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In this episode, Chelsea speaks with Dan Olson from @FoldingIdeas to discuss his recent explainer video on the danger of crypto and NFTs.

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Hello, everyone, and welcome back to a brand new episode of The Financial Confessions.

This week we have a guest who came on the show on what I have to say for TFC might be a land speed record in terms of short notice. I reached out to him a couple of days ago.

He's sitting down today. And then in a few days you guys will be seeing this live on your YouTube or wherever you listen to your podcasts. And usually, we don't really run on that side of a timeline.

We tend to talk about more evergreen topics, and do deep dives into things that are not necessarily based on what's trending in the news right now. However, the topic that I'm going to talk about today with our guest is one that I really felt deserved as much timeliness as we could give it. Most of you who have even a passing interest in personal finance-- which if you watch a personal finance channel or listen to one is probably all of you-- have been aware of the meteoric rise in popularity and interest and in use of cryptocurrencies and NFTs or non-fungible tokens.

We get asked about them every day multiple times a day on this and other platforms. Also, on our YouTube channel you may frequently see bots pretending to be our channel trying to spam other people into buying various cryptocurrencies and NFTs. Those are not us.

We block and ban as fast as we can. But we can't get to them all right away. Suffice it to say, it is very much in the zeitgeist.

And my guest today recently made a video that is just absolutely blowing up on YouTube, which I think is quite a net good for society, breaking down these concepts, exploring what they are, why they're so popular, and to be perfectly honest, why they're bad as hell. My overall stance on these issues really aligns with that of our guest, which is that these kinds of financial instruments-- and I think in some ways, it's even sort of dubious to call them that because it lends them more credibility than they deserve-- are incredibly toxic for reasons that are financial, technological, and also societal. While his video does, I think, an absolutely masterful job at breaking all that down.

And, yes, you should invest the 2 plus hours it takes to watch it. We'll link you guys to it in the description below. I want to dive a little bit deeper on some of the topics that he covers in his video as well as talk about what it's been like in the very short time since his video has caused such a considerable amount of conversation on the topic.

Without further ado, I am joined today by Dan Olsen, who is the founder and host of the Folding Ideas YouTube channel, and the creator of the recent viral video "The Problem With NFTs." Welcome, Dan. Welcome. Thank you.

Thank you. I don't think it's a particularly useful exercise to outline what cryptocurrencies and NFTs are in any great detail. But because this is a financial show and the audience is financial, in terms of the very broad strokes of how you would define these things financially, do you have a more bit-sized summary to contextualize some of this conversation for people who may be a little more new to it?

Oh, I mean, cryptocurrencies are a speculative financial asset that has a lot of myth-making and narrative surrounding it that would take hours to fully unpack. Yeah, I guess that's kind of you almost have to summarize it based off of its complexity. Yeah, I totally agree.

And I think that part of what is so important about your video is it does manage to make what is ultimately a very, very complex and intricate explanation of the thing interesting for two hours. But one of the arguments that you kind of make in your video, and correct me if I'm wrong, is that the reason these NFTs, these digital tokens essentially-- because it's not really the artwork that you're buying. It's sort of a proof of ownership of that artwork.

Although even that is kind of tenuous. The reason that they've become popular is because they're effectively outside of drugs, basically, the only thing with a demonstrated sort of use case for spending cryptocurrency. People spend their cryptocurrency to buy these NFTs.

So they've become popular because they're a reason for people to buy into cryptocurrencies. Obviously, therefore to enter actual dollars into that market and move the money around, essentially. Is that fair to say?

Yeah, a lot of what-- they're the first actual native use case of cryptocurrency that gives holders something to spend it on that's, I was going to say legal, but that ends up being a broader sort of question mark. But, yeah, it's the first thing-- crypto has been plagued for a decade with just a lack of stuff to do with it. And NFTs were largely invented as a thing to do with it.

So you made this video a week and a half ago. It came out two weeks ago? It came out two Fridays ago.

Two Fridays ago, and last time I looked it had almost 4 million views. It's creeping up there, yeah. So I haven't checked.

I've stopped watching the number. It got overwhelming. But it's somewhere between 3.5 and 4.

Now, for those who may not be familiar with YouTube numbers, unless you're like Jake Paul fighting a professional athlete or like a child playing with a bunch of play-doh goo, those are some incredible numbers to be putting up on YouTube. Is that? It's a notable number, yeah.

I'm not complaining about, I'm not complaining about the number at all. Well, part of the reason why I'm highlighting it is because I think there's something really interesting about how quickly it gains steam with what you say is sort of an exterior audience, and how much it became a part of the conversation. Not just because I think it's important that people are engaging with these ideas at that scale, but also because, from what I've seen, the response to it seems to be quite positive in a space and about a subject where criticism is often met with extreme hostility and even aggression.

So have you felt that the response has been largely quite positive? Or have you been receiving a lot of that backlash? So when the video initially went out, the initial response for like day, day and a half, two days was overwhelmingly positive.

