Vitalik Buterin on The Revolt of the Public (The “A-Side”)

by Morgan Beller (@Beller). Morgan is a General Partner at NFX, a seed-stage venture firm headquartered in San Francisco.

A Side

Last week, Vitalik Buterin and I took a 3-hour virtual walk together. Vitalik is known as the creator of Ethereum and is a force behind much of the crypto movement.

But Vitalik is much more than just crypto. He is a close friend with a rare ability to see the present and future in a way few others do.

We recorded our conversation for the benefit of entrepreneurs, investors, believers, skeptics — anyone who wants a front-row seat to understand what an already iconic young Founder sees happening across technology, society, culture, and globalization.

Today we’re releasing the “A-Side” of our conversation which brings Vitalik’s unique points of view to bear on politics, crypto, Americanism, GameStop, Wall Street Bets, Tesla, China, privacy, The Revolt of the Public, the decentralization of finance and so much more.

With technology now at the forefront of society, the world is transforming faster than ever — and it’s incumbent on all of us to understand where we are, and where we’re going.

 

Stay tuned this Thursday, when we release the “B Side” — part two covering a longer time scale. These are the studio cuts we know the tech community, contrarians, and cult-fans need to hear.

B Side

 

Americans Aren’t What They Think

Morgan: Looking from the inside out, and looking from the outside in — what do you observe, if anything, in the American psyche that you don’t think Americans realize about themselves?

Vitalik: There are definitely differences between the United States and many other places in the world. Americans think that they’re different from the world in X, Y & Z ways, where XYZ contains both good things and bad things. But actually, Americans are different from the rest of the world in V, W ways where V and W also contain good and bad things. Those differences aren’t what Americans themselves think.

Growing up [outside the US] 10 years ago, the view of the United States was that it’s this horrible, materialist, capitalist, white supremacist place where people eat burgers and fries all day.

Then I spent some time in America, I spent some time in Europe, spent some time in China, spent some time in plenty of other places — and it became more and more clear that there are a lot of places that are significantly worse than the US on every one of those dimensions.

There are plenty of parts in the world that are more materialistic than the US is, and there are plenty of places that have less of the U.S. approach to: “We should try to be altruistic and try to benefit humanity.”

You can even see some of these things in the crypto space. One example of this would be just comparing a US-based crypto project to some of the Asian crypto projects to some of the European crypto projects. The crypto space is this strange range from idealism about decentralizing the world stuff to just this mindset of “Hey, let’s trade and gamble and make money.” The places that dominate on the “trade and gamble and make money” part are not the U.S.

The flawed U.S. story is that the U.S. is very big on selfishness and individualism, and not big on hearing about other people — but open source software is the exact opposite of selfishness and individualism in so many ways. And the US and Europe are probably two of its strongest epicenters. So that’s a contradiction to the U.S. story.

There’s definitely a moralistic discourse in U.S. culture. There’s obviously a moralistic discourse against governments that are being too dictatorial. There is discourse against the people within the US that are being too racist. There’s a moralistic discourse against the corporations that are being too greedy.

The extent of all that just feels much more developed and deeper in the U.S. than it does in a lot of other places.

Ultimately, if we want a foundation for morality that does better than “support your own family and screw other people’s families” then you have to rely on universal moral principles, and just push those principles as ends in themselves. But at the same time, even that has its own failure modes. It does sometimes end up dividing people more than it unites them.

 

The Unbundling of Religion & The Rise of Hyphen-Hyphenisms

Morgan: How do you define religion? Both, what is religion, and what is the smallest unit that can still be defined as religion?

Vitalik: Religion itself is definitely a bundle of things. There is a set of beliefs, some notion of some kind of mental and spiritual practice. There is some notion of social connections. There’s also often some kind of moral code that gets attached, whether that moral code is personal virtue and how you treat yourself, or interpersonal virtue and how you treat other people. There’s this big collection of things that are tied together and influence each other.

We’re definitely starting to enter a world where those things start coming apart — you start to have some of those pieces appearing without other pieces. Even already just the idea that there is literally a man in the sky who created the world, and it was 6,024 years ago. Actually, no. It’s 6,025 years now. That belief is definitely and significantly less popular than it was a hundred years ago.

But at the same time, the demands for the “not literally” belief-related factors are still quite strong. You have things like yoga and meditation, and this attempts to explore all of these Asian and enlightenment concepts. That’s a form of spirituality without really having an epistemology attached to it.

