This post brought to you by Deep Capture Blog. All opinions are 100% mine.
Patrick Byrne proudly wears the label “The most hated man on Wall Street.” In addition to his day job as CEO of Overstock.com he is a keynote speaker, thought leader and proponent of the Austrian School of Economics. He also has triple degrees from Stanford, Cambridge, and Dartmouth. His position as one of the most important supporter of Cryptocurrencies like Bitcoin was cemented when Overstock became the first major retailer to accept Bitcoin. Recently Byrne was the keynote speaker at the 2014 Bitcoin conference. There he shared his thoughts on how Bitcoin fits into the development of liberal philosophy.
Two Key Books
Snowcrash is a cyber punk novel that had a visionary view about the way the internet would develop. It invites us to look as civilization as an operating system. History is essentially a petri dash where these systems are in a constant struggle. Another book on the same idea is Francis Fukuyama’s “Trust”. The book posits that you can see societies as operating systems to solve one problem which is trust. In low trust societies you cannot trust outside of your family which limits the size of businesses. In a high trust society you can build at scale and create much larger organizations.
The Development Of Liberal Political Thought
Five hundred years ago a collection of ideas started to develop that the “consent of the governed mattered”. These ideas began in Netherlands. These ideas included tolerance, pluralism and constitutionally protected freedom. In 1600 dissidents came to the belief that society based on these ideas could be developed. But they were dismayed by licentious nature of Netherlands and its corrupting influence on the young. Consequently the pilgrims decided to emigrate to America.
At the University of Salamander these ideas were applied to economics. The possibility of socialist calculation, quantity theory of money, and entrepreneurship were at its heart. These ideas went to hibernation for 150 years until being rediscovered by the Austrian School of Economics.
The Great Philosophical Mistake
There is a great philosophical mistake which has been inserted into the operating system of liberalism. Rousseau introduced the idea with the “social contract”. French intellectuals believed in the “general will of the people”. This stated that there may only one person who understands the will of the people. His will should be the law. True freedom is found in submission. Kant extended the idea with the idea that freedom is found in understanding the historical process your are part of. Marx interpreted this idea of submission to historical processes in terms of economics. These ideas were continued by Nazi’s and Maoists. All had in common the argument for centralized institutions.
The Issue Of Regulatory Capture
Regulatory capture is the major problem. Regulators are set up to protect us from certain industries. But sometimes they get captured by those industries. In deep capture society journalists, police, and politicians may all be beholden to the players in those industries. Byrne believes that there is deep capture occurring in the financial industry. The two centralized institution to blame are central banking and central counterpart clearing (CCC).
The systems by which property rights are transferred has much more “slop” than we imagine. For example during the mortgage bank crisis the American Banking Association estimated that 18 -30% of mortgage backed securities simply didn’t exist. It was Byrnes investigation of insider trading and corruption in the hedge fund industry that eventually led him to be labeled “the most hated man on Wall Street”.
The Ultimate Question
Finally Overstock.com CEO Patrick Byrne suggests that there is an ultimate question we must ask ourselves – “What system respects the consent of its participants while undermine the centralized institutions we have come to distrust.” He believes that the answer to this question is crypotcurrencies like Bitcoin. Crypto-currencies therefore appear to be the best solution to a financial system that is Byrne’s terms a faulted operating system. Byrne’s keynote speech is highly recommended viewing not only for Bitcoin advocates, but also anyone who is interested in why our current financial system is flawed and almost destined to fail.
Watch Byrne’s video and don’t forget to share your views with us in the comments section on what you think about his speech. You can also connect with Patrick Byrne on Twitter.