And that's kind of expected. You know, it's like my immediate audience are going to be the first people to view it. And then they're going to share it with people close to them.

And then it spreads out. But it took a couple of days before it really started getting into the crypto space, and I started seeing a lot more hostility towards it. But it has been interesting.

Because there has been a lot of sort of positive. There has been a lot of positive response to it within the crypto sphere. But then also a lot of like begrudgingly positive.

I think it's-- I don't want to ascribe outsized influence to the video. But I think it landed at the right moment where it's kind of causing a shock through the system. One person described it as a sobering, one heavily, heavily pro crypto person described it as a sobering put up or shut up moment.

Pro crypto people who are like I don't know how to deal with this, because I agree with basically everything, I just don't like the tone. Well, isn't that like the material content of 85% of internet comments? Just responding to the tone and also whether or not it applies to their life directly.

You obviously, so you made this video really deep diving into both, you know, what cryptocurrencies and NFTs are. And again, I think everyone should really go watch that if you haven't already before even really listening to this, honestly. It'll help you get more out of the conversation.

But you made this video kind of explaining what they are. And from my view, explaining a really high sense of moral financial technological urgency to understand why these things are bad. And obviously, it's a nuanced answer.

But for someone watching casually who doesn't know much about this, why are cryptocurrencies and NFTs so dangerous, so bad? Cryptocurrency is a socially destructive experiment in financial reorganization that serves the needs and whims of some very scary people who already really have too much power. And NFTs are just kind of a extension onto the side of that that exist to create legitimacy for the overarching thing.

And this was the thing that actually-- this is the thing that I struggled with a lot in writing it, which is that the whole ecosystem is so complex that it's almost necessary when engaging with it to compartmentalize all of the different things that you're talking about and all of the different things that you're dealing with. So you start talking about NFTs, it's very, very easy and tempting to just start talking about NFTs in their own little bubble. So you end up talking about, oh, well, you know, is digital ownership a bad thing?

Are digital collectibles bad? And it's like, well, no, digital ownership isn't a bad concept. Digital collectibles aren't a bad thing.

Well, is it bad for artists to get paid? Well, no, it's great for artists to get paid. But that's missing the bigger picture.

I've been accused of missing the forest for the trees, but that's literally missing the forest for the trees. That's saying that it's like, oh, well, like this one application concept for NFTs has good and legitimate roots, therefore like it's all OK. I said, well, no, because it's in service of this bigger thing, you know.

In order to get into that ecosystem where you're doing the harmless thing, you're legitimizing this experiment that is attempting to dismantle social, that's attempting to like dismantle our already fragile social systems. It's attempting to starve out public works. It wants to turn everything into-- that it's like, oh, well, what if we replace mayors with CEOs?

Like what if cities had CEOs instead of mayors? What if we had a CEO of the country instead of a president? And it's like whatever opinion you have about the structure of our political of our political systems, it's pretty easy to say that it's like, OK, presidents might be a bad idea.

CEOs are a worse one. And that's kind of where-- Oh boy, I don't know if I'm summing that up adequately. Because it took-- probably the most flattering response that I got to the video was somebody who said that, "It's telling of how circuitous the system is that a 2 and 1/4 hour video doesn't feel padded." Yeah, no, no, no.

In fact, it feels like at certain times you could have gone way, way longer on different subjects. I could have. It could have been 10 hours and I still wouldn't have run out of things to talk about.

So I'm not sure if that's a good summary. But the why are crypto and NFTs bad? It's like they're socially destructive and they represent crypto.

I really want to stress that NFTs are an extension of crypto. And crypto is a socially destructive experiment that goes to great lengths to concentrate even more wealth and even more power into the hands of the few. They're deflationary by design, which traps-- So the long-term outcome of these would be that late comers, which-- you have to consider that, oh, well, what does a late adopter look like in crypto?

And it's like well if we're talking on a timeline, it's people who are kids right now. So let's imagine this hypothetical future where crypto becomes like mainstream. Let's say it wins and it takes over.

Well it's like, oh, well, you should have bought in early. It's like, well I couldn't buy in early. I was five.

Right. I now have to buy in late because the passage of time dictates it. And it's like, OK, how is it going to behave when those people have to buy in?

And it's like, oh, not good, not well. It's going to be terrible. And deflationary economies trap ordinary people into irrecoverable cycles of debt that just leads towards serfdom.

That's why under the gold based economy of the Middle Ages we had a whole lot of serfdom. We know how this unfolds. We know how the Gilded Age unfolded.

And is fiat currency great? No. In terms of historic monetary systems, it's actually pretty good.

It actually legitimately solves a lot of problems. There's some bad externalities for it. But we have history books.

The railroad robber barons exist after the invention of photography. We know what these guys looked like. It's not ancient history.

It's not that far back. We know how it plays out when you have economic systems that are based off of deflationary currency. And it's real bad for the average person who is forced to engage with it on a debt basis.