Obviously, there’s also just secular morality. People have made the case that those ideas are descended-stuff from Christianity — loving the poor, and loving your neighbor, and loving your enemy, and all of these things.

Then as far as just creating communities between people, the Internet does supercharge that but has also changed the nature of community in a lot of ways. You have fewer of these closer connections where you meet people like once a week or regularly in person. Then you have more of these very loose connections where you just know someone by their username. That kind of connection has different properties.

Then you have political religions — some that talk really strongly about the evils of central banking, about a long list of things that are evil for them. Including plant-based food, which is just something I totally can’t get on board with. As in, I can’t get on board with plant-based being evil. I can totally get on board with plant-based food.

Then you have all of these different kinds of sects of anarcho-mutualism, anarcho-capitalism, and so many hyphen-hyphenisms.

 

Tribal nfx

 

Revolt of the Public Comes to the Stock Market

Morgan: Do you think subreddits count as religions? Is Wall Street Bets a religion of sorts? There’s a pre-Wall Street Bets world, and there’s a post-Wall Street Bets world — it was a watershed moment. Just what do you think are the biggest switches that were flipped last week?

Vitalik: Are you familiar with the book The Revolt of the Public? It goes through some of the revolutions in the Middle East all the way through 5 to 15 years ago and Barack Obama. The book was written before Donald Trump, but Donald Trump just plays into it so perfectly. The book asks what is the common theme between all of these events.

The common theme is basically that the internet and social media are empowering direct and decentralized coordination and at just a much more powerful scale than what was possible before.

Elites that were able to maintain control during previous eras are having a much harder time doing that because of this sudden technological shock. The people who are “not elites” and have grievances with the things that the elites are doing are basically using this new internet platform to revolt.

The way that I’m seeing Wall Street Bets is basically: Revolt of the Public comes to the stock market.

If you think about the stock market, one of these big defining events was the 2008 great financial crisis. Financial institutions, governments, and a lot of fat powerful actors made some very big mistakes — and mistake is even too kind a word for it. They acted in ways that maximize their profits without much concern for the fall-out that could happen, not just to them, but also to everyone else.

A lot of people were then very angry about this, and I don’t think anyone really forgot. A lot of people feel that basically, they got off easy. That they weren’t punished for what they did before 2007. The banks are mostly all still intact and they’re still doing really well. Lots of people feel like the financial industry hasn’t learned its lesson. They see this rigged financial system that’s just designed to screw over the little guy.

What happened with GameStop: At the beginning, you have these Redditors and they started buying up this stock that had a lot of people shorting it, and they just thought that, “Hey, this company is a nice little gaming company that deserves to survive and have a chance. How dare these bankers basically just try to kill it.”

Then as the price went up, it evolved and grew stronger, much higher than I think anyone or almost anyone even expected at the time. It turned into a much more powerful symbolic thing, which became even more powerful and symbolic once all the Robinhood stuff started happening when people were stopped from being able to trade.

Then media pieces from The Wall Street Journal and all of these financial organizations started coming out basically blaming the Reddit market manipulators for screwing around with the market.

That’s when the public response was like, “Dude, you’ve been screwing around with the markets since forever. How dare you blame us for doing the thing that you really do as your source of profit every single year?”

There have been people in traditional finance for years manipulating these systems and using big piles of money that ordinary people would never have access to, to just force a system from one equilibrium to another and profit as a result. They’ve been doing this forever — but now that a group of random, anonymous, millennial Redditors is doing it, they’re upset. Nobody’s buying it.

I think there’s a lot that’s very beautiful about that.

I definitely don’t buy the extreme story that says that short-selling is fundamentally illegitimate as a concept. I think short selling is to financial markets what criticism is to free speech. You can’t have a speech ecosystem without criticism. You can’t have a financial ecosystem without being able to bet against things. But at the same time, it is true that there are a lot of these systems that have multiple equilibria.

This all brings back to front and center all of these issues about the financial system that people have been talking about to some extent for 12 years — it’s all just coming back.

 

Instant Settlements, Uniswap — And To Hell With The Inefficiencies

Morgan: How do you think the financial industry will be impacted beyond some hedge funds losing some money? Do you think any changes will actually happen? Regulatory?

