are being proposed (0:30:32) watching environments and maybe other impacts, you know, what your view is on them (0:30:36) versus (0:30:38). Thanks.

ANDREAS ANTONOPOULOS: I think consensus algorithms are really a very interesting area, it’s basically an (0:30:46) science. Started in January 3, 2009 with one and if you look at the number of economic papers published in the space and drawing at a hyperbolic rate at the moment so hundreds and hundreds of Ph.D. dissertations and papers on consensus algorithms in the last year and I only expect that pace to increase, I expect we’re going to see entire degrees, master’s degrees perhaps or post-graduates, M.Phils or Ph.Ds focused on consensus algorithms. There are many interesting experiments in that space but to me the really one thing is running your experiments in the wild at scale with real actors, real money and state and seeing how it survives in those conditions.

This is not a theoretical science, this is an experimental science where we can run global scale experiments and prove these systems in real terms and I think that that’s really to use the tried expression where the rubber meets the road. So until we see the (0:31:57) skill deployment of practical use of noble (0:32:00) consensus algorithms I know one that works today and that’s proof-of-work. We’ll see what comes next. That doesn’t mean you can’t do it another way but I think it’s also important to recognize that different consensus algorithms produced different characteristics and features. Proof-of-work produces (0:32:21) guarantee and immutability which is something you can’t do any other way and maybe with proof-of-stake we’re going to see different results, different features, different characteristics.

This is a broad ecosystem in which different systems will specialize for fitness to a particular niche application (0:32:41) and there’s plenty of room for a lot of competition. This is not the old zero-sum national currency game where in any particular domain there can be only one and it’s the winner takes all. That’s not what we’re doing here, it’s completely different. Let’s take one more question and then we’ll wrap it.

MAN #4: Hi! So, I know that decentralization is the ultimate and final goal. I know you make mention of a break in challenging (0:33:18) traditions. Do you feel that a radical change in transformation to this can be accepted and adopted with ease? Or do you feel that a more gradual transition is the more logical route with a more honest and transparent centralization methods of – methods and practices for mainstream public adoption?

ANDREAS ANTONOPOULOS: I think neither is really the correct answer. First of all I don’t think you can have gradual transformation. History shows us that disruptive innovation never works in a gradual fashion. Revolutionary change if you read about, you know, the philosophy of science, if you read the history of science what you will see is there’s form of punctuated equilibrium where you have the status quo in tradition established kind of a Pluto where ideas are relatively sell for a very long period of time and then a little spark knocks everything out of equilibrium.

It gets very chaotic for a short period and then it resettles into a new norm. And we see that again and again in science. We also see it in technology, we also see it in politics, we see it in society gradual is not the way of this world. What you have is systems that build up energy within them until they reach a tipping point and then some events you never know what kind of events it will be triggers that tipping point and you have a sudden cascade into a new reality. We will not see a gradual transition into a new world through these technologies and part of the reason is there are many places in the world where people will not wait, where mainstream adoption is not going to be done because of a whim it’s going to be done because of a desperate need. Talk to a Venezuelan, an Argentinean, a Brazilian, a Kazakh, a Ukrainian, perhaps even a Greek or Cypriot and they will tell you that working at these types of technology as a safe haven, as an exit as a safety valve from failing monetary systems is a very real possibility.

And when you have that level of desperation there’s nothing to stop people from adopting them. Now, I can guarantee you that we do not need acceptance, we do not need the participation of the old system, we do not need the permission of the traditional systems in order to succeed. People will use these things because they are useful and they will use them because they can obtain and choose to use them when they feel they are ready when we give them a (0:36:06), when we give them an application that is sufficiently compelling to overcome their comfort zone and then they will find a way to use these technologies. But I certainly don’t expect that we will see this primarily driven by traditional institutions gracing us with permission and acceptance so that we can innovate from within disrupt the disrupters, create change from within organizations.

That stuff doesn’t happen. In reality large organizations can’t do that and they get disrupted from the outside most of the time very painfully and few of them survive in their original form. So, start learning the skills, polish up your resume and get ready for a roller-coaster. This is going to be fun.

All right, thank you very much. We’ll close the questions there.


Written by Andreas M. Antonopoulos on June 22, 2016.