And it filters wealth upwards. And so that's why I keep trying to pull it back to that big picture. It's like why are NFTs bad if they're paying artists?

Well, NFTs are bad because they're a tumor, they're a growth on the side of cryptocurrency. And cryptocurrency is an attempt to destabilize our economy and society even further in order to implement a power system that is deflationary and rewards the wealthy and the early with explicit political and monetary power. And kind of your closing argument in the video is really comparing cryptocurrencies and NFTs, in particular, as effectively very similar to an MLM, which is a subject that we cover quite a lot on our channel.

And our audience, which is primarily women, are very interested in. Because women are very heavily targeted by MLMs. This obviously, seems to skew much more masculine, hence people referring to it as kind of an MLM for men.

But effectively, the driving sort of dynamic behind both of those things and the comparison is that, ultimately, because these are totally speculative, and because they really have very limited real world application, if any, the value of these currencies, the value of these tokens depend on owners convincing another person that they have a higher value than they themselves purchased it at. Is that also fair to say? Yeah, that's fair to say.

And also, the a big thing with the similarities is that they utilize a lot of the same rhetoric. Like the myth-making and narrative surrounding the products themselves are very, very similar between multi-level marketing and crypto. There's adaptations for a specific audience.

But when you pick them apart, it's the same promises. It's the same myths. It's the same anxieties that are being tapped into.

It's the same psychology. One of the things that I think makes the entire phenomenon of cryptocurrency so dangerous from a financial perspective-- and I mentioned in the intro that this is something we get asked about all the time. And it's something that even, I mean, our audience is pretty discerning and savvy about personal finance.

And I think many of them, even myself formally, kind of operate on this assumption that there's something to it that we don't understand, and therefore it must be legitimate. There must be some real value to it. And I think the term itself, currency, is part of that misleading nature and part of what makes it so dangerous.

Because in effect, it hasn't really demonstrated itself to be an actual currency. No it's very, very bad as a currency. And the last week and a half of watching kind of the valuation and spending power of the two most popular, well, actually, I mean like the 5, 10 most popular coins-- though Bitcoin and Ether have such an overwhelming market share that you can basically just talk about them as though they're the economy, and it's functionally accurate.

Watching those swings, and the swings over the last year, year and a half, and I mean, the last decade of this stuff, it's basically nonfunctional as currency. And the rapid fluctuations and spending power would make it insane to try to actually use it fully as currency. It's just it's so unstable.

And part of the problem that I tried to dig into in the video, but it's hard to squeeze it all into a mere two hours, is that if you actually look at like the needs of users, like buyers just going about their lives-- So if we think about a theoretical mass adoption scenario where it's like, all right, what would you and I, and my mom, and my brothers, and my dad, and my uncles, and everybody I know, what would we need in a currency, in a digital currency that we use to do just our daily interactions? That version of a hypothetical digital currency bears basically no resemblance to what crypto coins actually are and how they behave. And the incentive sets for the people who run, build, manage, launch, sell cryptocurrencies are antithetical.

They're completely different, like completely incompatible paradigms. Because what I need in a currency that I'm going to spend every day is stability. I need it to be very, very boring.

I need it to be so almost absurdly safe as a thing to have value in that I can just stop thinking about it. I can just use it. Because it's like the value needs to change so slowly that I need to worry about it on timelines of years.

If I need to worry about the value of my currency on a timeline of even weeks, that's already like nonfunctional. That's going to completely screw up all of the incentives around using it. And it's just going to mess everything up.

But the incentives of people selling crypto is they want it to go to the moon. They want it to be volatile. They want that line going up.

They want it to be exciting. They want it to be a high pressure investment scenario where it's like, yeah, it's like big risk, but it's also huge rewards. You've got just these completely irrational swings in numbers because that's energizing to them.

And that's what gets them excited. That gets the blood flowing. And it's like, yeah, but that makes it not a currency.

You can't-- if it's doing that, if it's behaving that way, it's nonfunctional as a currency. So it's just not a currency and nobody treats it as a currency. Everybody treats it as an investment.

Because tick OK, like that's what it is. I love the idea of walking into a 7-eleven to buy some milk with your crypto, and by the time you get to the cash register they're like, that's a million dollars, effectively. And you're like, what?

Yeah, one of the things that I-- it just ends up being a small detail. Even just as I was pulling all of these examples, so when Jack sold the first tweet, it took them like 11 days or something to actually settle the auction. And in that time, the dollar value of the Ether-- So the initial bid was for $2.5 million.

And by the time the auction was settled two weeks later, it was now $2.9 million. Awesome. Don't all currencies we know and love do that in a two week span of time?

We just love it. One of the things that I think is really keeping people on this sort of what I would call middle ground, there are people who are all in on crypto. There are people who are very against.

And then there, I would say, most people in the middle who, again, feel that there must be something I don't understand. There must be some kind of legitimacy there. Which by the way, let's be clear, is also endemic to the overall financial market.