Vitalik: I definitely think there’s going to be some kind of reforms to how stock markets work and how trading works. Even just the whole concept of delayed settlements, where when you buy a stock, you don’t actually have the stock until two days in the future. For those two days, the company basically, or whatever broker you’re trading through, provides some amount of capital ahead of time that they have to have a float that’s proportional to some estimate of the volatility, etc. That whole scheme is definitely going to be looked at again.

It’s time to switch to instant settlements. I definitely hope that we see some experiments in that direction.

But at the same time, I’m not sure that the millennials value financial efficiency that highly.

I wanted to bring up Uniswap, but speaking very abstractly. The idea is that instead of having an order book exchange, you will have this kind of automated thing that just has a curve, the famous X x Y = K curve and you can buy and sell against this.

And it’s this fully automated and incredibly simple construct. Theoretically, there’s a lot of these very good reasons why it should be much less efficient than a traditional order book exchange. And yet it’s been much more successful than traditional order book exchanges. So efficiency in a kind of idealized financial model is definitely not the only thing that matters. And so I do wonder, is there somebody that goes, you know, to hell with whatever inefficiencies it introduces because T plus zero is right. I do wonder if, just like in this example of Uniswap flow, we’re just going to see much more examples of people trying out T plus zero instant settlements in a lot of different contexts, and liking it, and to hell with the financial inefficiencies that it brings, because it just makes more intuitive sense.

 

A Changing Of The Guards Moment

Morgan: This does feel like a changing of the guards moment, right? A broader cultural movement. There are two strong opposing sides: the Redditors (defended by both AOC and Ted Cruz), playing offense, and the traditional financial institutions, and media outlets, playing defense.

Vitalik: The younger generation has a different way of looking at the world, including financial markets. There is less expectation that things are supposed to work the way they are said to work and more expectation that things can be different.

Millennials are more inclined to think that they can be the force of change. That is inevitable. If there are going to be more “Gamestops” and “Teslas” going forward, then what does this mean for the economy as a whole?

I generally am a fan of the approach that just says, well, the markets are just going to be what they are. And it’s not clear that there’s all that much that you can do about it without risking making things worse.

And so the thing that we should focus on is making sure that people’s lives are doing well — regardless of where the market sits at any particular point in time.

 

3 Preconditions to Timing

 

Humanity Has A Need For Speed

Morgan: The COVID vaccine introduced this idea of challenge trials to most people for the first time. You know, the idea that you waive your liability rights by volunteering to get the vaccine early. You’re waiving your rights in exchange for hoping this vaccine saves your life, hoping this vaccine saves other lives, and hoping that it expedites the testing and data collection and saves the world.

What are other areas in modern life that you think we should have challenge trials for?

Vitalik: One of the big problems with medical ethics that I personally really dislike is the following narrative:

100 hundred people dying from medical experiments gone wrong is a tragedy, but 1,000,000 people dying because treatment came a year later than it otherwise could have is just a statistic.

Because of scope insensitivity, which is a universal human fallacy, there is definitely not an appreciation of the need for speed as a humanitarian end in itself.

The need for speed is perceived as reckless humans or reckless Silicon Valley — but you know, the fact innovation is happening earlier rather than later really does improve a lot of people’s lives. It is a strong social good that’s still underappreciated — but COVID feels like it’s starting to change that.

People are going to be more willing and more inclined to just start things earlier because COVID really does make clear that waiting has a cost.

Every month of waiting costs hundreds of thousands of lives. Every month of waiting continues to debilitate the economy. Every month of waiting continues de-stabilizing political systems. The earliness in a solution is such a large humanitarian gain.

I’m definitely hoping that that spirit can be applied to a lot of other spheres. Can we have experimental jurisdictions for taking on risk in order to have speed trials? Self-driving cars might be one of those examples — trying to more rapidly iterate and experiment on the urban environment. Can we have a city where if you move to that city, then you basically agree to be a human challenge trial, testing things out like self-driving cars and drone food delivery?

 

Dogecoin, Nationalism As Dead Wifi, And A Scary Relationship To Privacy

Morgan: What is something that you think is truly widely accepted today that people will either realize is wrong or will be less widely accepted in two years, in five years, in 20 years, and in a hundred years? And I think the different timescales illuminate different factors.

Vitalik: I guess speaking of believing in God earlier, apparently in 2021, the really cool thing is believing in Doge. Like, have you seen the Dogecoin prices?