But we can get into that another time. But I think part of what is keeping people in that middle ground is the participation of a lot of tech leaders, celebrities, notable figures, billionaires in these various cryptocurrencies. My question to you, I mean, I view this, as I'm sure you do as well, as a pretty obvious pump and dump of like, Paris Hilton going on Jimmy Fallon to talk about how cool her ape is.

I love the hat. Like that happening clearly-- [INAUDIBLE] tried to crawl out of my body. It's so hard to watch. but yet, in some ways, kind of cool actually.

It's very lynchian. So that is-- Sunglasses. [CHUCKLING] Yeah, sunglasses. So she's obviously trying to sort of pump the value of it.

Now, between these celebrities, like I'm sure Paris Hilton has no clue what an NFT is and someone's selling her on it. And then I'm sure someone like Jack Dorsey, who has all kinds of investments in crypto, he's more actively sort of understanding what he's doing himself. But for the big people who are in-- --getting into slap fights with other crypto people.

It's very funny. Love that for him. Just our little Rasputin out here always causing drama.

So amongst all of these big figures who are in it, how many do you feel are in it because they're true believers? And how many are in it do you feel just because they're getting swindled by someone who's into crypto? Oh God, that's a hard, hard number to pin.

Of like celebrities, of like pop culture celebrities, I would put scant few of them into the true believer camp. There's a few of them that I don't know if they're true believers, but they're definitely in it authentically. Like Waka Flocka Flame posts about it all the time in a very personal like vlog-ish way.

So it's like, all right, he's in for a penny, in for a pound. I think Elijah Wood is into it as a hobby. But Jimmy Fallon doesn't-- Justin Bieber has no clue what MetaMask is.

He doesn't know or care, you know. Like somebody approached his manager with a business deal and is like, hey-- or got a hold of his financial investor, whatever. It's like, hey, we've got a really good opportunity for you here.

And it just goes on the pile of meaningless pitches that big name celebrities deal with every single day. It's effectively treated no different than any other brand endorsement deal. Yeah, yeah.

In the tech sphere I think it I think it skews a lot more. You're going to end up with-- I would say in the tech sphere you end up with a lot more true believers because they're equipped with a very specific self-inflicted condition that enables them to convince themselves of all sorts of intangible things as being-- Like that you're able to treat these intangible things as being effectively present and real. And that's being-- we've constructed this monstrous machine where like ever since-- I mean, it happened in the dot com boom, in the dot com bubble where companies would pop up and they would talk about their plans.

And it's like, oh, we're going to do xyz. And then regardless of whether or not xyz was a good idea, a feasible idea, or even physically possible, they would get valuated based off of that. And they would sell stock based off of that.

Well, they had a single empty, like a single office with three desks in it, and they would move all of this money. And we've got two decades of basically that environment where tech industries, tech people can make grandiose claims with no end. And connection to reality is unnecessary.

It's secondary. It's optional. And I think after those two decades, they've just gotten very, very, very used to it.

And it's enabled them to-- because in a lot of cases, I don't want to say it works out, but somebody ends up winning. You end up with an Amazon. You end up with a Google.

You end up with a Zoom. You end up with a Discord. You end up with whatever.

You do end up with winners. And so there is not some vast systemic punishment for ridiculous overpromising. And that's created a acceptable psychology of like, oh, yeah, you can just make these grandiose completely confabulated claims, and question mark, question mark, question mark, it'll probably work out.

So I think the tech sphere is better equipped to disillusion itself and just convince itself that like, yeah, it'll absolutely work. In the financial half of side, that's where I think you find the really, really hard core grifters. That's where you find the Jordan Belfort's who are just straight up, like they do not care.

They don't believe in any of it. And they just no commitment, completely mercenary. It's just like, hey, these are the magic words that you need to say in order to get $150,000 views on YouTube to get like 2000 people showing up to your Twitter spaces and to get 50 of them signing up for your workshop.

Man alive. Just there's something so undignified about NFTs. Like the idea of a completely mercenary Goldman Sachs executive like just basically having to make this pitch to his bosses about we got to go all in on these disgusting apes.

At least with other horrible financial swindles, there was, I don't know, I just felt like there was more dignity to it. This is just so base and childish. And so contemptuous for the people who are actually-- because the thing is that like, yes, the comparison to MLMs is very apt.

And, yes, it is very bad when women end up with walk-in closets full of moisturizers that they can't sell. But at least those moisturizers exist. At least you can actually put them on skin and maybe be a little more moisturized.

With these there's nothing. You end up garage qualified in Herbalife. And you have a storage room full of awful supplements, but I guess they at least have some caloric value.

Yeah. There's your silver lining on a very dark cloud. Where if you end up garage qualified in crypto, you might as well have got had by a wallet inspector.

True. So this is a more of a political question. But we're very open at TFD about our progressive political values.

Because obviously, all of our financial choices exist in a much greater economic and political framework, and obviously are very subject to regulation, and tax policy, and all of these things. It appears to me, and this could be my Bernie bias showing, but it appears to me that the entire ethical and philosophical underpinnings of the cryptocurrency world of NFTs, et cetera, is fundamentally libertarian and a fundamentally right wing ideology. Do you think that that's true?

And I guess more pertinently, is it possible to be a progressive crypto person? So, Yes. So the first part, yes, absolutely.

I think the connections, like the philosophical connections between Bitcoin and sound money, between Bitcoin and gold standard, it's weird that this seems so disconnected-- Back in 2009, 2010 when I was first like following Bitcoin, this was just all on the table. This was out in the open. It's like the comparisons between Bitcoin, it's like Bitcoin is digital gold.

We need to go back to the gold standard. And the overlap between Bitcoin enthusiasts and gold bugs, the overlap between Bitcoin enthusiasts and just like sound money, kind of like really scary weirdos, you know-- And even just the fact that fiat currency has become so pervasive as a framework for talking about centralized finance. It's like that was all very out in the open.

The roots of that are super exposed. But I think there's been a lot of recruiting done over the last, particularly the last five years, to really try to get in a liberal, if not socialist, sort of wing to all of this. There's been a lot of pitching towards them that has focused more on the smart contract layer of things, like the governance layer, that is used to basically left wash the deflationary sound money gold bug roots of the system itself.

One of the other ways in which I think the MLM comparison is very apt is that MLMs sort of notoriously take a lot of material realities that women experience, not a lot of job opportunities, especially for stay at home mothers, military spouses, et cetera, socially isolated in a lot of cases, experienced gender discrimination, discrimination for being mothers, et cetera. It sort of presents them with all of these problems that are true, and then offers them a solution which usually ends by putting them in debt and making all of their problems worse. And similarly, a lot of the discourse that I've seen from some of the people who seem, if not more politically center or even left, at least savvy at pretending to be, is this real sort of meaningful sounding gesture to how predatory, and how unequal, and how insufficiently protected and regulated the overall financial system is.

It sort of has this overall tone of the way the economy runs is really bad. And their answer to it is to exacerbate all of those problems. Like here's this alternative system that's worse in all of the ways that we described above.

And when you watch-- You could be, Yeah, but you could be the co-owner of that new thing if you get in now. Pay no attention to the people who won't have an opportunity to get in until five years from now. Right.

Don't think about them, just think about now. Yeah. Do you feel that the resonance that it's having with people comes from just sort of a desperation to find an alternative system?

Is that it? Yeah. Yeah.

Like the narrative of crypto is absolutely touching on very real pressure points that exist in our society, very real inequalities. And it's promising to be a solution to those. And the issue, the umbrage that I take is that not enough people are asking, one, is this actually going to solve those problems?

Is your proposed solution even going to work in the first place? And two, are you even working on it? Because the thing is there's a lot of people.

There's a lot of people who are willing to start up a crypto fund promising, like, oh, we're going to be a bold experiment in UBI. And then it's just a pump for some Bitcoin. Now, this is a question that probably no one can answer.

But I feel obligated to ask what you're, even surface level, response to this is. When you have so many people who rightfully feel that they have very little kind of upward mobility or possibility of achieving their even kind of modest financial goals, they feel the system is broken beyond repair, et cetera, and this is offering them an alternative. What do you say to those people?

Like what do you say to someone even, for example, in our own lives that we would want to get out of that system while still validating what are very real concerns? What else can we offer? God, I really wish I had an answer to that.

Because I have a tremendous amount of empathy for anyone who just ends up like completely black pilled on these subjects right now, just goes like full into doomerism. It's like, oh, is the system, in fact, so utterly broken that it becomes just a completely rational choice to go all in on crypto? Because it's like nothing matters.

Who cares? If nothing matters, then what does it matter what poison you pick? I mean the-- It feels super weak to just be that it's like the arguments in that kind of localized personal conversation just end up being like, yeah, everything sucks.

But this is super risky. Even by the standards of risk, you're probably going to get better returns at a roulette table. And you get free drinks.

Plus you can smoke cigarettes inside, which is rare these days. Yeah, that ends up-- I mean, that's the hard part. Because it all ties into systemic stuff.

So if you're talking about how do we like de-fang the crypto movement, particularly de-fang the predatory arm of the crypto movement, which is the largest? The answers to that are things like, well, fix minimum wage. It's like, OK, tie minimum wage to inflation.

Correct wage stagnation. Build affordable housing. Forgive student debt.

Fix the medical debt, the medical debt economy. Make people's lives less chaotic. And that right there is like the greatest inoculate against predation.

People become resistant to predation when they feel safe. Because what these grifters rely on is having a steady stream of desperate people who are in legitimately bad scenarios where their risk evaluation gets completely out of whack for utterly understandable reasons. I mean, the long running thing over the last few years, like the whole avocado toast thing, where it's like, oh, look, millennials can't buy houses because they're busy buying avocado toast every day.