Aside from that…

Our relationship to a kind of physical location is definitely going to continue to change. This means our relationship to nationality is going to considerably change as a result of this as well. There’s a newer concept: If you’re not happy in a place, or you feel like your rights are being infringed in a particular place, then it’s like dead wifi — just go to a place that satisfies your values better.

Here’s a scary one: Our relationship to privacy is going to change significantly. And is going to vary drastically just because in some spheres the ability to communicate privately still exists.

You have all of these encrypted chats and encrypted texts, but the level of in-person privacy that we have is lower than it has been at pretty much any point in history, right? In a few decades, we’re going to forget about China or the U.S. being able to surveil the movements of its own people. Because you’ll have China being able to surveil the movements of U.S. people and the U.S. being able to surveil the movements of Chinese people, just because resolution from satellites is going to be powerful enough to do that sort of thing. So, what will geopolitics look like in that kind of world?

Another fascinating change — There’s the concept of immutable, right? A mindset where there’s this thing which is human nature, and human nature is immutable. But then there are layers that you’re going to wrap around human nature… whether it’s education, whether it’s tools, whether it’s having a phone that you can use to Google stuff, whether it’s ideology. So over the next hundreds of years or the next hundred years — that is going to break a lot of philosophical concepts, even the philosophical conception of human equality.

One thing that I think will happen but that I’m not worried about is the second order, social and cultural effects of longevity. I think longevity is one of those things that will lead to the world population just totally not fitting in with standard development experts’ predictions. They’ll be like, “Wait, WTF why are there 17 billion people in the world in 2100? Our charts showed that there should have been 7 billion.” But the reality is that the change is just going to happen slowly enough and we will have time to adapt — just because people already age at a maximum of one year per year.

 

Privacy & Life In The Virtual Sphere

Morgan: You mentioned the P-word, privacy, one of my favorite and most troubling topics. And you said that our relationship to privacy is going to change, and that’s a scary one. Scary is a very polite way of saying how terrifying it is. That’s why I had to stop watching Black Mirror because it became too real. And unfortunately, I wish I was more optimistic, but it does seem like the object is in motion and it’s going to stay in motion. Do you see any ways to combat that momentum?

Vitalik: One possibility is that more of our life moves into the virtual sphere. And thanks to things like encryption and zero-knowledge proofs and all of these cryptographic technologies, the virtual sphere will continue to be fairly free of snooping or at least have significantly less snooping than the physical world does. So that would be a kind of short and medium-term mitigation to not having any privacy at all.

The other possibility, of course, is that society as a whole becomes much wiser and we stop reacting in stupid ways to things that other people do that are completely harmless. But I’m definitely less optimistic about that in the short and medium-term. I suppose in the long-term, if we engineer ourselves up to IQs of 250, it might happen?

 

The Great Fight For Progress

Morgan: I now have a pretty good idea of what your life and 3021 is going to look like, and it sounds pretty great. I plan on being there with you. Between now and then, in the near future, what do you think of the next one to ten years? And specifically, what do you think, or what do you have confidence in that most people would say is crazy?

Vitalik: Okay. So I think in the medium-term future, 2020 will be remembered as a nadir for the U.S. and global political culture and people’s ability to get along with each other at large scales. But basically from here, things are only slowly going to start to improve.

I expect that we’re going to see a lot of different positive trends that are going to start coming out and getting stronger over the next decade or so. One of the trends that I’m personally excited about — that a lot of people aren’t following well — is this notion of the techno progressive political conscience. It’s this idea that the large humanitarian gains that can come from things like longevity and research and drones and building better cities and space travel — all of these things really can do a lot to uplift people’s lives and make people’s lives much better. I expect this to be a strong force for progress and optimism over the next couple of decades to come.

We need to get people excited about a great fight for progress in the first half of the 21st century.

Another thing I’m optimistic about is small countries. Small countries are a category that I think did really well in 2020. In 2019, the way that it seemed was that we were just kind of moving toward more and more domination from these large powers, like the U.S. and China and maybe the E.U. having a larger and larger influence on the world to the exception of everyone else.

But in 2020, we were seeing that a lot of small countries did a really, really good job handling COVID. A lot of small countries are doing a really good job of just having healthy internal political cultures. They are doing a good job of having better policies. A world with more empowered small countries is a world with more choice and more experimentation.

 

What do people overestimate/underestimate about China?

Morgan: I think this is the longest I’ve ever gone without talking about China. So the time has come. What do you think people are underestimating in regards to China? And what do you think people are overestimating in regards to China? For context, you’ve spent a lot of time there. You speak Mandarin. I think you have a different perspective on it.