And it's like I'm sorry, $4 a day is not going to buy you a house. Basic math here, how many years of avocado toast do you need to eat before you can afford a house that exists today? And it's like, all right, people make these decisions because the numbers are stacked against them.

And they realize that the numbers are stacked against them. And it's like does it become rational to gamble when-- it's like, all right, you've got $5 a week in slack in your budget, why not buy a lottery ticket? I mean, in terms of-- I guess it's probably on par with where you'd be if you bought lottery tickets.

But I do think the most compelling argument from just a sort of purely sort of personal finance view is you're right about all these things. The system is bad. You're dealing with an unfair deck of cards.

Your choices are bad. But you're almost guaranteed to be materially worse off if you put your money in crypto, period. Yeah, you might win, but odds are not in your favor.

I mean, I've had some people approach me like, OK, if you were going to do this, how would you approach it? What would be the most ethical way to approach it? It's basically like, all right, you put a little bit in, just a bit.

You set a benchmark for what you want to see on that. And the moment you hit that benchmark, you ignore every psychological trick that your brain is going to try to pull on you in terms of sunk cost or like hot hand fallacy or anything like that. If it's like, all right, I put $100 in, and once that hits $200 I pull it out.

You know, it's like you kind of have to have these extremely strict rules of engagement in order to prevent yourself from getting sucked into the scenario where you're going to convince yourself like, oh, my 100 went to 200. It's going to go to 400. Well if it's going to go to 400, then I should up my 200 to 2,000.

I should up my 2,000 to 8,000. I should-- Oh no, it just dropped 40% and is going to linger there for the next six months. And Oh no, I actually just, I just put all my car payments into crypto.

Interestingly, you've just described the process of someone at a blackjack table also. I mean this is exactly how gambling works. So you draw a very, very strong parallel in your video between the 2008 crash, and what led to it, and what we're seeing with the cryptocurrency markets.

I mean, put plainly, do you feel that these digital currencies have the possibility of bringing us into another recession? That my gut tells me no purely on the basis of I think crypto is so insulated at the moment that for the most part, if crypto were to just basically zero out tomorrow, for the most part, unless you were invested in crypto, you wouldn't feel it. However, there's a little voice at the back of my head that's like, yeah, but you know, Dan, you know factually that a whole bunch of investment banks and just regular banks they're holding a lot of crypto.

And you don't know what they're doing with it. You don't know their risk profile is. You don't know what their investment in this is.

You don't know what they've been borrowing against it. You don't know what they've been lending based off of it. Who knows?

Who knows how much like, how many cards are stacked on top of that? So there is this worry in the back of my head that there's a whole, that there's basically a whole synthetic CDO situation that's just floating around out there that no one really is entirely aware that it exists because they're not dealing with it directly that would cause the same kind of chain reaction. I hope that's not the case.

I have a strong, my gut tells me that the conventional institutions-- actually, wait, University of California actually has a very, very uncomfortable risk profile in regards to their crypto borrowing and lending that I don't entirely understand the numbers on. But that's a little worrying. Because they have a lot of then connections into pension funds that end up being the pressure point that ends up causing the chain reactions of these financial meltdowns to bleed over into the lives of ordinary people who have no direct connection to it.

So I have some-- yeah, I guess to try to package that, I have some complex reservations. But there's a hope in my heart that a crypto meltdown would largely just melt crypto. Well, I mean, it's tough to say, right.

It's also tough to say if crypto melting down would be the end of crypto. Because the anti-MLM movement has been incredibly popular for years. Yeah.

In that regard I think I'm a realist about that. I don't think crypto's going away in our lifetimes. I mean, even if you believe that crypto is the future, there's an observable bubble.

The valuation of all of these crypto assets against their material product is just so utterly irrational that even if you believe in crypto, it's not sane right now. It's completely disconnected from reality. There's no reason, no reason at all for Ether to be north of $100.

The actual value of Bitcoin is probably $200, and that's being generous in terms of the material exchange of the actual purchasing power and like equivalency of those things. So even if you're pro crypto, there is a very, very obvious bubble that is just-- a little bit of pressure just got relieved out of it. But it's still super inflated.

So I don't think crypto is going to disappear in the same way that MLMs are never going to. It is now a thing that will be with us for quite a while. But I strongly, strongly doubt that crypto 10 years from now is going to look anything like it does now.

I think there's a major pressure release coming, and it's going to hurt a lot of retail investors. Well, sorry guys, but you should have known those apes were a bad deal when you saw them. I had one, I did get one bit of-- the crew at the Defiance put out a video response where, one, they got really upset at some of the things I said about a few specific individuals.

But also, they just had this really bizarre argument that if it was a scam, it would be dead already. Because scams only have a shelf life of like a couple of years. And I was just like, Bernie Madoff ran his Ponzi scheme for 30 years.

The fact that Bitcoin hasn't exploded yet, like it hasn't just melted into slag, is not proof that it's not fraudulent. Also, there are so many like MLMs that have been around for decades. I mean even Lululemon survived the atomic blast of that documentary.

Lulu, sorry, LuLaRoe. Although, yeah-- LuLaRoe survived LulaRich. Amway still, I don't want to say going strong, but like still there.

Yeah. So some of you guys sent in some questions. One of my favorites was, "since the video has come out, have you heard any notable criticisms or ideas that you have not considered about your original arguments?" No.

But I want to put a healthy caveat on that, which is that there have been some good criticisms. There have been some pretty valid ones, but they were all ones that I essentially saw coming. Because there's a lot that I had to cut from the video.

You know, and there's a lot that I didn't necessarily cut, but I was like, OK, there's this subject, this subject, this subject, this subject that I want to talk about. But I need to get this done and it's already super long. And I just don't know where to fit it in.

And I don't know how to segue into it. And I need to finish this at some point. And so I just need to take that subject and shelve it.

There's a bunch of commentary that it's like, oh, this subject has been simplified. And the person considers it an oversimplification. Or there's specific wording of a few of the examples that they're just like, oh, his explanation of gas fees on Ethereum-- I'm like, I don't think my explanation in the video is inaccurate.

But I absolutely understand why people who are trying to protect the virtue of Ethereum are going to be like, oh, well it's too simplified. And there's a few, if I went back and revisited it, I'd probably reword it a little bit. Because I think the explanation that I put in maybe doesn't do a great job of differentiating between block validation and individual transactions.

That it's like, OK, a block is a bunch of transactions. And I also don't bring up the subject of how gas is basically two dimensional. So you've got both, there's the price of gas per unit, but then your transaction has a variable quantity of gas.

And so the price is fluctuating along two axis at the same time. And I didn't mention that in the video. And so I could see how somebody would be like, Oh, you didn't, it's too oversimplified.

And talking about one criticism that I was really empathetic towards is that it's like you don't spend a lot of time talking about well-intentioned projects. And that was a thing that I was aware of. Because like that got cut from the video.

But it got cut for specific reasons, which is that it created this false sense of scale, this false sense of magnitude between the different arms of the space. That it's like the fraudulent side of the space and the side of the space that works in service of the aims and underlying aims and goals of cryptocurrency, which as we discussed, ties into all of the sound money, virtual gold stuff. It's like all of that just utterly dwarfs the well-meaning weirdo art projects that basically exist in service of legitimizing the broader ecosystem.

And then I found that if-- Yeah, it can kind of just be summed up in that line. That it's like, yeah, there's well-meaning, well-intentioned projects. But their existence serves only to legitimize the broader system.

And it's a bad comparison. Because well-intentioned people got involved with Bernie Madoff early on. And I'm sure the money that they got out of that went to went to good purposes, went to well-intentioned purposes.

And they saw returns, you know, air quote returns. Their investment got bigger and they used that money on something. But that doesn't mean-- Madoff's Ponzi scheme was a Ponzi scheme.

It absolutely was. That's undeniable. So the fact that somebody involved in that scheme probably did something good with the money that they got out of it is I find it's uncompelling.

And focusing on it distracts from the bigger picture. You seem to, I mean, one walks away from your video with the perception that a decentralized financial system, like with no actual sort of structural oversight, governing body, et cetera, really can't work. Is that accurate to how you feel on the issue?

That's a tricky question just because it goes into the realm of basically sci-fi hypotheticals. So it's like can we imagine a society where a completely decentralized economy that functions at the scale of our current global economy? Yeah, we could probably hypothesize one.

Is the trajectory of crypto headed towards that? No. How do we actually solve the problem of owning digital products while simultaneously not using DRM, but protecting/helping the artist creator?

That's kind of a false question. Boom. Because, Yeah.

No, there's a problem in the framing of that question, which is that any system that is going to regulate or that is going to systematize digital ownership will by definition be DRM. Oh, and just for those watching who may not know, can you explain DRM? DRM is Digital Rights Management, which basically once you unpack the acronym it becomes obvious why.

Anything that manages digital rights is going to be digital rights management. So you can't really have digital ownership without having a system of DRM. It is in kind of a perverse way effectively all or nothing.

Either you have provable ownership and DRM or you don't have DRM, and thus ownership is effectively just a very vague trust mediated system that only functions within its local economy. So an example that actually got cut from-- I talked about this actually a bunch in an earlier draft of the video. Have you ever heard of adoptables?

No. So adoptables are a subculture that's been running for about 20 years now. So it's related to the furry community, but they're not like one-to-one correlated.

Where artists in this community would create characters, and then sell those characters. You could adopt somebody's character, and then that becomes your character that's yours. And the ownership of all of these different characters inside the ecosystem is effectively just mediated just by social trust.

That it's like how do we know that so-and-so owns this blue jaguar character? And it's like, well, because we know. Would that work at scale?