Vitalik: I do think that people in the U.S. overestimate the extent to which they can accomplish what they think their objectives are by going after Chinese tech companies specifically.

Basically, if your strategy for handling the scary things that you’re worried about in a Chinese tech company is to go after China, then you’re going to be very vulnerable to any non-Chinese tech company, or anyone from any other part of the world that’s trying to do exactly the same thing.

My philosophy for a cyber civic space specifically is that we need less going after lions and more armoring the sheep. The problem with going after lions is that when you go after lions, it’s hard to credibly convince the world that you’re the one going after the lions, and you’re not the one being the lion.

And the problem is that the sort of entity and culture you need to become in order to properly attack Chinese tech companies may have other disadvantages.

This could also be the libertarian in me speaking, but I keep wanting to think that the important thing is not America versus China. The important thing is tech companies versus statism everywhere essentially.

I don’t really want to go around attacking tech entrepreneurs. Though at the same time, in practice, these trends do exist. And this is where crypto comes in because decentralization is the one way that you can credibly convince people that you actually care about trying to protect people.

 

A vs. B is good for C(rypto)

Vitalik: It’s definitely true that a lot of the conflict, even if it’s a negative-sum for humanity overall, is good for crypto. It’s interesting how conflicts can often end up actually being good for the third party, right?

I remember when I was still in high school, there was this interesting puzzle, about three people in a duel. It’s basically three people in a shooting duel that have different levels of accuracy. A is more accurate than B is, and B is more accurate than C. The question is: who’s the most likely to win the duel?

Under a lot of choices for rules and parameters, the answer is C. And in fact, the answer is C to such an extent that if the rule says that C shoots first, then C’s optimal first shot is to shoot in the air to make sure he does not hit A or B the first time.

And the reason why this is true is because A and B both know that A and B are each other’s greatest threat, and so they’re just going to basically kill each other, and so C’s the most likely to emerge as the winner. Anybody could see most of the mechanics like this a lot of the time, right?

So one fun political example is that as of 2021, Vietnam has won two wars with the United States. The first war is the one in the 1960s and the 70s. And then the second example is that Vietnam is the winner of the fight between the U.S. and China.

Crypto is definitely one of those things that’s well-positioned to be C, that’s the winner of a great conflict between whether it’s one state versus another state or states versus corporations.

 

An Unintentional Ad For Decentralization

Morgan: January 2021 has been an unintentional ad for decentralization, which is something we’ve talked about. The first half of the month was an ad for decentralized communication apps with Trump getting kicked off everywhere, Signal and Telegram seeing record numbers, WhatsApp changing their privacy settings. And then the second half of the month could not have been a better advertisement for decentralized finance.

Vitalik: January ‘21 was definitely interesting, especially in terms of the narrative around censorship. Basically, a lot of people were booted off of social media and there was this big uproar around hate speech and all of these things. It was definitely in a lot of ways the most pro-censorship moment from at least the last couple of decades, and in a lot of ways that really worried me.

And you even saw the response from outside… The response from outside the U.S. was very worried like you saw Alexei Navalny, the Russian opposition politician basically said, “Hey guys, you’re making a bad precedent here.”

And given that people from Europe were concerned… Well, places in Europe do have government-imposed restrictions on free speech. Germany has the anti-Nazism laws and all that, but they’re very concerned about this idea of basically a private corporation enforcing speech restrictions for, and ultimately bigger than the country, just the world in some sense.

But at the same time within the U.S., there was definitely this dominant mood that these things are necessary and actually that the free speech thing is overrated.

And then two weeks later the Wall Street Bets Discord server got taken down for hate speech, and it’s like, “Well, wait a minute, this stuff can actually get abused.” That was an interesting one punch, two punch that everyone got.

The cat is definitely out of the bag in terms of centralized entities being pressured to censor people, and just generally picking people off of their platforms if they’re doing things that they don’t like. So I see the trend going forward as just dealing both with the centralized services that end up needing to or being pressured to, go after people — and people trying to create some alternatives to centralized services on the other hand. The complicated interplay between these two things. That’s going to be one of the big dynamics of the next couple of decades.

Coming soon: The “B-Side” of our talk — the outtakes. The weird stuff. The good stuff you don’t get to hear when someone is on stage, on script, or in the media.

 

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