No. No. Because it requires those tight, it requires that social fabric of people actually knowing each other in order to function.

So can you have versions of digital ownership that function without DRM? Yes, in very localized contexts. Can we have a mass market solution to selling games or selling in-game objects that doesn't utilize DRM?

No. On that note though of ownership of digital objects, as someone who is also a creator of content online I'm sure the fact that the internet has made people, I think, much less used to the idea or willing to pay for content that they consume online, be that video, article, art, whatever it might be, that is a real problem. People no longer want to pay for the things that they consume online.

Do you think that the rise of NFTs in any way help address that problem? Or do they aggravate it? How do you feel about that?

The degree to which I've seen people involved in crypto become more willing to pay for content relies heavily on the fact that when you're into the crypto ecosystem the currencies themselves, the only way that you can stay sane while treating them as currencies, is to go to kind of extreme levels of depersonalization and distancing yourself from them. You basically need to put yourself into a mindset where it just becomes script, it just becomes tokens. It's like, OK, I've bought Tezos.

You know, I've bought a bunch of tez because I want to participate on [INAUDIBLE].. And you stop thinking about your tez as having any dollar equivalent, and you just start thinking about them like Chuck E Cheese tokens. Where it's like, all right, I've got a bunch of tez that I can use inside the tez ecosystem.

And you know, if you treat it as a one way purchase in the same way that it's like, OK, I buy bits off from Amazon so that I can use them on Twitch. And then it's like, yeah, I've already bought the bits. I just give them to the streamers that I enjoy.

I give them to streamers for channel rewards, for whatever. And you just stop, you don't consider at all that there's any kind of like exit strategy for those bits. They're spent.

It's done. You've got them. They're now inside this little game, like fun ecosystem, and you use them on fun stuff.

And that's basically, so the degree to which crypto folks are more willing to spend on content comes down to the fact that they need to depersonalize the actual exit strategy of their crypto just in order to stay sane. Because otherwise you pay attention to the volatility and it drives you to madness. Right, I mean, the underlying perception of this is not that, hey, these artists are making great things and we should support them as individuals.

Because half the time the art is stolen or repurposed anyway. The underlying perception is more that we're just collecting more of these valuable tokens that will serve us down the road. Yeah, in a lot of ways, yeah.

You do see some subcultures, some localized communities where it's very much like, oh, somebody bought something from me for a bunch of tez. But because I don't view tez as being real currency, I have very little emotional attachment to holding it or trying to cash it out. And so it's like I spend it very, very willingly.

That it's like, oh, if I see a token, if I see a piece of artwork on [INAUDIBLE] that like catches my attention, and it's like five tez, it's just like, all right, whatever. I've got 20. It's like just, you know-- It just kind of rattles around like that.

But then you can't really like get it. I keep coming back to Tezos. Tezos fascinates me because of its very peculiar history and the fact that it functions.

Like that it actually almost sort of functions very tenuously, but then almost entirely by virtue of the fact that it's unpopular. So forgive me if I keep using this as an example. But we see this also in Ethereum with Bored Apes and whatnot, you know, and Lazy Lions, and a lot of the PFP programs.

Where it's like you've got people who have been invested in Ethereum for five, six years now, seven years now. Where they're sitting on just irrational amounts of it that they can't cash out. And so psychologically they're just playing with house money.

It's like 2 Ether, 5 Ether, 20 Ether, like you see these jumps in the prices, like the bidding prices, that are just sort of these bizarre leaps in bidding value that make a lot more sense if you view Ethereum psychologically as a video game economy. Where it's like, OK, if you're psychologically just playing with game cash, if you have so much Ether that it's just game cash, it's just Chuck E cheese tokens, you're just playing with house money, then it's like, yeah, why not just add another 10 Ether onto your bid? 200 Ether to wash trade something? Sure, why not.

Well, I can already hear-- OpenSea's going to take a big old cut of that wash trade. It's like who cares? It's all fake money anyway.

I mean, I can already hear someone who's a big crypto person being like, well that happens in the real economy too with multi-billionaires it's like, OK. Which is why we know that it's going on. Right, and it's also like that also being bad doesn't prove that your system is better.

In fact, it actually, in some ways, proves the opposite. It proves that you're recreating the exact same incentive sets. Thank you so much, Dan.

You know, I've so appreciated this conversation. Obviously, as I mentioned, you have a YouTube channel. And where can people go to find more of what you do?

You can find me on YouTube. Channel is Folding Ideas. Or you can find me on socials under the handle Foldable Human.

Twitter is the main one that I use, though I'm a lot less active on social in general these days. But that might turn around once the heat dies down. I'll probably be back to Twitter.

I'm an addict. Can't stay away forever, but, yeah. Yeah, I can't even imagine what those guys are doing to you right now.

Well, be strong. Ignore the haters. Ignore the trolls.

And thank you guys so much for tuning in. We will see you next week on a brand new episode of The Financial Confessions. bye-bye, everyone.